7 questions. Try each one, then open the answer to check yourself and read the explanation.
Which of the following is usually guiding human decisions?
Answer: B (cost benefit analysis)
People weigh what an action costs against what it brings; if the benefit is greater than the cost they are likely to go ahead. That is cost-benefit analysis.
When total utility reaches the maximum, marginal utility will be ________
Answer: B (zero)
Marginal utility is the extra satisfaction from one more unit. At the top of the total utility curve an extra unit adds nothing, so MU = 0.
When there is a change in national income as a result of changes in any if the components of national income, we refer to this as ________
Answer: C (Multiplier)
The multiplier measures how much national income changes when a component such as investment or consumption changes: K = 1/(1 − MPC) = 1/MPS.
The monopolist's demand curve is ________
Answer: B (downward sloping)
A monopolist is the whole industry, so to sell more it must lower its price: its demand (AR) curve slopes downward, with MR below it.
Cost −push inflation might start with ________
Answer: A (a rise in money wage rates)
Cost-push inflation comes from rising production costs such as wages. More government spending or more money in circulation causes demand-pull inflation.
Indifference curve did not exhibit which of the following properties?
Answer: D (lower indifference curve represents equal satisfaction of value)
Indifference curves slope down, are convex to the origin, and a higher curve means more satisfaction. A lower curve means less satisfaction, not equal, so D is not a property.
Economics is regarded as a science subject because ________
Answer: A (it sometimes follows empirical methods)
Economics counts as a science because it uses the scientific method: observing facts, forming theories and testing them against evidence.