Topic 1: Introduction

Question 1

Judy would like to enjoy freshly grown vegetables from her own garden but also wants her daughter to enjoy summers with a swimming pool in the backyard. Despite being a keen gardener, she chooses to use her extra land for a swimming pool. The opportunity cost of the swimming pool is:

Answer 1

the value she places on having her own garden.

Question 2

If an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y, then what is the maximum units of good Y the economy can produce?

Answer 2

20

Question 3

Consider two points on the PPF: point A, at which there are 50 oranges and 100 apricots; and point B, at which there are 51 oranges and 98 apricots. If the economy is currently at point A, the opportunity cost of moving to point B is:

Answer 3

2 apricots

Question 4

The extra cost associated with producing or consuming the next unit is called the:

Answer 4

marginal cost

Question 5

Economic growth causes the PPF (production possibility frontier) to:

Answer 5

shift rightward

Question 6

“There is no such thing as a free lunch”. Which economic concept is this statement associated with?

Answer 6

trade-offs

Question 7

Jack receives 30 utils (i.e. units of satisfaction) from one apple, 45 utils from two apples, and 55 utils from three apples. It follows that the marginal utility of the third apple is __________ utils and that Jack’s __________utility rises as his __________ declines.

Answer 7

10; total; marginal

Question 8

Which of the following could be considered a microeconomic issue?
a.
Chinese economic growth has declined.

b.
Kmart decides to add more self-checkout machines as the cost of labour rises.

c.
The Reserve Bank of Australia cuts key interest rates in order to stimulate lending.

d.
India experiences a reduction in unemployment after opening its borders to trade.

Answer 8

b. Kmart decides to add more self-checkout machines as the cost of labour rises.

Question 9

Which of the following is an example of a positive statement?
a.
The state government should allocate more funds toward education.

b.
Teachers should be paid higher salaries.

c.
Individuals with a bachelor’s degree earn higher average incomes than those with only a high school certificate.

d.
The consumption of marijuana is unacceptable and should never be legally allowed in a society.

Answer 9

Individuals with a bachelor’s degree earn higher average incomes than those with only a high school certificate.

Question 10

Which type of statement is most likely to include the word ‘should’?

Answer 10

Normative statement