TEST BANK
MICROECONOMICS
3RD CANADIAN EDITION
CHAPTER NO. 01. ECONOMICS: FOUNDATIONS AND MODELS
MULTIPLE CHOICE
1) Changes in global weather patterns can lead to
A) wage increases for coffee shop employees.
B) the destruction of the Canadian coffee harvest.
C) Canadians demanding more coffee.
D) Canadians having to pay more for coffee.
E) more Canadians drinking coffee.
ANSWER: D
2) The study of economics arises due to
A) unlimited resources.
B) money.
C) greed.
D) unemployment.
E) scarcity.
ANSWER: E
3) Scarcity refers to the situation in which
A) a country's population is larger than its resource base.
B) unlimited resources exceed limited wants.
C) unlimited wants exceed limited resources.
D) our needs and wants are finite.
E) a nation's poverty level increases faster than its population.
ANSWER: C
4) The basic economic problem of ________ has always existed and will continue to exist.
A) efficiency
B) inflation
,C) unemployment
D) recession
E) scarcity
ANSWER: E
5) Economics is the study of the ________ people make to attain their goals, given their
________ resources.
A) decisions; household
B) choices; scarce
C) income; available
D) purchases; unlimited
E) output; time
ANSWER: B
6) An economic ________ is a simplified version of some aspect of economic life used to
analyze an economic issue.
A) opportunity cost
B) trade-off
C) model
D) variable
E) market
ANSWER: C
7) The term "market" in economics refers to
A) a place where money changes hands between institutions and the arrangements they
make.
B) a group of buyers and sellers and the arrangement by which they come together to trade.
C) an organization which sells goods and services to a group of buyers who make decisions
at the margin.
D) a legal institution where exchange can take place between a group of buyers and sellers.
E) a place where stocks are traded between a group of international buyers and sellers.
ANSWER: B
8) The term ________ in economics refers to a group of buyers and sellers of a product and
the arrangement by which they come together to trade.
A) monopoly
B) market
C) collective
D) cooperative
,E) trade-off
ANSWER: B
9) Economists assume that
A) individuals behave in unpredictable ways.
B) people put other people's interests ahead of their own.
C) society's output should be equally distributed.
D) consumer behaviour is explained by the existence of unlimited resources.
E) optimal decisions are made at the margin.
ANSWER: E
10) Economists assume that rational behaviour is useful in explaining choices people make
A) because irrational people do not make economic choices.
B) even though people rarely, if ever, behave in a rational manner.
C) because individuals act rationally all the time in all circumstances.
D) even though people may not behave rationally all the time.
E) because economic choices are not needed by rational people.
ANSWER: D
11) Economists assume that rational people do all of the following except
A) undertake activities that benefit others and hurt themselves.
B) do things to make themselves better off.
C) use all available information as they act to achieve their goals.
D) weigh the benefits and costs of all possible alternative actions.
E) respond to economic incentives.
ANSWER: A
12) Economics does not study correct or incorrect behaviours but rather it assumes that
economic agents behave ________, meaning they make the best decisions given their knowledge
of the costs and benefits.
A) equitably
B) rationally
C) emotionally
D) erratically
E) selfishly
ANSWER: B
, 13) Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price
than other rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow
some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only.
B) b only.
C) c only.
D) a and b.
E) a, b, and c.
ANSWER: E
14) As professors and teachers get closer to retirement age they typically spend more time
reading and thinking about the financial planning as well as the stock market. By gathering and
using all available information as they act to achieve their goals, these teachers are exemplifying
the economic idea that
A) optimal decisions are made at the margin.
B) people make identical choices.
C) people are rational.
D) equity is more important than efficiency.
E) people respond to economic incentives.
ANSWER: C
15) Suppose your provincial government encouraged new medical school graduates to take
over rural and small town practices from doctors wishing to retire by paying both the new and
retiring doctors $100,000. These doctors would be exemplifying the economic idea that
A) optimal decisions are made at the margin.
B) people are rational.
C) people make identical choices.
D) people respond to economic incentives.
E) equity is more important than efficiency.
ANSWER: D
MICROECONOMICS
3RD CANADIAN EDITION
CHAPTER NO. 01. ECONOMICS: FOUNDATIONS AND MODELS
MULTIPLE CHOICE
1) Changes in global weather patterns can lead to
A) wage increases for coffee shop employees.
B) the destruction of the Canadian coffee harvest.
C) Canadians demanding more coffee.
D) Canadians having to pay more for coffee.
E) more Canadians drinking coffee.
ANSWER: D
2) The study of economics arises due to
A) unlimited resources.
B) money.
C) greed.
D) unemployment.
E) scarcity.
ANSWER: E
3) Scarcity refers to the situation in which
A) a country's population is larger than its resource base.
B) unlimited resources exceed limited wants.
C) unlimited wants exceed limited resources.
D) our needs and wants are finite.
E) a nation's poverty level increases faster than its population.
ANSWER: C
4) The basic economic problem of ________ has always existed and will continue to exist.
A) efficiency
B) inflation
,C) unemployment
D) recession
E) scarcity
ANSWER: E
5) Economics is the study of the ________ people make to attain their goals, given their
________ resources.
A) decisions; household
B) choices; scarce
C) income; available
D) purchases; unlimited
E) output; time
ANSWER: B
6) An economic ________ is a simplified version of some aspect of economic life used to
analyze an economic issue.
A) opportunity cost
B) trade-off
C) model
D) variable
E) market
ANSWER: C
7) The term "market" in economics refers to
A) a place where money changes hands between institutions and the arrangements they
make.
B) a group of buyers and sellers and the arrangement by which they come together to trade.
C) an organization which sells goods and services to a group of buyers who make decisions
at the margin.
D) a legal institution where exchange can take place between a group of buyers and sellers.
E) a place where stocks are traded between a group of international buyers and sellers.
ANSWER: B
8) The term ________ in economics refers to a group of buyers and sellers of a product and
the arrangement by which they come together to trade.
A) monopoly
B) market
C) collective
D) cooperative
,E) trade-off
ANSWER: B
9) Economists assume that
A) individuals behave in unpredictable ways.
B) people put other people's interests ahead of their own.
C) society's output should be equally distributed.
D) consumer behaviour is explained by the existence of unlimited resources.
E) optimal decisions are made at the margin.
ANSWER: E
10) Economists assume that rational behaviour is useful in explaining choices people make
A) because irrational people do not make economic choices.
B) even though people rarely, if ever, behave in a rational manner.
C) because individuals act rationally all the time in all circumstances.
D) even though people may not behave rationally all the time.
E) because economic choices are not needed by rational people.
ANSWER: D
11) Economists assume that rational people do all of the following except
A) undertake activities that benefit others and hurt themselves.
B) do things to make themselves better off.
C) use all available information as they act to achieve their goals.
D) weigh the benefits and costs of all possible alternative actions.
E) respond to economic incentives.
ANSWER: A
12) Economics does not study correct or incorrect behaviours but rather it assumes that
economic agents behave ________, meaning they make the best decisions given their knowledge
of the costs and benefits.
A) equitably
B) rationally
C) emotionally
D) erratically
E) selfishly
ANSWER: B
, 13) Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price
than other rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow
some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only.
B) b only.
C) c only.
D) a and b.
E) a, b, and c.
ANSWER: E
14) As professors and teachers get closer to retirement age they typically spend more time
reading and thinking about the financial planning as well as the stock market. By gathering and
using all available information as they act to achieve their goals, these teachers are exemplifying
the economic idea that
A) optimal decisions are made at the margin.
B) people make identical choices.
C) people are rational.
D) equity is more important than efficiency.
E) people respond to economic incentives.
ANSWER: C
15) Suppose your provincial government encouraged new medical school graduates to take
over rural and small town practices from doctors wishing to retire by paying both the new and
retiring doctors $100,000. These doctors would be exemplifying the economic idea that
A) optimal decisions are made at the margin.
B) people are rational.
C) people make identical choices.
D) people respond to economic incentives.
E) equity is more important than efficiency.
ANSWER: D
