Question 1

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

Question 2

The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns. $$\begin{array}{l}
\begin{array} { | l | l | l | } 
\hline & \text { Fishing lures } & \text { Mowed lawns } \
\hline \text { Tristan } & 12 & 3 \
\hline \text { Thomas } & 6 & 6 \
\hline
\end{array}\
\text { TABLE 1- } 1
\end{array}$$
-Refer to Table 1- 1. What is Thomas's opportunity cost of producing one mowed lawn?

Accepted Answer

A)  one fishing lure 
B)  1/6 fishing lure 
C)  12 fishing lures 
D)  0 fishing lures 
E)  6 fishing lures

Question 3

Money facilitates trade and specialization by

Accepted Answer

A)  increasing the value of gold. 
B)  eliminating the need for barter. 
C)  reducing the shift of resources between uses. 
D)  providing employment for coin makers. 
E)  increasing investment.

Question 4

The Canadian economy is best described as

Accepted Answer

A)  primarily a public ownership economy. 
B)  primarily free- market decision making. 
C)  traditional. 
D)  a mixed economic system. 
E)  a command economy.

Question 5

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)  technological progress. 
C)  an increase in the labour supply. 
D)  the employment of previously idle resources. 
E)  a reallocation of resources from military to civilian goods.

Question 6

The diagram below shows two production possibilities boundaries for Country X.  FIGURE 1- 3
-Refer to Figure 1- 3. A shift of the production possibilities boundary from PPB1 to PPB2 implies

Accepted Answer

A)  that if point E is the new choice of outputs, productivity has increased in the consumption goods industry. 
B)  a movement from full employment to some unemployment. 
C)  that technology in the capital goods industries has improved. 
D)  that technology in the consumption goods industry has improved. 
E)  an inevitable decrease in total output.

Question 7

On a diagram of a production possibilities boundary, the concept of opportunity cost is illustrated by the

Accepted Answer

A)  distance from the origin to the boundary. 
B)  unattainable points outside the boundary. 
C)  negative slope of the boundary. 
D)  area bounded by the two axes and the boundary. 
E)  boundary being concave to the origin.

Question 8

Consider a production possibilities boundary showing the possible combinations of military goods and civilian goods that a country can produce. Suppose that the country is currently at a point on the boundary. If the production of military goods is increased, the production of civilian goods will necessarily

Accepted Answer

A)  remain the same. 
B)  decrease. 
C)  increase. 
D)  increase at a decreasing rate. 
E)  increase at a increasing rate.

Question 9

The diagram below shows two production possibilities boundaries for Country X.  FIGURE 1- 3
-Refer to Figure 1- 3. If Country X, constrained by the production possibilities boundary PPB1, is currently producing at point A, it can produce more capital goods by moving to point

Accepted Answer

A)  E. 
B)  F. 
C)  B. 
D)  C. 
E)  D.

Question 10

The diagram below shows two production possibilities boundaries for Country X.  FIGURE 1- 3
-Refer to Figure 1- 3. If Country X were producing at point C,

Accepted Answer

A)  it is not possible to move to any point on PPB1 or PPB2 without technological progress. 
B)  this is the maximum output possible from given resources. 
C)  the opportunity cost of moving to point A is to give up some capital goods. 
D)  the opportunity cost of moving to point B is to give up some consumption goods. 
E)  the opportunity cost of moving to point A is zero.

Question 11

A barter system of exchange

Accepted Answer

A)  requires the use of money. 
B)  is the most efficient form of exchange. 
C)  involves the trading of goods directly for other goods 
D)  does not involve the double coincidence of wants. 
E)  developed late in history.

Question 12

One of the "real" flows in the circular flow of income is

Accepted Answer

A)  goods going from consumers to producers. 
B)  goods going from producers to consumers. 
C)  money payments going from consumers to producers. 
D)  factor services going from producers to consumers. 
E)  money payments going from producers to consumers.

Question 13

Karl Marx argued that

Accepted Answer

A)  centrally planned economies could provide a more equitable distribution of total output than capitalist economies. 
B)  benevolence, not self- interest, produced an effective economic order. 
C)  technological change was not important in improving living standards. 
D)  the unfettered market system driven by self- interest leads to the best social outcome. 
E)  a free- market system would produce a low level of total output.

Question 14

Economists usually assume that households and firms, respectively, maximize

Accepted Answer

A)  wages and revenues. 
B)  expenditures and profits. 
C)  income and sales. 
D)  savings and profits. 
E)  utility and profits.

Question 15

Income redistribution in a mixed economy

Accepted Answer

A)  risks reducing individual incentives to work and produce. 
B)  is only accomplished through government intervention. 
C)  is supported by all individuals. 
D)  is not allowed. 
E)  rarely occurs.

Question 16

A modern economy like Canada's is largely organized by

Accepted Answer

A)  benevolent individuals pursuing the public interest. 
B)  individuals following their own self interest, doing what seems best for themselves. 
C)  individuals forming cooperative enterprises and labour unions. 
D)  the self- interested behaviour of a small number of individuals. 
E)  governments at all levels coordinating the activities of firms and citizens.

Question 17

Because resources are scarce, individuals are required to

Accepted Answer

A)  sacrifice production but not consumption. 
B)  improve production but not distribution. 
C)  use resources inefficiently. 
D)  improve distribution but not production. 
E)  make choices among alternatives.

Question 18

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 19

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. Currently, each divide their time equally between production of the two goods per month -- Katie produces 100 jars of pickles and 50 pies while Hugh produces 400 jars of pickles and 100 pies. In order for Katie and Hugh to jointly gain from specialization, which of the following changes should take place?

Accepted Answer

A)  Hugh should produce more pies and fewer jars of pickles. 
B)  Katie should produce more pies and fewer jars of pickles. 
C)  Katie and Hugh should both produce more pies and fewer jars of pickles. 
D)  Katie and Hugh should both produce more jars of pickles and fewer pies. 
E)  Katie should produce more jars of pickles and fewer pies.

Question 20

If there is always a three- for- one trade- off between the production of goods X and Y, then the production possibilities boundary for X and Y is

Accepted Answer

A)  a downward- sloping straight line. 
B)  a downward- sloping curve convex to the origin. 
C)  a downward- sloping curve concave to the origin. 
D)  semi- circular. 
E)  a downward- sloping straight line that is broken at one point.

Exam 1: Economic Issues and Concepts