Deck 1: Getting Started

Question 1

The primary focus of microeconomics is

A) to examine the operation of the entire (aggregate) economy.
B) the levels of employment and inflation.
C) to examine the behaviour and operation of the individual units or sectors that make up the economy.
D) to study how we managed to eliminate scarcity.
E) our government's monetary policy.

Answer 1

to examine the behaviour and operation of the individual units or sectors that make up the economy.

Question 2

When Tesla decides to increase production of electric cars, it directly answers the ________ question.

A) why
B) how
C) what
D) for whom
E) where

Answer 2

what

Question 3

Scarcity exists because:

A) human wants exceed the resources available to satisfy them.
B) some people make bad economic decisions.
C) people take too much leisure time.
D) some individuals have low incomes.
E) the costs of production are high.

Answer 3

human wants exceed the resources available to satisfy them.

Question 4

Which of the following BEST describes macroeconomics?

A) It is not a social science because its predictions cannot be tested.
B) It examines how the choices that individuals make affect governments.
C) It analyses the aggregate effects on the national economy of the choices made by individuals, firms and governments.
D) Proving causation is never a problem for macroeconomics.
E) It studies the choices that individuals and businesses make when coping with scarcity

Question 5

When an electricity distribution company decides to use manpower to bury its lines, it directly answers the ________ question.

A) for whom
B) how
C) what
D) why
E) when

Question 6

Which of the following is a microeconomic issue?

A) The unemployment rate soars in Spain.
B) The Brazilian economy experiences rapid economic growth.
C) Inflation skyrockets in Russia.
D) The price of petrol increases in the United States this year.
E) The Australian government cuts taxes to combat a recession.

Question 7

The question of 'What goods and services get produced?' most closely relates to which of the following issues?

A) The distribution of goods and services in the economy.
B) Building a missile defence system, or putting a computer in every primary school classroom.
C) Producing goods and services in the least costly manner.
D) Obtaining specialised training to increase one's income.
E) Taxing high-income workers to give payments to poor households

Question 8

Which of the following statements best describes the study of economics?

A) Economics studies how firms make profits.
B) Economics studies how to organise production so that scarcity does not occur.
C) Economics studies how businesses reach decisions.
D) Economics studies how we make choices in the face of scarcity.
E) Economics studies how to create incentives so that scarcity does not exist.

Question 9

Scarcity forces people to:

A) cheat and steal.
B) choose among the available alternatives.
C) be unwilling to help others.
D) live at a low standard of living.
E) consume as much as they can as quickly as they can.

Question 10

Economics is best defined as the social science that studies

A) how choices made in the social interest must conflict with choices made in the self-interest.
B) how a person can get everything he or she wants.
C) the choices that societies, and the people and institutions that make up societies, make in dealing with the issue of scarcity.
D) the reason money exists.
E) the way to eliminate choices in our decisions.

Question 11

Which of the following is a macroeconomic topic? i. China increases interest rates to slow its economic growth.
Ii) Parliament lowers tax rates to try to lower the unemployment rate.
Iii) Nissan decides to produce more electric Leaf models and fewer Altima sedans.

A) ii and iii
B) i and iii
C) iii only
D) i and ii
E) i only

Question 12

Which of the following is the best example of a 'what?' question?

A) Should higher-income or lower-income people buy SUVs?
B) Should cars be produced using workers or robots?
C) Should we make faster microprocessors or pest-resistant corn?
D) Should migrant workers or domestic workers be used to pick grapes?
E) What should doctors be paid?

Question 13

Because human wants are insatiable and unlimited while available resources are limited, people are said to face the problem of

A) social interest versus self-interest.
B) macroeconomics.
C) microeconomics.
D) scarcity.
E) why to produce.

Question 14

When a home builder decides to computerise all of his production schedule, it directly answers the ________ question.

A) what
B) where
C) why
D) for whom
E) how

Question 15

Which economic question depends on the incomes that people earn and the prices they pay for goods and services?

A) For whom?
B) What?
C) Where?
D) How?
E) Why?

Question 16

Which of the following is a microeconomic topic? i. K-Mart's decision to close stores that are not making a profit.
Ii) Bunning's choice to hire more full-time employees because its sales increased.
Iii) Virgin Airlines changes its fares.

A) i only
B) i and iii
C) ii and iii
D) i, ii, and iii
E) i and ii only

Question 17

Scarcity requires that we

A) have unlimited resources.
B) make choices about what goods and services to produce.
C) learn to limit our wants.
D) have the most rapid economic growth possible.
E) produce efficiently.

Question 18

Which of the following is a microeconomic issue?

A) The Australian government cuts taxes to combat a recession.
B) The inflation rate fell this year.
C) The quantity of wheat grown in South Australia increases this year.
D) Growth in the Australian economy slowed.
E) Increased federal government expenditures have lowered the unemployment rate.

Question 19

Which of the following is a topic studied in macroeconomics?

A) How the wheat industry determines how much wheat to grow.
B) The effect on economic growth if the government raises taxes.
C) The impact of higher prices for petrol on the number of SUVs people buy.
D) The pricing decisions in the computer hardware industry.
E) The impact of labour unions on wages.

Question 20

When an AFL player earns more than a police officer, society answers the ________ question.

A) for whom
B) why
C) what
D) social interest versus self-interest
E) how

Question 21

Choices that are best for the society as a whole are choices in pursuit of

A) answering the 'how?' question.
B) answering the 'for whom?' question.
C) self-interest.
D) incentives.
E) the social interest.

Question 22

Self-interest

A) occurs only when wants exceed available resources.
B) reflects choices that are best for society as a whole.
C) reflects choices that are best for the individual who makes them.
D) cannot be used to determine how goods are produced.
E) has nothing to do with determining what goods are produced

Question 23

The opportunity cost of a decision is measured in terms of

A) sunk cost.
B) the next best thing given up.
C) the price of the alternative we choose.
D) time.
E) the price of a new opportunity that arises.

Question 24

Suppose that, instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the

A) forgone party.
B) forgone working and partying.
C) test because you are taking it.
D) forgone working or partying, depending on which was your next best choice.
E) forgone work.

Question 25

Matthew has eaten two hamburgers and is considering a third. The marginal benefit in his decision is the pleasure from consuming

A) all three hamburgers.
B) just the third hamburger.
C) just the second hamburger.
D) the third hamburger minus the pleasure from consuming zero hamburgers.
E) the two previous hamburgers.

Question 26

Mothers Against Drunk Drivers (MADD) campaigned to increase the legal penalties of drunk driving. This successful campaign ________ of drunk driving.

A) increased the marginal benefit
B) had no effect on the marginal cost or marginal benefit but did affect the total benefit
C) decreased the marginal benefit
D) increased the marginal cost
E) decreased the marginal cost

Question 27

When Ferrari decides to produce 1,200 '360 Modenas' each year, Ferrari is answering the ________ question.

A) why
B) for whom
C) scarcity
D) how
E) what

Question 28

Ali decides to attend the one-hour review session for microeconomics instead of working at his job. His job pays him $10 per hour. Ali's opportunity cost of attending the review session is

A) the one-hour review session.
B) equal to the benefit he gets from the review session.
C) the $10 he could have earned at his job.
D) the value of the session minus the $10 he could have earned at his job.
E) nothing, because the review session does not cost anything.

Question 29

Which of the following statements is true regarding scarcity?

A) An economy experiences scarcity only when the incomes of its citizens decline.
B) Scarcity could be overcome if people would make all choices in the social interest.
C) Poor people experience scarcity more often than do rich people.
D) Scarcity affects poorer countries only.
E) All citizens in a wealthy economy experience scarcity.

Question 30

Scarcity results from the fact that

A) not all goals are desirable.
B) we cannot answer the major economic questions.
C) choices made in self-interest are not always in the social interest.
D) the population keeps growing.
E) people's wants exceed the resources available to satisfy them

Question 31

Your lecturer changes the penalty for cheating on exams from getting a 0 on the exam to getting an F in the course. Your lecturer has

A) recognised that students don't make rational choices.
B) decreased the marginal benefit of cheating.
C) made all the students act in the social interest.
D) recognised that students don't respond to incentives.
E) increased the marginal cost of cheating.

Question 32

Whether a company produces fishing rods mostly by hand or using high-tech machinery is a question of

A) 'when will the goods be produced?'
B) 'where will the goods be produced?'
C) 'why will the goods be produced?'
D) 'for whom will goods be produced?'
E) 'how will the goods be produced?'

Question 33

You have chosen to take a trip during the mid-semester break. If you had not gone, you would either have worked at a temporary job or studied for exams. The opportunity cost of your trip is

A) We cannot determine what the opportunity cost is without knowing which alternative, working or studying, you would have preferred.
B) the wages you would have earned from working.
C) the wages you would have earned from working and the lower grade earned by not studying.
D) the value of the trip.
E) the lower grade earned by not studying.

Question 34

An opportunity cost is

A) the benefits of the highest-valued alternative forgone.
B) another term for all the sunk costs.
C) the dollar amount that is paid.
D) whatever is paid out and cannot be reduced or reversed.
E) anything the decision maker believes costs to be.

Question 35

The question 'should economics majors or sociology majors earn more after they graduate?' is an example of a ________ question.

A) how
B) what
C) for whom
D) why
E) where

Question 36

What is NOT true about rational choice?

A) It is the same for all individuals.
B) It can result in different decisions for different individuals.
C) It is a choice that uses the available resources to best achieve the objective of the person making the choice.
D) It might turn out not to have been the best choice after the event.
E) It involves comparing costs and benefits

Question 37

Australia has a universal health care system called Medicare, so that everyone, regardless of their ability to pay, has some access to health care. Based on this observation, Australia has decided that 'everyone, regardless of their ability to pay' is the answer to what microeconomic question?

A) How will health care be produced?
B) Why will we offer health care?
C) What type of health care will be produced and in what quantity?
D) Must we offer health care?
E) For whom will health care be produced?

Question 38

Which of the following is a microeconomic issue?

A) Why has unemployment risen nationwide?
B) What is the impact on the quantity of Pepsi purchased if consumers' tastes change in favour of non-carbonated drinks?
C) Why has economic growth been rapid in China?
D) Why did overall production increase in Australia last year?
E) Why is the average income lower in Africa than in Latin America?

Question 39

Rational choice:

A) is always efficient.
B) is a choice that uses the available resources to best achieve the objective of the person making the choice.
C) provides the answer to only the 'how?' question.
D) is made by comparing different incentives.
E) is what you must give up to get what you want

Question 40

The cost of a one-unit increase in an activity is called the

A) margin.
B) marginal cost.
C) rational cost.
D) opportunity benefit.
E) marginal benefit.

Question 41

Decision making on the margin involves

A) eliminating the additional cost when making a decision.
B) comparing the total cost and the total benefit when making a decision.
C) comparing the marginal cost and marginal benefit when making a decision.
D) comparing the benefits for the social interest to the benefits for the person's self-interest.
E) determining the total benefit of a decision.

Question 42

Proponents of cuts to income tax rates argue that when income tax rates are cut, workers have an incentive to increase their work hours. This argument is based on the assumption that

A) the opportunity cost of working is negative.
B) the marginal cost of each additional work hour is not important to most workers.
C) workers are irrational.
D) workers make decisions based on the marginal benefit of each hour worked compared to the marginal cost of work.
E) workers make decisions based on the social interest.

Question 43

Correlation means:

A) other things remaining the same.
B) 'after this, therefore because of this'.
C) 'on the margin'.
D) a natural experiment has been conducted.
E) the tendency for the values of two variables to move in a predictable and related way.

Question 44

Your economics lecturer offers 10 bonus marks on the final exam if you attend a review session before the exam. These bonus marks are an example of

A) a rational choice.
B) a decrease in the marginal benefit of attending the review session.
C) an incentive to attend the review session.
D) an increase in the marginal cost of attending the review session.
E) None of the above answers is correct.

Question 45

Going skiing will cost Adam $80 a day. He also loses $40 per day in wages because he has to take time off from work. Yet, Adam still decides to go skiing.

A) He loses a total of $120 per day, so his decision is irrational.
B) Adam is definitely making a decision that is in the social interest.
C) Adam's lost $40 per day in wages is not an opportunity cost and so did not affect his decision.
D) His decision is rational if Adam's marginal benefit of spending a day skiing is greater than his marginal cost.
E) The $80 price of skiing is not an opportunity cost and so did not affect Adam's decision.

Question 46

Normative statements
i) describe how the world is.
Ii) describe how the world ought to be.
Iii) depend on people's values and cannot be tested.

A) i and iii
B) ii only
C) ii and iii
D) i only
E) iii only

Question 47

In making your decision whether to spend a week on the Gold Coast during the mid-semester break, you compare all the other activities you could undertake. As a result, you

A) are making a choice on the margin.
B) limit the cost and the benefit you can gain.
C) are not making a rational choice.
D) must have made a choice in the social interest.
E) do not face an opportunity cost.

Question 48

The statement that 'increases in the tax on petrol increase the price of petrol' is an example of which of the following?

A) Marginal statement.
B) Rational-decision statement.
C) Macroeconomic statement.
D) Positive statement.
E) Normative statement.

Question 49

Which of the following is a normative statement?

A) Flood victims should pay for their own rebuilding.
B) Recessions lead to increases in the unemployment rate.
C) When the price of kiwi fruit increases, fewer people eat kiwi fruit.
D) An increase in the supply of computers has caused computer prices to fall.
E) Cyclones strike mainly Queensland and Western Australia.

Question 50

What typically happens to benefits as the amount of an activity is increased?

A) Marginal benefit increases.
B) Marginal benefit decreases.
C) Marginal benefit remains constant.
D) The marginal benefit changes only if the marginal cost changes.
E) Total benefit remains constant.

Question 51

Suppose you eat two hamburgers for lunch. The marginal benefit of the first burger is usually ________ of the second burger.

A) equal to the marginal benefit
B) equal to the marginal cost and the marginal benefit
C) larger than the marginal benefit
D) not related to the marginal benefit
E) smaller than the marginal benefit

Question 52

In order to determine whether to major in economics, a rational individual compares the ________ of the decision.

A) marginal benefit and marginal cost
B) normative benefits and positive costs
C) self-interest and social interest
D) positive benefits and normative costs
E) opportunity cost and the sunk cost

Question 53

Which of the following statements is a positive statement?

A) Too many people are unemployed.
B) Our country must increase military spending.
C) There should be a computer in every primary school classroom.
D) Online shopping increased by 50 per cent last Christmas season.
E) We need to spend less on luxury items for the wealthy, and more on necessities for the less fortunate.

Question 54

'Lower ticket prices would lead to more people attending football games.' This statement is a:

A) statement that confuses marginal cost and sunk cost.
B) macroeconomic statement.
C) normative statement.
D) positive statement.
E) statement assessing the social interest versus the private interest.

Question 55

An incentive is

A) the marginal cost of some course of action.
B) a constraint that society imposes on those who make self-interested choices.
C) the net gain of some course of action.
D) an inducement to take a particular action.
E) the marginal benefit of some course of action.

Question 56

A positive statement:
i) makes a statement about how the world operates.
Ii) is a true statement.
Iii) can be tested against the facts.

A) ii and iii
B) i, ii and iii
C) i and ii
D) i only
E) i and iii

Question 57

When Gabriel made a rational choice to spend his entire allowance on chocolate bars, he did so by comparing the

A) benefits of the chocolate bars to the scarcity of the chocolate bars.
B) marginal benefits of the chocolate bars to the marginal costs of the chocolate bars.
C) opportunity costs of the chocolate bars to the scarcity of the chocolate bars.
D) self-interest to the social interest.
E) benefits of the chocolate bars to the desire he had for the chocolate bars.

Question 58

A normative statement: i. can be tested as to whether it is true or false.
Ii) is considered negative.
Iii) depends on a person's values.

A) i only
B) iii only
C) i and iii
D) ii and iii
E) i, ii and iii

Question 59

Which of the following is a positive statement?

A) Everyone should have some knowledge of economics.
B) Social security must be reformed.
C) Taxes on petrol should be lower so that petrol is more affordable for the poor.
D) If we reduce welfare payments given to the poor, they will find jobs.
E) The rich should pay more in taxes.

Question 60

In examining two variables, we find that as one variable changes, the other changes. These variables are said to be

A) significantly related.
B) statistics.
C) independent.
D) casually related.
E) correlated.

Question 61

The vertical axis in a graph

A) is named the y-axis.
B) has no origin.
C) is named the x-axis.
D) measures time only in a time-series graph.
E) measures time in a cross-section and time-series graph.

Question 62

By donating $1,000 to the Salvation Army, Caroline reduced her taxable income. To Caroline, the reduction in her taxable income is

A) a marginal benefit.
B) a marginal cost.
C) an incentive.
D) an opportunity cost.
E) the margin.

Question 63

Jamie has enough money to buy either a Mountain Dew, a Pepsi, or a bag of chips. He chooses to buy the Mountain Dew. The opportunity cost of the Mountain Dew is

A) the Mountain Dew.
B) the Pepsi and the bag of chips.
C) the Pepsi or the bag of chips, whichever is the highest-valued alternative forgone.
D) the Pepsi, because it is a drink as is the Mountain Dew.
E) zero because he enjoys the Mountain Dew.

Question 64

Which type of economic graph reveals trends in data?

A) Time-series graph
B) Cross-section graph
C) Scatter diagram
D) Answers A and C are correct.
E) Answers A, B and C are all correct.

Question 65

When the Adelaide Crows score more than 100 points in a home game, they win the game. This is an example of

A) an incentive to win the game.
B) an economic theory.
C) a normative statement.
D) a statement on the margin.
E) a correlation.

Question 66

The marginal benefit of an activity is: i. the benefit from a one-unit increase in the activity.
Ii) the benefit of a small, unimportant activity.
Iii) measured by what the person is willing to give up to get one additional unit of the activity.

A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii

Question 67

To show how a variable ________, we typically use a ________.

A) changes over time; cross-time chart
B) relates to another variable; time-series graph
C) changes over time; cross-section graph
D) relates to another variable; pie chart
E) changes over time; time-series graph

Question 68

Which of the following is NOT a normative economic statement?

A) People over the age of 75 should not be allowed to drive cars.
B) Teenagers are responsible for most driving fatalities.
C) The price of petrol is too high.
D) States should reduce the tax on heating fuel oil during the winter.
E) We don't spend enough money on anti-smoking campaigns.

Question 69

The figure above shows a

A) slope.
B) cross-section graph.
C) time-series graph.
D) scatter diagram.
E) trend diagram.

Question 70

A trend is

A) a measure of closeness on a scatter diagram.
B) the minimum value of a variable.
C) the difference between the maximum value of a variable and the minimum value of the variable.
D) the maximum value of a variable.
E) a general tendency for a variable to rise or fall.

Question 71

A graph of the value of one variable against the value of another variable is known as a:

A) three-dimensional graph.
B) scatter diagram.
C) time-series graph.
D) two-variable graph.
E) two-dimensional graph.

Question 72

A graph shows the wage rate of factory workers. The slope of the line is positive for periods when the wage rate is

A) high and not changing.
B) rising.
C) falling.
D) high and falling.
E) low and falling.

Question 73

If there is no scarcity,

A) choices are no longer rational.
B) the opportunity cost of an action would be greater than its sunk cost.
C) all marginal benefits would equal zero.
D) an action would have zero opportunity cost.
E) the marginal cost of an action is greater than its marginal benefit.

Question 74

If the marginal benefit of the next slice of pizza exceeds the marginal cost, you will

A) not eat the slice of pizza.
B) eat the slice of pizza.
C) eat half the slice.
D) be unable to choose between eating and not eating.
E) More information is needed about how much the marginal benefit exceeds the marginal cost to determine if you will or will not eat the slice.

Question 75

A steep slope in a time-series graph means the variable is

A) rising or falling quickly.
B) rising or falling slowly.
C) very close to its trend point.
D) falling.
E) high.

Question 76

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

A) Car prices should be affordable.
B) Fewer people die in larger cars than in smaller cars.
C) If wages increase, firms will fire some workers.
D) If cars become more expensive, fewer people will buy them.
E) Cars emit pollution.

Question 77

Which of the following is a positive statement?

A) The class average on this test should be more than 80 per cent.
B) A 10 per cent increase in income leads to a 4 per cent increase in the consumption of beef.
C) Taxes should be lower because then people get to keep more of what they earn, so they will work more.
D) Given their negative impact on productivity, the government should eliminate labour unions.
E) My economics class should last for two terms because it is my favourite class.

Question 78

John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his email. What is the opportunity cost of attending the concert for John?

A) Attending a movie
B) Answering his email
C) Studying for an economics exam
D) Going to the concert because that is what John chose to do
E) Attending a movie, studying for an economics exam, and answering his email

Question 79

A statement that 'all children should receive free health care' is an example of what kind of statement?

A) A natural experiment statement
B) A normative statement
C) A fair statement
D) A positive statement
E) A statement on the margin

Question 80

The ________ of something is the gain or pleasure that it brings.

A) benefit
B) rational choice
C) opportunity cost
D) rational margin
E) marginal cost