Economics 2021 T1A Exercise

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Unit 1 Economics Name: _________________

Term 1A 2021 - Basic economic concepts exercise


Total marks – 25
Time allowed – 30 minutes

Multiple choice questions (5 marks)

1. Which one of the following statements best describes the nature of economics?

a. The purpose of economics is to make more money for the government.


b. The science of economics is about achieving a balance between public and private provision of goods and
services.
c. The purpose of economics is to study how limited resources can best be allocated to meet unlimited needs
and wants.
d. The purpose of economics is to ensure that opportunity cost is eliminated from every decision.

2. The opportunity cost of building a new sports pavilion at Haileybury is:

a. The possibility of building more science classrooms


b. About $2 million based on current market prices
c. The loss of students if the pavilion had not been constructed
d. A decrease in the number of students visiting the library

3. Resources are:
a. The natural assets of a country
b. The inputs used to produce goods and services
c. The goods and services that are the product of the production process
d. Unlimited
Multiple choice questions 4 & 5 refer to the following Production Possibility Frontier for a hypothetical economy that
produces only beef and fish.

4. The opportunity cost of moving from point B to point A in the PPF above is:

a. 20 units of beef
b. 20 units of fish
c. 10 units of beef
d. 10 units of fish

5. Point F in the PPF shows a combination of production that may occur in the future if there is:

a. an increase in the size of the labour force


b. a deterioration in climatic conditions
c. a decrease in the unemployment rate
d. an increase in aggregate demand

Short answer questions (20 marks)

1. Identify the following issues as microeconomics or macroeconomics (circle) 2 marks

a. The 2020 bushfires increased the price of strawberries micro / macro


b. Australia’s unemployment rate increased during 2020 micro / macro

2. Identify the following statements as positive or normative (circle) 2 marks

a. During the COVID pandemic, Australia’s growth rate was low positive / normative
b. Cutting taxes is the best way boost economic growth positive / normative
3. Identify the type of efficiency referred to in the following statement (circle) 2 marks

a. Using the least cost method of production and minimising resources used allocative / productive
b. Using resources to satisfy as many needs and wants as possible allocative / productive

4. Define the term resources. Using examples, distinguish between the three types of resources. 6 marks
5. Distinguish between material living standards and non-material living standards. Provide examples to
demonstrate your understanding. 4 marks

6. Explain why the existence of relative scarcity leads to opportunity cost. 4 marks

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