Ch 1-3: Econ 208 Study Guide Qs || QUESTIONS WITH
100% VERIFIED SOLUTIONS!!
Fundamental problem of economics: correct answers Scarcity of resources relative to human
wants
Scarcity is a problem that correct answers Exists due to finite resources and unlimited human
wants
Which is not a factor of production
a) bulldozer
b) mechanic
c) farmhand
d) tractor
e) haircut correct answers haircut
Opportunity cost measures correct answers Amount of 1 good forfeit to obtain unit of other
good
If a DVD costs $20 and a videocassette costs $10, opportunity cost of 5 DVDs = correct
answers 10 videocassettes
Assuming the alternative is employment, opportunity cost of university education = correct
answers Tuition + book costs + forgone salary (not meals/residence)
Downward-sloping PPB that is also straight line implies correct answers Constant
opportunity costs
What can cause outward shift of PPB? correct answers Increase in productivity of factors of
production
Putting currently employment resources to work can be illustrated by correct answers Moving
from point inside PPB to a point on it
One of great insights of Adam Smith was correct answers By acting in own self-interest,
people produce spontaneous economic order
What is a main characteristic of a market economy? correct answers Private property
A major reason why a relatively efficient economic order arises in market economies is
correct answers Prices respond to overall conditions of scarcity/plenty
Market economy refers to correct answers A society where individuals specialize in
productive activities an enter voluntary trades
In a barter economy, individuals ... correct answers Trade goods directly for other goods
Introduction of production lines where individuals specialize in performing specific tasks is
known as correct answers Division of labour
, Economic theory assumes that individuals correct answers Makes choices to maximize their
utility
Central assumption in economic theory regarding firms is that they correct answers Seek to
maximize profits
Individual consumers maximize their well-being by correct answers Buying more of a good
for which the marginal benefit exceeds the marginal cost
2 major types of markets in circular flow of income are: correct answers Product markets and
factor markets
Circular flow of income and expenditure shows flow of
a) Goods and services from firms to consumers
b) Payments for goods and services from consumers to firms
c) Factor services from consumers to firms
d) Payments for factor services from firms to consumers
e) All of the above correct answers All of the above
Use of money when buying and selling correct answers Makes exchange easier
Specialization of labour leads to a more efficient allocation of resources because correct
answers The principle of comparative advantage
Market in which individual sells labour services is called correct answers Factor market
Major cause of recent move toward globalization is correct answers Big reduction in costs of
transportation and information
Process of globalization tends to correct answers Create similarity of consumer tastes among
countries
What is a source of similarity among alternative types of economic systems? correct answers
Need to determine what to produce and how to produce it
In Canadian economy, majority of decisions on resource allocation are made by correct
answers Consumers and firms through price system
Complex economic plans for many sectors of the economy are most associated w/: correct
answers command economy
General agreement among economists that government intervention in modern market
economies correct answers Is appropriate when private markets create externalities and fail to
produce public goods
Failure of central planning was caused by
a) production bottlenecks, shortages, and gluts
b) lack of incentive to produce goods of high quality
c) failure to protect environment
100% VERIFIED SOLUTIONS!!
Fundamental problem of economics: correct answers Scarcity of resources relative to human
wants
Scarcity is a problem that correct answers Exists due to finite resources and unlimited human
wants
Which is not a factor of production
a) bulldozer
b) mechanic
c) farmhand
d) tractor
e) haircut correct answers haircut
Opportunity cost measures correct answers Amount of 1 good forfeit to obtain unit of other
good
If a DVD costs $20 and a videocassette costs $10, opportunity cost of 5 DVDs = correct
answers 10 videocassettes
Assuming the alternative is employment, opportunity cost of university education = correct
answers Tuition + book costs + forgone salary (not meals/residence)
Downward-sloping PPB that is also straight line implies correct answers Constant
opportunity costs
What can cause outward shift of PPB? correct answers Increase in productivity of factors of
production
Putting currently employment resources to work can be illustrated by correct answers Moving
from point inside PPB to a point on it
One of great insights of Adam Smith was correct answers By acting in own self-interest,
people produce spontaneous economic order
What is a main characteristic of a market economy? correct answers Private property
A major reason why a relatively efficient economic order arises in market economies is
correct answers Prices respond to overall conditions of scarcity/plenty
Market economy refers to correct answers A society where individuals specialize in
productive activities an enter voluntary trades
In a barter economy, individuals ... correct answers Trade goods directly for other goods
Introduction of production lines where individuals specialize in performing specific tasks is
known as correct answers Division of labour
, Economic theory assumes that individuals correct answers Makes choices to maximize their
utility
Central assumption in economic theory regarding firms is that they correct answers Seek to
maximize profits
Individual consumers maximize their well-being by correct answers Buying more of a good
for which the marginal benefit exceeds the marginal cost
2 major types of markets in circular flow of income are: correct answers Product markets and
factor markets
Circular flow of income and expenditure shows flow of
a) Goods and services from firms to consumers
b) Payments for goods and services from consumers to firms
c) Factor services from consumers to firms
d) Payments for factor services from firms to consumers
e) All of the above correct answers All of the above
Use of money when buying and selling correct answers Makes exchange easier
Specialization of labour leads to a more efficient allocation of resources because correct
answers The principle of comparative advantage
Market in which individual sells labour services is called correct answers Factor market
Major cause of recent move toward globalization is correct answers Big reduction in costs of
transportation and information
Process of globalization tends to correct answers Create similarity of consumer tastes among
countries
What is a source of similarity among alternative types of economic systems? correct answers
Need to determine what to produce and how to produce it
In Canadian economy, majority of decisions on resource allocation are made by correct
answers Consumers and firms through price system
Complex economic plans for many sectors of the economy are most associated w/: correct
answers command economy
General agreement among economists that government intervention in modern market
economies correct answers Is appropriate when private markets create externalities and fail to
produce public goods
Failure of central planning was caused by
a) production bottlenecks, shortages, and gluts
b) lack of incentive to produce goods of high quality
c) failure to protect environment
