Identify the letter of the choice that best completes the statement or answers the question.
____1.When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing a.scarcity.
____2.Economics is the study of
b.how society manages its scarce resources.
c.how households decide who performs which tasks.
d.the interaction of business and government.
____3.A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between a.guns and butter.
b.efficiency and equity.
c.inflation and unemployment.
d.work and leisure.
____4.Efficiency means that
a.society is conserving resources in order to save them for the future. b.society's goods and services are distributed equally among society's members. c.society's goods and services are distributed fairly, though not necessarily equally, among society's members. d.society is getting the maximum benefits from its scarce resources.
____5.Economists use the word equity to describe a situation in which a.each member of society has the same income.
b.each member of society has access to abundant quantities of goods and services, regardless of his or her income. c.society is getting the maximum benefits from its scarce resources. d.the benefits of society's resources are distributed fairly among society's members.
____6.For most students, the largest single cost of a college education is a.the wages given up to attend school.
b.tuition, fees, and books.
c.room and board.
d.transportation, parking, and entertainment.
____7.For a college student who wishes to calculate the true costs of going to college, the costs of room and board a.should be counted in full, regardless of the costs of eating and sleeping elsewhere. b.should be counted only to the extent that they are more expensive at college than elsewhere. c.usually exceed the opportunity cost of going to college.
d.plus the cost of tuition, equals the opportunity cost of going to college.
____8.The opportunity cost of an item is
a.the number of hours needed to earn money to buy the item. b.what you give up to get that item.
c.usually less than the dollar value of the item.
d.the dollar value of the item.
____9.To say that "people respond to incentives" is to say that a.changes in costs (but not changes in benefits) influence people's decisions and their behavior. b.changes in benefits (but not changes in costs) influence people's decisions and their behavior. c.changes in benefits or changes in costs influence people's decisions and their behavior. d.tradeoffs can be eliminated by rational people who think at the margin.
____10.Stan buys a 1966 Mustang for $2,000, planning to restore and sell the car. He goes on to spend $8,000 restoring the car. At this point he can sell the car for $9,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $12,000. Stan should a.complete the repairs and sell the car for $12,000.
b.sell the car now for $9, 000.
c.never try such an expensive project again.
d.be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.
____11.By scientific method we mean
a.the use of modern electronic testing equipment to understand the world. b.the dispassionate development and testing of theories about how the world works. c.the use of controlled laboratory experiments to understand the way the world works. d.finding evidence to support preconceived theories about how the world works.
____12.The use of theory and observation is more difficult in...