Deck 1: Measuring Macroeconomic Performance: Output and Prices

Question 1

Macroeconomics is distinguished by its concentration on

A) choices.
B) the performance of national economies and ways to improve upon that performance.
C) individual markets.
D) the level of prices in specific markets.
E) abstract models.

Answer 1

the performance of national economies and ways to improve upon that performance.

Question 2

Which of the following is a macroeconomic issue?

A) Planning a price increase for daily bus fare.
B) Predicting inflation rates for next year.
C) Determining how many permits should be issued for single homes in Montreal.
D) Negotiation a wage increase for faculty at local university.
E) Identifying the best location for future department stores in Ontario.

Answer 2

Predicting inflation rates for next year.

Question 3

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

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

Answer 3

macroeconomics.

Question 4

Which of the following is a microeconomic statement?

A) Tariff barriers hurt all Canadians.
B) Inflation will remain low for the next two years.
C) Inflation and unemployment will remain low for the next two years.
D) Increased gasoline prices have raised taxi fares by 10%.
E) National output remained constant last year.

Question 5

Even today,microeconomic concepts developed by ___________ remain influential.

A) Adam Smith.
B) Alfred Marshall.
C) David Hume
D) John Maynard Keynes.
E) John Stuart Mill.

Question 6

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

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

Question 7

Which of the following is a microeconomic statement?

A) Interest rates in Canada are directly linked to interest rates in the United States.
B) The Competition Bureau accuses oil companies of illegally fixing gas prices.
C) The government negotiated a trade agreement with the European Union.
D) The unemployment rate increased by 1.5% this year.
E) National output fell by 1% last year.

Question 8

Which of the following questions would NOT be part of macroeconomics?

A) What caused the Great Depression?
B) At what rate does the Canadian economy typically grow?
C) Did the sharp increase in gasoline prices alter SUV sales?
D) How does government spending affect the economy?
E) Do trends exist in the national rate of unemployment?

Question 9

Which of the following is a macroeconomic statement?

A) Unionized workers for Ford went on strike for higher wages.
B) The price of wheat doubled in the past month.
C) Forest fires destroyed thousands of hectares in Western Canada.
D) The demand for smart phones increased by 10% this year
E) National output fell by 1% last year.

Question 10

Economics is best defined as the study of

A) prices and quantities.
B) inflation and interest rates.
C) how people make choices under the conditions of scarcity,and the results of the choices.
D) how to make money.
E) wages and incomes.

Question 11

Microeconomics includes the study of

A) inflation.
B) unemployment.
C) economic growth.
D) the distribution of income.
E) the national aggregate output.

Question 12

The study of individual choices and group behaviour in individual markets defines

A) microeconomics.
B) economics.
C) the scarcity principle.
D) macroeconomics.
E) the cost-benefit principlE.

Question 13

Which of the following is a macroeconomic statement?

A) Severe drought in the prairies has increased the price of wheat.
B) Technological improvements have lowered prices in the automobile industry.
C) The provincial government of British Columbia has increased tuition fees.
D) The unemployment rate in Canada is expected to decline over the next two years.
E) Hurricanes in Florida lead to greater exports of soft wood lumber from Canada to the U.S.

Question 14

The economist often considered the "father of macroeconomics" is ___________.

A) Adam Smith.
B) Alfred Marshall.
C) David Hume
D) John Maynard Keynes.
E) John Stuart Mill.

Question 15

The Scottish economist who wrote "The Wealth of Nations" was ______________

A) Adam Smith.
B) Alfred Marshall.
C) David Hume
D) John Maynard Keynes.
E) John Stuart Mill.

Question 16

The study of macroeconomics includes

A) the choices made by individual consumers.
B) the production decisions of firms.
C) the causes of poverty.
D) the determinants of the national unemployment rate.
E) individual markets.

Question 17

The distinguishing feature of microeconomics is studying

A) choices.
B) the performance of national economics.
C) the overall price level.
D) choices made by individuals or groups in the context of individual markets.
E) how to improve the performance of national economies.

Question 18

Which of the following decisions would NOT be part of microeconomics?

A) What university major to select.
B) How to make the largest profit.
C) Whether to study or watch TV tonight.
D) How will an early frost in Prince Edward Island affect the price of potatoes.
E) Should the federal budget always be balanced.

Question 19

The focus of microeconomics is the study of

A) national economies.
B) trends in consumer purchases.
C) the total value of national output.
D) individuals and firms.
E) the determinants of the unemployment ratE.

Question 20

Macroeconomics differs from microeconomics in that

A) the concept of scarcity applies to the latter but does not apply to the former.
B) the latter studies individual markets while the former studies groups of markets,including the whole economy.
C) rational decisions are relevant to the former but not the latter.
D) the former is the study of how people make choices under conditions of scarcity while the latter is concerned with the results of those choices for society.
E) the former explains such concepts as how prices are determined in markets while the latter explains the overall price level.

Question 21

The logical implication of the scarcity problem is that

A) one will never be satisfied with what one has.
B) as wealth increases,making trade-offs becomes less necessary.
C) as wealth decreases,making trade-offs becomes less necessary.
D) choices must be made.
E) resources need to be made unlimited.

Question 22

If a campus organization provides a free lunch to all students who show up,then

A) the scarcity problem has been violated.
B) the scarcity problem still applies to the decision to allocate the time to go and eat.
C) the lunch is completely without cost.
D) no trade-offs are involved.
E) it is a free lunch because no price was charged.

Question 23

The principle of scarcity applies to

A) the poor exclusively.
B) nations exclusively.
C) all consumers.
D) all firms.
E) everyone;consumers,firms,governments,and nations.

Question 24

The scarcity problem applies to

A) all decisions.
B) only market decisions,e.g. ,buying a car.
C) only non-market decisions,e.g. ,watching a sunset.
D) only the poor.
E) only the wealthy.

Question 25

An economic model is a representation of economic reality that

A) highlights all possible variables and the relationships among them.
B) highlights particular variables and the relationships among them.
C) predicts how government actions influence the private sector.
D) illustrates the difference between economic and non-economic theories.
E) focuses strictly on welfare economics.

Question 26

Benny has one hour before bedtime and he can either watch TV or listen to a new CD.He chooses to listen to the CD.The scarcity problem's influence on Benny is seen in

A) the decision to listen to music.
B) the decision not to watch TV.
C) the fixed amount of time before bed.
D) the decision to choose between TV and music.
E) Benny's taste in music.

Question 27

Scarcity exists in the world today because

A) human wants and desires are insatiable.
B) average households are too poor.
C) there is not enough money in the world.
D) people always make the wrong choices.
E) we are always producing the wrong things.

Question 28

If there were no scarcity,it implies that

A) benefits must be greater than costs.
B) all human desires would be irrelevant.
C) costs would be irrelevant.
D) market prices must be low.
E) everyone probably has lots of money.

Question 29

If all the world's resources were to magically increase 100-fold,then

A) the scarcity problem would still govern behaviour.
B) economics would no longer be relevant.
C) the scarcity problem would disappear.
D) everyone would be satisfied.
E) trade-offs would become unnecessary.

Question 30

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

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 31

For a given question to be considered an economic question,it would need to involve

A) explicit prices.
B) making a choice.
C) money and income.
D) limited resources.
E) limited resources and making a choicE.

Question 32

The cost-benefit principle indicates that an action should be taken

A) if the total benefits exceed the total costs.
B) if the extra benefits are positive.
C) if the average benefits exceed the average costs.
D) if the resulting economic surplus is zero.
E) if the extra benefits are greater than the extra costs.

Question 33

The scarcity problem indicates __________ and the cost-benefit principle indicates __________.

A) that choices must be made;how to make the choices
B) how to make the choices;that choices must be made
C) that choices must be made;just one of many possible ways to make the choices
D) that choices must be made;that the choices will be poor
E) that choices must be made;that the costs can never outweigh the benefits of the choices

Question 34

Whether studying the size of the Canadian economy or the number of children a couple will choose to have,the unifying concept is

A) wants are limited,resources are limited,and thus trade-offs must be made.
B) wants are unlimited,resources are limited,and thus trade-offs must be made.
C) wants are unlimited,resources are limited to some but not to others,and thus some people must make trade-offs.
D) wants are unlimited,resources are unlimited,and thus no trade-offs need to be made.
E) wants are unlimited,resources are limited,and thus government needs to do morE.

Question 35

The scarcity problem indicates that

A) no matter how much one has,it is never enough.
B) compared to 100 years ago,individuals have less time today.
C) with limited resources,having more of "this" means having less of "that."
D) because trade-offs must be made,resources are therefore scarce.
E) the wealthier a person is,the fewer trade-offs he must makE.

Question 36

Choosing to study for an exam until the extra benefit (improved score)equals the extra cost (mental fatigue)is

A) not rational.
B) an application of the cost-benefit principle.
C) an application of the scarcity principle.
D) the relevant opportunity cost.
E) less desirable than studying for the entire evening.

Question 37

A rational person is someone that

A) is reasonable.
B) makes choices that are easily understood.
C) possesses clear objectives and behaves logically to achieve them.
D) does not believe what experts claim.
E) is highly cynical.

Question 38

Forest is a mountain man living in complete isolation in northern British Columbia.He is completely self-sufficient through hunting,fishing,and farming.He has not been in the city to buy anything in five years.One can infer

A) the scarcity problem does not apply to Forest.
B) Forest is not required to make choices.
C) the scarcity problem still applies because more hunting means less fishing and so on.
D) Forest is very satisfied.
E) Forest knew the Prime Minister.

Question 39

When economists make predictions using the framework of a given economic model,it is usually based on

A) personal experiences.
B) important relationships between particular variables.
C) mathematical abstractions.
D) political implications.
E) the profit-maximizing objectivE.

Question 40

The range of topics,or issues,that fit within the definition of economics is

A) limited to market activities,e.g. ,buying soap.
B) limited to individuals and firms.
C) extremely wide,requiring only the ideas of choice and scarcity.
D) limited to governments and nations.
E) very limited.

Question 41

In an economic sense,scarcity means that there are

A) limited resources available,so consumers never have to make choices.
B) unlimited resources available,so consumers never have to make choices.
C) not many products available to consumers.
D) limited resources available,so consumers have to make choices.
E) unlimited resources available,so consumers have to make choices.

Question 42

The concept of scarcity applies both to Bill Gates and a homeless person because

A) both have the same legal rights.
B) they have the same access to the markets for goods and services.
C) there are only 24 hours in the day for both of them.
D) they are both consumers.
E) both must breathe air in order to livE.

Question 43

Deciding to pursue an activity as long as the extra benefits are at least equal to the extra costs defines the

A) cost-benefit principle.
B) scarcity principle.
C) No-Free-Lunch principle.
D) marginal principle.
E) extra principlE.

Question 44

The core problem of economics is

A) that unemployment is too high.
B) that governments do not spend enough money on education.
C) understanding the Great Depression.
D) the scarcity problem.
E) determining the best price for oil.

Question 45

When economists say there is no such thing as a free lunch,they mean that

A) we must pay money for everything we get.
B) it is against the law to accept goods or services without paying for them.
C) when we eat lunch,our time has no value.
D) each day we decide to eat lunch is another day we must pay out money.
E) every choice we make involves a trade-off.

Question 46

Amy is thinking about going to the movies tonight.A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30.The total cost of seeing the movie is

A) $7.
B) $30.
C) $37.
D) $37 minus the benefit of seeing the movie.
E) indeterminatE.

Question 47

The cost-benefit principle states that a consumer will be better off to follow a particular course of action,only if the

A) total benefits increase.
B) total costs decrease.
C) total costs remain unchanged.
D) extra benefits from taking the action are at least equal to the extra costs.
E) total benefits do not decreasE.

Question 48

The existence of the cost-benefit principle stems from

A) the limited nature of wants.
B) the trade-offs the scarcity problem indicates must be made.
C) the necessity of government intervention.
D) opportunity costs.
E) the unlimited nature of resources.

Question 49

The Web site for this textbook can be viewed simultaneously by thousands of students around the world without paying money to view it.Does this suggest that the concept of scarcity does not apply to Web sites?

A) No,because each of the students incurs an opportunity cost,measured by the next best alternative to viewing the Web site.
B) Yes,because an additional student viewing the Web site does not prevent another student from viewing it.
C) Yes,because the students do not have to pay money to view the Web site and thus they do not have to forgo something else to view it.
D) No,because the more students who view it,the slower the transmission of the information to each of the students.
E) Yes,because the technology of the internet has made the principles of economics outdated.

Question 50

Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20.After the movie,she says to one of her friends that the movie was not worth it.Apparently,

A) Jenna failed to apply the cost-benefit model to her decision.
B) Jenna was not rational.
C) the economic model of cost-benefit analysis failed.
D) Jenna overestimated the benefits of the movie.
E) this proves the limitations of economic models,specifically the cost-benefit principlE.

Question 51

Applying the cost-benefit principle to the issues of large class sizes and recent tuition hikes in Canadian universities and colleges will help to find

A) a fair solution to the problems of such increases.
B) the best solution to the problems of such increases.
C) a plausible explanation of the problems of such increases.
D) out who could best bear the full burden of such increases.
E) out whether the government is doing their best to avert the problems of such increases.

Question 52

The fundamental problem that is studied in economics is that

A) consumers have limited wants in the face of unlimited resources.
B) markets should function without government interference.
C) Canada is too wealthy.
D) consumers have unlimited wants in the face of limited resources.
E) there are unlimited resources.

Question 53

The opportunity cost of an activity is the value of

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 54

Cost-benefit analysis can help to shed light in the decision-making process

A) even if we can at times describe costs and benefits in vague qualitative form only.
B) even if we have absolutely no information at all.
C) only if we know the precise dollar value of all costs and benefits.
D) only if we know the maximum dollar value of all costs and benefits.
E) only if we have information on all the relevant market data.

Question 55

The cost-benefit principle

A) states that an action should be taken only if the total benefit is at least as great as the total cost.
B) implies that the cost of all alternatives should be included when choosing among alternatives.
C) states that an action should be taken only if the extra benefit is at least as great as the extra cost.
D) states that an action should be taken only if the average benefit is greater than the average cost.
E) states that an action should be taken only if the extra benefit is less than the extra cost.

Question 56

With banking machines,it is possible to retrieve cash from the bank at any time.100 years ago,one could only get cash from the bank during business hours,say,9 am to 3 pm.The difference is because

A) flexibility was not valued 100 years ago.
B) it was impossible to provide 24 hour a day service 100 years ago.
C) the cost of providing 24 hour a day service is much lower today.
D) the government forced banks to become more convenient.
E) cash is a more popular means of making payments today.

Question 57

Imagine a world with unlimited resources,including time.On that planet,

A) personal strife would not exist.
B) the scarcity problem would not apply but the cost-benefit principle would.
C) the cost-benefit principle would be irrelevant because trade-offs would be unnecessary.
D) the scarcity problem would still apply.
E) the discipline of economics would be more important.

Question 58

To determine the best course of action,one needs to consider

A) the benefits.
B) the costs.
C) neither the benefits nor the costs.
D) both the benefits and the costs.
E) either the benefits or the costs,but not both.

Question 59

In applying the cost-benefit principle,one should calculate the

A) total cost and total benefit,and choose that quantity of an activity where they are equal.
B) average cost and average benefit,and choose that quantity of an activity where the average benefit exceeds the average cost by the greatest amount.
C) total cost and total benefit,and choose that quantity of an activity where the total cost exceeds the total benefit by the greatest amount.
D) marginal cost and marginal benefit,and choose that quantity of an activity where the marginal benefit at least equals the marginal cost.
E) marginal cost,total cost,marginal benefit,and marginal cost,and choose that quantity of an activity where the marginal cost equals the total cost and the marginal benefit equals the total benefit.

Question 60

The scarcity problem refers to the fact that

A) consumers do not have to make choices.
B) consumers have limited wants in the face of unlimited resources.
C) there are not many products available to consumers.
D) consumers have unlimited needs and wants,but there are limited resources.
E) there are unlimited resources available so consumers never have to make choices.

Question 61

Decisions that involve doing something or not (e.g. ,seeing a movie)and decisions that involve choosing a level (e.g. ,square footage of an apartment)are

A) dissimilar,requiring two different models on how to decide.
B) dissimilar,with the cost-benefit principle useful only when deciding on the level.
C) similar,requiring a comparison of total benefits and total costs.
D) similar,requiring a comparison of marginal benefits and marginal costs.
E) similar,requiring a comparison of average benefits and average costs.

Question 62

Opportunity cost is best defined as

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 63

To avoid the mistake of ignoring opportunity costs,questions can be framed in the form of

A) "should I do A?"
B) "should I do B?"
C) "why should I do A?"
D) "should I do A or B?"
E) "should I do A or B or C or¼ Z?"

Question 64

David finds he has one hour of time in the evening to allocate on the first day of the new semester.He can do one of two things.He can watch TV for one hour or he can open his economics textbook and read for an hour.The benefit of watching TV is 30;the benefit of reading about economics is 20.
The opportunity cost of watching TV is __________ and the opportunity cost of reading about economics is __________.

A) 20;30
B) 0;0
C) 30;20
D) -20;-30
E) indeterminate;indeterminate

Question 65

When wages fall,the

A) opportunity cost of an hour of work increases.
B) opportunity cost of an hour of leisure (not working)stays the same.
C) cost of working increases.
D) opportunity cost of an hour of leisure (not working)decreases.
E) opportunity cost of an hour of leisure (not working)increases.

Question 66

Tony notes that an electronics store is offering a flat $20 off all prices in the store.Tony reasons that,if he wants to buy something with a price of $50,it is a good offer,but if he wants to buy something with a price of $500,it is not a good offer.This is an example of

A) inconsistent reasoning;saving $20 is saving $20.
B) the proper application of the cost-benefit principle.
C) rational choice because,in the first case,he saves 40% and,in the second case,he saves 4%.
D) "marginal cost equals marginal benefit" thinking.
E) opportunity costs.

Question 67

After graduating from high school,Ron Willis plans to go to college.The college tuition is $15,000 a year.But,instead of going to college,Ron could take a full-time job paying $20,000.If Ron decides to go to college,what is his total cost for attending for one year?

A) $5,000.
B) $15,000.
C) $20,000.
D) $35,000.
E) $40,000.

Question 68

The opportunity cost of a new public highway is the

A) money cost of hiring contractors and construction workers for the new highway.
B) other goods and services that must be sacrificed to construct the new highway.
C) cost of constructing the new highway in a future year.
D) increased traffic from the use of the new highway.
E) cost of constructing the new highway in a previous year.

Question 69

The opportunity cost of attending college is likely to be highest for a high school graduate

A) who has access to student loans.
B) whose family is extremely wealthy.
C) who will attend a more expensive college.
D) who started a successful business in high school.
E) who will attend a less expensive collegE.

Question 70

Maria spends her afternoon at the beach,paying $2 to rent a beach umbrella and $10 for food and drinks,rather than going to a movie.The total cost of going to the beach is

A) zero,because the money she spent was for food,drinks and an umbrella rather than to enter the beach.
B) the $12 she spent on the umbrella,food and drinks.
C) only $2 because she would have spent the money on food and drinks whether or not she went to the beach.
D) the movie she missed seeing.
E) the movie she missed seeing plus the $12 she spent on the umbrella,food,and drinks.

Question 71

Suppose that a person makes a choice that seems inconsistent with the cost-benefit principle.Which of the following statements represents the most reasonable conclusion to draw?

A) The person (explicitly or implicitly)over-estimated the benefits or under-estimated the costs or both.
B) The abstraction of the cost-benefit principle is so great as to be unable to explain behaviour.
C) The person does not grasp how decisions should be made.
D) The person is simply irrational.
E) Because people do not explicitly calculate benefits and costs,it is not surprising that choices are made which violate the cost-benefit principlE.

Question 72

According to the cost-benefit principle,the incentive to save $10 on a product is

A) directly dependent on the price of the product.
B) purely a question of whether it is worth it to do what is necessary to receive the $10 of savings.
C) stronger if the $10 is a large percentage of the list price of the product.
D) inversely related to the price of the product.
E) weaker if the $10 is a small percentage of the list price of the product.

Question 73

The opportunity cost of any activity is defined as

A) the value of the least best alternative activity forgone.
B) the time one spends involved in the activity.
C) the value of the next best alternative activity forgone.
D) the income one spends on the activity.
E) the value of some unspecified alternative activity forgonE.

Question 74

Class attendance today is nearly 100%,but on most other days it is less.The likely explanation for this would be

A) the opportunity cost of not attending today is much higher than usual.
B) random chance.
C) everything on TV was a rerun.
D) students thought today's class was a review.
E) the opportunity cost of attending today is much higher than usual.

Question 75

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

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 76

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?

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 77

Economists argue that

A) there is an opportunity cost associated with all decisions.
B) there is an opportunity cost associated only with decisions involving money.
C) economic decisions have opportunity costs but other decisions do not.
D) decisions do not have opportunity costs.
E) there is an opportunity cost for some economic decisions.

Question 78

David finds he has one hour of time in the evening to allocate on the first day of the new semester.He can do one of two things.He can watch TV for one hour or he can open his economics textbook and read for an hour.The benefit of watching TV is 30;the benefit of reading about economics is 20.
If David applies the cost-benefit principle accurately,he will

A) read about economics.
B) watch TV.
C) watch TV but fret that he should be reading economics.
D) read about economics but resent missing TV.
E) flip a coin,because the economic surplus is the same either way.

Question 79

The value of the best alternative to any action you undertake is referred to as its

A) production cost.
B) opportunity cost.
C) resource cost.
D) increasing cost.
E) accounting cost.

Question 80

The opportunity cost of a new national park is the

A) cost of hiring staff and park rangers to provide services for visitors.
B) cost of constructing park buildings.
C) alternative uses for the land.
D) increased pollution to the wildlife habitat at the park.
E) cost of constructing highways to access the park.