Tutorial 1 1. Microeconomics is a branch of economics that studies: A. the determination of the gross domestic product. B. the behaviour of individual decision-making units in the economy. C. the impact of inflation in South Africa. D. the effects and consequences of the aggregate behaviour of all decision-making units. E. both B and D above. 2. The field of economics is often said to be built around how scarcity is dealt with. What is meant with the term 'scarcity' in this context? a. b. c. d. Resources Resources Resources Resources that that that that are are are are hard to find limited in the presence of unlimited wants of people unlimited in the presence of the limited wants of people very limited 3. Bobby really enjoys watching television. Unfortunately, since losing his job he could not afford to pay for the television licence and as a result his television was cut off from any broadcasting. Television broadcasting is an example of a: a. b. c. d. Consumer good Need Want Demand 4. An example of a limited natural resource would be: a. b. c. d. Solar power Manpower Air Coal 5. A farmer wants to plant two types of crops: wheat and corn. Because of the limited land and water available to him, an increase in the amount of corn he plants will lead to a decrease in the amount of wheat he will be able to plant and vice versa. This phenomenon of sacrificing one product for another is known as: a. Opportunity cost b. Production possibilities c. Ceteris paribus d. Laissez-faire 6. The study of the unemployment rate in South Africa will fall in the realm of: a. b. c. d. Microeconomics Macroeconomics Mesoeconomics Mixed economics 7. The owner of a small retail shop feels that more time and money should be spent on increasing the sales of summer dresses from 5% of the total sales to 10% of the total sales within the next year. This scenario refers to the following two economic concepts: a. b. c. d. Normative economics and rates of change Positive economics and levels of change Normative economics and levels of change Positive economics and rates of change 8. The summer dresses referred to in question 6 is an example of: a. b. c. d. Semi-durable consumer goods Durable private goods Semi-durable capital goods Non-durable public goods 9. The classification of goods as in question 7, helps to answer which of the three central economic questions? a. b. c. d. Who should produce goods? For whom should goods be produced? What should be produced? How should goods be produced? 10. One of the factors needed in the production of goods and services, is capital. This refers to: a. The money available for production b. The amount of money needed for production c. The resources available for production d. The machines and equipment needed in production 11. If a country’s economic activity is not centrally controlled but mainly determined by the forces of supply and demand, the economic system present in that country is a: a. b. c. d. Market economy Command society Traditional society Mixed economy 12. Opportunity cost is best defined as: A. the actual money expenditure incurred when a decision is made. B. the value of the best alternative sacrificed when a choice is made. C. the total value of all the alternatives given up when a choice is made. D. the value of time used to make a choice. E. both B and C above. 13. A production possibility frontier shows: A. the maximum combination of inputs that can be used to produce output in a typical economy. B. the maximum revenue that can be generated from the sale of output produced by limited resources in an economy. C. the minimum quantities of commodities that can be produced from limited but fully-employed resources in an economy. D. the quantities of factors of production available to produce goods and services in an economy. 14. The axes of the production possibility curve measure A. quantities of productive inputs. B. quantities of finished commodities. C. quantities of raw materials. D. values of finished commodities. E. values of raw materials. 15. A major drawback of the economic system in the previous question is that: a. b. c. d. It does not provide opportunity for high levels of welfare It results in a relatively low standard of living This type of society usually becomes stagnant If people can’t afford satisfying a need, even a basic one, they will have to do without it 16. In South Africa market forces play an important role in determining economic activities, but there is also a lot of government intervention, for example building houses for the poor and implementing labour protection acts. The economic system present in South Africa is a: a. b. c. d. Market economy Command society Traditional society Mixed economy 17. Which of the following describe the economic problem? a) b) c) d) Outcomes are limited by available resources. Incentives influence our choices as to how to allocate our resources. Freedom of choice carries a cost. All of the above. 18. Which of the following is a macroeconomic issue? a) b) c) d) The closure of the General Motors plant in South Africa. The implementation of a sugar tax. An increase in the official unemployment rate in South Africa. Eskom’s pricing strategy. 19. Which statement is true? The production factor … a) b) c) d) “land” includes fisheries. “labour” refers to the skills and knowledge workers possess. “capital” includes stocks and bonds. All of the above. 20. Which statement is not true? a) b) c) d) Economic progress is fuelled by self-interest. Economic progress is fuelled by social interest. Globalisation and climate change are outcomes of economic progress. Technological progress has increased financial volatility. 21. Economics is a social science. Identify the normative statements. i. The EFF is a party for the poor. ii. The DA is a party for the white population. iii. The ANC received the majority of votes in the 2016 local government elections. a) i and ii b) ii and iii c) i and iii d) None of the above. 22. The production possibility frontier illustrates ____ as production is ____ the area ____ the line and also illustrates increasing opportunity cost if the curve is ____. a) b) c) d) scarcity; limited to; outside; straight the best combination of resources; maximised on; inside; bowed outward scarcity; limited to; inside; bowed outward the best combination of resources; limited to; inside; straight 23. Consider the following production possibility frontier. Production efficiency is illustrated by ____ as it indicates ____ and ____ allocative efficiency. a) point B; the best combination of resources; also represents b) point A; maximum output; also represents c) points A, B and C; the use of all resources; might indicate arrow D; improved resource use; better 24. A dairy farmer can produce either cream (in litres) or butter (in kilograms) with his given resources. The following table indicates his options. Currently he produces at point C. Cream (l ) Butter (kg) a) b) c) d) A 70 0 Production combinations per day B C D 60 45 25 15 27 35 E 0 40 The opportunity cost to move production to point A is 25 litres of cream. The opportunity cost to move production to point B is 15 kg of butter. The opportunity cost to move production to point D is 8 kg of butter. The opportunity cost to move production to point E is 45 litres of cream. 25. Microeconomics can be defined as the branch of economics that deals with the economic behavior of a. individual consumers, firms, and resource owners. b. groups of consumers, firms, and resource owners. c. single countries. d. government interest groups. e. none of the above. 26. Which one of the following statements is correct (or closest to correct)? A. Economics is the study of money. B. Economics teaches us how to avoid choices. C. Economics is the study of profit and loss. D. Economics can be described as the study of choice. E. Economics teaches one how to become rich. 27. Which of the following is key to the way in which economists think? A. Money B. Wealth C. Opportunity cost D. Poverty E. Balance sheet 28. Which one of the following statements is incorrect? A. Rich people do not experience scarcity. B. Because resources are scarce, everyone has to make choices. C. Every time a choice is made, opportunity cost is incurred. D. The opportunity cost of a particular choice is the value of the best opportunity forgone (sacrificed) as a result of the choice. E. The central elements of economics are scarcity and choice. 29. Which one of the following is a macroeconomic issue? A. A sharp rise in the price of vegetables. B. A shortage of maths teachers. C. A surplus of tomatoes in Limpopo. D. A rise in the inflation rate. E. An increase in medical tariffs. 30. John spends R5 000 on a new carpet. What is the opportunity cost to him of the carpet? A. R5 000. B. The land, labour and capital used in manufacturing the carpet. C. The other things he could have bought with the R5 000. D. The reduction in his bank balance due to purchasing the carpet. E. The increased value of a better decorated house. 31. The essence of the economic problem is that: A. there is a need for a price system. B. inflation exists in many economies. C. exports seldom pay for imports. D. resources are limited but human wants are unlimited. E. two-thirds of the world’s population experience a food shortage. 32. If the principal concern of economics is the question of how best to use society’s resources, then economics would be irrelevant if A. we had unlimited wants. B. economies were organised around command rather than market principles. C. economies were organised around market rather than command principles. D. resources were available in unlimited quantities. E. incomes were distributed more equally. 33. In economics, the “how” or input question refers to: A. the problem of allocating scarce resources among competing uses. B. the ways in which factors of production may be combined to produce output. C. the way in which a firm decides on its profit-maximising rate of output. D. the problem of how output is distributed among individuals and groups in society. E. the way in which the state sets output targets in a command economy. 34. In a command economy, resource allocation is brought about by A. price signals driven by relative price changes. B. the collective preferences of central planners. C. the behaviour of self-interested individuals striving to maximise their own well-being. D. the principle of consumer sovereignty. E. the desire of producers to maximise profits. 35. Which one of the following is not a basic economic system? A. Monetary system B. Market system C. Mixed system D. Command system E. Traditional system 36. South Africa has a: A. pure market economy. B. pure command economy. C. traditional economy. D. mixed economy. E. classical economy. 37. Which one of the following is incorrect? Market capitalism is characterised by: A. strong government intervention. B. individualism. C. private freedom. D. private property. E. decentralised decision making. 38. In market capitalism, economic activity is driven by: A. altruism. B. concern for others. C. self-interest. D. the public interest. E. religious values. 39. Which one of the following statements is correct? A. South Africa has an unlimited supply of natural resources. B. The N1 highway between Cape Town and Johannesburg is an example of a capital good. C. Wealth and income are synonyms (have the same meaning). D. In a market system there is an agency that instructs the various participants in the economy how to allocate their resources. E. South Africa has a pure market economy. 40. The South African economy is a: A. pure market economy. B. pure command economy. C. pure traditional economy. D. mixed economy. E. multilateral economy.
