ICE Task 1

Economic questions are mainly concerned with__________ that are ________________ while the _________ that are available to satisfy those wants are _________________.

• needs; limited; wants; unlimited

• needs; unlimited; wants; limited

• wants; limited; needs; unlimited

• wants; unlimited; means; limited

• None of the above.

Which one of the following statements is incorrect?

• Rich people do not experience scarcity.

• Because resources are scarce, everyone has to make choices.

• Every time a choice is made, opportunity cost is incurred.

• The opportunity cost of a particular choice is the value of the best opportunity forgone (sacrificed) as a result of the choice.

• The central elements of economics are scarcity and choice.

An economist decides to give up her job at a commercial bank, where she earns R800 000 per year. She is offered another full-time job for R850 000 per year or can work for herself from home as a private consultant. What is the opportunity cost of working from home?

• Zero

• R800 000

• R850 000

• R1 650 000

• R800 000 in addition to the cost of her monthly home loan repayments

Which one of the following is an example of the economic problem?

• I would eat all the chocolate in the world but I cannot afford it.

• I had two invitations for parties on Friday, I could only go to one and had to choose.

• Bill Gates might be the richest man on earth, but he still only has 24 hours in a day to do what he wants.

• One day, all the coal in South Africa will have been mined and there will not be any left to export.

• All of the above.

John spends R5 000 on a new carpet.  What is the opportunity cost to him of the carpet?

• R5 000.

• The land, labour and capital used in manufacturing the carpet.

• The other things he could have bought with the R5 000.

• The reduction in his bank balance due to purchasing the carpet.

• The increased value of a better decorated house.

A production possibility frontier shows:

• the maximum combination of inputs that can be used to produce output in a typical economy.

• the maximum revenue that can be generated from the sale of output produced by limited resources in an economy.

• the minimum quantities of commodities that can be produced from limited but fully-employed resources in an economy.

• the maximum quantities of commodities that can be produced from limited but fully-employed resources in an economy.

• the quantities of factors of production available to produce goods and services in an economy.

The figures in the table show maximum combinations of houses and steel that can be produced per month from a given set of resources in a particular economy. Use this information to answer the question.

 If the resultant production possibility frontier has its normal concave shape, then X will be

• less than 150 000 tons.

• more than 150 000 tons.

• 150 000 tons.

• 50 000 tons.

• impossible to estimate, even in these broad terms, from the information given.

If all factors of production are equally suitable for the production of different goods, then the production possibility curve (ppc) is likely to be ________ in shape, illustrating a situation of ________ opportunity costs. However, if factors of production are not equally suitable for the production of different goods, then the ppc will be ________ in shape, reflecting a situation of ________ opportunity costs.

• linear; increasing; concave; constant

• linear; constant; concave; increasing

• concave; constant; linear; increasing

• concave; increasing; linear; constant

• linear; increasing; concave; increasing

Economists tend to disagree because:

• they tend to be difficult.

• they might be biased.

• they use different scales on their production possibility frontiers.

• one economist might calculate total production in rands and the other economist might calculate total production in dollars.

• they are educated.

Microeconomics is a branch of economics that studies

• the determination of national income.

• the behaviour of individual decision-making units in the economy.

• the impact of unemployment in South Africa.

• the effects and consequences of the aggregate behaviour of all decision-making units.

• both b and d above