Deck 1: Economic Issues and Concepts

Question 1

Most modern economies in the world today

A) are similar to feudal systems.
B) have pure market exchange.
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 1

D

Question 2

A basic underlying point in economics is that

A) people have unlimited wants in the face of limited resources.
B) people have limited wants in the face of limited resources.
C) governments should satisfy the needs of the people.
D) there are unlimited resources.
E) governments should never interfere in the workings of a market economy.

Answer 2

A

Question 3

Which of the point(s) below is (are) true of money?
I) Money eliminated the need for barter.
Ii) Money allowed for specialization of labour and expansion of trade.
Iii) Money allowed for the development of a market economy.
Iv) Money allowed one to save current production for future use.

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 true.

Answer 3

E

Question 4

Economics can best be described as

A) the application of sophisticated mathematical models to address social problems.
B) the study of how to reduce inflation and unemployment.
C) the study of the use of scarce resources to satisfy unlimited human wants.
D) the study of how a society ought to allocate its resources.
E) a normative science.

Question 5

A farmer selling tomatoes and corn at a roadside, and a currency trader in Hong Kong, are each participating in

A) international trade.
B) an involuntary transaction.
C) flexible manufacturing.
D) barter.
E) a market.

Question 6

A barter system of exchange

A) requires the use of money.
B) is the most efficient form of exchange.
C) involves the trading of goods directly for other goods
D) does not involve the double coincidence of wants.
E) developed late in history.

Question 7

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.

Question 8

Economists usually assume that households and firms, respectively, maximize

A) wages and revenues.
B) expenditures and profits.
C) income and sales.
D) savings and profits.
E) utility and profits.

Question 9

The Canadian economic system can best be described as

A) traditional.
B) pure free market.
C) mixed socialism.
D) mixed capitalism.
E) command.

Question 10

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1- 3
Refer to Figure 1- 3. At point B,

A) the opportunity cost of producing an extra unit of consumption goods is higher than at point A.
B) the price of capital goods is higher than the price of consumption goods.
C) the opportunity cost of producing an extra unit of capital goods is higher than at point A.
D) Country X is producing too many consumption goods and too few capital goods.
E) the price of consumption goods is equal to the price of capital goods.

Question 11

Suppose Andrea has a job that pays her $25 000 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 will cost $10 000 per year. What is the opportunity cost of Andrea's four- year university degree?

A) $88 000
B) $100 000
C) $120 000
D) $148 000
E) $188 000

Question 12

Consider the production possibilities boundary (PPB) of an economy. Economic growth is illustrated by

A) a movement onto the PPB.
B) an outward shift of the PPB.
C) a movement along the PPB.
D) the negative slope of the PPB.
E) the movement to a point outside of the PPB.

Question 13

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- 5
Refer to Figure 1- 5. Suppose the government's current spending is shown by point D. In this case,

A) more education expenditures can be achieved only by sacrificing some health expenditures.
B) the government should spend its total budget so as to get to point B, since more health spending and more education spending are both clearly desirable.
C) the prices of education and health care have increased beyond the government's ability to pay.
D) more health expenditures can be achieved only by sacrificing some education expenditures.
E) the government is not spending its total budget.

Question 14

Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her. FIGURE 1- 2
Refer to Figure 1- 2. For Madeleine, the opportunity cost of one regular coffee is

A) 1/4 of a regular coffee.
B) 80 lattes.
C) 4 lattes.
D) 1/4 of a latte.
E) 20 lattes

Question 15

Karl Marx argued that

A) centrally planned economies could provide a more equitable distribution of total output than capitalist economies.
B) benevolence, not self- interest, produced an effective economic order.
C) technological change was not important in improving living standards.
D) the unfettered market system driven by self- interest leads to the best social outcome.
E) a free- market system would produce a low level of total output.

Question 16

In a modern 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) securities regulators and the court system.
C) private property and freedom of contract.
D) the House of Commons and the Senate.
E) the Department of Finance and the Bank of Canada.

Question 17

A point lying inside the production possibilities boundary is one at which

A) more output could be produced with existing resources.
B) it is not possible to produce more output with existing resources.
C) the economy has run out of resources.
D) there is no scarcity.
E) the opportunity cost of producing more output is negative.

Question 18

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. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Fishing lures } & \text { Mowed lawns } \\\hline \text { Tristan } & 12 & 3 \\\hline \text { Thomas } & 6 & 6 \\\hline\end{array}\\\text { TABLE 1- } 1\end{array}$$

-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) 1/4 of a mowed lawn
D) 1/3 of a mowed lawn
E) 4 mowed lawns

Question 19

The table below shows that, in one day, Claire can complete either 3 chemistry or 2 biology lab reports, while Sam can complete either 4 chemistry or 3 biology lab reports. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Chemistry L ab Reports } & \text { Biology Lab Reports } \\\hline \text { Claire } & 3 & 2 \\\hline \text { Sam } & 4 & 3 \\\hline\end{array}\\\text { TABLE 1- } 2\end{array}$$

-Refer to Table 1- 2. What is Sam's opportunity cost of completing 1 chemistry lab report?

A) 3 of a biology lab report
B) 4 of a biology lab report
C) 3 of a biology lab report 4
D) 2 of a biology lab report 3
E) 4 of a biology lab report 3

Question 20

The table below shows that, in one day, Claire can complete either 3 chemistry or 2 biology lab reports, while Sam can complete either 4 chemistry or 3 biology lab reports. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Chemistry L ab Reports } & \text { Biology Lab Reports } \\\hline \text { Claire } & 3 & 2 \\\hline \text { Sam } & 4 & 3 \\\hline\end{array}\\\text { TABLE 1- } 2\end{array}$$

-Refer to Table 1- 2. What is Sam's opportunity cost of completing 2 biology lab reports?

A) 2 2 3
Chemistry lab reports
B) 3 of a chemistry lab report 4
C) 4 chemistry lab reports
D) 2 of a chemistry lab report 3
E) 1 1 chemistry lab reports 3

Question 21

Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her. FIGURE 1- 2
Refer to Figure 1- 2. For Madeleine, the opportunity cost of one latte is

A) 1/4 of a latte.
B) 1/4 of a regular coffee.
C) 8 regular coffees.
D) 4 regular coffees.
E) 80 regular coffees.

Question 22

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. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Fishing lures } & \text { Mowed lawns } \\\hline \text { Tristan } & 12 & 3 \\\hline \text { Thomas } & 6 & 6 \\\hline\end{array}\\\text { TABLE 1- } 1\end{array}$$

-Refer to Table 1- 1. What is Thomas's opportunity cost of producing one mowed lawn?

A) one fishing lure
B) 1/6 fishing lure
C) 12 fishing lures
D) 0 fishing lures
E) 6 fishing lures

Question 23

Which countries have mostly public ownership of resources?

A) Brazil and Argentina
B) Sweden and Norway
C) Cuba and North Korea
D) United States and Canada
E) France and Germany

Question 24

If a country's production possibilities boundary is drawn as a straight (downward- sloping) line it indicates

A) the use of the scarce resources in an economy.
B) constant opportunity cost of producing more of either good.
C) increasing opportunity cost of producing more of either good.
D) decreasing opportunity cost of producing more of either good.
E) an unfair distribution of resources in an economy.

Question 25

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) unattainable points outside the boundary.
C) negative slope of the boundary.
D) area bounded by the two axes and the boundary.
E) boundary being concave to the origin.

Question 26

The table below shows that, in one day, Claire can complete either 3 chemistry or 2 biology lab reports, while Sam can complete either 4 chemistry or 3 biology lab reports. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Chemistry L ab Reports } & \text { Biology Lab Reports } \\\hline \text { Claire } & 3 & 2 \\\hline \text { Sam } & 4 & 3 \\\hline\end{array}\\\text { TABLE 1- } 2\end{array}$$

-Refer to Table 1- 2. What is Sam's opportunity cost of completing 3 biology lab reports?

A) 3 chemistry lab reports
B) 4 chemistry lab reports
C) 0 chemistry lab reports
D) 2 chemistry lab reports
E) 1 chemistry lab reports

Question 27

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) contract.
B) expand.
C) run over.
D) stop.
E) explode.

Question 28

In the Canadian economy, most decisions regarding resource allocation are made by

A) the various levels of government.
B) consumers and producers interacting in the price system.
C) legal contract.
D) business firms only.
E) negotiation between unions and firms.

Question 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. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Fishing lures } & \text { Mowed lawns } \\\hline \text { Tristan } & 12 & 3 \\\hline \text { Thomas } & 6 & 6 \\\hline\end{array}\\\text { TABLE 1- } 1\end{array}$$

-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 and 3 mowed lawns
C) Tristan produces 6 lures; Thomas produces 6 lures
D) Tristan produces 12 lures; Thomas produces 6 mowed lawns
E) Tristan produces nothing, Thomas produces 6 lures and 6 mowed lawns

Question 30

A country's production possibilities boundary shows that

A) when a society combines its resources efficiently, it cannot produce more of one good without producing less of the other good.
B) the supply for goods always exceeds the demand.
C) when a society combines its resources inefficiently, it cannot produce more of one good without producing less of the other good.
D) when a society combines its resources efficiently, it is always possible to produce more of all goods.
E) all points inside the boundary are preferred to all points on the boundary.

Question 31

In the current Canadian economy, the majority of choices on how resources are allocated are made by

A) legal contracts.
B) the various levels of government.
C) consumers and firms through the price system.
D) negotiation between unions and firms.
E) business firms only.

Question 32

With regard to various economic systems, most economists agree that

A) most production and consumption decisions are more efficiently coordinated by markets than through central planning.
B) the mix of market and command principles that exists in Canada is the best.
C) command economies have been very successful in distributing income in socially just ways.
D) the optimal mix of market and command systems remains constant over time.
E) government intervention in the economy is only justified in time of war.

Question 33

Income redistribution in a mixed economy

A) risks reducing individual incentives to work and produce.
B) is only accomplished through government intervention.
C) is supported by all individuals.
D) is not allowed.
E) rarely occurs.

Question 34

Economics is the study of

A) how to limit human wants so that scarce resources are sufficient.
B) the allocation of scarce resources among alternative uses.
C) how to plan an economy.
D) how to distribute income as equally as possible.
E) why resources are scarce.

Question 35

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 straight line.
B) a downward- sloping curve convex to the origin.
C) a downward- sloping curve concave to the origin.
D) semi- circular.
E) a downward- sloping straight line that is broken at one point.

Question 36

Consider a production possibilities boundary showing the possible combinations of military goods and civilian goods that a country can produce. Suppose that 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) remain the same.
B) decrease.
C) increase.
D) increase at a decreasing rate.
E) increase at a increasing rate.

Question 37

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. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Fishing lures } & \text { Mowed lawns } \\\hline \text { Tristan } & 12 & 3 \\\hline \text { Thomas } & 6 & 6 \\\hline\end{array}\\\text { TABLE 1- } 1\end{array}$$

-Refer to Table 1- 1. What is Thomas's opportunity cost of producing one fishing lure?

A) 1 mowed lawn
B) 1/6 of a mowed lawn
C) there is no opportunity cost
D) 5 lures
E) 1/6 of a lure

Question 38

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1- 3
Refer to Figure 1- 3. If Country X were producing at point C,

A) it is not possible to move to any point on PPB1 or PPB2 without technological progress.
B) this is the maximum output possible from given resources.
C) the opportunity cost of moving to point A is to give up some capital goods.
D) the opportunity cost of moving to point B is to give up some consumption goods.
E) the opportunity cost of moving to point A is zero.

Question 39

Suppose fire destroy 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 shift outward of
B) a movement to a point beyond
C) a movement inside
D) an inward shift of
E) a movement along

Question 40

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1- 3
Refer to Figure 1- 3. Growth in the country's productive capacity is illustrated by

A) a movement from a point inside the boundary such as C to the boundary.
B) the movement between points on a given boundary.
C) a point like D outside the boundary.
D) a single point such as A on the boundary.
E) an outward shift of the boundary, for example from PPB1 to PPB2.

Question 41

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1- 3
Refer to Figure 1- 3. 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) E.
B) F.
C) B.
D) C.
E) D.

Question 42

In mixed economies, economic behaviour is

A) based primarily on custom and habit.
B) random and unpredictable.
C) directed only by self interest.
D) largely determined by a central authority.
E) affected by elements of tradition, government command, and market incentives.

Question 43

Economics is generally NOT concerned with

A) restricting the level of human wants.
B) the distribution of income among households.
C) the concept of opportunity cost.
D) the rate of growth of productive capacity.
E) the allocation of resources among alternative uses.

Question 44

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- 5
Refer to Figure 1- 5. If the government's spending on health and education is given by point B, a move to point A must involve

A) more spending on education.
B) less spending on education.
C) less spending in total.
D) less spending on health.
E) zero opportunity cost.

Question 45

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) circular.
B) a downward- sloping straight line.
C) a downward- sloping curve convex to the origin.
D) a downward- sloping straight line with slope equal to - 1.
E) a downward- sloping curve concave to the origin.

Question 46

The circular flow of income illustrates

A) the flows of expenditures and income in a household.
B) that there is no relationship between goods markets and factor markets.
C) that firms own the factors of production.
D) the interaction of households and firms through the factors and goods markets.
E) that the flow of payments moves in the same direction as the flow of goods.

Question 47

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1- 3
Refer to Figure 1- 3. A shift of the production possibilities boundary from PPB1 to PPB2 implies

A) that if point E is the new choice of outputs, productivity has increased in the consumption goods industry.
B) a movement from full employment to some unemployment.
C) that technology in the capital goods industries has improved.
D) that technology in the consumption goods industry has improved.
E) an inevitable decrease in total output.

Question 48

Suppose drought destroys many millions of acres of valuable Canadian farmland. The effect on the Canadian economy would be to move

A) its production possibilities boundary inward.
B) it beyond its production possibilities boundary.
C) it along 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.

Question 49

Because resources are scarce, individuals are required to

A) sacrifice production but not consumption.
B) improve production but not distribution.
C) use resources inefficiently.
D) improve distribution but not production.
E) make choices among alternatives.

Question 50

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) D
B) E
C) F
D) G
E) B

Question 51

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) 50 kilometres of highway repair.
B) 150 kilometres of highway repair.
C) 0 kilometres of highway repair.
D) 200 kilometres of highway repair.
E) 100 kilometres of highway repair.

Question 52

Suppose that one unit of labour can produce either 5 units of wool or 2 pineapples. What is the opportunity cost of producing 1 pineapple?

A) 2/5 unit of wool
B) 5 units of wool
C) 5/2 units of wool
D) zero
E) 2 units of wool

Question 53

In command economies, economic behaviour is

A) largely affected by elements of tradition and market incentives.
B) largely determined by a central authority.
C) random and unpredictable.
D) based primarily on custom and habit.
E) directed by individual self interest.

Question 54

Complex economic plans for many economic sectors are most associated with a

A) feudal system.
B) traditional economy.
C) free- market system.
D) command economy.
E) mixed market system..

Question 55

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) an increase in the labour supply.
B) the employment of previously idle resources.
C) the reallocation of resources between military and civilian goods.
D) technological progress.
E) the growth of productive capacity.

Question 56

Which of the following statements best describes the underlying feature in most economic problems?

A) Governments should never interfere in the workings of a market economy.
B) People have unlimited wants in the face of limited resources.
C) People have limited wants in the face of limited resources.
D) There are unlimited resources.
E) Our country is rich; we just don't realize it.

Question 57

The concept of scarcity in economics usually refers to a condition

A) where society is not employing all of its available resources in an efficient manner.
B) that afflicts only poor countries.
C) where people's wants can never be satisfied by the available resources.
D) where production is efficient, but distribution is inefficient.
E) where too many frivolous goods and services are produced at the expense of socially desirable goods and services.

Question 58

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 beyond its new production possibilities boundary.
B) shift its production possibilities boundary inward.
C) shift its production possibilities boundary outward.
D) move it inside its new production possibilities boundary.
E) move it along an unchanged production possibilities boundary.

Question 59

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. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Fishing lures } & \text { Mowed lawns } \\\hline \text { Tristan } & 12 & 3 \\\hline \text { Thomas } & 6 & 6 \\\hline\end{array}\\\text { TABLE 1- } 1\end{array}$$

-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.

Question 60

The table below shows that, in one day, Claire can complete either 3 chemistry or 2 biology lab reports, while Sam can complete either 4 chemistry or 3 biology lab reports. $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Chemistry L ab Reports } & \text { Biology Lab Reports } \\\hline \text { Claire } & 3 & 2 \\\hline \text { Sam } & 4 & 3 \\\hline\end{array}\\\text { TABLE 1- } 2\end{array}$$

-Refer to Table 1- 2. What is Claire's opportunity cost of completing 1 chemistry lab report?

A) 3 biology lab reports
B) 2 of a biology lab report 3
C) 2 biology lab reports
D) 3 of a biology lab report 4
E) 1 1 biology lab reports 2

Question 61

The key decision makers in a market economy are:

A) households, firms, and government.
B) corporations and governments.
C) individual citizens, non- profit organizations, and the Bank of Canada.
D) governments and all institutions under government control.
E) large corporations and labour organizations.

Question 62

The famous economist who developed the idea of the division of labour was

A) Adam Smith.
B) David Ricardo.
C) Milton Friedman.
D) Karl Marx.
E) John Maynard Keynes.

Question 63

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) an indication of the extreme difficulty of transition from one type of economic system to another.
B) the failure of the market system.
C) the difficulty of corruption in non- market economies.
D) the triumph of capitalism over communism.
E) an indication that these economies should return to being command economies.

Question 64

The diagram below shows two production possibilities boundaries for Country X. FIGURE 1- 3
Refer to Figure 1- 3. Suppose that Country X is currently producing at point E. Country X could achieve production at point D if

A) firms reduced output of capital goods.
B) sufficient improvements in technology occurred in either the capital goods industry or the consumer goods industries.
C) the given resources were more efficiently employed.
D) the given resources were fully employed.
E) the prices of capital goods and consumption goods fell.

Question 65

In the circular flow of income, the allocation of resources is largely decided by

A) central authorities and firms only.
B) individuals only.
C) central authorities only.
D) firms and households acting independently.
E) political parties and firms only.

Question 66

Which of the following has most contributed to the globalization of the economy?

A) tariffs and trade barriers
B) reductions in transportation and communication costs
C) the decline in the relative importance of manufacturing
D) the decreased importance of agriculture
E) the shift toward a market economy in China

Question 67

An economic system that relies primarily upon custom and habit in economic decision making is a

A) mixed system.
B) market system.
C) traditional system.
D) communist system.
E) command system.

Question 68

Economists usually assume that households

A) make consistent decisions, maximize utility, and are the principal owners of the factors of production.
B) make consistent decisions, maximize savings, and are the principal users of the factors of production.
C) do not make consistent decisions, maximize satisfaction, and are the principal owners of the factors of production.
D) make consistent decisions, maximize profits, and are the principal users of the factors of production.
E) do not make consistent decisions, maximize profits, and are the principal users of the factors of production.

Question 69

Behaviour in free- market economies is

A) determined by a central authority.
B) based primarily on custom and habit.
C) random and unpredictable.
D) mostly affected by elements of tradition and government command.
E) mostly directed by self interest.

Question 70

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- 5
Refer to Figure 1- 5. The levels of health and education expenditures at point C

A) are equal to those of point A and point B.
B) are less than at point D.
C) could be achieved if the prices of health and/or education increased.
D) are more cost- effective than those at points A, B, and D.
E) are not attainable with the government's current budget.

Question 71

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) an economic service.
B) a capital resource.
C) a commodity.
D) goods and services.
E) a factor of production.

Question 72

Scarcity is likely to be

A) a problem that will always exist.
B) a problem that will be solved by the proper use of available resources.
C) eliminated with a better understanding of economics.
D) a result of the work ethic.
E) unique to the twentieth century.

Question 73

On a diagram of a production possibilities boundary, the concept of scarcity is illustrated by the

A) area within the boundary.
B) distance from the origin to the boundary.
C) unattainable points outside the boundary.
D) negative slope of the boundary.
E) points on the boundary.

Question 74

The opportunity cost of going to college or university for four years is

A) zero.
B) equal to the wage rate a person will earn after graduation.
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) the least valued alternative one forfeits to attend.

Question 75

Suppose there are three alternatives to attending a 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) $45.
B) $20.
C) $10.
D) zero.
E) $25.

Question 76

Money facilitates trade and specialization by

A) increasing the value of gold.
B) eliminating the need for barter.
C) reducing the shift of resources between uses.
D) providing employment for coin makers.
E) increasing investment.

Question 77

Scarcity arises from limited resources. For this reason, all economic choices involve

A) an opportunity cost.
B) greed.
C) a value judgement.
D) complementary ends.
E) pride.

Question 78

The opportunity cost of producing good A is defined to be

A) the cost of having to get by using something else in place of good A.
B) the money cost of the factors of production used in good A.
C) what must be sacrificed of other goods to get an additional unit of good A.
D) the cheapest method of producing good A.
E) the retail price of good A.

Question 79

The use of money for transactions

A) makes specialization of labour more difficult.
B) increases the use of barter.
C) enables humanity to satisfy all wants.
D) makes exchange easier and thus promotes the specialization of labour.
E) fosters self- sufficiency.

Question 80

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. Currently, each divide their time equally between production of the two goods per month -- Katie produces 100 jars of pickles and 50 pies while Hugh produces 400 jars of pickles and 100 pies. In order for Katie and Hugh to jointly gain from specialization, which of the following changes should take place?

A) Hugh should produce more pies and fewer jars of pickles.
B) Katie should produce more pies and fewer jars of pickles.
C) Katie and Hugh should both produce more pies and fewer jars of pickles.
D) Katie and Hugh should both produce more jars of pickles and fewer pies.
E) Katie should produce more jars of pickles and fewer pies.