Question 1

The fact that even a rich country like Canada faces the economic problem of scarcity implies that

Accepted Answer

A)  scarcity must be a problem related to the use of land and labour in Canada. 
B)  scarcity must be the result of mismanagement of natural resources by Canadian businesses. 
C)  scarcity must be largely due to the inefficiency of the government in Canada. 
D)  wants and human desires in Canada exceed available resources. 
E)  Canada is not a rich country after all. 
A)  scarcity must be a problem related to the use of land and labour in Canada. 
B)  scarcity must be the result of mismanagement of natural resources by Canadian businesses. 
C)  scarcity must be largely due to the inefficiency of the government in Canada. 
D)  wants and human desires in Canada exceed available resources. 
E)  Canada is not a rich country after all.

Question 2

The study of national economies,and policies to improve their performance,is known as

Accepted Answer

A)  microeconomics. 
B)  economics. 
C)  macroeconomics. 
D)  intereconomics. 
E)  intraeconomics. 
A)  microeconomics. 
B)  economics. 
C)  macroeconomics. 
D)  intereconomics. 
E)  intraeconomics.

Question 3

Opportunity cost is best defined as

Accepted Answer

A)  marginal cost minus marginal benefit. 
B)  the time spent on an economic activity. 
C)  the value of the best forgone alternative. 
D)  the monetary cost of an economic decision. 
E)  marginal cost plus marginal benefit. 
A)  marginal cost minus marginal benefit. 
B)  the time spent on an economic activity. 
C)  the value of the best forgone alternative. 
D)  the monetary cost of an economic decision. 
E)  marginal cost plus marginal benefit.

Question 4

Ontel engineers proposed developing a 10-Gigahertz microprocessor in early 2011 at a cost of $20 million for a working prototype.By mid-2012,the $20 million had been spent with no prototype.The engineers request an additional $10 million to finish the project.For convenience,assume the marginal cost of producing the chip once it is developed is zero.
-A senior executive at Ontel argues that the engineers should only be granted the additional $10 million if Ontel can collect $30 million in revenues after the chip is developed.The executive's argument is

Accepted Answer

A)  correct. 
B)  incorrect;Ontel need only collect $20 million. 
C)  incorrect;the $20 million already spent is a marginal cost and should be ignored. 
D)  incorrect;the $20 million already spent is a sunk cost and should be ignored. 
E)  possibly correct;insufficient information to say. 
A)  correct. 
B)  incorrect;Ontel need only collect $20 million. 
C)  incorrect;the $20 million already spent is a marginal cost and should be ignored. 
D)  incorrect;the $20 million already spent is a sunk cost and should be ignored. 
E)  possibly correct;insufficient information to say.

Question 5

The opportunity cost of an activity is the value of

Accepted Answer

A)  an alternative forgone. 
B)  the next-best alternative forgone. 
C)  the least-best alternative forgone. 
D)  the difference between the chosen activity and the next-best alternative forgone. 
E)  the alternative one would have preferred to choosE. 
A)  an alternative forgone. 
B)  the next-best alternative forgone. 
C)  the least-best alternative forgone. 
D)  the difference between the chosen activity and the next-best alternative forgone. 
E)  the alternative one would have preferred to choosE.

Question 6

Joe has decided to purchase his textbooks for the semester.His options are to purchase the books via the Internet with next day delivery to his home at a cost of $250,or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $245.Last week he drove to campus to buy a concert ticket because they offered 20 percent off the regular price of $20.Which of the following statements is true?

Accepted Answer

A)  It would not be rational for Joe to drive to campus to purchase the books because the $5 saving is only two percent of the cost of the books,and that is much less than the 20 percent he saved on the concert ticket. 
B)  It would be rational for Joe to drive to campus because it costs less to buy the books there than via the Internet. 
C)  It would be rational for Joe to drive to campus because the $5 saving is more than he saved by driving there to buy the concert ticket. 
D)  It would not be rational for Joe to drive to campus to purchase the books because the cost of gas and his time must certainly be more than the $5 he would save. 
E)  There is insufficient information to determine whether or not it would be rational for Joe to purchase the books via the Internet or on campus. 
A)  It would not be rational for Joe to drive to campus to purchase the books because the $5 saving is only two percent of the cost of the books,and that is much less than the 20 percent he saved on the concert ticket. 
B)  It would be rational for Joe to drive to campus because it costs less to buy the books there than via the Internet. 
C)  It would be rational for Joe to drive to campus because the $5 saving is more than he saved by driving there to buy the concert ticket. 
D)  It would not be rational for Joe to drive to campus to purchase the books because the cost of gas and his time must certainly be more than the $5 he would save. 
E)  There is insufficient information to determine whether or not it would be rational for Joe to purchase the books via the Internet or on campus.

Question 7

-The least important cost to consider when making a choice is the

Accepted Answer

A)  marginal cost. 
B)  average cost. 
C)  sunk cost. 
D)  interest cost. 
E)  opportunity cost. 
A)  marginal cost. 
B)  average cost. 
C)  sunk cost. 
D)  interest cost. 
E)  opportunity cost.

Question 8

Ontel engineers proposed developing a 10-Gigahertz microprocessor in early 2011 at a cost of $20 million for a working prototype.By mid-2012,the $20 million had been spent with no prototype.The engineers request an additional $10 million to finish the project.For convenience,assume the marginal cost of producing the chip once it is developed is zero.
-In deciding whether to continue the 10-Gigahertz chip,Ontel executives should compare the __________ to the expected revenues.

Accepted Answer

A)  $20 million spent plus the extra $10 million 
B)  $20 million spent 
C)  extra $10 million 
D)  $20 million spent minus the extra $10 million 
E)  $20 million spent plus the extra $10 million plus $5 million for cost overruns 
A)  $20 million spent plus the extra $10 million 
B)  $20 million spent 
C)  extra $10 million 
D)  $20 million spent minus the extra $10 million 
E)  $20 million spent plus the extra $10 million plus $5 million for cost overruns

Question 9

If two variables move together but are otherwise unrelated,we have

Accepted Answer

A)  a fallacy of composition. 
B)  an econometric model. 
C)  a spurious correlation. 
D)  an efficiency problem. 
E)  evidence of a weak correlation but strong causation. 
A)  a fallacy of composition. 
B)  an econometric model. 
C)  a spurious correlation. 
D)  an efficiency problem. 
E)  evidence of a weak correlation but strong causation.

Question 10

If one fails to account for opportunity costs in decision making,then applying the cost-benefit principle will be flawed because

Accepted Answer

A)  the benefits will be overstated. 
B)  the costs will be understated. 
C)  the benefits will be understated. 
D)  the costs will be overstated. 
E)  both benefits and costs will be understated. 
A)  the benefits will be overstated. 
B)  the costs will be understated. 
C)  the benefits will be understated. 
D)  the costs will be overstated. 
E)  both benefits and costs will be understated.

Question 11

"Economic development reduces environmental quality and should be restricted" is an example of

Accepted Answer

A)  positive economics. 
B)  normative economics. 
C)  comparative economics. 
D)  neoclassical economics. 
E)  classical economics 
A)  positive economics. 
B)  normative economics. 
C)  comparative economics. 
D)  neoclassical economics. 
E)  classical economics

Question 12

We do not expect economists to agree on economic issues that involve

Accepted Answer

A)  positive analysis. 
B)  normative analysis. 
C)  microeconomic analysis. 
D)  cost and benefit analysis. 
E)  factual analysis. 
A)  positive analysis. 
B)  normative analysis. 
C)  microeconomic analysis. 
D)  cost and benefit analysis. 
E)  factual analysis.

Question 13

Jackson just took out a $1,000 loan to buy a 1979 Corvette and he needs to travel to Vancouver this summer.He can either drive his car or take a bus.In order to make a rational decision,he decides to calculate the costs of driving the car on the trip.He estimates the cost of gas at 10 cents per kilometre,the car repair shop estimates maintenance at 3 cents per kilometre,his car insurance costs $600 for 6 months,and from a Web site,he determines that depreciation is about $1 per kilometre.
-Which of the above costs are NOT sunk costs?

Accepted Answer

A)  Maintenance,depreciation,insurance,loan payment,and gasoline costs. 
B)  Maintenance,depreciation and insurance costs. 
C)  Depreciation,insurance and loan payment costs. 
D)  Insurance and loan payment costs. 
E)  Maintenance,depreciation,and gasoline costs. 
A)  Maintenance,depreciation,insurance,loan payment,and gasoline costs. 
B)  Maintenance,depreciation and insurance costs. 
C)  Depreciation,insurance and loan payment costs. 
D)  Insurance and loan payment costs. 
E)  Maintenance,depreciation,and gasoline costs.

Question 14

Jason studied 5 hours for his first History test and his test score was 85;6 hours for his second History test and scored 90;and 7 hours for his third History test and scored 95.He also studied 5 hours for his first Math test and his test score was 68;6 hours for his second Math test and scored 78;and 7 hours for his third Math test and scored 88.
-The average benefit per hour studied for the History tests was ________ and the average benefit per hour studied for the Math tests was _______.

Accepted Answer

A)  15;13 
B)  5;10 
C)  90;78 
D)  13;15 
E)  10: 5 
A)  15;13 
B)  5;10 
C)  90;78 
D)  13;15 
E)  10: 5

Question 15

The following table provides the costs (Cost A and Cost B)and the benenfits associated with each unit of activity
-The average benefit of 3 units of activity is

Accepted Answer

A)  $41. 
B)  $50. 
C)  $60. 
D)  $75. 
E)  $100. 
A)  $41. 
B)  $50. 
C)  $60. 
D)  $75. 
E)  $100.

Question 16

"We should support government intervention because the market produces undesirable outcomes" is an example of

Accepted Answer

A)  positive economics. 
B)  normative economics. 
C)  comparative economics. 
D)  negative economics. 
E)  formative economics. 
A)  positive economics. 
B)  normative economics. 
C)  comparative economics. 
D)  negative economics. 
E)  formative economics.

Question 17

When 5 units of an activity are chosen,the average benefits are $13 and the average costs are $12.One can infer that

Accepted Answer

A)  more units should be chosen. 
B)  5 is the optimal amount. 
C)  fewer units should be chosen. 
D)  total benefits are less than total costs. 
E)  insufficient information is available to judge if 5 units are optimal or not. 
A)  more units should be chosen. 
B)  5 is the optimal amount. 
C)  fewer units should be chosen. 
D)  total benefits are less than total costs. 
E)  insufficient information is available to judge if 5 units are optimal or not.

Question 18

The figure above shows the marginal benefit of additional minutes in a cell-phone plan.The marginal cost is constant at $0.10 per minute.
-What is the optimal number of minutes to purchase?

Accepted Answer

A)  0. 
B)  100. 
C)  200. 
D)  300. 
E)  400. 
A)  0. 
B)  100. 
C)  200. 
D)  300. 
E)  400.

Question 19

How the price mechanism allocates resources in particular markets is a topic in

Accepted Answer

A)  microeconomics. 
B)  macroeconomics. 
C)  welfare economics. 
D)  entrepreneurial economics. 
E)  positive economics. 
A)  microeconomics. 
B)  macroeconomics. 
C)  welfare economics. 
D)  entrepreneurial economics. 
E)  positive economics.

Question 20

Sharon,a marketing major,has her first economics test and her first finance test to take tomorrow and she has four hours tonight to allocate to studying the two subjects.The data below show her scores on the two tests based on the time spent studying.(Hint: Studying economics for 0 hours means studying finance for 4 hours. )
  
-To efficiently allocate her 4 hours of study time,Sharon should seek to maximize the

Accepted Answer

A)  economics test score. 
B)  difference in the two test scores. 
C)  finance test score. 
D)  combined test scores. 
E)  economics test score first and then the finance test scorE. 
A)  economics test score. 
B)  difference in the two test scores. 
C)  finance test score. 
D)  combined test scores. 
E)  economics test score first and then the finance test scorE.

The fact that even a rich country like Canada faces the economic problem of scarcity implies that

The study of national economies,and policies to improve their performance,is known as

Opportunity cost is best defined as

The opportunity cost of an activity is the value of

-The least important cost to consider when making a choice is the

If two variables move together but are otherwise unrelated,we have

If one fails to account for opportunity costs in decision making,then applying the cost-benefit principle will be flawed because

"Economic development reduces environmental quality and should be restricted" is an example of

We do not expect economists to agree on economic issues that involve

The following table provides the costs (Cost A and Cost B)and the benenfits associated with each unit of activity -The average benefit of 3 units of activity is

"We should support government intervention because the market produces undesirable outcomes" is an example of

When 5 units of an activity are chosen,the average benefits are $13 and the average costs are $12.One can infer that

The figure above shows the marginal benefit of additional minutes in a cell-phone plan.The marginal cost is constant at $0.10 per minute. -What is the optimal number of minutes to purchase?

How the price mechanism allocates resources in particular markets is a topic in

Measuring Macroeconomic Performance: Saving and Wealth

Measuring Macroeconomic Performance: Wages, Employment and the Labour Market

Short-Term Economic Fluctuations

Spending and Output in the Short Run

Fiscal Policy

Money, Prices and the Reserve Bank

The Reserve Bank and the Economy

The Aggregate Demand - Aggregate Supply Model

Macroeconomic Policy

The Economy in the Long Run: an Introduction to Economic Growth

The Production Function Approach to Understanding Growth

Savings, Capital Formation and Comparative Economic Growth

International Trade

Exchange Rates and the Open Economy

The Balance of Payments: Net Exports and International Capital Flows

Filters

Exam 1: Measuring Macroeconomic Performance: Output and Prices

The fact that even a rich country like Canada faces the economic problem of scarcity implies that

The study of national economies,and policies to improve their performance,is known as

Opportunity cost is best defined as

The opportunity cost of an activity is the value of

-The least important cost to consider when making a choice is the

If two variables move together but are otherwise unrelated,we have

If one fails to account for opportunity costs in decision making,then applying the cost-benefit principle will be flawed because

"Economic development reduces environmental quality and should be restricted" is an example of

We do not expect economists to agree on economic issues that involve

The following table provides the costs (Cost A and Cost B)and the benenfits associated with each unit of activity -The average benefit of 3 units of activity is

"We should support government intervention because the market produces undesirable outcomes" is an example of

When 5 units of an activity are chosen,the average benefits are $13 and the average costs are $12.One can infer that

The figure above shows the marginal benefit of additional minutes in a cell-phone plan.The marginal cost is constant at $0.10 per minute. -What is the optimal number of minutes to purchase?

How the price mechanism allocates resources in particular markets is a topic in

Measuring Macroeconomic Performance: Saving and Wealth

Measuring Macroeconomic Performance: Wages, Employment and the Labour Market

Short-Term Economic Fluctuations

Spending and Output in the Short Run

Fiscal Policy

Money, Prices and the Reserve Bank

The Reserve Bank and the Economy

The Aggregate Demand - Aggregate Supply Model

Macroeconomic Policy

The Economy in the Long Run: an Introduction to Economic Growth

The Production Function Approach to Understanding Growth

Savings, Capital Formation and Comparative Economic Growth

International Trade

Exchange Rates and the Open Economy

The Balance of Payments: Net Exports and International Capital Flows

Filters