Basics of Economics   
1. Scarcity exists when:
 
A. the price of a good rises.
B. society can meet the wants of every individual.
 
C. there is less of a good or resource available than people wish to have.
 
D. there is less than an infinite amount of a resource or good.
 
 ANSWER:
 
2. Economics is defined as the study of
 
A. how society manages its scarce resources.
 
 B. business.
 
C. central planning.
 
D. government regulation.
 
ANSWER:
 
3. A good definition of equity would be:
 
A. efficiency.
 
B. eliminating extreme affluence.
 
C. fairness.
 
D. everyone receiving the same income.
 
ANSWER:
 
4. When government policies are being designed,
 
A. increasing efficiency usually results in more equity.
 
B. there is usually a tradeoff between equity and efficiency.
 
 C. equity can usually be achieved without an efficiency loss.
 
D. equity and efficiency goals are usually independent of each other.
 
ANSWER:
 
5. The opportunity cost of an item is:
 
A. what you give up getting that item.
 
B. always equal to the dollar value of the item.
 
C. always less than the dollar value of the item.
 
D. the number of hours needed to earn the money to buy it.
 
 ANSWER:
 
6. Ryan spends an hour studying instead of going for a bike ride. The opportunity cost to him of studying is:
 
A. the improvement in his grades from studying for the hour.
 
B. the enjoyment and exercise he would have received had he gone for a bike ride.
 
C. the difference between the improvement in his grades from studying minus the enjoyment of a bike ride.
 
D. zero. Since Ryan chose to study rather than to ride his bike, the value of studying must have been greater than the value of the bike ride.