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## Macroeconomics 3rd Canadian Edition Hubbard | Test Bank

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Macroeconomics 3rd Canadian Edition Hubbard | Test Bank

Exam

Name

# MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

## Table 1.1

 Hours Open Total Revenue (dollars) 1 \$50 2 75 3 95 4 110 5 120 6 125

Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Ly figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She wou to hire a worker for those hours at a wage rate of \$10 per hour.

• Refer to Table 1. What is Lydia's marginal cost if she decides to stay open for two hours instead of one hour?
1. A) \$10 B) \$20 C) \$25 D) \$40 E) \$50

1)

• Which of the following statements is true about profit? 2)
1. A firm's revenue will increase as its costs
2. The terms "accounting profit" and "economic profit" can be used
3. Profit is calculated by multiplying price and quantity
4. Profit is the difference between revenue and

• Profit refers to the revenue received from the sale of a quantity of
• The highest valued alternative that must be given up to engage in an activity is the definition of 3)
1. marginal
2. economic
3. marginal
4. economic

• opportunity

## Figure 1.2

• Refer to Figure 2. Calculate the area of the triangle A. 4)
1. \$1.3 million
2. \$2.6 million
3. \$3.4 million
4. \$5.2 million
5. \$8.4 million

• A grocery store sells a bag of potatoes at a fixed price of \$5.50. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
1. pure profit
2. marginal costs
3. net benefit
4. marginal revenue
5. gross earnings

5)

• Scarcity refers to the situation in which 6)
1. a country's population is larger than its resource
2. unlimited resources exceed limited
3. a nation's poverty level increases faster than its
4. unlimited wants exceed limited
5. our needs and wants are

• If the price of milk was \$2.50 a litre and it is now \$3.25 a litre, what is the percentage change in price?
1. 13 percent
2. 30 percent
3. 75 percent
4. 77 percent
5. 130 percent

7)

• By charging users that skip workouts, the designers of a gym are 8)
1. increasing both the marginal cost and the marginal benefit of
2. decreasing the marginal cost and the marginal benefit of
3. assuming gym members are
4. increasing the marginal benefit of

• increasing the marginal cost of
• Economists reason that the optimal decision is to continue any activity up to the point where the 9)
1. marginal benefit starts
2. marginal cost is
3. marginal benefit is
4. marginal benefit is greater than the marginal
5. marginal benefit equals the marginal

• DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is \$40, and he charges \$75 for this For a total price of \$90, DeShawn will also detail the car's engine, a service that adds an additional \$20 to the total cost of the package. What is DeShawn's marginal benefit if he sells a basic detailing package?
1. A) \$35
2. B) \$75
3. zero dollars
4. He makes a marginal loss of \$15.
5. The marginal benefit cannot be

10)

• The relationship between consumer spending and disposable personal income is 11)
1. an inverse
2. a negative
3. a direct

• reverse
• Economic models do all of the following except 12)
1. make economic ideas explicit and concrete for use by decision
2. portray reality in all its minute
3. simplify some aspect of economic

• simplify versions of
• Which of the following is an example of an activity undertaken by an entrepreneur? 13)
1. running for Prime Minister of Canada
4. choosing the color scheme for your renovated kitchen

• holding a position as the president of a small university

• Which of the following is motivated by an equity concern? 14)
1. Canada offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their
2. Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor,
3. Following the implementation of subsidies for energy conservation, household demand for rooftop solar panels increased quite significantly in
4. Some provinces and municipalities have transferred funds to food bank programs in order to increase benefits to lower-income
5. Some provinces allow automotive insurance companies to charge men and women different

rates for insurance.

• On a two-dimensional graph, allows for the effects of additional 15)
2. eliminating a curve
3. moving along a curve
4. shifting curves
5. eliminating colour

• The term in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to
2. collective
3. cooperative
4. monopoly
5. market

16)

• Central planning relies on to determine what types of products to make 17)
2. consumers' choices
3. collective decisions
4. government employees
5. consumers' wants

• You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over the past two years she has lowered the price of her headbands and yet has seen a decrease in How would you respond to Surya?
1. I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her
2. Surya is making the mistake of assuming that correlation implies
3. Surya is making the mistake of assuming that causation implies
4. I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in
5. Surya is right; she has evidence to back her The theory must be erroneous.

18)

• All of the following contributed to the downfall of the Soviet Union in 1991 except 19)
1. lack of a strong dictator who can coordinate economic
2. an inability to produce low-cost consumer goods that households
3. lack of high-quality goods and
4. an overabundance of high-quality goods and
5. public dissatisfaction with low living standards and political

• Consider the following statements:
1. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the
2. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring
3. Firms produce more of a particular DVD when its selling price

Which of the above statements demonstrates that economic agents respond to incentives?

1. a B) b only. C) c only. D) a and b. E) a, b, and

c.

• Obesity is one of the biggest health challenges facing Canadians, with few Canadians getting the recommended amount of daily physical Economists would expect
1. there is no correlation between fines for skipping exercise and how often people will go to the
2. people who agree to pay a fine for skipping exercise sessions will be less
3. the cost of gym memberships will decrease as people join gyms and demand
4. people who value physical appearance to exercise less than
5. people will exercise more when the cost of skipping exercise

20)

21)

• Which of the following is a positive economic statement? 22)
1. The government should close income tax
2. If the price of iPhones falls, a larger quantity of iPhones will be
3. The government should restructure the health care
4. The standard of living in Canada should be
5. The Ontario government should not have bailed out Canadian auto

• DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is \$40, and he charges \$75 for this For a total price of \$90, DeShawn will also detail the car's engine, a service that adds an additional \$20 to the total cost of the package. What is the marginal cost of adding the engine detailing to the basic detailing package?
1. A) \$20
2. B) \$30
3. C) \$60
4. \$60 plus the value of his time
5. \$0

23)

• Which of the following statements is true about competition in a market? 24)
1. Competition forces firms to outsource the production of their labour-intensive
2. Competition forces firms to add only high profit margins to their costs of
3. Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of
4. Competition forces firms to add only low profit margins to their costs of

• Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price
• Making optimal decisions "at the margin" requires 25)
1. making consistently irrational
3. making decisions according to one's whims and
4. making borderline

• weighing the costs and benefits of a
• Technology is defined as 26)
1. the machines that workers have to work
2. the processes used to produce goods and
3. the process of recycling
4. the process of developing and revising
5. new innovations and

• Which of the following statements about the economic decisions consumers, firms, and the government have to make is false?
1. Governments face the problem of scarcity in making economic
2. Each faces the problem of scarcity which necessitates trade-offs in making economic
3. Only individuals face scarcity; firms and the government do
4. Both firms and individuals have to make
5. Both firms and individuals face

• increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of
1. A centrally planned economy
2. Voluntary exchange
3. Equity
4. Competition
5. Equality

27)

28)

• Which of the following is not an example of an economic trade-off that a firm has to make? 29)
1. whether it is to outsource the production of a good or service
2. whether it should produce less of its product
3. whether it should produce more of its product
4. whether it is cheaper to produce with more machines or with more workers

• whether or not consumers will buy its products

• Political candidates often hold fund raisers by charging "per plate" for Wendy purchased four tickets to a \$1,000 per plate dinner for a local city council candidate. Is this transaction economically efficient?
1. No, political candidates should never be allowed to overcharge for a fund raising
2. Yes, it is efficient only from the perspective of Wendy but not from the perspective of the
3. Yes, it was a voluntary exchange that benefited both
4. Yes, it is efficient only from the perspective of the candidate but not from the perspective of
5. No, Wendy paid too much for four

30)

• Allocative efficiency best explains , and productive efficiency best explains . 31)
1. what will be produced; how something will be produced
2. what will be produced; when something will be produced
3. how something will be produced; when something will be produced
4. why something will be produced; what will be produced
5. when something will be produced; why something will be produced

• Suppose your provincial government encouraged new medical school graduates to take over rural and small town practices from doctors wishing to retire by paying both the new and retiring doctors \$100,000. These doctors would be exemplifying the economic idea that
1. equity is more important than
2. people make identical
3. people are
4. people respond to economic
5. optimal decisions are made at the

32)

• What is the "omitted variable" problem in determining cause and effect? 33)
1. It is a problem that arises when an insignificant variable is given too much weight in an economic analysis leading to skewed conclusions about cause and
2. It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and
3. It is a problem that arises when an economic variable that affects other variables is purposely omitted from an analysis and its omission leads to correct conclusions about cause and
4. It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic experiment leading to false conclusions about cause and
5. It is a problem that arises when a significant variable is not given enough weight in an economic experiment leading to skewed conclusions about cause and

• In 2019, Hooverville consumed 205,000 tonnes of In 2020, sugar consumption rose to 245,000 tonnes. Calculate the percentage change in sugar consumption.
1. A) 37% B) 11.95% C) 19.51% D) 26.33% E) 53%

34)

• Which of the following questions or statements regarding minimum wage is normative? 35)
1. People working in the retail sector deserve higher
2. How do changes in minimum wages affect the employment opportunities of teens?
3. Higher minimum wages will cause firms to employ fewer
4. The minimum wage law causes
5. Wages play a role in causing someone to apply for a

• Automobile manufacturers produce a range of automobiles such as sports utility vehicles, luxury sedans, pickup trucks and compact cars. What fundamental economic question are they addressing by making this range of products?
1. What to produce?
2. How to produce goods that consumers want?
3. What price to charge for each range of products?
4. Why produce a variety of automobiles?
5. Who to produce automobiles for?

36)

• Which of the following statements is false? 37)
1. A curved line has slope values that change at every
2. An inverse relationship has a negative slope
3. A straight line has a slope of
4. Few economic relationships are actually

• A direct relationship has a positive slope
• Who receives the most of what is produced in a market economy? 38)
1. those who are willing and able to buy them
2. those who need them the most
3. lawmakers and other politically favoured groups
4. people who earn the highest incomes

• everyone receives an equal amount
• Suppose when the price of laptops fall, university students buy more This implies that 39)
1. there is a direct relationship between laptop prices and quantities purchased by college
2. there is a one-to-one relationship between laptop prices and quantities purchased by college
3. there is no relationship between laptop prices and quantities purchased by college
4. there is a positive relationship between laptop prices and quantities purchased by college
5. there is a negative relationship between laptop prices and quantities purchased by college

• The Coffee Nook, a small cafe near campus, sells cappuccinos for \$2.50 and Russian tea cakes for

\$1.00 each. What is the opportunity cost of buying a cappuccino?

1. A) \$2.50
2. B) \$0.40
3. C) 2 1/2 Russian tea cakes
4. D) \$1.00
5. E) 2/5 of a Russian tea cake

40)

• Which of the following is motivated by an efficiency concern? 41)
1. The right to purchase tickets to the Grey Cup is decided by a
2. The federal government Equalization program which makes larger transfers to poor provinces than to wealthy
3. In 2013 the Alberta government handed out pre-paid credit and debit cards to flood
4. Organ transplant waiting lists rationing scarce kidneys that would favour young patients over old in an effort to wring more life out of donated
5. Some university scholarships have been cut back since these programs siphon money from need-based programs, thus harming lower-income students with greater financial

• Changes in global weather patterns can lead to 42)
2. Canadians having to pay more for
4. the destruction of the Canadian coffee
5. wage increases for coffee shop

• An economic is a simplified version of some aspect of economic life used to analyze an economic
1. model
2. market
3. variable
4. opportunity cost

• As professors and teachers get closer to retirement age they typically spend more time reading and thinking about the financial planning as well as the stock By gathering and using all available information as they act to achieve their goals, these teachers are exemplifying the economic idea that
1. equity is more important than
2. people make identical
3. people respond to economic
4. people are
5. optimal decisions are made at the

43)

44)

• Economists assume that rational behaviour is useful in explaining choices people make 45)
1. even though people may not behave rationally all the
2. because irrational people do not make economic
3. because economic choices are not needed by rational
4. even though people rarely, if ever, behave in a rational

• because individuals act rationally all the time in all
• Economists assume that 46)
1. individuals behave in unpredictable
2. society's output should be equally
3. optimal decisions are made at the
4. people put other people's interests ahead of their

• consumer behaviour is explained by the existence of unlimited
• Markets promote 47)
1. voluntary exchange and
2. equity and
3. competition and voluntary
4. competition and

• equity and

## Scenario 1.1

Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of \$5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by \$6,000 and our costs by \$6,700, we are still making an overall profit of \$5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."

• Refer to Scenario 1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 3,000 cell phones?
1. net benefit
2. gross earnings
3. explicit revenue
4. sales revenue
5. marginal revenue

48)

• If climate change continues to reduce the amount of green coffee available to roasters, 49)
1. the price of take out coffee will
2. people working in coffee shops will receive higher
3. demand for green coffee will
4. more people will want to drink coffee than

• more entrepreneurs will enter the roasting

## Table 1.1

 Hours Open Total Revenue (dollars) 1 \$50 2 75 3 95 4 110 5 120 6 125

Lydia runs a small nail salon in the town of New Hope. She is debating whether she should extend her hours of operation. Ly figures that her sales revenue will depend on the number of hours the nail salon is open as shown in the table above. She wou to hire a worker for those hours at a wage rate of \$10 per hour.

• Refer to Table 1. Using marginal analysis, determine how many hours should Lydia extend her nail salon's hours of operations?
1. 2 hours B) 3 hours C) 4 hours D) 5 hours E) 6 hours

• Refer to Table 1. What is Lydia's marginal benefit if she decides to stay open for two hours instead of one hour?
1. A) \$25 B) \$50 C) \$75 D) \$125 E) \$150

50)

51)

## Figure 1.4

• Refer to Figure 1- Which of the following statements is false? 52)
1. The slope of the tangent at F is
2. Neither the slope of the tangent at E nor the slope of the tangent at F are equal to
3. The slope of the tangent at E is
4. The slope of the tangent at E and the slope of the tangent at F are

• The slope of the tangent at E is positive and the slope of the tangent at F is
• Which of the following is a result of a market economy? 53)
1. voluntary exchange
2. agreement on equity
3. scarcity
4. environmental protection

• an equal income distribution
• Which of the following is a problem inherent in centrally planned economies? 54)
1. Production managers are more concerned with satisfying consumer wants than with satisfying government's
2. There is too little production of low-cost, high-quality goods and
3. Those who are willing and able to buy what is produced determine what is
4. Households and firms make poor decisions in choosing how resources are

• Exports tend to exceed
• The three fundamental questions that any economy must address are 55)
1. Who gets jobs; what wages do workers earn; and who owns what property?
2. How can the economy's output be equally shared; who are the decision makers; and what is the optimum output?
3. What goods and services to produce; how will these goods and services be produced; and who receives them?
4. What will be the prices of goods and services; how will these goods and services be produced; and who will receive them?

• How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

• The revenue received from the sale of of a product is a marginal benefit to the 56)
1. all the units
3. the total number of units
4. no units
5. only profitable units

• Consider the following economic agents:
1. the government
2. consumers
3. producers

Who, in a centrally planned economy, decides what goods and services will be produced with the sc resources available in that economy?

1. the government
2. consumers
3. producers
4. consumers and producers
5. the government, consumers and producers

57)

• Making "how much" decisions involves 58)
2. calculating the total costs of the activity and determining if you can afford to incur that
3. calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that
4. calculating the total benefits of the activity and determining if you are satisfied with that

• advanced knowledge of economics and product
• Which of the following generates productive efficiency? 59)
1. government regulations
2. competition among sellers
4. government production rules

• government inspectors
• The basic economic problem of has always existed and will continue to 60)
1. inflation
2. scarcity
3. recession
4. unemployment

• efficiency
• The approximately 12 seconds between episodes on Netflix means that binge watching is 61)
1. the result of a series of marginal
2. something every one plans to when they first login to
3. an indication of how quickly Netflix users can make
4. a rational

• something Netflix forces viewers to

• Which of the following is an example of an efficiency-equity trade-off faced by economic agents? 62)
1. Provincial health programs are not cost Instead of focusing on universal access to the health care system, money should be spent on programs that prevent disease first and

treating disease second.

1. Concerned about the falling birth rate, the French government has pledged more money for families with three children, in an effort to encourage working women to have more
2. Municipal sports programs must charge all participants the same price, even when participants don't live in the
3. The growing demand for corn by ethanol producers has led to a surge in the price of tortillas, a staple in the Mexican diet. To quell public outcry over rising tortilla prices, the Mexican government released government corn stocks at prices well below the market, and pressured states to impose price ceilings on tortillas.

• Some Canadian universities are actively recruiting foreign students for their technology-based
• Which of the following is a macroeconomics question? 63)
1. How is the production quantity of digital cameras determined?
2. What factors determine the price of iPhones?
3. What determines the size of the film industry in Canada?
4. What determines the wage of auto workers?
5. What determines the inflation rate?

• If a straight line passes through the point x = 14 and y = 3 and also through the point x = 4 and y =

10, the slope of this line is

1. 6 divided by
2. one and seven tenths
3. seven
4. negative seven
5. negative 11 divided by

64)

• The machines workers have to work with are considered 65)
1. natural
2. human
3. financial

• physical
• Which of the following is a normative economic statement? 66)
1. The minimum wage law causes
2. Toronto is considering increasing funds for light-rail development to promote the use of public
3. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more
4. Rising global demand for coal has led to increases in the price of

• With rising mortgage rates and rising unemployment rates, the number of unsold homes has

• How are the fundamental economic decisions determined in North Korea? 67)
1. These decisions are made by the country's elders who have had much experience in answering these
2. Individuals, firms, and the government interact in a market to make these economic
3. North Korean firms decide as they determine
4. The government decides because North Korea is a centrally planned

• The United Nations decides because North Korea is a developing
• Macroeconomics is the study of 68)
1. how firms make
2. how households make
3. how households and firms make
4. the economy as a

• the impact of government interventions on market
• Economists assume that rational people do all of the following except 69)
1. use all available information as they act to achieve their
2. respond to economic
3. weigh the benefits and costs of all possible alternative
4. undertake activities that benefit others and hurt

• do things to make themselves better
• Which of the following is a positive economic statement? 70)
1. Foreign workers should not be allowed to work for lower wages than the citizens of a
2. The government should mandate electric
3. Scarcity necessitates that people make trade-

• People should not buy imported fruits and
• Which of the following statements is true? 71)
1. Anytime you have to decide which action to take you are experiencing economic
2. Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance
3. Economics is a social science that studies the trade-offs we are forced to make because resources are
4. Every individual, no matter how rich or poor, is faced with making trade-

• Producing more of one good means more of another good can be produced.
• Which of the following statements about positive economic analysis is false? 72)
1. There is much more disagreement among economists over normative economic analysis than over positive economic
2. Positive analysis is concerned with what is and can potentially be
3. Positive analysis uses an economic model to estimate the costs and benefits of different course of
4. There is much more disagreement among economists over positive economic analysis than over normative economic

• Unlike normative economic analysis, positive economic analysis can be

## Scenario 1.1

Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of \$5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by \$6,000 and our costs by \$6,700, we are still making an overall profit of \$5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."

• Refer to Scenario 1. Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher or lower, and if so by how much?
1. Its profit will be \$700
2. Its profit will be
3. Its profit will be \$6,700
4. Its profit will be \$700
5. Its profit will be \$6,000

73)

• In economics, the term "equity" means 74)
1. economic benefits are distributed
2. everyone has an equal standard of
3. economic benefits are distributed
4. the hardest working individuals consume all they
5. only elected officials have high standards of

• The economic analysis of minimum wage involves both normative and positive Consider t following consequences of a minimum wage:
1. The minimum wage law causes
2. A minimum wage law benefits some groups and hurts
3. In some cities such as San Francisco and New York, minimum wage laws are necessary for low-skilled workers to stay in the
4. The gains to winners of a minimum wage law should be valued more highly than the losses to l

because the latter primarily comprises businesses.

Which of the consequences above are positive statements and which are normative statements?

1. a, b, and c are positive statements and d is a normative
2. a and b are positive statements, c and d are normative
3. Only a is a positive statement, b, c and d are normative
4. a and c are positive statements, b and d are normative
5. a and d are positive statements, b and c are normative

• DeShawn's Detailing is a service that details cars at the customers' homes or places of work. DeShawn's cost for a basic detailing package is \$40, and he charges \$75 for this For a total price of \$90, DeShawn will also detail the car's engine, a service that adds an additional \$20 to the total cost of the package. Should DeShawn continue to offer the engine detailing service?
1. Yes, but only if he raises the price of the basic detailing
2. No, his marginal benefit is less than his marginal
3. Yes, because he will increase sales of the basic detailing
4. Yes, he still makes a profit by selling the engine detailing service with the basic detailing

• Refer to Figure 1. Using the information in the figure above, calculate the percentage change in sales of alcoholic beverages between 2013 and 2015.
1. A) 1% B) 23.8% C) 30% D) 40% E) 42.9%

75)

76)

77)

• Which of the following correctly describes the relationship between economic efficiency and economic equity?
1. They are both automatically achieved in a free market
2. There is often a trade-off between the
3. They always call for opposite
4. There is no trade-off between the
5. There is no conflict between the two

78)

• Which of the following is a microeconomics question? 79)
1. What factors determine the price of carrots?
2. What will the level of economic growth be in the entire economy?
3. What determines the average price level and inflation?
4. How much will be saved and how much will be produced in the entire economy?

• Why do economies experience periods of recession?
• Marginal analysis involves undertaking an activity 80)
1. until its marginal cost is
2. until its marginal benefits equal marginal
3. only if its marginal costs are greater than its marginal
4. until its marginal costs start
5. only when its marginal benefits are

• is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable
1. The omitted variable
2. Nonlinear slope
3. Tangent line
4. The positive-to-negative relationship
5. Reverse causality

• Arlene quits her \$125,000-a-year job to take care of her ailing What is the opportunity cost of her decision?
1. at least \$125,000
2. the total value of all alternatives that must be given up to engage in taking care of her parents
3. It depends on the "going rate" for home-care
4. zero, since she will no longer be earning a salary
5. the value she attributes to the satisfaction she receives from taking care of her parents

81)

82)

• The term "market" in economics refers to 83)
1. an organization which sells goods and services to a group of buyers who make decisions at the
2. a legal institution where exchange can take place between a group of buyers and
3. a place where stocks are traded between a group of international buyers and
4. a group of buyers and sellers and the arrangement by which they come together to

• a place where money changes hands between institutions and the arrangements they

• As the minimum wage 84)
1. there will be a surplus of
2. there will be a shortage of
3. the price of takeout coffee will
4. more coffee will be exported from

• the price of takeout coffee will
• The extra cost associated with undertaking an activity is called 85)
1. opportunity
2. marginal
3. activity
4. net
5. foregone

• McCain Foods Ltd. is one of the largest producer s of frozen french fries in the world. If the marginal cost of producing an extra million kilograms of french fries is \$1 million, then McCain Foods should produce the extra french fries
1. as long as the marginal benefit the firm receives is just equal to or greater than \$1
2. until the marginal benefit the firm receives reaches
3. only if the marginal benefit is greater than \$1 million plus an acceptable profit
4. as long as the marginal cost does not

86)

• is a situation in which a good or service is produced at the lowest possible 87)
1. Optimal marginalism
2. Equity
3. Productive efficiency
4. Allocative efficiency

• Equality
• In economics, the accumulated skills and training that workers have is known as 88)
1. natural
2. physical
3. human
• Allocative efficiency is achieved when firms produce goods and services 89)
1. at a marginal cost of
2. at the highest possible
3. at the lowest possible
4. at the lowest opportunity

• that consumers value
• If a graph has a line that shows the amount of outsourcing in the last ten years, it is known as 90)
1. a time-series
2. a pie
3. a demand curve for
4. a supply curve of

• a flow

• Which of the following is a normative economic statement? 91)
1. When the price of gasoline falls, oil companies cut
2. The current high price of gasoline is the result of strong worldwide
3. The price of gasoline is too
4. When the price of gasoline rises, the quantity of gasoline purchased
5. When the price of gasoline rises, transportation costs

• At a recent faculty meeting, Lorraine Waverly, president of Skywalker College, announced that enrollment is up by 12 percent over the previous semester. If enrollment the previous semester was 3,250 students, what is the student enrollment this semester?
1. A) 390 B) 2,860 C) 3,640 D) 4,030 E) 3,238

92)

• Productive efficiency is achieved when 93)
1. firms produce the goods and services that consumers value
2. firms add a low profit margin to the goods and services they
3. there are no surpluses in the
4. there are no shortages in the

• firms produce goods and services at the lowest
• Microeconomics is the study of 94)
1. how households and firms make
2. the global
3. the economy as a
4. topics such as inflation and economic

• what determines the unemployment
• The study of economics arises due to 95)

• unlimited
• How are the fundamental economic questions answered in a market economy? 96)
1. Individuals, firms, and the government interact in markets to decide the answers to these
2. The government alone decides the
3. Households and firms interact in markets to decide the answers to these
4. Wealthy individuals alone decide the
5. Large corporations alone decide the

• The prevalence of Alzheimer's dementia is very high among residents living in nursing A student concludes that it is likely that living in nursing home causes Alzheimer's dementia. What is the flaw in the student's reasoning?
1. The student is drawing a false conclusion; he is confusing cause and
2. The student is using an inadequate sample
3. The student has failed to take into account other causes of Alzheimer's
4. The student is drawing a false conclusion by making the mistake of omitting the age of the
5. The student is drawing a false conclusion by making the mistake of omitting the gender of the

97)

• In economics, the term means "additional" or "extra." 98)

1. absolute B) optimal C) marginal D) allocativ

e

1. E) equity

• have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic
1. Pie charts
2. Two-dimensional graphs
3. Flow charts
4. One-dimensional graphs
5. Bar graphs

## Figure 1.1

• Refer to Figure 1- Using the information in the figure above, calculate the percentage change in revenue from alcoholic beverage sales between 2013 and 2015.
1. A) 8% B) 30% C) 40% D) 42.9% E) 73.3%

99)

100)

• All of the following are part of an economic model except 101)
• When production reflects consumer preferences, 102)
1. efficient central planning
2. equity
3. allocative efficiency
4. scarcity

• productive efficiency

• Society faces a trade-off in all of the following situations except 103)
1. when deciding who will receive the goods and services
2. when some previously unemployed workers find
3. when deciding what goods and services will be
4. when making a trade-off because of
5. when deciding how goods and services will be

• The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of

• Assume an economics instructor want to promote equity in their To do this, announce that all students will receive a final grade equal to the class average. Based on the

equity-efficiency tradeoff, what is a likely outcome?

1. Freed from competition, students will fully apply themselves to an economics course causing the class average to
2. Students will put extra effort into this economics course solely to help other students do
3. Most students will spend their time on other courses, resulting in little learning and a low class
4. Students will demand the same grade allocation in all their other
5. Student behaviour will not change, but everyone in the class will have the same

104)

105)

• Which of the following statements about economic resources is true? 106)
1. All economic resources are found in
2. Economic resources include financial capital and
3. All economic resources are man-
4. Economic resources are used only by

• Economic resources are also called factors of
• The distribution of income primarily determines which of the fundamental economic questions? 107)
1. How to plan the economy?
2. What goods and services are to be produced?
3. How the goods and services are to be produced?
4. How to redistribute the goods and services?

• Who will receive the goods and services produced?

## Scenario 1.1

Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and makes a profit of \$5,000 per week. A manager at the plant observes, "Although the last 3,000 cell phones we produced and sold increased our revenue by \$6,000 and our costs by \$6,700, we are still making an overall profit of \$5,000 per week so I think we're on the right track. We are producing the optimal number of cell phones."

• Refer to Scenario 1. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 3,000 cell phones?
1. a marginal
2. a loss
3. an explicit cost
4. a foregone cost
5. an opportunity cost

• Economics is the study of the _ people make to attain their goals, given their
1. income; available
2. output; time
3. choices; scarce
4. decisions; household
5. purchases; unlimited

108)

109)

• Voluntary exchange between buyers and sellers generates _ in a market 110)
1. equity
2. equality
3. scarcity
4. productive efficiency
5. allocative efficiency

• Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is \$700 per She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for \$950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics major, you rightly conclude that
1. Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least \$250.
2. Soo Jin figures that the benefit of having her own place (as opposed to sharing) is at least

\$950.

1. the cost of having one's own space outweighs the
2. you made an error in assuming that Soo Jin is
3. Soo Jin did not have a choice; her roommate was a

• Economics does not study correct or incorrect behaviours but rather it assumes that economic agents behave , meaning they make the best decisions given their knowledge of the costs and
1. rationally
2. selfishly
3. equitably
4. erratically
5. emotionally

111)

112)

• Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?
1. Failure to do this could lead to an inequitable allocation of goods and services
2. Failure to do this could lead to an equal allocation of goods and services
3. Failure to do this could lead to drastic shortages of good and
4. Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as
5. Failure to do this could reduce efficiency and lead to an inequitable allocation of

• The decision about what goods and services will be produced made in a market economy is made by

113)

114)

## Figure 1.3

1. lawmakers in the government voting on what will be
2. consumers dictating to firms what they need
3. workers deciding to produce only what the boss says must be
4. producers deciding what society wants
5. consumers and firms choosing which goods and services to buy or

• Refer to Figure 3. Calculate the area of the trapezoid X. 115) A) \$270 B) \$720 C) \$810 D) \$2,520 E) \$2,500

# TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

• If it costs Sinclair \$300 to produce 3 suede jackets and \$420 to produce 4 suede jackets, then the difference of \$120 is the marginal cost of producing the 4th suede

• An economic model is a simplified version of reality used to analyze real-world economic

116)

117)

• Scarcity is a problem that will eventually disappear as technology 118)

• Examining the conditions that could lead to a recession in an economy is an example of macroeconomics

119)

• The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomics topic.

• A university must decide if it wants to offer more Internet-based This decision involves answering the economic question of "what to produce."

• In the market for factors of production, firms earn income by selling goods and services to

• "The distribution of income should be left to the market" is an example of a positive economic

• One desirable outcome of a market economy is that it leads to a more equitable distribution of

• Suppose the extra cost of producing an extra million kilograms of french fries is \$1 Then, McCain Foods Ltd. should make the extra french fries if they generate additional revenue of \$1 million.

• "An increase in the price of gasoline will increase the demand for hybrid " This statement is an example of a positive economic statement.

120)

121)

122)

123)

124)

125)

126)

• When voluntary exchange takes place, both parties gain from the 127)

• Optimal decisions are made at the point where marginal cost equals 128)

• One example of human capital is the amount of skills that you 129)

• Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what "

• Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those

• The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal

130)

131)

132)

• The government makes all economic decisions in a mixed 133)

# ESSAY. Write your answer in the space provided or on a separate sheet of paper.

• Define productive Does productive efficiency imply allocative efficiency? Explain.
• Explain the economic idea that "people respond to "

• What is the difference between positive economic analysis and normative economic analysis? Give one example each of a positive and normative economic issue or question or
• What is a centrally planned economy?

• What is the difference between an invention and an innovation?
• Explain the difference between a firm's revenue and its

• Explain why economics is considered a social
• Explain the economic assumption that "people are "
• Which of the following are primarily macroeconomic topics and which are primarily microeconomic topics?
1. gasoline prices
2. unemployment
3. inflation
4. health care costs
5. air pollution

• economic growth

## Table 1.2

 Year DVD Recorders (millions) 2007 12.5 2008 14.0 2009 17.2 2010 20.0 2011 21.7

• Refer to Table 2. The table above shows the sales of DVD recorders in North America. Present the information using a bar graph.
• What is meant by the statement that "optimal decisions are made at the margin"?

• What is equity, and how does it differ from efficiency?
• What are some of the reasons given for the the increase in coffee prices?

• What is opportunity cost?
• Suppose that watching one more episode of your favourite NetFlix show is worth \$ 200 to Suppose that studying for that same amount of time will boost your mark enough to get you a bursary. What is the smallest size of the bursary that would cause you to study instead of watching another episode (assuming you are rational)?

• List the five main factors of

Testname: CHAPTER 1

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Testname: CHAPTER 1

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• Productive efficiency is an efficiency criterion that describes a situation in which goods and services are produced at the lowest possible It does not imply allocative efficiency which is a criterion associated with producing goods and services that consumers value most. For example, a manufacturer may be able to produce typewriters at the lowest possible cost of say, \$200, but this does not necessarily mean that consumers are willing to pay \$200 for a typewriter.
• Human beings act from a variety of motives, including religious belief, envy, and "People respond to incentives" means that people will act if they feel it is in their best economic interest to do so.
• Positive economic analysis is concerned with what Positive economic analysis reaches conclusions based on verifiable statements. Normative economic analysis, on the other hand, is concerned with what ought to be. Normative analysis reaches conclusions based on opinions. (Students will give many different examples.)
• A centrally planned economy is an economy in which the government decides how economic resources will be
• An invention is the development of a new good or a new process for making a An innovation is the practical application of an invention. Innovation could also refer to any significant improvement in a good or in the means of producing a good.
• A firm's revenue is the total amount received for selling a good or It is calculated by multiplying the price per unit by the number of units sold. A firm's profit is the difference between its revenue and its costs.

Testname: CHAPTER 1

• Economics is a social science because it studies the actions of As a social science, economics considers human behaviour, particularly decision-making behaviour, in every context.
• "People are rational" means that economists assume consumers and firms will use all available information as they

act to achieve their goals. Rational individuals weigh the benefits and costs of each action, and they choose an action only if the benefits exceed the costs.

• b, c, and f are primarily macroeconomic a, d, and e are primarily microeconomic topics.
• economics, the word "marginal" means "extra" or "additional." Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost, so optimal decisions are made at the point where the extra benefit received from an activity is equal to the extra cost associated with that
• Equity refers to the fair distribution of economic In economics, efficiency refers to least cost production (productive efficiency) and producing according to human preferences (allocative efficiency).
• The reasons include bad weather in Colombia, wages, and the actions of individual
• Opportunity cost refers to the highest-valued alternative that must be given up to engage in an For example, the opportunity cost of taking this economics class is what you are giving up to take the class, which may be taking another class such as accounting or psychology, working extra hours at your job, or extra sleep (whichever is your highest-valued alternative).
• The bursary would have to be at least \$200 for a rational person to choose to study instead of watching the next

episode — assuming there are no other benefits to studying.

• The five main factors of production are labour, capital, human capital, natural resources, and entrepreneurial
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