Economics Today: The Micro View, 18th Edition Test Bank by Roger LeRoy Miller

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Economics Today, 18e (Miller)
Chapter 2 Scarcity and the World of Trade-Offs
2.1 Scarcity
1) Scarcity arises because
A) resources are finite and are inadequate to meet all human wants.
B) production of goods and services is always slow.
C) companies are slow to explore for new resources.
D) a large number of people live in poverty.
Answer: A
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
2) Scarcity refers to
A) a shortage in a good or service.
B) the ability of society to consume all that it produces.
C) the inability of society to satisfy all human wants because of limited resources.
D) the inability of an individual to purchase a good or service due to her limited income.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
3) Which of the following statements is TRUE about scarcity?
A) Both rich and poor people face the problem of scarcity.
B) Scarcity exists only when supply is insufficient to meet demand.
C) Scarcity exists only when a shortage exists.
D) Scarcity can be eliminated when a country becomes richer.
Answer: A
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

2

4) The problem of economic scarcity applies
A) only in developed countries, because resources are scarce in these nations.
B) only in underdeveloped countries, because there are no productive resources in these nations.
C) only to an economy with an insufficient supply of money.
D) to the economies of all nations, regardless of their level of development.
Answer: D
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
5) In every economic system, choices must be made because resources
A) are unlimited, but human desires and wants are limited.
B) are limited, but human desires and wants are unlimited.
C) are unlimited, and so are human desires and wants.
D) are limited, and so are human desires and wants.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
6) In the production of goods and services, trade-offs exist because
A) not all production is efficient.
B) society has only a limited amount of productive resources.
C) buyers and sellers often must negotiate prices.
D) human wants and needs are limited at a particular point in time.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
7) Which of the following statements about economic scarcity is FALSE?
A) Scarcity occurs among the poor and the rich.
B) Scarcity only occurs if there are shortages and people wait in line to buy things.
C) Scarcity results from not having enough resources to produce all the things we want.
D) Scarcity results in the necessity to make choices.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

3

8) Which of the following statements is FALSE?
A) Economic goods are available in desired quantities at a zero price.
B) A good is anything that gives satisfaction or happiness to individuals.
C) Services are intangible goods such as dry cleaning, hospital care, and restaurant meal
preparation.
D) Wants are unlimited and include all material and nonmaterial desires.
Answer: A
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
9) Which of the following statements about scarcity is TRUE?
A) Scarcity is no longer a problem for industrialized countries.
B) Scarcity exists in all societies.
C) Scarcity is a problem only for greedy people.
D) Scarcity is a problem only in countries that do not use markets to organize economic activity.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
10) In 2006, hurricanes damaged many parts of Texas, destroying homes, businesses, schools,
and infrastructure. In strictly economic terminology, these hurricanes are said to have caused
A) scarcity, because the damages made food and shelter scarce.
B) scarcity, because some goods were difficult to get.
C) shortages, because supplies were cut off and goods were destroyed.
D) tradeoffs, because some areas of the country were damaged when others were not.
Answer: C
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

4

11) Scarcity implies that people must
A) be miserable.
B) be selfish.
C) make choices.
D) not be selfish.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
12) Scarcity
A) does not exist in the United States.
B) applies only to developing countries.
C) is caused by production problems.
D) is not a shortage.
Answer: D
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
13) The difference between scarcity and a shortage is that
A) scarcity is caused by poverty and shortages are caused by natural disasters.
B) shortages are a type of scarcity caused by natural disasters while scarcity is caused by human
errors.
C) scarcity always is a part of human life while shortages usually are temporary.
D) shortages are always part of human life while scarcity is usually temporary.
Answer: C
Diff: 3
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

17) In economic terminology, when a resource is used to produce output it is referred to as
A) an intangible.
B) a factor of production.
C) a service.
D) a fifth element.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
18) All of the following are examples of physical capital EXCEPT
A) buildings.
B) machinery.
C) company stocks and bonds.
D) a hydroelectric power plant.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Application of knowledge
19) Entrepreneurs are important to market economies because
A) they engage in risk taking and innovation.
B) they make up a large portion of low-skilled labor.
C) they take few risks and thereby, suffer fewer bankruptcies.
D) they represent the bulk of employment at large corporations.
Answer: A
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

20) Which of the following are considered factors of production?
I. Land
II. Labor
III. Physical capital
IV. Entrepreneurship
A) I and II only
B) I and III only
C) I, II and III only
D) I, II, III and IV
Answer: D
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
21) All of the following are economic resources, or factors of production EXCEPT
A) land.
B) physical capital.
C) money.
D) entrepreneurship.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
22) In economic terminology, the accumulated training and education that workers receive to
increase their productivity is referred to as
A) entrepreneurship.
B) human capital.
C) labor.
D) physical capital.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

23) Physical capital is distinguished from human capital because
A) physical capital refers to trained people.
B) physical capital refers to equipment and machinery, whereas human capital refers to trained
people.
C) human capital refers only to day laborers.
D) physical capital refers to trained people, whereas human capital refers to equipment and
machinery.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
24) In economics, the term physical capital
A) refers to funds used by businesses to acquire goods and services.
B) refers to all manufactured resources used for production.
C) refers to the process of raising funds through the stock market.
D) defines the stock of merchandise already produced.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
25) Human capital is
A) what people get from physical capital.
B) the accumulation of skills, training and education of workers.
C) the value obtained from selling stocks and bonds.
D) the human resources that perform the function of raising capital.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

26) The conversion of resources into consumer goods or services is called
A) human capital.
B) production.
C) opportunity cost.
D) absolute advantage.
Answer: B
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
27) Services can be thought of as
A) unvalued goods.
B) unwanted goods.
C) free goods.
D) intangible goods.
Answer: D
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
28) Economic goods are defined as
A) tangible items only.
B) services only.
C) anything from which an individual derives satisfaction.
D) any item which is available in sufficient quantity at zero price.
Answer: C
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

29) If the quantity desired of something exceeds the amount available at zero price, that item is
called
A) capital.
B) an economic good.
C) an intangible good.
D) a bad.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
30) Which is the best example of an intangible good?
A) the car you dream of owning but cannot afford
B) the suit you hope will make a good impression when you go on job interviews
C) the textbook study guide you hope will prepare you to perform well on examinations
D) the advice and expertise provided by the music store clerk who sold you that CD
Answer: D
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
31) At a zero price, which of the following conditions is TRUE for an economic good?
A) Its quantity supplied exceeds its quantity demanded.
B) Its quantity demanded exceeds its quantity supplied.
C) Its quantity demanded equals its quantity supplied.
D) Scarcity disappears.
Answer: B
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

32) The most basic concept in economics is
A) wealth.
B) income.
C) scarcity.
D) spending.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
33) Scarcity
A) exists in all human societies.
B) is a problem for less-developed nations only.
C) used to be a problem, but is not an issue for modern industrial nations.
D) afflicts greedy people only.
Answer: A
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
34) Scarcity affects
A) only rich people.
B) only poor people.
C) only middle income people.
D) all people.
Answer: D
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

35) Scarcity is
A) a shortage of goods and services.
B) poverty and misery.
C) a situation in which the resources for producing the goods and services that people desire are
sufficient to satisfy people’s desires.
D) a situation in which the resources required to produce the goods and services that people
desire are insufficient to satisfy all wants.
Answer: D
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
36) Scarcity implies that
A) people should limit their wants, since shortages exist.
B) firms should be more efficient when producing goods.
C) people must make choices.
D) nonrenewable resources should never be used.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
37) Economic goods are
A) abundant goods, about which we must constantly make decisions about their best use.
B) all imaginable items from which individuals derive satisfaction or happiness.
C) goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a
zero price.
D) goods that are scarce, for which the quantity demanded exceeds the quantity supplied at any
price.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

38) Scarcity exists because
A) the majority of people in the world are poor.
B) people are too greedy and refuse to share what they have with others.
C) human wants exceed what can be produced with the limited resources available.
D) not enough new technology is being used to eliminate scarcity.
Answer: C
Diff: 1
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
39) Extremely cold winter weather has destroyed oranges in Florida. The freeze has caused
A) scarcity because there are less oranges now than people want.
B) scarcity because people have to switch to other types of citrus fruits.
C) a shortage because people cannot obtain as many oranges as they wish to buy at the pre-freeze
price.
D) a shortage because the orange growers will have less income.
Answer: C
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
40) The existence of scarcity means that
A) there are not enough resources to satisfy unlimited human wants.
B) firms will increase their production to eliminate the scarcity.
C) the government will step in to eliminate the scarcity.
D) firms working with the government will allocate resources to eliminate the scarcity.
Answer: A
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking

41) Jane is a top-level executive earning a high salary. Jane has just ordered a luxury car only to
be told that she will have to wait three weeks for it to be delivered. Which of the following
statements is TRUE?
A) The car is not a scarce good.
B) The car is an economic good.
C) The car is human capital.
D) The car is an intangible good.
Answer: B
Diff: 2
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
42) Scarcity and shortages differ in that
A) scarcity is caused by natural disasters and shortages are caused by mistakes people make.
B) scarcity is a condition of human life while shortages are usually temporary phenomena related
to an imbalance between the amount desired and the amount produced.
C) scarcity is a type of shortage but shortage is a broader concept.
D) shortages apply to resource markets while scarcity applies to product markets.
Answer: B
Diff: 3
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Analytical thinking
43) There are not enough of four goods to satisfy the wants of people. For good A, this is true
when the price is $100. This is true for good B at a price of $10, for good C at a price of $1, and
for good D at a price of zero. Which situation reflects scarcity rather than shortage?
A) A
B) B
C) C
D) D
Answer: D
Diff: 3
Topic: 2.1 Scarcity
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to
think like an economist
AACSB: Application of knowledge