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Tutorial 1 1

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6 views

Tutorial 1 1

Uploaded by

meladfelobater3
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Tutorial 1

Chapter 1
▪ Choose the correct answer:

1) Scarcity is a situation in which


A) people cannot satisfy all their wants.
B) most people can get only bare necessities.
C) people can satisfy all their wants.
D) some people can get all they want and some cannot.
Answer: A

2) Fundamental economic problems basically arise from


A) the fact that society has more than it needs.
B) turmoil in the stock market.
C) the unequal distribution of income.
D) our wants exceeding our scarce resources.
Answer: D

3) Scarcity can be eliminated through


A) the use of market mechanisms.
B) exploration that helps us find new resources.
C) wise use of our resources.
D) None of the above because scarcity cannot be eliminated.
Answer: D
(Remember that all people suffer from scarcity (rich and poor))

4) As an economic concept, scarcity applies to


A) both money and time.
B) money but not time.
C) time but not money.
D) neither time nor money.
Answer: A
(Note that scarcity implies that people must make choices)
5) Economics is best defined as
A) how people make money and profits in the stock market.
B) making choices from an unlimited supply of goods and services.
C) making choices with unlimited wants but facing a scarcity of resources.
D) controlling a budget for a household.
Answer: C

6) The study of the choices made by individuals is part of the definition of


A) microeconomics.
B) positive economics.
C) macroeconomics.
D) normative economics.
Answer: A

7) In part, microeconomics is concerned with the study of


A) unemployment and economic growth.
B) the Federal Reserve's policies.
C) the effect government regulation has on the price of a product.
D) national output of goods and services.
Answer: C

8) Which of the following questions is a macroeconomic issue?


A) How many more pounds of cookies will a consumer purchase if the price of cookies
decreases?
B) What effect would a cure for Mad Cow Disease have on the market for beef?
C) What is the future growth prospect for an economy?
D) How many workers should the owner of a business hire?
Answer: C

9) Which factor of production earns profit?


A) land
B) human capital
C) money
D) entrepreneurship
Answer: D

10) The "gifts of nature" are included as part of which factor of production?
A) labor
B) land
C) capital
D) entrepreneurship
Answer: B
11) Human resources that perform the functions of organizing, managing, and assembling the
other resources are called
A) physical capital.
B) venture capital.
C) entrepreneurship.
D) productive capital.
Answer: C

12) After you graduate, you have decided to accept a position working at the Bureau of Labor
Statistics for $45,000.00 a year. The two other offers you received were working for Wal-Mart
for $38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you
would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the
position at the Bureau of Labor Statistics?
A) the $45,000 you are paid for working at the Bureau of Labor Statistics
B) the $42,000 you would have been paid working for Ernst and Young
C) the $38,000 you would have been paid working for Wal-Mart
D) the $42,000 you would have been paid working for Ernst and Young and the $38,000 you
would have been paid working for Wal-Mart
Answer: B

13) During the summer you have made the decision to attend summer school, which prevents
you from working at your usual summer job in which you normally earn $6,000 for the summer.
Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, the
opportunity cost of attending summer school is
A) $10,300.
B) $6,000.
C) $4,300.
D) $3,300.
Answer: A

14) Jill, an economics student, has already spent 5 hours cleaning her room. In deciding whether
or not to continue cleaning for another hour, she applies the economic principle of
A) scarcity.
B) ceteris paribus.
C) choosing at the margin.
D) productivity.
Answer: C
15) Suppose that you are spending two hours a day studying economics, and your grade is 85
percent. You want a higher grade and decide to study for an extra hour a day. As a result, your
grade rises to 90 percent. Your marginal benefit is the
A) 5 points increase in your grade minus the opportunity cost to you of spending the hour
studying.
B) extra hour per day you spend on studying.
C) 5 points increase in your grade.
D) three hours per day you spend on studying.
Answer: C

▪ Suppose you plan to go to school this summer. The cost of tuition and textbooks is $1,400 and
housing, board, and entertainment will cost you $500. If you didn't go to school, you'd live in your
parents' house for free, but your other living expenses would be about the same. Also, if you didn't
go to school, you'd work full time and could earn $8,000. You can still work part time while
attending the summer school, but you will earn only $3,000.

a) What will the summer school cost you in terms of money explicitly paid?

b) What are the opportunity costs of going to summer school that you don't pay explicitly?
Explain.

c) What are your total opportunity costs of going to school this summer? Explain your answer.

Answer:
a) You explicitly pay the cost of tuition and textbooks ($1,400) and the cost of housing ($500),
so your total explicit costs are $1,900.

b) Your opportunity cost is what your give up to go to summer school. You forego a fulltime job,
at which you would earn $8,000, in exchange for a part-time job, where you earn $3,000, which
means you give up $5,000. Although you don't pay this money explicitly, you lose the
opportunity to earn it and so it's an opportunity cost of attending summer school.

c) First, your opportunity cost includes the cost that you pay explicitly ($1,900), which you have
to pay only if you go to school. If you decide not to go to school, you can use this money to
buy something else—an opportunity you are giving up.

Second, as explained in the previous part, you are also giving up $5,000, although not paying
this money explicitly. So, your full opportunity cost of going to school is $1,900 + $5,000 =
$6,900.

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