Deck 1: Ten Lessons From Economics

Question 1

Economists study how individuals make decisions, how they interact with each other and the factors that affect the economy as a whole.

Answer 1

True

Question 2

Efficiency refers to the size of the economic pie and equity refers to how the pie is divided.

Answer 2

True

Question 3

With careful planning, we can usually get something that we like without having to give up something else that we like.

Answer 3

False

Question 4

The opportunity cost of something refers to the price you pay to get it.

Question 5

The phrase 'there's no such thing as a free lunch' refers to the concept of scarcity.

Question 6

Australian government policies announcing when changes to child benefits would occur had no effect on the decision around timing of some Australian families to have babies.

Question 7

People are likely to make good decisions only if they understand the options that are available to them.

Question 8

The opportunity cost of consuming a unit of good X is the amount of resources that must be devoted to its production.

Question 9

Public policies to reduce emissions from cars do not affect the private costs and benefits of driving cars.

Question 10

In international trade, if one party gains, the other party loses.

Question 11

Scarcity means that society has less to offer than people wish to have.

Question 12

The word 'economy' comes from the Greek word for 'one who manages the government'.

Question 13

A marginal change is a large and significant change to an existing plan of action.

Question 14

In economic policymaking, there is often a conflict between the goal of efficiency and the goal of equity.

Question 15

Economics is the study of the circulation of money between banks, taxpayers and the government.

Question 16

Pollution regulations make society better off by raising incomes.

Question 17

The marginal cost of something is what you give up to get one extra unit of a good.

Question 18

Equity means that everyone in the economy should receive an equal share of the goods and services produced.

Question 19

A higher price on a good is a disincentive to buying it.

Question 20

When the government redistributes income from the rich to the poor, society benefits since there are more poor than rich.

Question 21

If each person pursues their own self-interest through a market-institution, the resulting chaos would cause the market to collapse.

Question 22

Inflation in an economy is primarily caused by profiteering by greedy firms.

Question 23

A market economy rewards people according to their ability to produce things that other people are willing to pay for.

Question 24

A monopolist has limited market power.

Question 25

If the government prints too much money, it will cause inflation.

Question 26

Inflation increases the value of money.

Question 27

The two broad reasons for a government to intervene in the economy are: to promote efficiency, and to promote equity.

Question 28

Protecting domestic jobs from foreign competition is the best way to raise labour productivity.

Question 29

Trade is about countries competing to export the most goods.

Question 30

Monopoly power and income inequality are examples of market failure.

Question 31

The Phillips curve shows that at least in the short term, reductions in the inflation rate must be accompanied by increases in unemployment.

Question 32

Economists agree that monetary and fiscal policy, although not very powerful, are necessary instruments for controlling the economy.

Question 33

In a market economy a central agency decides how much goods and services should cost.

Question 34

A benefit of trade is that it permits two parties to specialise in those tasks in which they have the highest productivity.

Question 35

When markets allocate resources efficiently and there are no market failures, the government should intervene.

Question 36

While the 'invisible hand' cannot guarantee efficiency, it is better at guaranteeing equity.

Question 37

Better tools and technology can increase productivity and therefore living standards in countries.

Question 38

Productivity is defined as the quantity of goods and services produced from each hour of a worker's time.

Question 39

An employee outsourcing his own job is an example of an unexpected loss from trade.

Question 40

The growth rate of a nation's productivity determines the growth of its average inflation rate.

Question 41

The scarcity problem:

A)has been eliminated in the richest countries
B)persists only because countries have failed to eliminate unemployment
C)has been solved in all industrialised nations
D)persists because society cannot give every individual the highest standard of living to which he or she might aspire

Question 42

Daniel decides to spend an hour playing cricket rather than working at $16 per hour.His trade-off is:

A)nothing, because he enjoys playing cricket more than working
B)the increase in skill he obtains from playing cricket for that hour
C)the $16 he could have earned
D)nothing, because he spent $16 for admission into the sports complex to play cricket

Question 43

An equitable outcome is one where:

A)rich people give more to charities
B)it can be described as fair
C)it can be described as efficient
D)everyone has the same income

Question 44

Society faces a trade-off between equity and efficiency because:

A)something that is equitable is also always efficient
B)people always think about the consequences of decisions before they act
C)government wage policies reduce incentives to work
D)often it is not possible to distribute resources fairly while also getting the most out of them

Question 45

When government policies are being designed:

A)equity and efficiency goals are usually independent of each other
B)there is usually a trade-off between equity and efficiency
C)equity can usually be achieved without an efficiency loss
D)increasing efficiency usually results in more equity

Question 46

Which of the following is NOT included in the decisions that every society must make?

A)what goods will be produced
B)what determines consumer preferences
C)who will produce goods
D)who will consume the goods

Question 47

When a society cannot produce all the resources that people wish to have, it is called:

A)a trade-off
B)a market
C)efficiency
D)scarcity

Question 48

For society, a good is not scarce if:

A)all members of society can have all they want of it
B)at least one individual in society can obtain all he or she wants of the good
C)firms are producing at full capacity
D)those who have enough income can buy all they want of the good

Question 49

The word 'economy' comes from the Greek word for:

A)'one who manages a household'
B)'one who participates in a market'
C)'environment'
D)'conservation'

Question 50

The study of economics is concerned with:

A)keeping private businesses from losing money
B)demonstrating that capitalistic economies are superior to socialistic economies
C)how society manages its scarce resources
D)determining the most equitable distribution of society's output

Question 51

An electronics store usually sells televisions for $1000 but business has been slow and it needs to sell them before the new model comes out.The shop buys the televisions in bulk for $550 each.The manager estimates they can only sell the old televisions for $375 each.What should the store do?

A)Never sell anything for less than they paid for it
B)Cut their losses and sell them for $375
C)Sell the televisions back to the bulk seller
D)Give the televisions to their employees as a bonus

Question 52

Equity means that:

A)all members of society have the same income
B)the benefits of society's resources are distributed fairly among society's members
C)society's goods and services are distributed according to need
D)society is getting the most it can from its scarce resources

Question 53

What does the adage 'There is no such thing as a free lunch' mean?

A)the government taxes firms that sell lunches
B)food prices have risen as a consequence of increased taxes
C)lunches are not free
D)we usually have to give up something, in order to get something else we like

Question 54

Which of the following is a major area of study for economists?

A)how people make decisions
B)the design of nuclear power plants
C)the best way to design a nature reserve
D)how countries choose national leaders

Question 55

If stricter regulations are used to reduce pollution then:

A)everyone will benefit so there is no trade-off
B)only firms that polluted will be affected
C)there will be no trade-off as the firms can afford to reduce pollution
D)incomes of these firm's owners, workers and customers will be affected, and this means a trade-off must result

Question 56

Economics is defined as the study of:

A)politics and business
B)central planning
C)government regulation
D)how society manages its scarce resources

Question 57

Which of the following resources is least likely to meet the definition of scarcity?

A)whales
B)air
C)ice-cream
D)computers

Question 58

The classic trade-off between guns and butter refers to:

A)The fact that if we spend money on national defence we won't spend money on social welfare
B)The fact that government welfare reduces the incentive for people to work
C)The more we spend on national defence, the more we will be able to produce commodities
D)The more we spend on national defence, the less we can spend on personal goods

Question 59

An 'increase in efficiency' suggests that an economy:

A)is using more costly production techniques
B)has decided to produce more luxury goods
C)is able to get less goods and services from a given amount of resources
D)is able to get more goods and services from a given amount of resources

Question 60

In economics, the cost of something is:

A)the out-of-pocket expense of obtaining it
B)what you give up to get it
C)always measured in units of time
D)always higher than people think

Question 61

Lee decides to go to the zoo with her friends on Saturday instead of photographing a wedding for $1000.The opportunity cost she places on photographing the wedding is:

A)the $1000 she would earn
B)the enjoyment of spending the day with her friends at the zoo
C)the $1000 less the enjoyment she would have received from being at the zoo with her friends
D)nothing, as she wasn't going to earn any money at the zoo

Question 62

If Australia is better than the US at producing wheat, but the US is better than Australia at producing cars, the US should:

A)impose a tariff on Australian wheat in order to protect jobs in the US car industry
B)sell cars to Australia, and buy Australian wheat
C)subsidise its wheat industry so that it can compete with Australian wheat
D)put a quota on the amount of Australian wheat imported

Question 63

Which of the following is important for policymakers to consider when designing public policy?

A)the possibility that policies might change behaviour
B)the direct effect of policies
C)the indirect effect of policies
D)all of the above

Question 64

You have spent $500 purchasing and repairing an old car which you expect to sell for $700 once the repairs are complete.You discover that you need an additional part, which will cost $500, including labour, in order to complete the repairs.You can sell the car as it is now for $300.What should you do?

A)you should never sell something for less than it costs
B)you should cut your losses and take the $300
C)you should complete the repairs and sell the car
D)it doesn't matter which action you take; the outcome is the same either way

Question 65

Trade between Australia and New Zealand:

A)is a losing proposition for New Zealand because Australian workers are more productive
B)is a losing proposition for Australia because New Zealand has cheaper labour
C)is like a sports contest - one side wins and the other side loses
D)benefits both Australia and New Zealand

Question 66

Jack must decide whether to go skiing or work on the weekend.He decides to go skiing, which costs him $500.His opportunity cost of going skiing is:

A)the number of hours needed to earn money to pay for the ski trip
B)what else he could have done with his time if he was neither skiing nor working
C)the danger that he will get injured while skiing
D)how much he could have earned if he worked instead

Question 67

Aaron has bought a new television for $2000.He has just learnt that in a push to reduce household waste the government is giving $500 to people who have their televisions fixed, instead of throwing them out when they break and buying a new one.What might Aaron do?

A)Nothing, his television is working fine
B)Break his television and have it fixed so he can get the $500
C)Break his television and have it fixed if it will cost less than $500 to fix
D)Wait until he has used the television for a while and then break it

Question 68

According to Peltzman, one effect of a government-imposed seatbelt law has been:

A)fewer pedestrian deaths
B)safer driving
C)an increase in the number of accidents
D)that everyone now wears seatbelts

Question 69

People make decisions at the margin by:

A)following tradition
B)comparing costs and benefits
C)experience
D)calculating dollar costs

Question 70

International trade:

A)prevents countries from specialising in what they do best
B)restricts the variety of goods a country can enjoy
C)always creates winners and losers
D)is a threat to national security

Question 71

The opportunity cost of going to university is:

A)the total spent on food, clothing, books, transportation, tuition, lodging and other expenses
B)zero for students who are fortunate enough to have all of their university expenses paid by someone else
C)the value of the best opportunity a student gives up to attend university
D)zero, since a university education will allow a student to earn a higher income after graduation

Question 72

Trade can benefit a family:

A)by increasing the variety of goods and services they can buy at a lower cost
B)by requiring each person to perform a wide range of tasks, including those they are not very productive in
C)only if the government provides them with a subsidy
D)both A and B

Question 73

Tim decides to spend an hour looking at cat videos on YouTube instead of going to the gym.The opportunity cost of him looking at cat videos is:

A)the improvement in his knowledge of the best cat videos on the internet
B)the fitness and fun he would have had at the gym
C)the money he would have spent on gym class
D)zero, since Tim chose to watch cat videos, prices must have adjusted to reflect his preference

Question 74

For most students, from an economic point of view, the largest single cost of a university education is:

A)transportation, parking and entertainment
B)tuition fees and books
C)the wages given up to attend university
D)room and board

Question 75

Whenever a person gives up one resource to obtain an item it is called:

A)cost-benefit analysis
B)opportunity decision
C)opportunity price
D)opportunity cost

Question 76

From an accounting point of view, the largest single cost of a university education for most students is:

A)transportation, parking and entertainment
B)tuition fees and books
C)the wages given up to attend university
D)room and board

Question 77

Economists have recognised that people respond to:

A)the aspirations of policymakers
B)incentives
C)regulations rather than prices
D)poverty rather than pollution

Question 78

Australia can benefit from trade if it

A)trades with all other countries
B)does not trade with countries that make the same goods as Australia
C)does not trade with any country with lower wages than Australia
D)trades only with countries that have higher wages than Australia

Question 79

Which of the following is most likely to be a marginal change?

A)Working one day less a month
B)Getting a new job
C)Getting a pay increase of 50%
D)Deciding to work part-time

Question 80

A rational decision maker takes an action only if the:

A)marginal benefit is greater than the marginal cost
B)marginal benefit is less than the marginal cost
C)average benefit is greater than the average cost
D)marginal benefit is greater than both the average cost and the marginal cost