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Week 1_Tutorial Questions-1

The document contains tutorial questions related to economic concepts such as incentives, opportunity cost, and production possibility frontiers. It includes multiple-choice questions assessing understanding of economic behavior and short answer questions requiring explanations of key economic principles. Additionally, it discusses practical applications of these concepts in real-world scenarios, such as ticket distribution and investment decisions.

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gems0906
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6 views

Week 1_Tutorial Questions-1

The document contains tutorial questions related to economic concepts such as incentives, opportunity cost, and production possibility frontiers. It includes multiple-choice questions assessing understanding of economic behavior and short answer questions requiring explanations of key economic principles. Additionally, it discusses practical applications of these concepts in real-world scenarios, such as ticket distribution and investment decisions.

Uploaded by

gems0906
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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WEEK 1_TUTORIAL QUESTIONS

1) Consider the following statements:


a. Car owners purchase more petrol from a petrol station that sells petrol at a lower
price than other rival petrol stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to
allow some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.

Which of the above statements demonstrates that economic agents respond to


incentives?
A) b only
B) c only
C) a and b
D) a, b, and c

2) Suppose that some investors have decided that economic and financial uncertainty
have made the prospect of investing in domestic stock markets more risky than
investing in foreign stock markets, and therefore choose to invest in foreign markets.
By using all available information as they act to achieve their goals, these investors
are exemplifying the economic idea that________.
A) people are rational
B) people respond to economic incentives
C) optimal decisions are made at the margin
D) equity is more important than efficiency

3) Damian shares a small food truck with his sister. His share of the expenses is $500
per month. He has decided to get his own, newer food truck which he will not have to
share with anyone. His expenses for the newer truck are $1 400 per month. Damian is
as rational as any other person. As an economics major, you rightly conclude
that________.

A. Damian cannot afford the newer truck and will have to go back to sharing a truck
with his sister
B. Damian figures that the additional benefit of having his own truck (as opposed to
sharing) is at least $900
C. Damian figures that the benefit of having his own truck (as opposed to sharing) is
at least $1 400
D. the cost of having one’s own truck outweighs the benefits

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4) The production possibility frontier shows the ________ combinations of two
products that may be produced in a particular time period with available resources and
current technology.
A) minimum attainable
B) maximum attainable
C) only
D) equitable

5) What are the attainable production points on a production possibility curve?


A) The horizontal and vertical intercepts
B) The points along the production possibility frontier
C) The points outside the area enclosed by the production possibility frontier
D) The points along and inside the production possibility frontier

SHORT ANSWER AND ESSAY TYPE QUESTIONS:

Question 1) In your own words, explain what opportunity cost means.

Consider the following example.


Andy has just been offered an extra evening shift for 3 hours at Coles. He would earn
$100 if he takes it. However, he already plans to go with his mates and catch the latest
Avengers movie: “Avengers: The Finale”. The movie ticket costs $20.

What do you think is the total opportunity cost for Andy if he decides to go to the
movies?

- Opportunity cost refers to the potential benefits that an individual, an investor or a


business misses out on when choosing one alternative over another. In Andy’s case, if
he decides to go to the movies with his mates which will cost him $20, instead of
taking the extra evening shifft for 3 hours at Coles which will earn him $100. The
opportunity cost would be the earrnings that he culd have made by taking the extra
evening shift at Coles.

- The total opportunity cost if Andy decides to go to the movies that he wil be minus
$20 for the movie ticket rather than earning $100 by taking the extra evening shift at
Coles he was offered.

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Question 2) The following table gives the relationship between the price and the
number of Pies bought per week.

Price ($) Quantity of Pies Week

3.00 6 2 July

2.00 7 9 July

5.00 4 16 July

6.00 3 23 July

1.00 8 30 July

4.00 5 6 August

a. Plot the data from the table above on a graph


b. Is the relationship between price and the number of Pies bought positive or
negative?

Question 3
From 2009 onwards movie studios began to release a number of films in 3D format.
To show films in this format cinemas have to purchase 3D equipment that costs
around $75 000 for each projector. Usually, cinema owners charge about $4 more for
a ticket to a 3D movie than for a movie in the conventional 2D format. If you owned a
cinema, discuss how you would go about deciding whether to invest in 3D equipment.

- The passage mentions that the cost of 3D equipment for each projector is around $75
000. Consider how many projectors your cinema needs and if there an additional
costs associated with the 3D equipment such as screens, glasses, and maintance. If
you can charge for 4$ more per ticket for a 3D movie, the you must sell 18 750
tickets to 3D movies to cover the additional $75 000 equipment cost ($4 x 18 750
tickets = $75 000)

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Question 4
Suppose that your local police recover 100 tickets to a big football match in a drug
raid. It decides to distribute these to residents and announces that tickets will be given
away at 10 a.m. on Monday at the Town Hall.
a. What groups of people will be most likely to try to get the tickets? Think
of specific examples and then generalise.
b. What is the opportunity cost of distributing the tickets this way?
c. Productive efficiency occurs when a good or service (such as the
distribution of tickets) is produced at the lowest possible cost. Is this an
efficient way to distribute the tickets? If possible, think of a more
efficient method of distributing the tickets.
d. Is this an equitable way to distribute the tickets? Explain.

a. Groups of people will be most likely to try to get the tickets:


- Football enthusiasts who couldn’t afford or secure tickets through regular channels.
- Those who missed out on tickets due to high demand or limited availability.
- People who don’t have a job in the morning and those who live or work close by.

b. The major opportunity cost of distributing the tickets this way includes the potential
uses of police resources and time for organizing and overseeing the event. This effort
could have been uses elsewhere, for instance, in community policing, crime
prevention, or other public services. The opportunity cost of using the Town Hall
space for this purpose instead of other potential community activities or services that
could benefit residents.

c. This isn’t an efficient way to distribute the tickets, since it wastes time and
resources. Perhaps a more efficient method could be collaborating with local football
club, schools, or community center or utilize online platforms for ticket distribution.

d.

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