Deck 1: The Economic Problem

Question 1

Gwen had only $10 yesterday.She was uncertain whether to go out for lunch or to buy beer.In the end she bought beer.Which of the following statements is correct?

A)The choice of the beer and not lunch is an example of constant costs.
B)The cost of buying beer is less than lunch.
C)The opportunity cost of beer is lunch.
D)The opportunity cost of beer is $10.

Answer 1

The opportunity cost of beer is lunch.

Question 2

Which of the following was argued by John Stuart Mill?

A)It is ideas,not vested interests,which are dangerous for good and evil.
B)The distribution of money is dictated by the pattern of resource use.
C)As technology changes,what is produced also necessarily changes.
D)Society can intervene in any fashion that it may wish to redistribute income.

Answer 2

Society can intervene in any fashion that it may wish to redistribute income.

Question 3

What fundamental question is implied by the following statement: Should scarce resources be devoted to persuading people to quit smoking or to developing a less harmful form of tobacco?

A)What to produce?
B)How to produce?
C)For whom?
D)How much competition?
E)How much command?

Answer 3

What to produce?

Question 4

What can we say is true as a result of people engaging in voluntary trade?

A)One person gains and the other loses.
B)One person gains while there is a neutral effect on the other person.
C)Both people gain.
D)Neither person gains.

Question 5

All of the following except one are considered to be among the three fundamental questions in economics? Which one is the exception?

A)What to produce?
B)How much competition?
C)How to produce?
D)For whom?

Question 6

What is fundamental question is implied by the following statement: Social policies are needed to ensure that no individual lives in poverty.

A)What to produce?
B)How to produce?
C)For whom?
D)How much competition?
E)How much command?

Question 7

Which of the following is an alternative for the term,"factors of production"?

A)Methods of organizing an economy.
B)Ways of coordinating an economy.
C)Productive resources or inputs.
D)Goods and services.

Question 8

Which of the following is correct?

A)Scarcity forces choice which involves opportunity costs.
B)Choice causes scarcity which involves increasing costs.
C)Choice causes scarcity which involves opportunity costs.
D)Scarcity forces choice which involves increasing costs.

Question 9

Which of the following terms describes the next best alternative that must be sacrificed as a result of making a particular choice?

A)Microeconomics.
B)Opportunity cost.
C)Macroeconomics.
D)The law of increasing costs.
E)Scarcity.

Question 10

All of the following except one are factors of production.Which is the exception?

A)Land.
B)Labour.
C)Capital.
D)Money.
E)Enterprise.

Question 11

The maximum production possible in Rome and in Cathay are as follows:

If each country is self-sufficient (no trade)and each allocates one half of its resources to producing each of the two products,what is the combined output in the two counties?

A)60 bread and 60 figs.
B)60 bread and 0 figs.
C)0 bread and 60 figs.
D)30 bread and 30 figs.

Question 12

The maximum production possible in Rome and in Cathay are as follows:

If each country specializes in the production of what it does best and trades with the other,what is the combined output?

A)20 bread and 20 figs.
B)30 bread and 30 figs.
C)40 bread and 40 figs.
D)60 bread and 60 figs.

Question 13

The maximum production possible in Rome and in Cathay are as follows:

If each country is self-sufficient (no trade)and each allocates one half of its resources to producing each of the two products,what will be the output in each country?

A)40 bread and 20 figs in Rome and 20 bread and 40 figs in Cathay.
B)40 bread and 0 figs in Rome and 20 bread and 0 figs in Cathay.
C)0 bread and 20 figs in Rome and 0 bread and 40 figs in Cathay.
D)20 bread and 10 figs in Rome and 10 bread and 20 figs in Cathay.

Question 14

The maximum production possible in Rome and in Cathay are as follows:

If each country specializes in the production of what it does best,what are the gains from trade?

A)There are no gains.
B)20 bread.
C)20 figs.
D)10 bread and 10 figs.

Question 15

All of the following except one are included in the four Cs used,throughout history,by humankind to coordinate its economies.Which is the exception?

A)Cooperation.
B)Communism.
C)Custom.
D)Competition.
E)Command.

Question 16

_____________ efficiency refers to 'getting the most for the least'.

A)Technical
B)Economic
C)Allocative
D)Productive

Question 17

What do economists mean when they say that the economy faces scarcity?

A)There are fewer resources available than there were in the 1960s.
B)It is quite evident that the world is running out of resources.
C)The economy is producing far below its capacity to produce.
D)The resources available are not sufficient to produce all that everyone wants.

Question 18

What do economists assume is true about human wants?

A)They are easily defined.
B)That we are on the verge of being able to satisfy them.
C)They are unlimited.
D)They haven't changed much over the centuries.

Question 19

What fundamental question is implied by the following statement: The appropriate technology in one country can be quite different from the appropriate technology in another country.

A)What to produce?
B)How to produce?
C)For whom?
D)How much competition?
E)How much command?

Question 20

What is the opportunity cost of a particular product?

A)The price paid for that product.
B)The value put on that product by the person who bought it.
C)The value of the next-best alternative that is given up as a result of buying that particular product.
D)The combined value of all the other alternatives that are given up as a result of buying that particular product.

Question 21

Which pair of the four Cs would play the dominant role in a simple hunter/gatherer society such as that of the San people of the Kalahari Desert?

A)Commercialization and competition.
B)Cooperation and custom.
C)Competition and cooperation.
D)Command and competition.

Question 22

All of the following statements,except one,are positive statements.Which is the exception?

A)Economics is a social science.
B)Economics is sometimes referred as the science of choice.
C)A majority of economists argue that economics is a very relevant discipline.
D)Economics should be a mandatory course in all Canadian colleges and universities.
E)Economics is a possible undergraduate major for students who want to go to law school.

Question 23

Which of the following statements describes the law of increasing costs?

A)As the economy's production level of any particular item decreases,its opportunity cost rises.
B)As the economy's production level of any particular item increases,its opportunity cost rises.
C)The prices of consumer goods always rise and never fall.
D)If someone waits to make a purchase,she will pay a higher price.
E)The total cost of production rises as output goes up.

Question 24

Which of the following is a capital good?

A)An oven in a bakery.
B)A home computer.
C)The first application of CD ROM technology to an economics textbook.
D)An investment in IBM stock.

Question 25

What does the term technology mean to an economist?

A)The way various factors of production are combined to obtain output.
B)The most recent methods of production.
C)High-tech methods of production as found,for example,in the computer industry.
D)The way in which products are allocated.

Question 26

Which of the following statements concerning capitalism and socialism is false?

A)Sweden is more of a socialist economy than is Hong Kong.
B)Government plays a larger role in a capitalist economy.
C)There is more economic planning in a socialist economy.
D)The Canadian economy is more socialist than is the US economy.

Question 27

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and quarks.

Refer to the graph above to answer this question.What is the opportunity cost of producing the first 700 quarks?

A)It is 6 quirks.
B)It is 10 quirks.
C)It is 14 quirks.
D)The answer cannot be determined from the information given.

Question 28

The fact that the typical movie theatre charges people for popcorn but does not charge them to use the restrooms is an example of which of the four Cs?

A)Competition.
B)Command.
C)Custom.
D)Cooperation.

Question 29

Ensuring the right type of products are produced is referred to as _________ efficiency.

A)Technical
B)Economic
C)Allocative
D)Productive

Question 30

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and quarks.

Refer to the graph above to answer this question.If Mendork's current production is at point A,what is the (approximate)cost of producing one more quirk?

A)100 quarks.
B)50 quarks.
C)25 quarks.
D)200 quarks.
E)One more quark.

Question 31

All of the following except one are true of economic theories or models.Which one is the exception?

A)They attempt to establish cause and effect between economic variables.
B)They always perfectly reflect reality.
C)They are built with assumptions and then tested with facts.
D)They are generalizations used to give context to our observations.

Question 32

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and quarks.

Refer to the graph above to answer this question.If this society chooses to produce 10 quirks,what is the maximum quantity of quarks it can produce?

A)500 quarks.
B)800 quarks.
C)No quarks.
D)600 quarks.

Question 33

All of the following except one are positive statements.Which is the exception?

A)The government needs to reduce its budget deficit.
B)A decrease in price will lead to a larger quantity bought.
C)Production is subject to the law of increasing costs.
D)The degree of competition in our economy has been increasing in the last ten years.

Question 34

Which of the following would best describe a policy of laissez-faire?

A)More production of capital goods than consumer goods.
B)More production of consumer goods than capital goods.
C)An emphasis on the role of the market.
D)An emphasis on the role of government.
E)A reliance on custom.

Question 35

What is true about an economic model?

A)It is built on a series of assumptions.
B)It establishes cause and effect between variables.
C)It can make predictions that can be tested with empirical data.
D)It could also be called an economic theory.
E)It is built on a series of assumptions,it establishes cause and effect between variables,it can make predictions that can be tested with empirical data,and it could also be called an economic theory.

Question 36

What do economists always do when they are constructing theories or models?

A)They make simplifying assumptions.
B)They attempt to duplicate the real world.
C)They ensure that the theory can be expressed mathematically.
D)They try to include as much information as possible.

Question 37

Which of the following statements describes the key assumption behind the law of increasing costs?

A)Not all resources are equally suitable for the production of goods and services.
B)All resources are equally suitable for the production of goods and services.
C)All resources available are not fixed in the production of goods and services.
D)Although resources are available in unlimited amounts,their usefulness in production is limited over time.

Question 38

What term is used to describe the way that the various factors of production are combined to obtain output?

A)Opportunity costs.
B)Types of economies.
C)Ways of coordinating an economy.
D)Technology.

Question 39

All of the following statements,except one,are normative statements.Which is the exception?

A)The taxes on gasoline should be lower.
B)Lowering the taxes on gasoline would decrease the price at the pump.
C)It is wrong for the government to tax gasoline.
D)The government is trying to mislead people about the tax on gasoline.

Question 40

Which pair of the four Cs plays the dominant role in Canada today?

A)Custom and competition.
B)Cooperation and competition.
C)Command and competition.
D)Command and cooperation.

Question 41

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.What is indicated by the shift from PPI to PPII?

A)Unemployment.
B)Inflation.
C)Inefficiency.
D)Economic growth.

Question 42

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.What could have caused the shift from PPI to PPII?

A)A decrease in the price of videos.
B)Capital accumulation in the tea industry.
C)A decrease in the opportunity cost of tea.
D)Technological change in the video industry.

Question 43

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and quarks.

Refer to the graph above to answer this question.Which of the following statements is correct if Mendork is currently producing 500 quarks and 8 quirks?

A)This society is using competition to coordinate its economic activities.
B)This society is experiencing either unemployment or inefficiency.
C)This economy is experiencing full employment.
D)This society is not adequately answering the question:" What to produce".
E)This economy is growing quickly.

Question 44

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.What is the opportunity cost of 1 unit of wheat?

A)0.5 units of rye.
B)2 units of rye.
C)5 units of rye.
D)$2.

Question 45

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.Which of the following statements would be correct if the land was producing 200 units of rye and 100 units of wheat?

A)Some of the land might be idle.
B)The most appropriate technology may not be in use.
C)There may be inefficiencies in production.
D)Some of the land might be idle,the most appropriate technology may not be in use,and there may inefficiencies in production.

Question 46

Below are some production possibilities data for the mystical land of Lhanor.

Refer to the information above to answer this question.Which of the following statements is correct if Lhanor is currently producing 10 Kaldors and 24 Bouldings?

A)All resources must be fully employed.
B)18 more units of Bouldings could be produced.
C)This combinations of goods is not possible.
D)Graphically,Lhanor is operating inside its PP curve.

Question 47

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.Assume that the economy is facing PPI and that the economy is currently producing the combination of tea and videos represented by point A What is the opportunity cost of increasing the output of videos to 400,000?

A)400 tons of tea.
B)800 tons of tea.
C)100,000 videos.
D)300,000 videos.

Question 48

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.If 150 units of rye are currently being produced,what is the cost of producing 50 more units of rye?

A)25 units of wheat.
B)50 units of wheat.
C)100 units of wheat.
D)400 units of wheat.
E)Cannot be determined.

Question 49

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.Given the shape of the PP curve,which of the following statements is correct?

A)The law of increasing costs doesn't apply.
B)The resources being used to produce rye and wheat are very similar.
C)The two goods being produced are very similar.
D)Opportunity costs are constant.
E)It is better for the economy to product rye.

Question 50

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.What is the total cost of producing 300 units of rye?

A)0 units of wheat.
B)0.5 units of wheat.
C)2 units of wheat.
D)600 units of wheat.

Question 51

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.Assume that the economy is producing on PPI at point A After the shift from PPI to PPII,what does point B represent?

A)An increase in the production of videos but not of tea.
B)An increase in the production of tea but not of videos.
C)A decrease in the production of tea but not of videos.
D)An increase in the production of both goods.

Question 52

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.What might point U indicate?

A)Not all resources available to the economy are being used.
B)The resources being used are not being used efficiently.
C)The technology being used is not the most appropriate one.
D)All of these.

Question 53

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.If 300 units of rye are being produced,how many units of wheat are possible?

A)200 units of wheat.
B)300 units of wheat.
C)600 units of wheat.
D)0 units of wheat.

Question 54

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and quarks.

Refer to the graph above to answer this question.If Mendork's current production is at point B,what is the opportunity cost of one more quark as output changes from point B to A?

A)0.04 quirks.
B)4 quirks.
C)400 quirks.
D)1 quirk.
E)0.4 quirks.

Question 55

Below is a production possibilities curve for a large tract of prairie farm land.

Refer to the graph above to answer this question.What is the opportunity cost of 1 unit of rye?

A)0.5 units of wheat.
B)2 units of wheat.
C)5 units of wheat.
D)$400.

Question 56

Below are some production possibilities data for the mystical land of Lhanor.

Refer to the information above to answer this question.Approximately how many units of Kaldors can be produced if 48 units of Bouldings are being produced?

A)0 Kaldors.
B)4 Kaldors.
C)6 Kaldors.
D)8 Kaldors.
E)16 Kaldors.

Question 57

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and quarks.

Refer to the graph above to answer this question.If new technology increased the output of quirks by 50%,how many quirks could be produced if 600 quarks were produced?

A)18 quirks.
B)20 quirks.
C)15 quirks.
D)10 quirks.
E)No quirks.

Question 58

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.Which of the following illustrates the law of increasing costs?

A)Any point outside the production possibilities curve.
B)A "bowed-out" production possibilities curve.
C)A straight-line production possibilities curve.
D)Any point inside the production possibilities curve.

Question 59

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.What is indicated by the shape of both the PPI and the PPII curves?

A)Constant costs.
B)Alternative costs.
C)Increasing costs.
D)Decreasing costs.

Question 60

Below is a production possibilities curve involving tea and videos.

Refer to the graph above to answer this question.Assume that the economy is facing PPI and that 2,000 tons of tea are produced,how many videos could be produced?

A)600,000.
B)500,000.
C)2,000.
D)0.

Question 61

All of the following except one would be included in a definition of economics.Which is the exception?

A)Choice.
B)Resources.
C)Unlimited wants.
D)Scarcity.
E)Paradigm.

Question 62

Meridith had only $16 to spend this last weekend.She was,at first,uncertain about whether to go to two movies she had been wishing to see or to buy a new CD she had recently heard.In the end she went to the movies.Which of the following statements is correct?

A)The choice of the two movies and not the CD is an example of increasing costs.
B)The opportunity cost of the two movies is one CD.
C)The opportunity cost of the two movies is $16.
D)The choice of two movies rather than one CD was a bad one.

Question 63

All of the following except one are macroeconomic topics.Which is the exception?

A)The effect of a tax change on total consumption.
B)The effect of an interest rate change on the cost of your monthly loan payment.
C)The effect of an exchange rate change on total exports.
D)The effect of the election of a new government on investment in Canada

Question 64

Below are some production possibilities data for the mystical land of Ghandor.

Refer to the information above to answer this question.What is the opportunity cost of producing the third unit of Arrows?

A)1 unit of Viners.
B)6 units of Viners.
C)8 units of Viners.
D)14 units of Viners.

Question 65

All of the following except one are microeconomic statements.Which is the exception?

A)The price of wheat declined by 5% in Canada last year.
B)GDP increased by 1.8% in Canada last year.
C)The cost of production in the mining industry has recently declined.
D)The profits of The Canadian Corporation last year was $25 million.
E)The demand for Turbinado sugar is increasing.

Question 66

Why do economists feel that their discipline is relevant?

A)It is able to predict the future very well.
B)It is a value-free study.
C)Its methodology is so different from other social sciences.
D)The scope and range of subjects that it addresses is very wide.

Question 67

What are the three fundamental questions in economics?

A)What to produce,how to produce it,and for whom is it produced.
B)Is it necessary,is it right,and is it valuable?
C)Who should produce,what is the right way to produce,and how should we decide?
D)What to produce,how to produce it,and who should produce it.

Question 68

1.unemployment in Nova Scotia
2.interest rates
3.wages for farm workers
4.inflation rates
5.government's farm price supports
6.monopoly practices in Canada
Refer to the above information to answer this question.Which of the above are macroeconomic concepts?

A)2,4 and 6.
B)1,2 and 4.
C)2,3 and 6.
D)2,3 and 5.
E)1,3 and 4.

Question 69

In reference to voluntary trade,what was Adam Smith the first to recognize?

A)It does not happen very often.
B)It may or may not benefit one or both of the parties to the trade.
C)It benefits one party to the trade but only at the expense of the other.
D)It benefits both parties to the trade.

Question 70

Which of the following is a microeconomic topic?

A)Inflation rates.
B)Unemployment.
C)Interest rate determination.
D)Tax policies.
E)Supply and demand analysis of a factor market.

Question 71

Below are some production possibilities data for the mystical land of Ghandor.

Refer to the information above to answer this question.Suppose that Ghandor is currently producing combination A What is the opportunity cost of producing 4 units of Arrows.

A)Zero.
B)4 units of Viners.
C)5 units of Viners.
D)20 units of Viners.

Question 72

What is the definition of opportunity cost?

A)The amount of money spent on a good.
B)The value of the next best alternative that is given up as a result of making a particular decision.
C)The value of all the alternatives given up as a result of making a particular decision.
D)The cost incurred in producing a good.

Question 73

Below are some production possibilities data for the mystical land of Ghandor.

Refer to the information above to answer this question.Suppose that Ghandor is currently producing combination D What is the opportunity cost of producing an additional 10 units of Viners?

A)1 unit of Arrows.
B)2 units of Arrows.
C)10 units of Arrows.
D)18 units of Arrows.

Question 74

What are the four basic ways that society can use to organize its economic affairs?

A)With consumer goods,capital goods,models and positive statements.
B)Using cooperation,command,custom or competition.
C)Using plentiful resources,opportunity costs,technology and specialization.
D)Using capitalism,communism,fantasy and technology.

Question 75

"Factors of production" is a term that can be used interchangeably with:

A)Models.
B)Consumer goods.
C)Either resources or inputs.
D)Technologies.

Question 76

What do most of the disagreements among economists involve?

A)The appropriate goals and policies for the economy.
B)Generalizing about facts.
C)Gathering data.
D)The use of statistics.
E)The use of mathematics.

Question 77

1.unemployment in Nova Scotia
2.interest rates
3.wages for farm workers
4.inflation rates
5.government's farm price supports
6.monopoly practices in Canada
Refer to the above information to answer this question.Which of the above are microeconomic concepts?

A)1,3 and 5.
B)1,5 and 6.
C)2,5 and 6.
D)3,5 and 6.

Question 78

Below are some production possibilities data for the mystical land of Ghandor.

Refer to the information above to answer this question.Suppose that Ghandor is currently producing combination B How many Viners could be produced if the production of Arrows increased by 2?

A)3 units of Viners.
B)4 units of Viners.
C)8 units of Viners.
D)14 units of Viners.

Question 79

Who said: "The ideas of economists,both when they are right and when they are wrong,are more powerful than is commonly understood"?

A)Sayre and Morris.
B)Adam Smith.
C)Pierre Trudeau.
D)John Maynard Keynes.

Question 80

What are the factors of production?

A)Land,labour,money,and enterprise.
B)Land,labour,money,and capital.
C)Land,labour,capital,and enterprise.
D)Competition,command,custom,and cooperation.