WHALES: Economics 101

What could cause an increase in demand for a factor of production?

• decrease in the efficiency of the factor of production

• decrease in the price of an alternative factor of production

• increase in the demand for the good or service produced

• increase in the price of the factor of production

A student has nothing to do on a Friday evening. She withdraws $5 from the $100 she has in a savings account and buys a present to take to a party, to which admission is free. What does this involve?

• an opportunity cost equal to $95

• an opportunity cost equal to other goods she could have bought for $5

• no opportunity cost, as entrance to the party is free

• no opportunity cost, as she had no better way of using the time

The development of artificial intelligence in machines raises the productivity of capital. What will be the effect of this?

• The costs of production will increase.

• The demand for capital will increase

• The price of capital will fall.

• The supply of capital will decrease.

To help reduce the price of oil, new supplies are needed. However, objectors oppose exploration of new sites because of the environmental damage it may cause. Why is this statement an example of the basic economic problem?

• Oil is a limited resource.

• Oil is expensive.

• The exploration involves demand and supply.

• There are external costs involved in production.

What is an opportunity cost for a consumer spending money on a holiday?

• the potential interest earned if the holiday money had been saved

• the price paid for an air ticket to the holiday destination

• the rubbish created during the holiday which affects the local community

• the satisfaction that the consumer gains from the holiday

Which combination of characteristics describes a public good?

• excludable and non-rival in consumption

• excludable and rival in consumption

• non-excludable and non-rival in consumption

• non-excludable and rival in consumption

What is an advantage of a market economy?

• Equilibrium market price clears the market.

• Producers and consumers have the same aims.

• The government has no need to intervene in markets

• The lowest price possible is always charged.

Which choice would be classed as part of the basic economic problem?

• to use direct taxes rather than indirect taxes

• to use fiscal rather than monetary policy

• to use land for industry rather than agriculture

• to use tariffs rather than import quotas

What is found in a mixed economy?

• Economic goods are provided only by the private sector.

• Economic goods are provided only by the public sector.

• Public goods are provided only by the private sector.

• Public goods are provided only by the public sector.

The diagram shows the production possibility curve (PPC) for an economy. Which cost can be determined as the economy moves along its PPC from point X to point Y?

• the opportunity cost of producing more capital goods

• the opportunity cost of producing more consumer goods

• the social cost of producing more capital goods

• the social cost of producing more consumer goods