Question 1

Since taxes affect only the price paid by the buyer,they cannot have an adverse impact on the allocation of society's resources.

Accepted Answer

A) True 
 B)False  False

Question 2

One tradeoff society faces is between efficiency and equity.Define each term.If the Canadian government redistributes income from the rich to the poor,explain how this action affects equity as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society getting the most it can from its scarce resources.Equity is defined as the property of distributing economic prosperity fairly among the members of society.Often,these two goals conflict.When the government redistributes income from the rich to the poor,it reduces the reward for working hard.Fewer goods and services are produced and the economic pie gets smaller.When the government tries to cut the economic pie into more equal slices,the pie gets smaller.Policies aimed at achieving a more equal distribution of economic well-being,such as the welfare system,try to help those members of society who are most in need.The individual income tax asks the financially successful to contribute more than others to support the government.

Question 3

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. A

Question 4

Stan buys a 1966 Mustang,which he plans to restore and sell.He anticipates that the cost of the car and the repairs will be $15,000 and that he can sell it for $19,000.When he has spent $14,000,he discovers he needs to replace the engine,which will cost $5000.He can sell the car without the new engine for $16,000.What should Stan do

Accepted Answer

A) He should complete the repairs and sell the car for $19,000. 
B) He should sell the car now for $16,000. 
C) He should keep the car for his own use because selling it would be a loss. 
D) He should be totally indifferent between finishing the project and selling the car now. 
A) He should complete the repairs and sell the car for $19,000. 
B) He should sell the car now for $16,000. 
C) He should keep the car for his own use because selling it would be a loss. 
D) He should be totally indifferent between finishing the project and selling the car now.

Question 5

How does a market economy reward people

Accepted Answer

A) according to their need for goods and services 
B) according to their willingness to work 
C) according to their ability to produce things that other people are willing to pay for 
D) according to their ability to produce things of cultural importance 
A) according to their need for goods and services 
B) according to their willingness to work 
C) according to their ability to produce things that other people are willing to pay for 
D) according to their ability to produce things of cultural importance

Question 6

Why do both households and societies face many decisions

Accepted Answer

A) Resources are scarce. 
B) Populations may fluctuate over time. 
C) Wages for households and therefore society fluctuate with business cycles. 
D) People, by nature, tend to disagree. 
A) Resources are scarce. 
B) Populations may fluctuate over time. 
C) Wages for households and therefore society fluctuate with business cycles. 
D) People, by nature, tend to disagree.

Question 7

What does NOT result when seat belt laws alter a driver's cost-benefit calculation

Accepted Answer

A) Fewer drivers are killed. 
B) More pedestrians are killed. 
C) Drivers drive faster. 
D) More accidents occur. 
A) Fewer drivers are killed. 
B) More pedestrians are killed. 
C) Drivers drive faster. 
D) More accidents occur.

Question 8

If education produces external benefits for society,what might NOT be an appropriate policy for society to establish regarding education

Accepted Answer

A) tax incentives for schooling 
B) mandatory minimum levels of education 
C) programs that promote the hiring of high school dropouts 
D) free bussing to local high schools 
A) tax incentives for schooling 
B) mandatory minimum levels of education 
C) programs that promote the hiring of high school dropouts 
D) free bussing to local high schools

Question 9

What do we know about college-age athletes who drop out of college to play professional sports

Accepted Answer

A) They are not rational decision makers. 
B) They are well aware that their opportunity cost of attending college is very high. 
C) They are concerned more about present circumstances than their future. 
D) They underestimate the value of a college education. 
A) They are not rational decision makers. 
B) They are well aware that their opportunity cost of attending college is very high. 
C) They are concerned more about present circumstances than their future. 
D) They underestimate the value of a college education.

Question 10

After much consideration,you have chosen Cancun over Fort Lauderdale for your spring break trip this year.For this decision to change,what must occur

Accepted Answer

A) The marginal benefit of Cancun must increase. 
B) The marginal cost of Cancun must decrease. 
C) The marginal benefit of Fort Lauderdale must increase. 
D) The marginal cost of Fort Lauderdale must increase. 
A) The marginal benefit of Cancun must increase. 
B) The marginal cost of Cancun must decrease. 
C) The marginal benefit of Fort Lauderdale must increase. 
D) The marginal cost of Fort Lauderdale must increase.

Question 11

In what economy are the decisions of firms and households guided by profit and self-interest

Accepted Answer

A) a command economy 
B) a traditional economy 
C) a market economy 
D) in every economy 
A) a command economy 
B) a traditional economy 
C) a market economy 
D) in every economy

Question 12

Robert spends an hour studying instead of going hiking.What is the opportunity cost to him of studying

Accepted Answer

A) the improvement in his grades from studying for the hour 
B) the difference between the improvement in his grades from studying minus the enjoyment of hiking 
C) the enjoyment and exercise he would have received had he gone hiking 
D) nothing, because Russell chose to study rather than to go hiking the value of studying must have been greater than the value of hiking 
A) the improvement in his grades from studying for the hour 
B) the difference between the improvement in his grades from studying minus the enjoyment of hiking 
C) the enjoyment and exercise he would have received had he gone hiking 
D) nothing, because Russell chose to study rather than to go hiking the value of studying must have been greater than the value of hiking

Question 13

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 14

When the government attempts to improve equity in an economy,what is often the result

Accepted Answer

A) an increase in overall output in the economy 
B) additional government revenue since overall income will increase 
C) an actual reduction in equity 
D) reduced efficiency in the economy 
A) an increase in overall output in the economy 
B) additional government revenue since overall income will increase 
C) an actual reduction in equity 
D) reduced efficiency in the economy

Question 15

In most societies,who allocates resources

Accepted Answer

A) a single central planner 
B) those who own the resources 
C) those firms that use resources to provide goods and services 
D) the combined actions of millions of households and firms 
A) a single central planner 
B) those who own the resources 
C) those firms that use resources to provide goods and services 
D) the combined actions of millions of households and firms

Question 16

Which of the following is most likely to generate an externality

Accepted Answer

A) Teachers at a local high school purchase a coffee maker for the staffroom. 
B) A couple with young children moves next door to the children's grandparents. 
C) A newlywed couple buys furniture for their condo. 
D) John buys a tractor to mow his newly purchased five-hectare lot. 
A) Teachers at a local high school purchase a coffee maker for the staffroom. 
B) A couple with young children moves next door to the children's grandparents. 
C) A newlywed couple buys furniture for their condo. 
D) John buys a tractor to mow his newly purchased five-hectare lot.

Question 17

Guns and butter represent the classic societal tradeoff between spending on which two items

Accepted Answer

A) durable and nondurable goods 
B) imports and exports 
C) national defence and consumer goods 
D) law enforcement and agriculture 
A) durable and nondurable goods 
B) imports and exports 
C) national defence and consumer goods 
D) law enforcement and agriculture

Question 18

Which activity will most likely result in an external benefit

Accepted Answer

A) a student buys a deck of cards to play solitaire in her dorm room 
B) a group of children plant a vegetable garden on a vacant lot in their neighbourhood 
C) an executive purchases a book to read on a business trip 
D) a 10-year-old buys new Nikes with his allowance money he has saved 
A) a student buys a deck of cards to play solitaire in her dorm room 
B) a group of children plant a vegetable garden on a vacant lot in their neighbourhood 
C) an executive purchases a book to read on a business trip 
D) a 10-year-old buys new Nikes with his allowance money he has saved

Question 19

The Students' Union on campus provides free popcorn to all students who attend their annual meeting.In this instance,how will the principle of scarcity apply

Accepted Answer

A) It will only apply to students who miss class to attend. 
B) It will apply in terms of the time given up to attend. 
C) It will not apply because the popcorn is free. 
D) It will not apply because no tradeoffs are involved. 
A) It will only apply to students who miss class to attend. 
B) It will apply in terms of the time given up to attend. 
C) It will not apply because the popcorn is free. 
D) It will not apply because no tradeoffs are involved.

Question 20

For your birthday,your friends have joined forces and offer you a choice among the following options (they will pay all expenses of your choice): A) A two-week trip to an exotic destination; B) A new,high-tech mountain bike,C) An annual pass to your preferred sports team games,and D) A dinner with your preferred celebrity.Suppose your subjective valuations of these options are as follows: A)$800,B)$700,C)$1500,and D)$1000.If you are a rational individual,you will obviously choose C,the annual pass,because it is the option of your highest valuation.
a) What is your opportunity cost of choosing option C
 Explain.
b) Now,suppose your friends announce at the last minute a fifth option,E,a cheque of $1100.What is now your opportunity cost of choosing option C
c) As you can see,the theory of opportunity cost implies that the cost of an action depends on other,seemingly unrelated facts.Why does this make sense

Accepted Answer

a) The opportunity cost of an action is

Since taxes affect only the price paid by the buyer,they cannot have an adverse impact on the allocation of society's resources.

One tradeoff society faces is between efficiency and equity.Define each term.If the Canadian government redistributes income from the rich to the poor,explain how this action affects equity as well as efficiency in the economy.

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

How does a market economy reward people

Why do both households and societies face many decisions

What does NOT result when seat belt laws alter a driver's cost-benefit calculation

If education produces external benefits for society,what might NOT be an appropriate policy for society to establish regarding education

What do we know about college-age athletes who drop out of college to play professional sports

After much consideration,you have chosen Cancun over Fort Lauderdale for your spring break trip this year.For this decision to change,what must occur

In what economy are the decisions of firms and households guided by profit and self-interest

Robert spends an hour studying instead of going hiking.What is the opportunity cost to him of studying

What does the word "margin" mean

When the government attempts to improve equity in an economy,what is often the result

In most societies,who allocates resources

Which of the following is most likely to generate an externality

Guns and butter represent the classic societal tradeoff between spending on which two items

Which activity will most likely result in an external benefit

The Students' Union on campus provides free popcorn to all students who attend their annual meeting.In this instance,how will the principle of scarcity apply

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Exam 1: Ten Principles of Economics

Since taxes affect only the price paid by the buyer,they cannot have an adverse impact on the allocation of society's resources.

One tradeoff society faces is between efficiency and equity.Define each term.If the Canadian government redistributes income from the rich to the poor,explain how this action affects equity as well as efficiency in the economy.

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

How does a market economy reward people

Why do both households and societies face many decisions

What does NOT result when seat belt laws alter a driver's cost-benefit calculation

If education produces external benefits for society,what might NOT be an appropriate policy for society to establish regarding education

What do we know about college-age athletes who drop out of college to play professional sports

After much consideration,you have chosen Cancun over Fort Lauderdale for your spring break trip this year.For this decision to change,what must occur

In what economy are the decisions of firms and households guided by profit and self-interest

Robert spends an hour studying instead of going hiking.What is the opportunity cost to him of studying

What does the word "margin" mean

When the government attempts to improve equity in an economy,what is often the result

In most societies,who allocates resources

Which of the following is most likely to generate an externality

Guns and butter represent the classic societal tradeoff between spending on which two items

Which activity will most likely result in an external benefit

The Students' Union on campus provides free popcorn to all students who attend their annual meeting.In this instance,how will the principle of scarcity apply

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters