1 Economics deals with primarily with the concept of Quiz 1 a Scarcity b Money c Poverty d Banking that 2 The adage There is no such thing as a free lunch is used to illustrate the principle a Goods are scarce b People face trade offs c d Households face many decisions Income must be earned 3 Efficiency a And equality both refer to how much a society can produce with its resources b And equality both refer to how fairly the benefits from using resources are distributed between members of society c Refers to how much society can produce with its resources Equality refers to how evenly the benefits using resources are distributed among members of society d refers to how evenly the benefits using resources are distributed among members of society Equality Refers to how much society can produce with its resources 4 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 the item c Usually less than the dollar of the item d The dollar value of the item 5 Economists face an obstacle that many other scientists do not face What is that obstacle a b It is often difficult to formulate theories in economics It is often difficult and sometimes impossible to perform experiments in economics c Economics cannot be addressed objectively it must be addressed subjectively d The scientific method cannot be applied to the study of economics 6 In the simple circular flow diagram the participants in the economy are a Firms and governments b Households and firms c Households and governments d Households firms and government 7 Which of the following is a correct statement about production possibilities frontier a An economy can produce only on the production possibilities frontier b An economy can produce at any point inside or outside a production possibilities frontier c An economy can produce at any point on or inside the production possibilities frontier but not outside the frontier d An economy can produce at any point inside the production possibilities frontier but not on or outside the frontier 8 An economy s production possibilities frontier is also its consumption possibilities frontier a Under all circumstances b Under no circumstances c When the economy is self sufficient d When the rate of tradeoff between the two goods being produced is constant 9 The producer that requires a smaller quantity of inputs to produce a certain amount of a good relative to the quantities of inputs required by other producers to produce the same amount of that good a Has a lower opportunity cost of producing that good relative to the opportunity costs of other producers b Has a comparative advantage in the production of that good c Has an absolute advantage in the production of that good d Should be the only producer of that good 10 Canada and the U S both produce wheat and computer software Canada is said to have the comparative advantage in producing wheat if a Canada requires fewer resources than the U S to produce a bushel of wheat b The opportunity cost of producing a bushel of wheat is lower for Canada than c The opportunity cost of producing a bushel of wheat is lower for the U S than d The U S has an absolute advantage over Canada in producing computer it is for the U S it is for Canada software Answers 1 A 2 B 3 C 4 B 5 B 6 B 7 C 8 C 9 C 10 B