1. A situation in which people's wants exceed their resources is called
   
   
   1. abundance.
      
      
   2. choice.
      
      
   3. scarcity.
      
      
   4. allocation.
      
      
2. Economists study how
   
   
   1. people make purposeful choices with scarce resources.
      
      
   2. people make purposeful choices with abundant resources.
      
      
   3. people make random choices with scarce resources.
      
      
   4. people make random choices with abundant resources.
      
      
3. An arrangement by which economic exchanges between people takes place is called
   
   
   1. a choice.
      
      
   2. a market.
      
      
   3. scarcity.
      
      
   4. gains from trade.
      
      
4. Which of the following represents the alternative choices of goods that the economy can produce?
   
   
   1. Opportunity costs
      
      
   2. Economic interactions
      
      
   3. Budget constraints
      
      
   4. Production possibilities
      
      
5. The value of the alternative that was not chosen is called the
   
   
   1. marginal cost of the choice.
      
      
   2. average cost of the choice.
      
      
   3. opportunity cost of the choice.
      
      
   4. gain from the choice.
      
      
6. Exchange of goods and services between people or firms in different nations is called
   
   
   1. intranational trade.
      
      
   2. international trade.
      
      
   3. gains from trade.
      
      
   4. comparative advantage.
      
      
7. When one person or group of people can produce one good relative to another good with comparatively less time, effort, or resources than another person can produce that good, this is called
   
   
   1. comparative advantage.
      
      
   2. specialization.
      
      
   3. opportunity cost.
      
      
   4. division of labor.
      
      
8. The production possibilities curve slopes
   
   
   1. downward and is bowed out from the origin.
      
      
   2. upward and is bowed out from the origin.
      
      
   3. downward and is bowed in toward the origin.
      
      
   4. upward and is bowed in toward the origin.
      
      
9. Points outside the production possibilities curve are
   
   
   1. efficient.
      
      
   2. inefficient.
      
      
   3. impossible.
      
      
   4. possible.
      
      
10. Economic growth causes a(n)
    
    
    1. inward shift in the production possibilities curve.
       
       
    2. outward shift in the production possibilities curve.
       
       
    3. upward movement on the production possibilities curve.
       
       
    4. downward movement on the production possibilities curve.
       
       
11. Which of the following is not one of the essential questions that an economy focuses on?
    
    
    1. What are the goods and services to be produced?
       
       
    2. When are the goods and services to be produced?
       
       
    3. How are the goods and services to be produced?
       
       
    4. For whom are the goods and services to be produced?
       
       
12. Which of the following is not one of the characteristics of a market economy?
    
    
    1. Freely determined prices
       
       
    2. Property rights
       
       
    3. Competitive markets
       
       
    4. Centrally planned production
       
       
13. The costs of buying and selling are called
    
    
    1. transaction costs.
       
       
    2. market costs.
       
       
    3. opportunity costs.
       
       
    4. incentive costs.
       
       
14. Which of the following is not one of the important roles of prices in a market economy?
    
    
    1. They serve as signals.
       
       
    2. They provide incentives.
       
       
    3. They form preferences.
       
       
    4. They affect the distribution of income.
       
       
    Use the following table for questions 15 and 16.
    
    Suppose that the production possibilities for guns and flowers are as follows:
    
    

    Choice	Guns	Flowers
    A	0	100
    B	25	90
    C	50	70
    D	75	40
    E	100	0

15. If all of the economy's resources were devoted to the production of flowers, the amount of guns that would be produced is
    
    
    1. 100.
       
       
    2. 75.
       
       
    3. 0.
       
       
    4. 50.
       
       
16. If the economy is currently producing 50 guns and 60 flowers, then
    
    
    1. it is at an efficient level of production.
       
       
    2. an efficient level of production can be achieved by producing 20 more flowers.
       
       
    3. an efficient level of production can be achieved by producing less flowers and more guns.
       
       
    4. an efficient level of production can be achieved by producing 10 more flowers.
       
       
    Use Figure 1.7 for questions 17, 18, and 19.
    
    

    Figure 1.7

    
    
17. If the economy devotes all of its resources to steel production, it will be producing at point
    
    
    1. A.
       
       
    2. B.
       
       
    3. H.
       
       
    4. G.
       
       
18. Point F in Figure 1.7 represents
    
    
    1. an efficient production level.
       
       
    2. an inefficient production level.
       
       
    3. an impossible production level.
       
       
    4. a possible production level.
       
       
19. If the economy is currently producing at point E, then
    
    
    1. it is utilizing its resources efficiently.
       
       
    2. it is utilizing its resources inefficiently.
       
       
    3. it is on its production possibilities curve.
       
       
    4. it is beyond its production possibilities curve.
       
       
    Use Figure 1.8 for question 20.
    
    

    Figure 1.8

    
    
20. An economy experiences economic growth when it moves
    
    
    1. from point A to point B.
       
       
    2. from point A to point C.
       
       
    3. from point D to point C.
       
       
    4. from point D to point B.