Chapter 01 - Thinking Like an Economist

11. The scarcity principle applies to: A. all decisions.

B. only market decisions, e.g., buying a car.

C. only non-market decisions, e.g., watching a sunset. D. only the poor.

12. Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

A. not an economic problem because neither one costs money.

B. not an economic problem because it's an hour that is wasted no matter what Chris does.

C. an economic problem because the tuition Chris pays covers both the gym and the library.

D. an economic problem because Chris has only one hour during which he can study or work out.

13. Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decided to stay home and work on the paper. According to the scarcity principle, the reason Josh didn't go to the game is that:

A. Josh prefers schoolwork to football games.

B. writing the paper is easier than going to the game.

C. Josh doesn't have enough time for writing the paper and going to the game. D. it's too expensive to go to the game.

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Chapter 01 - Thinking Like an Economist

14. Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is that wants are: A. limited, resources are limited, and thus choices must be made. B. unlimited, resources are limited, and thus choices must be made.

C. unlimited, resources are limited to some but not to others, and thus some people must make choices.

D. unlimited, resources are limited, and thus government needs to do more.

15. The cost-benefit principle indicates that an action should be taken: A. if the total benefits exceed the total costs.

B. if the average benefits exceed the average costs. C. if the net benefit (benefit minus cost) is zero.

D. if the extra benefit is greater than or equal to the extra costs.

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Chapter 01 - Thinking Like an Economist

16. When a person decides to pursue an activity as long as the extra benefits are at least equal to the extra costs, that person is: A. violating the cost-benefit principle. B. following the scarcity principle. C. following the cost-benefit principle. D. pursuing the activity too long.

17. Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is: A. not rational.

B. an application of the cost-benefit principle. C. an application of the scarcity principle. D. the relevant opportunity cost.

18. The scarcity principle tells us that __________, and the cost-benefit principle tells us __________.

A. choices must be made; how to make the choices

B. choices must be made; that the costs can never outweigh the benefits of the choices

C. rare goods are expensive; that the costs should outweigh the benefits of the choices

D. rare goods are expensive; that the costs can never outweigh the benefits of the choices

19. According to the cost-benefit principle:

A. the lowest cost activity usually gives the lowest benefit.

B. a person should always choose the activity with the lowest cost. C. a person should always choose the activity with the greatest benefit.

D. the extra costs and benefits of an activity are more important considerations than the total costs and benefits.

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Chapter 01 - Thinking Like an Economist

20. A rational person is one who: A. is reasonable.

B. makes choices that are easily understood.

C. possesses well-defined goals and seeks to achieve them. D. is highly cynical.

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