Microeconomics Final Exam Review

Final Exam
Prep. Questions


1) In a world characterized by scarcity
A) all goods are free.
B) opportunity cost is zero.
C) we are not limited by time.
D) individuals need not work to obtain goods.
E) people must make choices among alternatives.
Answer: E
Topic: Definition of Economics

2) The study of how wages are set for New Brunswick teachers is classified as
A) a macroeconomic topic.
B) a microeconomic topic.
C) economics of social interest.
D) economics of private interest.
E) normative economics.
Answer: B
Topic: Definition of Economics

3) Which of the following newspaper headlines concerns a macroeconomic issue?
A) Why are people buying more SUVs and fewer minivans?
B) How would a tax on e-commerce affect chapters.indigo.ca?
C) How would an unexpected freeze in Oxford, Nova Scotia change the price of blueberries
in the Maritimes?
D) Why is Japan's economy stagnant?
E) Why do grain producers purchase less pesticides?
Answer: D
Topic: Definition of Economics

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
A) marginal benefit.
B) monetary cost.
C) opportunity cost.
D) human capital.
E) entrepreneurship.
Answer: C
Topic: The Economic Way of Thinking




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,5) Which one of the following is a necessary consequence of scarcity?
A) no choices required
B) high profits
C) the requirement of making choices
D) all wants are satisfied
E) low profits
Answer: C
Topic: The Economic Way of Thinking

6) 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?
A) Since hospitals have positive benefits, they should never be closed.
B) If Saskatchewan had more hospitals than Ontario, it must have had too many hospitals.
C) The Saskatchewan government must have thought the marginal benefit from one of
these hospitals exceeded its marginal cost.
D) The Saskatchewan government must have thought the marginal benefit from one of
these hospitals was less than its marginal cost.
E) The communities where these hospitals existed bore no costs from these decisions,
because they did not pay for any of the hospital operating costs.
Answer: D
Topic: The Economic Way of Thinking

6) Chanel has the option of purchasing one of three products: Brand A, Brand B, or Brand
C. The price of each product is $10. If Chanel decides to purchase Brand A, the opportunity
cost of this decision is
A) $20.
B) Brand B or Brand C, depending on which she considers to be the highest-valued
alternative forgone.
C) Brand A.
D) Brand B and Brand C.
E) zero if this is a frivolous purchase with no marginal benefit.
Answer: B
Topic: The Economic Way of Thinking

8) The existence of increasing opportunity cost
A) explains why specialization is frequently useful.
B) explains why resources are scarce.
C) explains the bowed-out shape of the production possibilities frontier.
D) follows from the existence of property rights.
E) explains why some societies produce inside their production possibilities frontier.
Answer: C
Topic: Production Possibilities and Opportunity Cost




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,Use the figure below to answer the following questions.




Figure 2.1.2

9) Refer to the production possibilities frontier in Figure 2.1.2. If 6 units of X are currently
being produced, then
A) 40 units of Y cannot be produced unless production of X is decreased.
B) 40 units of Y cannot be produced unless production of X is increased.
C) 60 units of Y can be produced with some resources not fully used.
D) 50 units of Y must be produced, regardless of resource utilization.
E) 50 units of Y can be produced if all resources are used and assigned to the task for
which they are the best match.
Answer: E
Topic: Production Possibilities and Opportunity Cost

10) Refer to the production possibilities frontier in Figure 2.1.2. Suppose that 50 units of Y
are currently being produced. Then
A) 7 units of X are being produced.
B) 6 units of X can be produced if all resources are used and assigned to the task for which
they are the best match.
C) 9 units of X can be produced if all resources are used and assigned to the task for which
they are the best match.
D) resources are not being fully utilized.
E) 6 units of X are being produced.
Answer: B
Topic: Production Possibilities and Opportunity Cost




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, 11) Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity
cost of producing 3 more units of X
A) is 30 units of Y.
B) is 3 units of X.
C) is 20 units of Y.
D) is 10 units of Y.
E) cannot be determined from the diagram.
Answer: C
Topic: Production Possibilities and Opportunity Cost

12) Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity
cost of increasing production of Y to 80 units is
A) 10 units of Y.
B) 80 units of Y.
C) 2 units of X.
D) 3 units of X.
E) 1 unit of X.
Answer: D
Topic: Production Possibilities and Opportunity Cost

13) Refer to the production possibilities frontier in Figure 2.1.2. At point C, the opportunity
cost of producing one more unit of X is
A) 1 unit of Y.
B) 1 unit of X.
C) 8 units of X.
D) 20 units of X.
E) 20 units of Y.
Answer: E
Topic: Production Possibilities and Opportunity Cost

14) Refer to the production possibilities frontier in Figure 2.1.2. At point C, what is the
opportunity cost of increasing the production of Y from 20 to 50 units?
A) 6 units of X
B) 2 units of X
C) 8 units of X
D) 20 units of Y
E) 30 units of Y
Answer: B
Topic: Production Possibilities and Opportunity Cost




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