Question 1

Economists make predictions about individual behaviour based on the assumption that people exploit opportunities to make themselves better off.The fact that different individuals make different choices when confronted with the same situation implies that this assumption is often violated.

Accepted Answer

Different choices can be due to varying preferences, information, or constraints, not necessarily a violation of the assumption that people act to improve their well-being.

Question 2

Handicapped-designated parking spaces are an example of the market economy achieving efficiency.

Accepted Answer

Handicapped-designated parking spaces are a result of government regulations and policies aimed at ensuring equal access and accommodation for people with disabilities, rather than an outcome of market forces seeking efficiency.

Question 3

The fact that individuals in a market economy act so as to make themselves better off is a major reason a market equilibrium is usually efficient.

Accepted Answer

In a market economy, individuals act in their self-interest and make choices that maximize their own utility. As a result, the market equilibrium reflects the collective choices of all individuals and is efficient in allocating resources. This is known as the invisible hand principle, where individuals pursuing their own self-interest leads to an overall desirable outcome for society as a whole.

Question 4

When people in Brazil engage in trade with people in Germany,all citizens in both nations are necessarily made better off.

Accepted Answer

While trade can bring benefits to both countries by allowing them to specialize in goods they produce most efficiently, not all citizens in both nations are necessarily made better off due to factors like job displacement in industries that cannot compete with imports.

Question 5

In equilibrium,there will be no further opportunities for gains from trade.

Accepted Answer

In equilibrium, everything has been traded at the best possible terms for both parties involved. Therefore, there are no more opportunities for either party to gain from trade.

Question 6

When people want more goods and services than are available,the economy undergoes inflation.Which economic principle does this statement BEST represent?

Accepted Answer

The statement describes an excess of demand over supply, which can lead to inflation. This illustrates the economic principle of overall spending sometimes getting out of line with the economy's productive capacity.

Question 7

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behaviour.

Accepted Answer

Economists generally assume that individuals act in their own self-interest, not necessarily in the interest of others, when making predictions about behavior.

Question 8

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

Accepted Answer

An economy is considered efficient if it is impossible to make one person better off without making someone else worse off, which is known as Pareto efficiency.

Question 9

The study of economics arises because of the necessity of choice,and the necessity of choice arises because of the fundamental problem of scarcity of resources.

Accepted Answer

Economics is primarily concerned with how to allocate scarce resources among competing wants and needs. If resources were unlimited, there would be no need to make choices and study economics. Therefore, the statement is true.

Question 10

Because Canada is a rich nation,free health care can be provided for all citizens without considering the issue of scarcity.

Accepted Answer

Despite being a wealthy nation, Canada still faces issues related to scarcity in the provision of health care services. The government's universal health care system is designed to provide equitable access to essential medical services, but there are limitations to the coverage and waiting times for specialized treatments. Additionally, the system is funded by taxes, which not all citizens may contribute equally to, and as health care costs continue to rise, there may be challenges to sustaining the current system.

Question 11

Trade theoretically allows people to get more of what they want.

Accepted Answer

Trade allows people to specialize in producing goods or services in which they have a comparative advantage, and then exchange those goods or services for other goods or services that they desire. This allows people to access a wider variety of goods and services than they would be able to produce themselves, thus enabling them to get more of what they want.

Question 12

An economic situation is in equilibrium when no individual would be better off taking a different action.

Accepted Answer

An economic situation is considered to be in equilibrium when there is no incentive for individuals to change their behaviour or switch to a different course of action, as it would not result in any improvement of their welfare. In other words, an equilibrium state is achieved when demand and supply are balanced, and resources are allocated efficiently without any excess or shortage.

Question 13

Because of the opportunity cost,if Canada spends $87 billion in the rebuilding of Haiti after a Hurricane,it has to forgo the opportunity to spend $87 billion on some other programme.

Accepted Answer

Opportunity cost refers to the cost of forgoing the next best alternative when making a decision. Therefore, if Canada spends $87 billion in the rebuilding of Haiti, it cannot use that same $87 billion on some other programme, thus incurring an opportunity cost.

Question 14

A trade-off involves weighing costs and benefits.

Accepted Answer

This statement is true. A trade-off involves making a decision between different options and weighing the benefits and drawbacks of each option in order to make the best choice.

Question 15

Equity is the same as efficiency.

Accepted Answer

Equity and efficiency are two separate concepts. Equity refers to fairness and equitable distribution, while efficiency refers to the optimal use of resources to achieve a goal. While they may intersect in certain contexts, they are not interchangeable.

Question 16

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

Accepted Answer

Marginal analysis involves comparing the additional benefits and costs of consuming one more unit. In the case of consuming an additional slice of pizza, one would need to consider the additional enjoyment or satisfaction from eating the slice versus the cost of the slice in terms of money, calories, or potential negative health consequences.

Question 17

In 2013,the federal government passed a tax cut.The country did NOT incur any opportunity cost from this decision.

Accepted Answer

Every decision has an opportunity cost, which is the value of the next-best alternative that must be given up in order to pursue the chosen option. In the case of the 2013 tax cut, the opportunity cost could have been the reduction of government spending on social programs or increased borrowing to cover the revenue shortfall. Therefore, the statement that the country did not incur any opportunity cost from this decision is false.

Question 18

If an economy's resources are used efficiently,then it is guaranteed that the economy will also achieve equity.

Accepted Answer

Efficiency and equity are not necessarily linked. An economy can use resources efficiently but still have unequal distribution of wealth and opportunities. Achieving equity requires deliberate policies and interventions to address inequality.

Question 19

During the Great Depression,consumers and producers in Canada dramatically reduced their spending relative to the quantity of goods and services available at the time.Which economic principle does this statement BEST represent?

Accepted Answer

The statement best represents the principle that overall spending sometimes gets out of line with the economy's productive capacity. During the Great Depression, there was a significant reduction in consumer and producer spending relative to the quantity of goods and services available, indicating that overall spending was not aligned with the productive capacity of the economy.

Question 20

As long as individuals know that they can find the goods and services they want in the market,they are willing to forgo being self-sufficient and are willing to specialize.

Accepted Answer

This statement is true. The existence of a market where individuals can freely exchange goods and services allows for specialization and division of labor, leading to increased efficiency and productivity. As a result, individuals are willing to forgo being self-sufficient and can rely on others to provide the goods and services they need.

Quiz 1: First Principles