Deck 1: What Is Economics

Question 1

Which of the following is a microeconomic topic?

A)The reasons why total employment decreases
B)The reasons why Kathy buys less orange juice
C)The effect of the government budget deficit on inflation
D)The reasons for a decline in average prices

Answer 1

The reasons why Kathy buys less orange juice

Question 2

In economics, positive statements are about

A)microeconomics, not macroeconomics.
B)macroeconomics, not microeconomics.
C)the way things are.
D)the way things ought to be.

Answer 2

the way things are.

Question 3

Normative statements are statements about

A)quantities.
B)what ought to be.
C)what is.
D)prices.

Answer 3

what ought to be.

Question 4

Which of the following are considered factors of production used to produce goods and services?
I. Land
II. Labour
III. Capital
IV. Entrepreneurship

A)I and II only
B)I and III only
C)I, II and III only
D)I, II, III and IV

Question 5

If an increase in x (the variable on the horizontal axis)from 6 to 8 units causes a decrease in y (the variable on the vertical axis)from 4 to 3 units, the slope equals

A)- 2.
B)2.
C)- 1/2.
D)1/2.

Question 6

An economic model is

A)a description of some aspect of the economic world that includes only those features of the world that are needed for the purpose at hand.
B)a statement that describes how the world should be.
C)a collection of facts that describe the real world.
D)a generalisation that summarises all the normative assumptions we make about a particular issue.

Question 7

Which of the following questions is NOT a microeconomic question?

A)Can the Reserve Bank keep income growing by cutting interest rates?
B)What is the opportunity cost of building another airport in Sydney?
C)Does Australia have a comparative advantage in information technology services?
D)How would a tax on e- commerce affect eBay?

Question 8

You have the choice of going on vacation to the Gold Coast for one week, staying at work for the week, or spending the week doing fix- up projects around your house. If you decide to go to the Gold Coast, the opportunity cost of the trip is

A)working and doing fix- up projects.
B)working, because you would be giving up dollars.
C)working or doing fix- up projects, depending on which you would have done otherwise.
D)nothing because you will enjoy the trip to the Gold Coast.

Question 9

The vertical axis in a graph

A)is named the y- axis.
B)has no origin.
C)is named the x- axis.
D)is not used in a scatter diagram.

Question 10

Suppose we are considering the relationship between two variables y and x. y is measured on the y- axis and x is measured on the x- axis, and the relationship between them is a straight line. Suppose that the slope of the line is equal to 1. This slope means that

A)a change in x is associated with a smaller change in y.
B)a change in x is associated with an equal change in y.
C)a change in x is associated with a bigger change in y.
D)a change in x is associated with no change in y.

Question 11

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

A)Households are the primary source of saving.
B)Government should not redistribute income.
C)Business firms ought to contribute more to charities.
D)The foreign sector should be more tightly controlled.

Question 12

The slope of the line shown in the above figure is

A)- 1 2/3.
B)- 1 1/3.
C)- 1.25.
D)- 0.80.

Question 13

In the above figure, the slope at point b

A)lies between 1 and 2.
B)exceeds 2.
C)equals 1.
D)lies between 1/3 and 1.

Question 14

In the above figure, the x- coordinate of point b is

A)3.
B)1.
C)14.
D)2.

Question 15

Which of the following is an example of a microeconomic decision?

A)A multinational company deciding where to relocate its world headquarters
B)A small shoe factory deciding how much leather to purchase for the next quarter's production need
C)An individual deciding how to allocate the time he or she has for work and leisure
D)All of the above answers are correct.

Question 16

Which of the following correctly describes the above figure?

A)There is a negative relationship between x and y.
B)There is no relationship between x and y.
C)There is a positive relationship between x and y.
D)None of the above answers is correct.

Question 17

Marginal cost is the

A)total cost of an activity.
B)cost of an activity minus the benefits of the activity.
C)cost of an increase in an activity.
D)cost of all forgone alternatives.

Question 18

In the above figure, the axis breaks are used

A)to indicate that there are jumps from the origin, 0, to the first values recorded along the axes.
B)to show that there are no data available for the omitted ranges.
C)to create a misleading graph.
D)to indicate that there are not enough data to be included in the graph.

Question 19

The loss of the highest- valued alternative defines the concept of

A)scarcity.
B)entrepreneurship.
C)opportunity cost.
D)marginal benefit.

Question 20

Which of the following is a normative statement?

A)Housing costs are rising.
B)Owners of apartment buildings are free to charge whatever rent they want.
C)Low rents will restrict the supply of housing.
D)Low rents are good because they make apartments more affordable.

Question 21

Which of the following is a macroeconomic decision or concept?

A)The price of oil
B)The unemployment rate for the entire economy
C)How many television sets to produce
D)The unemployment rate for each firm

Question 22

In the above figure, the curve has a slope that is .

A)negative and becoming smaller in magnitude
B)negative and becoming larger in magnitude
C)positive and becoming larger in magnitude
D)positive and becoming smaller in magnitude

Question 23

Misty has the option of purchasing one of three products: Brand A, Brand B or Brand C. Each costs ten dollars. If she decides that Brand A meets her needs best, then the opportunity cost of this decision is

A)Brand A.
B)Brand B plus Brand C.
C)twenty dollars.
D)Brand B or Brand C, depending on which is considered the highest- value alternative forgone.

Question 24

An inducement to take a particular action is called

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

Question 25

Economics is BEST defined as the science of choice and how people cope with

A)differences in wants.
B)scarcity.
C)different economic systems.
D)differences in needs.

Question 26

In the above figure, if household consumption is positively related to household income, then an increase in household income will

A)make the line positively sloped.
B)cause a movement along the line.
C)shift the line rightward.
D)shift the line leftward.

Question 27

Along a straight line, the value of y is always equal to the value of x. The slope of the line is

A)- 1.
B)1.
C)0.
D)infinite.

Question 28

All economic questions arise because we

A)want more than we can get.
B)want more than we need.
C)have limited wants that need to be satisfied.
D)have an abundance of resources.

Question 29

On a graph showing the relationship between x and y, the ceteris paribus condition implies that

A)no other variables are related to x and y.
B)the value of y is held constant.
C)the value of x is held constant.
D)other variables not shown are held constant.

Question 30

Which of the following is a normative statement?

A)As compact disc prices fall, people buy more of them.
B)There is more caffeine in a cup of tea than in a cup of coffee.
C)If income increases, sales of luxury goods fall.
D)The rich should face higher income tax rates than the poor.

Question 31

In every economic system, choices must be made because resources are and our wants are
.

A)limited; limited
B)limited; unlimited
C)unlimited; limited
D)unlimited; unlimited

Question 32

The economic resource that organises the use of other economic resources is called

A)land.
B)labour.
C)entrepreneurship.
D)capital.

Question 33

Which of the following correctly describes the above figure?
I. There is no relationship between the price of an avocado and a student's grade in economics.
II. The value of the variable measured on the y- axis is constant as the variable measured on the
X- axis increases.
III. As a student's grade in economics increases, the price of an avocado increases.

A)I
B)I and II
C)II and III
D)I, II and III

Question 34

In the above figure, the relationship between the tax rate and tax revenue is positive and becoming less steep between tax rates of

A)30 per cent and 100 per cent.
B)0 per cent and 30 per cent.
C)0 per cent and 100 per cent.
D)None of the above answers is correct.

Question 35

Which of the following is NOT part of the first big economic question?

A)Why do incentives affect only marginal costs?
B)For whom are goods and services produced?
C)What goods and services are produced?
D)How are goods and services produced?

Question 36

Opportunity cost is BEST defined as

A)how much money is paid for something, taking inflation into account.
B)all the alternatives that are given up to get something.
C)the highest- valued alternative that is given up to get something.
D)how much money is paid for something.

Question 37

In the above figure, tax revenue is at a maximum when the tax rate is

A)50 per cent.
B)0 per cent.
C)30 per cent.
D)100 per cent.

Question 38

A graph shows that as fees to use ATM machines increase, people use them less frequently. The graph of this relationship would show

A)an inverse relationship.
B)a negative relationship.
C)a direct relationship.
D)A and B are both correct.

Question 39

In the above figure, when the interest rate is 8 per cent and household income is $40,000, household consumption is

A)$60,000.
B)$20,000.
C)$35,000.
D)$0.

Question 40

Fred and Ann are both given free tickets to see a movie. Both decide to see the same movie. We know that

A)the opportunity cost of seeing the movie is zero because the tickets were free.
B)both bear an opportunity cost of seeing the movie because they could have done other things instead of seeing the movie.
C)it is not possible to calculate the opportunity cost of seeing the movie because the tickets were free.
D)both bear the same opportunity cost of seeing the movie because they are doing the same thing.

Question 41

In the above table, the relationship between x and y is _ and, with y measured on the vertical axis, the slope between y=5 and y=8 is equal to .

A)positive; 5
B)positive; 3
C)negative; 8
D)negative; 6

Question 42

An economic model includes

A)only normative statements.
B)only details considered essential.
C)both normative and positive statements.
D)all known details in order to increase its accuracy.

Question 43

The study of economics

A)recognises that scarcity does not affect rich nations.
B)deals mainly with microeconomics.
C)arises from the fact that our wants exceed available resources.
D)focuses mainly on individual consumers.

Question 44

One economist says that raising taxes on gas would be in the social interest. What does this economist mean?

A)Raising taxes on gas would benefit most of the people.
B)Higher taxes on gas would benefit society as a whole.
C)Higher taxes on gas would benefit everyone.
D)Both answers A and C are correct.

Question 45

The largest part of what Australia produces today are such as .

A)services; textbooks and computers
B)services; trade and health care
C)goods; food and electronic equipment
D)goods; education and entertainment

Question 46

You notice that when interest rates increase, new residential housing prices tend to decrease. This observation indicates that

A)higher interest rates must cause low housing prices.
B)a scatter diagram between interest rates and housing prices will show a direct relationship.
C)there must be false causality between interest rates and housing prices.
D)a scatter diagram between interest rates and housing prices will show a negative relationship.

Question 47

Economics is BEST defined as

A)making choices from an unlimited supply of goods and services.
B)controlling a budget for a household with a given income.
C)making choices with unlimited wants while facing a scarcity of resources.
D)how people make money and profits in the stock market.

Question 48

Human resources that perform the functions of organising, managing and assembling the other resources are called

A)venture capital.
B)productive capital.
C)physical capital.
D)entrepreneurship.

Question 49

A student athlete is deciding whether to work out for an extra hour. Her marginal benefit from another hour of exercise

A)is less than the marginal cost of the additional hour.
B)is the benefit she receives from exercising the additional hour.
C)is the benefit she gets from all the hours she's worked out all week.
D)depends on the cost of the workout.

Question 50

An incentive

A)is neither a reward nor a penalty.
B)could be either a reward or a penalty.
C)could be a reward but could not be a penalty.
D)could be a penalty but could not be a reward.

Question 51

The slope of the line shown in the above figure is

A)2/5.
B)5/2.
C)2/3.
D)5.

Question 52

On a graph, an upward- sloping curve that is flatter as you move away from the origin indicates a

A)positive relationship with a decreasing slope.
B)positive relationship with an increasing slope.
C)negative relationship with an increasing slope.
D)negative relationship with a decreasing slope.

Question 53

In the above figure, the slope at point b is

A)1.
B)greater than 5/2.
C)5/2.
D)between 1 and 5/2.

Question 54

In economics, the term "land" means

A)land that is devoted to economic pursuits.
B)only land that is used in agricultural production.
C)land, mineral resources, and nature's other bounties.
D)land used for agricultural and urban purposes.

Question 55

Joe likes to sleep late in the mornings and play tennis in the afternoons. The opportunity cost of Joe attending his morning class for one hour is

A)an hour of sleep given up.
B)an hour of tennis given up.
C)both the tennis given up and the sleep given up.
D)nothing because he is paying for his class.

Question 56

The marginal benefit is the

A)loss of the highest- valued alternative.
B)additional cost from one more unit of an activity.
C)additional gain from one more unit of an activity.
D)additional gain from one more unit of an activity minus the additional cost from one more unit of the activity.

Question 57

In terms of dollars, the marginal benefit of working five days a week instead of four days a week is

A)the wages received for five days of work.
B)the wages received for four days of work.
C)the wages received for the fifth day of work.
D)None of the above answers is correct.

Question 58

The opportunity cost of attending college includes the cost of

A)the highest- valued alternative to attending college.
B)the tuition but not the job at which you would otherwise have worked.
C)the highest- valued alternative to attending college plus the cost of tuition.
D)tuition, books and the lost wages for the hours spent studying.

Question 59

In the above figure, the slope across the arc between a and b is

A)- 4.
B)1.
C)1/4.
D)- 1/4.

Question 60

Marginal benefit is the benefit

A)of an activity that exceeds its cost.
B)that your activity provides to someone else.
C)that arises from the secondary effects of an activity.
D)that arises from an increase in an activity.

Question 61

In the above figure, the slope across the arc between b and d is

A)6/5.
B)1/2.
C)5/3.
D)1/3.

Question 62

In the above figure, when income is zero, household expenditures equal

A)$8,000.
B)$4,000.
C)$1,000.
D)$0.

Question 63

The slope of the line shown in the above figure is

A)- 1/3.
B)- 3.
C)- 5.
D)- 1.

Question 64

Entrepreneurs directly do all of the following EXCEPT

A)create new ideas about what and how to produce.
B)face risks that arise from making business decisions.
C)decide for whom goods and services are produced.
D)make business decisions.

Question 65

In the figure above, when income equals $20,000, what does consumption equal?

A)$20,000
B)$10,000
C)$0
D)Impossible to tell

Question 66

Suppose we are considering the relationship between two variables y and x. y is measured on the y- axis and x is measured on the x- axis, and the relationship between them is a straight line. Suppose that the slope of the line is greater than 1. This slope means that

A)a change in x is associated with a bigger change in y.
B)a change in x is associated with no change in y.
C)a change in x is associated with a smaller change in y.
D)a change in x is associated with an equal change in y.

Question 67

The slope of the line shown in the above figure is

A)0.25.
B)2.
C)1 1/3.
D)0.75.

Question 68

Because we face scarcity, every choice involves

A)the question "what?".
B)an opportunity cost.
C)giving up something for nothing.
D)money.

Question 69

In the table above, Y is measured along the y- axis and X along the x- axis. The slope between points A and B is

A)0.25.
B)- 0.25.
C)4.
D)25.

Question 70

The statement "An increase in the price of petrol will lead to a decrease in the amount purchased" is

A)a political statement.
B)a normative statement.
C)a scientific statement.
D)a positive statement.

Question 71

When a textile company keeps track of its inventory using a computer and its competitor uses a pad of paper and a pencil, they are both answering the _ _ part of one of the two big economic questions.

A)"where"
B)"how"
C)"for whom"
D)"what"

Question 72

In the above table, when x increases from 4 units to 6 units, y changes by _ units.

A)- 2
B)- 6
C)2
D)6

Question 73

The slope of the line in the above figure is

A)- 2.
B)1/2 = 0.5.
C)- 1/2 = - 0.5.
D)2.

Question 74

In the above figure, the slope across the arc between b and c is

A)1/2.
B)2.
C)1.
D)2/3.

Question 75

Which of the following is a positive statement?

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

Question 76

In the above figure, using the slope across an arc, the slope of the curve between points a and b is

A)2.
B)- 2.
C)1/2.
D)- 1/2.

Question 77

Human capital is

A)the skill and knowledge of workers.
B)machinery that meets or exceeds federal safety standards for use by humans.
C)all capital owned by individuals or corporations, but not by governments.
D)all capital owned by individuals, but not by corporations or governments.

Question 78

A scatter diagram shows the

A)relationship between two variables.
B)evolution of a variable.
C)level of one variable over time.
D)change in one variable over time.

Question 79

In the above figure, the slope across the arc between a and b is

A)3.
B)1/3.
C)3/5.
D)1.

Question 80

In the above figure, the axis break in the x- axis

A)shows that there is no relationship between inflation and unemployment.
B)misleadingly shows that inflation has changed very little even though the unemployment rate has increased a great deal.
C)reflects the fact that for the years covered in the figure, the unemployment rate was never less than 3 per cent.
D)implies that for the years covered in the figure, the inflation rate was always greater than 1 per cent.