Question

1. The major bulk of national income flows to:
a. land owners in the form of rent
b. capital owners in the form of interest
c. capital owners in the form of profit
d. workers in the form of wages and salaries

2. The three basic characteristics of the economic perspective are:
a. Relative scarcity, purposeful behavior, and adaptability
b. Supply, demand, and equilibrium
c. Description, institutions, and facts
d. Prices, quantities, and incomes

3. In the context of the basic work-leisure model, “work” is defined as:
a. time devoted to a paying job or household work
b. time devoted to a paying job
c. time devoted to any “undesirable” activity
d. all time not devoted to rest and relaxation

4. In the context of the basic work-leisure model, “leisure” time includes:
a. only time devoted to rest and relaxation
b. any time not devoted to either a paying job or household work
c. any time devoted to anything desirable
d. any time not devoted to a paying job

5. The convex shape of a standard indifference curve reflects:
a. a diminishing marginal rate of substitution of leisure for income
b. an increasing marginal rate of substitution of leisure for income
c. a constant marginal rate of substitution of leisure for income
d. the wage rate

Answer 1

1. The major amount of national income goes in the hands of workers in the form of renumeration (wages and salaries) for the services they provided in the production process. Therefore, option D is correct.

2. Relative scarcity is the core of economic perspective where purposeful decision are made in the presence of scarce resources and adaptability. Therefore, option A is correct.

3. Time devoted to a paying job constitutes "work" in the work-leisure model. And leisure is time devoted to any activity that does not pays in monetary form. Therefore, option B is correct.

4. Anytime that is not devoted to a paying job constitutes "leisure" in a work-leisure model. Therefore, option is D correct.

5. The marginal rate of substitution of leisure for income is diminishing. That means, an individual becomes increasingly reluctant to give up income as it becomes increasingly scarce. Therefore, option A is correct.