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EXPLORING MACROECONOMICS 4TH CANADIAN EDITION
(SEXTON) EXAM 2026 LATEST VERSION QUESTIONS AND ANSWERS
2026 EDITION
EXPLORING MACROECONOMICS 4TH CANADIAN EDITION (SEXTON)
EXAMINATION
250 Questions with Rationales
SECTION 1: THE ROLE AND METHOD OF ECONOMICS (Questions 1-50)
Question 1
Which of the following best defines the economic concept of scarcity?
A) The ability to produce unlimited goods and services
B) A situation where human wants exceed the available supply of resources
C) A problem faced only by the wealthy
D) An issue that arises only in planned economies
Rationale: The correct answer is B. Scarcity is the fundamental economic problem that arises
because human wants are unlimited while the resources needed to satisfy those wants are
limited . All societies face scarcity, regardless of their level of wealth.
Question 2
The phrase "ceteris paribus" in economic analysis means:
A) All variables change simultaneously
B) Everything is held constant except the variables being studied
C) Only one variable is allowed to change
D) The economy is in equilibrium
Rationale: The correct answer is B. Ceteris paribus is a Latin expression meaning "other
things being equal" or "holding all else constant" . It allows economists to isolate the
relationship between two variables by assuming other relevant factors remain unchanged.
Question 3
The fallacy of composition refers to the incorrect belief that:
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A) What is true for one individual is also true for the group
B) The economy functions without government intervention
C) Resources are unlimited
D) All individuals act in their own self-interest
Rationale: The correct answer is A. The fallacy of composition states that even if something
is true for an individual, it is not necessarily true for many individuals as a group . For
example, an individual can increase their savings, but if everyone saves more, it may reduce
aggregate demand and harm the economy.
Question 4
Positive economic analysis focuses on:
A) What ought to be
B) Statements that can be tested against real-world data
C) Ethical judgments about the economy
D) Policy recommendations
Rationale: The correct answer is B. Positive economics deals with objective statements that
can be tested, validated, or rejected using empirical evidence . They describe "what is"
without making value judgments.
Question 5
Normative economic analysis focuses on:
A) Testable statements about the economy
B) Statements about what ought to be or value judgments
C) The relationship between cause and effect
D) Scientific predictions
Rationale: The correct answer is B. Normative economics focuses on subjective statements
that reflect opinions or value judgments about what should be . These statements cannot be
tested empirically.
Question 6
Which of the following is an example of a positive economic statement?
A) The government should increase taxes on the wealthy
B) A tax cut will lead to higher inflation
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C) Inflation is too high and should be reduced
D) We ought to reduce income inequality
Rationale: The correct answer is B. "A tax cut will lead to higher inflation" is a positive
statement because it is a testable, factual assertion about cause and effect . The other options
express value judgments.
Question 7
The opportunity cost of a decision is:
A) The sum of the value of all alternatives not chosen
B) The value of the best forgone alternative
C) The monetary cost of the decision
D) The total cost of production
Rationale: The correct answer is B. Opportunity cost is defined as the value of the best
alternative that must be forgone when a choice is made . It represents the true cost of any
decision.
Question 8
**If a student gives up a job earning $34,000 per year to attend college full-time, what is the
opportunity cost of attending college?**
A) Only the tuition and fees
B) Only the cost of books and supplies
C) The forgone income of $34,000 plus other out-of-pocket costs
D) The total cost of education minus expected future earnings
Rationale: The correct answer is C. The opportunity cost includes both explicit costs (tuition,
books) and implicit costs (forgone income) . The lost wages are a significant part of the
opportunity cost of attending college.
Question 9
The marginal cost of producing an additional unit of a good is:
A) The total cost divided by the number of units produced
B) The additional cost incurred as the result of producing one more unit
C) The average cost of production
D) The fixed cost of production
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Rationale: The correct answer is B. Marginal cost is the additional cost incurred from
producing one additional unit of a good or service . It is a key concept in rational decision-
making.
Question 10
When individuals make decisions by comparing additional benefits against additional
costs, they are using:
A) Marginal analysis
B) Normative analysis
C) The fallacy of composition
D) The ceteris paribus assumption
Rationale: The correct answer is A. Marginal analysis involves comparing the additional
(marginal) benefits of an action with its marginal costs . Rational individuals will choose an
action only if marginal benefits exceed marginal costs.
Question 11
The rule of rational choice states that an action should be taken if:
A) Total benefits exceed total costs
B) Marginal benefits exceed marginal costs
C) Average benefits exceed average costs
D) The opportunity cost is zero
Rationale: The correct answer is B. The rule of rational choice is to take an action if the
marginal benefits exceed the marginal costs . This rule guides optimal decision-making in
economics.
Question 12
Which of the following is a factor of production?
A) Money
B) Labour
C) Stocks and bonds
D) Government services
Rationale: The correct answer is B. The four factors of production are land, labour, capital,
and entrepreneurship . Money is not a factor of production; it is a medium of exchange.
EXPLORING MACROECONOMICS 4TH CANADIAN EDITION
(SEXTON) EXAM 2026 LATEST VERSION QUESTIONS AND ANSWERS
2026 EDITION
EXPLORING MACROECONOMICS 4TH CANADIAN EDITION (SEXTON)
EXAMINATION
250 Questions with Rationales
SECTION 1: THE ROLE AND METHOD OF ECONOMICS (Questions 1-50)
Question 1
Which of the following best defines the economic concept of scarcity?
A) The ability to produce unlimited goods and services
B) A situation where human wants exceed the available supply of resources
C) A problem faced only by the wealthy
D) An issue that arises only in planned economies
Rationale: The correct answer is B. Scarcity is the fundamental economic problem that arises
because human wants are unlimited while the resources needed to satisfy those wants are
limited . All societies face scarcity, regardless of their level of wealth.
Question 2
The phrase "ceteris paribus" in economic analysis means:
A) All variables change simultaneously
B) Everything is held constant except the variables being studied
C) Only one variable is allowed to change
D) The economy is in equilibrium
Rationale: The correct answer is B. Ceteris paribus is a Latin expression meaning "other
things being equal" or "holding all else constant" . It allows economists to isolate the
relationship between two variables by assuming other relevant factors remain unchanged.
Question 3
The fallacy of composition refers to the incorrect belief that:
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A) What is true for one individual is also true for the group
B) The economy functions without government intervention
C) Resources are unlimited
D) All individuals act in their own self-interest
Rationale: The correct answer is A. The fallacy of composition states that even if something
is true for an individual, it is not necessarily true for many individuals as a group . For
example, an individual can increase their savings, but if everyone saves more, it may reduce
aggregate demand and harm the economy.
Question 4
Positive economic analysis focuses on:
A) What ought to be
B) Statements that can be tested against real-world data
C) Ethical judgments about the economy
D) Policy recommendations
Rationale: The correct answer is B. Positive economics deals with objective statements that
can be tested, validated, or rejected using empirical evidence . They describe "what is"
without making value judgments.
Question 5
Normative economic analysis focuses on:
A) Testable statements about the economy
B) Statements about what ought to be or value judgments
C) The relationship between cause and effect
D) Scientific predictions
Rationale: The correct answer is B. Normative economics focuses on subjective statements
that reflect opinions or value judgments about what should be . These statements cannot be
tested empirically.
Question 6
Which of the following is an example of a positive economic statement?
A) The government should increase taxes on the wealthy
B) A tax cut will lead to higher inflation
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C) Inflation is too high and should be reduced
D) We ought to reduce income inequality
Rationale: The correct answer is B. "A tax cut will lead to higher inflation" is a positive
statement because it is a testable, factual assertion about cause and effect . The other options
express value judgments.
Question 7
The opportunity cost of a decision is:
A) The sum of the value of all alternatives not chosen
B) The value of the best forgone alternative
C) The monetary cost of the decision
D) The total cost of production
Rationale: The correct answer is B. Opportunity cost is defined as the value of the best
alternative that must be forgone when a choice is made . It represents the true cost of any
decision.
Question 8
**If a student gives up a job earning $34,000 per year to attend college full-time, what is the
opportunity cost of attending college?**
A) Only the tuition and fees
B) Only the cost of books and supplies
C) The forgone income of $34,000 plus other out-of-pocket costs
D) The total cost of education minus expected future earnings
Rationale: The correct answer is C. The opportunity cost includes both explicit costs (tuition,
books) and implicit costs (forgone income) . The lost wages are a significant part of the
opportunity cost of attending college.
Question 9
The marginal cost of producing an additional unit of a good is:
A) The total cost divided by the number of units produced
B) The additional cost incurred as the result of producing one more unit
C) The average cost of production
D) The fixed cost of production
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Rationale: The correct answer is B. Marginal cost is the additional cost incurred from
producing one additional unit of a good or service . It is a key concept in rational decision-
making.
Question 10
When individuals make decisions by comparing additional benefits against additional
costs, they are using:
A) Marginal analysis
B) Normative analysis
C) The fallacy of composition
D) The ceteris paribus assumption
Rationale: The correct answer is A. Marginal analysis involves comparing the additional
(marginal) benefits of an action with its marginal costs . Rational individuals will choose an
action only if marginal benefits exceed marginal costs.
Question 11
The rule of rational choice states that an action should be taken if:
A) Total benefits exceed total costs
B) Marginal benefits exceed marginal costs
C) Average benefits exceed average costs
D) The opportunity cost is zero
Rationale: The correct answer is B. The rule of rational choice is to take an action if the
marginal benefits exceed the marginal costs . This rule guides optimal decision-making in
economics.
Question 12
Which of the following is a factor of production?
A) Money
B) Labour
C) Stocks and bonds
D) Government services
Rationale: The correct answer is B. The four factors of production are land, labour, capital,
and entrepreneurship . Money is not a factor of production; it is a medium of exchange.
