Deck 1: The Art and Science of Economic Analysis

Question 1

What are resources such as land and labour used for?  

A) to produce goods and services 
B) to consume goods and services 
C) to help facilitate exchange 
D) to provide for an improved financial system

Answer 1

 to produce goods and services 

Question 2

Which of the following is the best definition of economics?  

A) It studies human behaviour when scarcity exists and choices must be made. 
B) It provides the only reasonable explanation of how people make decisions. 
C) It can accurately explain all human behaviour because it is based on the assumption of rationality. 
D) It is the only social science that can explain the existence and behaviour of public institutions.

Answer 2

 It studies human behaviour when scarcity exists and choices must be made. 

Question 3

Some people can become completely saturated with a service, such as television.When it comes to making choices, what does this saturation suggest?  

A) that wants are limited. 
B) that desires for a single commodity can be satisfied, but then the focus will switch to other goods and services 
C) that a highly productive economy may someday be able to satisfy all human desires 
D) that scarcity of services does NOT exist

Answer 3

 that desires for a single commodity can be satisfied, but then the focus will switch to other goods and services 

Question 4

Which of the following best defines economics?  

A) an investigation of the quantities and prices of the various goods produced by the nations of the world 
B) a study of why inflation and unemployment periodically plague the Canadian economy 
C) an analysis of how individuals and societies deal with the problem of scarcity 
D) an examination of the role of money in the economy

Question 5

Which of the following describes the economic reality of scarcity?  

A) It exists only in countries that are NOT highly industrialized. 
B) It is likely to disappear as production increases. 
C) It is sure to disappear as technology improves. 
D) It will exist as long as resources are available in limited amounts.

Question 6

Which of the following would an economist classify as capital?  

A) 100 shares of Microsoft stock 
B) a $50 bill 
C) a credit card 
D) a lawyer's office computer

Question 7

Which of the following is the best definition of economics?  

A) how to get rich by playing the stock market 
B) how to reduce people's wants, given the scarcity of resources 
C) how rational government officials determine what goods should be produced 
D) how people use limited resources to try to satisfy unlimited wants

Question 8

Which of the following best describes economics?  

A) It is the study of choice when scarcity exists. 
B) It is the study of the production of goods and services. 
C) It is the science of money. 
D) It is the art of spending money wisely.

Question 9

In economics, what is the definition of capital?  

A) natural resources, such as water, oil, and iron ore 
B) the natural, unskilled abilities of people 
C) the buildings, equipment, and human skills used to produce goods and services 
D) money and other financial assets

Question 10

Which of the following best describes when scarcity occurs?  

A) when resources are unlimited 
B) when there is a shortage, so buyers cannot obtain the goods they want 
C) when there is a surplus, so sellers cannot sell the goods they produce 
D) when resources are insufficient to satisfy unlimited wants

Question 11

In economics, what is the definition of natural resources?  

A) the buildings, equipment, and human skills used to produce goods and services 
B) the time and the physical and mental efforts used to produce goods and services 
C) the imagination required to develop a new product or process 
D) all gifts of nature used to produce goods and services NOT considered scarce because they are NOT produced by society

Question 12

Why does economic scarcity exist?  

A) because people have wants that are unlimited relative to the availability of resources to satisfy those wants 
B) because governments have the means to provide as many services as it decides to 
C) because individuals do NOT have to make choices 
D) because NOT everyone has unlimited wants

Question 13

Which of the following would an economist NOT classify as capital?  

A) a $20 bill in a firm's petty cash drawer 
B) the building in which economics students meet 
C) a plumber's wrench 
D) a railroad car

Question 14

What does economics study?  

A) how individuals amass personal fortunes in the stock market 
B) how individuals and nations deal with the problem of scarcity 
C) how money plays a role in the economy 
D) how goods and services are distributed throughout the world

Question 15

What occurs when people's wants are unlimited but resources are scarce?  

A) Only rich people get everything they want. 
B) People must make choices. 
C) More services are available than goods. 
D) More goods are available than services.

Question 16

What statement describes the reality of scarcity?  

A) There are NOT enough jobs available to all people. 
B) There are NOT enough resources to satisfy people's unlimited wants. 
C) There are NOT enough resources to satisfy people's limited wants. 
D) There are NOT enough taxes to fund daycare spaces.

Question 17

What is the meaning of unlimited wants?  

A) that people always desire more of at least one good 
B) that each person has an unlimited desire for every good 
C) that selfish people are NOT concerned about other people 
D) that people buy goods without regard to what they can afford

Question 18

Which of the following is the best definition of the study of economics?  

A) the study of how individuals decide to use scarce resources in an attempt to satisfy their unlimited wants 
B) the study of how to make money 
C) the study of how the government should deal with unemployment and inflation 
D) the study of how to run a business

Question 19

Which of the following is an example of human capital?  

A) dump trucks 
B) a college education 
C) rent 
D) money

Question 20

Canada has an abundant supply of fresh water.Why would an economist consider water in Canada to be a scarce resource?  

A) because water is necessary for human life 
B) because pollution will eventually destroy all life in the Great Lakes 
C) because water is limited relative to people's unlimited wants 
D) because water commands a very high price

Question 21

When is a good or service considered scarce?  

A) if any quantity of it can be consumed at a zero price 
B) if the amount people desire exceeds the amount available at a zero price 
C) if the amount people desire exceeds the amount available at any price 
D) if the amount people desire is less than the amount available at any price

Question 22

In economics, which set of categories does the term capital refer to?  

A) currency, coins, silver, and gold 
B) stocks, bonds, and other financial assets 
C) oil, gas, trees, and water 
D) machines, buildings, tools, and knowledge

Question 23

Which of the four types of decision makers in the Canadian economy plays the largest role?  

A) consumers 
B) business 
C) government 
D) exporters

Question 24

Which of the following best describes the meaning of the expression "There is no such thing as a free lunch"?  

A) Meals always cost money. 
B) Resources used up in producing something are NOT available to satisfy other wants. 
C) The best things in life are free. 
D) Many people do NOT have to work to make a living.

Question 25

Why are goods and services scarce?  

A) because people are greedy 
B) because economic resources must be used to make them 
C) because firms keep production low in order to earn higher profits 
D) because they are produced by firms that seek profits

Question 26

What are the respective payments for the resources of natural resources, labour, capital, and entrepreneurial ability?  

A) interest, wages, profit, and rent 
B) profit, rent, interest, and wages 
C) rent, wages, profit, and interest 
D) rent, wages, interest, and profit

Question 27

What types of exchanges does a market help to facilitate?  

A) ones between buyers and sellers 
B) ones between government departments 
C) ones within business organizations 
D) ones that occur in households

Question 28

Given that resources are scarce, which statement best describes this reality?  

A) Opportunity costs are zero. 
B) People must make choices. 
C) All human wants and desires can be satisfied. 
D) Resource prices are fixed.

Question 29

If a business produces and sells only one unit of a good, what would its profit be?  

A) the price received for the good 
B) the price of the product minus the cost of the resources used to produce the product 
C) the return paid to the firm's bank on its outstanding loans 
D) the price of the product minus the wages paid for the labour used to produce it

Question 30

Which set of broad categories are resources divided into?  

A) people, money, time, and machines 
B) saving, spending, investment, and capital 
C) human, technological, environmental, and government 
D) natural resources, labour, capital, and entrepreneurial ability

Question 31

What is the role of an entrepreneur?  

A) to always make a profit 
B) to generally avoid risky situations 
C) to claim the residual (i.e., whatever is left over) after other resource suppliers are compensated 
D) to be a parasite that benefits by NOT paying other resources for their services

Question 32

Entrepreneurs are considered an essential resource in an economy.Which of the following is NOT a reason entrepreneurs work in an economy?  

A) They have the talent required to dream up a new product or find a better way to produce an existing one. 
B) They are rewarded by profits. 
C) They increase the unemployment rate. 
D) They benefit from what's left over after paying other resource suppliers.

Question 33

What does the adage "There's no such thing as a free lunch" mean?  

A) Even people on welfare have to pay for food. 
B) The cost of living is always increasing. 
C) To get something we like, we usually have to give up another thing we like. 
D) All costs are included in the price of a product.

Question 34

Where are goods and services exchanged?  

A) in product markets 
B) in resource markets 
C) in inventory markets 
D) in government markets

Question 35

How does a good differ from a service?  

A) A good is desirable whereas services are NOT. 
B) A good uses resources to satisfy wants. 
C) A good is physical and tangible. 
D) A good is abundant and free.

Question 36

Which of the following is an example of physical capital?  

A) rent 
B) bulldozers 
C) a college education 
D) carpentry skill

Question 37

Which of the following describes a service?  

A) anything that is scarce and which satisfies unlimited human wants 
B) a thing for which people pay money 
C) an intangible activity that satisfies human wants 
D) any output produced by the fast-food industry

Question 38

Which of the following is the best definition of an entrepreneur?  

A) an individual who is highly educated 
B) an organizer who seeks profitable opportunities and is willing to accept risks 
C) a person who generally works an eight-hour day 
D) an administrator who runs an enterprise without accepting any risk of financial loss

Question 39

What is the major difference between a good and a service?  

A) A good is tangible, but a service is NOT. 
B) A service helps satisfy unlimited wants, but a good does NOT. 
C) A service is available in unlimited quantities, but a good is NOT. 
D) A good is available in unlimited quantities, but a service is NOT.

Question 40

Which of the following are natural resources?  

A) bodies of water 
B) cars 
C) buildings 
D) truck drivers

Question 41

What is the labour market an example of?  

A) a government market 
B) a communication market 
C) a resource market 
D) a product market

Question 42

Which of the following describes how economic information is acquired?  

A) Acquiring information involves using scarce resources. 
B) Acquiring information is usually available free to any decision maker. 
C) Acquiring information is usually NOT required for rational decision making. 
D) Acquiring information must be complete before any decision is made.

Question 43

In economics, which of the following describes marginal?  

A) incremental 
B) unimportant 
C) outlier 
D) borderline

Question 44

When will a rational decision maker take action?  

A) when marginal costs are greater than marginal benefits 
B) when marginal costs are equal to or greater than marginal benefits 
C) when marginal benefits are equal to or greater than marginal costs 
D) when marginal benefits are at a maximum

Question 45

In a circular-flow model, which of the following is NOT supplied by households?  

A) labour 
B) goods and services 
C) capital 
D) entrepreneurial ability

Question 46

Consumers need information to make good choices.Which of the following best describes a role of information in an economy?  

A) It is abundantly available and therefore NOT as valuable 
B) It is scarce and therefore valuable. 
C) It is NOT easily available and therefore NOT valuable 
D) It is abundantly available and therefore valuable.

Question 47

Economists believe that people respond in a predictable way to changes in costs and benefits.Which term refers to this phenomenon?  

A) opportunity cost 
B) scarcity 
C) innovation 
D) marginal analysis

Question 48

What is the function of households in the circular-flow model?  

A) They own and sell resources. 
B) They play a very minor role in the economy. 
C) They supply goods and services. 
D) They are the largest purchasers of resources.

Question 49

What is implied by the assumption that individual people act rationally?  

A) People think only of themselves and disregard the well-being of others. 
B) People undertake all those activities that yield benefits to themselves. 
C) The greater the cost of a charitable deed to a benefactor, the more likely a person is to perform that deed. 
D) People implicitly calculate the costs and benefits of an activity to decide if it is worthwhile.

Question 50

What is microeconomics the study of?  

A) marginal or inferior products 
B) the economic behaviour of individual decision makers 
C) the behaviour of the economy as a whole 
D) how to use the fewest natural resources to produce goods and services

Question 51

What does it mean to say that people make marginal decisions?  

A) that people usually wait until the last minute before they make a decision to buy 
B) that people weigh the additional costs and additional benefits of various activities before they make a decision 
C) that, given a choice, most people would prefer to make their own decisions concerning the things that affect their lives 
D) that people consider the total costs and benefits of various activities before they make a purchase

Question 52

Which of the following best characterizes rational self-interest by an individual?  

A) The use of some mathematical model when solving a problem is desirable. 
B) Maximize expected benefits and minimize expected costs. 
C) Only monetary costs and benefits are weighed. 
D) Scarcity can be eliminated for that individual.

Question 53

What does it mean when economists say that people act as rational decision makers?  

A) that people gather all relevant information before making any purchases 
B) that once a pattern of behaviour has been established, people tend to become set in their ways 
C) that people respond in predictable ways to changes in costs and benefits 
D) that people rarely make errors when they are permitted to make transactions

Question 54

What do economists generally assume about the capacity of consumers to make decisions?  

A) that buyers and sellers have all the information they need to make decisions 
B) that buyers acquire information as long as the additional benefits exceed the additional costs of acquiring this information 
C) that decision makers never make mistakes 
D) that economic decisions result from random behaviour

Question 55

When will consumers use an economic perspective to search for information?

A) if there are no costs involved 
B) if the benefits are very high 
C) if the expected marginal benefit exceeds the expected marginal cost 
D) if the total benefits exceed the total costs

Question 56

Which of the following views might affect how an economist formulates ideas about self-interest?  

A) People who choose to promote the interests of others cannot be acting rationally in their own self-interest. 
B) People show concern only for those whom they know personally. 
C) The notion of self-interest rules out concern for others. 
D) Concern for the welfare of others is consistent with the concept of self-interest.

Question 57

Steve currently subscribes to two magazines and is trying to decide whether to subscribe to a third.Which of the following would best determine his decision if he is acting rationally?  

A) the total cost of the magazines compared to the total satisfaction Steve would receive 
B) the total amount of satisfaction Steve would receive from the magazines 
C) the cost of the third magazine, including the time it takes Steve to read it 
D) the cost of the third magazine compared to the additional enjoyment Steve would receive from it

Question 58

Which of the following are NOT economic decision makers?  

A) governments 
B) consumers 
C) businesses 
D) machines

Question 59

In economics, what does the term "marginal" usually refer to?  

A) a small change in an economic variable 
B) a low-quality product or resource 
C) an unimportant and irrelevant economic variable 
D) a footnote or minor point

Question 60

In what way may marginal analysis be useful in helping to make economic choices?  

A) It eliminates impractical or irrelevant information. 
B) It eliminates incorrect decisions and bad choices. 
C) It involves comparing the additional costs and additional benefits of an activity prior to making a decision. 
D) It involves examining only the total costs and total benefits of an activity prior to making a decision.

Question 61

What is the goal of using theories?  

A) to provide an interesting, but NOT useful, framework of analysis 
B) to provoke stimulating debates in scientific journals 
C) to demonstrate that the developer of the theory is capable of logical thinking 
D) to help scientists understand how the world works

Question 62

What type of economics studies the economic behaviour of individual decision makers as well as the determination of price and output in specific markets?  

A) microeconomics 
B) macroeconomics 
C) positive economics 
D) normative economics

Question 63

Why must all economic models involve simplifications?  

A) because economic models are generally mathematically based 
B) because human behaviour is very erratic and unpredictable 
C) because reality is too complex to understand in its entirety, so it must be reduced to a level that can be understood 
D) because economic models always try to duplicate all possible information and cover all possible variables that might influence decision making

Question 64

What is analyzed in macroeconomics?  

A) the overall performance of the economy as a whole 
B) arrangements through which specific products are exchanged 
C) influences on the decision making of particular households 
D) the factors that affect the decisions of individual firms

Question 65

Why do economists use assumptions?  

A) to diminish the chance of wrong answers 
B) to make the world easier to understand 
C) because all scientists make assumptions 
D) to make certain that all necessary variables are included

Question 66

Which of the following lists the steps of the scientific process in the correct order?  

A) define variables; state assumptions; form a hypothesis; test 
B) state assumptions; define variables; form a hypothesis; test 
C) identify variables; state assumptions; test; form a hypothesis 
D) identify variables; form "other-things-equal" assumptions; form behavioural assumptions; test

Question 67

Why do economists use economic models?  

A) to construct simplifying assumptions about real world economics 
B) to explain economic reality in all its complexity 
C) to explain and predict economic events 
D) to construct economic situations where controlled experiments can be carried out

Question 68

What is macroeconomics the study of?  

A) the behaviour of large firms in the marketplace 
B) the economic behaviour of individual decision makers 
C) the behaviour of the economy as a whole 
D) how to use the fewest natural resources to produce goods and services

Question 69

Economists use theories to explain economic phenomena.How do these theories relate to reality?  

A) Theories involve some simplification of reality. 
B) Theories bear no relation to reality. 
C) Theories approach reality in all its complexity. 
D) Theories involve so much distortion of reality that it is worthless.

Question 70

Why do economists use models?  

A) to make their profession appear more precise 
B) to make economics accessible to the public 
C) to learn how the economy works 
D) to make sure that all the details of the economy are included in their analysis

Question 71

Which of the following is a step in the scientific method?  

A) formulate a hypothesis 
B) reflect an opinion 
C) specify assumptions 
D) identify the question and define relevant variables

Question 72

Why do economists use models?  

A) to learn how the economy works 
B) to make their profession appear to be more precise 
C) to make economics accessible to the public 
D) to make sure that all of the details of the economy are included in their analysis

Question 73

Why do economists use economic theories?  

A) because theories have realistic assumptions 
B) because theories contains as much detail as possible 
C) because theories cannot be proven false 
D) because theories predict well

Question 74

Why do economists develop theories to explain the reality of economic behaviour?  

A) because theories simplify a complex reality 
B) because theories confront reality in all its complexity by focusing on the unique aspects of each phenomenon 
C) because theories explain phenomena without predicting them 
D) because theories predict phenomena without explaining them

Question 75

How do we know if an economic model is useful?  

A) It includes every detail of reality. 
B) It involves no unproven assumptions. 
C) It is expressed in equations. 
D) It makes accurate predictions.

Question 76

Why do economists use economic theory in their work?  

A) to express their normative values 
B) to develop imaginative and interesting stories 
C) to predict the behaviour of a specific economic decision maker after an economic change 
D) to predict the average behaviour of a group of similar economic decision makers after an economic change

Question 77

What do economists aim to achieve when they use the other-things-constant assumption?  

A) to make useful predictions 
B) to focus on the role of incentives 
C) to focus only on consumers' decisions, and NOT on those of firms 
D) to ignore reality, where things are constantly changing

Question 78

Which of the following would be a topic studied in the field of macroeconomics?  

A) the amazing recent growth of the Chinese economy 
B) the movement of Canadian manufacturing firms to China 
C) the differences in wages between men and women in Canada 
D) the effect of rent controls on the housing market in Toronto

Question 79

What is a model?  

A) a theoretical abstraction with very little value 
B) a useful tool to only the ones who considered it 
C) a realistic and carefully constructed theory 
D) a simplification of the real world

Question 80

What is a good theory?  

A) one that is widely accepted 
B) one that starts from realistic assumptions 
C) one that helps us to understand the world better 
D) one where no logical mistakes were made in developing it