Question 1

The opportunity cost of going to college or university for four years is

Accepted Answer

A) the least valued alternative one forfeits to attend. 
B) the cost of tuition,residence fees and books. 
C) zero. 
D) equal to the wage rate a person will earn after graduation. 
E) the cost of tuition and books and four years of lost wages from employment.

Question 2

Many economies in central and Eastern Europe,including the countries of the former Soviet Union,are still in the process of moving from a command economy to a market economy.In the first years of this transition,most of these countries experienced sharp drops in output and reductions in living standards.Economists generally see this as

Accepted Answer

A) an indication of the extreme difficulty of transition from one type of economic system to another. 
B) the failure of the market system. 
C) the difficulty of corruption in non- market economies. 
D) the triumph of capitalism over communism. 
E) an indication that these economies should return to being command economies.

Question 3

Katie and Hugh are producing pies and jars of pickles.Katie can produce either 200 jars of pickles or 100 pies per month.Hugh can produce either 800 jars of pickles or 200 pies per month.Which of the following statements is correct?

Accepted Answer

A) Katie's opportunity cost of producing 1 jar of pickles is 2 pies. 
B) Hugh's opportunity cost of producing 1 jar of pickles is 4 pies. 
C) Katie's opportunity cost of producing 1 jar of pickles is 1/2 of a pie. 
D) Hugh's opportunity cost of producing 1 pie is 1/4 jar of pickles. 
E) Hugh's and Katie's opportunity costs of producing are the same.

Question 4

Madeleine allows herself $100 per month for purchasing coffee.The diagram below illustrates the choices available to her.
  FIGURE 1- 3
-Refer to Figure 1- 3.If Madeleine chooses to allocate all $100 to buying lattes,we can say that her opportunity cost in one month is

Accepted Answer

A) 80 cups of regular coffee. 
B) zero because she stayed within her budget. 
C) 20 cups of regular coffee. 
D) zero because she bought what she desired. 
E) 40 cups of regular coffee.

Question 5

FIGURE 1- 1
With a budget of $200 million,the government can choose to purchase 4 helicopters or repair 200 km of highway. 
-Refer to Figure 1- 1.Which of the following combinations of kilometres of highway repair and helicopters is unaffordable,given the government's budget of $200 million?

Accepted Answer

A) G 
B) B 
C) D 
D) F 
E) E

Question 6

Consider Canada's production possibilities boundary.Suppose a scientific breakthrough leads to a lower- cost method of producing battery- operated cars in Canada.The likely effect would be to move Canada's current production

Accepted Answer

A) to a point inside its new production possibilities boundary. 
B) above the level of U.S.production. 
C) to a point beyond its new production possibilities boundary. 
D) possibilities boundary outward. 
E) possibilities boundary inward.

Question 7

Madeleine allows herself $100 per month for purchasing coffee.The diagram below illustrates the choices available to her.
  FIGURE 1- 3
-Refer to Figure 1- 3.Which of the following combinations of regular coffees and lattes is affordable over the one- month period,given Madeleine's budget?

Accepted Answer

A) 15 lattes and 30 coffees 
B) 16 lattes and 16 coffees 
C) 20 lattes and 80 coffees 
D) 4 lattes and 66 coffees 
E) 8 lattes and 50 coffees

Question 8

The diagram below shows two production possibilities boundaries for Country X.
  FIGURE 1- 4
-Consider Canada's production possibilities boundary.Suppose fire destroys many millions of hectares of valuable Canadian forest.The effect on the Canadian economy would be best illustrated by the production possibilities boundary.

Accepted Answer

A) a shift outward of 
B) a movement to a point beyond 
C) a movement inside 
D) an inward shift of 
E) a movement along

Question 9

The concept of scarcity in economics usually refers to a condition

Accepted Answer

A) that afflicts only poor countries. 
B) where society is not employing all of its available resources in an efficient manner. 
C) where production is efficient,but distribution is inefficient. 
D) where too many frivolous goods and services are produced at the expense of socially desirable goods and services. 
E) where people's wants can never be satisfied by the available resources.

Question 10

In a pure market economy,the role of government is limited to provision of : i)a basic legal and institutional structure.
Ii)intervention in the allocation of resources in some areas of the economy.
Iii)redistribution of income.
Iv)stabilization of economic conditions generally.
Which of the above points is true?

Accepted Answer

A) Only i). 
B) Only i)and ii). 
C) Only i)and iv). 
D) Only i),ii),and iv). 
E) All of the points are provided by government in a pure market economy.

Question 11

A move from inside the production possibilities boundary to the boundary itself could be caused by

Accepted Answer

A) an improvement in the government's ability to control its spending. 
B) an increase in the labour supply. 
C) technological progress. 
D) the employment of previously idle resources. 
E) a reallocation of resources from military to civilian goods.

Question 12

In mixed economies,economic behaviour is

Accepted Answer

A) largely determined by a central authority. 
B) random and unpredictable. 
C) based primarily on custom and habit. 
D) affected by elements of tradition,government command,and market incentives. 
E) directed only by self interest.

Question 13

Consider the following list: a worker with training in video gaming technology,10 hectares of arable land in southern Ontario,a fishing trawler in Nova Scotia,an ice- cream truck at a park in Quebec.Each of these is an example of

Accepted Answer

A) a commodity. 
B) goods and services. 
C) an economic service. 
D) a factor of production. 
E) a capital resource.

Question 14

Scarcity is likely to be

Accepted Answer

A) a result of the work ethic. 
B) a problem that will always exist. 
C) unique to the twentieth century. 
D) a problem that will be solved by the proper use of available resources. 
E) eliminated with a better understanding of economics.

Question 15

An economic system that relies primarily upon custom and habit in economic decision making is a

Accepted Answer

A) market system. 
B) communist system. 
C) traditional system. 
D) mixed system. 
E) command system.

Exam 1: Economic Issues and Concepts