Question 1

A farmer selling tomatoes and corn at a roadside,and a currency trader in Hong Kong are each participating in

Accepted Answer

A) barter. 
B) a market. 
C) an involuntary transaction. 
D) flexible manufacturing. 
E) international trade. 
A) barter. 
B) a market. 
C) an involuntary transaction. 
D) flexible manufacturing. 
E) international trade.

Question 2

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.
   FIGURE 1-6
-Refer to Figure 1-6.If the governmentʹs spending on health and education is given by point B,a move to point A must involve

Accepted Answer

A) less spending on health. 
B) zero opportunity cost. 
C) less spending on education. 
D) less spending in total. 
E) more spending on education. 
A) less spending on health. 
B) zero opportunity cost. 
C) less spending on education. 
D) less spending in total. 
E) more spending on education.

Question 3

On a diagram of a production possibilities boundary,the concept of scarcity is illustrated by the

Accepted Answer

A) points on the boundary. 
B) area within the boundary. 
C) distance from the origin to the boundary. 
D) negative slope of the boundary. 
E) unattainable points outside the boundary. 
A) points on the boundary. 
B) area within the boundary. 
C) distance from the origin to the boundary. 
D) negative slope of the boundary. 
E) unattainable points outside the boundary.

Question 4

Which of the following best describes the study of economics?

Accepted Answer

A) how to plan an economy 
B) how to limit human wants so that scarce resources are sufficient 
C) why resources are scarce 
D) the allocation of scarce resources among alternative uses 
E) how to distribute income as equally as possible 
A) how to plan an economy 
B) how to limit human wants so that scarce resources are sufficient 
C) why resources are scarce 
D) the allocation of scarce resources among alternative uses 
E) how to distribute income as equally as possible

Question 5

Complex economic plans for many economic sectors are most associated with a

Accepted Answer

A) free-market system. 
B) mixed market system. 
C) command economy. 
D) feudal system. 
E) traditional economy. 
A) free-market system. 
B) mixed market system. 
C) command economy. 
D) feudal system. 
E) traditional economy.

Question 6

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
   FIGURE 1-7
-Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose this economy is currently producing 1280 tonnes of cotton and 200 tonnes of bananas.What is the opportunity cost of increasing production of bananas by 100 tonnes?

Accepted Answer

A) 100 tonnes of cotton 
B) 360 tonnes of cotton 
C) 360 tonnes of bananas 
D) 920 tonnes of cotton 
E) there is no opportunity cost 
A) 100 tonnes of cotton 
B) 360 tonnes of cotton 
C) 360 tonnes of bananas 
D) 920 tonnes of cotton 
E) there is no opportunity cost

Question 7

Which of the following has most contributed to the globalization of the economy?

Accepted Answer

A) the decreased importance of agriculture 
B) reductions in transportation and communication costs 
C) the shift toward a market economy in China 
D) tariffs and trade barriers 
E) the decline in the relative importance of manufacturing 
A) the decreased importance of agriculture 
B) reductions in transportation and communication costs 
C) the shift toward a market economy in China 
D) tariffs and trade barriers 
E) the decline in the relative importance of manufacturing

Question 8

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.If you were to draw a budget line to illustrate the choice between Model A and Model B vehicles,with A on the vertical axis and B on the horizontal axis,the vertical intercept and the horizontal intercept,respectively,would be

Accepted Answer

A) 10 and 10. 
B) 6 and 6. 
C) 0 and 10. 
D) 0 and 0. 
E) 10 and 6. 
A) 10 and 10. 
B) 6 and 6. 
C) 0 and 10. 
D) 0 and 0. 
E) 10 and 6.

Question 9

Which of the following represents a typical ʺrealʺ flow (as opposed to a financial flow)in the circular flow of income?

Accepted Answer

A) goods going from producers to consumers 
B) factor services going from producers to consumers 
C) goods going from consumers to producers 
D) money payments going from consumers to producers 
E) money payments going from producers to consumers 
A) goods going from producers to consumers 
B) factor services going from producers to consumers 
C) goods going from consumers to producers 
D) money payments going from consumers to producers 
E) money payments going from producers to consumers

Question 10

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.
   FIGURE 1-6
-Refer to Figure 1-6.The levels of health and education expenditures at point C

Accepted Answer

A) are less than at point D. 
B) are equal to those of point A and point B. 
C) are more cost-effective than those at points A,B,and D. 
D) could be achieved if the prices of health and/or education increased. 
E) are not attainable with the governmentʹs current budget. 
A) are less than at point D. 
B) are equal to those of point A and point B. 
C) are more cost-effective than those at points A,B,and D. 
D) could be achieved if the prices of health and/or education increased. 
E) are not attainable with the governmentʹs current budget.

Question 11

When discussing types of economic systems the Canadian economy is best described as

Accepted Answer

A) primarily a public ownership economy. 
B) primarily free-market decision making. 
C) traditional. 
D) a command economy. 
E) a mixed economic system. 
A) primarily a public ownership economy. 
B) primarily free-market decision making. 
C) traditional. 
D) a command economy. 
E) a mixed economic system.

Question 12

Suppose that a bakeshop with 5 employees can produce both pies and cakes.In one day,if all resources are devoted to baking pies,the shop can produce 125 pies; if all resources are devoted to baking cakes,the shop can produce 50.What is the shopʹs opportunity cost of producing any one pie?

Accepted Answer

A) 125 pies 
B) 0.4 cakes 
C) 2.5 pies 
D) 0.4 pies 
E) 50 cakes 
A) 125 pies 
B) 0.4 cakes 
C) 2.5 pies 
D) 0.4 pies 
E) 50 cakes

Question 13

In a pure market economy,the role of government is limited to provision of : i)a basic legal and institutional structure.
Ii)intervention in the allocation of resources in some areas of the economy.
Iii)redistribution of income.
Iv)stabilization of economic conditions generally.
Which of the above points is true?

Accepted Answer

A) Only i). 
B) Only i)and ii). 
C) Only i)and iv). 
D) Only i),ii),and iv). 
E) All of the points are provided by government in a pure market economy. 
A) Only i). 
B) Only i)and ii). 
C) Only i)and iv). 
D) Only i),ii),and iv). 
E) All of the points are provided by government in a pure market economy.

Question 14

In the Canadian economy,most decisions regarding resource allocation are made by

Accepted Answer

A) consumers and producers interacting in the price system. 
B) the various levels of government. 
C) negotiation between unions and firms. 
D) business firms only. 
E) legal contract. 
A) consumers and producers interacting in the price system. 
B) the various levels of government. 
C) negotiation between unions and firms. 
D) business firms only. 
E) legal contract.

Question 15

The barter system of exchange is inefficient because

Accepted Answer

A) ʺfairʺ values cannot be defined without the use of money. 
B) bargaining power is unequal between rich and poor. 
C) the double coincidence of wants may not exist. 
D) markets do not exist. 
E) exchange partners need to know each other. 
A) ʺfairʺ values cannot be defined without the use of money. 
B) bargaining power is unequal between rich and poor. 
C) the double coincidence of wants may not exist. 
D) markets do not exist. 
E) exchange partners need to know each other.

Question 16

Because resources are scarce,individuals are required to

Accepted Answer

A) make choices among alternatives. 
B) use resources inefficiently. 
C) sacrifice production but not consumption. 
D) improve distribution but not production. 
E) improve production but not distribution. 
A) make choices among alternatives. 
B) use resources inefficiently. 
C) sacrifice production but not consumption. 
D) improve distribution but not production. 
E) improve production but not distribution.

Question 17

Suppose Andrea has a job that pays her $25 000 per year (after taxes).She is considering quitting her job and going to university full time for four years.Tuition fees and books will cost $12 000 per year.Living expenses in either situation will cost $10 000 per year.What is the opportunity cost of Andreaʹs four -year university degree?

Accepted Answer

A) $88 000 
B) $100 000 
C) $120 000 
D) $148 000 
E) $188 000 
A) $88 000 
B) $100 000 
C) $120 000 
D) $148 000 
E) $188 000

Question 18

Suppose Amin has a job that pays him $87 000 per year (after taxes).He is considering taking an unpaid leave of absence from his job to complete a 12-month MBA program.Tuition is $75 000 and books and materials will cost $5000.Living expenses for the 12-month period will be cheaper by $500 per month,mostly due to lower apartment rental costs.What is the opportunity cost of Aminʹs 1-year MBA program?

Accepted Answer

A) $75 000 
B) $76 000 
C) $161 000 
D) $167 000 
E) $175 000 
A) $75 000 
B) $76 000 
C) $161 000 
D) $167 000 
E) $175 000

Question 19

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
   FIGURE 1-7
-Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose this economy moves from point D to point F,where it is then producing bananas exclusively.Which of the following explanations best describes the opportunity cost involved in producing this extra 100 tonnes of bananas?

Accepted Answer

A) The opportunity cost is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. 
B) The opportunity cost is very low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. 
C) The opportunity cost is very high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton. 
D) The opportunity cost is very low in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton. 
E) The opportunity cost of producing the extra bananas is independent of the amount being produced. 
A) The opportunity cost is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. 
B) The opportunity cost is very low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. 
C) The opportunity cost is very high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton. 
D) The opportunity cost is very low in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton. 
E) The opportunity cost of producing the extra bananas is independent of the amount being produced.

Question 20

If a countryʹs production possibilities boundary is drawn as a straight (downward -sloping)line it indicates

Accepted Answer

A) decreasing opportunity cost of producing more of either good. 
B) the use of the scarce resources in an economy. 
C) constant opportunity cost of producing more of either good. 
D) an unfair distribution of resources in an economy. 
E) increasing opportunity cost of producing more of either good. 
A) decreasing opportunity cost of producing more of either good. 
B) the use of the scarce resources in an economy. 
C) constant opportunity cost of producing more of either good. 
D) an unfair distribution of resources in an economy. 
E) increasing opportunity cost of producing more of either good.

Exam 1: Economic Issues and Concepts

A farmer selling tomatoes and corn at a roadside,and a currency trader in Hong Kong are each participating in

On a diagram of a production possibilities boundary,the concept of scarcity is illustrated by the

Which of the following best describes the study of economics?

Complex economic plans for many economic sectors are most associated with a

Which of the following has most contributed to the globalization of the economy?

Which of the following represents a typical ʺrealʺ flow (as opposed to a financial flow)in the circular flow of income?

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue. FIGURE 1-6 -Refer to Figure 1-6.The levels of health and education expenditures at point C

When discussing types of economic systems the Canadian economy is best described as

Suppose that a bakeshop with 5 employees can produce both pies and cakes.In one day,if all resources are devoted to baking pies,the shop can produce 125 pies; if all resources are devoted to baking cakes,the shop can produce 50.What is the shopʹs opportunity cost of producing any one pie?

In the Canadian economy,most decisions regarding resource allocation are made by

The barter system of exchange is inefficient because

Because resources are scarce,individuals are required to

If a countryʹs production possibilities boundary is drawn as a straight (downward -sloping)line it indicates

Economic Theories, data, and Graphs

Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Competitive Markets

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Exchange Rates and the Balance of Payments

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