Economics - Canadian Edition, 16e (Ragan)

Economics - Canadian Edition, 16e (Ragan) Chapter 1 Economic Issues and Concepts 1.1 What Is Economics?) Consider the following list: a worker with training in video gaming technology, 10 hectares of arable land in sout ...

Economics - Canadian Edition, 16e (Ragan) Chapter 1 Economic Issues and Concepts 1.1 What Is Economics?) 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-cream truck at a park in Quebec. Each of these is an example of A) a factor of production. B) a capital resource. C) a commodity. D) goods and services. E) an economic service. Answer: A Diff: 1 Type: MC Topic: 1.1a. economics/resources Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 4) Which of the following is NOT considered a "factor of production" in economics? A) the espresso machine at your local cafe B) the barista who makes the coffee C) the espresso drink you purchase D) the wood stir sticks E) the land on which the cafe sits Answer: C Diff: 2 Type: MC Topic: 1.1a. economics/resources Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, an 1) Which of the following statements provides the best definition of economics? A) The study of the most equitable distribution of scarce resources. B) The study of the use of scarce resources to satisfy unlimited human wants. C) The study of the production of goods and services. D) The study of the productive capacity of a nation's factors of production. E) The study of production and increasing its efficiency. Answer: B Diff: 1 Type: MC Topic: 1.1a. economics/resources Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 2) Society's resources are often divided into broad categories. They are A) goods and services. B) factors of consumption. C) land, labour, and capital. D) population and natural resources. E) tangible commodities and intangible commodities. Answer: C Diff: 1 Type: MC Topic: 1.1a. economics/resources Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice,, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative ) 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-cream truck at a park in Quebec. Each of these is an example of A) a factor of production. B) a capital resource. C) a commodity. D) goods and services. E) an economic service. Answer: A Diff: 1 Type: MC Topic: 1.1a. economics/resources Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 4) Which of the following is NOT considered a "factor of production" in economics? A) the espresso machine at your local cafe B) the barista who makes the coffee C) the espresso drink you purchase D) the wood stir sticks E) the land on which the cafe sits Answer: C Diff: 2 Type: MC Topic: 1.1a. economics/resources Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative ) 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) land. B) goods. C) services. D) capital. E) labour. Answer: D Diff: 2 Type: MC Topic: 1.1a. economics/resources Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 6) In economics, what word is used to describe the act of using goods or services to satisfy wants? A) consumption B) production C) purchasing power D) investment E) shopping Answer: A Diff: 2 Type: MC Topic: 1.1a. economics/resources Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative ) A basic underlying point in economics is that A) people have unlimited wants in the face of limited resources. B) there are unlimited resources. C) governments should satisfy the needs of the people. D) people have limited wants in the face of limited resources. E) governments should never interfere in the workings of a market economy. Answer: A Diff: 1 Type: MC Topic: 1.1b. scarcity and choice Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 8) Which of the following best describes the study of economics? A) how to plan an economy B) how to limit human wants so that scarce resources are sufficient C) why resources are scarce D) the allocation of scarce resources among alternative uses E) how to distribute income as equally as possible Answer: D Diff: 1 Type: MC Topic: 1.1b. scarcity and choice Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 9) Economics can best be described as A) the study of how a society ought to allocate its resources. B) the study of the use of scarce resources to satisfy unlimited human wants. C) the application of sophisticated mathematical models to address social problems. D) a normative science. E) the study of how to reduce inflation and unemployment. Answer: B Diff: 1 Type: MC Topic: 1.1b. scarcity and choice Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative ) Scarcity is likely to be A) a problem that will be solved by the proper use of available resources. B) unique to the twenty-first century. C) a problem that will always exist. D) a result of the work ethic. E) eliminated with a better understanding of economics. Answer: C Diff: 2 Type: MC Topic: 1.1b. scarcity and choice Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 11) Which of the following statements best describes the economic concept of scarcity? A) Society is not employing all of its available resources in an efficient manner. B) People's wants can never be satisfied by the available resources. C) Scarcity afflicts only poor countries. D) Too many frivolous goods and services are produced at the expense of socially desirable goods and services. E) Production is efficient, but distribution is inefficient. Answer: B Diff: 2 Type: MC Topic: 1.1b. scarcity and choice Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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) There are unlimited resources. C) Resources are distributed fairly. D) People have limited wants in the face of limited resources. E) Governments should never interfere in the workings of a market economy. Answer: A Diff: 1 Type: MC Topic: 1.1b. scarcity and choice Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative Because resources are scarce, individuals are required to A) make choices among alternatives. B) use resources inefficiently. C) sacrifice production but not consumption. D) improve distribution but not production. E) improve production but not distribution. Answer: A Diff: 2 Type: MC Topic: 1.1b. scarcity and choice Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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. Answer: D Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 15) Which of the following best completes the definition of opportunity cost? ? The opportunity cost of choosing any one alternative is the A) market cost of the next best alternative. B) value of the next best alternative that is given up. C) the revenues that would be given up if that alternative is not chosen. D) value of all other alternatives combined. E) value of resources used to make that alternative available to the market. Answer: B Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 6) 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) 0 kilometres of highway repair. B) 50 kilometres of highway repair. C) 100 kilometres of highway repair. D) 150 kilometres of highway repair. E) 200 kilometres of highway repair. Answer: B Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative ) 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 kilometre of highway repA) 1 search and rescue helicopter. B) 1/2 of a search and rescue helicopter. C) 1/10 of a search and rescue helicopter. D) 1/50 of a search and rescue helicopter. E) 1/100 of a search and rescue helicopter. Answer: D Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 8) 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. If the government chooses to allocate all $200 million to highway repair, we can say that A) the opportunity cost of the highway repair is uncertain. B) the opportunity cost of the highway repair is $0. C) the opportunity cost of the highway repair is 4 search and rescue helicopters. D) there is no opportunity cost involved because the government has achieved its objectives. E) there is no opportunity cost involved because the government stayed within its budget. Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative ) 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. Which of the following combinations of kilometres of highway repair and helicopters is unaffordable, given the government's budget of $200 million? A) B B) D C) E D) F E) G Answer: E Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative ) ) 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. Which of the following combinations of kilometres of highway repair and helicopters is unaffordable, given the government's budget of $200 million? A) B B) D C) E D) F E) G Answer: E Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative20) 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. 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 Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative ) 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. 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 Answer: E Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative ) 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. 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 2000 laptops. B) The opportunity cost is 20,000 textbooks. C) The opportunity cost is uncertain. D) The opportunity cost is $0. E) There is no opportunity cost because the purchase was made within the available budget. Answer: B Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 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. 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 Answer: D Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 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. 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 Answer: D Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 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 Answer: A Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative ) 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 laptop computer in this example? A) $25 B) $40 C) $50 D) $100 E) $250 Answer: E Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative ) 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) one mowed lawn B) 3 mowed lawns C) 1/3 of a mowed lawn D) 1/4 of a mowed lawn E) 4 mowed lawns Answer: D Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Quantitative 27) 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 fishing lure? A) 5 lures B) 1 mowed lawn C) 1/6 of a lure D) 1/6 of a mowed lawn E) There is no opportunity cost. Answer: B Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Quantitative ) 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) one fishing lure B) 3 fishing lures C) 4 fishing lures D) 6 fishing lures E) 12 fishing lures Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Quantitative 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) one fishing lure D) 6 fishing lures E) 12 fishing lures Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Quantitative ) 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. 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; Thomas produces 6 lures C) Tristan produces 6 lures and 3 mowed lawns D) Tristan produces 12 lures; Thomas produces 6 mowed lawns E) Tristan produces nothing, Thomas produces 6 lures and 6 mowed lawns Answer: D Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Quantitative ) 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. 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; Thomas produces 6 lures C) Tristan produces 6 lures and 3 mowed lawns D) Tristan produces 12 lures; Thomas produces 6 mowed lawns E) Tristan produces nothing, Thomas produces 6 lures and 6 mowed lawns Answer: D Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Quantitative ) 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) Thomas has a higher opportunity cost of producing mowed lawns. C) Tristan has a higher opportunity cost of producing fishing lures. D) Thomas has a higher opportunity cost of producing fishing lures. E) Both A and D are correct. Answer: E Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Table Category: Qualitative 2) Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month. FIGURE 1-3 Refer to Figure 1-3. For Madeleine, the opportunity cost of one regular coffee is A) 1/4 of a regular coffee. B) 20 lattes. C) 4 lattes. D) 1/4 of a latte. E) 80 lattes. Answer: D Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month. FIGURE 1-3 Refer to Figure 1-3. For Madeleine, the opportunity cost of one latte is A) 1/4 of a regular coffee. B) 1/4 of a latte. C) 8 regular coffees. D) 80 regular coffees. E) 4 regular coffees. Answer: E Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 4) Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month. 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) zero because she stayed within her budget. C) 80 cups of regular coffee. D) 40 cups of regular coffee. E) 20 cups of regular coffee. Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 24 Copyright © 2020 Pearson Canada Inc. 35) Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month. 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) 15 lattes and 30 coffees B) 16 lattes and 16 coffees C) 8 lattes and 50 coffees D) 4 lattes and 66 coffees E) 20 lattes and 80 coffees Answer: B Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 25 Copyright © 2020 Pearson Canada Inc. 36) Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month. FIGURE 1-3 Refer to Figure 1-3. What is the price of a regular coffee in this example? A) $0.80 B) $1.25 C) $2.00 D) $5.00 E) $8.00 Answer: B Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 26 Copyright © 2020 Pearson Canada Inc. 37) Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month. FIGURE 1-3 Refer to Figure 1-3. What is the price of a coffee latte in this example? A) $0.80 B) $1.00 C) $1.25 D) $2.00 E) $5.00 Answer: E Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 27 Copyright © 2020 Pearson Canada Inc. 38) Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs to purchase, and Model B, which costs $50 000 to purchase. You have a budget of 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) 10 and 10. B) 6 and 6. C) 0 and 10. D) 0 and 0. E) 10 and 6. Answer: E Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 39) Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs to purchase, and Model B, which costs $50 000 to purchase. You have a budget of for the purchase of new vehicles. What is the opportunity cost of one Model A vehicle? A) 0 B) 3/5 of a Model B vehicle C) 5/3 of Model B vehicle D) 5 Model B vehicles E) 3 Model B vehicles Answer: B Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative ) Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs to purchase, and Model B, which costs $50 000 to purchase. You have a budget of for the purchase of new vehicles. What is the opportunity cost of one Model B vehicle? A) 0 B) 3/5 of a Model A vehicle C) 5/3 of a Model A vehicle D) 5 Model A vehicles E) 3 Model A vehicles Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 41) Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs to purchase, and Model B, which costs $50 000 to purchase. You have a budget of for the purchase of new vehicles. Which of the following statements best describes the shape of your budget line? A) The budget line is concave to the origin, indicating that the opportunity cost of each model of vehicle increases with each additional unit purchased. B) The budget line is convex to the origin, indicating that the opportunity cost of each vehicle decreases with each additional unit purchased. C) The budget line is a straight line, indicating that the opportunity cost of each vehicle decreases with each additional unit purchased. D) The budget line is a straight line, indicating that the opportunity cost of each model of vehicle is independent of how many are purchased. E) The budget line is a straight line, indicating that the opportunity cost of each vehicle increases with each additional unit purchased. Answer: D Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 29 Copyright © 2020 Pearson Canada Inc. 42) Scarcity arises from limited resources. For this reason, all economic choices involve A) a value judgement. B) an educated decision. C) an opportunity cost. D) complementary ends. E) greed. Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 43) The opportunity cost of going to college or university for four years is A) equal to the wage rate a person will earn after graduation. 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) the cost of tuition, residence fees and books. E) zero. Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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. Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 30 Copyright © 2020 Pearson Canada Inc. 45) The opportunity cost of producing good A is defined to be A) the money cost of the factors of production used in good A. B) the retail price of good A. C) the cheapest method of producing good A. D) what must be sacrificed of other goods to get an additional unit of good A. E) the cost of having to get by using something else in place of good A. Answer: D Diff: 1 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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) 5 pineapples B) 2 pineapples C) 2/5 of a pineapple D) 5/2 pineapples E) zero pineapples Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 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) 5 units of wool B) 2 units of wool C) 2/5 unit of wool D) 5/2 units of wool E) zero Answer: D Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 31 Copyright © 2020 Pearson Canada Inc. 48) A small landscaping firm purchases a tractor that, in one day, is capable of drilling 60 fencepost 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) 1/12th of the cost of the tractor B) 1/5 of the cost of the tractor C) drilling 12 fence-post holes D) drilling 5 fence-post holes E) There is no opportunity cost. Answer: D Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 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 pies B) 0.25 pies C) 2.5 pies D) 0.4 cakes E) 2.5 cakes Answer: C Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 32 Copyright © 2020 Pearson Canada Inc. 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) 125 pies B) 0.4 cakes C) 2.5 pies D) 0.4 pies E) 50 cakes Answer: B Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 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) Katie's opportunity cost of producing 1 jar of pickles is 2 pies. B) Katie's opportunity cost of producing 1 jar of pickles is 1/2 of a pie. C) Hugh's opportunity cost of producing 1 jar of pickles is 4 pies. D) Hugh's opportunity cost of producing 1 pie is 1/4 jar of pickles. E) Hugh's and Katie's opportunity costs of producing are the same. Answer: B Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 33 Copyright © 2020 Pearson Canada Inc. 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) $128 000 B) $200 000 C) $240 000 D) $248 000 E) $288 000 Answer: D Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 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) $75 000 B) $76 000 C) $161 000 D) $167 000 E) $175 000 Answer: C Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 34 Copyright © 2020 Pearson Canada Inc. 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) when prospects for getting a job are poor, the opportunity cost of getting a job is lower. B) when prospects for getting a job are poor, the opportunity cost of doing nothing is higher. C) during periods of high unemployment, tuition fees are reduced. D) during periods of high unemployment, the opportunity cost is no longer relevant. E) when prospects for getting a job are poor, the opportunity cost of going to university is lower. Answer: E Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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 thiss 6-month, unpaid leave of absence? A) $12 000 B) $22 000 C) $42 000 D) $52 500 E) $65 000 Answer: D Diff: 3 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 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) decreases; increase C) increases; increase D) decreases; decrease E) remains the same; remain the same Answer: D Diff: 2 Type: MC Topic: 1.1c. opportunity cost Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 35 Copyright © 2020 Pearson Canada Inc. 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) it is always possible to produce more of all goods. D) all points inside the boundary are preferred to all points on the boundary. E) the supply for goods always exceeds the demand. Answer: A Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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) decrease. B) remain the same. C) increase. D) increase at a decreasing rate. E) increase at a increasing rate. Answer: A Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 59) A point lying inside the production possibilities boundary is one at which A) there is no scarcity. B) the opportunity cost of producing more output is negative. C) it is not possible to produce more output with existing resources. D) the economy has run out of resources. E) more output could be produced with existing resources. Answer: E Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 36 Copyright © 2020 Pearson Canada Inc. 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) the use of the scarce resources in an economy. C) constant opportunity cost of producing more of either good. D) an unfair distribution of resources in an economy. E) increasing opportunity cost of producing more of either good. Answer: C Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 37 Copyright © 2020 Pearson Canada Inc. 61) The diagram below shows two production possibilities boundaries for Country X. 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 decreasing opportunity cost of producing more of either good B) the scarcity of resources in the economy C) the constant opportunity cost of producing more of either good D) the unfair distribution of resources in the economy E) the increasing opportunity cost of producing more of either good Answer: E Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 38 Copyright © 2020 Pearson Canada Inc. 62) The diagram below shows two production possibilities boundaries for Country X. 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 or E. B) D or E. C) A, B, or C. D) A or B, but not C. E) A, B, C, D, or E. Answer: C Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 39 Copyright © 2020 Pearson Canada Inc. 63) The diagram below shows two production possibilities boundaries for Country X. 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 capital goods industries to the consumer goods industries. C) the cost of producing consumer goods were to increase. D) some resources were switched from the consumer goods industries to the capital goods industries. E) Country X is no longer able to produce the quantity of capital goods at point A. Answer: B Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative The diagram below shows two production possibilities boundaries for Country X. 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 to give up an increase in the production of consumer goods. B) the opportunity cost of moving to point A is zero. C) the opportunity cost of moving to point A is to give up some capital goods. D) this is the maximum output possible from given resources. E) it is not possible to move to any point on PPB1 or PPB2 without technological progress. Answer: A Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 41 Copyright © 2020 Pearson Canada Inc. 65) The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 Refer to Figure 1-4. At point B, A) the price of capital goods is higher than the price of consumer goods. 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 opportunity cost of producing an extra unit of consumer goods is higher than at point A. Answer: E Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative ) The diagram below shows two production possibilities boundaries for Country X. 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) E. C) D. D) C. E) B. Answer: A Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 43 Copyright © 2020 Pearson Canada Inc. 67) The diagram below shows two production possibilities boundaries for Country X. 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) the given resources were more efficiently employed. C) sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries. D) firms reduced output of capital goods. E) the prices of capital goods and consumption goods fell. Answer: C Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 44 Copyright © 2020 Pearson Canada Inc. 68) The diagram below shows two production possibilities boundaries for Country X. Refer to Figure 1-4. A shift of the production possibilities boundary from PPB1 to PPB2 implies A) a movement from full employment to some unemployment. B) that if point E is the new choice of outputs, productivity has increased in the consumer goods industry. C) that productive capacity in the capital goods industries has improved. D) an inevitable decrease in total output. E) that productive capacity in the consumer goods industry has improved. Answer: C Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 45 Copyright © 2020 Pearson Canada Inc. 69) The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 Refer to Figure 1-4. Growth in the country's productive capacity is illustrated by A) a point like D outside the boundary. B) a movement from a point inside the boundary such as C to the boundary. C) the movement between points on a given boundary. D) a single point such as A on the boundary. E) an outward shift of the boundary, for example from PPB1 to PPB2. Answer: E Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 46 Copyright © 2020 Pearson Canada Inc. 70) The diagram below shows two production possibilities boundaries for Country X. FIGURE 1-4 Refer to Figure 1-4. An outward shift of the production possibilities boundary from to indicates which of the following? A) an increase in the price of raw materials for consumer goods B) growth in the country's productive capacity C) an increase in the price of raw material for capital goods D) more of the country's resources are being used E) the country's resources are being used less efficiently Answer: B Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 47 Copyright © 2020 Pearson Canada Inc. 71) 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) the opportunity cost of producing either capital goods or consumer goods does not depend on how much of each good is produced. C) consumer goods are preferred to capital goods. D) in this society, the resources are not efficiently employed. E) capital goods are preferred to consumer goods. Answer: B Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 48 Copyright © 2020 Pearson Canada Inc. 72) FIGURE 1-5 Refer to Figure 1-5. Which production possibilities boundaries are consistent with increasing opportunity costs? A) boundary A only B) boundaries A and B C) boundary C only D) boundaries B and C E) boundaries A, B, and C Answer: C Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 49 Copyright © 2020 Pearson Canada Inc. 73) FIGURE 1-5 Refer to Figure 1-5. Which production possibilities boundaries exhibit decreasing opportunity costs? A) boundary B only B) boundaries A and C C) boundaries A and B D) boundary A only E) boundary C only Answer: D Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative ) 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 convex to the origin. B) semicircular. C) a downward-sloping straight line. D) a downward-sloping straight line that is broken at one point. E) a downward-sloping curve concave to the origin. Answer: C Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Quantitative 75) On a diagram of a production possibilities boundary, the concept of scarcity is illustrated by the A) points on the boundary. B) area within the boundary. C) distance from the origin to the boundary. D) negative slope of the boundary. E) unattainable points outside the boundary. Answer: E Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 76) On a diagram of a production possibilities boundary, the concept of opportunity cost is illustrated by the A) distance from the origin to the boundary. B) negative slope of the boundary. C) boundary being concave to the origin. D) unattainable points outside the boundary. E) area bounded by the two axes and the boundary. Answer: B Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative ) On a diagram of a production possibilities boundary, the concept of choice is illustrated by the A) negative slope of the boundary. B) unattainable combinations outside the boundary. C) need to select among the alternative attainable points along or inside the boundary. D) the concave shape of the boundary. E) the distance from the origin to the boundary. Answer: C Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Recall Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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) a movement along the PPB. E) the movement to a point outside of the PPB. Answer: B Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 79) Suppose there are only two goods produced in our economy—snowplows 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 A) a downward-sloping curve convex to the origin. B) circular. C) a downward-sloping straight line. D) a downward-sloping straight line with slope equal to -1. E) a downward-sloping curve concave to the origin. Answer: C Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 52 Copyright © 2020 Pearson Canada Inc. 80) A straight-line production possibilities boundary differs from a concave boundary in which of the following ways? A) The straight-line boundary illustrates constant opportunity costs, whereas the concave boundary illustrates increasing opportunity costs. B) The concave boundary illustrates constant opportunity costs, whereas the straight-line boundary illustrates decreasing opportunity costs. C) The straight-line boundary does not show scarcity, whereas the concave boundary does. D) The straight-line boundary shows opportunity cost, whereas the concave boundary does not. E) A straight-line boundary is associated with a command economy, whereas a concave boundary is associated with a free-market economy. Answer: A Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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 outward. D) possibilities boundary inward. E) above the level of U.S. production. Answer: C Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 53 Copyright © 2020 Pearson Canada Inc. 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) a movement inside B) a movement along C) a movement to a point beyond D) a shift outward of E) an inward shift of Answer: E Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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) shift its production possibilities boundary inward. D) shift its production possibilities boundary outward. E) move it along an unchanged production possibilities boundary. Answer: D Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 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 shift inward. C) no change. D) a movement along. E) a movement to a point beyond the boundary. Answer: C Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 54 Copyright © 2020 Pearson Canada Inc. 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) a shift outward B) a shift inward C) movement to a point beyond the boundary D) movement to a point within the boundary E) no change Answer: E Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 86) Suppose drought destroys many millions of acres of valuable Canadian farmland. The effect on the Canadian economy would be to move A) it along its production possibilities boundary. B) its production possibilities boundary inward. C) it beyond its production possibilities boundary. D) its production possibilities boundary outward. E) None of the above. There would be no change in Canada's production possibilities boundary. Answer: B Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 87) A move from inside the production possibilities boundary to the boundary itself could be caused by A) the employment of previously idle resources. B) a reallocation of resources from military to civilian goods. C) technological progress. D) an increase in the labour supply. E) an improvement in the government's ability to control its spending. Answer: A Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 55 Copyright © 2020 Pearson Canada Inc. 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 employment of previously idle resources. B) the reallocation of resources between military and civilian goods. C) the growth of productive capacity. D) an increase in the labour supply. E) technological progress. Answer: B Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Category: Qualitative 56 Copyright © 2020 Pearson Canada Inc. 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) are equal to those of point A and point B. C) are more cost-effective than those at points A, B, and D. D) could be achieved if the prices of health and/or education increased. E) are not attainable with the government's current budget. Answer: E Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 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. 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 health. B) zero opportunity cost. C) less spending on education. D) less spending in total. E) more spending on education. Answer: C Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative 58 Copyright © 2020 Pearson Canada Inc. 91) 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. Suppose the government's current spending is shown by point D. In this case, A) the government is not spending its total available budget for these two items. B) more education expenditures can be achieved only by sacrificing some existing health expenditures. C) more health expenditures can be achieved only by sacrificing some existing education expenditures. D) the government is spending more than its total budget. E) the prices of education and health care have increased beyond the government's ability to pay. Answer: A Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Qualitative ) Figure 1-7 shows the production possibilities boundary for an economy that produces two goods—cotton and bananas. FIGURE 1-7 Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods—cotton 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) 60 tonnes of cotton C) 100 tonnes of cotton D) 1440 tonnes of bananas E) 1500 tonnes of bananas Answer: B Diff: 1 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 60 Copyright © 2020 Pearson Canada Inc. 93) Figure 1-7 shows the production possibilities boundary for an economy that produces two goods—cotton and bananas. FIGURE 1-7 Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods—cotton 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) 420 tonnes of cotton C) 100 tonnes of cotton D) 60 tonnes of cotton E) 920 tonnes of cotton Answer: E Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 61 Copyright © 2020 Pearson Canada Inc. 94) Figure 1-7 shows the production possibilities boundary for an economy that produces two goods—cotton and bananas. FIGURE 1-7 Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods—cotton 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 producction of bananas by 100 tonnes? A) 100 tonnes of cotton B) 360 tonnes of cotton C) 360 tonnes of bananas D) 920 tonnes of cotton E) There is no opportunity cost. Answer: B Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 62 Copyright © 2020 Pearson Canada Inc. 95) Figure 1-7 shows the production possibilities boundary for an economy that produces two goods—cotton and bananas. FIGURE 1-7 Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods—cotton 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 high 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 low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. C) 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. 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 of producing the extra bananas is independent of the amount being produced. Answer: A Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 63 Copyright © 2020 Pearson Canada Inc. 96) Figure 1-7 shows the production possibilities boundary for an economy that produces two goods—cotton and bananas. FIGURE 1-7 Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods—cotton 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) 0.36 tonnes of cotton B) 3.6 tonnes of cotton C) 3.75 tonnes of cotton D) 36 tonnes of cotton E) 375 tonnes of cotton Answer: B Diff: 3 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 64 Copyright © 2020 Pearson Canada Inc. 97) Figure 1-7 shows the production possibilities boundary for an economy that produces two goods—cotton and bananas. Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods—cotton 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 is 1500 tonnes of cotton at point A, compared to 500 tonnes at point E. B) The opportunity cost is 500 tonnes of cotton at point A, compared to 1500 tonnes at point E. C) The opportunity cost of producing an extra tonne of bananas is much higher at point A than at point E. D) The opportunity cost of producing an extra tonne of bananas is much lower at point A than at point E. E) The opportunity cost of producing an extra tonne of bananas is the same at point A as at point E. Answer: D Diff: 2 Type: MC Topic: 1.1d. production possibilities boundary Skill: Applied Learning Obj.: 1-1 Explain the importance of scarcity, choice, and opportunity cost, and how each is illustrated by the production possibilities boundary. Graphics: Graph Category: Quantitative 65 Copyright © 2020 Pearson Canada Inc. 1.2 The Complexity of Modern Economics 1) A modern economy like Canada's is largely organized by A) governments at all levels coordinating the activities of firms and citizens. B) individuals forming cooperative enterprises and labour unions. C) individuals following their own self-interest, doing what seems best for themselves. D) benevolent individuals pursuing the public interest. E) the self-interested behaviour of a small number of individuals. Answer: C Diff: 2 Type: MC Topic: 1.2a. self-organizing economy Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 2) An insight first fully developed by Adam Smith is that A) without benevolence production would not occur. B) all individuals are motivated solely by self-interest. C) self-interest, not benevolence, is the foundation of economic order. D) self-interest undermines effective economic order. E) individual self-interest is the only necessary force for social order. Answer: C Diff: 1 Type: MC Topic: 1.2a. self-organizing economy Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 3) 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) productivity. B) division of labour. C) specialization. D) benevolence. E) efficiency. Answer: E Diff: 2 Type: MC Topic: 1.2a. self-organizing economy Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 66 Copyright © 2020 Pearson Canada Inc. 4) In the Canadian economy, most decisions regarding resource allocation are made by A) consumers and producers interacting in the price system. B) the various levels of government. C) negotiation between unions and firms. D) business firms only. E) legal contract. Answer: A Diff: 1 Type: MC Topic: 1.2a. self-organizing economy Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 5) 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 firms and individuals acting independently D) by political parties and firms only E) by individuals only Answer: C Diff: 1 Type: MC Topic: 1.2b. circular flow of income and expenditure Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 6) The key decision makers in a market economy are A) individuals, firms, and government. B) individuals, non-profit organizations, and the Bank of Canada. C) governments and all institutions under government control. D) large corporations and labour organizations. E) corporations and governments. Answer: A Diff: 1 Type: MC Topic: 1.2b. circular flow of income and expenditure Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 67 Copyright © 2020 Pearson Canada Inc. 7) Economists usually assume that individuals and firms, respectively, maximize A) income and sales. B) savings and profits. C) wages and revenues. D) utility and profits. E) expenditures and profits. Answer: D Diff: 2 Type: MC Topic: 1.2b. circular flow of income and expenditure Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 8) Which of the following is illustrated by the circular flow of income? A) the flows of expenditures and income in a household B) that firms own the factors of production C) the interaction of individuals and firms through the factors and goods markets D) that the flow of payments moves in the same direction as the flow of goods E) that there is no relationship between goods markets and factor markets Answer: C Diff: 2 Type: MC Topic: 1.2b. circular flow of income and expenditure Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 9) Which of the following represents a typical "real" flow (as opposed to a financial flow) in the circular flow of income? A) goods going from producers to consumers B) factor services going from producers to consumers C) goods going from consumers to producers D) money payments going from consumers to producers E) money payments going from producers to consumers Answer: A Diff: 1 Type: MC Topic: 1.2b. circular flow of income and expenditure Skill: Recall Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 68 Copyright © 2020 Pearson Canada Inc. 10) 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) stop. B) run over. C) expand. D) contract. E) explode. Answer: D Diff: 2 Type: MC Topic: 1.2b. circular flow of income and expenditure Skill: Applied Learning Obj.: 1-2 View the market economy as self-organizing in the sense that order emerges from a large number of decentralized decisions. Category: Qualitative 11) The famous economist who first described the division of labour was A) Karl Marx. B) Milton Friedman. C) David Ricardo. D) John Maynard Keynes. E) Adam Smith. Answer: E Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 12) Which of the following statements about specialization and trade are correct? A) They developed only in the twentieth century. B) They exist only in capitalist economies. C) They arose as humans changed from nomadic and self-sufficient food gatherers to settled food producers. D) They developed only where government and political institutions were stable. E) They occur only in the private sector. Answer: C Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 69 Copyright © 2020 Pearson Canada Inc. 13) If an economy exhibits the specialization of labour, we know that A) a barter economy is more suitable. B) most production is artisanal in nature. C) each worker is self-sufficient. D) job security is ensured. E) different individuals are producing different products. Answer: E Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 14) Which of the following statements best describes a barter system of exchange? A) It involves the trading of goods directly for other goods. B) It requires the use of money. C) It eliminates the transactions costs involved in exchange. D) It developed late in history. E) It is the most efficient form of exchange. Answer: A Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 15) Specialization of labour led to greater efficiency in the allocation of resources because of A) greater reliance on self-sufficiency. B) the use of barter. C) the principle of comparative advantage. D) an increase in total work effort. E) the opportunity cost of labour increased. Answer: C Diff: 2 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative ) A greater specialization of labour leads to which of the following major results? A) The overall output of the economy declines. B) There is an increased need for government to intervene in the marketplace. C) The circular flow of income contracts. D) There is a greater need for trade. E) Each worker must become more self-sufficient. Answer: D Diff: 2 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 17) A farmer selling tomatoes and corn at a roadside, and a currency trader in Hong Kong are each participating in A) barter. B) a market. C) an involuntary transaction. D) flexible manufacturing. E) international trade. Answer: B Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Applied Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 18) Which of the following has most contributed to the globalization of the economy? A) the decreased importance of agriculture B) reductions in transportation and communication costs C) the shift toward a market economy in China D) tariffs and trade barriers E) the decline in the relative importance of manufacturing Answer: B Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 71 Copyright © 2020 Pearson Canada Inc. 19) Which of the following results from the introduction of money for use in transactions? A) exchange becomes easier and this promotes the specialization of labour B) an increased use of barter C) the specialization of labour becomes more difficult D) self-sufficiency is assured E) society is able to satisfy all wants Answer: A Diff: 2 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 20) The barter system of exchange is inefficient because A) "fair" values cannot be defined without the use of money. B) bargaining power is unequal between rich and poor. C) the double coincidence of wants may not exist. D) markets do not exist. E) exchange partners need to know each other. Answer: C Diff: 2 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Applied Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 21) 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. Answer: D Diff: 2 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 72 Copyright © 2020 Pearson Canada Inc. 22) 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) reducing the shift of resources between uses. E) providing employment for coin makers. Answer: C Diff: 1 Type: MC Topic: 1.2c. division of labour, specialization and trade Skill: Recall Learning Obj.: 1-3 Explain how specialization gives rise to the need for trade, and how trade is facilitated by money. Category: Qualitative 1.3 Is There an Alternative to the Market Economy? 1) An economic system that relies primarily upon custom and habit in economic decision making is referred to as a A) market system. B) traditional system. C) command system. D) mixed system. E) communist system. Answer: B Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 2) In practice, the term "centrally planned economy" refers to an economy in which A) the government makes ALL production and consumption decisions. B) the mix of market and command principles is heavily weighted towards the latter. C) all commodities are rationed. D) the military is in control of the government. E) economic decisions are made in the geographic centre of the country. Answer: B Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 73 Copyright © 2020 Pearson Canada Inc. 3) Karl Marx argued that A) technological change was not important in improving living standards. B) a free-market system would produce a low level of total output. C) benevolence, not self-interest, produced an effective economic order. D) centrally planned economies could provide a more equitable distribution of total output than capitalist economies. E) the unfettered market system driven by self-interest leads to the best social outcome. Answer: D Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 4) When discussing types of economic systems, the Canadian economy is best described as A) primarily a public ownership economy. B) primarily free-market decision making. C) traditional. D) a command economy. E) a mixed economic system. Answer: E Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Applied Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 5) With regard to various economic systems, most economists agree that A) the mix of market and command principles that exists in Canada is the best. B) the optimal mix of market and command systems remains constant over time. C) most production and consumption decisions are more efficiently coordinated by markets than through central planning. D) government intervention in the economy is only justified in time of war. E) command economies have been very successful in distributing income in socially just ways. Answer: C Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 74 Copyright © 2020 Pearson Canada Inc. 6) Which countries have mostly public ownership of resources? A) United States and Canada B) Cuba and North Korea C) France and Germany D) Sweden and Norway E) Brazil and Argentina Answer: B Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 7) Behaviour in free-market economies is A) determined by a central authority. B) based primarily on custom and habit. C) mostly directed by self-interest. D) mostly affected by elements of tradition and government command. E) random and unpredictable. Answer: C Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 8) In command economies, economic behaviour is A) largely determined by a central authority. B) based primarily on custom and habit. C) directed by individual self-interest. D) largely affected by elements of tradition and market incentives. E) random and unpredictable. Answer: A Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 9) In mixed 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) affected by elements of tradition, government command, and market incentives. E) random and unpredictable. Answer: D Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 10) 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) affected by elements of tradition, government command, and market incentives. E) random and unpredictable. Answer: B Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 11) Complex economic plans for many economic sectors are most associated with a A) free-market system. B) mixed market system. C) command economy. D) feudal system. E) traditional economy. Answer: C Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 76 Copyright © 2020 Pearson Canada Inc. 12) Most modern economies in the world today A) have pure market exchange. B) are similar to feudal systems. C) are mostly run by government decree. D) have a mix of traditional, command and market elements. E) are complex systems that defy description and analysis. Answer: D Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 13) In the current Canadian economy, the majority of choices on how resources are allocated are made by A) the various levels of government. B) negotiation between unions and firms. C) business firms only. D) legal contracts. E) consumers and firms through the price system. Answer: E Diff: 1 Type: MC Topic: 1.3. alternative economic systems Skill: Applied Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 14) Comparison of economic systems indicates that A) most nations have either a purely socialist economy or a purely capitalist economy. B) most countries have mixed economies. C) socialist economies are clearly superior in producing consumer goods. D) capitalist economies are clearly superior in distributing income. E) all countries have largely traditional economies. Answer: B Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 77 Copyright © 2020 Pearson Canada Inc. 15) 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 failure of the market system. B) the triumph of capitalism over communism. C) an indication of the extreme difficulty of transition from one type of economic system to another. D) an indication that these economies should return to being command economies. E) the difficulty of corruption in non-market economies. Answer: C Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 16) 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. Answer: A Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervention. Category: Qualitative 78 Copyright © 2020 Pearson Canada Inc. 17) In a mmodern mixed economy the government ensures that key institutions are in place to facilitate voluntary transactions between economic agents. These key institutions are A) labour and capital markets. 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) private property and freedom of contract. Answer: E Diff: 2 Type: MC Topic: 1.3. alternative economic systems Skill: Recall Learning Obj.: 1-5 Describe how all actual economies are mixed economies, having elements of free markets, tradition, and government intervervention. Category: Qualitative Economics - Canadian Edition, 16e (Ragan) Chapter 2 Economic Theories, Data, and Graphs 2.1 Positive and Normative Statements 1) Disagreements over positive statements A) cannot arise because positive statements are facts. B) are best handled by an appeal to the facts. C) arise from the failure to distinguish between a positive and a normative statement. D) are basically devoid of any emotion. E) never occur. Answer: B Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 2) A positive statement is one that states A) what is, was, or will be. B) what is and what should be. C) what should be but is not. D) what is desirable. E) non-negative numbers. Answer: A Diff: 2 Type: MC Topic: 2.1. positive and normative statements Skill: Recall Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 3) Which is the best description of positive statements? Positive statements A) have been verified by appeal to factual evidence. B) form the basis of all normative arguments. C) are falsifiable in principle by appeal to factual evidence. D) are seldom employed in social sciences like economics. E) have no place in economics because economics deals only with value judgments. Answer: C Diff: 2 Type: MC Topic: 2.1. positive and normative statements Skill: Recall Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 2 Copyright © 2020 Pearson Canada Inc. 4) Which is an example of a positive statement? A) There should be one price for gasoline throughout Canada. B) The higher the price for gasoline, the less of it will be consumed. C) Substitutes for fossil fuels should be developed. D) Canada should reduce its imports of consumer goods. E) Corporations in Canada should pay more taxes. Answer: B Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 5) Which is the best description of a normative statement? A normative statement A) can be derived logically from facts. B) concerns what is provable. C) is a statement that is empirically testable. D) is one that involves a value judgment. E) has no place in the study and practice of economics. Answer: D Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Recall Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 6) Which of the following is a normative statement? A) The sun rises in the west and sets in the east. B) A government deficit will reduce unemployment and cause an increase in prices. C) Reducing unemployment is more important than reducing inflation. D) Queen Elizabeth II is the wealthiest woman in the world. E) An increase in the price of lumber is followed by a decrease in the construction of new houses. Answer: C Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 3 Copyright © 2020 Pearson Canada Inc. 7) Which of the following is a normative statement? A) The higher is the level of taxes, the lower is consumption spending. B) The higher is the level of taxes, the higher are wage demands. C) A reduction in export taxes on petroleum would result in higher wages. D) Tuition fees should be waived for low-income students. E) A free-trade agreement between two countries will result in an increase in trade. Answer: D Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 8) Suppose an economist tells you that the unemployment rate in Canada last year was 7.8%. This is an example of a(n) ________ statement. A) autonomous B) positive C) normative D) induced E) imputed Answer: B Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 9) Suppose an economist tells you that, on average, people in Canada have too much personal debt. This is an example of a(n) ________ statement. A) autonomous B) positive C) normative D) independent E) induced Answer: C Diff: 1 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 4 Copyright © 2020 Pearson Canada Inc. 10) Which of the following statements belongs more properly in the field of normative economics than positive economics? A) An increase in the minimum wage leads to more unemployment. B) The price of one Canadian dollar is $0.85 U.S. C) When a drought occurs, the price of vegetables tends to rise. D) Canadian governments should provide assistance to the auto industry. E) Technological change has reduced the cost of cell phone service. Answer: D Diff: 2 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 11) Which of the following best describes the relationship between positive and normative statements in economics? A) Normative statements are those with which all economists agree; positive statements may give rise to some disagreement. B) Positive and normative statements are alternate ways of describing the desirability of certain economic policies. C) Normative statements evaluate the desirability of certain economic changes; positive statements do not. D) Neither positive nor normative statements are concerned with the desirability of certain economic changes. E) Economists generally agree with each other regardless of whether a question is positive or normative. Answer: C Diff: 2 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 12) An assertion about the desirability of reducing unemployment by lowering payroll taxes is most likely A) a theory. B) a testable proposition. C) a hypothesis. D) a normative statement. E) a positive statement. Answer: D Diff: 2 Type: MC Topic: 2.1. positive and normative statements Skill: Applied Learning Obj.: 2-1 Distinguish between positive and normative statements. Category: Qualitative 5 Copyright © 2020 Pearson Canada Inc. 2.2 Building and Testing Economic Theories 1) Which of the following best describes a theory? A theory A) enables one to predict the future with certainty. B) is designed to explain and predict what we observe. C) is used to impose order on the world. D) can only be tested with a controlled experiment. E) assumes definitions for variables. Answer: B Diff: 1 Type: MC Topic: 2.2a. economic theories Skill: Recall Learning Obj.: 2-2 Explain why and how economists use theories to help them understand the economy. Category: Qualitative 2) An economic theory requires, among other things, A) a set of definitions of the variables to be considered. B) a controlled laboratory setting in which the theory can be tested. C) that the set of predictions be correct. D) a set of value judgments to interpret the empirical evidence. E) the use of endogenous variables only. Answer: A Diff: 2 Type: MC Topic: 2.2a. economic theories Skill: Recall Learning Obj.: 2-2 Explain why and how economists use theories to help them understand the economy. Category: Qualitative 3) Choose the statement that best describes how endogenous variables differ from exogenous variables. A) An endogenous variable is a flow, while an exogenous variable is a stock. B) An endogenous variable is explained outside the theory and influences an exogenous variable while an exogenous variable is explained within the theory. C) An exogenous variable is a function of the endogenous variable, and both are flow variables. D) An endogenous variable is a function of the exogenous variable, and both are stock variables. E) An endogenous variable is explained within the theory, while an exogenous variable influences the endogenous variables but is determined outside the theory. Answer: E Diff: 2 Type: MC Topic: 2.2a. economic theories Skill: Recall Learning Obj.: 2-2 Explain why and how economists use theories to help them understand the economy. Category: Qualitative