Choose the correct answer for each question.

1. In a market-based economy the scarcity of factors of production means that

   1.   ?    Consumers must inevitably consider the opportunity cost of their choices
   2.   ?    The economy cannot achieve economic growth every year
      
      
   3.   ?    Inflation is inevitable
   4.   ?    The economy cannot produce on its production possibility frontier

2. The opportunity cost to society of constructing a new motorway would be

   1.   ?    The loss of farmland and natural habitat used in order to build the road
   2.   ?    The other goods and services which labour employed constructing the road could produce
   3.   ?    The other goods and services that would be produced if the motorway were not built
   4.   ?    The financial cost of the road

3. Which one of the following is best described as a normative statement?

   1.   ?    A reduction in spending on the NHS will result in some job losses
   2.   ?    Free health care should be provided to everyone free at the point of consumption and not based on ability to pay
   3.   ?    A reduction in health care spending will have most impact on lower income households
   4.   ?    Extra funding for the NHS may involve some switching of spending from other services

4. Economics is primarily concerned with the study of

   1.   ?    determining how the government should allocate resources
   2.   ?    how to make more effective use of resources through reducing wants
   3.   ?    allocating scarce resources to satisfy unlimited wants
   4.   ?    how new wants and economic resources are produced

5. Which one of the following is a positive economic statement?

   1.   ?    the extent of income inequality in the United Kingdom has increased over the last 30 years
   2.   ?    the rate of unemployment is too high
   3.   ?    the national minimum wage rate should be increased to £5 per hour for all workers
   4.   ?    nurses working the national health service should be on a maximum working week of 50 hours per week

6. Choice is an important element in the basic economic problem because

   1.   ?    wants increase with income
   2.   ?    scarce economic resources are distributed equally
   3.   ?    limited economic resources have many alternative uses
   4.   ?    high demand leads to higher market prices

7. Which one of the following is an example of a 'normative economic statement'?

   1.   ?    Increased consumer spending on new cars will lead to a rise in traffic congestion
   2.   ?    Prices in a competitive market are likely to be lower than under a pure monopoly
   3.   ?    Most firms seek to maximise their market share
   4.   ?    The government should increase the taxation on goods which harm the environment

8. In economics it is generally assumed that the MAIN objective of firms is to

   1.   ?    reduce price and satisfy as many consumers as possible
   2.   ?    maximise the company share price on the stock market
   3.   ?    employ more workers
   4.   ?    maximise total profits

9. 
   Which economic concept is illustrated by the shape of the production possibility frontier shown in the diagram above?

   1.   ?    The law of diminishing marginal returns
   2.   ?    The law of economies of scale
   3.   ?    Economic growth
   4.   ?    The theory of demand

10. 
    A reallocation of resources within an economy from A to B shown in the PPF diagram above is likely to lead to

    1.   ?    A short term rise in production of consumer goods and a fall in demand for investment goods
    2.   ?    A short term fall in production of consumer goods but a long term rise in an economy's productive potential
    3.   ?    A decrease in demand for workers employed in producing capital goods
    4.   ?    An increase in the demand for consumption goods

11. Profit is most likely to be an economic objective of

    1.   ?    labour
    2.   ?    consumers
    3.   ?    governments
    4.   ?    entrepreneurs

12. Which of the following is a measure of productivity?

    1.   ?    The amount produced
    2.   ?    Output divided by employment
    3.   ?    The quantity of capital employed
    4.   ?    The percentage increase in employment

13. When an economy operates on its production possibility frontier (PPF), it is

    1.   ?    satisfying all the economic wants of consumers
    2.   ?    productively efficient
    3.   ?    maximising the profits of producers
    4.   ?    not producing demerit goods such as cigarettes

14. Which of the following is a positive economic statement?

    1.   ?    Direct taxes should be increased to distribute income more fairly
    2.   ?    The government ought to cut the taxes paid by motorists
    3.   ?    The distribution of income and wealth is unequal
    4.   ?    All taxes are bad, but some public services are good

15. Which one of the following is a normative economic statement?

    1.   ?    The government should spend more on the health service
    2.   ?    Building a new hospital involves an opportunity cost
    3.   ?    The government regards health care as a merit good
    4.   ?    Some medicinal drugs are ineffective