I.

MULTIPLE CHOICE

1. Economics deals primarily with the concept of

a. Scarcity. c. Change.
b. Poverty. d. Power.

2. 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 goods
c. what determines consumer preferences
d. who will consume the goods

3. Both households and societies face many decisions because

a. resources are scarce.
b. populations may increase or decrease over time.
c. wages for households and therefore society fluctuate with business cycles.
d. people, by nature, tend to disagree.

4. A good is considered scarce in a society when

a. more output of the good is possible.
b. everyone in that society cannot have all they want of the good.
c. the government restricts production of the good.
d. only the richest people in the economy can buy all they want of the good.

5. Scarcity exists when

a. there is less than an infinite amount of a resource or good.
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. the government fails to produce goods.

6. Which of the following would NOT be true in a world without scarcity?

a. There would be no need for the science of economics.
b. Everyone would have all the goods and services they wanted.
c. There would have to be an infinite supply of every resource.
d. There would be opportunity costs.

7. Approximately what percentage of the world’s economies experience scarcity?

a. 25% c. 75%
b. 50% d. 100%

8. The opportunity cost of going to college is

a. the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
b. the value of the best opportunity a student gives up to attend college.
c. zero for students who are fortunate enough to have all of their college expenses paid by someone else.
d. zero, since a college education will allow a student to earn a larger income after graduation.

9. Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns
P8 an hour. Her opportunity cost of working is
a. the P24 she earns working.
b. the P24 minus the enjoyment she would have received from watching the video.
c. the enjoyment she would have received had she watched the video.
d. nothing, since she would have received less than P24 of enjoyment from the video.

10. Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is
a. the improvement in his grades from studying for the hour.
b. the difference between the improvement in his grades from studying minus the enjoyment of playing
tennis.
c. the enjoyment and exercise he would have received had he played tennis.
d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been
greater than the value of playing tennis.

11. Communist countries worked on the premise that economic well-being could be organized only through/by
a. a market economy.
b. government central planners.

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 c. government-imposed private monopolies.
d. increased competition.

12. A company decides to install more machines and lay off workers. Which economic question is addressed
directly? A
a. How to produce
b. What to produce
c. For whom to produce
d. Where to produce

13. In economic terms, what are land, labor, capital and entrepreneurship? B
a. Production possibility
b. Factors of production
c. Production trade-offs
d. Opportunity costs

14. What is the main idea behind the study of economics? C,

a. Monetary policy
b. Efficiency of production
c. Allocation of scarce resources
d. Business decisions

15. In which of the following economic systems is the “factors of production” privately owned?
a. Capitalism c. Communism
b. Socialism d. Confucianism

16. In economics, the “how” or production question refers to

a. the problem of allocating scarce resources among competing users.
b. the ways in which factors of production may be combined to produce output.
c. the way in which a firm decides on its profit-maximising rate of output.
d. the problem of how output is distributed among individuals and groups in society.E.the way in which the
state sets output targets in a command economy.

17. The economic problem arises from the coexistence of

a. A.unlimited wants and unlimited resources.
b. limited wants and limited resources.
c. unlimited wants and limited resources.
d. E.limited wants and unlimited resources.

18. If the principal concern of economics is the question of how best to use society’s resources, then economics
would be irrelevant if
a. we had unlimited wants.
b. economies were organised around command rather than market principles.
c. economies were organised around market rather than command principles.
d. resources were available in unlimited quantities.

19. The fundamental purpose of production is to:

a. earn high profits. c. fulfil government plans.
b. increase exports. d. meet human wants.

20. Fundamental economic problems basically arise from

a. the fact that society has more than it needs.
b. turmoil in the stock market.
c. the unequal distribution of income.
d. our wants exceeding our scarce resources.

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