Principles of Economics Quiz

Resources are

• scarce for households but plentiful for economies.

• plentiful for households but scarce for economies.

• scarce for households and scarce for economies.

• plentiful for households and plentiful for economies.

Economics is the study of

• production methods.

• how society manages its scarcer resources.

• how households decide who performs which tasks.

• the interaction of business and government.

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

• goods are scarce.

• people face tradeoffs.

• income must be earned.

• households face many decisions.

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that

• trade can make everyone better off.

• people face trade-offs

• rational people think at the margin.

• people respond to incentives.

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms’ owners, workers, and customers. This statement illustrates the principle that

• trade can make everyone better off.

• rational people think at the margin.

• people face tradeoffs.

• people respond to incentives.

When society requires that firms reduce pollution, there is

• a tradeoff because of reduced incomes to the firms' owners and workers.

• a tradeoff only if some firms are forced to close.

• no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.

• no tradeoff, since everyone benefits from reduced pollution.

Efficiency means that

• society is conserving resources in order to save them for the future.

• society's goods and services are distributed equally among society's members.

• society's goods and services are distributed fairly, though not necessarily equally, among society's members.

• society is getting the maximum benefits from its scarcer resources.

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

• equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarcer resources.

• equality refers to maximizing benefits from scarcer resources and efficiency refers to uniform distribution of those benefits.

• equality refers to everyone facing identical tradeoffs.

When the government redistributes income from the wealthy to the poor,

• efficiency is improved, but equality is not.

• both wealthy people and poor people benefit directly.

• people work less and produce fewer goods and services.

• the government collects more revenue in total.

What you give up to obtain an item is called your

• opportunity cost.

• explicit cost.

• monetary cost.

• direct cost.