ECO1010F Test 1 - 2012
1) You pick up a five rand coin in the street and use it to buy yourself a coke. The opportunity cost of the coke
is:
a) zero.
b) the total enjoyment you get from all the things you can buy with five rands.
c) the enjoyment you get from the product you buy if coke wasn’t available.
d) the enjoyment you get from a second coke.
e) the time lost in making the decision to buy the coke.
2) Which of the following is an example of a positive statement?
a) Government should not redistribute income.
b) Businesses should pay higher taxes than individuals.
c) Households are the primary source of saving in our economy.
d) The foreign sector should be more tightly controlled.
e) The lottery is a good way for government to raise revenues.
3) Which of the following is a macroeconomic topic?
a) The reasons for a rise in the price of orange juice.
b) The reasons for the rise in average prices.
c) The benefits two countries experience when they trade with one another.
d) The reasons why investment bankers earn more than street sweepers.
e) Whether the army should buy more tanks or hire more soldiers.
4) Which of the following is NOT a factor of production?
a) A new computer used by a small business owner.
b) The time worked by elementary school teachers.
c) A tractor used by a wheat farmer.
d) A share of stock issued by a firm.
e) The skills that a worker has obtained through on-the-job training.
1
,5) The South African Reserve Bank hires 20 more economists. A month later the Reserve Bank Quarterly
Bulletin reports a 10% increase in inflation and a journalist writes the headline: “Economists cause inflation.”
This is an example of:
a) the fallacy of composition.
b) the post hoc fallacy.
c) ceteris paribus.
d) a normative statement.
e) why the Reserve Bank should fire all its economists.
6) “When you save more your own wealth increases, but when everyone saves more total spending declines
and the national income can fall.” This statement is an example of:
a) the fallacy of composition.
b) the post ergo propter hoc fallacy.
c) poor economic logic.
d) the statistical concept of alea jacta est.
e) macroeconomic opportunity costs.
7) When economists talk about the operation of the invisible hand they mean that resources are allocated:
a) by the market mechanism alone.
b) exclusively by state command and control.
c) by a developmental state.
d) unsuccessfully due to anarchy.
e) through a real-world mixture of state intervention and free market operation.
8) Suppose you plan to attend summer school at UCT. The cost of tuition and textbooks is R6,000, housing
costs you R2,000, and you plan to spend R500 on food. If you decide not to attend summer school, you can
live in your parents' house for free and spend only R200 on food. Also, if you don't take courses in the
summer, you can work full-time and earn R3,000. You can, however, still work part-time while taking
summer-school courses, but then you can only earn R800. What is your opportunity cost of attending
summer school given that you must then live away from home?
a) R10,500
b) R8,500
c) R6,000
d) R3,000
e) R2,200
2
,Use the diagram below, which shows the production possibilities frontier (PPF) of an economy producing two
goods per week, to answer questions 9 to 11.
9) Assume that the economy is technically efficient and there are no unemployed factors of production.
The opportunity cost of increasing the output of good B from 15 to 20 units per week is:
a) 15 units of A
b) 12 units of A
c) 6 units of A
d) 4 units of A
e) 3 units of A
10) If the economy is at point Z and moves to point W the opportunity cost is:
a) zero
b) 5 units of B
c) 4 units of A
d) 10 units of B
e) 14 units of B
3
, 11) This PPF shows that if there is full employment the opportunity cost of good A:
a) increases as the output of A increases
b) decreases as the output of A increases
c) first increases then decreases as the output of A increases
d) first decreases then increases as the output of A increases
e) is constant as the output of A increases
Use the diagram below, which shows a PPF of an economy producing two goods A & B, to answer question 12.
The economy has no money flows.
Good A
100
90
60 X
0 80 170 200 Good B
12) At point X one unit of B costs:
a) 0.5 units of A
b) 2.0 units of A
c) 0.25 units of A
d) 4.0 units of A
e) 4.5 units of A
4
1) You pick up a five rand coin in the street and use it to buy yourself a coke. The opportunity cost of the coke
is:
a) zero.
b) the total enjoyment you get from all the things you can buy with five rands.
c) the enjoyment you get from the product you buy if coke wasn’t available.
d) the enjoyment you get from a second coke.
e) the time lost in making the decision to buy the coke.
2) Which of the following is an example of a positive statement?
a) Government should not redistribute income.
b) Businesses should pay higher taxes than individuals.
c) Households are the primary source of saving in our economy.
d) The foreign sector should be more tightly controlled.
e) The lottery is a good way for government to raise revenues.
3) Which of the following is a macroeconomic topic?
a) The reasons for a rise in the price of orange juice.
b) The reasons for the rise in average prices.
c) The benefits two countries experience when they trade with one another.
d) The reasons why investment bankers earn more than street sweepers.
e) Whether the army should buy more tanks or hire more soldiers.
4) Which of the following is NOT a factor of production?
a) A new computer used by a small business owner.
b) The time worked by elementary school teachers.
c) A tractor used by a wheat farmer.
d) A share of stock issued by a firm.
e) The skills that a worker has obtained through on-the-job training.
1
,5) The South African Reserve Bank hires 20 more economists. A month later the Reserve Bank Quarterly
Bulletin reports a 10% increase in inflation and a journalist writes the headline: “Economists cause inflation.”
This is an example of:
a) the fallacy of composition.
b) the post hoc fallacy.
c) ceteris paribus.
d) a normative statement.
e) why the Reserve Bank should fire all its economists.
6) “When you save more your own wealth increases, but when everyone saves more total spending declines
and the national income can fall.” This statement is an example of:
a) the fallacy of composition.
b) the post ergo propter hoc fallacy.
c) poor economic logic.
d) the statistical concept of alea jacta est.
e) macroeconomic opportunity costs.
7) When economists talk about the operation of the invisible hand they mean that resources are allocated:
a) by the market mechanism alone.
b) exclusively by state command and control.
c) by a developmental state.
d) unsuccessfully due to anarchy.
e) through a real-world mixture of state intervention and free market operation.
8) Suppose you plan to attend summer school at UCT. The cost of tuition and textbooks is R6,000, housing
costs you R2,000, and you plan to spend R500 on food. If you decide not to attend summer school, you can
live in your parents' house for free and spend only R200 on food. Also, if you don't take courses in the
summer, you can work full-time and earn R3,000. You can, however, still work part-time while taking
summer-school courses, but then you can only earn R800. What is your opportunity cost of attending
summer school given that you must then live away from home?
a) R10,500
b) R8,500
c) R6,000
d) R3,000
e) R2,200
2
,Use the diagram below, which shows the production possibilities frontier (PPF) of an economy producing two
goods per week, to answer questions 9 to 11.
9) Assume that the economy is technically efficient and there are no unemployed factors of production.
The opportunity cost of increasing the output of good B from 15 to 20 units per week is:
a) 15 units of A
b) 12 units of A
c) 6 units of A
d) 4 units of A
e) 3 units of A
10) If the economy is at point Z and moves to point W the opportunity cost is:
a) zero
b) 5 units of B
c) 4 units of A
d) 10 units of B
e) 14 units of B
3
, 11) This PPF shows that if there is full employment the opportunity cost of good A:
a) increases as the output of A increases
b) decreases as the output of A increases
c) first increases then decreases as the output of A increases
d) first decreases then increases as the output of A increases
e) is constant as the output of A increases
Use the diagram below, which shows a PPF of an economy producing two goods A & B, to answer question 12.
The economy has no money flows.
Good A
100
90
60 X
0 80 170 200 Good B
12) At point X one unit of B costs:
a) 0.5 units of A
b) 2.0 units of A
c) 0.25 units of A
d) 4.0 units of A
e) 4.5 units of A
4
