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Chapter 1—Ten Principles of Economics
MULTIPLE CHOICE
1. Which word comes from the Greek word for “one who manages a household”? a. market
b. consumer
c. producer
d. economy
Actual Answer: D PTS: 1 DIF: Easy REF: p. 3-4 BLM: Remember NOT: Macro TB_1-1
2. From which Greek word(s) is the word economy derived?
a. environment
b. one who manages a household
c. one who participates in a market
d. conservation
Actual Answer: B PTS: 1 DIF: Easy REF: p. 3-4 BLM: Remember NOT: Macro TB_1-2
3. What do households and economies have in common?
a. They both must allocate scarce resources.
b. They both face many decisions.
c. They both must allocate the goods and services they produce.
d. They both must have a central decision maker.
Actual Answer: D PTS: 1 DIF: Average REF: p. 3-4 BLM: Remember NOT: Macro
TB_1-3
4. What concept does economics primarily deal with?
a. scarcity
b. poverty
c. change
d. power
Actual Answer: A PTS: 1 DIF: Easy REF: p. 4 BLM: Remember NOT: Macro TB_1-4
5. Which of the following is NOT included in the decisions that every society must make? a. what
goods will be produced
b. who will produce the goods
c. what determines consumer preferences
d. who will consume the goods
Actual Answer: C PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-5
6.Why do both households and societies face many decisions?
a. because resources are scarce
b. because populations may increase or decrease over time
c. because wages for households and therefore society fluctuate with business cycles d.
because people, by nature, tend to disagree
Actual Answer: A PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-6
7. When is a good considered scarce in a society?
a. when more output of the good is possible
b. when everyone in that society cannot have all they want of the good
c. when the government restricts production of the good
d. when only the richest people in the economy can buy all they want of the good
Actual Answer: B PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-7
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8. When does scarcity exist?
a. when there is less than an infinite amount of a resource or good
b. when society can meet the wants of every individual
c. when there is less of a good or resource available than people wish to have
d. when the government fails to produce goods
Actual Answer: C PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-8
9. How are goods and services allocated in a market economy?
a. by government decisions
b. by giving each individual just enough for a decent standard of living
c. by the actions of all firms and consumers
d. by inherited rights and properties
Actual Answer: C PTS: 1 DIF: Average REF: p. 4
BLM: Higher Order NOT: Macro TB_1-9
10. Approximately what percentage of the world’s economies experience scarcity? a. 25%
b. 50%
c. 75%
d. 100%
Actual Answer: D PTS: 1 DIF: Easy REF: p. 4
BLM: Remember NOT: Macro TB_1-10
11. What is the economy experiencing when a society cannot produce all the goods and services people wish to
have?
a. scarcity
b. communism
c. externalities
d. market failure
Actual Answer: A PTS: 1 DIF: Easy REF: p. 4
BLM: Higher Order NOT: Macro TB_1-11
12. For society, when is a good NOT scarce?
a. if at least one individual in society can obtain all he or she wants of the good b. if firms
are producing at full capacity
c. if all members of society can have all they want of the good
d. if those who have enough income can buy all they want of the good
Actual Answer: C PTS: 1 DIF: Average REF: p. 4 BLM: Higher Order NOT: Macro
TB_1-12
13. Which of the following goods best meets the definition of scarcity? a. air
b. water in the ocean
c. water in a city
d. wood in a forest
Actual Answer: C PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-13
14. What does economics study?
a. business
b. how society manages its scarce resources
c. central planning
d. government regulation
Actual Answer: B PTS: 1 DIF: Easy REF: p. 4 BLM: Remember NOT: Macro TB_1-14
15. What does economics study?
a. how society manages its scarce resources
b. the government’s role in society
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c. how to increase production
d. how firms make profits
Actual Answer: A PTS: 1 DIF: Easy REF: p. 4 BLM: Remember NOT: Macro TB_1-15
16. In most societies, who allocates resources?
a. a single central planner
b. those who own the resources
c. those firms that use resources to provide goods and services
d. the combined actions of millions of households and firms
Actual Answer: D PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-16
17. What do economists study?
a. how people make decisions
b. how governments interact with one another
c. the forces and trends that affect only the economy as a whole d. how
societies change over time
Actual Answer: D PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-17
2026
2026
18. Which of the following is NOT a major area of study for economists?
a. how people make decisions
b. how countries choose national leaders
c. how people interact with each other
d. how forces and trends affect the overall economy
Actual Answer: B PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-18
19. What concept is illustrated by the adage, “There is no such thing as a free lunch”? a.
tradeoffs
b. scarcity
c. productivity
d. efficiency
Actual Answer: A PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-19
20. What does the adage “There is no such thing as a free lunch” mean?
a. Even people on welfare have to pay for food.
b. The cost of living is always increasing.
c. To get something we like, we usually have to give up another thing we like. d. All
costs are included in the price of a product.
Actual Answer: C PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-20
21. What do economists illustrate when they use the phrase “There is no such thing as a free lunch”? a. how
inflation increases prices
b. that to get one thing, we must give up something else
c. that nothing is free in a market economy
d. that if something looks too good to be true, it probably is
Actual Answer: B PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-21
22. Which best represents the concept represented by the adage “There is no such thing as a free lunch”? a.
Melissa can only attend the concert if she takes her sister with her.
b. Greg is hungry and homeless.
c. Brian must repair the tire on his bike before he can ride it to class.
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Chapter 1—Ten Principles of Economics
MULTIPLE CHOICE
1. Which word comes from the Greek word for “one who manages a household”? a. market
b. consumer
c. producer
d. economy
Actual Answer: D PTS: 1 DIF: Easy REF: p. 3-4 BLM: Remember NOT: Macro TB_1-1
2. From which Greek word(s) is the word economy derived?
a. environment
b. one who manages a household
c. one who participates in a market
d. conservation
Actual Answer: B PTS: 1 DIF: Easy REF: p. 3-4 BLM: Remember NOT: Macro TB_1-2
3. What do households and economies have in common?
a. They both must allocate scarce resources.
b. They both face many decisions.
c. They both must allocate the goods and services they produce.
d. They both must have a central decision maker.
Actual Answer: D PTS: 1 DIF: Average REF: p. 3-4 BLM: Remember NOT: Macro
TB_1-3
4. What concept does economics primarily deal with?
a. scarcity
b. poverty
c. change
d. power
Actual Answer: A PTS: 1 DIF: Easy REF: p. 4 BLM: Remember NOT: Macro TB_1-4
5. Which of the following is NOT included in the decisions that every society must make? a. what
goods will be produced
b. who will produce the goods
c. what determines consumer preferences
d. who will consume the goods
Actual Answer: C PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-5
6.Why do both households and societies face many decisions?
a. because resources are scarce
b. because populations may increase or decrease over time
c. because wages for households and therefore society fluctuate with business cycles d.
because people, by nature, tend to disagree
Actual Answer: A PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-6
7. When is a good considered scarce in a society?
a. when more output of the good is possible
b. when everyone in that society cannot have all they want of the good
c. when the government restricts production of the good
d. when only the richest people in the economy can buy all they want of the good
Actual Answer: B PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-7
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8. When does scarcity exist?
a. when there is less than an infinite amount of a resource or good
b. when society can meet the wants of every individual
c. when there is less of a good or resource available than people wish to have
d. when the government fails to produce goods
Actual Answer: C PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-8
9. How are goods and services allocated in a market economy?
a. by government decisions
b. by giving each individual just enough for a decent standard of living
c. by the actions of all firms and consumers
d. by inherited rights and properties
Actual Answer: C PTS: 1 DIF: Average REF: p. 4
BLM: Higher Order NOT: Macro TB_1-9
10. Approximately what percentage of the world’s economies experience scarcity? a. 25%
b. 50%
c. 75%
d. 100%
Actual Answer: D PTS: 1 DIF: Easy REF: p. 4
BLM: Remember NOT: Macro TB_1-10
11. What is the economy experiencing when a society cannot produce all the goods and services people wish to
have?
a. scarcity
b. communism
c. externalities
d. market failure
Actual Answer: A PTS: 1 DIF: Easy REF: p. 4
BLM: Higher Order NOT: Macro TB_1-11
12. For society, when is a good NOT scarce?
a. if at least one individual in society can obtain all he or she wants of the good b. if firms
are producing at full capacity
c. if all members of society can have all they want of the good
d. if those who have enough income can buy all they want of the good
Actual Answer: C PTS: 1 DIF: Average REF: p. 4 BLM: Higher Order NOT: Macro
TB_1-12
13. Which of the following goods best meets the definition of scarcity? a. air
b. water in the ocean
c. water in a city
d. wood in a forest
Actual Answer: C PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-13
14. What does economics study?
a. business
b. how society manages its scarce resources
c. central planning
d. government regulation
Actual Answer: B PTS: 1 DIF: Easy REF: p. 4 BLM: Remember NOT: Macro TB_1-14
15. What does economics study?
a. how society manages its scarce resources
b. the government’s role in society
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c. how to increase production
d. how firms make profits
Actual Answer: A PTS: 1 DIF: Easy REF: p. 4 BLM: Remember NOT: Macro TB_1-15
16. In most societies, who allocates resources?
a. a single central planner
b. those who own the resources
c. those firms that use resources to provide goods and services
d. the combined actions of millions of households and firms
Actual Answer: D PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-16
17. What do economists study?
a. how people make decisions
b. how governments interact with one another
c. the forces and trends that affect only the economy as a whole d. how
societies change over time
Actual Answer: D PTS: 1 DIF: Average REF: p. 4 BLM: Remember NOT: Macro
TB_1-17
2026
2026
18. Which of the following is NOT a major area of study for economists?
a. how people make decisions
b. how countries choose national leaders
c. how people interact with each other
d. how forces and trends affect the overall economy
Actual Answer: B PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-18
19. What concept is illustrated by the adage, “There is no such thing as a free lunch”? a.
tradeoffs
b. scarcity
c. productivity
d. efficiency
Actual Answer: A PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-19
20. What does the adage “There is no such thing as a free lunch” mean?
a. Even people on welfare have to pay for food.
b. The cost of living is always increasing.
c. To get something we like, we usually have to give up another thing we like. d. All
costs are included in the price of a product.
Actual Answer: C PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-20
21. What do economists illustrate when they use the phrase “There is no such thing as a free lunch”? a. how
inflation increases prices
b. that to get one thing, we must give up something else
c. that nothing is free in a market economy
d. that if something looks too good to be true, it probably is
Actual Answer: B PTS: 1 DIF: Average REF: p. 4
BLM: Remember NOT: Macro TB_1-21
22. Which best represents the concept represented by the adage “There is no such thing as a free lunch”? a.
Melissa can only attend the concert if she takes her sister with her.
b. Greg is hungry and homeless.
c. Brian must repair the tire on his bike before he can ride it to class.
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