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Professional Engineering (Economics) Exam Questions And Accurate Answers
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Professional Engineering (Economics) ExamQuestions And Accurate Answers
What is economics? - Answ The study of how people make decisions with limited
resources
What is economics? (2) - Answ The study of how finite resources
are allocated to meet infinite needs
and wants
What are the two major sections in economics? - Answ Microeconomics &
Macroeconomics
What is microeconomics? - Answ economics of an individual
What is macroeconomics? - Answ The study of the economy as a whole
Principles & assumptions of Economics - Answer a) Actors are rational
b) Full Information (know the cost and benefit of all alternatives)
c) Income is limited
d) Opportunity costs exist-alternatives sacrificed
e) The Law of Diminishing Utility applies
law of diminishing marginal utility - Answer rule stating that the additional satisfaction a
consumer gets from purchasing one more unit of a product will lessen with each
additional unit purchased
,Scarcity Principle - Solution We have unlimited needs and wants, but the resources are
available to us are not limitless. Hence, having more of one good thing often means
having less of another.
Cost-Benefit Principle - Solution - a person should take an action if, and only if, the
additional benefits from taking the action are at least as great as the additional costs.
maximization firms - Answer Some firms' goal is to make as much immediate profit as
possible.
maximization individuals - Answer Individuals seek to maximize utility
maximization owners - Answer Owners seek to maximize their return
free enterprise - Answer Economic system in which individuals and business are
allowed to compete for profit with a minimum of government interference
free enterprise (characteristics) - Answer a) Market mechanism (Resources are
allocated through the price mechanism)
b) Ownership of factors or production (Nearly all factors of production are privately
owned)
c) Limited government interference (Government exists to supply public goods; provide
a legal
framework within which markets can work and prevent the creation of monopolies)
d) Decentralized decision making (The allocation of resources; the decisions on what to
produce; how to produce and who gets the
commodities: decided by individuals/entrepreneurs)
e) Motivated by Self-Interest (Consumers, producers and property owners are motivated
by this - maximisation)
, Advantages of free enterprise - Answer a) Wider choice for those with income to spend
b) Innovation / R & D encouraged
c) Efficiency incentivised (greater profit)
d) Economic growth encouraged (individuals motivated by self interest ->aiming for max
efficiency)
e) Bureaucracy reduced (less centralised decision making)
Disadvantages of free enterprise - Answer a) Inequality these without ability to supply
labour, money or enterprise have no income)
b) Fewer public services available non-profit making ones)
c) Monopoly power may be built up Multi-National Companies)
d) Unemployment cost minimising policies)
e) Short-term thinking, leading to failures like
environmental exploitation
What are the reasons why the
government chooses to become involved
in the economy? - Answer a) Redistribution of wealth
b) Provision of essential services
c) Job creation
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