Question 1

Behaviour in free-market economies is

Accepted Answer

A) determined by a central authority. 
B) based primarily on custom and habit. 
C) mostly directed by self interest. 
D) mostly affected by elements of tradition and government command. 
E) random and unpredictable. 
A) determined by a central authority. 
B) based primarily on custom and habit. 
C) mostly directed by self interest. 
D) mostly affected by elements of tradition and government command. 
E) random and unpredictable.

Question 2

The diagram below shows two production possibilities boundaries for Country X.
   FIGURE 1-4
-Refer to Figure 1-4.If Country X,constrained by the production possibilities boundary PPB1,is producing the combination of goods indicated at point F,it can produce more consumer goods by moving to one of the points

Accepted Answer

A) A or E. 
B) D or E. 
C) A,B,or C. 
D) A or B,but not C. 
E) A,B,C,D,or E. 
A) A or E. 
B) D or E. 
C) A,B,or C. 
D) A or B,but not C. 
E) A,B,C,D,or E.

Question 3

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.If the economy moves from point C to point D,what is the opportunity cost of each extra tonne of bananas produced?

Accepted Answer

A) 0.036 tonnes of cotton 
B) 0.36 tonnes of cotton 
C) 3.6 tonnes of cotton 
D) 36 tonnes of cotton 
E) 360 tonnes of cotton 
A) 0.036 tonnes of cotton 
B) 0.36 tonnes of cotton 
C) 3.6 tonnes of cotton 
D) 36 tonnes of cotton 
E) 360 tonnes of cotton

Question 4

A small landscaping firm purchases a tractor that,in one day,is capable of drilling 60 fence -post holes or removing 12 tree stumps (or some intermediate combination).For this landscaper,what is the opportunity cost of removing one extra tree stump?

Accepted Answer

A) 1/12th of the cost of the tractor 
B) 1/5 of the cost of the tractor 
C) drilling 12 fence-post holes 
D) drilling 5 fence-post holes 
E) there is no opportunity cost 
A) 1/12th of the cost of the tractor 
B) 1/5 of the cost of the tractor 
C) drilling 12 fence-post holes 
D) drilling 5 fence-post holes 
E) there is no opportunity cost

Question 5

Consider Canadaʹs production possibilities boundary.Suppose fire destroys many millions of hectares of valuable Canadian forest.The effect on the Canadian economy would be best illustrated by ________ the production possibilities boundary.

Accepted Answer

A) a movement inside 
B) a movement along 
C) a movement to a point beyond 
D) a shift outward of 
E) an inward shift of 
A) a movement inside 
B) a movement along 
C) a movement to a point beyond 
D) a shift outward of 
E) an inward shift of

Question 6

Which of the following statements about specialization and trade are correct?

Accepted Answer

A) They developed only in the twentieth century. 
B) They exist only in capitalist economies. 
C) They arose as humans changed from nomadic and self-sufficient food gatherers to settled food producers. 
D) They developed only where government and political institutions were stable. 
E) They occur only in the private sector. 
A) They developed only in the twentieth century. 
B) They exist only in capitalist economies. 
C) They arose as humans changed from nomadic and self-sufficient food gatherers to settled food producers. 
D) They developed only where government and political institutions were stable. 
E) They occur only in the private sector.

Question 7

Which countries have mostly public ownership of resources?

Accepted Answer

A) United States and Canada 
B) Cuba and North Korea 
C) France and Germany 
D) Sweden and Norway 
E) Brazil and Argentina 
A) United States and Canada 
B) Cuba and North Korea 
C) France and Germany 
D) Sweden and Norway 
E) Brazil and Argentina

Question 8

The opportunity cost of producing good A is defined to be

Accepted Answer

A) the money cost of the factors of production used in good A. 
B) the retail price of good A. 
C) the cheapest method of producing good A. 
D) what must be sacrificed of other goods to get an additional unit of good A. 
E) the cost of having to get by using something else in place of good A. 
A) the money cost of the factors of production used in good A. 
B) the retail price of good A. 
C) the cheapest method of producing good A. 
D) what must be sacrificed of other goods to get an additional unit of good A. 
E) the cost of having to get by using something else in place of good A.

Question 9

Consider Canadaʹs production possibilities boundary.During the nineteenth and early twentieth centuries,millions of people immigrated to western Canada.The effect on the Canadian economy was to

Accepted Answer

A) move it to a point beyond its new production possibilities boundary. 
B) move it inside its new production possibilities boundary. 
C) shift its production possibilities boundary inward. 
D) shift its production possibilities boundary outward. 
E) move it along an unchanged production possibilities boundary. 
A) move it to a point beyond its new production possibilities boundary. 
B) move it inside its new production possibilities boundary. 
C) shift its production possibilities boundary inward. 
D) shift its production possibilities boundary outward. 
E) move it along an unchanged production possibilities boundary.

Question 10

Comparison of economic systems indicates that

Accepted Answer

A) most nations have either a purely socialist economy or a purely capitalist economy. 
B) most countries have mixed economies. 
C) socialist economies are clearly superior in producing consumer goods. 
D) capitalist economies are clearly superior in distributing income. 
E) all countries have largely traditional economies. 
A) most nations have either a purely socialist economy or a purely capitalist economy. 
B) most countries have mixed economies. 
C) socialist economies are clearly superior in producing consumer goods. 
D) capitalist economies are clearly superior in distributing income. 
E) all countries have largely traditional economies.

Question 11

The diagram below shows two production possibilities boundaries for Country X.
   FIGURE 1-4
-Refer to Figure 1-4.Suppose that Country X is currently producing at point E.Country X could achieve production at point D if

Accepted Answer

A) the given resources were fully employed. 
B) the given resources were more efficiently employed. 
C) sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries. 
D) firms reduced output of capital goods. 
E) the prices of capital goods and consumption goods fell. 
A) the given resources were fully employed. 
B) the given resources were more efficiently employed. 
C) sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries. 
D) firms reduced output of capital goods. 
E) the prices of capital goods and consumption goods fell.

Question 12

The world price of oil fell in 2014-2015 from over $100 per barrel to less than $50.As a producer of oil,what effect did this change have on Canadaʹs production possibilities boundary?

Accepted Answer

A) a shift outward 
B) a shift inward 
C) movement to a point beyond the boundary 
D) movement to a point within the boundary 
E) no change 
A) a shift outward 
B) a shift inward 
C) movement to a point beyond the boundary 
D) movement to a point within the boundary 
E) no change

Question 13

The opportunity cost of going to college or university for four years is

Accepted Answer

A) equal to the wage rate a person will earn after graduation. 
B) the least valued alternative one forfeits to attend. 
C) the cost of tuition and books and four years of lost wages from employment. 
D) the cost of tuition,residence fees and books. 
E) zero. 
A) equal to the wage rate a person will earn after graduation. 
B) the least valued alternative one forfeits to attend. 
C) the cost of tuition and books and four years of lost wages from employment. 
D) the cost of tuition,residence fees and books. 
E) zero.

Question 14

Money facilitates trade and specialization by

Accepted Answer

A) allowing an efficient barter system to develop. 
B) increasing the value of gold. 
C) eliminating the need for barter. 
D) reducing the shift of resources between uses. 
E) providing employment for coin makers. 
A) allowing an efficient barter system to develop. 
B) increasing the value of gold. 
C) eliminating the need for barter. 
D) reducing the shift of resources between uses. 
E) providing employment for coin makers.

Question 15

A countryʹs production possibilities boundary shows that

Accepted Answer

A) when a society combines its resources efficiently,it cannot produce more of one good without producing less of the other good. 
B) when a society combines its resources inefficiently,it cannot produce more of one good without producing less of the other good. 
C) when a society combines its resources efficiently,it is always possible to produce more of all goods. 
D) all points inside the boundary are preferred to all points on the boundary. 
E) the supply for goods always exceeds the demand. 
A) when a society combines its resources efficiently,it cannot produce more of one good without producing less of the other good. 
B) when a society combines its resources inefficiently,it cannot produce more of one good without producing less of the other good. 
C) when a society combines its resources efficiently,it is always possible to produce more of all goods. 
D) all points inside the boundary are preferred to all points on the boundary. 
E) the supply for goods always exceeds the demand.

Question 16

If some income earned by households is not spent on output,or if some income earned by firms is not spent on factor services,the circular flow of income will

Accepted Answer

A) stop. 
B) run over. 
C) expand. 
D) contract. 
E) explode. 
A) stop. 
B) run over. 
C) expand. 
D) contract. 
E) explode.

Question 17

Suppose that one unit of labour can produce either 5 units of wool or 2 pineapples.What is the opportunity cost of producing 1 pineapple?

Accepted Answer

A) 5 units of wool 
B) 2 units of wool 
C) 2/5 unit of wool 
D) 5/2 units of wool 
E) zero 
A) 5 units of wool 
B) 2 units of wool 
C) 2/5 unit of wool 
D) 5/2 units of wool 
E) zero

Question 18

An insight first fully developed by Adam Smith is that

Accepted Answer

A) without benevolence production would not occur. 
B) all individuals are motivated solely by self-interest. 
C) self-interest,not benevolence,is the foundation of economic order. 
D) self-interest undermines effective economic order. 
E) individual self-interest is the only necessary force for social order. 
A) without benevolence production would not occur. 
B) all individuals are motivated solely by self-interest. 
C) self-interest,not benevolence,is the foundation of economic order. 
D) self-interest undermines effective economic order. 
E) individual self-interest is the only necessary force for social order.

Question 19

The diagram below shows two production possibilities boundaries for Country X.
   FIGURE 1-4
-Refer to Figure 1-4.If Country X were producing at point C,

Accepted Answer

A) the opportunity cost of moving to point B is to give up some consumption goods. 
B) the opportunity cost of moving to point A is zero. 
C) the opportunity cost of moving to point A is to give up some capital goods. 
D) this is the maximum output possible from given resources. 
E) it is not possible to move to any point on PPB1 or PPB2 without technological progress. 
A) the opportunity cost of moving to point B is to give up some consumption goods. 
B) the opportunity cost of moving to point A is zero. 
C) the opportunity cost of moving to point A is to give up some capital goods. 
D) this is the maximum output possible from given resources. 
E) it is not possible to move to any point on PPB1 or PPB2 without technological progress.

Question 20

The diagram below shows two production possibilities boundaries for Country X.
   FIGURE 1-4
-Refer to Figure 1-4.If Country X is currently producing at point A,it could move to point B if

Accepted Answer

A) the cost of producing capital goods were to increase. 
B) some resources were switched from the capital goods industries to the consumer goods industries. 
C) the cost of producing consumer goods were to increase. 
D) some resources were switched from the consumer goods industries to the capital goods industries. 
E) Country X is no longer able to produce the quantity of capital goods at point A. 
A) the cost of producing capital goods were to increase. 
B) some resources were switched from the capital goods industries to the consumer goods industries. 
C) the cost of producing consumer goods were to increase. 
D) some resources were switched from the consumer goods industries to the capital goods industries. 
E) Country X is no longer able to produce the quantity of capital goods at point A.

Exam 1: Economic Issues and Concepts

Behaviour in free-market economies is

A small landscaping firm purchases a tractor that,in one day,is capable of drilling 60 fence -post holes or removing 12 tree stumps (or some intermediate combination).For this landscaper,what is the opportunity cost of removing one extra tree stump?

Consider Canadaʹs production possibilities boundary.Suppose fire destroys many millions of hectares of valuable Canadian forest.The effect on the Canadian economy would be best illustrated by ________ the production possibilities boundary.

Which of the following statements about specialization and trade are correct?

Which countries have mostly public ownership of resources?

The opportunity cost of producing good A is defined to be

Consider Canadaʹs production possibilities boundary.During the nineteenth and early twentieth centuries,millions of people immigrated to western Canada.The effect on the Canadian economy was to

Comparison of economic systems indicates that

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.Suppose that Country X is currently producing at point E.Country X could achieve production at point D if

The world price of oil fell in 2014-2015 from over $100 per barrel to less than $50.As a producer of oil,what effect did this change have on Canadaʹs production possibilities boundary?

The opportunity cost of going to college or university for four years is

Money facilitates trade and specialization by

A countryʹs production possibilities boundary shows that

If some income earned by households is not spent on output,or if some income earned by firms is not spent on factor services,the circular flow of income will

Suppose that one unit of labour can produce either 5 units of wool or 2 pineapples.What is the opportunity cost of producing 1 pineapple?

An insight first fully developed by Adam Smith is that

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.If Country X were producing at point C,

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 -Refer to Figure 1-4.If Country X is currently producing at point A,it could move to point B if

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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