Quiz NO 05
1 The process by which resources are transformed into useful forms is
A capitalisation.
B consumption.
C allocation.
D production.
2 The concept of choice would become irrelevant if
A capital were eliminated.
B scarcity were eliminated.
C we were dealing with a very simple, one-person economy.
D poverty were eliminated.
3 Which of the following is not a resource as the term is used by economists?
A money.
B land.
C buildings.
D labour.
4 Capital, as economists use the term,
A is the money the firm spends to hire resources.
B is money the firm raises from selling stock.
C refers to the process by which resources are transformed into useful forms.
D refers to things that have already been produced that are in turn used to produce
other goods and services.
5 Opportunity cost, most broadly define, is
A the additional cost of producing an additional unit of output.
B what we forgo, or give up, when we make a choice or a decision.
C a cost that cannot be avoided, regardless of what is done in the future.
D the additional cost of buying an additional unit of a product.
6 A graph showing all the combinations of goods and services that can be produced if all of
society’s resources are used efficiently is a
A demand curve.
B supply curve
C production possibility frontier.
D circular-flow diagram.
7 Periods of “less than full employment” of resources correspond to
A points on the ppf.
B points outside the ppf.
C either points inside or outside the ppf.
D points inside the ppf.

8 What lies is at the heart of the allocation of goods and services in a free-market economy?
A Concerns of equity or equal distribution among individuals.
B The order or command of the ruling government or dictator.
C The wishes of consumers in the market.
D The price mechanism.
9 The phrase ‘ceteris paribus’ is best expressed as
A ‘all else equal.’
B ‘everything affects everything else.’
C ‘scarcity is a fact of life.’
D ‘there is no such thing as a free lunch.’
10 Laboratory (or controlled) experiments cannot be performed in economics because:
A of resource scarcity.
B economics is a natural science.
C of the difficulty of distinguishing between normative and positive statements.
D economics is a social science.
11 Positive statements are:

value judgments
verifiable or testable
statements in the affirmative
good statements

12 The former Soviet Union was an example of:
A a planned economy
B free-market/capitalism
C dictatorship
D a mixed economy
13. Rational choice or rational decision-making involves
A. comparing the net benefit of a choice with the total net benefit foregone of all the
alternatives combined
B. weighing up total costs and total benefits associated with a decision
C. weighing up marginal costs and marginal benefits associated with a decision
D. all of the above.

14 The PPF can be used to illustrate:
A. the principle of opportunity costs and increasing opportunity costs
B. the distinction between micro and macroeconomics
C. efficient, infeasible and inefficient production combinations
D. all of the above