Tutorial 1 economic.doc

BBD1033MicroeconomicsTutorial 1 1. Which of the following involve a tradeoff?a. Buying a new car.b. Going to college.c. Taking a nap.d. All of the above.2. Tradeoffs are required because wants are unlimited and resources are a. efficient.b. economical.c. scarce.d. unlimited.3. Economics is the study of a. how to fully satisfy our unlimited wants.b. how society manages its scarce resources.c. how to reduce our wants until we are satisfied.d. how to avoid having to make tradeoffs.4. Microeconomics approaches the study of economics from the viewpoint ofa. the entire economy.b. the government.c. the operation of specific markets.d. the stock market.5. Which of the following is most appropriately a microeconomic issue?a. The study of the relationship between the unemployment rate and the inflation rateb. The forces determining the price level in an individual marketc. The determination of total output in the economyd. The aggregate behavior of all decision-making units in the economy6. The ceteris paribus assumption is used toa. make economic theory more realistic.b. make economic analysis more realistic.c. avoid the fallacy of composition.d. focus the analysis on the effect of a single factor.7. In economics, efficiency means thata. income is distributed equally among all citizens.b. there is a low level of inflation and full unemployment of economic resources.c. total productivity is increasing at a constant and equal rate within each sector of the economy.d. the economy is producing those goods and services that citizens desire and is doing so at the least possible cost. 8. Which of the following situations describes the greatest market power?a. A farmers impact on the price of corn.b. Volvos impact on the price of autos.c. Microsofts impact on the price of desktop operating systems.d. A students impact on college tuition.9. A rational person does not act unlessa. The action produces marginal costs that exceed marginal benefits.b. The action produces marginal benefits that exceed marginal costs.c. The action makes money for the person.d. The action is ethical.10. The Phillips curve suggests that a. An increase in inflation temporarily increases unemployment.b. A decrease in inflation temporarily increases unemployment. (increase in amount of money stimulate spending, demand for goods and services increase, production increase, more hiring, lower unemployment)c. Inflation and unemployment are unrelated in the short run.d. None of the above.11. Economists are particularly adept at understanding that people respond toa. laws.b. incentives.c. punishments more than rewards.d. rewards more than punishments.12. The term used to describe a situation in which markets fail to allocate resources efficiently is calleda. economic meltdown.b. market failure.c. disequilibrium.d. the effect of the invisible hand.13. An example of an externality is the impact ofa. bad weather on the income of farmers.b. the personal income tax on a persons ability to purchase goods and services.c. pollution from a factory on the health of people in the vicinity of the factory.d. increases in health care costs on the health of individuals in society.14. The amount of goods and services produced from each hour of a workers time is calleda. total output.b. productivity.c. marginal product.d. efficiency.15. An increase in the overall level of prices in an economy is referred to asa. economic growth.b. inflation.c. the price effect.d. the demand effect.16. In economics, the cost of something isa. the dollar amount of obtaining it.b. always measured in units of time given up to get it.c. what you give up to get it.d. often impossible to quantify, even in principle.17. Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginala. cost of leaving was greater than the marginal benefit.b. benefit of leaving was greater than the marginal cost.c. benefit of teaching was greater than the marginal cost.d. All of the above are correct.18. Which of the following statements about markets is most accurate?a. Markets are usually a good way to organize economic activity.b. Markets are usually inferior to central planning as a way to organize economic activity.c. Markets fail and are therefore not an acceptable way to organize economic activity.d. Markets are a good way to organize economic activity in developed nations, but not in less developed nations.19. In a market economy, economic activity is guided bya. the government.b. corporations.c. central planners.d. self-interest and prices.20. In an economy in which decisions are guided by prices and individual self-interest, there isa. the potential to achieve efficiency in production.b. a strong need for government intervention in the market.c. less efficiency than would be observed in a centrally-planned economy.d. more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.Terms and Definitions:Key terms:_ Scarcity_ Market power_ Economics_ Monopoly_ Efficiency_ Productivity_ Equity_ Inflation_ Opportunity cost_ Philips curve_ Marginal changes_ Market economy_ “Invisible hand”_ Market failure_ ExternalityDefinitions:1. The property of distributing output fairly among societys members.2. A situation in which the market fails to allocate resources efficiently.3. Limited resources and unlimited wants.4. The amount of goods and services produced per hour by a worker.5. The case in which there is only one seller in the market.6. The principle that self-interested market participants may unknowingly maximize the welfare of society as a whole.7. The