Question 1

Rational people act only when the marginal benefit of the action exceeds the marginal cost.

Accepted Answer

Rational individuals decide to take action only when the marginal benefit derived from the action exceeds the marginal cost incurred in carrying out the act. This is because rational people seek to maximize their utility or satisfaction, and acting otherwise would be illogical as it reduces their overall welfare.

Question 2

Economics is the study of how

Accepted Answer

Economics is the study of how society manages its scarce resources. This means that society has limited resources to produce goods and services, and must make choices about how to allocate these resources in order to meet the unlimited wants and needs of its members.

Question 3

There are three questions that any economy has to face: What goods and services should be produced? How should these goods and services be produced? ___________________?

Accepted Answer

The third question an economy has to face is who should get the goods and services that have been produced. This refers to the distribution of goods and services to individuals or groups in society, which can be influenced by factors such as income, wealth, social status, and government policies.

Question 4

Economics deals primarily with the concept of

Accepted Answer

Economics is the study of how societies allocate scarce resources among competing wants and needs. Therefore, scarcity is the central concept in economics, and all economic problems arise from the scarcity of resources. Money, poverty, and banking are all related to economics, but they are not the primary concept that economics deals with.

Question 5

A rational person does not act unless

Accepted Answer

Rational decision-making involves weighing the costs and benefits of an action. A rational person will only act if the marginal benefits of the action are greater than the marginal costs. This is the most efficient use of resources and ensures that the person is maximizing their utility.

Question 6

Adam Smith's "invisible hand" concept describes how corporate business reaches into the pockets of consumers like an "invisible hand."

Accepted Answer

The concept of the "invisible hand" in Adam Smith's work actually refers to the idea that individuals pursuing their own self-interest in a free market economy will unintentionally benefit others and promote the overall well-being of society. It does not specifically refer to corporate businesses taking money from consumers.

Question 7

Suppose you are considering going to the cinema, and you place a R180 value on your anticipated enjoyment of the film. The ticket price is R90 and you would be giving up two hours of work, where you earn R75 per hour. You would go to

Accepted Answer

The opportunity cost of going to the cinema is R240 (R90 ticket + R150 lost wages), which exceeds the R180 value you place on the film.

Question 8

The opportunity cost of building additional parking at your university is

Accepted Answer

The opportunity cost of building additional parking at the university is the value of the land used in its next best alternative use, as well as the cost of the labour and materials used to build the parking. This is because the land could have been used for other purposes, such as building a new academic building or green space, which would have generated different benefits. Therefore, by choosing to build the parking lot, the university incurs the opportunity cost of the foregone benefits from the alternative use of the land.

Question 9

When the government redistributes income with taxes and welfare, the economy becomes more efficient.

Accepted Answer

The answer of When the government redistributes income with taxes...

Question 10

When economists say, "There is no such thing as a free lunch," they mean that all economic decisions involve trade-offs.

Accepted Answer

This statement means that everything has a cost, even if it is not immediately apparent. To obtain something, something else must be given up, whether it is time, money, or resources.

Question 11

Choices must be made in the use of resources

Accepted Answer

Resources are limited in supply, which means there is a finite amount available. Therefore, choices must be made in how those resources are used and allocated in order to prevent depletion and ensure their availability for future generations.

Question 12

Trade-offs are required because wants are unlimited and resources are

Accepted Answer

Trade-offs are required because resources are scarce, meaning there are not enough resources to satisfy everyone's wants and needs. Therefore, individuals and societies must make choices between different alternatives, and this is where trade-offs come into play.

Question 13

When a jet flies overhead, the noise it generates is an externality.

Accepted Answer

The noise generated by the jet is an unintended consequence of its operation, and affects people and animals on the ground who did not choose to be exposed to it. This is an example of a negative externality.

Question 14

Raising taxes and increasing welfare payments

Accepted Answer

Raising taxes and increasing welfare payments leads to better equity by redistributing wealth from the wealthy to the poor, but it also decreases efficiency by discouraging work and decreasing incentives to invest in businesses. This is referred to as the equity-efficiency tradeoff. Therefore, the correct answer is E, which shows that equity is improved at the expense of efficiency.

Question 15

High and persistent inflation is caused by excessive growth in the quantity of money in the economy.

Accepted Answer

High and persistent inflation is generally caused by an increase in the quantity of money in an economy that outpaces the growth of real output. This is often referred to as "too much money chasing too few goods." When there is an excess supply of money relative to the demand for goods and services, prices tend to rise as consumers compete for a limited supply of goods.

Question 16

Andile is better at cleaning and Joe is better at cooking. It will take fewer hours to eat and clean if Joe specialises in cooking and Andile specialises in cleaning than if they share the household duties evenly.

Accepted Answer

Specialization of tasks according to individual strengths results in greater efficiency and productivity, so if Andile focuses on cleaning and Joe focuses on cooking, they will be able to complete the household duties in less time than if they evenly split the tasks.

Question 17

Which of the following involve a trade-off?

Accepted Answer

All of these options involve trade-offs, meaning that you have to sacrifice or give up something in order to gain something else. For example, taking a nap may mean sacrificing time that you could be doing other productive tasks or socializing, going to university may mean sacrificing time and money for several years, and buying a new car may mean sacrificing money that could be saved for other purposes. Therefore, it is important to consider the trade-offs involved in any decision in order to make the best choice for your individual situation.

Question 18

In the short run, a reduction in inflation tends to cause a reduction in unemployment.

Accepted Answer

The answer of In the short run, a reduction in...

Question 19

Resources are

Accepted Answer

Resources are scarce for both households and economies because there are limits to what can be produced or consumed with the available resources. While households may have more control over their individual resources, there is still a finite amount available overall. The same applies to economies, where the resources are distributed and allocated in a way that addresses the scarcity issue.

Question 20

South Africa will benefit economically if we eliminate trade with other countries because South African citizens will be forced to produce more of their own cars and clothes.

Accepted Answer

Eliminating trade with other countries would lead to the loss of access to cheaper imports and potential markets for South African exports, ultimately harming the economy. Additionally, forcing citizens to produce more of their own goods would likely lead to higher costs and inefficiency, further hurting economic growth.

Quiz 1: What Is Economics