Tutorial 1

Chang Ting EEE140705

Haura Anis Susetyo
EEE140709
Sumaya Hoque EEE140710

1. Among the fundamental concepts in econo

mics are

A) opportunity cost.
B) marginalism.
C) efficient markets.
D) all of the above

2. Which of the following is the best definitio

n of economics?
A) the study of how individuals and societies ch
oose to use the scarce resources that nature an
d previous generations have provided
B) the study of how consumers spend their inco
me
C) the study of how business firms decide what
inputs to hire and what outputs to produce
D) the study of how the federal government allo
cates tax dollars

3. All economics questions and problems ar

ise because
A) we produce inefficiently.
B) people don't work hard enough.
C) the rich take too much and don't leave enoug
h for the poor.
D) human wants exceed resources available.

4. Which of the following statements is NOT

correct?
A) Economics is a behavioral science.
B) In large measure, economics is the study of h
ow people make choices.
C) If poverty were eliminated, there would be n
o reason to study economics.
D) Economic analysis can be used to explain ho
w both individuals and societies make decisions
.

5. The study of economics

A) is a very narrow endeavor.
B) is a way of analyzing decisionmaking process
es caused by scarcity.
C) is concerned with proving that capitalism is b
etter than socialism.
D) focuses on how a business should function.

6. Which of the following is NOT one of the

three fundamental concepts of economics?

A) profit maximization
B) marginalism
C) opportunity cost
D) the working of efficient markets

7. Suppose that you purchased a ticket to a

jazz festival for $100 from an online ticket b
roker. Once you arrived at the festival, you
discovered that parking costs you an additi
onal $15. In this situation, the additional $1
5 you pay for parking is an example of

A) an economic loss.
B) opportunity cost.
C) marginal cost.
D) an inefficient cost.

8. The concept of opportunity cost

A) is relevant only to economics.
B) can be applied to the analysis of any decision
making process.
C) applies to consumers but not to firms.
D) refers only to actual payments and incomes.

9. The reason that opportunity costs arise is

that
A) an economy relies on money to facilitate exc
hange of goods and services.
B) resources are scarce.
C) there are no alternative decisions that could
be made.
D) people have limited wants.

10. The branch of economics that examines

the functioning of individual industries and
the behavior of individual decisionmaking u
nits is

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

11. The study of how benefits are determin

ed for city employees would be considered

A) microeconomics.
B) macroeconomics.
C) descriptive economics.
D) institutional economics.

12. Inflation and unemployment

A) are the focus of normative economics.

B) are a focus of microeconomics.
C) are a focus of positive economics.
D) are a focus of macroeconomics.

13. Better insurance benefits increase the i

ncentive of some individuals to work. This s
tatement is best described as
A) a positive statement.
B) an example of the ceteris paribus assumptio
n.
C) a normative statement.
D) a comparative economics statement.

14. The government should extend the dura

tion of unemployment benefits to those wo
rkers who lost their jobs due to outsourcing
. This statement is best described as

A) an example of marginalism.
B) an example of the fallacy of composition.
C) a normative statement.
D) a positive statement.

15. The amount of education that one has i

s an important factor in the determination
of his or her wage rate. This is best describe
d as

A) a positive statement.
B) an example of the fallacy of composition.
C) a normative statement.
D) an example of marginalism.

16. Positive economics is an approach to ec

onomics that
A) seeks to understand behavior and the operati
on of systems while making judgments about the
ir usefulness to society.
B) analyzes outcomes of economic behavior, eval
uates them as good or bad, and may prescribe p
referred courses of action.
C) seeks to understand behavior and the operati
on of systems without making judgments.
D) examines the role of government in the econo
my.

17. Normative economics is an approach to

economics that
A) seeks to understand behavior and the operat
ion of systems without making judgments.
B) analyzes outcomes of economic behavior, ev
aluates them as good or bad, and may prescrib
e preferred courses of action.
C) applies statistical techniques and data to eco
nomic problems.
D) examines the role of government in the econ
omy.

18. An efficient economy is an economy

A) in which output is steady or growing and ther
e is low inflation.
B) that produces what consumers demand and
does so at the least possible cost.
C) that distributes output equally among all con
sumers.
D) in which there is a fair distribution of wealth.

19. An efficient market is characterized by t

he fact that
A) output is steady or growing and there is low i
nflation.
B) profit opportunities are eliminated almost ins
tantaneously.
C) there are no opportunity costs.
D) wealth is distributed fairly.

20. The four criteria that are frequently use

d in judging the outcome of economic pol
icy are
A) efficiency, equity, stability, and economic gro
wth.
B) efficiency, equality, stability, and economic gr
owth.
C) efficiency, equality, profitability, and stability.
D) efficiency, equity, profitability, and stability.

21. Below is a production possibilities table

for consumer goods (automobiles) and capi
tal goods (forklifts):

i.

Show these data graphically. Upon what specif

ic assumptions is this production possibilities
curve is based?

The assumptions are full

employment, fixed supplies
of resources, fixed
technology and two goods.

ii. If the economy is at point C, what is the cost of

one more automobile? Of one more forklift? Ex
plain how the production possibilities curve refl
ects the law of increasing opportunity costs.
Ans 4.5 forklifts; .33 automobiles, as determined fro

m the table. Increasing opportunity costs are reflected i

n the concave-from-the-origin shape of the curve. This
means the economy must give up larger and larger amo
unts of rockets to get constant added amounts of auto
mobilesand vice versa.

iii. If the economy characterized by this productio

n possibilities table and curve were producing 3
automobiles and 20 forklifts, what could you co
nclude about its use of its available resources?
Ans The economy is underutilizing its available resou
rces. The assumption of full employment has been viol
ated.

iv. What would production at a point outside the p

roduction possibilities curve indicate? what mus
t occur before the economy can attain such a le
vel of production?
Ans Production outside the curve cannot occur (consu
mption outside the curve could occur through foreign tr
ade). To produce beyond the current production possib
ilities curve this economy must realize an increase in its
available resources and/or technology.