True (T) / False (F) Statements
1. Macroeconomics focuses on aggregate variables such as national income, employment and inflation.
2. A product is said to be scarce if the total amount needed by the society exceeds the total amount that the society can obtain free-of charge
3. Price concept will be meaningless to a society that does not use money as a medium of exchange.
4. When you make a decision to study principles of economics, you incur opportunity cost.
5. If an economy operates within a specific production possibility curve, additional output can be produced without incurring any cost.
6. Production possibility curve can explain the concepts of scarcity, opportunity cost, efficiency and choice
7. A society can move along the production possibilities curve without incurring opportunity cost.
8. In the free-market economy, all economic decisions are made in the market where price and productivity are the main factors in determining what should be produced, how to produce and for whom should it be produced.
9. In centrally-planned economy, production resources are owned by individuals.
10. The decreasing opportunity cost causes the production possibility curve to have a concave shape.
Fill in the blank
1. Scarcity occurs when _____________ wants faces ________________ resource.
2. Three main questions caused by scarcity and have to be resolved by the economic systems are: _________ should be produced, ____________ resources used in production and ____________ will be obtaining the goods produced.
3. When an economist states about price or cost, he actually means the value of best ____________ forgone when a choice is made. This concept is known as ____________ or alternative cost. This cost is implicit in all choices.
4. _____________ is a study related to employment, inflation, money, tax, exchange rates, national income and other aggregate variables. ____________ is more specified to the study of how consumers and firms make decisions and interact with one another.
5. Interaction among household, business firms and the government is shown by the ________________ model.
6. If the combination of output being produced is in the production possibility curve, part of the resource is ________________; while the point outside the production possibility curve is _____________________.
7. A normal production possibility curve has a convex shape because opportunity cost is _____________________. The cost of producing goods increases when production level increases due to the problem of ______________ return.
8. The government`s role in the capitalism system is minimum and follows the _______________ policy. There are no societies practicing true capitalism or centrally-planned system, most of us live in the _______________ economy.
1. Assume that Country A produces two types of goods, consumer goods and agricultural goods. Assume too that the production possibilities curve of Country A has a normal convex shape. By placing the consumer goods at the Y-axis and the agricultural goods at the X-axis, illustrate the effects of conditions stated below to the production possibility curve of Country A. Draw the curve for every condition in separate diagrams with the assumption that the original curves are the same before any changes take place.
(a) Technology growth occurs in the agricultural field only.
(b) Technology growth occurs in the production of consumer goods only.
(c) Education level of all labour increases in a period of three years.
(d) Investment in capital goods decreases throughout a decade.
(e) A few million acres of agricultural land are gained by sea embankment.
2. Determine whether these statements are TRUE (T) or FALSE (F) based on the figures below.
(a) If both countries are having the same resources, Country U will have a more advanced technology compared to Country R.
(b) Both countries face decreasing returns in the production of both goods.
(c) Investment of Country R is higher at point d compared to point c.
(d) If Country R is at point a, it can move to point d.
(e) Point a for both countries illustrates inefficiency and waste of resources.
(f) Opportunity cost is constant along the production possibility curve of Country U.
(g) Consumption in Country R exceeds investment at point d.
(h) Each country can experience rapid growth when moving along the curve towards capital goods.
(i) Country U can move from point e to point c without incurring cost.
(j) If both countries use the same level of technology, Country R will have more resources compared to Country U.