Question 1

Foreign trade

Accepted Answer

A)   increases the scarcity of resources.
B)   makes a country more equitable.
C)   allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home.
D)   allows a country to avoid trade-offs.E) A) and D)
F) A) and C)

Question 2

Choices must be made in the use of resources

Accepted Answer

A)   because they are limited in supply.
B)   because they are limited in demand.
C)   only if the resources are non-renewable.
D)   because they are in infinite supply.E) All of the above
F) A) and C)

Question 3

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) A) and B)
F) A) and D)

Question 4

Why is a high quality education system important in raising living standards for future generations?

Accepted Answer

A high quality educational system will r...

Question 5

The inflation rate is the

Accepted Answer

A)   price level.
B)   average price of goods and services in an economy.
C)   rate of growth of the price level.
D)   purchasing power of money.E) A) and C)
F) All of the above

Question 6

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) C) and D)
F) A) and B)

Question 7

Resources are

Accepted Answer

A)   scarce for households but plentiful for economies.
B)   plentiful for households but scarce for economies.
C)   scarce for households and scarce for economies.
D)   plentiful for households and plentiful for economies.E) A) and D)
F) None of the above

Question 8

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) B) and C)
F) A) and C)

Question 9

When are markets not a good way to organise economic activity?

Accepted Answer

Markets are a poor way to organise econo...

Question 10

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) None of the above
F) All of the above

Question 11

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 D)

Question 12

Which of the following situations describes the greatest market power?

Accepted Answer

A)   BMW's impact on the price of cars.
B)   A farmer's impact on the price of corn.
C)   Microsoft's impact on the price of desktop operating systems.
D)   A student's impact on university fees.E) A) and C)
F) B) and C)

Question 13

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) A) and B)
F) A) and C)

Question 14

Define opportunity cost. What is the opportunity cost to you of attending university? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some...

Question 15

Trade-offs are required because wants are unlimited and resources are

Accepted Answer

A)   economical.
B)   unlimited.
C)   efficient.
D)   marginal.
E)   scarce.F) C) and D)
G) A) and E)

Question 16

When a jet flies overhead, the noise it generates is an externality.

Accepted Answer

A) True 
 B)False

Question 17

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) All of the above

Question 18

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 19

When economists say, "There is no such thing as a free lunch," they mean that all economic decisions involve trade-offs.

Accepted Answer

A) True 
 B)False

Question 20

Adam Smith's "invisible hand" concept describes how corporate business reaches into the pockets of consumers like an "invisible hand."

Accepted Answer

A) True 
 B)False

Exam 1: What Is Economics

Adam Smith's "invisible hand" concept describes how corporate business reaches into the pockets of consumers like an "invisible hand."

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The opportunity cost of building additional parking at your university is

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Resources are

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Almost all variation in living standards in different countries

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When are markets not a good way to organise economic activity?

Correct AnswerverifiedMarkets are a poor way to organise econo...View AnswerShow Answer

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

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An increase in the price of beef provides

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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

A nation's standard of living can be increased by

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Which of the following situations describes the greatest market power?

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The inflation rate is the

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Choices must be made in the use of resources

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Foreign trade

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Why is a high quality education system important in raising living standards for future generations?

Correct AnswerverifiedA high quality educational system will r...View AnswerShow Answer

Trade-offs are required because wants are unlimited and resources are

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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

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

When a jet flies overhead, the noise it generates is an externality.

Correct AnswerverifiedShow Answer

Define opportunity cost. What is the opportunity cost to you of attending university? What was your opportunity cost of coming to class today?

Correct AnswerverifiedWhatever must be given up to obtain some...View AnswerShow Answer

When economists say, "There is no such thing as a free lunch," they mean that all economic decisions involve trade-offs.

Correct AnswerverifiedShow Answer

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Markets are a poor way to organise econo...
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Correct Answer
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If there is a market failure, such as an...
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Correct Answer
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A high quality educational system will r...
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Correct Answer
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Whatever must be given up to obtain some...
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