B. there is usually a tradeoff between equity and efficiency

Chapter 1

1. The word economy comes from the Greek word for

a. “environment.”

b. “one who participates in a market.”

c. “one who manages a household.”

d. “conservation.”

2. Economics deals primarily with the concept of

a. poverty.

B. scarcity.

c. change.

d. power.

3. Which of the following is NOT included in the decisions that every society must make?

a. what goods will be produced

B. what determines consumer preferences

c. who will produce goods

d. who will consume the goods

4. Scarcity exists when

a. there is less than an infinite amount of a resource or good.

B. there is less of a good or resource available than people wish to have.

c. society can meet the wants of every individual.

d. the price of a good rises.

5. Which of the following goods best meets the definition of scarcity?

a. air

b. wood in a forest

c. water in the ocean

D. water in a city

6. Economics is defined as

a. the study of business.

B. the study of how society manages its scarce resources.

c. the study of central planning.

d. the study of government regulation.

7. The adage, “There is no such thing as a free lunch,” means:

A. To get something we like, we usually have to give up another thing we like.

b. Even people on welfare have to pay for food these days.

c. The cost of living is always increasing.

d. All costs are measured in dollars.

8. Daniel decides to spend an hour playing basketball rather than working at $6 per hour. His tradeoff is

a. nothing, because he enjoys playing basketball more than working.

b. the increase in skill he obtains from playing basketball for that hour.

c. the $6 he could have earned.

d. nothing, because he spent $6 for admission into the sports complex to play basketball.

9. Efficiency means that

A. society is getting the most it can from its scarce resources.

b. society is conserving resources in order to save them for the future.

c. society’s goods and services are distributed fairly among society’s members.

d. society has lessened its dependence on foreign energy sources.

10. Equity means that

a. all members of society have the same income.

b. society is getting the most it can from its scarce resources.

c. society’s goods and services are distributed according to need.

D. the benefits of society’s resources are distributed fairly among society’s members.

11. A good definition of equity would be

a. everyone receiving the same income.

B. fairness.

c. efficiency.

d. eliminating extreme affluence.

12. When government policies are being designed,

a. equity and efficiency goals are usually independent of each other.

b. there is usually a tradeoff between equity and efficiency.

c. equity can usually be achieved without an efficiency loss.

d. increasing efficiency usually results in more equity.

13. When the government redistributes income from the rich to the poor,

a. efficiency is improved.

b. both rich people and poor people benefit directly.