Category: Economics

Multiple Choice 10 points
The Nifty Gum Co. has purchased a large parcel of land for $1 million. The company recently discovered that the land is contaminated and is worthless to all possible buyers. The opportunity cost of the land is
A) $0.
B) $1 million.
C) some amount greater than $0 but less than $1 million.
D) equal to the cost of the factory that was planned to be built there.
2 Multiple Choice 10 points
Economic efficiency entails
A) producing a given amount of output with the most expensive mix of inputs.
B) producing a given amount of output with the least number of inputs.
C) producing a given amount of output with the most inputs.
D) producing a given amount of output with the cheapest mix of inputs.
3 Multiple Choice 10 points
Economists proclaim that competitive firms make zero economic profit in the long run. This shows how
A) detached economists are from the real world.
B) unrealistic economic theory is.
C) firms cover all their cost, both monetary and non-monetary.
D) firms cover only monetary cost when economic profits are zero.
Multiple Choice 10 points
A specific tax of $1 per unit of output will affect a firm’s
A) average total cost, average variable cost, average fixed cost, and marginal cost.
B) average total cost, average variable cost, and average fixed cost.
C) average total cost, average variable cost, and marginal cost.
D) marginal cost only.

Which of the following has not been found to be true by health economists about substitution in the health economy?
substitution effects have been found among different types of healthcare providers
substitutions are consistently considered functionally identical by consumers
substitution effects have been found between specific hospital beds and medical stalf
substitution effects have been found between a wide array of types of allied health professionals
True or False 3 points
Healthcare goods and services, even when operated by private for-prolit forms, are rarely porely private ventures.
True
False
38The or False 3 points
The time spent by healthcare corsumers obtaining healthcare services is a key unpriced factor in the health economy.
True
False

A company has identified five independent projects for possible implementation in the upcoming financial year.
The table below shows the initial investment, the life and the present worth for each of the projects:
Project
Initial Investment (Rands)
Project Life (in Years)
PW of Project @ 12% (in Rands)
A
-R150,000
6
R 85,400
B
-R250,000
8
R 123,250
C
-R100,000
6
R 30,000
D
-R250,000
4
R 100
E
-R400,000
12
R 153,500
Given the number of projects, what is the maximum number of mutually exclusive project bundles that can be formed and how many of these bundles will fit within a budget limitation of R250,000? Select the correct answer from the options below:
Question 7Answer
5 mutually exclusive bundles are possible, all will fit in the budget
5 mutually exclusive bundles are possible, but only 4 bundles will fit in the budget
16 mutually exclusive bundles are possible, but only 5 bundles will fit in the budget
32 mutually exclusive bundles are possible, but only 5 bundles will fit in the budget
64 mutually exclusive bundles are possible, but only 5 bundles will fit in the budget
16 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
32 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
64 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
8 mutually exclusive bundles are possible, but only 6 bundles will fit in the budget
None of the above

Two firms are planning to sell 10 or 20 units of their goods. The payoff matrix illustrated at right shows profits when the firms produce simultaneously, the first game tree shows profits when Firm 1 decides how much to produce first, and the second game tree shows profits when Firm 2 decides how much to produce first.
Part 2
How does your analysis change if the government imposes a lump-sum franchise tax of $200 on each firm?
Part 3
If the government imposes a lump-sum franchise tax of $200 on each firm, then
Part 4
A. each firm will produce more output in each game at the Nash equilibria.
B. the games will no longer have Nash equilibria.
C. each firm in each game will now have a dominant strategy leading to each Nash equilibria.
D. the Nash equilibria for the games will not be affected.
E. at least one firm will shut down and produce nothing in each game at the Nash equilibria.
Part 5
Now explain how your analysis would change if the firms have an additional option of shutting down and avoiding the lump-sum tax rather than producing 10 or 20 units and paying the tax.
Part 6
If firms have the option of shutting down and avoiding the lump-sum tax, then
Part 7
A. profits for each firm for each game will not be affected.
B. each firm in each game will now have a dominant strategy.
C. it will no longer be possible for each firm to produce 10 or 20 units of output in each game.
D. an additional column and row will be added to each game for each firm.
E.

Rio and Mei are both applying for a job with PWCQ. Both are very intelligent and are more than capable of doing the job. However, Rio has an honours degree from the University of Queensland and Mei has an online degree from a small, relatively unknown university.
Select the item from the list provided to make the following statements true. – 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
Rio’s UQ degree communicates that she is an intelligent, capable future employee. This is an example of __________. – 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
As an employer, PWCQ must rely on such signals as a result of __________. – 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.
The managers of PWCQ decide to refurbish their offices even though this costs the company a considerable amount of money. This is an instance of __________.
1. Adverse selection
2. 20%
3. Asymmetric information
4. Marginal benefit
5. Principal-agent problem
6. Expected value
7. 80%
8. Costly to fake principle
9. More time looking
10. Moral hazard
11. Marginal cost
12. Less time looking

A talk-show participant argues that examining the raw gender wage gap without controlling for factors like industry, education, and labor force attachment is meaningless. How might an economist respond?
They could argue that the gender wage gap is biased by the fact that most women only work part-time while men work full-time, implying that there must be a considerable gap in median earnings. The problem is therefore not if we control for different factors or not, but the wage data that is being used.
They could agree, arguing that controlling for factors like industry and labor force attachment eliminates the wage gap entirely, suggesting that discrimination (in its narrow definition) no longer exists. This perspective implies that the raw gender gap is misleading and creates a problem where none exists
They could argue that controlling for different factors can indeed separate discrimination (using the narrow definition) from other factors. However, the raw gender gap can be useful because structural processes, such as steering, occupational segregation, and care work expectations systematically shape gendered outcomes in the labor market and should thus also be considered in discussions of the wage gap.
They could dismiss the relevance of the raw wage gap, and explain why statistical discrimination is the main issue. However, it is important that statistical discrimination should not be considered real discrimination because it is evidence-based.