Question 1

Which of the following is NOT a reason for the government to intervene in the market?

Accepted Answer

A)  to promote efficiency 
B)  to enforce property rights 
C)  to promote equity 
D)  to protect an industry 
A)  to promote efficiency 
B)  to enforce property rights 
C)  to promote equity 
D)  to protect an industry

Question 2

With which nations does Canada benefit from trade?

Accepted Answer

A)  only nations that can produce goods Canada cannot produce 
B)  with any nation 
C)  with any nation not in economic competition with Canada 
D)  only with less developed nations 
A)  only nations that can produce goods Canada cannot produce 
B)  with any nation 
C)  with any nation not in economic competition with Canada 
D)  only with less developed nations

Question 3

In a market economy, what do prices reflect?

Accepted Answer

A)  the popularity of a good in society 
B)  the cost to society of making the good 
C)  the quantity society will ultimately choose to produce 
D)  the level of wealth in society 
A)  the popularity of a good in society 
B)  the cost to society of making the good 
C)  the quantity society will ultimately choose to produce 
D)  the level of wealth in society

Question 4

Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800. He discovers that he needs an additional repair, which will cost $400. He can sell the boat as it is now for $300. What should he do?

Accepted Answer

A)  He should take the $300. 
B)  He should never sell something for less than its cost. 
C)  He should complete the repairs and sell the boat. 
D)  It doesn't matter which action he takes; the outcome is the same either way. 
A)  He should take the $300. 
B)  He should never sell something for less than its cost. 
C)  He should complete the repairs and sell the boat. 
D)  It doesn't matter which action he takes; the outcome is the same either way.

Question 5

Which observation was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  People tend to spend more than they earn. 
D)  Markets are guided by an invisible hand that leads to desirable outcomes. 
A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  People tend to spend more than they earn. 
D)  Markets are guided by an invisible hand that leads to desirable outcomes.

Question 6

What has been one effect of a government-imposed seat belt law?

Accepted Answer

A)  fewer pedestrian deaths 
B)  safer driving 
C)  an increase in the number of accidents 
D)  everyone now wears seat belts 
A)  fewer pedestrian deaths 
B)  safer driving 
C)  an increase in the number of accidents 
D)  everyone now wears seat belts

Question 7

What is an economy experiencing when a society cannot produce all the goods and services people wish to have?

Accepted Answer

A)  scarcity 
B)  misallocation 
C)  externalities 
D)  market failure 
A)  scarcity 
B)  misallocation 
C)  externalities 
D)  market failure

Question 8

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 9

What does the word "margin" mean?

Accepted Answer

A)  edge 
B)  distance 
C)  inside 
D)  measure 
A)  edge 
B)  distance 
C)  inside 
D)  measure

Question 10

According to economists, what do people respond to?

Accepted Answer

A)  laws 
B)  incentives 
C)  threats more than rewards 
D)  positives, but not negatives 
A)  laws 
B)  incentives 
C)  threats more than rewards 
D)  positives, but not negatives

Question 11

According to Adam Smith, what is the success of decentralized market economies primarily due to?

Accepted Answer

A)  the basic benevolence of society 
B)  society's justice (legal) system 
C)  individuals' self-interest 
D)  basic human survival instincts 
A)  the basic benevolence of society 
B)  society's justice (legal) system 
C)  individuals' self-interest 
D)  basic human survival instincts

Question 12

How does trade affect the well-being of the nations involved?

Accepted Answer

A)  Trade makes every nation better off. 
B)  Trade makes exporting nations better off and importing nations worse off. 
C)  Trade makes a nation better off only if the nation cannot produce that good itself. 
D)  Trade makes rich nations better off and poor nations worse off. 
A)  Trade makes every nation better off. 
B)  Trade makes exporting nations better off and importing nations worse off. 
C)  Trade makes a nation better off only if the nation cannot produce that good itself. 
D)  Trade makes rich nations better off and poor nations worse off.

Question 13

The cost of an action is measured in terms of foregone opportunities.

Accepted Answer

A) True 
 B)False

Question 14

When does scarcity exist?

Accepted Answer

A)  when there is less than an infinite amount of a resource or good 
B)  when society can meet the wants of every individual 
C)  when there is less of a good or resource available than people wish to have 
D)  when the government fails to produce goods 
A)  when there is less than an infinite amount of a resource or good 
B)  when society can meet the wants of every individual 
C)  when there is less of a good or resource available than people wish to have 
D)  when the government fails to produce goods

Question 15

What is the largest single cost of going to university?

Accepted Answer

A)  books 
B)  room and board 
C)  tuition 
D)  lost wages 
A)  books 
B)  room and board 
C)  tuition 
D)  lost wages

Question 16

What is one necessary role of government in a market economy?

Accepted Answer

A)  to tax goods and services that are most desired by consumers 
B)  to maintain subsidized housing forlow-income households 
C)  to provide services such as pensions 
D)  to enforce property rights 
A)  to tax goods and services that are most desired by consumers 
B)  to maintain subsidized housing forlow-income households 
C)  to provide services such as pensions 
D)  to enforce property rights

Question 17

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Because this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?

Accepted Answer

A)  lower the price of the remaining donuts even if the price falls below $1.00 
B)  lower the price of the remaining donuts as long as it's more than $1.00 
C)  lower the price on all donuts so they will all be sold earlier in the day 
D)  donate them to the local Food Bank and produce ten fewer dozen tomorrow 
A)  lower the price of the remaining donuts even if the price falls below $1.00 
B)  lower the price of the remaining donuts as long as it's more than $1.00 
C)  lower the price on all donuts so they will all be sold earlier in the day 
D)  donate them to the local Food Bank and produce ten fewer dozen tomorrow

Question 18

For most students, what is the largest single cost of a university education?

Accepted Answer

A)  the wages given up to attend school 
B)  tuition, fees, and books 
C)  room and board 
D)  transportation, parking, and entertainment 
A)  the wages given up to attend school 
B)  tuition, fees, and books 
C)  room and board 
D)  transportation, parking, and entertainment

Question 19

What would happen without the government's protection of property rights?

Accepted Answer

A)  Businesses would have less incentive to provide goods and services. 
B)  There would be less government regulation of businesses and prices would be lower for consumers. 
C)  Taxes would be lower, causing less market inefficiencies. 
D)  Businesses would have more freedom with production processes. 
A)  Businesses would have less incentive to provide goods and services. 
B)  There would be less government regulation of businesses and prices would be lower for consumers. 
C)  Taxes would be lower, causing less market inefficiencies. 
D)  Businesses would have more freedom with production processes.

Question 20

What happens when the government prevents prices from adjusting naturally to supply and demand?

Accepted Answer

A)  It stabilizes the economy by reducing market uncertainties. 
B)  It adversely affects the allocation of resources. 
C)  There is an improvement in equity that justifies the reduction in efficiency. 
D)  There is an improvement in efficiency that justifies the reduction in equity. 
A)  It stabilizes the economy by reducing market uncertainties. 
B)  It adversely affects the allocation of resources. 
C)  There is an improvement in equity that justifies the reduction in efficiency. 
D)  There is an improvement in efficiency that justifies the reduction in equity.

Which of the following is NOT a reason for the government to intervene in the market?

With which nations does Canada benefit from trade?

In a market economy, what do prices reflect?

Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800. He discovers that he needs an additional repair, which will cost $400. He can sell the boat as it is now for $300. What should he do?

Which observation was made famous by Adam Smith in his book The Wealth of Nations?

What has been one effect of a government-imposed seat belt law?

What is an economy experiencing when a society cannot produce all the goods and services people wish to have?

Market failure refers to a situation in which the market does not allocate resources efficiently.

What does the word "margin" mean?

According to economists, what do people respond to?

According to Adam Smith, what is the success of decentralized market economies primarily due to?

How does trade affect the well-being of the nations involved?

The cost of an action is measured in terms of foregone opportunities.

When does scarcity exist?

What is the largest single cost of going to university?

What is one necessary role of government in a market economy?

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Because this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?

For most students, what is the largest single cost of a university education?

What would happen without the government's protection of property rights?

What happens when the government prevents prices from adjusting naturally to supply and demand?

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 1: Ten Principles of Economics

Which of the following is NOT a reason for the government to intervene in the market?

With which nations does Canada benefit from trade?

In a market economy, what do prices reflect?

Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800. He discovers that he needs an additional repair, which will cost $400. He can sell the boat as it is now for $300. What should he do?

Which observation was made famous by Adam Smith in his book The Wealth of Nations?

What has been one effect of a government-imposed seat belt law?

What is an economy experiencing when a society cannot produce all the goods and services people wish to have?

Market failure refers to a situation in which the market does not allocate resources efficiently.

What does the word "margin" mean?

According to economists, what do people respond to?

According to Adam Smith, what is the success of decentralized market economies primarily due to?

How does trade affect the well-being of the nations involved?

The cost of an action is measured in terms of foregone opportunities.

When does scarcity exist?

What is the largest single cost of going to university?

What is one necessary role of government in a market economy?

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Because this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?

For most students, what is the largest single cost of a university education?

What would happen without the government's protection of property rights?

What happens when the government prevents prices from adjusting naturally to supply and demand?

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters