Question 1

When the government chooses to use resources to build a dam, those resources are no longer available to build a highway. This illustrates the concept of

Accepted Answer

This scenario demonstrates the concept of opportunity cost, which refers to the tradeoff of choosing one option over another, and the cost of that decision in terms of what could have been gained from the foregone option. In this case, choosing to use resources for building a dam means that the opportunity to build a highway is lost, highlighting the opportunity cost of the decision.

Question 2

If you take an additional class this term, you can graduate earlier. This is an example of

Accepted Answer

The additional class represents a marginal benefit, as it will result in an earlier graduation. The other options do not accurately describe the situation.

Question 3

Sally has to decide whether to study for her economics test or her accounting test. If she chooses to study for accounting, her opportunity cost of studying accounting is

Accepted Answer

The opportunity cost of studying accounting is the value of the next best alternative, which is studying economics. Therefore, Sally's best choice would be to study for accounting, as the opportunity cost of studying economics is greater than the value of studying accounting.

Question 4

When the government of Alberta chooses to build more roads, the required resources are no longer available to provide better healthcare facilities. This situation illustrates the concept of

Accepted Answer

The concept being illustrated is opportunity cost, which refers to the trade-off that occurs when one decision is made over another. In this case, the decision to build more roads means that resources that could have been used to improve healthcare facilities are no longer available, highlighting the opportunity cost of that decision.

Question 5

Saskatchewan had more hospitals than Ontario, despite having one-tenth the population. The Saskatchewan government closed many of these hospitals in spite of widespread local protests. Which one of the following arguments is true?

Accepted Answer

The statement implies that the Saskatchewan government closed hospitals despite protests, which suggests that the decision was a result of considering the costs and benefits. The argument that the marginal benefit from one of these hospitals was less than its marginal cost is consistent with an economic analysis of the decision.

Question 6

According to Adam Smith

Accepted Answer

Adam Smith believed that the invisible hand of the market would lead decisions made in pursuit of self-interest to unintentionally promote the social interest. He felt that government intervention in markets was not desirable.

Question 7

To make choices, people must

Accepted Answer

To make choices, people must have the ability to evaluate the values of alternative actions. This involves considering the potential outcomes and weighing the pros and cons of each option in order to make the best decision. Without this skill, individuals would struggle to make informed choices and could potentially make poor decisions that have negative consequences. While access to information and financial resources can be helpful, the ability to evaluate alternatives is ultimately the most important factor in effective decision-making.

Question 8

Monika will choose to eat a seventh pizza slice if

Accepted Answer

Monika will choose to eat a seventh pizza slice if the marginal benefit from the seventh slice is greater than its marginal cost. This means that the additional satisfaction or enjoyment she will get from eating the seventh slice is greater than the additional cost of consuming it (such as feeling uncomfortably full or spending more money). If the marginal benefit is less than the marginal cost, Monika would not choose to eat the seventh slice.

Question 9

Which one of the following is a necessary consequence of scarcity?

Accepted Answer

Scarcity means that there are limited resources (e.g. time, money, materials) to satisfy unlimited wants and needs. Therefore, individuals and societies must make choices about how to allocate those resources. Without scarcity, there would be no need for choices. Option A is incorrect because choices are required due to scarcity. Option B and E are not necessarily true or false outcomes of scarcity, as it depends on various factors such as the market and competition. Option D is impossible because if all wants are satisfied, then there is no scarcity.

Question 10

Which of the following sayings best describes opportunity cost?

Accepted Answer

"There's no such thing as a free lunch" means that everything has a cost and when you choose one option, you give up the opportunity to choose another. This is the central idea behind opportunity cost.

Question 11

The concept of opportunity cost

Accepted Answer

The concept of opportunity cost suggests that choosing one option over the other means giving up the benefits of the option not chosen. Therefore, if a government chooses to increase spending on public education, they will have less money to spend on expanding the public healthcare system. This concept is not limited to any specific country or region, developed or developing. Option A, B, D, and E are all incorrect statements.

Question 12

Complete the following sentence. Marginal cost is

Accepted Answer

Marginal cost is the opportunity cost of an increase in an activity, which means the additional cost incurred by producing one more unit or taking one more action. A and B are incorrect because they refer to the total cost, not the additional or incremental cost. D is incorrect because it refers to the opportunity cost of a decrease in an activity, which is not the same as the marginal cost. E is incorrect because marginal benefit is not necessarily equal to marginal cost.

Question 13

An outcome is considered efficient if

Accepted Answer

An efficient outcome is one where it is not possible to make someone better off without making someone else worse off. This means that resources are allocated in the most optimal manner and any change to the allocation would result in a decrease in overall welfare. Options A, B, D, and E do not necessarily guarantee an efficient outcome.

Question 14

Marginal benefit is the

Accepted Answer

Marginal benefit refers to the additional benefit received from an increase in an activity, such as consuming one more unit of a good or service. A and D are incorrect because they refer to the total benefit and opportunity cost of a decrease in an activity, respectively. B and E are also incorrect because they refer to the additional benefit and opportunity cost of a decrease in an activity, respectively, rather than an increase.

Question 15

Marginal benefit is

Accepted Answer

Marginal benefit is the additional benefit that arises from an increase in an activity. It is the benefit that is compared to the marginal cost to determine whether an action should be taken. Therefore, the correct choice is D, "the benefit that arises from an increase in an activity."

Question 16

Which one of the following news headlines definitely concerns the social interest?

Accepted Answer

The headline about E Coli test results being posted on beaches concerns the safety and well-being of the general public, therefore it definitely concerns social interest.

Question 17

"There can be too much of a good thing." This statement suggests that

Accepted Answer

The statement "there can be too much of a good thing" implies that producing more of a good may lead to a point where its marginal cost (the additional cost of producing an extra unit) exceeds its marginal benefit (the additional benefit of consuming an extra unit). In this scenario, producing more of the good would no longer be efficient or desirable. Therefore, option B is the correct choice. Options A, C, D, and E do not accurately reflect the meaning behind the statement.

Question 18

Opportunity cost is

Accepted Answer

Opportunity cost is the highest-valued alternative that we give up to get something. It is the cost of what we forewent in order to obtain something else. Options A, B, C, and D do not fully capture the concept of opportunity cost.

Question 19

When asked in an interview what she missed the most because of the time she spent training for the Olympics, a rower, who lived on her own, answered "a normal social life." She also revealed that she had given up a job that paid $30,000 per year to train fulltime. She received a grant of $8,000 per year from Sport Canada, but this failed to cover all her training expenses. Her food and rent were $5,000 per year and training expenses were $12,000 per year. Aside from the value of a normal social life, what is the annual opportunity cost, expressed in dollars, to this rower of "Going for Gold"?

Accepted Answer

The answer of When asked in an interview what she...

Question 20

During the next hour John can choose one of the following three activities: playing basketball, watching television, or reading a book. The opportunity cost of reading a book

Accepted Answer

The answer of During the next hour John can choose...

Quiz 1: What Is Economics