Question 1

The opportunity cost of building additional parking at your university is

Accepted Answer

A)  the cost of the labour, concrete, etc.used to build the parking.
B)  the value of the land used in its next best alternative use, and the cost of the labour, concrete, etc.used to build the parking.
C)  the value of the land and resources used in all of their alternative uses.
D)  infinite; we cannot estimate it.E) B) and C)
F) A) and C)

Question 2

Almost all variation in living standards in different countries

Accepted Answer

A)  is attributable to variations in productivity.
B)  is attributable to differences in countries' endowments of natural resources.
C)  is attributable to differences in climate.
D)  is attributable to variation in population sizes.E) B) and C)
F) A) and B)

Question 3

A rational person does not act unless

Accepted Answer

A)  the action is ethical.
B)  the action produces marginal costs that exceed marginal benefits.
C)  the action produces marginal benefits that exceed marginal costs.
D)  the action makes money for the person.
E)  None of these answers.F) A) and E)
G) A) and B)

Question 4

Adam Smith argues in the Wealth of Nations that an economy will produce more goods and services if

Accepted Answer

A)  people act in the public interest, rather than if they act in their own self-interest.
B)  people act in their own self-interest, rather than if the government directs economic activity.
C)  the government controls the use of the nation's scarce resources.
D)  people ignore their own interests and contribute to national wealth as a whole.E) All of the above
F) C) and D)

Question 5

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure, such as an...

Question 6

Inflation reduces

Accepted Answer

A)  the price level.
B)  employment.
C)  the money supply.
D)  the value of money.E) B) and C)
F) A) and D)

Question 7

The business cycle is the

Accepted Answer

A)  relationship between unemployment and inflation.
B)  irregular fluctuations in economic activity.
C)  positive relationship between the quantity of money in an economy and inflation.
D)  predictable changes in economic activity due to changes in government spending and taxes.E) None of the above
F) B) and D)

Question 8

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

A)  the business cycle.
B)  productivity.
C)  the interest rate.
D)  inflation.E) B) and D)
F) A) and B)

Question 9

An increase in the price of beef provides

Accepted Answer

A)  no information because prices in a market system are managed by planning boards.
B)  information which tells consumers to buy less pork.
C)  information which tells producers to produce more beef.
D)  information which tells consumers to buy more beef.E) B) and C)
F) A) and C)

Question 10

Outline one example of the principle of 'thinking at the margin.'

Accepted Answer

Rational people think at the margin.They...

Question 11

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

Because economics is the study of how so...

Question 12

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Accepted Answer

A)  increase efficiency and increase equality.
B)  increase efficiency but decrease equality.
C)  decrease efficiency but increase equality.
D)  decrease efficiency and decrease equality.E) All of the above
F) B) and C)

Question 13

A nation's standard of living can be increased by

Accepted Answer

A)  improvements in technology and international trade.
B)  improvements in technology but not international trade.
C)  international trade but not improvements in technology.
D)  neither international trade nor improvements in technology.E) A) and C)
F) B) and C)

Question 14

Which of the following statements is true about a market economy?

Accepted Answer

A)  With a large enough computer, central planners could guide production more efficiently than markets.
B)  Market participants act as if guided by an invisible hand to produce outcomes that maximise social welfare.
C)  The strength of a market system is that it tends to distribute resources evenly across consumers.
D)  Taxes help prices communicate costs and benefits to producers and consumers.E) A) and B)
F) All of the above

Question 15

Andile is better at cleaning and Joe is better at cooking.It will take fewer hours to eat and clean if Joe specialises in cooking and Andile specialises in cleaning than if they share the household duties evenly.

Accepted Answer

A) True 
 B)False

Question 16

Explain why there is a short-run trade-off between inflation and unemployment.

Accepted Answer

Over a period of a year or two, many eco...

Question 17

There are three questions that any economy has to face: What goods and services should be produced? How should these goods and services be produced? ___________________?

Accepted Answer

A)  How many goods and services should be produced?
B)  When should the goods and services be produced?
C)  Why should the goods and services be produced?
D)  Who should get the goods and services that have been produced?E) A) and B)
F) B) and C)

Question 18

High and persistent inflation is caused by excessive growth in the quantity of money in the economy.

Accepted Answer

A) True 
 B)False

Question 19

Suppose you are considering going to the cinema, and you place a r₁80 value on your anticipated enjoyment of the film.The ticket price is R90 and you would be giving up two hours of work, where you earn R75 per hour.You would go to

Accepted Answer

A)  work as the opportunity cost of the movies exceeds the expected benefit.
B)  see the film as your incentive is the R90 excess expected benefit.
C)  see the film as your enjoyment will exceed the lost wages by R30.
D)  see the film as the benefit of R270 exceeds the lost wages.E) A) and D)
F) C) and D)

Question 20

The market power that your university's bookstore has now, compared with the 1990s, is limited by

Accepted Answer

A)  new competition laws.
B)  public goods provided by the government.
C)  university policies against monopoly power.
D)  increased access to other booksellers provided by the internet.E) B) and C)
F) A) and D)

Exam 1: What Is Economics

The market power that your university's bookstore has now, compared with the 1990s, is limited by

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A nation's standard of living can be increased by

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Adam Smith argues in the Wealth of Nations that an economy will produce more goods and services if

Correct AnswerverifiedShow Answer

Andile is better at cleaning and Joe is better at cooking.It will take fewer hours to eat and clean if Joe specialises in cooking and Andile specialises in cleaning than if they share the household duties evenly.

Correct AnswerverifiedShow Answer

There are three questions that any economy has to face: What goods and services should be produced? How should these goods and services be produced? ___________________?

Correct AnswerverifiedShow Answer

Both the production of goods and services and the unemployment rate are used to measure

Correct AnswerverifiedShow Answer

The business cycle is the

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How does the study of economics depend upon the phenomenon of scarcity?

Correct AnswerverifiedBecause economics is the study of how so...View AnswerShow Answer

A rational person does not act unless

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Explain why there is a short-run trade-off between inflation and unemployment.

Correct AnswerverifiedOver a period of a year or two, many eco...View AnswerShow Answer

An increase in the price of beef provides

Correct AnswerverifiedShow Answer

Suppose you are considering going to the cinema, and you place a r₁80 value on your anticipated enjoyment of the film.The ticket price is R90 and you would be giving up two hours of work, where you earn R75 per hour.You would go to

Correct AnswerverifiedShow Answer

Outline one example of the principle of 'thinking at the margin.'

Correct AnswerverifiedRational people think at the margin.They...View AnswerShow Answer

High and persistent inflation is caused by excessive growth in the quantity of money in the economy.

Correct AnswerverifiedShow Answer

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct AnswerverifiedIf there is a market failure, such as an...View AnswerShow Answer

Which of the following statements is true about a market economy?

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Inflation reduces

Correct AnswerverifiedShow Answer

Almost all variation in living standards in different countries

Correct AnswerverifiedShow Answer

The opportunity cost of building additional parking at your university is

Correct AnswerverifiedShow Answer

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Correct AnswerverifiedShow Answer

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Because economics is the study of how so...
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Over a period of a year or two, many eco...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Rational people think at the margin.They...
View Answer

Correct Answer
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Correct Answer
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If there is a market failure, such as an...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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