ECON 103 Principles of
Microeconomics Practice Multiple
Choice Questions and Answers
Complete and Rated A
,Chapter 1—Ten Principles of Economics
1. With what concept does economics deal primarily with?
a. scarcity
b. poverty
c. change
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 the goods
c. what determines consumer preferences
d. who will consume the goods
3. For what reason 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
4. 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
5. 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
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. What is the economy experiencing when a society cannot produce all the goods and services
people wish to have?
a. scarcity
b. communism
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,Junjie Liu – Econ 103 Practice Multiple Choice
c. externalities
d. market failure
8. 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 it
d. if those who have enough income can buy all they want of the good
9. What does economics study?
a. how society manages its scarce resources
b. the government's role in society
c. how to increase production
d. How firms make profits
10. 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
11. What concept is illustrated by the adage, "There is no such thing as a free lunch"?
a. tradeoffs
b. scarcity
c. productivity
d. efficiency
12. 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.
13. 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
14. Henry decides to spend 2 hours playing golf rather than working at his job which pays $8 per
hour. What is Henry's tradeoff?
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, a. the $16 he could have earned working for 2 hours
b. nothing, because he enjoys playing golf more than working
c. the increase in skill he obtains from playing golf for those 2 hours
d. nothing, because he spent $16 for green fees to play golf
15. When society requires that firms reduce pollution, what happens?
a. There is a tradeoff because of reduced incomes to the firms' owners, workers, and
customers.
b. There is no tradeoff, since everyone benefits from reduced pollution.
c. There is no tradeoff for society as a whole, since the cost of reducing pollution falls
only on the firms affected by the requirements.
d. There is a tradeoff only if some firms are forced to close.
16. Daniel decides to spend the last two hours of the night before his economics exam studying
instead of sleeping. For Daniel, what would his tradeoff be?
a. nothing, since no dollar value can be put on sleep
b. nothing, since studying would be more beneficial than sleep
c. the six hours of sleep he could have had if he had gone to bed before midnight
d. the two hours of rest he would have gotten
17. How does a tradeoff exist between a clean environment and a higher level of income?
a. Studies show that individuals with higher levels of income actually pollute less than low-
income individuals.
b. To pay for pollution clean-up, the government must increase taxes which lowers income.
c. Laws that reduce pollution raise costs of production and reduce incomes.
d. By employing individuals to clean up pollution, employment and income both rise.
18. What does efficiency mean?
a. Society is conserving resources in order to save them for the future.
b. Society’s goods and services are distributed fairly among society's members.
c. Society has lessened its dependence on foreign energy sources.
d. Society is getting the most it can from its scarce resources.
19. In which of the following situations would economists use the word equity?
a. Each member of society has the same income.
b. Society is getting the most it can from its scarce resources.
c. Those in society who have the least will receive the most.
d. The benefits of society's resources are distributed fairly among society's members.
20. What happens when government policies are being designed?
a. There is usually a tradeoff between equity and efficiency.
b. Equity and efficiency goals are usually independent of each other.
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