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MACROECONOMICS, 18TH CANADIAN EDITION (CHRISTOPHER T.S.
RAGAN) EXAM QUESTIONS LATEST EDITION 2026 – 2027 VERSION
SOLVED QUESTIONS & ANSWERS
MACROECONOMICS, 18th Canadian Edition (Christopher T.S. Ragan) —
QUESTIONS WITH RATIONALES
Question 1
The fundamental economic problem of scarcity arises because:
A) Resources are unlimited, but human wants are limited
B) Human wants are unlimited, but resources are limited
C) Both resources and human wants are unlimited
D) Both resources and human wants are limited
Answer: B) Human wants are unlimited, but resources are limited
Rationale: Scarcity is the fundamental economic problem that arises because human
wants are unlimited while the resources available to satisfy those wants are limited. This
forces individuals and societies to make choices about how to allocate scarce
resources.
Question 2
Opportunity cost is best defined as:
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A) The money cost of a good or service
B) The value of the next best alternative that is forgone when a choice is made
C) The total cost of all alternatives considered
D) The cost of producing one more unit of a good
Answer: B) The value of the next best alternative that is forgone when a choice is
made
Rationale: Opportunity cost is the value of the next best alternative that must be given
up in order to pursue a certain action. It reflects the true cost of a choice, including both
explicit and implicit costs.
Question 3
A production possibilities boundary (PPB) illustrates:
A) The maximum combinations of two goods that can be produced with available
resources and technology
B) The minimum combinations of two goods that can be produced
C) The exact combination of goods that will be produced
D) The total cost of producing all goods
Answer: A) The maximum combinations of two goods that can be produced with
available resources and technology
Rationale: The production possibilities boundary shows the maximum combinations of
two goods that an economy can produce given its available resources and technology.
Points on the boundary are efficient; points inside are inefficient; points outside are
unattainable.
Question 4
The law of demand states that, all else equal:
A) As price increases, quantity demanded increases
B) As price increases, quantity demanded decreases
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C) As price increases, demand increases
D) Price and quantity demanded are unrelated
Answer: B) As price increases, quantity demanded decreases
Rationale: The law of demand states that, all else equal, as the price of a good rises, the
quantity demanded falls, and as price falls, quantity demanded rises. This inverse
relationship is represented by a downward-sloping demand curve.
Question 5
Which of the following would cause a rightward shift in the demand curve for
coffee?
A) A decrease in the price of coffee
B) An increase in consumer income (assuming coffee is a normal good)
C) A decrease in the price of tea (a substitute)
D) A decrease in population
Answer: B) An increase in consumer income (assuming coffee is a normal good)
Rationale: An increase in consumer income for a normal good shifts the demand curve
to the right. A change in the price of coffee (A) causes movement along the demand
curve, not a shift. A decrease in the price of a substitute (C) would shift demand for
coffee to the left.
Question 6
The law of supply states that, all else equal:
A) As price increases, quantity supplied decreases
B) As price increases, quantity supplied increases
C) As price increases, supply decreases
D) Price and quantity supplied are unrelated
Answer: B) As price increases, quantity supplied increases
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Rationale: The law of supply states that, all else equal, as the price of a good rises, the
quantity supplied rises, and as price falls, quantity supplied falls. This direct relationship
is represented by an upward-sloping supply curve.
Question 7
Market equilibrium occurs when:
A) Quantity demanded exceeds quantity supplied
B) Quantity supplied exceeds quantity demanded
C) Quantity demanded equals quantity supplied
D) Price is at its maximum
Answer: C) Quantity demanded equals quantity supplied
Rationale: Market equilibrium occurs at the price where the quantity demanded equals
the quantity supplied. At this price, there is no tendency for the price to change. If
quantity demanded exceeds supply (A), there is a shortage and price will rise.
Question 8
A shortage in a market occurs when:
A) The price is above the equilibrium price
B) The price is below the equilibrium price
C) The price equals the equilibrium price
D) Demand decreases
Answer: B) The price is below the equilibrium price
Rationale: A shortage occurs when the price is below the equilibrium price, causing
quantity demanded to exceed quantity supplied. This creates upward pressure on price
until equilibrium is restored.
MACROECONOMICS, 18TH CANADIAN EDITION (CHRISTOPHER T.S.
RAGAN) EXAM QUESTIONS LATEST EDITION 2026 – 2027 VERSION
SOLVED QUESTIONS & ANSWERS
MACROECONOMICS, 18th Canadian Edition (Christopher T.S. Ragan) —
QUESTIONS WITH RATIONALES
Question 1
The fundamental economic problem of scarcity arises because:
A) Resources are unlimited, but human wants are limited
B) Human wants are unlimited, but resources are limited
C) Both resources and human wants are unlimited
D) Both resources and human wants are limited
Answer: B) Human wants are unlimited, but resources are limited
Rationale: Scarcity is the fundamental economic problem that arises because human
wants are unlimited while the resources available to satisfy those wants are limited. This
forces individuals and societies to make choices about how to allocate scarce
resources.
Question 2
Opportunity cost is best defined as:
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A) The money cost of a good or service
B) The value of the next best alternative that is forgone when a choice is made
C) The total cost of all alternatives considered
D) The cost of producing one more unit of a good
Answer: B) The value of the next best alternative that is forgone when a choice is
made
Rationale: Opportunity cost is the value of the next best alternative that must be given
up in order to pursue a certain action. It reflects the true cost of a choice, including both
explicit and implicit costs.
Question 3
A production possibilities boundary (PPB) illustrates:
A) The maximum combinations of two goods that can be produced with available
resources and technology
B) The minimum combinations of two goods that can be produced
C) The exact combination of goods that will be produced
D) The total cost of producing all goods
Answer: A) The maximum combinations of two goods that can be produced with
available resources and technology
Rationale: The production possibilities boundary shows the maximum combinations of
two goods that an economy can produce given its available resources and technology.
Points on the boundary are efficient; points inside are inefficient; points outside are
unattainable.
Question 4
The law of demand states that, all else equal:
A) As price increases, quantity demanded increases
B) As price increases, quantity demanded decreases
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C) As price increases, demand increases
D) Price and quantity demanded are unrelated
Answer: B) As price increases, quantity demanded decreases
Rationale: The law of demand states that, all else equal, as the price of a good rises, the
quantity demanded falls, and as price falls, quantity demanded rises. This inverse
relationship is represented by a downward-sloping demand curve.
Question 5
Which of the following would cause a rightward shift in the demand curve for
coffee?
A) A decrease in the price of coffee
B) An increase in consumer income (assuming coffee is a normal good)
C) A decrease in the price of tea (a substitute)
D) A decrease in population
Answer: B) An increase in consumer income (assuming coffee is a normal good)
Rationale: An increase in consumer income for a normal good shifts the demand curve
to the right. A change in the price of coffee (A) causes movement along the demand
curve, not a shift. A decrease in the price of a substitute (C) would shift demand for
coffee to the left.
Question 6
The law of supply states that, all else equal:
A) As price increases, quantity supplied decreases
B) As price increases, quantity supplied increases
C) As price increases, supply decreases
D) Price and quantity supplied are unrelated
Answer: B) As price increases, quantity supplied increases
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Rationale: The law of supply states that, all else equal, as the price of a good rises, the
quantity supplied rises, and as price falls, quantity supplied falls. This direct relationship
is represented by an upward-sloping supply curve.
Question 7
Market equilibrium occurs when:
A) Quantity demanded exceeds quantity supplied
B) Quantity supplied exceeds quantity demanded
C) Quantity demanded equals quantity supplied
D) Price is at its maximum
Answer: C) Quantity demanded equals quantity supplied
Rationale: Market equilibrium occurs at the price where the quantity demanded equals
the quantity supplied. At this price, there is no tendency for the price to change. If
quantity demanded exceeds supply (A), there is a shortage and price will rise.
Question 8
A shortage in a market occurs when:
A) The price is above the equilibrium price
B) The price is below the equilibrium price
C) The price equals the equilibrium price
D) Demand decreases
Answer: B) The price is below the equilibrium price
Rationale: A shortage occurs when the price is below the equilibrium price, causing
quantity demanded to exceed quantity supplied. This creates upward pressure on price
until equilibrium is restored.
