Exercises 2. Q1: Which of the following definitions subscribe to “economics”?

A)

Q1: Which of the following definitions subscribe to “economics”?

(a) human activity that creates wealth

(b) rational choices that humans made in order to cope with scarcity

(c) human decisions that creates wealth

(d) rational choices that humans made in order to cope with abundance

Q2: What is it meant by “scarcity”?

(a) Human resources exceed available needs and wants.

(b) Human needs (or wants) exceed available resources.

(c) Human activity depends on energy and time.

(d) Environmental resources are scarce.

Q3: Opportunity cost means:

(a) if a certain decision has been made then some other options have to be given up

(b) everything costs something

(c) a sacrifice in order to consume as much as possible

(d) a cost that is related to all the chances a man has got during his lifetime.

Q4: The opportunity cost of watching a movie on TV during Thursday afternoon is…

(a) the income one could earn by spending his/her time with work.

(b) the cost one has to pay for cable TV.

(c) the licence fee to watch TV.

(d) the cost that one has to pay in order to miss another programme on TV.

Q5: If the price of the cinema ticket increases, it is assumable that

(a) people will visit cinemas more frequently

(b) people will not visit cinemas at all

(c) people will visit cinemas less frequently

(d) people do not care at all because visiting a cinema does not have an opportunity cost.

Q6: If a supplier can produce either 2 units of shirts or 1 unit of trousers within one hour, then the opportunity cost of sewing 1 unit of trousers is

(a) half unit of shirt.

(b) 1 unit of shirt.

(c) 2 units of shirts.

(d) zero unit of shirt.

Q7: If a supplier can produce either 2 units of shirts or 1 unit of trousers within one hour, then the opportunity cost of sewing 1 unit of shirt is

(a) half unit of a pair of trousers.

(b) 1 unit of a pair of trousers.

(c) 2 units of a pair of trousers.

(d) zero unit of a pair of trousers.

Q8: Ceteris paribus means:

(a) being equal

(b) there is no change at all

(c) there is no chance to change anything in the economy

(d) other things being equal

Q9: A competitive equilibrium is a situation

(a) in which economic agents have no further incentives to consume or to produce more.

(b) in which economic agents cannot maximize their utility since there are no further resources left in the economy.

(c) in which economic agents have no further resources to consume or to produce more.

(d) in which economic agents try to maximize their chances in order to consume or to produce as much as possible.

Q10: If the price of cars doubles, producers will have an incentive to

(a) produce half as much cars as before.

(b) produce more cars.

(c) produce less cars.

(d) produce twice as much cars as before.

Q11: Which of the following statements are correct?

(a) A free-market competitive equilibrium becomes efficient if demand overlaps with supply in the market and resources are close to full utilization.

(b) A competitive equilibrium becomes efficient only if demand equals supply and all the relevant resources have been exploited by economic agents.

(c) A competitive equilibrium becomes efficient only if demand equals supply and all the relevant resources have been exploited by economic agents and the state.

(d) A free-market competitive equilibrium becomes efficient if demand equals supply in every market and all the resources are fully utilized.

Q12: Economic growth comes from

(a) hard work and high wages.

(b) capital accumulation and technological change.

(c) GDP per capita.

(d) natural resources exclusively.

B) now decide whether the following statements are correct or not.

The concept of the invisible hand means…

Q1: …a mechanism by which the economy and society works. Correct

Q2: …pursuing an individual’s own interest that does NOT serve the interest of the whole society. Incorrect

Q3: …a decentralised process, without the existence of a central authority. Correct

Q4: …that the equilibrium in the economy is intentional. Incorrect

Q5: …that a well-functioning free market has been assumed. Correct

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