ME - Tutorial 1
1 . Which of the following offers the best definition of
economics?
a. Economics is the study of how to eliminate scarcity
associated with the goods and services we produce.
b. Economics is the study of how to manage city and county
government to generate the greatest good to its citizens.
c. Economics is the study of how people choose to allocate
their scarce resources to satisfy their unlimited wants.
d. Economics is the study of how to track revenues and costs
within a business.
2. Which of the following situations best and most
completely reflects the concept of scarcity?
a. There are alternative uses of the air. If we allow firms to
avoid cleanup costs by polluting the air, we give up the
healthful benefits of clean air.
b. There are many enjoyable or useful ways to spend your
"free" time in the evening, and the cost of one activity is
the value of the next-best activity that must be foregone.
c. All the salt water they could ever want is freely available
to shipwreck survivors adrift in the middle of the Pacific
Ocean.
d. All but one of these.
3. Which of the following is an example of physical capital?
a. A person's physical and mental effort employed to
produce goods and services.
b. A person's ability to organize the productive resources
and manage a business enterprise.
c. Seams of coal, geologic strata containing oil, groundwater
basins, and marine fisheries.
d. Computers used by a company to record inventory, sales,
and payroll.
4. Ceteris paribus means:
A) Holding everything else constant.
B) Allowing the free market to decide, not government.
C) Changing prices to see how demand (or supply) shifts.
D) Holding prices constant to see how each determinant of
demand changes the quantity demanded.
5. ________ refers to comparisons of incremental,
additional, or small changes in economic conditions relative
to the status quo.
a. A normative economic statement.
b. A positive economic statement.
c. The ceteris paribus assumption.
d. Marginal analysis.
6. The primary interaction in a market economy is between:
a. households and government.
b. firms and government.
c. households and firms.
d. government and the rest of the world.
7. Positive economic statements can be proved or
disproved by reference to the facts, while normative
economic statements represent opinions that cannot
be proved or disproved.
a. True
b. False
8. In terms of opportunity cost, ________ is the
ultimate constraint.
a. schooling
b. circumstance
c. creativity
d. time
9. Which of the following is true regarding opportunity cost?
a. Different people will generally have the same opportunity
cost of engaging in some activity, such as attending opera.
b. Opportunity cost has nothing to do with scarcity.
c. Opportunity cost may vary with circumstances.
d. Opportunity cost is irrelevant.
10. A cost that has already been incurred and cannot be
recovered is called:
a. a fixed cost.
b. an explicit cost.
c. a sunk cost.
d. opportunity cost.
11. The difference between microeconomics and
macroeconomics is:
a. Microeconomics deals with the economies of individual
countries while macroeconomics describes the functioning of the
world economy
b. Microeconomics is concerned with the behavior of individual
entities like markets, firms, etc. while macroeconomics, with
the overall performance of the economy
c. Macroeconomics is concerned with the behavior of individual
entities like markets, firms, etc. While microeconomics with the
overall performance of the economy
d. Microeconomics is positive economics while macroeconomics
is normative.
12. Which of the following is the best definition of managerial
economics? Managerial economics is
a. a distinct field of economic theory.
b. a field that applies economic theory and the tools of decision
science.
c. a field that combines economic theory and mathematics.
d. none of the above.