Chapter 01 - Thinking Like an Economist

Chapter 01

Thinking Like an Economist

Multiple Choice Questions

1. Economics is best defined as the study of: A. prices and quantities.

B. inflation and interest rates.

C. how people make choices under the conditions of scarcity and the results of those choices.

D. wages and incomes.

2. Economic questions always deal with: A. financial matters. B. political matters.

C. insufficient resources.

D. choice in the face of limited resources.

3. The range of topics or issues that fit within the definition of economics is: A. limited to market activities, e.g., buying soap. B. limited to individuals and firms.

C. extremely wide, requiring only the ideas of choice and scarcity. D. very limited.

4. The central concern of economics is: A. poverty. B. scarcity.

C. wealth accumulation. D. overconsumption.

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Chapter 01 - Thinking Like an Economist

5. The scarcity principle indicates that:

A. no matter how much one has, it is never enough.

B. compared to 100 years ago, individuals have less time today.

C. with limited resources, having more of \D. because tradeoffs must be made, resources are therefore scarce.

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Chapter 01 - Thinking Like an Economist

6. The logical implication of the scarcity principle is that: A. one will never be satisfied with what one has.

B. as wealth increases, making choices becomes less necessary. C. as wealth decreases, making choices becomes less necessary. D. choices must be made.

7. If all the world's resources were to magically increase a hundredfold, then: A. the scarcity principle would still govern behavior. B. economics would no longer be relevant. C. the scarcity principle would disappear. D. tradeoffs would become unnecessary.

8. The principle of scarcity applies to: A. the poor exclusively. B. all consumers. C. all firms.

D. everyone—consumers, firms, governments, and nations.

9. At the very least, Joe Average and Bill Gates are both identically limited by: A. their wealth.

B. the 24 hours that comprise a day. C. their knowledge. D. their influence.

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Chapter 01 - Thinking Like an Economist

10. Forest is a mountain man living in complete isolation in Montana. He is

completely self-sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer: A. the scarcity principle does not apply to Forest. B. Forest is not required to make choices.

C. the scarcity principle still applies because more hunting means less fishing and farming.

D. Forest is very satisfied.

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