Question 1

Which of the following is a problem created by scarcity?

Accepted Answer

All of these options are issues that arise due to scarcity. In option A, there is a scarcity of time because the college course is only offered at certain times. In option B, there is a scarcity of funds which prevents the White House from offering tours. In option C, there is a scarcity of battery power which limits the number of phone calls that can be made.

Question 2

Scarcity can best be defined as a situation in which:

Accepted Answer

Scarcity refers to the limited availability of resources relative to the unlimited wants and needs we have as individuals and society. It means that not all wants and needs can be satisfied due to constraints on resources, and choices must be made about how to allocate these resources.

Question 3

Mimi gets a job twenty miles from her house and purchases a new car to commute. As a result of this new expense, Mimi decides to sell her season tickets to the local football stadium. Mimi's situation can be described as:

Accepted Answer

Mimi is making a trade-off between her new expense of commuting and her enjoyment of the football season tickets. She is choosing to sell the season tickets in order to save money and make her new commute more affordable.

Question 4

Which of the following is a basic tenant of the economic concept of scarcity?

Accepted Answer

The basic tenant of scarcity is that resources are limited, which means that economies must make choices among production alternatives, indicating that option D is the correct answer. The other options do not relate to the concept of scarcity in the same way.

Question 5

The greatest constraint faced by banks considering the alternative of lending to Bangladeshi villagers is:

Accepted Answer

The passage mentions limited funds as the main constraint faced by banks considering lending to Bangladeshi villagers. While other options mentioned (such as not having qualified loan officers or counterfeit financial reports) may also be challenges, they are not identified as the greatest constraint.

Question 6

The assumption of rational behavior:

Accepted Answer

The assumption of rational behavior helps economists explain how people behave in a way that will best achieve their goals. It assumes that people make decisions based on information and rational analysis, and seek to maximize their utility or satisfaction. However, this assumption is not always realistic, and people may not always behave rationally.

Question 7

Which of the following economic decisions would most likely be studied by a macroeconomist?

Accepted Answer

Macroeconomics is concerned with the study of the entire economy, including issues related to government policies, taxation, and economic growth. The implementation of a flat rate personal income tax by the government of Estonia would fall into this category. The decisions made by Domino's Pizza and a local entrepreneur opening a Waffle House are more related to microeconomics, which is concerned with individual consumers and firms making decisions. The rise in train fares due to labor negotiations would also be more related to microeconomics as it involves a specific industry and the impact on consumers.

Question 8

Which of the following is not a direct result of scarcity?

Accepted Answer

The answer of Which of the following is not a...

Question 9

The problems created by scarcity:

Accepted Answer

Scarcity is a fundamental economic problem that applies to everyone because resources, including time, money, and natural resources, are limited. This means that individuals, businesses, and governments must make choices about how to allocate these resources to satisfy competing wants and needs. While working overtime may help alleviate scarcity for an individual, it is not a sustainable or scalable solution for a larger society faced with scarcity. The top income earners are not exempt from the problem of scarcity, as their wants and needs also compete with limited resources.

Question 10

When we assume that consumers want to pay the lowest price possible, we assume that consumers are:

Accepted Answer

Assuming that consumers want to pay the lowest price possible is based on the assumption of rational behavior, meaning that consumers weigh the cost and benefits of a purchase and aim to minimize costs while maximizing benefits. It does not necessarily imply that consumers are cheap or deceitful, and while being informed may help consumers make better decisions, it is not directly related to the assumption of price minimization.

Question 11

Which of the following statements about scarcity is true?

Accepted Answer

Scarcity is an undeniable part of everyone's reality due to the world's limited resources. This is a fundamental concept in economics and affects all individuals, regardless of their wealth or economic status. While rational decision making can help to alleviate some scarcity concerns, it cannot eliminate them entirely as resources will always be limited. Scarcity is studied in both microeconomics and macroeconomics as it is a pervasive and important economic issue.

Question 12

Suppose Hassan wants to rent a house near the lake over a holiday weekend, but the only house available is out of his price range. This is an example of:

Accepted Answer

The situation described in the question is an example of a resource constraint, as Hassan is unable to obtain the desired house due to a limitation in his financial resources.

Question 13

When we believe the best result will come from the decision we have made, we are being:

Accepted Answer

When we believe the best result will come from the decision we have made, we are being rational. This means we have weighed the options and come to a logical conclusion that our decision will lead to the best outcome. Gullible implies a lack of critical thinking and blindly accepting information, while short-sighted suggests making a decision without considering long-term consequences. Being considerate may involve empathy and thoughtfulness towards others, but it does not necessarily imply rational decision-making.

Question 14

Which of the following statements about rationality is true?Economists wish to prove that all individuals are rational.Engaging in a behavior for which the marginal costs exceed the marginal benefits is irrational.As long as the marginal benefit of an action is positive, the action is rational.Individuals are hardly ever rational.

Accepted Answer

Engaging in a behavior for which the marginal costs exceed the marginal benefits is considered irrational according to economic theory, as rationality involves making decisions that maximize an individual's utility or satisfaction.

Question 15

Scarcity reflects our inability to satisfy wants due to:

Accepted Answer

Scarcity refers to the limited availability of resources to meet unlimited wants and needs. This is not necessarily caused by an unequal distribution of resources, inefficient political systems or unemployed workers, but rather by the inherent finite nature of resources.

Question 16

The problem of having unlimited wants under the constraint of limited resources describes:

Accepted Answer

The problem of having unlimited wants under the constraint of limited resources is scarcity, which refers to the fundamental economic problem of having unlimited human wants and needs in a world of limited resources. This forces individuals, businesses, and governments to make choices about how to allocate resources efficiently. Opportunity cost (A) is the cost of giving up the next best alternative when making a decision, sunk costs (B) are costs that have already been incurred and cannot be recovered, and the marginal principle (D) states that individuals should continue to consume a good or service up to the point where its marginal benefit equals its marginal cost.

Question 17

The famous saying, "There is no such thing as a free lunch," is an example of which economic concept?

Accepted Answer

The saying "There is no such thing as a free lunch" embodies the concept of trade-offs in economics, meaning that in order to obtain one thing, you have to give up something else. Even if something appears to be "free," there is always a cost or trade-off involved.

Question 18

Trade-offs:

Accepted Answer

Trade-offs are inevitable in every decision-making process, as it involves making a choice between different alternatives. Every option has its advantages and disadvantages, and choosing one option over the other would involve sacrificing something in return. Therefore, trade-offs are associated with every decision, making option A) the best choice. Options B), C), and D) are incorrect as they are not true statements.

Question 19

How should we best approach the issue of scarcity?

Accepted Answer

Scarcity is a fundamental economic problem that arises from limited resources (such as land, labor, capital, and entrepreneurship) whereas human wants and needs are unlimited. Thus, the best approach to the issue of scarcity is to make decisions and choices that allow us to arrange our resources rationally. This means prioritizing needs over wants and making trade-offs that maximize the use of available resources. Fiscal policy changes and adopting economic policies that lead to unlimited resources are not realistic solutions as scarcity is an inherent condition of resource allocation. Only option A relates to rational resource allocation, but it is not comprehensive enough to fully address the issue of scarcity.

Question 20

Individuals, firms, and societies are limited in the amount of goods and services that they can produce. This is a direct result of:

Accepted Answer

Scarcity is the condition in which available resources are finite and insufficient to satisfy wants and needs fully. As a result, individuals, firms, and societies must choose what goods and services to produce with their limited resources, and some wants and needs must go unmet. This is why scarcity is considered to be the fundamental economic problem.

Quiz 1: Economics and Life