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ME - Tutorial 1

1 . Which of the following offers the best definition of c. households and firms.
economics? d. government and the rest of the world.
a. Economics is the study of how to eliminate scarcity
associated with the goods and services we produce. 7. Positive economic statements can be proved or
b. Economics is the study of how to manage city and county disproved by reference to the facts, while normative
government to generate the greatest good to its citizens. economic statements represent opinions that cannot
c. Economics is the study of how people choose to allocate be proved or disproved.
their scarce resources to satisfy their unlimited wants. a. True
d. Economics is the study of how to track revenues and costs b. False
within a business.
8. In terms of opportunity cost, ________ is the
2. Which of the following situations best and most ultimate constraint.
completely reflects the concept of scarcity? a. schooling
a. There are alternative uses of the air. If we allow firms to b. circumstance
avoid cleanup costs by polluting the air, we give up the c. creativity
healthful benefits of clean air. d. time
b. There are many enjoyable or useful ways to spend your
9. Which of the following is true regarding opportunity cost?
"free" time in the evening, and the cost of one activity is
a. Different people will generally have the same opportunity
the value of the next-best activity that must be foregone.
cost of engaging in some activity, such as attending opera.
c. All the salt water they could ever want is freely available
b. Opportunity cost has nothing to do with scarcity.
to shipwreck survivors adrift in the middle of the Pacific
c. Opportunity cost may vary with circumstances.
Ocean.
d. Opportunity cost is irrelevant.
d. All but one of these.

3. Which of the following is an example of physical capital? 10. A cost that has already been incurred and cannot be
a. A person's physical and mental effort employed to recovered is called:
produce goods and services. a. a fixed cost.
b. A person's ability to organize the productive resources b. an explicit cost.
and manage a business enterprise. c. a sunk cost.
c. Seams of coal, geologic strata containing oil, groundwater d. opportunity cost.
basins, and marine fisheries.
11. The difference between microeconomics and
d. Computers used by a company to record inventory, sales,
macroeconomics is:
and payroll.
a. Microeconomics deals with the economies of individual
4. Ceteris paribus means: countries while macroeconomics describes the functioning of the
A) Holding everything else constant. world economy
B) Allowing the free market to decide, not government. b. Microeconomics is concerned with the behavior of individual
C) Changing prices to see how demand (or supply) shifts. entities like markets, firms, etc. while macroeconomics, with
D) Holding prices constant to see how each determinant of the overall performance of the economy
demand changes the quantity demanded. c. Macroeconomics is concerned with the behavior of individual
entities like markets, firms, etc. While microeconomics with the
5. ________ refers to comparisons of incremental, overall performance of the economy
additional, or small changes in economic conditions relative d. Microeconomics is positive economics while macroeconomics
to the status quo. is normative.
a. A normative economic statement.
12. Which of the following is the best definition of managerial
b. A positive economic statement.
economics? Managerial economics is
c. The ceteris paribus assumption.
a. a distinct field of economic theory.
d. Marginal analysis.
b. a field that applies economic theory and the tools of decision
6. The primary interaction in a market economy is between: science.
a. households and government. c. a field that combines economic theory and mathematics.
b. firms and government. d. none of the above.