Question 1

Which of the following statements is true about scarcity?
A)Scarcity refers to the situation in which unlimited wants exceed limited resources.
B)Scarcity is not a problem for the wealthy.
C)Scarcity is only a problem when a country has too large a population.
D)Scarcity arises when there is a wide disparity in income distribution.

Accepted Answer

Scarcity refers to the situation in which unlimited wants exceed limited resources. It is a universal problem and affects individuals, organizations, and countries regardless of their level of wealth, population size, or income distribution. It is the fundamental economic problem that requires individuals and societies to make choices about how to allocate limited resources to meet their unlimited wants and needs.

Question 2

Economists assume that individuals
A)behave in unpredictable ways.
B)will never take actions to help others.
C)prefer to live in a society that values fairness above all else.
D)are rational and respond to incentives.

Accepted Answer

Economists generally assume that individuals are rational and respond to incentives. This means that individuals weigh the costs and benefits of their actions and make decisions that they believe will maximize their own well-being. This assumption serves as a foundation for much of economic theory and analysis.

Question 3

In economics, choices must be made because we live in a world of
A)unemployment.
B)scarcity.
C)greed.
D)unlimited resources.

Accepted Answer

Scarcity refers to limited resources and unlimited wants. Therefore, we must make choices about how to allocate these scarce resources among different wants and needs.

Question 4

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.
A)equitably
B)rationally
C)emotionally
D)selfishly

Accepted Answer

Economics assumes that economic agents behave rationally, meaning that they make the best decisions given their knowledge of the costs and benefits. This does not necessarily mean that they always make correct decisions or that they always act in their own self-interest, but rather that they make decisions that they believe will maximize their well-being given the information they have.

Question 5

On average women in Quebec have
A)fewer children than women in other provinces.
B)more children than women in other provinces.
C)the same number of children was women in other provinces.
D)exactly the number of children required to maintain a stable population.

Accepted Answer

On average, women in Quebec have more children than women in other provinces, partly due to policies that support families and encourage higher birth rates.

Question 6

By definition, economics is the study of
A)how to make money in the stock market.
B)how to make money in a market economy.
C)the choices people make to attain their goals, given their scarce resources.
D)supply and demand.

Accepted Answer

Economics is the study of how individuals, businesses, governments, and societies make choices about how to use limited or scarce resources to fulfill their unlimited wants and needs. It is concerned with analyzing the production, distribution, and consumption of goods and services in order to understand how economies function and how they can be improved. Option A and B are incomplete and Option D is only a small part of what economics encompasses.

Question 7

Economists assume that rational behavior is useful in explaining choices people make
A)because irrational people do not make economic choices.
B)even though people may not behave rationally all the time.
C)because individuals act rationally all the time in all circumstances.
D)even though people rarely, if ever, behave in a rational manner.

Accepted Answer

Economists acknowledge that people may not always behave rationally, but the assumption of rational behavior is useful in explaining many economic choices that people make.

Question 8

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.
A)collective
B)cooperative
C)market
D)trade-off

Accepted Answer

The term "market" specifically refers to a group of buyers and sellers who come together to trade a particular product. A collective refers to a group of individuals or entities working together for a common goal, while a cooperative is a type of organization owned and controlled by its members for their mutual benefit. A trade-off refers to a situation where one must give up one thing in exchange for another.

Question 9

In economics, the term ________ means "additional" or "extra."
A)allocative
B)marginal
C)equity
D)optimal

Accepted Answer

The term that means "additional" or "extra" in economics is marginal. It is used to describe the change in costs or benefits as a result of producing or consuming one more unit of a good or service. The concept of marginal analysis is important in understanding how individuals and firms make decisions about how much to produce or consume.

Question 10

Suppose that some teachers have decided that economic and financial uncertainty have made the prospect of retiring more risky, and therefore it carries a higher cost than not retiring.By using all available information as they act to achieve their goals, these teachers are exemplifying the economic idea that
A)people are rational.
B)people respond to economic incentives.
C)optimal decisions are made at the margin.
D)equity is more important than efficiency.

Accepted Answer

The teachers are using all available information to make a rational decision about retirement, reflecting the economic idea that people are rational.

Question 11

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.
A)market
B)trade-off
C)variable
D)model

Accepted Answer

An economic model is a simplified version of some aspect of economic life used to analyze an economic issue. It can help economists and policymakers understand the potential impact of certain policies or events on the economy. Options A, B, and C may be related to economic models but do not specifically define them.

Question 12

Bad weather in Colombia can lead to
A)more Canadians drinking coffee.
B)Canadians having to pay more for coffee.
C)wage increases for coffee shop employees.
D)the destruction of the Canadian coffee harvest.

Accepted Answer

Bad weather in Colombia can affect coffee production, leading to reduced supply and potentially higher prices for coffee, which Canadians may have to pay.

Question 13

Where do economic agents such as individuals, firms and nations, interact with each other?
A)in public locations monitored by the government
B)in any arena that brings together buyers and sellers
C)in any physical location people where people can physically get together for selling goods, such as shopping malls
D)in any location where transactions can be monitored by consumer groups and taxed by the government

Accepted Answer

Economic agents such as individuals, firms, and nations interact with each other in any arena that brings together buyers and sellers. This includes markets, both physical and virtual, where goods and services are exchanged for money or other goods and services. These interactions do not necessarily need to be monitored by the government or consumer groups, although taxes may be levied on transactions.

Question 14

Suppose your provincial government encouraged new medical school graduates to take over rural and small town practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors would be exemplifying the economic idea that
A)people are rational.
B)people respond to economic incentives.
C)optimal decisions are made at the margin.
D)equity is more important than efficiency.

Accepted Answer

The scenario describes the provincial government using financial incentives to encourage new medical school graduates to take over rural and small town practices from retiring doctors. This displays the economic idea that people respond to economic incentives, as the financial benefit encourages the new doctors to take on the practices and the retiring doctors to leave their practices.

Question 15

The basic economic problem of ________ has always existed and will continue to exist.
A)scarcity
B)efficiency
C)inflation
D)recession

Accepted Answer

Scarcity refers to the limited availability of resources relative to society's unlimited wants and needs. This basic economic problem has always existed and will continue to exist because there will always be limited resources and unlimited wants and needs. The other options - efficiency, inflation, and recession - are all related to specific economic issues that may fluctuate over time.

Question 16

Economists reason that the optimal decision is to continue any activity up to the point where the
A)marginal benefit is zero.
B)marginal benefit is greater than the marginal cost.
C)marginal cost is zero.
D)marginal benefit equals the marginal cost.

Accepted Answer

The optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost. This is because at this point, the additional benefit gained from continuing the activity is equal to the additional cost incurred, making it the most efficient use of resources.

Question 17

Consider the following statements:
a)Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b)Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c)Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A)a only.
B)b only.
C)c only.
D)a and b.
E)a, b, and c.

Accepted Answer

The answer of Consider the following statements:
a)Car owners purchase more...

Question 18

Economists assume that rational people do all of the following except
A)use all available information as they act to achieve their goals.
B)undertake activities that benefit others and hurt themselves.
C)weigh the benefits and costs of all possible alternative actions.
D)respond to economic incentives.

Accepted Answer

Economists assume that rational people act in their own self-interest and that they weigh the benefits and costs of their actions. Therefore, they would not undertake activities that benefit others and hurt themselves, as suggested in option B.

Question 19

Holding all other personal characteristics-such as age, ethnicity, and income-constant, economists would expect that
A)women in provinces making payments for having more children will have fewer children than women in other provinces.
B)women in provinces making payments for having more children will have more children than women in other provinces.
C)women in provinces making payments for having children will have the same number of children as women in other provinces.
D)there is no correlation between payments for having children and the number of children women choose to have.

Accepted Answer

Economists would expect that incentives, such as payments for having more children, would increase the number of children women choose to have, all else being equal. Therefore, women in provinces making payments for having more children are likely to have more children than women in other provinces.

Question 20

A grocery store sells a bag of potatoes at a fixed price of $5.50.Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?
A)marginal revenue
B)gross earnings
C)pure profit
D)marginal costs
E)net benefit

Accepted Answer

Marginal revenue is the term used by economists to describe the money received from the sale of an additional unit of a product. In this case, the additional bag of potatoes sold would bring in marginal revenue of $5.50.

Quiz 1: Economics: Foundations and Models

Which of the following statements is true about scarcity?

Economists assume that individuals

In economics, choices must be made because we live in a world of

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.

On average women in Quebec have

By definition, economics is the study of

Economists assume that rational behavior is useful in explaining choices people make

The term ________ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.

In economics, the term ________ means "additional" or "extra."

An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue.

Bad weather in Colombia can lead to

Where do economic agents such as individuals, firms and nations, interact with each other?

Suppose your provincial government encouraged new medical school graduates to take over rural and small town practices from doctors wishing to retire by paying both the new and retiring doctors $100,000.These doctors would be exemplifying the economic idea that

The basic economic problem of ________ has always existed and will continue to exist.

Economists reason that the optimal decision is to continue any activity up to the point where the

Economists assume that rational people do all of the following except

Holding all other personal characteristics-such as age, ethnicity, and income-constant, economists would expect that

A grocery store sells a bag of potatoes at a fixed price of $5.50.Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?