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

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.

Answer 2

C

Question 3

Labour, land and capital are called:

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

Answer 3

D

Question 4

Which of the following goods is not a capital good?

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

Question 5

Scarcity:

A) is a problem only in the poorer countries of the world.
B) will disappear if the country is rich.
C) can be solved by rapid advances in technology.
D) is a problem that exists in every economy with limited resources.
E) is not a problem for the developed countries.

Question 6

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 7

An economics textbook is an example of:

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

Question 8

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 9

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 as long as the resources are limited.

Question 10

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 11

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

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

Question 12

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 13

Which of the following is not a resource?

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

Question 14

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 15

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 and lands.

Question 16

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 mental and physical human capacities of workers to produce goods
And services.
E) include human effort involved in the production of goods but not services.

Question 17

An entrepreneur is a motivated person who seeks profit by:

A) economising.
B) undertaking risky activities, e.g. combing economic resources to produce goods and services.
C) winning in the lottery.
D) selling shares.

Question 18

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 reveal their wants.

Question 19

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 solved.
C) completely unrealistic.
D) present in the modern economies but not in the past.
E) the definition of scarcity.

Question 20

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 21

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 22

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

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

Question 23

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 aggregate consumption level.
E) Issues of inflation and unemployment rates.

Question 24

Macroeconomics is concerned with:

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

Question 25

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 four-day working week?
D) What happens to worker productivity when a job shifts to a four-day working week?
E) How is the electricity industry harmed by the passage of new clean-air legislation?

Question 26

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 27

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 28

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

A) The price of an apple.
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 29

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 imports and exports.
D) Prices of cars.

Question 30

Inflation is a concern of:

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

Question 31

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 32

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 an industry.
E) microeconomics examines the whole economy while macroeconomics studies the individual units of the economy.

Question 33

The most fundamental concepts underlying the discipline of economics are:

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

Question 34

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 unlimited income.
D) Economics is the study of how an individual agent/entity chooses to allocate scarce
Resources.

Question 35

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 the average income is in Australia.
D) The effect of price on an individual household's expenditure.
E) The growth of the economy.

Question 36

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 37

Which of the following is capital?

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

Question 38

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

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

Question 39

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) The demand for fuel efficient cars.
E) Effects of farm subsidies on food prices.

Question 40

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 in the presence of scarcity.
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 41

An economic model is useful only if it:

A) contains no positive statements.
B) captures all the complexities of reality.
C) yields accurate predictions with policy implication.
D) contains all normative statements.

Question 42

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 43

'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 44

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 45

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) understood the economy very well.
C) used normative economics to answer a positive question.
D) built an untestable model.

Question 46

Economists:

A) never use data and tables.
B) never use equations or diagrams.
C) sometimes use diagrams and equations.
D) have to use unrealistic assumptions all the time.

Question 47

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.

Question 48

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.

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 consumers' incomes and preferences 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 have no clues.

Question 50

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 51

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 52

Positive economics is a/an:

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

Question 53

To abstract from reality in an economic model means that:

A) only essential aspects of reality are included.
B) the economic study surveys only a very limited period of time.
C) we include only those elements which do not support our hypothesis.
D) the model includes some non-important aspect of the real world.

Question 54

An economic model is:

A) focused on all variables in the economy.
B) based on unrealistic assumptions.
C) a pursuit of parsimony.
D) designed to highlight minor details of the reality.

Question 55

A positive economic statement is:

A) an opinion of an action that should be taken.
B) an action that will have no effect on the economy.
C) a statement testable by facts.
D) a claim that the speaker has no idea.

Question 56

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

Question 57

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 58

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 59

An economist builds a model to:

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

Question 60

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 61

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 62

'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 63

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

Question 64

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 65

Economics studies decision making by a single individual.

Question 66

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

Question 67

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

Question 68

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

Question 69

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 70

Scarcity means that it is impossible to satisfy every desire.

Question 71

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 72

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

A) opinions, facts
B) fiction, fact
C) microeconomics, macroeconomics
D) negative aspects, positive aspects

Question 73

Which of the following words indicate the positive statement?

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

Question 74

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

A) The unemployment rate for women has been two times lower than the overall rate.
B) Increase in competition in the car manufacturing industry will result in a price reduction for cars.
C) A monopolist is a price maker.
D) Stronger regulation should be applied to polluting companies.

Question 75

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 priced low.'
C) the rate of inflation should hold steady.'
D) government should pay compensation to workers.'

Question 76

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

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

Question 77

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) Australia should use more renewable energy to reduce greenhouse gas emissions.
D) An increase in international trade benefits some workers but hurts others.

Question 78

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 79

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

Question 80

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