Question 1

True or False: According to the basic model of competition in a market, firms seek to maximise profits

Accepted Answer

true

Answer

false

Question 2

True or False: Economics cannot claim to be a science since the subject cannot make use of controlled laboratory experiments to test a theory

Accepted Answer

false

Answer

true

Question 3

True or False: The following statement is an example of a normative statement: “the cost of fruit and vegetables should be subsidised by the government to encourage healthy eating”

Accepted Answer

true

Answer

false

Question 4

Individuals and businesses must make choices because

Accepted Answer

Of resource scarcity

Answer

Of the law of diminishing returns

Answer

They must act rationally

Answer

None of the above

Question 5

If a consumer is acting rationally, we mean that

Accepted Answer

They weigh up the costs and benefits of each choice they make

Answer

They save a proportion of their monthly income rather than spend it all

Answer

They will always buy the products in the market that are cheapest

Answer

They won’t take a job that pays low wages

Question 6

Allocating scarce products such as cup final tickets by using ballot or a lottery is an example of

Accepted Answer

Rationing

Answer

The profit motive

Answer

Only selling to the highest bidder

Answer

None of the above

Question 7

In a market-based economy the scarcity of factors of production means that

Accepted Answer

Consumers must inevitably consider the opportunity cost of their choices

Answer

A country cannot achieve economic growth every year

Answer

Inflation is inevitable

Answer

The economy cannot produce on its production possibility frontier

Question 8

Which of the following is not a factor of production as the term is used by economists?

Accepted Answer

Cash in a bank account

Answer

Labour

Answer

Farmland

Answer

Buildings and machinery

Question 9

Which one of the following is best described as a normative statement?

Accepted Answer

Free health care should be provided to everyone

Answer

Extra funding for the NHS may involve some switching of spending from other services such as education or transport

Answer

A reduction in spending on the NHS will result in some job losses

Answer

A reduction in health care spending will have most impact on lower income households

Question 10

Economics is primarily concerned with the study of

Accepted Answer

Allocating scarce resources to satisfy competing and unlimited wants

Answer

How to make more effective use of resources through reducing wants

Answer

Determining how the government should allocate resources

Answer

How new wants and economic resources are produced by businesses

Question 11

Which one of the following is a positive statement?

Accepted Answer

Income inequality in the UK has increased over the last 30 years

Answer

The rate of unemployment is too high

Answer

Nurses working in the National Health Service should have a maximum working week of 50 hours per week

Answer

The national minimum wage rate should be increased to £5 per hour

Question 12

Choice is important in the basic economic problem because

Accepted Answer

Limited economic resources have many alternative uses

Answer

High demand leads to higher market prices

Answer

Scarce economic resources are distributed equally

Answer

Wants increase with income

Question 13

Which one of the following is a 'normative statement'?

Accepted Answer

The government should raise taxes on products which harm the environment

Answer

Prices in a competitive market are likely to be lower than a monopoly

Answer

Increased spending on new cars will lead to a rise in traffic congestion

Answer

Most firms seek to maximise their market share

Question 14

In economics it is generally assumed that the main objective of firms is to

Accepted Answer

Maximise total profits

Answer

Maximise the company share price on the stock market

Answer

Employ more workers in order to reduce unemployment

Answer

Reduce their prices and satisfy as many consumers as possible

Question 15

Profit is most likely to be an objective of

Accepted Answer

Entrepreneurs

Answer

State-owned industries

Answer

Consumers

Answer

Governments

Question 16

A possible advantage of a planned economy is that:

Accepted Answer

The state can better provide a range of goods for collective consumption

Answer

Resources are allocated via the price mechanism

Answer

Identification with the state may be a better work incentive than the profit motive

Answer

There is greater consumer choice of products

Question 17

Which of the following is a measure of labour productivity?

Accepted Answer

Total output divided by total employment of labour

Answer

The percentage increase in employment

Answer

The quantity of capital used by a business

Answer

The total amount of output produced by a business each year

Question 18

Which of the following is a positive statement?

Accepted Answer

The distribution of income and wealth is unequal

Answer

Direct taxes should be increased to distribute income more fairly

Answer

All taxes are bad, but some public services are good

Answer

The government ought to cut the taxes paid by motorists

Question 19

Which one of the following is a normative statement?

Accepted Answer

The government should spend more on the health service

Answer

Some medicinal drugs are ineffective and expensive to supply to patients

Answer

Building a new hospital involves an opportunity cost

Answer

The government regards health care as a merit good

Question 20

Opportunity cost is best defined

Accepted Answer

The cost of a choice measured by the next best alternative forgone

Answer

The cost of a choice measured by the cost of products bought

Answer

The cost of a choice measured by the time taken to consume

Answer

The cost of buying an additional unit of a good or service

Question 21

What are the four main types of factor of production?

Accepted Answer

Land, labour, capital and entrepreneurship

Answer

Land, labour and money

Answer

Labour, cash, capital, and entrepreneurship

Answer

Money, entrepreneurship, and factories

Question 22

A student works for a book shop during the holidays. She is offered the alternative of being paid £100 per week in cash of choosing £150 worth of books from the shelves. What is the opportunity cost to the student of choosing the books?

Accepted Answer

£100

Answer

The alternative use to which her time could have been put

Answer

£150

Answer

£50

Question 23

If scarce resources are allocated efficiently then

Accepted Answer

It is impossible to increase the output of one good without reducing the output of another good

Answer

Equal amounts of land, labour and capital have been used in producing a good or service

Answer

All consumers have equal amounts of goods and services

Answer

Firms are maximising their sales and profits

Question 24

The existence of scarcity implies that

Accepted Answer

Households, firms and governments must make choices

Answer

Only rich households can save

Answer

Supplies of factors of production cannot be increased

Answer

There are no free goods

Question 25

The workers in a factory currently earn £240 for a 40 hour week. The management offers them a choice between either a straight 10 per cent wage increase or an increase in the weekly wage to £260 along with a reduction in hours from 40 to 39 hours. Disregarding the value of leisure time, what is the opportunity cost to each worker of opting for the 39 hour week?

Accepted Answer

£4

Answer

£24

Answer

£20

Answer

£6

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