Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Economics is best described as the study of: 1) _______
a) how producers make profit in a market economy.
b) how people can buy and sell shares to make money in the stock market.
c) the choices everybody makes to attain their goals, given their scarce resources.
d) supply, demand and equilibrium in an economy.

2) Economics is the study of the ________ people make to attain their goals, given their ________
resources.
2) _______
a) decisions; household
b) purchases; unlimited
c) income; available
d) choices; scarce

3) In every economic system, choices must be made because resources are: 3) _______
a) limited and human wants are unlimited.
b) unlimited and human wants are limited.
c) limited and human wants are limited.
d) unlimited and human wants are unlimited.

4) Scarcity: 4) _______
a) is found only in developing nations.
b) occurs because there are too many people.
c) is not a problem for the wealthy people in society.
d) occurs because of unlimited wants and limited resources available to fulfil these wants.

5) What assumptions do economists make about people? 5) _______
a) People prefer to live in a society that values fairness above all else.
b) People are rational and respond to incentives.
c) Economists make no assumptions about human behaviour.
d) People are greedy and selfish.

6) Which of the following is what economically rational people do? 6) _______
a) Respond to economic incentives.
b) Use all available information as they act to achieve their goals.
c) Weigh the benefits and costs of all possible alternative actions.
d) Economically rational individuals do all of these.

7) What does the word 'marginal' mean in economics? 7) _______
a) Something done at the edge of a market, like buying a table at a garage sale.
b) Buying something that is illegal to buy.
c) The incremental, additional or extra benefit or cost resulting from an action.
d) None of these illustrate how the word marginal is used in economics.

8) In economics, an optimal decision involves carrying out an activity up to the point where: 8) _______
a) the opportunity cost of the activity is negative.
b) the marginal benefit of the activity is greater than the marginal cost of the activity.
c) the marginal benefit of the activity is equal to the marginal cost of the activity.
d) the opportunity cost of the activity is zero.

9) Because we live in a world of scarcity: 9) _______
a) we are forced to constantly be frustrated and unsatisfied.
b) the cost of living is so high that no one lives comfortably.
c) we have to make choices about how to spend our limited incomes on the goods available.
d) we are at the mercy of sellers who can charge any price they want.

10) If you have both an economics exam and a management exam tomorrow, but find that you have
time to fully study for only one of them, what are you facing?
10) ______
a) A trade-off.
b) A failing grade in both exams.
c) A zero opportunity cost.
d) An impossible situation.

11) The reason that opportunity cost arises is because: 11) ______
a) resources are limited at any point in time.
b) money has proven to be an inefficient means of facilitating exchange in a market.
c) sometimes there are no alternative decisions that can be made.
d) people have unlimited wants.

12) The government makes all economic decisions in a: 12) ______
a) market economy.
b) mixed economy.
c) free economy.
d) centrally planned economy.

13) Which of the following is a problem inherent in centrally planned economies? 13) ______
a) There is too much production of low-cost, high-quality goods and services.
b) There are no problems in centrally planned economies as everyone, including consumers,
is satisfied.
c) Production managers do not satisfy consumer wants, as they instead follow the
government's orders.
d) None of these describe a problem inherent in a centrally planned economy.

14) Which of the following types of economic systems best describes Australia? 14) ______
a) Market economy.
b) Mixed economy.
c) Centrally planned economy.
d) None of these options is correct.

15) Which of the following results in production occurring at the lowest possible cost? 15) ______
a) Allocative efficiency.
b) Dynamic efficiency.
c) Productive efficiency.
d) All of these options are correct.

16) Which of the following occurs when productive resources are used to produce the goods and
services that reflect consumer preferences?
16) ______
a) Dynamic efficiency.
b) Allocative efficiency.
c) Productive efficiency.
d) A centrally planned economy exists.

17) What is an economic model? 17) ______
a) A description of an economic issue that includes as little information as possible.
b) A description of an economic issue that includes all possible related information.
c) A very detailed version of some aspect of economic life used to analyse an economic issue.
d) A simplified version of some aspect of economic life used to analyse an economic issue.

18) Which of the following is part of an economic model? 18) ______
a) Economic data is needed to test the model.
b) Assumptions must be made to simplify the analysis.
c) The model must contain a hypothesis about the relationship between economic variables.
d) All of these options are correct.

19) Which of the following is a normative economic statement? 19) ______
a) The supply of petrol has not been able to meet the demand for petrol.
b) The current high price of petrol is the result of strong world-wide demand.
c) The price of petrol is too high.
d) Larger vehicles always use more fuel per kilometre than smaller vehicles.

20) Which of the following is a positive economic statement? 20) ______
a) The number of migrants should not be limited by the government.
b) The government should subsidise solar power for home owners.
c) Minimum wage laws cause unemployment.
d) People should not buy imported fruit and vegetables.

1) c
2) d
3) a
4) d
5) b
6) d
7) c
8) c
9) c
10) a
11) a
12) d
13) c
14) b
15) c
16) b
17) d
18) d
19) c
20) c