Deck 1: Introduction to Key Ideas

Question 1

The study of how society decides what, how, and for whom to produce is the study of:

A) production technology.
B) consumption decisions.
C) economics.
D) the best way to run society.

Answer 1

economics.

Question 2

The question of how society's output is to be distributed among its citizens must be answered:

A) only by developed economies.
B) only by developing economies.
C) only by mixed economies.
D) by all economies.

Answer 2

by all economies.

Question 3

All social systems face the problem of economic scarcity, and this problem arises primarily from the fact that:

A) in order to produce more of one good, increasing amounts of other goods must be foregone.
B) every society can produce along its possibilities frontier.
C) human wants are essentially unlimited but the means to satisfy these wants are limited.
D) all resources have alternative uses, and this gives rise to opportunity costs.

Answer 3

human wants are essentially unlimited but the means to satisfy these wants are limited.

Question 4

The problem of scarcity is present in some form or another:

A) in all societies.
B) only in market systems.
C) only in command economies.
D) in the industrialized countries only.

Question 5

The provincial government of British Columbia has to decide whether to construct 10 hospitals without research facilities or 5 with such facilities. Among the three fundamental questions in economics, which one applies here?

A) What to produce.
B) When to produce.
C) How to produce.
D) For whom.

Question 6

The Federal government has decided that more middle-class Canadians should benefit from the growth of the economy in the next 20 years. Among the three fundamental questions in economics, which one applies to this situation?

A) What to produce.
B) How to produce.
C) For whom to produce.
D) Not to produce at all.

Question 7

What is economics sometimes called?

A) The science of choice.
B) The most scientific of all sciences.
C) The enlightened discipline.
D) Practical subject.

Question 8

All of the following statements, except one, are valid examples of the way economists use the term 'scarcity.' Which is the exception?

A) Households face a scarcity of income.
B) Individuals face a scarcity of time.
C) Economies face a scarcity of resources.
D) The world faces a scarcity of ideas.

Question 9

Dynamic aspects of resource allocations help us to understand all of the following issues, except one. Which is the exception?

A) Why some economies grow at a faster rate than others?
B) Why some economies are stagnant?
C) Why some economies have higher savings and investments than others?
D) Why some economies have stronger governmental regulations than others?

Question 10

One of the major challenges today is all of the following, except one. The exception is:

A) climate change.
B) global warming.
C) emission of greenhouse gases.
D) slow population growth rates.

Question 11

Which of the following would not promote economic growth within a society?

A) Increasing the skill level of the workforce.
B) An increase in technological expertise.
C) More people looking for jobs than there are jobs available.
D) An increase in the stock of machines and productive equipment.

Question 12

Which of the following statements is correct for a society that emphasizes the production of capital goods over consumer goods?

A) The society could enjoy the same quantity of capital goods and a larger quantity of consumer goods in the future.
B) The society would have to save more now than a society that did not emphasize the production of capital goods.
C) The society will grow faster than a society that emphasizes the production of consumer goods.
D) All of the above are correct.

Question 13

High-growth economies are characterized by two key patterns, which are:

A) low saving and high investment.
B) high saving and high investment.
C) high saving and high consumption.
D) low saving and high consumption.

Question 14

At the very least, Joe Average and Bill Gates are both identically limited by:

A) their wealth.
B) their knowledge.
C) the square footage in their homes.
D) the 24 hours that comprise a day.

Question 15

The concept of scarcity applies equally to Bill Gates and a homeless person because:

A) both have the same legal rights protected by the U.S. constitution.
B) they have the same access to the markets for goods and services.
C) there are only 24 hours in the day for both of them.
D) they are both consumers.

Question 16

When economists say there is no such thing as a free lunch, they mean that:

A) we must pay money for everything we get.
B) it is against the law to accept goods or services without paying for them.
C) the more lunch a person eats the more weight the person will gain.
D) every choice we make involves a trade-off.

Question 17

Class attendance today is nearly 100% but on most other days it is less. The likely explanation for this would be:

A) the opportunity cost of not attending today is much higher than usual.
B) random chance.
C) the episode of Jerry Springer was a rerun.
D) students thought today's class was a review.

Question 18

Forest is a mountain man living in complete isolation in the Yukon. He is self-sufficient. through hunting, fishing, and farming. He has not been in the city to buy anything in five years. Therefore:

A) the scarcity problem does not apply to Forest.
B) Forest is not required to make choices.
C) the scarcity problem still applies because more hunting means less fishing and so on.
D) Forest is very satisfied.

Question 19

Benny has one hour before bedtime and he can either watch TV or listen to his new Korn CD. He chooses to listen to the CD. The scarcity problem's influence on Benny is seen in:

A) a the decision to listen to music.
B) the decision not to watch TV.
C) the fixed amount of time before bed.
D) the decision to choose between TV and music.

Question 20

The number of Canadian households with access to the Internet and those with broadband connections is growing rapidly. As an economist, one could predict that when a major purchase is being considered, families will:

A) collect as much information as humanly possible beforehand.
B) always buy online.
C) never buy online.
D) collect more information beforehand because the cost of finding and acquiring it is lower.

Question 21

Maria spends her afternoon at the beach, paying $2 to rent a beach umbrella and $10 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is:

A) zero, because she got food, drinks, and an umbrella in return for the money.
B) the $12 she spent on the umbrella, food, and drinks.
C) only $2 because she would have spent the money on food, and drinks whether or not she went to the beach.
D) the movie she missed seeing plus the $12 she spent on the umbrella, food and drinks.

Question 22

The fact that even a rich country like Canada faces the economic problem of scarcity implies that:

A) scarcity must be a problem related to the land and labor stocks in Canada.
B) scarcity must be the result of mismanagement of natural resources by Canadian businesses.
C) scarcity must be largely due to the inefficiency of the government in Canada.
D) wants and human desires in Canada exceed available resources.

Question 23

In order to properly ignore opportunity costs, the value of the next-best alternative and therefore all alternatives would have to be:

A) large and positive.
B) negative.
C) small.
D) zero.

Question 24

The production possibility frontier (PPF) shows, for each output of one good, ________________ of the other good that can be produced.

A) the maximum amount.
B) the minimum amount.
C) the residual amount.
D) the average amount.
E) None of the.

Question 25

-Referring to Figure 1.1, points A, B, C, and D illustrate:

A) an inefficient allocation of society's scarce resources.
B) possible combinations of food output and film output.
C) a constant trade-off between food output and film output.
D) society prefers food output to film output.

Question 26

-The production possibilities frontier in Figure 1.1 is concave to the origin because:

A) resources are equally substitutable between the production of food and films.
B) society can have more food only if it produces more films.
C) the cost of food in terms of films is constant.
D) the opportunity cost of food in terms of films increases are more films are produced.

Question 27

-The combination of food and films shown by point H in Figure 1.1:

A) is not attainable, given society's current level of resources and production technology.
B) can be attained only if some of society's resources are unemployed.
C) suggests opportunity costs of food, in terms of films, is constant.
D) results only because society inefficiently allocates its resources.

Question 28

-The combination of food and films shown by point G in Figure 1.1:

A) is an efficient use of society's resources because it is below the production possibilities frontier.
B) is more desirable than point E because producing at point G does not place a strain on society's production capacity.
C) is attainable but involves the unemployment and inefficient used of some of society's resources.
D) is beyond the capacity of society to produce.

Question 29

-The opportunity cost of moving from point G to point D in Figure 1.1 is equal to:

A) zero units of food output.
B) 5 units of food output.
C) 7.5 units of food output.
D) zero units of film output.

Question 30

-A movement from point B to point C along the production possibilities frontier in Figure 1.1 suggests:

A) an additional films can be produced only if more and more food is given up.
B) the trade-off between food and films is not constant.
C) society cannot have more of both goods at the same time.
D) all of the above.

Question 31

If a society moves along its production possibilities frontier, then:

A) it is using its scarce resources less and less efficiently.
B) it must be giving up more and more of some goods.
C) more of all goods are being produced.
D) some of its resources are unemployed.

Question 32

-Use the production possibilities described in Table 1.1, the cost of each additional film in terms of food:

A) remains constant.
B) falls as more films are produced.
C) increases as more films are produced.
D) is meaningless because the cost of films cannot be expressed in terms of food.

Question 33

-In Table 1.1 the opportunity cost of increasing food output from 17 to 22 is:

A) 17 films.
B) 9 films.
C) 26 films.
D) 8 films.

Question 34

The difference between a straight-line production possibilities frontier and one that is concave is that:

A) the concave production possibilities frontier exhibits constant opportunity costs, while the straight line frontier does not.
B) the concave frontier reflects the problem of scarcity but the straight line frontier does not.
C) the straight line frontier reflects constant opportunity costs but the concave frontier does not.
D) neither the straight line nor the concave frontier reflect output limits.

Question 35

When considering an economy producing only two goods, economic growth can be illustrated by:

A) a movement along its production possibilities frontier.
B) a movement of its production possibilities frontier toward the origin.
C) moving to a point beneath its production possibilities frontier.
D) an outward shift of its production possibilities frontier.

Question 36

Any point beyond the production possibilities frontier:

A) is attainable by society, given its current level of resources, production technology, and represents higher outputs of both go.
B) is less efficient than any point below the frontier.
C) cannot be attained, given society's current level of resources and production technology.
D) is less desirable than any point below the curve.

Question 37

All the following conditions will cause an outward shift of the production possibilities frontier except:

A) an improvement in the overall technology of production.
B) existing factors of production become more productive.
C) the quantity of the factors of production increases.
D) previously unemployed factors of production are put back to work.

Question 38

Meredith had only $10 to spend last weekend. She was, at first, uncertain whether to go to see a new movie or to rent two videos she has been told were good. In the end she rented the videos. Which of the following statements is correct?

A) The choice of the two videos and not the movie at the theatre is an example of increasing costs.
B) The opportunity cost of the two videos is one theatre movie.
C) The opportunity cost of the two videos is $10.
D) The choice of two videos rather than one theatre movie was a bad one.

Question 39

The table indicates production possibilities with given resources.


-Which of the following statements is false?

A) The opportunity cost one unit of food is one unit of film in country A.
B) The opportunity cost one unit of food is one unit of film in country B.
C) The opportunity cost one unit of film is one unit of food in country A.
D) The opportunity cost one unit of film is two units of food in country B

Question 40

The table indicates production possibilities with given resources.


-Which of the following statements is false?

A) Country A has comparative advantage in food and the country B has a comparative advantage in film.
B) Country B has comparative advantage in food and the country A has a comparative advantage in film.
C) The country A should specialize in films.
D) The country B should specialize in food.

Question 41

To say that markets are free means that:

A) the invisible hand operates and there is no government intervention.
B) consumers are free to purchase all that they want at the price established by the government.
C) production, distribution, and consumption of goods is free, but government sets minimum wages.
D) everyone produces according to his ability and receives goods and services according to his needs.

Question 42

A mixed economy is best described by the statement:

A) In a mixed economy, society answers the "what," "how," and "for whom" questions through a market system.
B) In a mixed economy, government policies determine the "what," "how," and "for whom" question.
C) In a mixed economy, the government and the private sectors interact in solving the basic economic question.
D) In a mixed economy, the invisible hand solves the basic economic questions.

Question 43

A pure command economy is best characterized by:

A) a rather large degree of market activities.
B) citizens owning and supplying the factors of production.
C) the "invisible hand" concept.
D) a strong central government deciding what, how, and for whom to produce.

Question 44

Most real world economic systems are:

A) pure market systems.
B) pure command systems.
C) mixed economic systems.
D) planned economic systems.

Question 45

Which of the following statements is false?

A) In most western economies, markets play a central role in allocating resources among competing uses.
B) In a market economy, prices do not play an important role in allocating of society's scarce resources.
C) Markets can answer the "what," "how," and "for whom" questions faced by every society.
D) Markets consist of both buyers and sellers of a good or service.

Question 46

The invisible hand is:

A) when individuals' pursuit of self-interest within free markets may allocate resources efficiently.
B) when the state plans resource allocation.
C) the inland revenue.
D) fiscal policy.

Question 47

Normative economics reflect:

A) society's laws.
B) economic analysis based on facts and evidence.
C) empirical and significant economic observations.
D) subjective values.

Question 48

All of the following statements are false except:

A) Normative economic statements are statements of fact.
B) In positive economics, we are detached scientists and personal values do not enter our description of economic events.
C) "The unemployment rate for September, 1987 was 5.9 percent" is a normative statement.
D) "The government should provide a minimum income to every citizen" is a positive statement.

Question 49

Normative economics:

A) makes explanations based upon economic data about the workings of the economy.
B) prescribes policies for the economy based upon personal value judgments.
C) is a scientific approach to the study of economic events.
D) none of the above.

Question 50

The propositions that emerge from positive economics can generally be supported or refuted:

A) by facts.
B) by normative analysis.
C) by high ranking government officials, especially high ranking economists.
D) only by economic experts in their particular field of studies.

Question 51

On October 20, 1987, some financial newspapers wrote editorials commenting on one of the worst stock market crashes in a century. Many offered suggestions about what the government should do in order to prevent a recession. These editorials were examples of:

A) positive economics.
B) microeconomics.
C) normative economics.
D) applied economics.

Question 52

When we make resource allocation recommendations based upon personal value judgments this is:

A) normative economics.
B) positive economics.
C) microeconomics.
D) macroeconomics.

Question 53

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

A) The government should lower the goods and services tax (GST).
B) There should be more advertisements to discourage smoking among teenagers.
C) The degree of monopoly in our economy has been increasing in the last ten years.
D) The government needs to balance the budget this year.

Question 54

"The Canadian Government ought to increase the operating grants to all Canadian Universities and Colleges." This statement is an example of:

A) an empirical statement.
B) a positive statement.
C) a value free statement.
D) a normative statement.

Question 55

Microeconomics best describes the study of the:

A) level of national unemployment.
B) growth rate of GNP.
C) effects of aggregate inflation.
D) behaviour of individual economic agents.

Question 56

Macroeconomics differs from microeconomics in that:

A) the concept of scarcity applies to the latter but does not apply to the former.
B) the latter studies individual markets while the former studies groups of markets, including the whole economy.
C) rational decisions are relevant to the former but not the latter.
D the former is the study of how people make choices under conditions of scarcity while the latter is . concerned with the results of those choices for society.

Question 57

Microeconomics studies all of the following except:

A) the consumption behaviour of an individual household.
B) why a dozen fresh eggs costs less than a dozen fresh shrimp.
C) the effect of price supports on the supply of milk.
D) the effect of a tax cut on the nation's spendable income.

Question 58

Macroeconomics is described best by which of the following statements?

A) Macroeconomics is the study of the economy as a whole.
B) Macroeconomics is the study of how firms strive to maximize profits.
C) Macroeconomics is the study of the demand for labour by firms and the supply of labour by households.
D) Macroeconomics is the study of why some households have higher income than others.

Question 59

If you are a macroeconomist, you might study:

A) changing national employment rates from one month to the next.
B) the level of saving and investment spending in the economy.
C) the effect of increased oil prices upon the production of goods and services in the economy.
D) all of the above.

Question 60

All of the following statements describe a macroeconomic topic except:

A) "Because of current prices, there is a shortage of adequate housing."
B) The Canadian economy experienced high inflation during the late 1970s.
C) "When the nation is at full employment, there still may be some individuals without jobs."
D) "One of the primary determinants of aggregate household consumption is the level of household income."

Question 61

Understanding how individuals make economic decisions is an example of:

A) undertaking normative economic analysis.
B) undertaking positive economic analysis.
C) making a choice at the margin.
D) undertaking microeconomic analysis.

Question 62

The study of individuals' decision-making about particular commodities is:

A) macroeconomics.
B) positive economics.
C) normative economics.
D) microeconomics.

Question 63

The study of the complete interaction of the economy as a whole is:

A) macroeconomics.
B) microeconomics.
C) ergonomics.
D) econometrics.

Question 64

Worldwide economic melt-down that began in 2008 as a result of high interest rate raises profound questions about the usefulness of the central bank.

Question 65

Worldwide economic melt-down that began in 2008 as a result of low interest rate raises profound questions about the appropriate roles of government and regulations in the financial markets.

Question 66

When an economic system answers the "for whom"
question, it affects the distribution of total output.

Question 67

An important idea in the definition of economics is that the economics teaches an individual how to operate efficiently and make money.

Question 68

Investments in physical capital and investments in education helped China to attain high economic growth rates in the recent past.

Question 69

Along a given production possibility curve, different combinations of goods can be produced with different technologies.

Question 70

When an economy is achieving economic efficiency and is operating on its production possibilities frontier, it is possible to increase production.

Question 71

A production possibilities curve of an economy is a graphical representation of the various combinations of output that are wanted by the citizens of the economy.

Question 72

A price system depends on the buying and selling of goods and services to allocate resources.

Question 73

To one degree or another, all of the economic systems in the world are mixed economic systems.

Question 74

Positive economics makes recommendations about how income should be distributed.

Question 75

Studying the causes of unemployment is an example of normative economics.

Question 76

It is always correct to allow markets to solve economic problems.

Question 77

Economists believe that incentives are the only motivating force in society.

Question 78

Economists believe that incentives form a central part of the modern mixed economy.

Question 79

Property rights are unimportant in developing economies as long as there is a rule of law.

Question 80

Public policy can play at best a marginal role in improving the performance of the economy.