Put into practice questions

Gillespie: Foundations of Economics 5e

Put into practice questions

Page 6

Which of the following is not a resource in the economy?

• The Labour force
• Machinery
• Natural resources
• Finished Products

Answer is D. Finished products. This is an output but not a resource

Page 13

Which of the following statements are true and which are false? Explain your answers

• The free market relies on government intervention. FASLE ; no intervention

b. The basic economic questions are: What to produce? When to produce? Why

produce? TRUE

• The free market may lead to income inequality; TRURE

Page 15

Are the following micro or macroeconomic issues? Explain your answers.

• The share price of Facebook. Micro
• The growth of the UK economy. Macro (whole economy)
• The supply of housing in Oxford. Micro- one market)
• A rise in unemployment. Macro- all labour markets)

Are the following normative or positive economics? Explain your answers.

• Lower interest rates lead to more spending in the economy Positive.
• Higher taxes on alcohol will reduce consumption. Positive.
• The government should focus more on reducing inflation than growth. Normative
• The government needs to spend more on healthcare. Normative

Page 21

Which of the following statements are true and which are false? Explain your answers.

• A government-run organization is part of the public sector. True

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(Foundations of Economics, 5e Andrew Gillespie) (Solution Manual all Chapters) Chapter 1 1 / 4

Gillespie: Foundations of Economics 5e

• Real wages have taken account of inflation. True
• If the marginal cost of an activity equals the marginal benefit there is no value in

undertaking this activity at all. False

• Capital goods are an investment for the future. True

End of chapter put into practice questions

Page 23

Which of the following is not a resource in the economy?

• Land
• Labour
• Finished goods
• Enterprise.

Answer is C. This is an output not a resource.

Which activities in your country are undertaken by the public sector? Compare this with one other economy of your choice. If there are differences in what the government provides in these countries, why do you think this might be?

Will depend on your country but consider areas such as energy, health, education and transport.

Identify one policy your government has introduced recently to affect the economy. Explain what the policy is and why this policy has been introduced.

Will depend on your government

Has the government transferred any organisation to the private sector in your country? If so why? OR has the government taken control of any organisation? If so why?

Will depend on what has happened in your economy

Which one of the following is true? Explain your answer?

• A normative statement is one which never contain words such as ‘is’ or ‘will’ or

‘always’. TRUE

• A normative statement is one which can be scientifically proven to be true or

false. FALSE

• A positive economic statement can be tested against the facts. TRUE
• A positive economic statement can never contain words such as ‘could’ or

‘should’. TRUE

Which of the following is a positive economics statement?

• There are too many poor people in the UK.

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Gillespie: Foundations of Economics 5e

• The distribution of income in the UK is unequal. POSITIVE
• The high income earners should be taxed more.
• The unemployed should receive more benefits.

What is the opportunity cost of university? Explain your answer.

It is the sacrifice foregone e.g the earnings you could have had if you had started work immediately

If inflation is 5 per cent and nominal wages are rising by 3 per cent what is happening to real wages? Why?

Real wages are filing because nominal wages are not increasing as much as prices.

Satisfaction is maximized when there is the biggest positive difference between the marginal benefit of an activity and the marginal cost. True or false? Explain your answer.

FALSE. Satisfaction would be maximized where there is no extra satisfaction from consuming a unit.

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Gillespie: Foundations of Economics 5e

© Andrew Gillespie, 2019. All rights reserved.

Chapter 2

Put into practice questions

Page 28

Calculate the opportunity cost of the fifth unit of B in terms of the numbers of units of A Sacrificed.

For the fifth unit of B, 2 units of A are sacrificed.

Page 30

Are the following statements true or false?

• The PPF shows the amount that consumers want of each product. False
• Any combination of goods inside the PPF is productively efficient. False
• Wants are limited, but resources are unlimited, which means that there is a

problem of scarcity and choice. True

Page 36

Imagine that an economy is at point C in Figure 2.6. Within the domestic economy, what is the opportunity cost of five more units of B?

• more unit so of B involve a sacrifice of 2 units of A; this is the opportunity cost

Assume that two units of A can be traded abroad for 12 units of B. Then, starting at C, if an economy were to give up two units of A and trade overseas, how many units of B could it now have?

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