1) Which of the following statements provides the best definition of economics?
A) The study of the productive capacity of a nation's factors of production.
B) The study of the use of scarce resources to satisfy unlimited human wants.
C) The study of the most equitable distribution of scarce resources.
D) The study of production and increasing its efficiency.
E) The study of the production of goods and services.
1)
2) Society's resources are often divided into broad categories. They are
A) land, labour, and capital.
B) factors of consumption.
C) population and natural resources.
D) tangible commodities and intangible commodities.
E) goods and services.
2)
3) 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-creamtruck at a park in Quebec. Each of these is an example of
A) a factor of production.
B) an economic service.
C) a commodity.
D) goods and services.
E) a capital resource.
3)
4) Which of the following is NOT considered a "factor of production" in economics?
A) the barista who makes the coffee
B) the land on which the cafe sits
C) the wood stir sticks
D) the espresso machine at your local cafe
E) the espresso drink you purchase
4)
5) Consider the following factors of production:
-a pharmaceutical research centre
-a hairstylist's scissors
-Google headquarters
-a cloud computing system
-a stapler at a checkout counter. Each of these is an example of
A) capital. B) goods. C) services. D) land. E) labour.
5)
6) In economics, what word is used to describe the act of using goods or services to satisfy wants?
A) production
B) consumption
C) shopping
D) purchasing power
E) investment
6)
7) A basic underlying point in economics is that
A) people have limited wants in the face of limited resources.
B) there are unlimited resources.
C) governments should satisfy the needs of the people.
D) people have unlimited wants in the face of limited resources.
E) governments should never interfere in the workings of a market economy.
7)
8) Which of the following best describes the study of economics?
A) how to distribute income as equally as possible
B) the allocation of scarce resources among alternative uses
C) why resources are scarce
D) how to plan an economy
E) how to limit human wants so that scarce resources are sufficient
8)
9) Economics can best be described as
A) the study of how to reduce inflation and unemployment.
B) the application of sophisticated mathematical models to address social problems.
C) a normative science.
D) the study of the use of scarce resources to satisfy unlimited human wants.
E) the study of how a society ought to allocate its resources.
9)
10) Scarcity is likely to be
A) a problem that will always exist.
B) eliminated with a better understanding of economics.
C) a problem that will be solved by the proper use of available resources.
D) a result of the work ethic.
E) unique to the twenty-first century.
10)
11) Which of the following statements best describes the economic concept of scarcity?
A) Too many frivolous goods and services are produced at the expense of socially desirable goods and services.
B) Society is not employing all of its available resources in an efficient manner.
C) People's wants can never be satisfied by the available resources.
D) Production is efficient, but distribution is inefficient.
E) Scarcity afflicts only poor countries.
11)
12) Which of the following statements best describes the underlying feature of most economic problems?
A) People have unlimited wants in the face of limited resources.
B) People have limited wants in the face of limited resources.
C) Governments should never interfere in the workings of a market economy.
D) There are unlimited resources.
E) Resources are distributed fairly.
12)
13) Because resources are scarce, individuals are required to
A) improve production but not distribution.
B) use resources inefficiently.
C) improve distribution but not production.
D) make choices among alternatives.
E) sacrifice production but not consumption.
13)
14) Scarcity implies that choices must be made. Making choices implies
A) the wasteful use of resources.
B) that scarcity can be eliminated.
C) the existence of costs of production.
D) the existence of opportunity costs.
E) both C and D above.
14)
15) Which of the following best completes the definition of opportunity cost? The opportunity cost of choosing any one alternative is the
A) value of all other alternatives combined.
B) market cost of the next best alternative.
C) value of the next best alternative that is given up.
D) value of resources used to make that alternative available to the market.
E) the revenues that would be given up if that alternative is not chosen.
15)
16) With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. For the government, the opportunity cost of one search and rescue helicopter is
A) 100 kilometres of highway repair.
B) 150 kilometres of highway repair.
C) 0 kilometres of highway repair.
D) 50 kilometres of highway repair.
E) 200 kilometres of highway repair.
16)
FIGURE 1-1
Refer to Figure 1-1. For the government, the opportunity cost of one kilometre of highway repair is
A) 1/10 of a search and rescue helicopter.
B) 1/100 of a search and rescue helicopter.
C) 1 search and rescue helicopter.
D) 1/50 of a search and rescue helicopter.
E) 1/2 of a search and rescue helicopter.
FIGURE 1-1
Refer to Figure 1-1. If the government chooses to allocate all $200 million to highway repair, we can say that
A) there is no opportunity cost involved because the government has achieved its objectives.
B) there is no opportunity cost involved because the government stayed within its budget.
C) the opportunity cost of the highway repair is uncertain.
D) the opportunity cost of the highway repair is $0.
E) the opportunity cost of the highway repair is 4 search and rescue helicopters.
FIGURE 1-1
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?
A) E B) B C) D D) G E) F
FIGURE 1-2
Refer to Figure 1-2. For the school board, what is the opportunity cost of one additional laptop computer?
A) 0 textbooks
B) 1/10 of a textbook
C) 10 textbooks
D) 20 textbooks
E) 2000 textbooks
FIGURE 1-2
Refer to Figure 1-2. For the school board, what is the opportunity cost of one additional textbook?
A) 2000 laptops
B) 1000 laptops
C) 1/100 of a laptop
D) 1/1000 of a laptop
E) 1/10 of a laptop
FIGURE 1-2
Refer to Figure 1-2. Suppose the school board chooses to allocate all $500 000 to the purchase of laptop computers. What is the opportunity cost of this entire purchase?
A) The opportunity cost is uncertain.
B) The opportunity cost is $0.
C) The opportunity cost is 20,000 textbooks.
D) The opportunity cost is 2000 laptops.
E) There is no opportunity cost because the purchase was made within the available budget.
FIGURE 1-2
Refer to Figure 1-2. Which of the following combinations of textbooks and laptops is unaffordable, given the school board's budget of $500 000?
A) A B) B C) C D) D E) E
24) With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. What is the price of a textbook in this example?
A) $25 B) $40 C) $50 D) $100 E) $250
24)
FIGURE 1-2
Refer to Figure 1-2. What is the price of a laptop computer in this example?
A) $25 B) $40 C) $50 D) $100 E) $250
26) 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.
| Fishing Lures | Mowed Lawns |
Tristan | 12 | 3 |
Thomas | 6 | 6 |
TABLE 1-1
Refer to Table 1-1. What is Tristan's opportunity cost of producing one fishing lure?
A) 4 mowed lawns
B) 3 mowed lawns
C) 1/3 of a mowed lawn
D) 1/4 of a mowed lawn
E) one mowed lawn
26)
| Fishing Lures | Mowed Lawns |
Tristan | 12 | 3 |
Thomas | 6 | 6 |
TABLE 1-1
Refer to Table 1-1. What is Thomas's opportunity cost of producing one fishing lure?
A) 1/6 of a mowed lawn
B) 1/6 of a lure
C) 1 mowed lawn
D) 5 lures
E) There is no opportunity cost.
28) 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.
| Fishing Lures | Mowed Lawns |
Tristan | 12 | 3 |
Thomas | 6 | 6 |
TABLE 1-1
Refer to Table 1-1. What is Tristan's opportunity cost of producing one mowed lawn?
A) 6 fishing lures
B) 12 fishing lures
C) 3 fishing lures
D) 4 fishing lures
E) one fishing lure
28)
29) 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.
| Fishing Lures | Mowed Lawns |
Tristan | 12 | 3 |
Thomas | 6 | 6 |
TABLE 1-1
Refer to Table 1-1. What is Thomas's opportunity cost of producing one mowed lawn?
A) 0 fishing lures
B) 1/6 fishing lure
C) 6 fishing lures
D) 12 fishing lures
E) one fishing lure
29)
| Fishing Lures | Mowed Lawns |
Tristan | 12 | 3 |
Thomas | 6 | 6 |
TABLE 1-1
Refer to Table 1-1. If Tristan and Thomas want to maximize their joint output from one day of work, how should they specialize their production?
A) Tristan produces 3 mowed lawns; Thomas produces 6 mowed lawns
B) Tristan produces 6 lures and 3 mowed lawns
C) Tristan produces 12 lures; Thomas produces 6 mowed lawns
D) Tristan produces 6 lures; Thomas produces 6 lures
E) Tristan produces nothing, Thomas produces 6 lures and 6 mowed lawns
31) 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.
| Fishing Lures | Mowed Lawns |
Tristan | 12 | 3 |
Thomas | 6 | 6 |
TABLE 1-1
Refer to Table 1-1. Which of the following statements about Tristan's and Thomas's opportunity costs is correct?
A) Tristan has a higher opportunity cost of producing mowed lawns.
B) Tristan has a higher opportunity cost of producing fishing lures.
C) Thomas has a higher opportunity cost of producing mowed lawns.
D) Thomas has a higher opportunity cost of producing fishing lures.
E) Both A and D are correct.
31)
FIGURE 1-3
Refer to Figure 1-3. For Madeleine, the opportunity cost of one regular coffee is
A) 4 lattes.
B) 1/4 of a latte.
C) 20 lattes.
D) 80 lattes.
E) 1/4 of a regular coffee.
FIGURE 1-3
Refer to Figure 1-3. For Madeleine, the opportunity cost of one latte is
A) 80 regular coffees.
B) 1/4 of a latte.
C) 1/4 of a regular coffee.
D) 8 regular coffees.
E) 4 regular coffees.
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
A) zero because she bought what she desired.
B) 80 cups of regular coffee.
C) 40 cups of regular coffee.
D) zero because she stayed within her budget.
E) 20 cups of regular coffee.
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?
A) 8 lattes and 50 coffees
B) 20 lattes and 80 coffees
C) 4 lattes and 66 coffees
D) 16 lattes and 16 coffees
E) 15 lattes and 30 coffees
FIGURE 1-3
Refer to Figure 1-3. What is the price of a regular coffee in this example?
A) $1.25 B) $0.80 C) $2.00 D) $8.00 E) $5.00
FIGURE 1-3
Refer to Figure 1-3. What is the price of a coffee latte in this example?
A) $2.00 B) $5.00 C) $0.80 D) $1.00 E) $1.25
38) 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) 6 and 6. B) 0 and 10. C) 10 and 10. D) 0 and 0. E) 10 and 6.
38)
39) 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) 3 Model B vehicles
B) 5/3 of Model B vehicle
C) 5 Model B vehicles
D) 3/5 of a Model B vehicle
E) 0
39)
40) 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 Model A vehicles
C) 5/3 of a Model A vehicle
D) 3/5 of a Model A vehicle
E) 5 Model A vehicles
40)
41) 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 a straight line, indicating that the opportunity cost of each model of vehicle is independent of how many are purchased.
B) The budget line is a straight line, indicating that the opportunity cost of each vehicle increases with each additional unit purchased.
C) The budget line is convex to the origin, indicating that the opportunity cost of each vehicle decreases with each additional unit purchased.
D) The budget line is concave to the origin, indicating that the opportunity cost of each model of vehicle increases with each additional unit purchased.
E) The budget line is a straight line, indicating that the opportunity cost of each vehicle decreases with each additional unit purchased.
41)
42) Scarcity arises from limited resources. For this reason, all economic choices involve
A) a value judgement.
B) greed.
C) an opportunity cost.
D) an educated decision.
E) complementary ends.
42)
43) The opportunity cost of going to college or university for four years is
A) the cost of tuition, residence fees and books.
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) equal to the wage rate a person will earn after graduation.
E) zero.
43)
44) Suppose there are only three alternatives to attending a "free" 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.
44)
45) The opportunity cost of producing good A is defined to be
A) the retail price of good A.
B) the cheapest method of producing good A.
C) what must be sacrificed of other goods to get an additional unit of good A.
D) the money cost of the factors of production used in good A.
E) the cost of having to get by using something else in place of good A.
45)
46) Suppose one unit of labour can produce either 5 wool sweaters or 2 pineapples. What is the opportunity cost of producing one wool sweater?
A) 2/5 of a pineapple
B) 2 pineapples
C) 5/2 pineapples
D) 5 pineapples
E) zero pineapples
46)
47) Suppose one unit of labour can produce either 5 units of wool or 2 pineapples. What is the opportunity cost of producing 1 pineapple?
A) 2 units of wool
B) 2/5 unit of wool
C) zero
D) 5 units of wool
E) 5/2 units of wool
47)
48) 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) 1/5 of the cost of the tractor
B) 1/12th of the cost of the tractor
C) drilling 5 fence-post holes
D) drilling 12 fence-post holes
E) There is no opportunity cost.
48)
49) Suppose 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 shop's opportunity cost of producing any one cake?
A) 0.4 cakes B) 0.4 pies C) 0.25 pies D) 2.5 pies E) 2.5 cakes
49)
50) Suppose 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 shop's opportunity cost of producing any one pie?
A) 50 cakes B) 125 pies C) 0.4 pies D) 2.5 pies E) 0.4 cakes
50)
51) 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) Hugh's opportunity cost of producing 1 pie is 1/4 jar of pickles.
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 2 pies.
D) Hugh's and Katie's opportunity costs of producing are the same.
E) Katie's opportunity cost of producing 1 jar of pickles is 1/2 of a pie.
51)
52) Suppose Andrea has a job that pays her $50 000 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 $20 000 per year. What is the opportunity cost of Andrea's four-year university degree?
A) $200 000 B) $128 000 C) $248 000 D) $240 000 E) $288 000
52)
53) 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 Amin's 1-year MBA program?
A) $175 000 B) $161 000 C) $75 000 D) $76 000 E) $167 000
53)
54) It has been observed that university enrollment in Canada is higher during periods of high unemployment. A possible explanation for this is that
A) during periods of high unemployment, tuition fees are reduced.
B) when prospects for getting a job are poor, the opportunity cost of going to university is lower.
C) during periods of high unemployment, the opportunity cost is no longer relevant.
D) when prospects for getting a job are poor, the opportunity cost of getting a job is lower.
E) when prospects for getting a job are poor, the opportunity cost of doing nothing is higher.
54)
55) 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 Chantal's opportunity cost for this 6-month, unpaid leave of absence?
A) $42 000 B) $52 500 C) $22 000 D) $12 000 E) $65 000
55)
56) 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) increases; increase
C) remains the same; remain the same
D) decreases; decrease
E) decreases; increase
56)
57) A country's production possibilities boundary shows that when a society uses its resources efficiently,
A) it cannot produce more of one good without producing less of the other good.
B) it can produce more of only one good.
C) the supply for goods always exceeds the demand.
D) it is always possible to produce more of all goods.
E) all points inside the boundary are preferred to all points on the boundary.
57)
58) Consider a production possibilities boundary that is drawn concave to the origin and shows the possible combinations of military goods and civilian goods that a country can produce. Suppose 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) remain the same.
B) decrease.
C) increase at a decreasing rate.
D) increase.
E) increase at a increasing rate.
58)
59) A point lying inside the production possibilities boundary is one at which
A) it is not possible to produce more output with existing resources.
B) there is no scarcity.
C) the opportunity cost of producing more output is negative.
D) more output could be produced with existing resources.
E) the economy has run out of resources.
59)
60) If a country's production possibilities boundary is drawn as a straight (downward -sloping) line it indicates
A) decreasing opportunity cost of producing more of either good.
B) an unfair distribution of resources in an economy.
C) the use of the scarce resources in an economy.
D) increasing opportunity cost of producing more of either good.
E) constant opportunity cost of producing more of either good.
60)
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 scarcity of resources in the economy
B) the unfair distribution of resources in the economy
C) the constant opportunity cost of producing more of either good
D) the decreasing opportunity cost of producing more of either good
E) the increasing opportunity cost of producing more of either good
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, B, or C.
B) D or E.
C) A or B, but not C.
D) A or E.
E) A, B, C, D, or E.
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 consumer goods industries to the capital goods industries.
C) the cost of producing consumer goods were to increase.
D) some resources were switched from the capital goods industries to the consumer goods industries.
E) Country X is no longer able to produce the quantity of capital goods at point A.
FIGURE 1-4
Refer to Figure 1-4. If Country X were producing at point C,
A) the opportunity cost of moving to point A is zero.
B) this is the maximum output possible from given resources.
C) the opportunity cost of moving to point A is to give up an increase in the production of consumer goods.
D) the opportunity cost of moving to point A is to give up some capital goods.
E) it is not possible to move to any point on PPB1 or PPB2 without technological progress.
FIGURE 1-4
Refer to Figure 1-4. At point B,
A) the opportunity cost of producing an extra unit of consumer goods is higher than at point A.
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 price of capital goods is higher than the price of consumer goods.
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) D. C) E. D) B. E) C.
FIGURE 1-4
Refer to Figure 1-4. Suppose 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) sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries.
C) firms reduced output of capital goods.
D) the given resources were more efficiently employed.
E) the prices of capital goods and consumption goods fell.
FIGURE 1-4
Refer to Figure 1-4. A shift of the production possibilities boundary from PPB1 to PPB2 implies
A) that productive capacity in the capital goods industries has improved.
B) that if point E is the new choice of outputs, productivity has increased in the consumer goods industry.
C) a movement from full employment to some unemployment.
D) an inevitable decrease in total output.
E) that productive capacity in the consumer goods industry has improved.
FIGURE 1-4
Refer to Figure 1-4. Growth in the country's productive capacity is illustrated by
A) a movement from a point inside the boundary such as C to the boundary.
B) an outward shift of the boundary, for example from PPB1 to PPB2.
C) the movement between points on a given boundary.
D) a point like D outside the boundary.
E) a single point such as A on the boundary.
FIGURE 1-4
Refer to Figure 1-4. An outward shift of the production possibilities boundary from PPB1 to PPB2 indicates which of the following?
A) an increase in the price of raw material for capital goods
B) an increase in the price of raw materials for consumer goods
C) more of the country's resources are being used
D) growth in the country's productive capacity
E) the country's resources are being used less efficiently
FIGURE 1-5
Refer to Figure 1-5. Suppose the relevant production possibilities boundary is the one labelled B. This boundary implies that
A) the concept of opportunity cost is not at work in this economy.
B) consumer goods are preferred to capital goods.
C) capital goods are preferred to consumer goods.
D) in this society, the resources are not efficiently employed.
E) the opportunity cost of producing either capital goods or consumer goods does not depend on how much of each good is produced.
FIGURE 1-5
Refer to Figure 1-5. Which production possibilities boundaries are consistent with increasing opportunity costs?
A) boundary C only
B) boundaries A and B
C) boundaries B and C
D) boundary A only
E) boundaries A, B, and C
FIGURE 1-5
Refer to Figure 1-5. Which production possibilities boundaries exhibit decreasing opportunity costs?
A) boundary C only
B) boundary A only
C) boundary B only
D) boundaries A and B
E) boundaries A and C
74) 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 concave to the origin.
B) semicircular.
C) a downward-sloping curve convex to the origin.
D) a downward-sloping straight line that is broken at one point.
E) a downward-sloping straight line.
74)
75) On a diagram of a production possibilities boundary, the concept of scarcity is illustrated by the
A) area within the boundary.
B) unattainable points outside the boundary.
C) distance from the origin to the boundary.
D) points on the boundary.
E) negative slope of the boundary.
75)
76) On a diagram of a production possibilities boundary, the concept of opportunity cost is illustrated by the
A) unattainable points outside the boundary.
B) area bounded by the two axes and the boundary.
C) boundary being concave to the origin.
D) distance from the origin to the boundary.
E) negative slope of the boundary.
76)
77) On a diagram of a production possibilities boundary, the concept of choice is illustrated by the
A) need to select among the alternative attainable points along or inside the boundary.
B) unattainable combinations outside the boundary.
C) negative slope of the boundary.
D) the concave shape of the boundary.
E) the distance from the origin to the boundary.
77)
78) 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) the movement to a point outside of the PPB.
E) a movement along the PPB.
78)
79) Suppose there are only two goods produced in our economysnowplows 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
79)
A) a downward-sloping curve convex to the origin.
B) circular.
C) a downward-sloping straight line with slope equal to -1.
D) a downward-sloping curve concave to the origin.
E) a downward-sloping straight line.
80) A straight-line production possibilities boundary differs from a concave boundary in which of the following ways?
A) The straight-line boundary shows opportunity cost, whereas the concave boundary does not.
B) The concave boundary illustrates constant opportunity costs, whereas the straight-line boundary illustrates decreasing opportunity costs.
C) A straight-line boundary is associated with a command economy, whereas a concave boundary is associated with a free-market economy.
D) The straight-line boundary illustrates constant opportunity costs, whereas the concave boundary illustrates increasing opportunity costs.
E) The straight-line boundary does not show scarcity, whereas the concave boundary does.
80)
81) 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
A) to a point beyond its new production possibilities boundary.
B) to a point inside its new production possibilities boundary.
C) possibilities boundary inward.
D) above the level of U.S. production.
E) possibilities boundary outward.
81)
82) 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.
A) an inward shift of
B) a movement along
C) a shift outward of
D) a movement inside
E) a movement to a point beyond
82)
83) Consider Canada's 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) move it along an unchanged production possibilities boundary.
D) shift its production possibilities boundary outward.
E) shift its production possibilities boundary inward.
83)
84) In recent years, several large Canadian-owned mining and resource companies have been sold to foreign owners. The immediate effect on Canada's production possibilities boundary is
A) a shift outward.
B) a movement along.
C) a movement to a point beyond the boundary.
D) no change.
E) a shift inward.
84)
85) 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 Canada's production possibilities boundary?
A) movement to a point beyond the boundary
B) movement to a point within the boundary
C) a shift outward
D) a shift inward
E) no change
85)
86) Suppose drought destroys many millions of acres of valuable Canadian farmland. The effect on the Canadian economy would be to move
A) it beyond its production possibilities boundary.
B) its production possibilities boundary outward.
C) its production possibilities boundary inward.
D) it along its production possibilities boundary.
E) None of the above. There would be no change in Canada's production possibilities boundary.
86)
87) A move from inside the production possibilities boundary to the boundary itself could be caused by
A) a reallocation of resources from military to civilian goods.
B) the employment of previously idle resources.
C) an increase in the labour supply.
D) an improvement in the government's ability to control its spending.
E) technological progress.
87)
88) 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 growth of productive capacity.
B) the employment of previously idle resources.
C) technological progress.
D) an increase in the labour supply.
E) the reallocation of resources between military and civilian goods.
88)
89) 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) could be achieved if the prices of health and/or education increased.
C) are not attainable with the government's current budget.
D) are more cost-effective than those at points A, B, and D.
E) are equal to those of point A and point B.
89)
FIGURE 1-6
Refer to Figure 1-6. If the government's spending on health and education is given by point B, a move to point A must involve
A) less spending on education.
B) zero opportunity cost.
C) more spending on education.
D) less spending in total.
E) less spending on health.
FIGURE 1-6
Refer to Figure 1-6. Suppose the government's current spending is shown by point D. In this case,
A) more health expenditures can be achieved only by sacrificing some existing education expenditures.
B) more education expenditures can be achieved only by sacrificing some existing health expenditures.
C) the government is not spending its total available budget for these two items.
D) the prices of education and health care have increased beyond the government's ability to pay.
E) the government is spending more than its total budget.
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goodscotton 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) 1500 tonnes of bananas
C) 1440 tonnes of bananas
D) 60 tonnes of cotton
E) 100 tonnes of cotton
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goodscotton 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) There is no opportunity cost.
B) 920 tonnes of cotton
C) 420 tonnes of cotton
D) 100 tonnes of cotton
E) 60 tonnes of cotton
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goodscotton 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) 920 tonnes of cotton
B) 360 tonnes of bananas
C) 100 tonnes of cotton
D) 360 tonnes of cotton
E) There is no opportunity cost.
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goodscotton 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 low 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 high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
C) The opportunity cost of producing the extra bananas is independent of the amount being produced.
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 is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goodscotton 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) 3.75 tonnes of cotton
B) 36 tonnes of cotton
C) 3.6 tonnes of cotton
D) 0.36 tonnes of cotton
E) 375 tonnes of cotton
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goodscotton 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 of producing an extra tonne of bananas is the same at point A as at point E.
B) The opportunity cost of producing an extra tonne of bananas is much higher at point A than at point E.
C) The opportunity cost of producing an extra tonne of bananas is much lower at point A than at point E.
D) The opportunity cost is 500 tonnes of cotton at point A, compared to 1500 tonnes at point E.
E) The opportunity cost is 1500 tonnes of cotton at point A, compared to 500 tonnes at point E.
98) A modern economy like Canada's is largely organized by
A) the self-interested behaviour of a small number of individuals.
B) individuals following their own self-interest, doing what seems best for themselves.
C) governments at all levels coordinating the activities of firms and citizens.
D) individuals forming cooperative enterprises and labour unions.
E) benevolent individuals pursuing the public interest.
98)
99) An insight first fully developed by Adam Smith is that
A) self-interest undermines effective economic order.
B) self-interest, not benevolence, is the foundation of economic order.
C) without benevolence production would not occur.
D) individual self-interest is the only necessary force for social order.
E) all individuals are motivated solely by self-interest.
99)
100) An important insight by Adam Smith, which was more fully developed over the next century, is that in a free market the resources available to a nation are organized so as to produce the goods and services that people want with the least possible amount of resources. This concept is known in economics as
A) specialization.
B) benevolence.
C) efficiency.
D) division of labour.
E) productivity.
100)
101) In the Canadian economy, most decisions regarding resource allocation are made by
A) business firms only.
B) legal contract.
C) the various levels of government.
D) consumers and producers interacting in the price system.
E) negotiation between unions and firms.
101)
102) 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 individuals only
D) by firms and individuals acting independently
E) by political parties and firms only
102)
103) The key decision makers in a market economy are
A) individuals, firms, and government.
B) large corporations and labour organizations.
C) corporations and governments.
D) individuals, non-profit organizations, and the Bank of Canada.
E) governments and all institutions under government control.
103)
104) Economists usually assume that individuals and firms, respectively, maximize
A) income and sales.
B) utility and profits.
C) savings and profits.
D) wages and revenues.
E) expenditures and profits.
104)
105) Which of the following is illustrated by the circular flow of income?
A) that firms own the factors of production
B) the flows of expenditures and income in a household
C) the interaction of individuals and firms through the factors and goods markets
D) that there is no relationship between goods markets and factor markets
E) that the flow of payments moves in the same direction as the flow of goods
105)
106) Which of the following represents a typical "real" flow (as opposed to a financial flow) in the circular flow of income?
A) money payments going from producers to consumers
B) goods going from producers to consumers
C) factor services going from producers to consumers
D) goods going from consumers to producers
E) money payments going from consumers to producers
106)
107) If some income earned by households is not spent on output, or if some income earned by firms is not spent on factor services, the circular flow of income will
A) run over. B) contract. C) stop. D) explode. E) expand.
107)
108) The famous economist who first described the division of labour was
A) Milton Friedman.
B) Karl Marx.
C) Adam Smith.
D) John Maynard Keynes.
E) David Ricardo.
108)
109) Which of the following statements about specialization and trade are correct?
A) They occur only in the private sector.
B) They developed only in the twentieth century.
C) They exist only in capitalist economies.
D) They arose as humans changed from nomadic and self-sufficient food gatherers to settled food producers.
E) They developed only where government and political institutions were stable.
109)
110) If an economy exhibits the specialization of labour, we know that
A) each worker is self-sufficient.
B) a barter economy is more suitable.
C) different individuals are producing different products.
D) most production is artisanal in nature.
E) job security is ensured.
110)
111) Which of the following statements best describes a barter system of exchange?
A) It is the most efficient form of exchange.
B) It developed late in history.
C) It requires the use of money.
D) It eliminates the transactions costs involved in exchange.
E) It involves the trading of goods directly for other goods.
111)
112) Specialization of labour led to greater efficiency in the allocation of resources because of
A) the principle of comparative advantage.
B) greater reliance on self-sufficiency.
C) the opportunity cost of labour increased.
D) an increase in total work effort.
E) the use of barter.
112)
113) A greater specialization of labour leads to which of the following major results?
A) Each worker must become more self-sufficient.
B) There is a greater need for trade.
C) There is an increased need for government to intervene in the marketplace.
D) The circular flow of income contracts.
E) The overall output of the economy declines.
113)
114) A farmer selling tomatoes and corn at a roadside, and a currency trader in Hong Kong are each participating in
A) flexible manufacturing.
B) a market.
C) an involuntary transaction.
D) barter.
E) international trade.
114)
115) Which of the following has most contributed to the globalization of the economy?
A) the decline in the relative importance of manufacturing
B) reductions in transportation and communication costs
C) the shift toward a market economy in China
D) tariffs and trade barriers
E) the decreased importance of agriculture
115)
116) Which of the following results from the introduction of money for use in transactions?
A) society is able to satisfy all wants
B) the specialization of labour becomes more difficult
C) self-sufficiency is assured
D) exchange becomes easier and this promotes the specialization of labour
E) an increased use of barter
116)
117) The barter system of exchange is inefficient because
A) "fair" values cannot be defined without the use of money.
B) markets do not exist.
C) exchange partners need to know each other.
D) bargaining power is unequal between rich and poor.
E) the double coincidence of wants may not exist.
117)
118) Which of the points below are true of money?
1) Money eliminates the need for barter.
2) Money allows for specialization of labour and expansion of trade.
3) Money facilitates the development of a market economy.
4) Trade did not take place before the introduction of money.
A) only 1
B) only 1 and 2
C) only 1 and 4
D) only 1, 2, and 3
E) All of the points are true.
118)
119) 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) providing employment for coin makers.
E) reducing the shift of resources between uses.
119)
120) An economic system that relies primarily upon custom and habit in economic decision making is referred to as a
A) market system.
B) communist system.
C) traditional system.
D) mixed system.
E) command system.
120)
121) In practice, the term "centrally planned economy" refers to an economy in which
A) economic decisions are made in the geographic centre of the country.
B) the military is in control of the government.
C) the government makes ALL production and consumption decisions.
D) all commodities are rationed.
E) the mix of market and command principles is heavily weighted towards the latter.
121)
122) Karl Marx argued that
A) benevolence, not self-interest, produced an effective economic order.
B) the unfettered market system driven by self-interest leads to the best social outcome.
C) centrally planned economies could provide a more equitable distribution of total output than capitalist economies.
D) technological change was not important in improving living standards.
E) a free-market system would produce a low level of total output.
122)
123) When discussing types of economic systems, the Canadian economy is best described as
A) a command economy.
B) traditional.
C) primarily a public ownership economy.
D) primarily free-market decision making.
E) a mixed economic system.
123)
124) With regard to various economic systems, most economists agree that
A) most production and consumption decisions are more efficiently coordinated by markets than through central planning.
B) command economies have been very successful in distributing income in socially just ways.
C) the mix of market and command principles that exists in Canada is the best.
D) the optimal mix of market and command systems remains constant over time.
E) government intervention in the economy is only justified in time of war.
124)
125) Which countries have mostly public ownership of resources?
A) United States and Canada
B) France and Germany
C) Sweden and Norway
D) Cuba and North Korea
E) Brazil and Argentina
125)
126) Behaviour in free-market economies is
A) determined by a central authority.
B) random and unpredictable.
C) mostly affected by elements of tradition and government command.
D) mostly directed by self-interest.
E) based primarily on custom and habit.
126)
127) In command economies, economic behaviour is
A) random and unpredictable.
B) largely determined by a central authority.
C) based primarily on custom and habit.
D) largely affected by elements of tradition and market incentives.
E) directed by individual self-interest.
127)
128) In mixed economies, economic behaviour is
A) affected by elements of tradition, government command, and market incentives.
B) random and unpredictable.
C) based primarily on custom and habit.
D) largely determined by a central authority.
E) directed only by self-interest.
128)
129) In traditional economies, economic behaviour is
A) largely determined by a central authority.
B) based primarily on custom and habit.
C) directed only by self-interest.
D) random and unpredictable.
E) affected by elements of tradition, government command, and market incentives.
129)
130) Complex economic plans for many economic sectors are most associated with a
A) feudal system.
B) traditional economy.
C) mixed market system.
D) command economy.
E) free-market system.
130)
131) Most modern economies in the world today
A) are mostly run by government decree.
B) have a mix of traditional, command and market elements.
C) are complex systems that defy description and analysis.
D) are similar to feudal systems.
E) have pure market exchange.
131)
132) In the current Canadian economy, the majority of choices on how resources are allocated are made by
A) the various levels of government.
B) legal contracts.
C) consumers and firms through the price system.
D) negotiation between unions and firms.
E) business firms only.
132)
133) Comparison of economic systems indicates that
A) most countries have mixed economies.
B) capitalist economies are clearly superior in distributing income.
C) all countries have largely traditional economies.
D) socialist economies are clearly superior in producing consumer goods.
E) most nations have either a purely socialist economy or a purely capitalist economy.
133)
134) 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
A) the difficulty of corruption in non-market economies.
B) an indication of the extreme difficulty of transition from one type of economic system to another.
C) the failure of the market system.
D) an indication that these economies should return to being command economies.
E) the triumph of capitalism over communism.
134)
135) 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?
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.
135)
136) In a modern mixed economy the government ensures that key institutions are in place to facilitate voluntary transactions between economic agents. These key institutions are
A) private property and freedom of contract.
B) the House of Commons and the Senate.
C) the Department of Finance and the Bank of Canada.
D) securities regulators and the court system.
E) labour and capital markets.
136)
1) B
2) A
3) A
4) E
5) A
6) B
7) D
8) B
9) D
10) A
11) C
12) A
13) D
14) D
15) C
16) D
17) D
18) E
19) D
20) C
21) E
22) C
23) D
24) A
25) E
26) D
27) C
28) D
29) E
30) C
31) E
32) B
33) E
34) B
35) D
36) A
37) B
38) E
39) D
40) C
41) A
42) C
43) C
44) C
45) C
46) A
47) E
48) C
49) D
50) E
51) E
52) C
53) B
54) B
55) B
56) D
57) A
58) B
59) D
60) E
61) E
62) A
63) D
64) C
65) A
66) A
67) B
68) A
69) B
70) D
71) E
72) A
73) B
74) E
75) B
76) E
77) A
78) B
79) E
80) D
81) E
82) A
83) D
84) D
85) E
86) C
87) B
88) E
89) C
90) A
91) C
92) D
93) B
94) D
95) E
96) C
97) C
98) B
99) B
100) C
101) D
102) D
103) A
104) B
105) C
106) B
107) B
108) C
109) D
110) C
111) E
112) A
113) B
114) B
115) B
116) D
117) E
118) D
119) C
120) C
121) E
122) C
123) E
124) A
125) D
126) D
127) B
128) A
129) B
130) D
131) B
132) C
133) A
134) B
135) A
