Tutorial Sheet 1 Scarcity, Opportunity Costs and Choice

KWAME NKRUMAH UNIVERSITY
SCHOOL OF BUSINESS
DEPARTMENT OF ECONOMICS & FINANCE
Economics 272: Introduction to Microeconomics, Tutorial sheet 1
TUTORIAL SHEET 1
1. Suppose that in the land of Plenty there is no scarcity. We can conclude that:
A. all resources are fully employed.
B. the production possibilities curve is concave to the origin.
C. opportunity costs are zero when the production of bread increases.
D. all goods are free.
E. both c and d are correct.
2. All of the following are examples of opportunity cost except:

A. the leisure time sacrificed to study for an exam.
B. the tuition fees paid to a university.
C. the income which could have been earned by a college student had he or she worked
full time instead of attending college.
D. the building which could have been built with the construction materials and labor
used to build a new university library.
E. all of the above are examples of opportunity costs.
3. Suppose you have to wait in line to purchase a soft drink at a Missouri State - Tulsa football
game. The drink costs one dollar. While, waiting in line, you hear the crowd roar as someone
scores a touchdown. While running back to your seat, you fall and spill your drink on another
spectator. What is your opportunity cost for the drink?
A. the cost of the drink plus the lost enjoyment of not seeing Missouri State score another
touchdown (it couldn't have been Tulsa).
B. the cost of the drink, the lost enjoyment of not seeing the Missouri State touchdown,
your thirst (you didn't get a drink), and the discomfort (to the other spectator) of sitting in
the sun with wet, sticky clothing.
C. the lost enjoyment of not seeing the Missouri State touchdown, your thirst (you didn't
get a drink), and the discomfort (to the other spectator) of sitting in the sun with wet,
sticky clothing.
D. the lost enjoyment of not seeing the Missouri State touchdown, your thirst (you didn't
get a drink), and your discomfort (assuming the other spectator responded by throwing
his drink in your lap) of sitting in the sun with wet, sticky clothing.
4. Which of the following is the best definition of opportunity costs?
A. the amount of one good that must be given up in order to produce one more unit of
another good.
B. the amount of money that must be paid in order to purchase one more unit of a good.
C. the amount of an input that must be used in order to produce one more unit of a good.
D. the price of a good that must be charged in order for a merchant to sell one more unit.
E. none of the above.
5. A free good is not scarce because:

A. individuals can have all they desire at zero price.
B. price rations the good so that all individuals willing to pay the market price can buy
the good and it is, therefore, not scarce.
C. human desires for the good exceed the amounts available at a zero money price.
D. it is an abundant natural resource.
E. a and b.
6. Which of the following statements could not be tested by economic analysis?

A. Higher tax rates cause tax revenues to fall.
B. Only cigarette companies are harmed by higher cigarette taxes.
C. Gambling should be legalized to raise tax revenue.
D. Outlawing bars will reduce drunk driving.
7. Which of the following is a positive statement?

A. An unemployment rate of 7 percent is a national disgrace.
B. Unemployment is not so important a problem as inflation.
C. When the national unemployment rate is 7 percent, the unemployment rate for inner-
city youth is often close to 40 percent.
D. Unemployment and inflation are equally important problems.
8. All of the following statements are positive except:

A. "My administration will balance the federal budget by 1983." (Ronald Reagan,
campaign promise, 1980.)
B. "It is an economic contradiction for airline passengers to pay higher fares to fly shorter
distances than longer ones." (Hobart Rowen, Washington Post, 1985.)
C. "inflation makes everyone worse off by lowering the purchasing power of people's
income."
D. "rent controls are preferable to income grants for assisting low-income families."
E. all of the above are positive statements.
9. Microeconomics is not concerned with:

A. the quantities of each good produced.
B. the size of aggregate money flows in the economy.
C. the distribution of goods among households.
D. the allocative function of changes in relative prices.
E. microeconomics is concerned with all of the above.
10. Most of economic theory:
A. views charitable human actions as especially moral.
B. assumes that groups of people often behave irrationally.
C. is based on the notion that politicians, entrepreneurs, and criminals are especially
selfish and greedy.
D. views individuals as home economists.
E. assumes that individuals act purposefully and rationally to maximize their own self
interest.
11. If it is impossible to make somebody better off without making someone else worse off, the
current situation must:
A. be allocatively efficient.
B. not be optimal.
C. be inequitable.
D. cure the problem of scarcity.
12. Inefficiency:
A. implies the existence of economic inequity.
B. occurs whenever it is possible to make someone better off without making someone
else suffer.
C. exists whenever maximum output is achieved given the resources available.
D. whenever present, implies that more total output could always be produced given an
economy's resources.
13. All of the following basic economic questions deal with microeconomics except:
A. How is the supply of goods allocated among the members of the society?
B. What goods and services are being produced and in what quantities?
C. By what methods are goods and services being produced?
D. Is the economy's capacity to produce goods growing over time?
E. all of the above

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KWAME NKRUMAH UNIVERSITY

2. All of the following are examples of opportunity cost except:

5. A free good is not scarce because:

6. Which of the following statements could not be tested by economic analysis?

7. Which of the following is a positive statement?

8. All of the following statements are positive except:

9. Microeconomics is not concerned with:

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