DEC5114 Tutorial 02

According to the circular flow diagram, if Suzy is a worker who delivers food for Food Panda, she participates

• in the markets for factors of production exchanging labor for income.

• in the markets for factors of production exchanging flowers for revenue.

• in the markets for goods and services exchanging flowers for wages, rent, and profit.

• in the markets for goods and services exchanging labor for income.

2. According to the circular flow diagram, if Daud is the owner of a car repair workshop and he just received $500 for repairing Ms.Farrah’s car,

• the $500 represents a cost of production for Daud’s firm.

• the $500 represents wages, rent, and profit to Daud’s firm.

• Daud acts as a firm who interacted in the markets for factors of production with Ms. Farrah.

• Daud acts as a firm who interacted in the markets for goods and services with Ms. Farrah.

Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two.

3. Refer to Figure 1. If this economy devotes all of its available resources to producing apples, then it will produce

• 0 bushels of apples and 200 sweaters.

• 80 bushels of apples and 160 sweaters

• 180 bushels of apples and 200 sweaters.

• 180 bushels of apples and 0 sweaters.

Refer to Figure 1. If this society is producing at point T,

• there is unemployment.

• production is efficient.

• growth can only be achieved through an advancement in technology.

• the opportunity cost of producing one more sweater is approximately 40 bushels of apples.

A society can produce two goods: green tea and vitamin water. As this society moves down its production possibility frontier, producing more and more units of vitamin water, the opportunity cost of producing vitamin water increases. The society's production possibilities frontier will be

• positively sloped and bowed outward.

• positively sloped and bowed inward.

• negatively sloped and bowed outward.

• negatively sloped and bowed inward.

6. Because resources are not equally well suited to producing all goods

• as more of a good is produced the inputs used to produce that good will increase in price.

• the opportunity costs of producing a good will increase as more of that good is produced.

• the opportunity costs of producing a good will decrease as more of that good is produced.

• as more of a good is produced the quality of that good declines and therefore the costs of production increase.

7. The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units is

• positive economics.

• normative economics.

• macroeconomics.

  
  

• microeconomics.

8. Which of the following areas of study typifies microeconomics as opposed to macroeconomics?

• the impact of minimum-wage laws on employment in the fast food industry

• the effect of changes in household saving rates on the growth rate of national income

• the impact of faster money growth on the rate of inflation

• a comparison of alternative tax policies and their respective impacts on the rate of the nation’s economic growth

9. Which of the following is not a resource as the term is used by economists?

• land

• labor

• buildings
  

• money

10. Better insurance benefits increase the incentive of some individuals to work. This statement is best described as

• a positive statement.

• an example of the ceteris paribus assumption.

• a normative statement.

• a comparative economics statement.