11 Econs Chpt 1

The main purpose of the production of goods and services is to

• a.   achieve more technological innovation.

• maximise exports

• maximise profits

• satisfy consumer wants

In a free market economy, the economic problem of what goods should be produced is usually solved by

• consumers expressing their tastes and preferences in their pattern of spending.

• households completing business surveys to reveal their preferred products.

• firms planning their activities to meet production targets set by government.

• entrepreneurs producing their own goods to satisfy their own needs and wants

Suppose you find $10. If you choose to use the $10 to go to the movies, your opportunity cost of going to the movies is

• nothing, because you found the money

• $10

• $10 plus the value of the time spent at the movies

• $10 plus the value of the time spent at the movies plus the cost of a coke & popcorn you consumed

In order for a good to be an economic good

• it must be traded in a market

• it must be produced efficiently

• it must be privately rather than publicly produced

• it must be scarce

What do economists regard as the reward for taking risks and organising production?

• enterprise

• interest

• wages

• profit

Which of the following statements best describes scarcity?

• Scarcity studies the choices people make to attain their goals

• Scarcity is a situation where unlimited wants exceed limited resources

• Scarcity is an imbalance between buyers and sellers in a specific market

• Scarcity refers to a lack of trade-offs

A rational person does not act unless

• the action makes money for the person

• the action is ethical

• the action produces marginal costs that exceed marginal benefits

• the action produces marginal benefits that exceed marginal costs

Your neighbour Alan ran out of coffee, so you gave him an unopened bag. You paid $15.00 for the bag, but the coffee would now cost $25.00 to replace. To compensate for your opportunity cost, Alan should pay you

• nothing; the coffee is a sunk cost

• $15.00, which is what you paid for the coffee

• $20, which splits the difference between the old and new price.

• $25.00, which is your replacement cost

If the economy is initially at point W on the PPF, then the opportunity cost of moving to point X is

• 6 units of honey

• 8 units of honey.

• 12 units of bread

• 23 units of bread

The diagram shows a PPF for an economy that produces only two goods, X and Y. The economy produces 800 of good Y and produces on its frontier. Which quantity of good X is given up?

• 200

• 400

• 800

• 1600