Question 1

Guns and butter represent the classic societal tradeoff between spending on which two items?

Accepted Answer

A)  durable and nondurable goods 
B)  imports and exports 
C)  national defence and consumer goods 
D)  law enforcement and agriculture 
A)  durable and nondurable goods 
B)  imports and exports 
C)  national defence and consumer goods 
D)  law enforcement and agriculture

Question 2

Murray receives $100 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: A,B,C,and D.Each option costs $100,but Murray values each option differently.Finally,he decides on C.What is the opportunity cost of C?

Accepted Answer

A)  the value to him of the option he would have chosen if C was not available 
B)  the value to him of options A,B,and D combined 
C)  $300 
D)  $100 
A)  the value to him of the option he would have chosen if C was not available 
B)  the value to him of options A,B,and D combined 
C)  $300 
D)  $100

Question 3

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 4

When people act in their self-interest,what typically happens in a market system,according to Adam Smith?

Accepted Answer

A)  They help only themselves. 
B)  They harm others. 
C)  They help others,but not as much as they would have if they were not self-interested. 
D)  They help others even more than when they seek to help others. 
A)  They help only themselves. 
B)  They harm others. 
C)  They help others,but not as much as they would have if they were not self-interested. 
D)  They help others even more than when they seek to help others.

Question 5

Which of these consumption activities will most likely impose an external cost?

Accepted Answer

A)  an executive plays a vigorous game of golf 
B)  a student in a dorm plays a YouTube video at 120 decibels late at night 
C)  a young mother exercises to a yoga video 
D)  a construction worker eats a sandwich during his lunch break 
A)  an executive plays a vigorous game of golf 
B)  a student in a dorm plays a YouTube video at 120 decibels late at night 
C)  a young mother exercises to a yoga video 
D)  a construction worker eats a sandwich during his lunch break

Question 6

Mike has spent $500 purchasing and repairing an old fishing boat,which he expects to sell for $800.He discovers that he needs an additional repair,which will cost $400.He can sell the boat as it is now for $300.What should he do?

Accepted Answer

A)  He should take the $300. 
B)  He should never sell something for less than its cost. 
C)  He should complete the repairs and sell the boat. 
D)  It doesn't matter which action he takes; the outcome is the same either way. 
A)  He should take the $300. 
B)  He should never sell something for less than its cost. 
C)  He should complete the repairs and sell the boat. 
D)  It doesn't matter which action he takes; the outcome is the same either way.

Question 7

When does a rational decision maker take an action?

Accepted Answer

A)  only if the marginal benefit is less than the marginal cost 
B)  only if the marginal benefit is greater than the marginal cost 
C)  only if the average benefit is greater than the average cost 
D)  only if the marginal benefit is greater than both the average cost and the marginal cost 
A)  only if the marginal benefit is less than the marginal cost 
B)  only if the marginal benefit is greater than the marginal cost 
C)  only if the average benefit is greater than the average cost 
D)  only if the marginal benefit is greater than both the average cost and the marginal cost

Question 8

With which nations does Canada benefit from trade?

Accepted Answer

A)  only nations that can produce goods Canada cannot produce 
B)  with any nation 
C)  with any nation not in economic competition with Canada 
D)  only with less developed nations 
A)  only nations that can produce goods Canada cannot produce 
B)  with any nation 
C)  with any nation not in economic competition with Canada 
D)  only with less developed nations

Question 9

Suppose you have your own pizza delivery business and receive a call to deliver to a remote client.You need to decide whether to take the call.If you don't,there are no consequences,since someone else will.Based on the distance to the client,you calculate that it would cost you $5 to deliver,and expect to receive $6 for the service.You also pay monthly rent for the car,which on average,based on past experience,comes down to about $2 per trip.Your time doesn't matter,as you have nothing more enjoyable or useful to do for the time being.How do you make this decision? What economic principle is at work in your decision process?

Accepted Answer

The benefit from the trip is $6 and the

Question 10

What will pollution regulations do?

Accepted Answer

A)  increase profit to firms 
B)  impose a tradeoff on society 
C)  allow firms to raise workers' wages 
D)  lower prices for consumers 
A)  increase profit to firms 
B)  impose a tradeoff on society 
C)  allow firms to raise workers' wages 
D)  lower prices for consumers

Question 11

For your birthday,your friends have joined forces and offer you a choice among the following options (they will pay all expenses of your choice): A)A two-week trip to an exotic destination; B)A new,high-tech mountain bike,C)An annual pass to your preferred sports team games,and D)A dinner with your preferred celebrity.Suppose your subjective valuations of these options are as follows: A)$800,B)$700,C)$1500,and D)$1000.If you are a rational individual,you will obviously choose C,the annual pass,because it is the option of your highest valuation.
​
a)What is your opportunity cost of choosing option C? Explain.
b)Now,suppose your friends announce at the last minute a fifth option,E,a cheque of $1100.What is now your opportunity cost of choosing option C?
c)As you can see,the theory of opportunity cost implies that the cost of an action depends on other,seemingly unrelated facts.Why does this make sense?

Accepted Answer

a)The opportunity cost of an action is y

Question 12

What are two very likely reasons for a government to intervene in a market?

Accepted Answer

A)  to promote stability and to raise revenues 
B)  to promote equity and to promote efficiency 
C)  to promote equity and to promote stability 
D)  to promote efficiency and to raise revenues 
A)  to promote stability and to raise revenues 
B)  to promote equity and to promote efficiency 
C)  to promote equity and to promote stability 
D)  to promote efficiency and to raise revenues

Question 13

Stan buys a 1966 Mustang,which he plans to restore and sell.He anticipates that the cost of the car and the repairs will be $15,000 and that he can sell it for $19,000.When he has spent $15,000,he discovers he needs to replace the engine,which will cost $4000.He can sell the car without the new engine for $9000.What should Stan do?

Accepted Answer

A)  He should complete the repairs and sell the car for $13,000. 
B)  He should sell the car now for $9000. 
C)  He should never try such an expensive project again. 
D)  He should be totally indifferent between finishing the project and selling the car now. 
A)  He should complete the repairs and sell the car for $13,000. 
B)  He should sell the car now for $9000. 
C)  He should never try such an expensive project again. 
D)  He should be totally indifferent between finishing the project and selling the car now.

Question 14

What happens when the government attempts to cut the economic pie into more equal slices?

Accepted Answer

A)  It is easier to cut the pie,and therefore the economy can produce a larger pie. 
B)  The government can more easily allocate the pie to those most in need. 
C)  The pie gets smaller,and there will be less pie for everyone. 
D)  The economy will spend too much time cutting the pie and lose the ability to produce enough pie for everyone. 
A)  It is easier to cut the pie,and therefore the economy can produce a larger pie. 
B)  The government can more easily allocate the pie to those most in need. 
C)  The pie gets smaller,and there will be less pie for everyone. 
D)  The economy will spend too much time cutting the pie and lose the ability to produce enough pie for everyone.

Question 15

What is an example of a monopoly?

Accepted Answer

A)  a jewellery store in Burnaby,British Columbia 
B)  a souvenir shop in Cancun,Mexico 
C)  an electric company in Outlook,Saskatchewan 
D)  a doctor in St.John's,New Brunswick 
A)  a jewellery store in Burnaby,British Columbia 
B)  a souvenir shop in Cancun,Mexico 
C)  an electric company in Outlook,Saskatchewan 
D)  a doctor in St.John's,New Brunswick

Question 16

What term refers to a situation in which markets fail to allocate resources efficiently?

Accepted Answer

A)  economic depression 
B)  market failure 
C)  corporate bankruptcy 
D)  disequilibrium 
A)  economic depression 
B)  market failure 
C)  corporate bankruptcy 
D)  disequilibrium

Guns and butter represent the classic societal tradeoff between spending on which two items?

Murray receives $100 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: A,B,C,and D.Each option costs $100,but Murray values each option differently.Finally,he decides on C.What is the opportunity cost of C?

When is a good considered scarce in a society?

When people act in their self-interest,what typically happens in a market system,according to Adam Smith?

Which of these consumption activities will most likely impose an external cost?

Mike has spent $500 purchasing and repairing an old fishing boat,which he expects to sell for $800.He discovers that he needs an additional repair,which will cost $400.He can sell the boat as it is now for $300.What should he do?

When does a rational decision maker take an action?

With which nations does Canada benefit from trade?

What will pollution regulations do?

What are two very likely reasons for a government to intervene in a market?

What happens when the government attempts to cut the economic pie into more equal slices?

What is an example of a monopoly?

What term refers to a situation in which markets fail to allocate resources efficiently?

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 1: Ten Principles of Economics

Guns and butter represent the classic societal tradeoff between spending on which two items?

Murray receives $100 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: A,B,C,and D.Each option costs $100,but Murray values each option differently.Finally,he decides on C.What is the opportunity cost of C?

When is a good considered scarce in a society?

When people act in their self-interest,what typically happens in a market system,according to Adam Smith?

Which of these consumption activities will most likely impose an external cost?

Mike has spent $500 purchasing and repairing an old fishing boat,which he expects to sell for $800.He discovers that he needs an additional repair,which will cost $400.He can sell the boat as it is now for $300.What should he do?

When does a rational decision maker take an action?

With which nations does Canada benefit from trade?

What will pollution regulations do?

What are two very likely reasons for a government to intervene in a market?

What happens when the government attempts to cut the economic pie into more equal slices?

What is an example of a monopoly?

What term refers to a situation in which markets fail to allocate resources efficiently?

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters