Question 1

How do prices direct economic activity in a market economy

Accepted Answer

A) by influencing the actions of buyers and sellers 
B) by reducing scarcity of the goods and services produced 
C) by eliminating the need for government intervention 
D) by allocating goods and services produced in the most equitable way 
A) by influencing the actions of buyers and sellers 
B) by reducing scarcity of the goods and services produced 
C) by eliminating the need for government intervention 
D) by allocating goods and services produced in the most equitable way

Question 2

In which situation would economists use the word equity

Accepted Answer

A) Each member of society has the same income. 
B) Society is getting the most it can from its scarce resources. 
C) Those in society who have the least will receive the most. 
D) The benefits of society's resources are distributed fairly among society's members. 
A) Each member of society has the same income. 
B) Society is getting the most it can from its scarce resources. 
C) Those in society who have the least will receive the most. 
D) The benefits of society's resources are distributed fairly among society's members.

Question 3

What is the term for what you give up to obtain an item

Accepted Answer

A) opportunity cost 
B) explicit cost 
C) true cost 
D) direct cost 
A) opportunity cost 
B) explicit cost 
C) true cost 
D) direct cost

Question 4

A typical worker in Italy can produce 24 units of product in an eight-hour day,where a typical worker in Poland produces 25 units of product in a 10-hour day.What can we conclude

Accepted Answer

A) Worker productivity in Poland is higher than in Italy. 
B) The standard of living will be higher in Italy than in Poland. 
C) Productivity for the Polish worker is three units per hour and 2.5 units per hour for the Italian worker. 
D) There will be no difference between the standard of living in Italy and Poland. 
A) Worker productivity in Poland is higher than in Italy. 
B) The standard of living will be higher in Italy than in Poland. 
C) Productivity for the Polish worker is three units per hour and 2.5 units per hour for the Italian worker. 
D) There will be no difference between the standard of living in Italy and Poland.

Question 5

Which of the following is an example of market power

Accepted Answer

A) a fast food restaurant in a university town 
B) a wheat farmer in Saskatchewan 
C) the only motel is in a remote Yukon town 
D) a shoe store in Ontario 
A) a fast food restaurant in a university town 
B) a wheat farmer in Saskatchewan 
C) the only motel is in a remote Yukon town 
D) a shoe store in Ontario

Question 6

What is NOT included in the decisions that every society must make

Accepted Answer

A) what goods will be produced 
B) who will produce the goods 
C) what determines consumer preferences 
D) who will consume the goods 
A) what goods will be produced 
B) who will produce the goods 
C) what determines consumer preferences 
D) who will consume the goods

Question 7

The average cost per seat on an airplane trip from Calgary to Kelowna is $250.Suppose no refreshments are served and seven seats are empty.How could the airline company increase its profit

Accepted Answer

A) if it charged no less than $250 for the seven remaining seats 
B) if it charged more than $250 for the seven remaining seats 
C) if it charged any ticket price above $0 for the remaining seats 
D) if it left the seats empty 
A) if it charged no less than $250 for the seven remaining seats 
B) if it charged more than $250 for the seven remaining seats 
C) if it charged any ticket price above $0 for the remaining seats 
D) if it left the seats empty

Question 8

Carol has spent $2000 purchasing and repairing an old car,which she expects to sell for $2400.She discovers that she needs an additional repair,which will cost $400.She can sell the car as it is now for $2000.What should she do

Accepted Answer

A) She should sell the car now for $2000. 
B) She should never sell something for less than it cost. 
C) She should complete the repairs and sell the car. 
D) It doesn't matter which action she takes; the outcome is the same either way. 
A) She should sell the car now for $2000. 
B) She should never sell something for less than it cost. 
C) She should complete the repairs and sell the car. 
D) It doesn't matter which action she takes; the outcome is the same either way.

Question 9

When is a good considered scarce in a society

Accepted Answer

A) when more output of the good is possible 
B) when everyone in that society cannot have all they want of the good 
C) when the government restricts production of the good 
D) when only the richest people in the economy can buy all they want of the good 
A) when more output of the good is possible 
B) when everyone in that society cannot have all they want of the good 
C) when the government restricts production of the good 
D) when only the richest people in the economy can buy all they want of the good

Question 10

What is the definition of inflation

Accepted Answer

A) a period of rising productivity in the economy 
B) a period of rising income in the economy 
C) an increase in the overall level of output in the economy 
D) an increase in the overall level of prices in the economy 
A) a period of rising productivity in the economy 
B) a period of rising income in the economy 
C) an increase in the overall level of output in the economy 
D) an increase in the overall level of prices in the economy

Question 11

What is the effect of a trade between Canada and India

Accepted Answer

A) benefits for both Canada and India 
B) a losing proposition for Canada because India has cheaper labour 
C) trade between the two countries would be inefficient due to the high cost of transporting the goods 
D) a losing proposition for India because Canadian workers are more productive 
A) benefits for both Canada and India 
B) a losing proposition for Canada because India has cheaper labour 
C) trade between the two countries would be inefficient due to the high cost of transporting the goods 
D) a losing proposition for India because Canadian workers are more productive

Question 12

If Canada decides to trade with Mexico,what do we know about the probable outcome

Accepted Answer

A) Mexico will be better off, but trade with a less developed country will not help Canada. 
B) It will not benefit Mexico because workers in Canada are more productive. 
C) It will benefit Mexico because workers in Canada are more productive. 
D) Mexico and Canada can both be better off. 
A) Mexico will be better off, but trade with a less developed country will not help Canada. 
B) It will not benefit Mexico because workers in Canada are more productive. 
C) It will benefit Mexico because workers in Canada are more productive. 
D) Mexico and Canada can both be better off.

Question 13

Your professor loves her work teaching economics.She has been offered other positions in the corporate world making 25 percent more,but has decided to stay in teaching.What might change her decision

Accepted Answer

A) if the marginal cost of teaching increased 
B) if the marginal benefit of teaching increased 
C) if the marginal cost of teaching decreased 
D) if the marginal cost of a corporate job increased 
A) if the marginal cost of teaching increased 
B) if the marginal benefit of teaching increased 
C) if the marginal cost of teaching decreased 
D) if the marginal cost of a corporate job increased

Question 14

What are economists illustrating when they use the phrase "There is no such thing as a free lunch"

Accepted Answer

A) how inflation increases prices 
B) that to get one thing, we must give up something else 
C) that nothing is free in a market economy 
D) that if something looks too good to be true, it probably is 
A) how inflation increases prices 
B) that to get one thing, we must give up something else 
C) that nothing is free in a market economy 
D) that if something looks too good to be true, it probably is

Question 15

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 16

What does the tenth principle of economics help explain

Accepted Answer

A) the business cycle 
B) supply and demand 
C) trade balance 
D) money supply changes 
A) the business cycle 
B) supply and demand 
C) trade balance 
D) money supply changes

Question 17

Which observation was made famous by Adam Smith in his book The Wealth of Nations

Accepted Answer

A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) People tend to spend more than they earn. 
D) Markets are guided by an invisible hand that leads to desirable outcomes. 
A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) People tend to spend more than they earn. 
D) Markets are guided by an invisible hand that leads to desirable outcomes.

Question 18

A friend of yours asks you why market prices are better than government-determined prices.What do you say

Accepted Answer

A) Because they generally reflect the value of a good to society, but not the cost of making it. 
B) Because they generally reflect the cost to society of making a good, but not its value. 
C) Because they generally reflect both the value of a good to society and the cost of making it. 
D) Because they generally reflect neither the value of a good to society nor the cost of making it. 
A) Because they generally reflect the value of a good to society, but not the cost of making it. 
B) Because they generally reflect the cost to society of making a good, but not its value. 
C) Because they generally reflect both the value of a good to society and the cost of making it. 
D) Because they generally reflect neither the value of a good to society nor the cost of making it.

Question 19

In the short run,what does the tenth principle of economics illustrate

Accepted Answer

A) the tradeoff between inflation and unemployment 
B) the tradeoff between equity and efficiency 
C) labour productivity in an economy 
D) the level of government intervention in a market economy 
A) the tradeoff between inflation and unemployment 
B) the tradeoff between equity and efficiency 
C) labour productivity in an economy 
D) the level of government intervention in a market economy

Question 20

Which statement best describes the concept represented by the adage "There is no such thing as a free lunch"

Accepted Answer

A) Melissa can only attend the concert if she takes her sister with her. 
B) Greg is hungry and homeless. 
C) Brian must repair the tire on his bike before he can ride it to class. 
D) Olivia must decide between skiing at Whistler or Lake Louise for spring break. 
A) Melissa can only attend the concert if she takes her sister with her. 
B) Greg is hungry and homeless. 
C) Brian must repair the tire on his bike before he can ride it to class. 
D) Olivia must decide between skiing at Whistler or Lake Louise for spring break.

Exam 1: Ten Principles of Economics

How do prices direct economic activity in a market economy

In which situation would economists use the word equity

What is the term for what you give up to obtain an item

A typical worker in Italy can produce 24 units of product in an eight-hour day,where a typical worker in Poland produces 25 units of product in a 10-hour day.What can we conclude

Which of the following is an example of market power

What is NOT included in the decisions that every society must make

The average cost per seat on an airplane trip from Calgary to Kelowna is $250.Suppose no refreshments are served and seven seats are empty.How could the airline company increase its profit

Carol has spent $2000 purchasing and repairing an old car,which she expects to sell for $2400.She discovers that she needs an additional repair,which will cost $400.She can sell the car as it is now for $2000.What should she do

When is a good considered scarce in a society

What is the definition of inflation

What is the effect of a trade between Canada and India

If Canada decides to trade with Mexico,what do we know about the probable outcome

Your professor loves her work teaching economics.She has been offered other positions in the corporate world making 25 percent more,but has decided to stay in teaching.What might change her decision

What are economists illustrating when they use the phrase "There is no such thing as a free lunch"

A marginal change is a small incremental adjustment to an existing plan of action.

What does the tenth principle of economics help explain

Which observation was made famous by Adam Smith in his book The Wealth of Nations

A friend of yours asks you why market prices are better than government-determined prices.What do you say

In the short run,what does the tenth principle of economics illustrate

Which statement best describes the concept represented by the adage "There is no such thing as a free lunch"

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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