Econ 101: Tutorial 1 – 2024

This tutorial consists of 2 sections, Section A and Section B. Please attempt to

answer all questions and attend your respective tutorial class.
Section A: Open-Ended Questions
1. Discuss the link between scarcity, choices and opportunity cost.
2. Explain the difference between what we study in microeconomics and
macroeconomics.
3. What is the opportunity cost for you personally studying at UKZN in 2023? Explain
your answer.
4. Explain the difference between a positive economic statement and a normative
economic statement. Give an example of each such statement.
5. Explain the difference between a post hoc fallacy and the fallacy of composition,
giving an example of each.

6. Describe the nature of the relationship between investment in capital goods and
economic growth represented by each of graphs F, G, H, and I in the figure below.
Section B: Multiple Choice Questions
1. Which of the following is a microeconomic question?
a) What quantity should a firm produce at to maximize profit?
b) Why has the unemployment rate in South Africa risen by 3%?
c) Does increasing the value of social welfare grants increase total
consumption expenditure?
d) Why has the inflation rate risen higher than the Reserve Bank’s upper limit
of 6%?
e) Why has there been a decrease in trade between China and the U.S?

2. Which of the following does not describe the use of factors of production?
a) A cool drink company hires students to market their product at a rugby
match.
b) UKZN builds a new lecture block.
c) The government hires 500 individuals to build new roads.
d) Toyota starts to use more advanced machinery to build cars.
e) An individual buys 1000 shares in Anglo American Corporation.

3. Opportunity costs means:

a) the monetary costs of an activity.
b) the direct costs of an activity.
c) the value of time lost when a choice is made.
d) the value of the best alternative given up when a choice is made.
e) Option C and D.
4. Which of the following is an example of the fallacy of composition?
a) Conducting a statistical investigation into how increasing the number of
staff employed at a firm, with all other relevant factors remaining the same,
may increase output.
b) Assuming that because it was raining before the sun came out, that rain
causes the sun to shine.
c) One cellphone company tries to increase profits by introducing a product
feature but all other firms also introduce new product features and they all
end up earning lower profits.
d) Taking an action and then calculating the highest-valued alternative
forgone.
e) Calculating the benefit received from consuming one more unit of a good
and setting it equal to the cost of producing that extra unit.

5. Which of the following statements regarding the post hoc fallacy is correct?
a) Another term for the post hoc fallacy is ceteris paribus.
b) An example of the post hoc fallacy is observing that a firm hires a new
senior manager and then observing the firm suffers losses, you then
assume that the new manager caused the firm to suffer losses
c) Post hoc fallacy and fallacy of composition are the same things.
d) All of the above statements are correct.
e) None of the above statements is correct.
 6. Consider the following statements:

i. The employment rate is too low.

ii. Firms buy factors of production in the factor market.
iii. The government should spend more on government grants.

Which of the above can be considered a positive statement

a) i only.
b) i and ii only.
c) ii only.
d) i and iii only.
e) i, ii and iii

7. Which of the following statements is correct?

a) Accounting cost refers to the opportunity cost of making a choice in the
face of scarcity.
b) The most fundamental economic problem is the fallacy of composition.
c) The skills and knowledge of workers is called human capital.
d) Money is a factor of production.
e) Economics is the study of only the direct costs involved with making
decisions.
8. Assume you are offered a job to work at a soccer match one Saturday
afternoon, where you will be paid R150 per hour to work for 5 hours. You
decide not to work but rather to drive down the coast to visit a friend. It costs
you R300 in petrol and R50 in toll road charges. The opportunity cost of
deciding to visit your friend is
a) R150
b) R750
c) R1100
d) R350.
e) R1050
9. In the above figure, the slope across the arc between b and c is
a) 1.
b) 4/3.
c) 2.
d) 1/2.
e) 4.
10. With reference to the above figure, which of the following statements is
correct?
a) Curve G shows that there is a negative relationship between
investment in capital goods and economic growth
b) Curve H shows that there is an inverse relationship between
investment in capital goods and economic growth
c) Curve F shows that there is a positive relationship between
investment in capital goods and economic growth
d) Curve I shows that there is a direct relationship between
investment in capital goods and economic growth
e) None of the above statements is correct