Question

1)

Economics is best defined as the study of

a) how society manages its scarce resources.

b) how to run a business most profitably.

c) how to predict inflation, unemployment, and stock prices.

d) how the government can stop the harm from unchecked self-interest.

2)

Your opportunity cost of going to a movie is

a) the price of the ticket.

b) the price of the ticket plus the cost of any soda and popcorn you buy at the theater.

c) the total cash expenditure needed to go to the movie plus the value of your time.

d) zero, as long as you enjoy the movie and consider it a worthwhile use of time and money

3)

You were planning to spend Saturday working at your part-time job, but a friend asks you to go skiing.

A. Which of the following are included in the true cost of going skiing? Check all that apply.

a) The cost of a lift ticket

b) The cost of your ski jacket you purchased last year

c) The wages you forgo by going skiing

d) The rental of any ski equipment you need

Now suppose you had been planning to spend the day studying at the library.

B What is the cost of going skiing in this case? Check all that apply.

a) The rental of any ski equipment you need

b) The cost of a lift ticket

c) The value of your time spent studying

d) The cost of your ski jacket you purchased last year

Answer 1

1) Economics is concerned with the allocation of scare resources which are limited in amount to satisfy wants that are unlimited (Option A).

2) The opportunity cost of doing something is the monetary cost of that action which includes any direct payment as well as the monetary cost of time spent which is usually indirect. (Option C)

3) The true cost of going skiing should include all the opportunity cost which includes both the money spent in buying tickets and jackets but also the money not earned. Select a), c) and d)

Again the cost of going skiing in this case involves direct and indirect payment. Select a), b) and c).

Answer 2

1.

Economics is a part of social science. It explains human behavior with respect to their unlimited wants. Economics has two broad parts such as microeconomics and macroeconomics. Microeconomics discusses individual behavior and macroeconomics discusses the economy in an aggregate manner. 

Economics is best defined as the study of how society manages its scarce resources. Humans have unlimited wants but the resources to fulfill their wants are very few. So, economics studies how to allocate those scarce resources among different individuals in society.

How to run a business most profitably is explained in microeconomics which is a part of economics. This cannot provide the proper definition of economics. How to predict inflation, unemployment, and stock prices are discussed in macroeconomics that is again a part of economics, so this defines only a narrow meaning of economics. Again, how the government can stop the harm from unchecked self-interest is a part of the discussion in macroeconomics.

Thus, the correct answer is (a).