Quiz 1
1. Economics is best defined as the study of how (3)
1) prices and quantities of goods and services are determined in markets.
2) private firms and households respond to taxes and subsidies.
3) people make choices in the presence of scarcity and the results of those choices.
4) interest rates and exchange rates are determined.

2. The scarcity principle implies that (4)
1) people will never be satisfied with what they have.
2) as wealth increases, making choices becomes less necessary.
3) the prices of scarce goods must rise due to excess demand.
4) choices must be made and tradeoffs will occur.

3. The 'no-free-lunch' principle is another name for the (2)
1) cost-benefit principle.
2) the scarcity principle.
3) the ceteris paribus principle.
4) the marginal (not average) principle.

4. You currently go to the gym three times each week. Each visit costs you $15 and you get $90 worth of benefits from your current weekly gym routine. Given this information (4)
1) you should go to the gym a fourth time each week.
2) you should reduce the number of times you go to the gym each week.
3) you should not change your gym routine. 4) it is impossible to say whether you should go to the gym more often than three times a week.

5. To earn her allowance of $30 Janie must either mow the lawn or wash clothes. She dislikes both chores, but prefers working outdoors. If both jobs take the same amount of time Janie will choose to mow because the ______________ is greater.(3)
1) marginal benefit
2) average benefit
3) economic surplus
4) opportunity cost. 6. Suppose Xena is willing to pay $1,000 for a new sword, but she is able to purchase one for $900. Her ___________ is __________. (4)
1) total benefit; $100
2) opportunity cost; $100
3) economic surplus; $1,000
4) economics surplus; $100

6.