Deck 1: Thinking like an economist

Question 1

Which of the following is not an example of a factor of production?

A)A lake.
B)A cow.
C)A union leader.
D)Dollars.

Answer 1

D

Question 2

An entrepreneur is a motivated person who seeks profit by:

A)economising.
B)undertaking risky activities.
C)winning in the lottery.
D)selling shares.

Answer 2

B

Question 3

The perpetual state of insufficiency of resources to satisfy people's unlimited wants is:

A)not a problem in developed countries.
B)a contradiction that cannot be resolved.
C)completely unrealistic.
D)present in modern economies but not in the past.
E)the definition of scarcity.

Answer 3

E

Question 4

The finite nature of the economy's resource base:

A)would be solved if only we would learn to conserve.
B)arises out of the insatiable appetite of consumers.
C)is only a problem in developing countries.
D)will be solved as technology advances.
E)will always be with us.

Question 5

Which of the following would eliminate scarcity as an economic problem?

A)Moderation of people's competitive instincts.
B)Discovery of sufficiently large new energy reserves.
C)Resumption of steady productivity growth.
D)Economic scarcity cannot be eliminated.

Question 6

Labour resources:

A)include only physical activities.
B)are only counted as a resource if used in the production of other resources.
C)include only skilled labour.
D)include both physical and mental activities.
E)include human effort involved in the production of goods but not services.

Question 7

An economics textbook is an example of:

A)capital.
B)labour.
C)a natural resource.
D)entrepreneurship.

Question 8

Scarcity is a situation:

A)where people's needs exceed their resources.
B)where people's wants exceed their resources.
C)where the quantity of resources is sufficient to meet all wants.
D)where people's needs exceed other people's resources.
E)where the quantity of resources is sufficient to meet all needs.

Question 9

Economists believe that scarcity forces everyone to:

A)satisfy all their wants.
B)abandon consumer sovereignty.
C)make choices.
D)create unlimited resources.
E)not to reveal their wants.

Question 10

Scarcity:

A)does not exist.
B)implies that people must make a choice.
C)exists only in developed countries.
D)exists only in developing countries.

Question 11

Which of the following is closest to the definition of capital?

A)Money in your bank account.
B)Factories and machinery.
C)Borrowed money.
D)The ability of an individual to create financial capital.
E)Lakes, animals, coal and oil.

Question 12

Which of the following is not a resource?

A)Land.
B)Labour.
C)Money.
D)Capital.

Question 13

All of the following are examples of capital except:

A)the robot used to help produce your car.
B)a computer used by your lecturer to write this exam.
C)the factory that produces the costume jewellery you buy.
D)the inventory of unsold goods at your local hardware store.
E)an uncut diamond that you discover in your backyard.

Question 14

Which of the following goods are not capital goods?

A)An arrow.
B)A computer.
C)Energy.
D)A car.

Question 15

Labour,land and capital are called:

A)goods and services.
B)entrepreneurship.
C)outputs.
D)factors of production.

Question 16

Scarcity:

A)is a problem only in the poorer countries of the world.
B)would disappear if resources were unlimited.
C)can be solved by rapid advances in technology.
D)is a problem that exists in every economy.
E)is not a problem for the very rich.

Question 17

Which of the following is the best example of a non-renewable resource?

A)Forests.
B)Oil.
C)Clean air.
D)Fish in the ocean.

Question 18

The creative ability of individuals to combine and direct resources to produce new products is known as:

A)economising.
B)entrepreneurship.
C)value judgement.
D)product sensitivity.

Question 19

Scarcity is a problem:

A)that only poor people face.
B)because human wants are limited while resources are unlimited.
C)because human wants are unlimited while resources are limited.
D)only in third world countries.

Question 20

The three basic categories of resources are land,labour and:

A)money.
B)time.
C)energy.
D)capital.

Question 21

Which of the following is included in the study of macroeconomics?

A)How households make a purchasing decision.
B)Market for laptops.
C)Flows of import and export.
D)Prices of cars.

Question 22

Which of the following is capital?

A)Fresh air.
B)Money.
C)Photocopier.
D)Pastoral land.
E)Lake.

Question 23

Microeconomists would be interested in which of the following topics?

A)How the GST affected the economy.
B)The unemployment in Europe and Australia.
C)What is the average income in Australia.
D)The effect of price on revenue.
E)The growth of the economy.

Question 24

Which of the following is the best example of a microeconomics topic?

A)The impact that the money supply has on inflation.
B)The effect that government budget deficits have on the interest rate.
C)The reasons for increases in the price of mobile phones.
D)The trade-off between inflation and unemployment.

Question 25

Macroeconomics is concerned with:

A)the study of the whole economy.
B)the study of the economic behaviour of government decision makers.
C)the study of the issues of how individual prices are determined in markets.
D)the study of how firms determine output levels.

Question 26

Consider the statement 'The increase in money supply will push the prices downwards'.This is a statement of a:

A)microeconomist.
B)both macroeconomist and microeconomist.
C)macroeconomist.
D)resource economist.
E)social science economist.

Question 27

The study of microeconomics and macroeconomics differs in that:

A)microeconomics is concerned with the domestic economy and macroeconomics is concerned only with the international economy.
B)microeconomics examines the individual markets of the economy while macroeconomics studies the whole economy.
C)microeconomics studies the actions of households and macroeconomics studies the actions of business firms.
D)microeconomics studies the economy in terms of private individuals and firms while macroeconomics includes the effect of government.
E)microeconomics examines the whole economy while macroeconomics studies the individual units of the economy.

Question 28

The most fundamental concepts underlying the discipline of economics are:

A)scarcity and choice.
B)supply and demand.
C)money, stocks and bonds.
D)inflation and unemployment.

Question 29

Inflation is a concern of:

A)macroeconomics.
B)microeconomics.
C)both macroeconomics and microeconomics.
D)neither macroeconomics or microeconomics.

Question 30

Which of the following is a macroeconomics topic?

A)The effect of price change on the supply of tomatoes.
B)The market price of electricity.
C)The interest rate and unemployment.
D)National demand for fuel efficient cars
E)Effects of farm subsidies on food prices.

Question 31

Economics is the study of how people:

A)vote for political leaders who decide what is to be produced.
B)make choices to produce and consume goods and services.
C)establish social institutions that maximise wellbeing.
D)develop value systems that affect their consumption choices.
E)form customs and traditions that influence consumption.

Question 32

Policies to lower the price level of goods in the nation are a concern of:

A)macroeconomics.
B)microeconomics.
C)both microeconomics and macroeconomics.
D)political science.

Question 33

Which one of the following is the most accurate definition of economics?

A)Economics is the study of stocks and bonds.
B)Economics is the study of how people allocate unlimited resources.
C)Economics is the study of how consumers choose to spend their income.
D)Economics is the study of how society chooses to allocate scarce resources.

Question 34

Which of the following is a microeconomics topic?

A)The unemployment rate.
B)The inflation rate.
C)The economy's growth rate.
D)The price of apples.
E)Forecasts of a recession next year.

Question 35

Microeconomics deals with the analysis of all the following except how:

A)the wages of doctors are determined.
B)Honda decides to price its cars.
C)to deal with the market power.
D)the monetary policy has changed.
E)monopolies and competitive markets differ.

Question 36

Which of the following is a microeconomics topic?

A)Changes in the economy's price levels.
B)Issues of Gross Domestic Product.
C)The reasons why industries employ different levels of resources.
D)Effect of government taxation on consumption.
E)Issues of inflation and unemployment rates.

Question 37

Which of the following questions would not be studied by a microeconomist but would be studied by a macroeconomist?

A)Why do national economies grow?
B)What percentage of consumer income is spent on entertainment?
C)Why do workers prefer a 4-day working week?
D)What happens to worker productivity when a job shifts to a 4-day working week?
E)How is the electricity industry harmed by the passage of new clean air legislation?

Question 38

A television network newscaster reports that the national inflation rate the past year equalled 4 per cent.This report would be of particular interest to a _____.

A)microeconomist
B)normative economist
C)macroeconomist
D)ceteris paribus
E)social science economist

Question 39

The central question in economics is how to:

A)deal with the problem of scarcity.
B)change government economic policy.
C)change people's wants to match their needs.
D)manage money and become wealthy.

Question 40

Which of the following would be of particular interest to a microeconomist?

A)The price of fruit the typical household consumes.
B)The nation's inflation rate.
C)The nation's rate of unemployment.
D)The budget of the national government.
E)The growth of the economy.

Question 41

An economic model is:

A)focused on all variables in the economy.
B)used to design an economic theory.
C)a pursuit of parsimony.
D)designed to highlight minor details of the reality.

Question 42

To abstract from reality in an economic model means that:

A)we include all aspects of reality.
B)the economic study surveys only a very limited period of time.
C)we include only those elements which support our hypothesis.
D)the model includes some non-important aspect of the real world.
E)only essential aspects of reality are included.

Question 43

Economists:

A)always use diagrams and tables.
B)never use equations or diagrams.
C)sometimes use diagrams and equations.
D)have to use diagrams and mathematical equations all the time.

Question 44

'An increase in the federal minimum wage causes an increase in unemployment among teenagers' is a:

A)statement of positive economics.
B)statement of normative economics.
C)testable value judgement.
D)fallacy of composition.

Question 45

Ceteris paribus means:

A)allowing everything else changing.
B)one-to-one cause-and-effect relationships.
C)holding one variable constant.
D)in the absence of other influences.

Question 46

The statement: 'John buys more of good X as his income increases,ceteris paribus',means:

A)John's income is being held constant.
B)John's purchases of good X are being held constant.
C)John's income and purchases of this good are being held constant.
D)John's income is the only influence that is being allowed to change.
E)the price of this good is being allowed to change.

Question 47

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions.This person has:

A)confused association and causation.
B)misunderstood the ceteris paribus assumption.
C)used normative economics to answer a positive question.
D)built an untestable model.

Question 48

If the price of textbooks rises and then students purchase fewer of them,then an economic model can show a cause-and-effect relationship only if which of the following conditions hold?

A)Students' incomes fall.
B)Tuition decreases.
C)The number of students increases.
D)Everything else is constant.
E)The bookstore no longer accepts used book trade-ins.

Question 49

An economic theory claims that a rise in petrol prices will cause petrol purchases to fall,ceteris paribus.The phrase 'ceteris paribus' means that:

A)other relevant factors like consumer incomes must be held constant.
B)the petrol prices must first be adjusted for inflation.
C)the theory is widely accepted but cannot be accurately tested.
D)consumers' need for petrol remains the same regardless of the price.

Question 50

An economist builds a model to:

A)define the problem.
B)capture all the complexities of reality.
C)collect data.
D)test the hypothesis.

Question 51

An economic model:

A)cannot be rejected.
B)cannot be tested.
C)always yields accurate predictions.
D)is valid if the evidence is consistent with the predictions.

Question 52

A model (or theory):

A)is a statement about the causal relationship between variables, based on intuition.
B)helps explain but cannot predict the relationship between variables.
C)when expressed as an upward sloping graph, implies an inverse relationship between the variables.
D)is a simplified description of reality.

Question 53

A model is defined as a:

A)description of all variables affecting a situation.
B)positive analysis of all variables affecting an event.
C)simplified description of reality to understand and predict an economic event.
D)prediction based on historical evidence.

Question 54

A positive economic statement is:

A)an opinion of an action that should be taken.
B)an action that will have a positive effect on the economy.
C)a statement testable by facts.
D)a claim that the speaker is positive will occur.
E)always a microeconomic position.

Question 55

Normative statements:

A)can always be tested.
B)are based on value judgements.
C)are not based on facts.
D)do not express a collective opinion on a subject.

Question 56

An economic model is useful only if it:

A)contains no positive statements.
B)captures all the complexities of reality.
C)yields accurate predictions.
D)has both macro- and microeconomic applications.

Question 57

Which of the following is a statement of positive economics?

A)Government should spend more on education.
B)Creating jobs is the most serious problem facing the Australian economy.
C)Raising taxes provides additional revenue to finance health care.
D)If taxes are over 50 per cent of national income, job creation falls.

Question 58

Positive economics is a/an:

A)reflection of individual or collective values.
B)statement dealing with the facts.
C)statement about usefulness of the economic model.
D)analysis of what ought to be.

Question 59

The Minister for Employment states that wage rates in the country have risen by 2 per cent in the past year.The head of a local labour union argues that wages have to be increased more to match the 3 per cent rate of inflation.The Minister's statement is a _____ economic statement and the union head's statement is a _____ economic statement.

A)normative, normative
B)normative, positive
C)positive, normative
D)positive, positive
E)proper, improper

Question 60

Which of the following is a statement of positive economics?

A)Government control of rent is a fair way to help poor people afford housing.
B)Government control of rent keeps landlords from charging too much rent.
C)Government control of rent decreases the number of new apartments constructed.
D)Government control of rent is an injustice.

Question 61

Microeconomics only looks at the behaviour of one consumer or one firm in a market,while macroeconomics looks at the behaviour of an entire industry or group of consumers.

Question 62

Which of the following is an example of a positive economic statement?

A)The economy's real output increased at about 3 per cent last year and the unemployment rate decreased.
B)A central bank should not print too much money because inflation could result.
C)Parliament should stabilise the social security system by raising taxes now.
D)A healthy economy should grow at about 5 per cent a year in order to provide enough goods for a growing population.
E)The government farm products surplus should be distributed to the needy.

Question 63

Which of the following words indicate the positive statement?

A)good, bad.
B)should, need.
C)if, then.
D)ought to.

Question 64

Macroeconomics is concerned with the issue of how monetary policy can slow down inflation.

Question 65

'It is not fair to increase the federal minimum wage because it causes an increase in unemployment among teenagers'.This is a:

A)statement of positive economics.
B)statement of normative economics.
C)testable value judgement.
D)fallacy of composition.

Question 66

Policies to determine the price of troll dolls are a concern of macroeconomics.

Question 67

Economists use _____ economic analysis to understand an individual market.They then use _____ economic analysis to guide future national economic policy.

A)macro, normative
B)micro, positive
C)micro, macro
D)normative, positive

Question 68

Normative economics deals with _____ and positive economics deals with _____.

A)what was, what is
B)fiction, fact
C)microeconomics, macroeconomics
D)negative aspects, positive aspects
E)opinions, facts

Question 69

Which of the following is an example of a normative economic statement?

A)The inflation rate in Australia decreased from 4 per cent last year to 3 per cent this year as a result of lower energy prices.
B)The economy grew at an annual rate of 5 per cent during the first quarter of this year.
C)If two automobile companies merge, it is likely that the price of automobiles will rise.
D)An increase in international trade benefits some workers but hurts others.
E)Australia should use more renewable energy to reduce greenhouse gas emissions.

Question 70

Select the normative statement that completes the following sentence: 'If the minimum wage is raised:

A)cost per unit of output will rise'.
B)workers will gain their rightful share of total income'.
C)the rate of inflation will increase'.
D)profits will fall'.

Question 71

Land resource includes farming land,forestry and fishery but does not include the atmosphere,the sun,the moon and other planets.

Question 72

Economists:

A)always disagree over policy, predictions and applications.
B)generally agree on theoretical fundamentals.
C)never agree on predictions and theoretical fundamentals.
D)always agree on personal values.

Question 73

The first step is to define the problem,then to develop a model and finally collect data and test the model.

Question 74

Scarcity means that rich people are able to have as much as they would like to have.

Question 75

Normative statements:

A)are dealing with facts.
B)express a collective judgement.
C)can be tested.
D)are the only statements that are true.

Question 76

Scarcity means that it is impossible to satisfy every desire.

Question 77

Which of the following is the best example of a normative economic statement?

A)The unemployment rate for women has been two times lower the overall rate.
B)Increase in competition in the car manufacturing industry will result in price reduction for cars.
C)Monopoly makes a decision based on market prices.
D)A stronger regulation should be applied to polluting companies.

Question 78

Economics studies decision making by a single individual.

Question 79

Policies to increase the supply of money in the economy are primarily a concern of microeconomics.

Question 80

Select the positive statement that completes the following sentence: 'If the competition is prohibited in the car manufacturing industry:

A)cost per unit of output will rise'.
B)cars will be unfairly priced'.
C)the rate of inflation should hold steady'.
D)government should pay compensation to workers'.