Tutorial 1 (Topic 1: Introduction To Economics)

Universiti Tunku Abdul Rahman
Centre for Foundation Studies

FHBM1014 Principles of Economics
Tutorial 1
(Topic 1: Introduction to Economics)
1. 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 income.
D. Economics is the study of how society chooses to allocate scarce resources.
2. Microeconomics approaches the study of economics from the viewpoint of:

A. inflation, unemployment, and economic growth.
B. the federal government.
C. individual economic units, such as consumers, firms, and units of
government.
D. the economy as a whole.
3. The basic difference between macroeconomics and microeconomics is:

A. microeconomics concentrates on individual markets while macroeconomics
focuses primarily on international trade.
B. microeconomics concentrates on the behavior of individual consumers while
macroeconomics focuses on the behavior of firms.
C. microeconomics concentrates on the behavior of individual consumers and
firms while macroeconomics focuses on the performance of the entire
economy.
D. microeconomics explores the causes of inflation while macroeconomics
focuses on the causes of unemployment.
4. The branch of economics that focuses on decision making for the economy as a
whole is called:
A. normative economics.
B. macroeconomics.
C. microeconomics.
D. consumer economics.
5. When economists say scarcity, they mean:

A. there are only a limited number of consumers who would be interested in
purchasing goods.
B. the human desire for goods exceeds the available supply of time, goods and
resources.
C. most people in poorer countries do not have enough goods.
D. goods are so expensive that only the rich can afford it.
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6. People are forced to make choices because of:

A. unlimited wants and unlimited resources.
B. limited wants and unlimited resources.
C. unlimited wants and limited resources.
D. limited wants and limited resources.
7. Natural resources are:

A. not considered scarce because no one pays for them.
B. only desired for use in producing other goods.
C. included in the category of resources called land.
D. available in unlimited quantities.
8. Which of the following is true of resources?

A. Resources are inputs used to produce goods and services.
B. Labor is the mental and physical capacity of workers to produce goods and
services.
C. Entrepreneurship organizes resources to produce goods and services.
D. All of these are true.
9. A chain saw is an example of which of the following factors of production?

A. Land.
B. Labor.
C. Capital.
D. None of these.
10. A factor of production is the same as:

A. the amount of a good produced.
B. a profit of a firm.
C. an opportunity cost.
D. a resource.
11. The perpetual problem in economics is:

A. our inability to work together effectively.
B. our inability to satisfy everyone's wants with the available resources.
C. our inability to utilize resources efficiently.
D. likely to be solved in resource-rich countries.
12. Which of the following would an economist classify as capital?

A. 100 shares of Microsoft stock.
B. $50 bill.
C. credit card.
D. lawyer's personal computer.
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13. An entrepreneur is a(n):

A. individual who has much education.
B. organizer who seeks profitable opportunities and is willing to accept risks.
C. business organization that uses inputs to produce output.
D. depot or warehouse for commercial products.
14. Which of the following is not an example of a factor of production?

A. A forest.
B. A computer program.
C. A labor leader.
D. Dollars.
15. Which of the following is the best example of a nonrenewable resource?

A. Forests.
B. Oil.
C. Clean air.
D. Fish in the ocean.
16. Determining the price of compact discs is a concern of:

A. macroeconomics.
B. microeconomics.
C. both macroeconomics and microeconomics.
D. neither macroeconomics nor microeconomics.
17. Which of the following is the best example of a microeconomic topic?

A. The impact that the money supply has on inflation.
B. The reasons for increases in the price of soft drinks.
C. The effect that federal budget deficits have on the interest rate.
D. The tradeoff between inflation and unemployment.
18. Mallory decides to spend three hours working overtime rather than watching a
video with her friends. She earns $8 an hour. Her opportunity cost of working is
A. the $24 she earns working.
B. the $24 minus the enjoyment she would have received from watching the
video.
C. the enjoyment she would have received had she watched the video.
D. nothing, since she would have received less than $24 of enjoyment from the
video.
19. Moira decides to spend two hours taking a nap rather than attending her classes.
Her opportunity cost of napping is
A. the value of the knowledge she would have received had she attended class.
B. the $30 she could have earned if she had worked at her job for the 2 hours.
C. the value of her nap less the value of attending class.
D. nothing, since she would valued sleep more than attendance at class.
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20. Which of the following is a macroeconomics topic?

A. Wages of textile workers in the Northeast.
B. The cost of producing 10,000 bookcases.
C. The economy's annual growth rate.
D. National demand for fish.
21. The television network newscaster reports that the national inflation rate the past
year equaled 4 percent. This report would be of particular interest to a ____.
A. microeconomist.
B. normative economist.
C. macroeconomist.
D. social science economist.
22. What type of economic analysis is limited to testable, verifiable statements?

A. Macroeconomics.
B. Entrepreneurial economics.
C. Positive economics.
D. Normative economics.
23. A normative economic statement:

A. is a model used to collect data.
B. is a statement of fact.
C. is a statement of what ought to be, not what is.
D. indicates what will occur if certain assumptions are true.
24. Which of the following is a statement of positive economics?

A. I hope unemployment comes down soon.
B. President X's way of dealing with unemployment is better than President Y's.
C. I think everyone should sacrifice to reduce the deficit.
D. If taxes are reduced, unemployment will drop.
25. The Secretary of Labor states that wage rates in the country have risen by 2
percent this past year. The head of a local labor union states that wage gains
should have been higher. The Secretary's statement is a (n) ____ economic
statement, and the labor head's statement is a (n) ____ economic statement.
A. normative; normative
B. normative; positive
C. positive; normative
D. positive; positive
26. 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.

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Universiti Tunku Abdul Rahman

Centre for Foundation Studies

(Topic 1: Introduction to Economics)

1. Which one of the following is the most accurate definition of economics?

2. Microeconomics approaches the study of economics from the viewpoint of:

3. The basic difference between macroeconomics and microeconomics is:

5. When economists say scarcity, they mean:

6. People are forced to make choices because of:

7. Natural resources are:

8. Which of the following is true of resources?

9. A chain saw is an example of which of the following factors of production?

10. A factor of production is the same as:

11. The perpetual problem in economics is:

12. Which of the following would an economist classify as capital?

13. An entrepreneur is a(n):

14. Which of the following is not an example of a factor of production?

15. Which of the following is the best example of a nonrenewable resource?

16. Determining the price of compact discs is a concern of:

17. Which of the following is the best example of a microeconomic topic?

20. Which of the following is a macroeconomics topic?

22. What type of economic analysis is limited to testable, verifiable statements?

23. A normative economic statement:

24. Which of the following is a statement of positive economics?

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