Question1

Which of the following is NOT a characteristic of markets?

Select one:

a.Government policies do not affect the decisions of firms and households.

b.Firms decide whom to hire and what to produce.

c.Firms and households guide the decisions based on profit and self-interest.

d.Households decide which firms to work for and what to buy with their incomes.

Question2

A demand curve shows the relationship between/among

Select one:

a.price and income.

b.price and quantity demanded.

c.income and quantity demanded.

d.income, price, and quantity demanded.

Question3

Using all available resources, if a farmer can produce either 65 cantaloupes or 70 watermelons, what is the opportunity cost of one cantaloupe to the farmer?

Select one:

a.0.82 watermelons

b.1.08 watermelons

c.1.50 watermelons

d.2.00 watermelons

Question4

Bill has noticed that increases in unemployment insurance claims are associated with recessions, and therefore he advocates limits on unemployment insurance so as to prevent recessions. Martha has noticed that most drug addicts once attended schools, and therefore she advocates getting rid of schools so as to prevent drug addiction. What do we know about the reasoning of Bill and Martha?

Select one:

a.The reasoning of both Bill and Martha suffers from the reverse causality problem.

b.The reasoning of both Bill and Martha suffers from the omitted variable problem.

c.Martha's reasoning suffers from the reverse causality problem, and Bill's reasoning suffers from the omitted variable problem.

d.Bill's reasoning suffers from the reverse causality problem, and Martha's reasoning suffers from the omitted variable problem.

Question5

To improve living standards, policymakers should

Select one:

a.formulate policies designed to increase productivity.

b.impose tougher immigration policies.

c.provide subsidized childcare to low-income families.

d.impose restriction on foreign competition.

Question6

What is the term that means "whatever must be given up to obtain an item"?

Select one:

a.efficiency

b.equilibrium

c.opportunity cost

d.externality

Question7

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

Select one:

a.It will not benefit Mexico because workers in Canada are more productive.

b.It will benefit Mexico because workers in Canada are more productive.

c.Mexico and Canada can both be better off.

d.Mexico will be better off, but trade with a less developed country will not help Canada.

Question8

Economists view normative statements as

Select one:

a.statements that establish production goals for the economy.

b.descriptive, making a claim about how the world is.

c.false statements about the normal condition of the world.

d.prescriptive, making a claim about how the world ought to be.

Question9

What do economists study?

Select one:

a.how governments interact with one another

b.the forces and trends that affect only the economy as a whole

c.how people make decisions

d.how societies change over time

Question10

A rancher can produce only beef, while a farmer can produce only potatoes. If the rancher and the farmer each like both foods, which of the following is most likely?

Select one:

a.They could gain from trade under certain circumstances, but not always.

b.They cannot gain from trade.

c.They could gain from trade only if each were indifferent between beef and potatoes.

d.They could gain from trade because each would enjoy a greater variety of food.

Question11

Suppose a gardener produces both green beans and corn in her garden. If she must give up 15 bushels of corn to get five bushels of green beans, what is the opportunity cost of one bushel of green beans?

Select one:

a.1/3 bushel of corn

b.3 bushels of corn

c.8 bushels of corn

d.18 bushels of corn

Question12

What does microeconomics study?

Select one:

a.how the economy as a whole works

b.the behaviour of consumers

c.how government affects the economy

d.how individual households and firms make decisions

Question13

Which statement is consistent with the tenth principle of economics?

Select one:

a.If we increase the rate of inflation from 3% to 6%, then the rate of unemployment will temporarily fall.

b.If we increase the rate of inflation from 3% to 6%, then the rate of unemployment will permanently fall.

c.If we increase the rate of inflation from 3% to 6%, then the rate of unemployment will permanently rise.

d.If we increase the rate of inflation from 3% to 6%, then the rate of unemployment will temporarily rise.

Question14

What is one definition ofequity?

Select one:

a.fairness

b.efficiency

c.similarity

d.equality

Question15

Economists view positive statements as

Select one:

a.affirmative, justifying existing economic policy.

b.optimistic, putting the best possible interpretation on things.

c.descriptive, making a claim about how the world is.

d.prescriptive, making a claim about how the world ought to be.

Question16

What does it mean if an economy is producing efficiently?

Select one:

a.There is no way to produce more of one good without producing less of the other.

b.It is not possible to produce more of one good at any cost.

c.It is possible to produce more of one good without producing less of the other.

d.It is possible to produce more of both goods.

Question17

According to economists, people respond to

Select one:

a.laws.

b.threats more than rewards.

c.positives, but not negatives.

d.incentives.

Question18

A primary function of prices in a market economy is to provide participants with

Select one:

a.spending limits.

b.economic information.

c.accounting capabilities.

d.an equitable distribution of goods.

Question19

A production possibilities frontier will be linear and not bowed out

Select one:

a.if the trade-off between the two goods is always at a constant rate.

b.if resources are allocated efficiently.

c.if unemployment is zero.

d.if no trade-offs exist.

Question20

Which statement about slope is NOT correct?

Select one:

a.Slope is positive if the two variables are moving in the same direction.

b.Slope explains how much one variable responds to changes in another variable.

c.Slope does not change if the line is linear.

d.Slope can be computed by delta x divided by delta y.

Question21

Production possibilities frontiers can shift outward

Select one:

a.if resources can be moved from the production of one good to another.

b.if there is an increase in technology.

c.if opportunity costs are reduced.

d.if government increases the amount of money in the economy.

Question22

What is the definition ofproductivity?

Select one:

a.the amount of labour that can be saved by replacing workers with machines

b.the amount of goods and services produced from each hour of a worker's time

c.the actual amount of effort workers put into an hour of working time

d.the estimated amount of effort workers put into an hour of working time

Question23

Economics deals primarily with the concept of

Select one:

a.scarcity.

b.power.

c.poverty.

d.change.

Question24

Which of the following displays a direct, or positive, relationship?

Select one:

a.a country's productivity and its standard of living

b.a country's prices for its goods and services, and its exports

c.a country's total population and its per-capita income

d.a country's government spending and its tax rates

Question25

How is absolute advantage found?

Select one:

a.by calculating the dollar cost of production

b.by comparing the productivity of one nation to that of another

c.by comparing opportunity costs

d.by first determining which country has a comparative advantage

Question26

What does the saying "There is no such thing as a free lunch" mean?

Select one:

a.All costs are included in the price of a product.

b.The cost of living is always increasing.

c.To get something we like, we usually have to give up another thing we like.

d.Even people on welfare have to pay for food.

Question27

Regan grows flowers and makes vases. Jayson also grows flowers and makes vases, but Regan is better at producing both. Who has an absolute or comparative advantage in what activity?

Select one:

a.Jayson has a comparative advantage in growing flowers.

b.Jayson has an absolute advantage in both activities.

c.Regan has a comparative advantage in growing flowers.

d.Regan has an absolute advantage in both activities.

Question28

In economics, capital refers to

Select one:

a.buildings and machines used in the production process.

b.the money households use to purchase necessities.

c.the finances necessary for firms to produce their products.

d.the value of stock market shares issued to investors.

Question29

What is the opportunity cost of going to university?

Select one:

a.zero, for students who are fortunate enough to attend on a scholarship

b.the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses

c.zero, because a college education will allow a student to earn a larger income after graduation

d.the value of the best opportunity a student gives up to attend university

Question30

What is a circular-flow diagram?

Select one:

a.a model that shows the effects of government and the central bank on the economy

b.a visual model of the relationship between money, prices, and businesses

c.a visual model of how the economy is organized

d.a mathematical model of how the economy works