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Year 11 Preliminary HSC Economics ‐ Multiple Choice Questions Part 1 ‐ Easy 1 Which of the following statements best describes the economic problem? (A) Resources are always used for their most efficient uses (B) Market prices tend to fluctuate to reflect changes in consumer demand (C) Unlimited resources are used to satisfy the limited wants of consumers (D) Resources are limited in relation to the unlimited wants of consumers 2 The solution to the economic problem is choice. What are the three main choices an economy faces? (A) How to Produce?; What and How Much to Produce?; To Whom to Distribute? (B) How to Produce?; What and How Much to Consume?; To Whom to Distribute? (C) How to Consume?; What to Consume?; Who to Consume it with? (D) How to Satisfy wants?; How to Satisfy Needs?; How to Deal with Limited Resources? 3 Which of the following are the four factors of production? (A) Wages, social welfare, interest and commission (B) Wages, rent, interest and profit (C) Land, labour, capital and enterprise (D) Wages, rent, interest and commission 4 Which of the following describes the opportunity cost of consuming a certain good? (A) The market price of the good (B) The price paid for the resources used to produce the good (C) The other goods a consumer has given up in order to purchase the good (D) The other goods which could be produced with the same resources 5 The following diagram shows a production possibility curve in an economy. Which of the following is the opportunity cost of increasing food output from 40 to 80? (A) 30 units of clothing (B) 150 units of clothing 40 units of food (C) 80 units of food (D) 6 Which of the following statements best describes relative scarcity? (A) The existence of limited needs and wants and unlimited resources (B) The scarce supply of all goods and services (C) The existence of limited resources and unlimited needs and wants (D) The limited supply of resources is insufficient to eliminate poverty 7 Which of the following can cause an inward movement in a production possibility frontier? (A) The use of less resources in production (B) Higher productivity of existing resource use (C) Producing less of one good and more of another good (D) An improvement in the rate of technological progress 8 What is the Marginal Rate of Substitution? (A) The ability to achieve a point on the production possibility frontier (B) The rate at which consumers substitute one product for another (C) The opportunity cost of substituting between one good and another (D) The opportunity cost of production vs. not producing 9 The factor return or factor income for land is? (A) Wages and Salaries (B) Rent (C) Profit (D) Housing 10 The factor return for Enterprise is? (A) Business Revenue (B) Profit (C) Wages and Salaries (D) Entrepreneurial Effort Year 11 Preliminary HSC Economics ‐ Multiple Choice Questions Part 2 ‐ Intermediate 11 Wants that are interchangeable for other wants are called (A) Complementary Wants (B) Luxury Wants (C) Substitute Wants (D) Swapping Wants 12 Wants that are demanded by the community as a whole are (A) Group wants (B) Collective Wants (C) Recurring Wants (D) Private Goods 13 A Porsche is an example of a (A) Basic Want (B) Recurring Want (C) Luxury Want (D) Resource 14 Allocative efficiency is best described by (A) Resources allocated efficiently (B) Resources allocated according to the preferences of consumers and society (C) Luxury Want (D) Resource 15 The future implication of a consumer choosing to save money is that… (A) They have lower standard of living in the present because they cannot consume as much (B) They have a higher standard of living in the future because they will have money to spend then (C) They have a nest egg (the "precautionary" motive of saving) (D) All of the above Year 11 Preliminary HSC Economics ‐ Multiple Choice Questions Part 3 ‐ Hard 16 Which of the following best describes a possible cause for this movement of the production possibility frontier in Country A from P1P1 to P2P2 (A) (B) (C) (D) 17 Which of the following best describes the production possibility frontier below: (A) (B) (C) (D) 18 Country A discovers more clothing Country A decides to produce more clothing Country A produces less food Country A gets twice as efficient at producing clothing Country A can produce unlimited clothing Country A can ONLY produce 100 units of clothing ‐ no less, no more Country A cannot produce Food and can produce 100 units of clothing Country A could produce 50 units of food but is currently producing 100 units of clothing A production possibility frontier can be drived from…? (A) A production possibility frontier (B) An assumption about constant marginal rate of substitution (C) A and B (D) None of the above 19 Which of the following best describes consumer goods (A) Goods that are consumed by ordinary people (B) Goods which give immediate satisfaction of wants (C) Goods that can be consumed (e.g. food and water) (D) Goods that are produced by firms 20 Which of the following is a real example of a government regulating economic behaviour in Australia (A) Setting prices for basic foodstuffs Determining production targets for businesses (B) (C) Protecting workers through minimum wage regulatrions (D) Establishing public companies to compete ewith private companies Year 11 Preliminary HSC Economics - Short Answer Questions Part 1 - Content 1 Explain the difference between needs and wants __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ (2 marks) 2 Provide definitions for the four factors of production __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ (2 marks) 3 Explain how choices faced by societies have an opportunity cost __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ (3 marks) 4 Explain what is meant by the marginal rate of substitution and provide an example __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ (3 marks) Year 11 Preliminary HSC Economics - Short Answer Questions Part 2 - Skills The following table shows a production possibility schedule for food and clothes in a hypothetical economy using a fixed quantity of resources Food Clothes 500 0 400 1000 300 200 200 300 100 400 0 500 1 Construct a production possibility curve using the table (2 marks) 2 State the opportunity cost of producing the first 100 units of food and the first (2 marks) 100 units of clothes __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ 3 Explain how the discovery of new resources and improvements in technology could affect food and clothing production in this economy __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ (2 marks) 4 Explain TWO ways in which an economy operating within its production possibility frontier could achieve full employment of its resources __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ __________________________________________________________ (4 marks)