Microeconomics Introduction: Basic

1.     Economics is the study of

• the choices that individuals, businesses, governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices.

• how to fully satisfy our unlimited wants.

• how society manages its unlimited resources.

• how to avoid having to make trade-offs.

• how to reduce our wants until we are satisfied.

Which one of the following statements is a microeconomic question?

• Does increasing the value of social welfare grants increase total consumption expenditure?

• What quantity should a firm produce at to maximize profit?

• Why has the unemployment rate in South Africa risen by 3%?

• Why has the inflation rate risen higher than the Reserve Bank’s upper limit of 6%?

Which one of the following statements is a microeconomic issue?

• The total production of goods and services in Zambia.

• The unemployment rate in Zimbabwe.

• The South African inflation rate.

• The rate of economic growth in Japan.

• The price of maize in South Africa.

Households sell their factors of production in the factors market. They then use their income to buy goods in the goods market.

• True

• False

Which one of the following statements does not describe the use of factors of production:

• Toyota starts to use more advanced machinery to build cars.

• A cool drink company hires students to market their product at a rugby match.

• An individual buys 1000 shares in Anglo American Corporation.

• The government hires 500 individuals to build new roads.