Deck 1: Economic Issues and Concepts

Question 1

Suppose that one unit of labour can produce either 5 units of wool or 2 pineapples.What is the opportunity cost of producing 1 pineapple?

A)5 units of wool
B)2 units of wool
C)2/5 unit of wool
D)5/2 units of wool
E)zero

Answer 1

5/2 units of wool

Question 2

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.If you were to draw a budget line to illustrate the choice between Model A and Model B vehicles,with A on the vertical axis and B on the horizontal axis,the vertical intercept and the horizontal intercept,respectively,would be

A)10 and 10.
B)6 and 6.
C)0 and 10.
D)0 and 0.
E)10 and 6.

Answer 2

10 and 6.

Question 3

Scarcity arises from limited resources.For this reason,all economic choices involve

A)a value judgement.
B)an educated decision.
C)an opportunity cost.
D)complementary ends.
E)greed.

Answer 3

an opportunity cost.

Question 4

Suppose there are only three alternatives to attending a ʺfreeʺ social event: read a novel (you value this at $10),go to work (you could earn $20),or watch videos with some friends (you value this at $25).The opportunity cost of attending the social event is

A)$10.
B)$20.
C)$25.
D)$45.
E)$55.

Question 5

Scarcity is likely to be

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

Question 6

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.What is the opportunity cost of one Model B vehicle?

A)0
B)3/5ths of a Model A vehicle
C)5/3rds of a Model A vehicle
D)5 Model A vehicles
E)3 Model A vehicles

Question 7

Which of the following statements provides the best definition of economics?

A)The study of the most equitable distribution of scarce resources.
B)The study of the use of scarce resources to satisfy unlimited human wants.
C)The study of the production of goods and services.
D)The study of the productive capacity of a nationʹs factors of production.
E)The study of production and increasing its efficiency.

Question 8

Because resources are scarce,individuals are required to

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

Question 9

The opportunity cost of producing good A is defined to be

A)the money cost of the factors of production used in good A.
B)the retail price of good A.
C)the cheapest method of producing good A.
D)what must be sacrificed of other goods to get an additional unit of good A.
E)the cost of having to get by using something else in place of good A.

Question 10

Which of the following statements best describes the economic concept of scarcity?

A)Society is not employing all of its available resources in an efficient manner.
B)Peopleʹs wants can never be satisfied by the available resources.
C)Scarcity afflicts only poor countries.
D)Too many frivolous goods and services are produced at the expense of socially desirable goods and services.
E)Production is efficient,but distribution is inefficient.

Question 11

Which of the following statements best describes the underlying feature in most economic problems?

A)People have unlimited wants in the face of limited resources.
B)There are unlimited resources.
C)Our country is rich; we just donʹt realize it.
D)People have limited wants in the face of limited resources.
E)Governments should never interfere in the workings of a market economy.

Question 12

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

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

Question 13

Which of the following best describes the study of economics?

A)how to plan an economy
B)how to limit human wants so that scarce resources are sufficient
C)why resources are scarce
D)the allocation of scarce resources among alternative uses
E)how to distribute income as equally as possible

Question 14

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.Which of the following statements best describes the shape of your budget line?

A)The budget line is concave to the origin,indicating that the opportunity cost of each model of vehicle increases with each additional unit purchased.
B)The budget line is convex to the origin,indicating that the opportunity cost of each vehicle decreases with each additional unit purchased.
C)The budget line is a straight line,indicating that the opportunity cost of each vehicle decreases with each additional unit purchased.
D)The budget line is a straight line,indicating that the opportunity cost of each model of vehicle is independent of how many are purchased.
E)The budget line is a straight line,indicating that the opportunity cost of each vehicle increases with each additional unit purchased.

Question 15

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.What is the opportunity cost of one Model A vehicle?

A)0
B)3/5 ths of a Model B vehicle
C)5/3rds of Model B vehicle
D)5 Model B vehicles
E)3 Model B vehicles

Question 16

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

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

Question 17

Economics can best be described as

A)the study of how a society ought to allocate its resources.
B)the study of the use of scarce resources to satisfy unlimited human wants.
C)the application of sophisticated mathematical models to address social problems.
D)a normative science.
E)the study of how to reduce inflation and unemployment.

Question 18

A small landscaping firm purchases a tractor that,in one day,is capable of drilling 60 fence -post holes or removing 12 tree stumps (or some intermediate combination).For this landscaper,what is the opportunity cost of removing one extra tree stump?

A)1/12th of the cost of the tractor
B)1/5 of the cost of the tractor
C)drilling 12 fence-post holes
D)drilling 5 fence-post holes
E)there is no opportunity cost

Question 19

A basic underlying point in economics is that

A)people have unlimited wants in the face of limited resources.
B)there are unlimited resources.
C)governments should satisfy the needs of the people.
D)people have limited wants in the face of limited resources.
E)governments should never interfere in the workings of a market economy.

Question 20

Societyʹs resources are often divided into broad categories.They are

A)goods and services.
B)factors of consumption.
C)land,labour,and capital.
D)population and natural resources.
E)tangible commodities and intangible commodities.

Question 21

Suppose Andrea has a job that pays her $25 000 per year (after taxes).She is considering quitting her job and going to university full time for four years.Tuition fees and books will cost $12 000 per year.Living expenses in either situation will cost $10 000 per year.What is the opportunity cost of Andreaʹs four -year university degree?

A)$88 000
B)$100 000
C)$120 000
D)$148 000
E)$188 000

Question 22

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.At point B,

A)the price of capital goods is higher than the price of consumer goods.
B)Country X is producing too many consumer goods and too few capital goods.
C)the price of consumer goods is equal to the price of capital goods.
D)the opportunity cost of producing an extra unit of capital goods is higher than at point A.
E)the opportunity cost of producing an extra unit of consumer goods is higher than at point A.

Question 23

A point lying inside the production possibilities boundary is one at which

A)there is no scarcity.
B)the opportunity cost of producing more output is negative.
C)it is not possible to produce more output with existing resources.
D)the economy has run out of resources.
E)more output could be produced with existing resources.

Question 24

Suppose that a bakeshop with 5 employees can produce both pies and cakes.In one day,if all resources are devoted to baking pies,the shop can produce 125 pies; if all resources are devoted to baking cakes,the shop can produce 50.What is the shopʹs opportunity cost of producing any one pie?

A)125 pies
B)0.4 cakes
C)2.5 pies
D)0.4 pies
E)50 cakes

Question 25

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.If Country X is currently producing at point A,it could move to point B if

A)the cost of producing capital goods were to increase.
B)some resources were switched from the capital goods industries to the consumer goods industries.
C)the cost of producing consumer goods were to increase.
D)some resources were switched from the consumer goods industries to the capital goods industries.
E)Country X is no longer able to produce the quantity of capital goods at point A.

Question 26

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.The production possibilities boundaries are drawn concave to the origin.What does this shape of the PPB demonstrate?

A)the decreasing opportunity cost of producing more of either good
B)the scarcity of resources in the economy
C)the constant opportunity cost of producing more of either good
D)the unfair distribution of resources in the economy
E)the increasing opportunity cost of producing more of either good

Question 27

Chantal has a full-time job as a geological engineer and earns an annual after -tax salary of $85 000.She decides to leave her job for 6 months to scuba dive on the Great Barrier Reef in Australia,and incurs costs of $7500 for course equipment and certification,$2500 for airfare,and $12 000 for regular living expenses in Australia (equal to her living expenses at home).What is Chantalʹs opportunity cost for this 6 -month,unpaid leave of absence?

A)$12 000
B)$22 000
C)$42 000
D)$52 500
E)$65 000

Question 28

During economic recessions, the opportunity cost of going to university ________ because the wages a student can expect to earn working in the best alternative ________.

A)increases; decrease
B)decreases; increase
C)increases; increase
D)decreases; decrease
E)remains the same; remain the same

Question 29

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.A shift of the production possibilities boundary from PPB1 to PPB2 implies

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

Question 30

It has been observed that university enrollment in Canada is higher during periods of high unemployment.A possible explanation for this is that

A)when prospects for getting a job are poor,the opportunity cost of getting a job is lower.
B)when prospects for getting a job are poor,the opportunity cost of doing nothing is higher.
C)during periods of high unemployment,tuition fees are reduced.
D)during periods of high unemployment,the opportunity cost is no longer relevant.
E)when prospects for getting a job are poor,the opportunity cost of going to university is lower.

Question 31

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

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

Question 32

Suppose that a bakeshop with 5 employees can produce both pies and cakes.In one day,if all resources are devoted to baking pies,the shop can produce 125 pies; if all resources are devoted to baking cakes,the shop can produce 50.What is the shopʹs opportunity cost of producing any one cake?

A)0.4 pies
B)0.25 pies
C)2.5 pies
D)0.4 cakes
E)2.5 cakes

Question 33

Suppose Amin has a job that pays him $87 000 per year (after taxes).He is considering taking an unpaid leave of absence from his job to complete a 12-month MBA program.Tuition is $75 000 and books and materials will cost $5000.Living expenses for the 12-month period will be cheaper by $500 per month,mostly due to lower apartment rental costs.What is the opportunity cost of Aminʹs 1-year MBA program?

A)$75 000
B)$76 000
C)$161 000
D)$167 000
E)$175 000

Question 34

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.If Country X were producing at point C,

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

Question 35

If a countryʹs production possibilities boundary is drawn as a straight (downward -sloping)line it indicates

A)decreasing opportunity cost of producing more of either good.
B)the use of the scarce resources in an economy.
C)constant opportunity cost of producing more of either good.
D)an unfair distribution of resources in an economy.
E)increasing opportunity cost of producing more of either good.

Question 36

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?

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

Question 37

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.If Country X,constrained by the production possibilities boundary PPB1,is producing the combination of goods indicated at point F,it can produce more consumer goods by moving to one of the points

A)A or E.
B)D or E.
C)A,B,or C.
D)A or B,but not C.
E)A,B,C,D,or E.

Question 38

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.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

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

Question 39

A countryʹs production possibilities boundary shows that

A)when a society combines its resources efficiently,it cannot produce more of one good without producing less of the other good.
B)when a society combines its resources inefficiently,it cannot produce more of one good without producing less of the other good.
C)when a society combines its resources efficiently,it is always possible to produce more of all goods.
D)all points inside the boundary are preferred to all points on the boundary.
E)the supply for goods always exceeds the demand.

Question 40

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.Suppose that Country X is currently producing at point E.Country X could achieve production at point D if

A)the given resources were fully employed.
B)the given resources were more efficiently employed.
C)sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries.
D)firms reduced output of capital goods.
E)the prices of capital goods and consumption goods fell.

Question 41

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.
FIGURE 1-6
Refer to Figure 1-6.The levels of health and education expenditures at point C

A)are less than at point D.
B)are equal to those of point A and point B.
C)are more cost-effective than those at points A,B,and D.
D)could be achieved if the prices of health and/or education increased.
E)are not attainable with the governmentʹs current budget.

Question 42

In recent years,several large Canadian-owned mining and resource companies have been sold to foreign owners.The immediate effect on Canadaʹs production possibilities boundary is

A)a shift outward.
B)a shift inward.
C)no change.
D)a movement along.
E)a movement to a point beyond the boundary.

Question 43

Suppose drought destroys many millions of acres of valuable Canadian farmland.The effect on the Canadian economy would be to move

A)it along its production possibilities boundary.
B)its production possibilities boundary inward.
C)it beyond its production possibilities boundary.
D)its production possibilities boundary outward.
E)None of the above.There would be no change in Canadaʹs production possibilities boundary.

Question 44

Consider Canadaʹs 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.

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

Question 45

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

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

Question 46

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.Growth in the countryʹs productive capacity is illustrated by

A)a point like D outside the boundary.
B)a movement from a point inside the boundary such as C to the boundary.
C)the movement between points on a given boundary.
D)a single point such as A on the boundary.
E)an outward shift of the boundary,for example from PPB1 to PPB2.

Question 47

The diagram below shows two production possibilities boundaries for Country X.
FIGURE 1-4
Refer to Figure 1-4.An outward shift of the production possibilities boundary fromPPB1 to PPB2 indicates which of the following?

A)an increase in the price of raw materials for consumer goods
B)growth in the countryʹs productive capacity
C)an increase in the price of raw material for capital goods
D)more of the countryʹs resources are being used
E)the countryʹs resources are being used less efficiently

Question 48

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.
FIGURE 1-6
Refer to Figure 1-6.Suppose the governmentʹs current spending is shown by point D.In this case,

A)the government is not spending its total budget.
B)more education expenditures can be achieved only by sacrificing some health expenditures.
C)more health expenditures can be achieved only by sacrificing some education expenditures.
D)the government should spend its total budget so as to get to point B,since more health spending and more education spending are both clearly desirable.
E)the prices of education and health care have increased beyond the governmentʹs ability to pay.

Question 49

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

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

Question 50

Consider the production possibilities boundary (PPB)of an economy.Economic growth is illustrated by

A)the negative slope of the PPB.
B)an outward shift of the PPB.
C)a movement onto the PPB.
D)a movement along the PPB.
E)the movement to a point outside of the PPB.

Question 51

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

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

Question 52

The world price of oil fell in 2014-2015 from over $100 per barrel to less than $50.As a producer of oil,what effect did this change have on Canadaʹs production possibilities boundary?

A)a shift outward
B)a shift inward
C)movement to a point beyond the boundary
D)movement to a point within the boundary
E)no change

Question 53

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

A)points on the boundary.
B)area within the boundary.
C)distance from the origin to the boundary.
D)negative slope of the boundary.
E)unattainable points outside the boundary.

Question 54

A straight-line production possibilities boundary differs from a concave boundary in which of the following ways?

A)The straight-line boundary illustrates constant opportunity costs,whereas the concave boundary illustrates increasing opportunity costs.
B)The concave boundary illustrates constant opportunity costs,whereas the straight -line boundary illustrates decreasing opportunity costs.
C)The straight-line boundary does not show scarcity,whereas the concave boundary does.
D)The straight-line boundary shows opportunity cost,whereas the concave boundary does not.
E)A straight-line boundary is associated with a command economy,whereas a concave boundary is associated with a free-market economy.

Question 55

Consider a production possibilities boundary showing the quantity of military goods and the quantity of civilian goods on the two axes.A movement along the production possibilities boundary could be caused by

A)the employment of previously idle resources.
B)the reallocation of resources between military and civilian goods.
C)the growth of productive capacity.
D)an increase in the labour supply.
E)technological progress.

Question 56

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose the economy is currently producing at point A.What is the opportunity cost to this economy of increasing production of bananas by 100 tonnes?

A)there is no opportunity cost
B)60 tonnes of cotton
C)100 tonnes of cotton
D)1440 tonnes of bananas
E)1500 tonnes of bananas

Question 57

Consider Canadaʹs production possibilities boundary.During the nineteenth and early twentieth centuries,millions of people immigrated to western Canada.The effect on the Canadian economy was to

A)move it to a point beyond its new production possibilities boundary.
B)move it inside its new production possibilities boundary.
C)shift its production possibilities boundary inward.
D)shift its production possibilities boundary outward.
E)move it along an unchanged production possibilities boundary.

Question 58

The downward-sloping line in the diagram below shows the combinations of health care and education expenditures that the government can afford with a given amount of tax revenue.
FIGURE 1-6
Refer to Figure 1-6.If the governmentʹs spending on health and education is given by point B,a move to point A must involve

A)less spending on health.
B)zero opportunity cost.
C)less spending on education.
D)less spending in total.
E)more spending on education.

Question 59

Consider Canadaʹs 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 Canadaʹs current production

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

Question 60

Suppose there are only two goods produced in our economy-snowplows and helicopters.If there is always a two-for-one tradeoff between the production of these two goods (in terms of opportunity cost),then the production possibilities boundary between snowplows and helicopters is

A)a downward-sloping curve convex to the origin.
B)circular.
C)a downward-sloping straight line.
D)a downward-sloping straight line with slope equal to -1.
E)a downward-sloping curve concave to the origin.

Question 61

Which of the following statements best describes a barter system of exchange?

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

Question 62

Which of the following statements about specialization and trade are correct?

A)They developed only in the twentieth century.
B)They exist only in capitalist economies.
C)They arose as humans changed from nomadic and self-sufficient food gatherers to settled food producers.
D)They developed only where government and political institutions were stable.
E)They occur only in the private sector.

Question 63

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose this economy moves from point D to point F,where it is then producing bananas exclusively.Which of the following explanations best describes the opportunity cost involved in producing this extra 100 tonnes of bananas?

A)The opportunity cost is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
B)The opportunity cost is very low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
C)The opportunity cost is very high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
D)The opportunity cost is very low in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
E)The opportunity cost of producing the extra bananas is independent of the amount being produced.

Question 64

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.If the economy moves from point C to point D,what is the opportunity cost of each extra tonne of bananas produced?

A)0.036 tonnes of cotton
B)0.36 tonnes of cotton
C)3.6 tonnes of cotton
D)36 tonnes of cotton
E)360 tonnes of cotton

Question 65

In the Canadian economy,most decisions regarding resource allocation are made by

A)consumers and producers interacting in the price system.
B)the various levels of government.
C)negotiation between unions and firms.
D)business firms only.
E)legal contract.

Question 66

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose this economy is currently producing 1280 tonnes of cotton and 200 tonnes of bananas.What is the opportunity cost of increasing production of bananas by 100 tonnes?

A)100 tonnes of cotton
B)360 tonnes of cotton
C)360 tonnes of bananas
D)920 tonnes of cotton
E)there is no opportunity cost

Question 67

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Which of the following statements best describes the difference in opportunity costs that this economy faces at point A compared to point E?

A)The opportunity cost is 1500 tonnes of cotton at point A,compared to 500 tonnes at point E.
B)The opportunity cost is 500 tonnes of cotton at point A,compared to 1500 tonnes at point E.
C)The opportunity cost of producing an extra tonne of bananas is much higher at point A than at point E.
D)The opportunity cost of producing an extra tonne of bananas is much lower at point A than at point E.
E)The opportunity cost of producing an extra tonne of bananas is the same at point A as at point E.

Question 68

Money facilitates trade and specialization by

A)allowing an efficient barter system to develop.
B)increasing the value of gold.
C)eliminating the need for barter.
D)reducing the shift of resources between uses.
E)providing employment for coin makers.

Question 69

The famous economist who first described the division of labour was

A)Karl Marx.
B)Milton Friedman.
C)David Ricardo.
D)John Maynard Keynes.
E)Adam Smith.

Question 70

Which of the following has most contributed to the globalization of the economy?

A)the decreased importance of agriculture
B)reductions in transportation and communication costs
C)the shift toward a market economy in China
D)tariffs and trade barriers
E)the decline in the relative importance of manufacturing

Question 71

A farmer selling tomatoes and corn at a roadside,and a currency trader in Hong Kong are each participating in

A)barter.
B)a market.
C)an involuntary transaction.
D)flexible manufacturing.
E)international trade.

Question 72

An insight first fully developed by Adam Smith is that

A)without benevolence production would not occur.
B)all individuals are motivated solely by self-interest.
C)self-interest,not benevolence,is the foundation of economic order.
D)self-interest undermines effective economic order.
E)individual self-interest is the only necessary force for social order.

Question 73

Specialization of labour led to greater efficiency in the allocation of resources because of

A)greater reliance on self-sufficiency.
B)the use of barter.
C)the principle of comparative advantage.
D)an increase in total work effort.
E)the opportunity cost of labour increased.

Question 74

A modern economy like Canadaʹs is largely organized by

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

Question 75

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose the economy is currently producing at point D.What is the opportunity cost of increasing production of bananas by 100 tonnes?

A)420 tonnes of cotton
B)100 tonnes of cotton
C)there is no opportunity cost
D)60 tonnes of cotton
E)920 tonnes of cotton

Question 76

Which of the following results from the introduction of money for use in transactions?

A)exchange becomes easier and this promotes the specialization of labour
B)an increased use of barter
C)the specialization of labour becomes more difficult
D)self-sufficiency is assured
E)society is able to satisfy all wants

Question 77

The barter system of exchange is inefficient because

A)ʺfairʺ values cannot be defined without the use of money.
B)bargaining power is unequal between rich and poor.
C)the double coincidence of wants may not exist.
D)markets do not exist.
E)exchange partners need to know each other.

Question 78

A greater specialization of labour leads to which of the following major results?

A)the overall output of the economy declines
B)there is an increased need for government to intervene in the marketplace
C)the circular flow of income contracts
D)there is a greater need for trade
E)each worker must become more self-sufficient

Question 79

If an economy exhibits the specialization of labour,we know that

A)a barter economy is more suitable.
B)most production is artisanal in nature.
C)each worker is self-sufficient.
D)job security is ensured.
E)different individuals are producing different products.

Question 80

With reference to the circular flow of income,how is the allocation of resources largely decided?

A)by central authorities only
B)by central authorities and firms only
C)by firms and households acting independently
D)by political parties and firms only
E)by individuals only