Exam 1: Ten Lessons From Economics

Amy is a recent university graduate. She has been offered a high paying job in Papua New Guinea. This job has more personal risks and will be more difficult. Alternatively she could take a lower paid job in Sydney. Under which conditions would taking the lower paid job be more rational?

What would happen to the study of economics if scarcity disappeared?

An example of an externality is:

A biscuit shop in a shopping centre is open from 9 a.m. to 5 p.m., Monday to Friday. The cost of making and selling biscuits averages $0.50 per biscuit. At 5 p.m. on Friday evening, the owner still has several dozen unsold biscuits. The biscuits will not be saleable on Monday. What is the best price strategy for the biscuit shop to take? Justify your answer.

New Zealand used to use a bounty system to control possums. Trappers got paid a fixed amount for each possum they caught. Given that people respond to incentives, explain why this system failed to halt the spread of possums in New Zealand.

Ryan spends an hour studying instead of going for a bike ride. The opportunity cost to him of studying is:

Give three examples each of household and societal decisions regarding the allocation of resources.

Daniel decides to spend an hour playing cricket rather than working at $16 per hour. His trade-off is:

If Australia is better than the US at producing wheat, but the US is better than Australia at producing cars, the US should: