1. In Colorado, there has been a drought, and rural communities are fighting with urban areas over water. This statement best represents the economic concept of:
A) resources are scarce.
B) resources should be used as efficiently as possible to achieve society's goals.
C) when markets don't achieve efficiency, government intervention can improve society's welfare.
D) government policies can change spending.

2. In Thailand, all the land, labor, and capital in society are used in a way that has fully exploited all opportunities to make everyone better off. This statement best represents the economic concept of:
A) markets move toward equilibrium.
B) resources should be used as efficiently as possible to achieve society's goals.
C) markets usually lead to efficiency.
D) when markets don't achieve efficiency, government intervention can improve society's welfare.

3. Individuals gain from trade because:
A) of specialization in production.
B) they can sell at a lower price than they can buy at.
C) self-sufficiency is efficient.
D) of the principle of absolute advantage.

4. Which of the following statements is true?
A) The concept of equilibrium requires that all individuals have an equal amount of income.
B) If equilibrium in a market exists, then the price in that market will not fluctuate by more than 5%.
C) If equilibrium in a market exists, then there will be no remaining opportunities for individuals to make themselves better off.
D) Equilibrium in a market will exist when the number of buyers is equal to the number of sellers.

5. Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor has a garden that grows tomatoes and peppers. How could Molly and Sandy gain from trade?
A) Molly could trade tomatoes to Sandy in exchange for peppers if Molly was the most efficient grower of peppers.
B) Sandy could trade tomatoes to Molly in exchange for peppers if Sandy was the most efficient grower of peppers.
C) Sandy could trade peppers to Molly in exchange for tomatoes if Molly was the most efficient grower of peppers.
D) Molly could trade peppers to Sandy in exchange for tomatoes if Molly was the most efficient grower of peppers.

6. The best measure of the opportunity cost of any choice is:
A) the monetary cost of that choice.
B) whatever you have given up to make that choice, even if no monetary costs are involved.
C) the cost associated with not taking full advantage of the opportunity offered by that choice.
D) your hourly wage.

7. Katherine has a physics exam tomorrow. However, a free lecture by one of her favorite authors is taking place this evening. Katherine decides to attend the lecture instead of studying for her exam. Which is a correct statement?
A) Katherine's opportunity cost is the time spent listening to the lecture.
B) Katherine's opportunity cost is not relevant since no money is involved.
C) Katherine's opportunity cost is her time spent listening to the lecture and getting to the lecture event itself.
D) Katherine's opportunity cost is the time spent getting to the lecture.

8. Market failure may occur because:
A) individual actions have side effects that are not properly taken into account by the market.
B) one party benefits more than another in trade.
C) all goods are suited for efficient management by markets.
D) some resouces are not scarce.

9. Suppose people in households decide to spend less. How will this impact an economy?
A) It will have no impact since this group makes up a small portion of any economy.
B) It will decrease the level of income of other people since household spending becomes someone else's income.
C) It will cause prices for many goods to increase.
D) It will increase the level of income in the economy since other groups will spend more.

10. Which book illustrates the advantages of specialization using an eighteenth-century pin factory?
A) Free to Choose by Milton Friedman
B) The Wealth of Nations by Adam Smith
C) Das Kapital by Karl Marx
D) The General Theory by John Maynard Keynes

11. It is better to produce corn in Kansas because of the fertile soil rather than in Death Valley, California. This statement best represents the economic concept of:
A) resources are scarce.
B) markets move toward equilibrium.
C) resources should be used as efficiently as possible to achieve society's goals.
D) markets usually lead to efficiency.

12. An economy is efficient if it is:
A) possible to produce more of all goods and services.
B) possible to produce more of one good without producing less of another.
C) not possible to produce more of one good without producing less of another good.
D) producing at a combination of goods that lies between the production possibilities curve and the origin.

13. Which of the following principles underlie the interaction of individual choices?
A) Resources are scarce.
B) There are gains from trade.
C) Marginal analysis is used for "how much" decisions.
D) People usually exploit opportunities to make themselves better off.

14. Everyone benefits from street lighting, yet the marginal benefit to any one individual usually falls short of the marginal cost. This is an example of:
A) individual actions that have side effects that are not properly taken into account by the market.
B) one party preventing mutually beneficial trades from occurring in an attempt to capture a greater share of resources for itself.
C) the unsuitability of some goods for efficient management by markets.
D) unregulated self-interest.

15. You notice that when a new yoga class is offered at the student recreation center, some students from the other yoga classes go to the new class instead. This statement best represents the economic concept of:
A) resources are scarce.
B) the real cost of something is what you must give up to get it.
C) people usually exploit opportunities to make themselves better off.
D) markets move toward equilibrium.

16. If resources are "scarce" it means that they:
A) cannot provide enough goods or services to satisfy all human material wants and needs.
B) have no opportunity cost.
C) are probably not valued by consumers.
D) have an unlimited supply.

17. People who live in households decide to spend less in their day-to-day activities. As a result, this will most likely lead to:
A) less income for other people in the economy.
B) more income for other people in the economy.
C) no impact on other people in the economy.
D) inflation.

18. When individuals act in their own self-interest:
A) efficiency is always achieved.
B) equity is always achieved.
C) society may be worse off, in some cases.
D) all opportunities have been taken to make some people better off without making other people worse off.

19. After swimming 100 laps at the pool, Erik decides to swim 10 more before lifting weights. This statement best represents the economic concept of:
A) resources are scarce.
B) the real cost of something is what you must give up to get it.
C) "how much?" is a decision at the margin.
D) there are gains from trade.

20. The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:
A) people usually exploit opportunities to make themselves better off.
B) markets move toward equilibrium.
C) resources should be used as efficiently as possible to achieve society's goals.
D) markets usually lead to efficiency.

21. Nara has gone to three movies already this week. She has some extra money so she decides to go to another. This statement best represents the economic concept of:
A) resources are scarce.
B) the real cost of something is what you must give up to get it.
C) "how much?" is a decision at the margin.
D) there are gains from trade.

22. The concept of the margin deals with:
A) making incremental choices.
B) all or none of something.
C) engaging in unethical activities.
D) making difficult choices.

23. An increase in efficiency means that an economy has:
A) reduced its opportunity costs.
B) increased the equity of its distribution of goods and services.
C) made some people better off without making others worse off.
D) increased the incentives for its citizens to follow their own self-interest.

24. Julie is getting ready for final exams. She has three exams during the first three days of the exam period. To prepare, she has outlined a schedule that includes reviewing for her first exam on one day, her next exam on the following day, and her third exam on the third day. On each day, she has also allocated some time when she can watch TV or basically do nothing. Which is the best explanation for why Julie provides some time for leisure?
A) Julie is not that smart and cannot study that long.
B) Julie is slacking off and will most likely fail all of her finals.
C) Julie realizes that there are benefits to leisure time that outweigh the costs of constant studying.
D) Julie does not understand the importance of studying.

25. When people want more goods and services than are available, the economy experiences inflation. This statement best represents the economic concept of:
A) resources are scarce.
B) when markets don't achieve efficiency, government intervention can improve society's welfare.
C) overall spending sometimes gets out of line with the economy's productive capacity.
D) government policies can change spending.

26. A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:
A) $7.
B) $6.
C) $13.
D) $0.

27. You can either spend $100 on a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:
A) $100.
B) the new CD player.
C) both the $100 and the new CD player.
D) impossible to determine.

28. Which of the following statements is correct?
A) Resource scarcity is not a major economic concern in the rich countries of the world.
B) While opportunity costs usually exist, some opportunity costs are zero.
C) An economic situation is in equilibrium when no individual would be better off taking a different action.
D) Some very talented, skilled individuals who can do everything better than most people should not specialize in doing any one thing.

29. We have to make choices because:
A) we have unlimited income.
B) resources are scarce.
C) choices involve a trade-off.
D) resources are scarce and because choices involve a trade-off.

30. The problem of determining what goods and services society should produce:
A) exists because we can produce more than we need or want.
B) exists because there are not enough resources to provide all the goods and services that people want to purchase.
C) would not exist if all goods and services were scarce.
D) would not exist if government owned all of the resources.

31. When markets fail:
A) government intervention may help.
B) the market realizes the maximum possible gains from trade given the available resources.
C) there may still be an efficient allocation of resources.
D) no goods and services are produced.

32. Manny is attending college and majoring in economics. Manny is improving his scarce resource of:
A) land.
B) labor.
C) capital.
D) human capital.

33. The phrase "gains from trade" refers to the:
A) profits obtained from sales of a good or service.
B) increase in total output that is realized when individuals specialize in particular tasks and trade with each other.
C) gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price.
D) gains that one obtains by taking advantage of a temporary discount or "sale" price.

34. The basic concern of economics is:
A) to keep business firms from losing money.
B) to prove that capitalism is better than socialism.
C) to study the choices people make.
D) to use unlimited resources to produce goods and services to satisfy limited wants.

35. Owen had a typewriter business but he went out of business because no one buys typewriters anymore. This statement best represents the economic concept of:
A) resources are scarce.
B) people usually exploit opportunities to make themselves better off.
C) markets move toward equilibrium.
D) one person's spending is another person's income.

36. Which of the following methods of encouraging recycling is likely to be most effective?
A) appealing to the consumers to "be a good citizen"
B) publicizing the advantages of recycling
C) imposing a tax per unit of garbage generated
D) All three methods are equally effective.

37. Overall, trade between China and the United States will:
A) benefit the U.S. more than China.
B) benefit China more than the United States.
C) benefit both countries.
D) hurt both countries.

38. You make a trade-off when you compare the ________and ________ of doing something.
A) direct costs; opportunity costs
B) marginal benefits; total benefits
C) costs; benefits
D) direct costs; total costs

39. Which of the following is an example of marginal analysis?
A) What additional output does a family business produce when it hires one more worker?
B) How do tax cuts change the growth rate of median income?
C) When a large corporation lays off workers, how do profits change if sales remain constant?
D) A commuter takes the bus to work rather than driving.

40. A key theme fundamental to all of economics is:
A) there are limited wants.
B) we are a rich country but are simply not aware of it.
C) people have unlimited wants facing limited means to satisfy them.
D) there are unlimited resources.