MBS666 Practice Multiple Choice Questions
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economics is the study of the ________ people make to attain their goals, given their ________ resources. A) decisions; household B) purchases; unlimited C) income; available D) choices; scarce 2) Which of the following is what economically rational people do? A) Respond to economic incentives. B) Weigh the benefits and costs of all possible alternative actions. C) Use all available information as they act to achieve their goals. D) Economically rational individuals do all of these. 3) Which of the following best describes the assumption about human behaviour that economics makes? A) Economics does not make assumptions about human behaviour, as human behaviour changes a lot. B) Economics assumes individuals act rationally all of the time and in all circumstances. C) People weigh factors such as religion, envy, compassion and anger in all the decisions they make. D) Assuming rational behaviour is useful in explaining the choices people make, even though people may not behave rationally all the time. 4) In economics, an optimal decision involves carrying out an activity up to the point where: A) the marginal benefit of the activity is equal to the marginal cost of the activity. B) the opportunity cost of the activity is negative. C) the marginal benefit of the activity is greater than the marginal cost of the activity. D) the opportunity cost of the activity is zero. 5) Which of the following is correct with respect to how firms, in reality, determine the optimal level of production? A) Firms often have to make careful calculations using marginal analysis to determine the optimal level of production. B) Profit maximising output is found where marginal benefit is as much larger than marginal cost as possible. C) The optimising rule of economics has no relevance to operating a business, only to individuals. D) It is very easy for firms to determine the optimal level of production. 6) Opportunity cost is best defined as: A) the additional cost of producing one more unit of output. B) the highest-valued alternative that we forego when we make a choice or decision. C) the additional cost of buying one more unit of a good. D) the cost to producers that results from a failed investment opportunity. 7) If a full-time student chooses to spend a day at the beach, the opportunity cost of this decision is equal to: A) zero, since the student is not in paid employment and is not foregoing any wages. B) the alternative use of the student's time, such as studying. C) the wages that the student would have received had he/she decided to work full-time instead of studying. D) the food, drinks and sunscreen purchased for the day at the beach. 8) According to consumer sovereignty, who ultimately decides what goods and services will be produced in a market economy? A) The government. B) Producing firms. C) Consumers. D) Consumers and producers. 9) Which of the following is a problem inherent in centrally planned economies? A) There are no problems in centrally planned economies as everyone, including consumers, is satisfied. B) Production managers do not satisfy consumer wants, as they instead follow the government's orders. C) There is too much production of low-cost, high-quality goods and services. D) None of these describe a problem inherent in a centrally planned economy.
10) What is an economic model? A) A description of an economic issue that includes as little information as possible. B) A description of an economic issue that includes all possible related information. C) A very detailed version of some aspect of economic life used to analyse an economic issue. D) A simplified version of some aspect of economic life used to analyse an economic issue. 11) Which of the following is part of an economic model? A) Economic data is needed to test the model. B) The model must contain a...
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