Ch01
Student: ___________________________________________________________________________
1. What do economists mean when they say that the economy faces scarcity?
A. There are fewer resources available than there were in the 1960s.
B. It is quite evident that the world is running out of resources.
C. The economy is producing far below its capacity to produce.
D. The resources available are not sufficient to produce all that everyone wants.
2. What do economists assume is true about human wants?
A. They are easily defined.
B. That we are on the verge of being able to satisfy them.
C. They are unlimited.
D. They haven't changed much over the centuries.
3. Which of the following terms describes the next best alternative that must be sacrificed as a result of
making a particular choice?
A. Microeconomics.
B. Macroeconomics.
C. Scarcity.
D. Opportunity costs.
E. The law of increasing costs.
4. What is the opportunity cost of a particular product?
A. The price paid for that product.
B. The value put on that product by the person who bought it.
C. The value of the next-best alternative that is given up as a result of buying that particular product.
D. The combined value of all the other alternatives that are given up as a result of buying that particular
product.
5. Meridith had only $10 to spend last weekend. She was, at first, uncertain whether to go to see a new
movie or to rent two videos she has been told were good. In the end she rented the videos. Which of the
following statements is correct?
A. The choice of the two videos and not the movie at the theatre is an example of increasing costs.
B. The opportunity cost of the two videos is one theatre movie.
C. The opportunity cost of the two videos is $10.
D. The choice of two videos rather than one theatre movie was a bad one.
6. Which of the following is correct?
A. Scarcity forces choice which involves opportunity costs.
B. Choice causes scarcity which involves increasing costs.
C. Choice causes scarcity which involves opportunity costs.
D. Scarcity forces choice which involves increasing costs.
7. What can we say is true as a result of people engaging in voluntary trade?
A. One person gains and the other loses.
B. One person gains while there is a neutral effect on the other person.
C. Both people gain.
D. Neither person gains.
The maximum production possible in Rome and in Cathay are as follows:
,8. If each country is self-sufficient (no trade) and each allocates one half of its resources to producing each
of the two products, what will be the output in each country?
A. 40 bread and 20 figs in Rome and 20 bread and 40 figs in Cathay.
B. 40 bread and 0 figs in Rome and 20 bread and 0 figs in Cathay.
C. 0 bread and 20 figs in Rome and 0 bread and 40 figs in Cathay.
D. 20 bread and 10 figs in Rome and 10 bread and 20 figs in Cathay.
9. If each country is self-sufficient (no trade) and each allocates one half of its resources to producing each
of the two products, what is the combined output in the two countries?
A. 60 bread and 60 figs.
B. 60 bread and 0 figs.
C. 0 bread and 60 figs.
D. 30 bread and 30 figs.
10. If each country specializes in the production of what it does best, what is the combined output?
A. 20 bread and 20 figs.
B. 30 bread and 30 figs.
C. 50 bread and 50 figs.
D. 60 bread and 60 figs.
11. If each country specializes in the production of what it does best and trades with the other, what are the
gains from trade?
A. There are no gains.
B. 20 bread.
C. 20 figs.
D. 10 bread and 10 figs.
Below are five questions.
1. What to produce?
2. How to produce?
3. For whom?
4. How much competition?
5. How much command?
12. Refer to the information above to answer this question. Which of the above is implied by the following
question: Should scarce resources be devoted to persuading people to quit smoking or to developing a
less harmful form of tobacco?
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
13. Refer to the information above to answer this question. Which of the above is implied by the following
statement: The appropriate technology in one country can be quite different from the appropriate
technology in another country.
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
,14. Refer to the information above to answer this question. Which of the above is implied by the following
statement: Social policies are needed to ensure that no individual lives in poverty.
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
15. All of the following except one are considered to be among the three fundamental questions in
economics? Which one is the exception?
A. What to produce?
B. How much competition?
C. How to produce?
D. For whom?
16. The provincial government of British Columbia has to decide whether to construct 10 hospitals without
research facilities or 5 with such facilities. Among the three fundamental questions in economics, which
one applies to this situation?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom?
17. The public works department has decided that the best way to produce 10 kilometres of highway is to use
large earth-moving and tarmac-laying machines and less unskilled labour. Among the three fundamental
questions in economics, which one applies to this situation?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom?
18. The Federal government has decided that more middle class Canadians should benefit from the growth
of the economy in the next 20 years. Among the three fundamental questions in economics, which one
applies to this situation?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom?
19. Which of the following was argued by J. S. Mill?
A. It is ideas, not vested interests, which are dangerous for good and evil.
B. The distribution of money is dictated by the pattern of resource use.
C. As technology changes, what is produced also necessarily changes.
D. Society can intervene in any fashion that it may wish to redistribute income.
20. All of the following except one are factors of production. Which is the exception?
A. Land.
B. Labour.
C. Capital.
D. Money.
E. Enterprise.
21. What are the names of the factors of production?
A. Land, labour, money and enterprise.
B. Land, labour, money and capital.
C. Land, labour, capital and enterprise.
D. Competition, command, custom and cooperation.
, 22. Which of the following is an alternative for the term factors of production?
A. Methods of organizing an economy.
B. Ways of coordinating an economy.
C. Productive resources or inputs.
D. Goods and services.
23. All of the following except one are included in the four Cs used, throughout history, by humankind to
coordinate its economies. Which is the exception?
A. Cooperation.
B. Communism.
C. Custom.
D. Competition.
E. Command.
24. When did market economies first emerge?
A. Approximately 200 years ago.
B. Over 500 years ago.
C. Soon after the fall of the Roman Empire.
D. It is uncertain, but at least 2,500 years ago.
25. Which pair of the four Cs would play the dominant role in a simple hunter/gatherer society such as that of
the San people of the Kalahari Desert?
A. Commercialization and competition.
B. Cooperation and custom.
C. Competition and cooperation.
D. Command and competition.
26. Which pair of the four Cs plays the dominant role in Canada today?
A. Custom and competition.
B. Cooperation and competition.
C. Command and competition.
D. Command and cooperation.
27. The fact that the typical movie theatre charges people for popcorn but does not charge them to use the
restrooms is an example of which of the four Cs?
A. Competition.
B. Command.
C. Custom.
D. Cooperation.
28. All of the following statements, except one, concerning capitalism and socialism are correct. Which is the
exception?
A. Sweden is more of a socialist economy than is Hong Kong.
B. Government plays a larger role in a capitalist economy.
C. There is more economic planning in a socialist economy.
D. The Canadian economy is more socialist than is the US economy.
29. Which of the following would best describe a policy of laissez-faire?
A. More production of capital goods than consumer goods.
B. More production of consumer goods than capital goods.
C. An emphasis on the role of the market.
D. An emphasis on the role of government.
E. A reliance on custom.
30. What do economists always do when they are constructing theories or models?
A. They make simplifying assumptions.
B. They attempt to duplicate the real world.
C. They ensure that the theory can be expressed mathematically.
D. They try to include as much information as possible.
Student: ___________________________________________________________________________
1. What do economists mean when they say that the economy faces scarcity?
A. There are fewer resources available than there were in the 1960s.
B. It is quite evident that the world is running out of resources.
C. The economy is producing far below its capacity to produce.
D. The resources available are not sufficient to produce all that everyone wants.
2. What do economists assume is true about human wants?
A. They are easily defined.
B. That we are on the verge of being able to satisfy them.
C. They are unlimited.
D. They haven't changed much over the centuries.
3. Which of the following terms describes the next best alternative that must be sacrificed as a result of
making a particular choice?
A. Microeconomics.
B. Macroeconomics.
C. Scarcity.
D. Opportunity costs.
E. The law of increasing costs.
4. What is the opportunity cost of a particular product?
A. The price paid for that product.
B. The value put on that product by the person who bought it.
C. The value of the next-best alternative that is given up as a result of buying that particular product.
D. The combined value of all the other alternatives that are given up as a result of buying that particular
product.
5. Meridith had only $10 to spend last weekend. She was, at first, uncertain whether to go to see a new
movie or to rent two videos she has been told were good. In the end she rented the videos. Which of the
following statements is correct?
A. The choice of the two videos and not the movie at the theatre is an example of increasing costs.
B. The opportunity cost of the two videos is one theatre movie.
C. The opportunity cost of the two videos is $10.
D. The choice of two videos rather than one theatre movie was a bad one.
6. Which of the following is correct?
A. Scarcity forces choice which involves opportunity costs.
B. Choice causes scarcity which involves increasing costs.
C. Choice causes scarcity which involves opportunity costs.
D. Scarcity forces choice which involves increasing costs.
7. What can we say is true as a result of people engaging in voluntary trade?
A. One person gains and the other loses.
B. One person gains while there is a neutral effect on the other person.
C. Both people gain.
D. Neither person gains.
The maximum production possible in Rome and in Cathay are as follows:
,8. If each country is self-sufficient (no trade) and each allocates one half of its resources to producing each
of the two products, what will be the output in each country?
A. 40 bread and 20 figs in Rome and 20 bread and 40 figs in Cathay.
B. 40 bread and 0 figs in Rome and 20 bread and 0 figs in Cathay.
C. 0 bread and 20 figs in Rome and 0 bread and 40 figs in Cathay.
D. 20 bread and 10 figs in Rome and 10 bread and 20 figs in Cathay.
9. If each country is self-sufficient (no trade) and each allocates one half of its resources to producing each
of the two products, what is the combined output in the two countries?
A. 60 bread and 60 figs.
B. 60 bread and 0 figs.
C. 0 bread and 60 figs.
D. 30 bread and 30 figs.
10. If each country specializes in the production of what it does best, what is the combined output?
A. 20 bread and 20 figs.
B. 30 bread and 30 figs.
C. 50 bread and 50 figs.
D. 60 bread and 60 figs.
11. If each country specializes in the production of what it does best and trades with the other, what are the
gains from trade?
A. There are no gains.
B. 20 bread.
C. 20 figs.
D. 10 bread and 10 figs.
Below are five questions.
1. What to produce?
2. How to produce?
3. For whom?
4. How much competition?
5. How much command?
12. Refer to the information above to answer this question. Which of the above is implied by the following
question: Should scarce resources be devoted to persuading people to quit smoking or to developing a
less harmful form of tobacco?
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
13. Refer to the information above to answer this question. Which of the above is implied by the following
statement: The appropriate technology in one country can be quite different from the appropriate
technology in another country.
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
,14. Refer to the information above to answer this question. Which of the above is implied by the following
statement: Social policies are needed to ensure that no individual lives in poverty.
A. 1.
B. 2.
C. 3.
D. 4.
E. 5.
15. All of the following except one are considered to be among the three fundamental questions in
economics? Which one is the exception?
A. What to produce?
B. How much competition?
C. How to produce?
D. For whom?
16. The provincial government of British Columbia has to decide whether to construct 10 hospitals without
research facilities or 5 with such facilities. Among the three fundamental questions in economics, which
one applies to this situation?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom?
17. The public works department has decided that the best way to produce 10 kilometres of highway is to use
large earth-moving and tarmac-laying machines and less unskilled labour. Among the three fundamental
questions in economics, which one applies to this situation?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom?
18. The Federal government has decided that more middle class Canadians should benefit from the growth
of the economy in the next 20 years. Among the three fundamental questions in economics, which one
applies to this situation?
A. What to produce?
B. When to produce?
C. How to produce?
D. For whom?
19. Which of the following was argued by J. S. Mill?
A. It is ideas, not vested interests, which are dangerous for good and evil.
B. The distribution of money is dictated by the pattern of resource use.
C. As technology changes, what is produced also necessarily changes.
D. Society can intervene in any fashion that it may wish to redistribute income.
20. All of the following except one are factors of production. Which is the exception?
A. Land.
B. Labour.
C. Capital.
D. Money.
E. Enterprise.
21. What are the names of the factors of production?
A. Land, labour, money and enterprise.
B. Land, labour, money and capital.
C. Land, labour, capital and enterprise.
D. Competition, command, custom and cooperation.
, 22. Which of the following is an alternative for the term factors of production?
A. Methods of organizing an economy.
B. Ways of coordinating an economy.
C. Productive resources or inputs.
D. Goods and services.
23. All of the following except one are included in the four Cs used, throughout history, by humankind to
coordinate its economies. Which is the exception?
A. Cooperation.
B. Communism.
C. Custom.
D. Competition.
E. Command.
24. When did market economies first emerge?
A. Approximately 200 years ago.
B. Over 500 years ago.
C. Soon after the fall of the Roman Empire.
D. It is uncertain, but at least 2,500 years ago.
25. Which pair of the four Cs would play the dominant role in a simple hunter/gatherer society such as that of
the San people of the Kalahari Desert?
A. Commercialization and competition.
B. Cooperation and custom.
C. Competition and cooperation.
D. Command and competition.
26. Which pair of the four Cs plays the dominant role in Canada today?
A. Custom and competition.
B. Cooperation and competition.
C. Command and competition.
D. Command and cooperation.
27. The fact that the typical movie theatre charges people for popcorn but does not charge them to use the
restrooms is an example of which of the four Cs?
A. Competition.
B. Command.
C. Custom.
D. Cooperation.
28. All of the following statements, except one, concerning capitalism and socialism are correct. Which is the
exception?
A. Sweden is more of a socialist economy than is Hong Kong.
B. Government plays a larger role in a capitalist economy.
C. There is more economic planning in a socialist economy.
D. The Canadian economy is more socialist than is the US economy.
29. Which of the following would best describe a policy of laissez-faire?
A. More production of capital goods than consumer goods.
B. More production of consumer goods than capital goods.
C. An emphasis on the role of the market.
D. An emphasis on the role of government.
E. A reliance on custom.
30. What do economists always do when they are constructing theories or models?
A. They make simplifying assumptions.
B. They attempt to duplicate the real world.
C. They ensure that the theory can be expressed mathematically.
D. They try to include as much information as possible.
