Question 1

Choices entail marginal costs because resources are scarce.

Accepted Answer

A) True 
 B)False

Question 2

An economic model is:

Accepted Answer

A)   a value judgment.
B)   a fact.
C)   built using theory.
D)   built on correlations.E) A) and B)
F) A) and D)

Question 3

If we say that two variables are directly related, this means that:

Accepted Answer

A)   the relationship between the two is purely random.
B)   an increase in one variable is associated with a decrease in the other variable.
C)   an increase in one variable is associated with an increase in the other variable.
D)   the two graph as a downsloping line.E) None of the above
F) B) and C)

Question 4

-The basic difference between consumer goods and capital goods is that:

Accepted Answer

A)   consumer goods are produced in the private sector and capital goods are produced in the public sector.
B)   an economy that commits a relatively large proportion of its resources to capital goods must accept a lower growth rate.
C)   the production of capital goods is not subject to the law of increasing opportunity costs.
D)   consumer goods satisfy wants directly while capital goods satisfy wants indirectly.E) None of the above
F) C) and D)

Question 5

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation which summarizes this relationship is:

Accepted Answer

A)   C = 80 + 100Y.
B)   C = 100 + .8Y.
C)   C = 100 + 80Y.
D)   C = 80 + .1Y.E) A) and B)
F) None of the above

Question 6

Assume an economy is operating at some point on its production possibilities curve which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods:

Accepted Answer

A)   will remain unchanged.
B)   may be either increased or decreased.
C)   must be decreased.
D)   must also be increased.E) B) and D)
F) A) and D)

Question 7

Which of the following is not an illustration of the idea of opportunity cost?

Accepted Answer

A)   A growing economy can produce more consumer goods and more capital goods at the same time.
B)   If I buy a pizza, I will not be able to afford a movie.
C)   Resources devoted to consumer goods production are not available for capital goods production.
D)   The land a Manitoba farmer plants in wheat is not available for corn production.E) A) and C)
F) B) and C)

Question 8

When a provincial government chooses to build more roads, the required resources are no longer available for spending on public education. This dilemma illustrates the concept of:

Accepted Answer

A)   marginal analysis.
B)   full employment.
C)   full production.
D)   opportunity cost.E) B) and D)
F) A) and D)

Question 9

You should decide to go to a movie:

Accepted Answer

A)   if the marginal cost of the movie exceeds its marginal benefit.
B)   if the marginal benefit of the movie exceeds its marginal cost.
C)   if your income will allow you to buy a ticket
D)   because movies are inherently good products.E) A) and B)
F) All of the above

Question 10

As a consequence of the condition of scarcity:

Accepted Answer

A)   there is always enough of everything.
B)   production has to be centrally planned.
C)   things which are plentiful have relatively high prices.
D)   individuals and communities have to make choices among alternatives.E) B) and C)
F) None of the above

Question 11

-Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

Accepted Answer

A)   is irrelevant because the economy is capable of producing a larger total output.
B)   will result in the maximum rate of growth available to this economy.
C)   would involve an inefficient use of the economy's scarce resources.
D)   is unobtainable in this economy.E) All of the above
F) A) and C)

Question 12

Assume that a tradeoff exists in the short run between inflation and unemployment. This relationship means that:

Accepted Answer

A)   a low rate of unemployment causes a low rate of inflation.
B)   the unemployment rate always equals the inflation rate.
C)   less unemployment can be achieved with more inflation.
D)   less unemployment can be achieved with less inflation.E) B) and D)
F) A) and D)

Question 13

The marginal cost curve is:

Accepted Answer

A)   upsloping because of increasing marginal opportunity costs.
B)   upsloping because successive units of a specific product yield less and less extra utility.
C)   downsloping because of increasing marginal opportunity costs.
D)   downsloping because successive units of a specific product yield less and less extra utility.E) A) and B)
F) B) and D)

Question 14

Which of the following is assumed in constructing a typical production possibilities curve?

Accepted Answer

A)   the economy is using its resources inefficiently.
B)   resources are perfectly shiftable among alternative uses.
C)   production technology is fixed.
D)   the economy is engaging in international trade.E) B) and D)
F) None of the above

Question 15

-Recessions are characterised by points that are not attainable on the production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 16

The amount of pizzas that consumers want to buy per week is reflected in the equation P = 15 - .02Qd, where Qd is the amount of pizzas purchased per week and P is the price of pizzas. On the basis of this information we can say that:

Accepted Answer

A)   if pizzas were free, people would consume 800 per week.
B)   more pizzas will be purchased at a high price than at a low price.
C)   if the price of pizzas is $6, then 150 will be purchased.
D)   50 fewer pizzas will be purchased per week for every $1 increase in price.E) A) and B)
F) B) and D)

Question 17

Which of the following is a positive statement?

Accepted Answer

A)   The humidity is too high today.
B)   It is too hot to jog today.
C)   The temperature is 30 degrees today.
D)   I enjoy summer evenings when it cools off.E) None of the above
F) B) and C)

Question 18

When an economist says that material wants are insatiable, this means that:

Accepted Answer

A)   economic resources are valuable only because they can be used to produce consumer goods.
B)   economic resources-land, labour, capital, and entrepreneurial ability-are scarce.
C)   these wants are virtually unlimited and therefore incapable of complete satisfaction.
D)   the structure of consumer demand varies from time to time and from country to country.E) C) and D)
F) A) and C)

Question 19

The society must also make choices under conditions of scarcity. This problem arises from the fact that:

Accepted Answer

A)   society's wants are limited but the resources are not.
B)   resources are scarce relative to society's wants.
C)   societies behave only in their self-interest.
D)   society's wants and resources are both unlimited.E) B) and C)
F) A) and D)

Question 20

A nation's production possibilities curve is "bowed out" from the origin because:

Accepted Answer

A)   resources are not equally efficient in producing every good.
B)   the originator of the idea drew it this way and modern economists follow this convention.
C)   resources are scarce.
D)   wants are virtually unlimited.E) A) and B)
F) A) and C)

Exam 1: Limits, Alternatives, and Choices

When a provincial government chooses to build more roads, the required resources are no longer available for spending on public education. This dilemma illustrates the concept of:

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-The basic difference between consumer goods and capital goods is that:

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Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation which summarizes this relationship is:

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If we say that two variables are directly related, this means that:

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A nation's production possibilities curve is "bowed out" from the origin because:

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Which of the following is assumed in constructing a typical production possibilities curve?

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Assume an economy is operating at some point on its production possibilities curve which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods:

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Which of the following is a positive statement?

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The society must also make choices under conditions of scarcity. This problem arises from the fact that:

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As a consequence of the condition of scarcity:

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-Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

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Assume that a tradeoff exists in the short run between inflation and unemployment. This relationship means that:

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The amount of pizzas that consumers want to buy per week is reflected in the equation P = 15 - .02Qd, where Qd is the amount of pizzas purchased per week and P is the price of pizzas. On the basis of this information we can say that:

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The marginal cost curve is:

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-Recessions are characterised by points that are not attainable on the production possibilities curve.

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When an economist says that material wants are insatiable, this means that:

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An economic model is:

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Choices entail marginal costs because resources are scarce.

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Which of the following is not an illustration of the idea of opportunity cost?

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You should decide to go to a movie:

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The amount of pizzas that consumers want to buy per week is reflected in the equation P = 15 - .02Q_d, where Q_d is the amount of pizzas purchased per week and P is the price of pizzas. On the basis of this information we can say that:

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