Question 1

Resources are

Accepted Answer

Resources are scarce for both households and economies. This is because resources have alternative uses and are limited in quantity, causing individuals and societies to have to make choices about how to allocate them.

Question 2

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

Accepted Answer

Trade-offs are necessary because resources are scarce, meaning that there are not enough resources to satisfy unlimited wants or needs. Therefore, individuals and businesses must make choices about how to allocate their limited resources, resulting in trade-offs.

Question 3

A rational person does not act unless

Accepted Answer

A rational person weighs the costs and benefits of any action before taking it. Therefore, they will only act if the marginal benefits exceed the marginal costs.

Question 4

Raising taxes and increasing welfare payments

Accepted Answer

Raising taxes and increasing welfare payments improves equity as it helps to redistribute wealth and reduce income inequality. However, it may come at the expense of efficiency as it can reduce incentives for individuals to work and invest.

Question 5

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

Accepted Answer

This is a well-established economic principle known as the Quantity Theory of Money, which states that the level of prices in an economy is directly proportional to the quantity of money in circulation. Therefore, if the quantity of money grows too rapidly, it can lead to inflation.

Question 6

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 7

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 8

Choices must be made in the use of resources

Accepted Answer

Resources are limited in supply, which means that we cannot produce an unlimited amount of goods and services. Therefore, we have to make choices about which goods and services to produce and how to allocate resources to achieve the best possible outcome. This is the fundamental concept of economics, and it applies to all types of resources, whether they are natural resources, labor, or capital.

Question 9

Economics is the study of how

Accepted Answer

Economics is the study of how society manages its scarce resources. This is because resources, including money, time, and natural resources, are limited, and therefore choices and trade-offs must be made. The study of economics helps individuals and societies make informed choices about how to allocate these limited resources.

Question 10

Economics deals primarily with the concept of

Accepted Answer

Economics is primarily concerned with the concept of scarcity, which refers to the limited resources available to meet unlimited wants and needs. This fundamental problem of economics requires individuals, businesses, and societies to make efficient choices about the allocation of resources in order to satisfy their needs and wants. While money, poverty, and banking are all relevant to economics, they are secondary concepts that are related to scarcity in various ways.

Question 11

Which of the following involve a trade-off?

Accepted Answer

All of the options listed involve a trade-off between different choices or opportunities. For example, taking a nap means sacrificing time that could be spent doing something else. Going to university involves sacrificing immediate employment opportunities and potentially taking on student loan debt. Buying a new car means sacrificing the money that could be used for other expenses or investments. Therefore, the best answer is B, as it encompasses all the options and acknowledges the presence of trade-offs in decision making.

Question 12

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 that any economy has to face is who should get the goods and services that have been produced. This question is related to the distribution of resources, income, and wealth in society.

Question 13

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

Accepted Answer

The noise generated by a jet flying overhead affects people and the environment below it, who do not bear the full cost of that noise. This is an example of a negative externality.

Question 14

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 result in increased production costs for goods and reduced competition, leading to higher prices for consumers in South Africa. This could ultimately harm the economy by limiting consumers' purchasing power and reducing the competitiveness of South African businesses on the global stage.

Question 15

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

Specializing in tasks that one is better at results in increased efficiency and productivity. Therefore, it is likely that if Joe focuses on cooking while Andile focuses on cleaning, the household duties can be completed faster than if they split the tasks evenly.

Question 16

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

Accepted Answer

Rational people weigh the costs and benefits of any action and will only act if the benefits outweigh the costs. This is reflected in the statement that they will only act when the marginal benefit (the additional benefit gained from taking the action) exceeds the marginal cost (the additional cost incurred by taking the action).

Question 17

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 anticipated enjoyment value of R180.

Question 18

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 refers to the idea that in a market economy, self-interest and competition can lead to economic benefits for society as a whole, without a central authority directing economic activity. It does not specifically refer to corporations reaching into the pockets of consumers.

Question 19

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

Accepted Answer

The saying "there is no such thing as a free lunch" means that everything has a cost, whether it is money, time, or other resources. Therefore, all economic decisions involve trade-offs and require giving up something in order to obtain something else.

Question 20

The opportunity cost of building additional parking at your university is

Accepted Answer

The opportunity cost of building additional parking at a university is not just the cost of construction materials and labor, but also includes the value of the land in its next best alternative use. This is because using the land for parking means it cannot be used for other purposes that may have been more valuable or productive, such as a new academic building or green space. Therefore, option B, which includes both the value of the land and the cost of building the parking, is the best choice.

Quiz 1: What Is Economics