Ch01
Student: ___________________________________________________________________________
1. The key economic concept that serves as the basis for the study of economics is:
A. inflation.
B. unemployment.
C. money.
D. scarcity.
2. As a consequence of the condition of scarcity:
A. there is never enough of anything.
B. production has to be centrally planned.
C. things which are plentiful have relatively high prices.
D. individuals and communities have to make choices among alternatives.
3. In every economic system, choices must be made because resources are:
A. infinite, but economic wants are finite.
B. finite, but economic wants are insatiable.
C. unlimited, but economic wants are limited.
D. limited, and so are economic wants.
4. Opportunity cost is best defined as:
A. marginal cost minus marginal benefit.
B. the time spent on an economic activity.
C. the value of the best foregone alternative.
D. the money cost of an economic decision.
5. Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay to fly to another
city to attend the concert of her favourite music group. The cost of transportation for the trip is $250. The
cost of the concert ticket is $50. The opportunity cost of Tammie's trip to the concert is:
A. $300.
B. $450.
C. $500.
D. $600.
6. When a provincial government chooses to build more roads, the required resources are no longer
available for spending on public education. This dilemma illustrates the concept of:
A. marginal analysis.
B. full employment.
C. full production.
D. opportunity cost.
7. Specialization and trade are beneficial to society because:
A. the output of economic goods may be increased with no increase in resources.
B. scarce resources are utilized more efficiently.
C. a division of labour lowers prices for products.
D. All of these are correct.
8. When economists describe "a market," they mean:
A. a place where stocks and bonds are traded.
B. information networks that allow individuals to keep in touch with each other.
C. a hypothetical place where the production of goods and services takes place.
D. a mechanism which coordinates actions of consumers and producers to establish equilibrium prices
and quantities.
,9. The institution that coordinates actions of consumers and producers to establish prices for goods and
services is known as:
A. a market.
B. a monopoly.
C. an economic system.
D. consumer sovereignty.
10. A major argument for economic growth is that it:
A. creates an equal distribution of income.
B. protects common property resources.
C. leads to a higher standard of living.
D. reduces the amount of taxation.
11. One of the basic economic defences of economic growth rests on the conclusion that:
A. growth makes workers less obsolete and more secure in employment.
B. growth reduces the cost of "common property" resources to society.
C. growth makes the gap between unlimited wants and scarce resources less acute.
D. a growth-oriented society confers a "work and look to the future" attitude on the members of society.
12. Concern about the general level of prices in an economy is primarily a concern about the economic goal
of:
A. economic efficiency.
B. economic security.
C. price-level stability.
D. equity.
13. Assume that a tradeoff exists in the short run between inflation and unemployment. This relationship
means that:
A. a low rate of unemployment causes a low rate of inflation.
B. a high rate of inflation causes a low rate of unemployment.
C. less unemployment can be achieved with more inflation.
D. less unemployment can be achieved with less inflation.
14. The study of economics is primarily concerned with:
A. keeping private businesses from losing money.
B. demonstrating that capitalistic economies are superior to socialistic economies.
C. choices which are made in seeking to use scarce resources efficiently.
D. determining the most equitable distribution of society's output.
15. The assertion that "There is no free lunch" means:
A. there are always tradeoffs between economic goals.
B. all production involves the use of scarce resources and thus the sacrifice of alternative goods.
C. marginal analysis is not used in economic reasoning.
D. choices do not need be made if behaviour is rational.
16. The study of economics exists because:
A. government interferes with the efficient allocation of scarce resources.
B. resources are scarce in relation to human material wants.
C. the market system is an obstacle to the efficient use of plentiful resources to satisfy constrained wants.
D. resources are overly abundant as compared to wants; thus, an allocation problem exists.
17. Economics may best be defined as:
A. the interaction between macro and micro considerations.
B. the study of the behaviour of people and institutions in the production, distribution, and consumption
of scarce goods.
C. the empirical testing of value judgments through the use of induction and deduction.
D. the use of policy to refute facts and hypotheses.
,18. Purposeful behaviour suggests that:
A. everyone will make identical choices.
B. resource availability exceeds material wants.
C. individuals will make different choices because their information and constraints differ.
D. an individual's economic goals cannot involve tradeoffs.
19. "Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services
they purchase." This is a reflection of:
A. resource scarcity and the necessity of choice.
B. purposeful behaviour.
C. marginal costs which exceed marginal benefits.
D. the tradeoff problem which exists between competing goals.
20. The "economic perspective" refers to:
A. macroeconomic phenomena, but not microeconomic phenomena.
B. microeconomic phenomena, but not macroeconomic phenomena.
C. the making of rational decisions in a context of marginal costs and marginal benefits.
D. unlimited resources in a context of limited material wants.
21. The "economic perspective" entails:
A. rational behaviour by individuals and institutions.
B. a comparison of marginal benefits and marginal costs in decision making.
C. the altering of behaviour when marginal benefits and marginal costs change.
D. All of these.
22. The economic perspective used in customer decision making at fast-food restaurants is reflected in:
A. customers selecting the shortest line.
B. customers leaving rather than waiting if all lines are long.
C. all customer lines tending to be of equal length.
D. All of these.
23. How is the economic perspective reflected in lines for fast food?
A. Customers select the shortest line because they have perfect information.
B. Customers select the shortest line because they believe it will reduce their time cost of obtaining food.
C. Lines will typically be of unequal length because of the inefficiencies in counter service.
D. The set of food choices is often too complex for most customers and thus creates long lines.
24. From an economic perspective, when consumers leave a fast-food restaurant because the lines to be
served are too long, they have concluded that the:
A. marginal cost of waiting is less than the marginal benefit of being served.
B. marginal cost of waiting is greater than the marginal benefit of being served.
C. management is exhibiting irrational behaviour by not maximizing profits.
D. management is making an assumption that other things are equal.
25. Consumers might leave a fast-food restaurant without being served because:
A. they are misinformed about the marginal cost and marginal benefits of the food being served.
B. they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit.
C. the environment is not conducive to a rational choice.
D. the lines waiting for service are not of equal length.
26. At fast-food restaurants:
A. consumers enjoy complete and accurate information.
B. decisions are usually made by trial and error.
C. decisions entail comparisons of marginal costs and marginal benefits.
D. benefits always exceed costs.
, 27. Economics involves "marginal analysis" because:
A. most decisions involve changes in the status quo.
B. marginal benefits always exceed marginal costs.
C. marginal costs always exceed marginal benefits.
D. much economic behaviour is irrational.
28. You should decide to go to a movie:
A. if the marginal cost of the movie exceeds its marginal benefit.
B. if the marginal benefit of the movie exceeds its marginal cost.
C. if your income will allow you to buy a ticket.
D. because movies are inherently good products.
29. Marginal costs exist because:
A. the decision to produce more of some product means the sacrifice of other products.
B. wants are scarce relative to resources.
C. households and businesses make rational decisions.
D. most decisions do not involve sacrifices or tradeoffs.
30. Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.
This fact:
A. is an example of irrational behaviour.
B. implies that reading should be taught through phonics rather than the whole language method.
C. contradicts the economic perspective.
D. implies that, for most people, the marginal benefit of reading a second newspaper is less than the
marginal cost.
31. The process of developing hypotheses, testing them against facts, and using the results to construct
theories is called:
A. opportunity cost calculation.
B. the scientific method.
C. marginal analysis.
D. microeconomics.
32. A "hypothesis" is:
A. a fundamental truth which all economists accept.
B. a tentative, untested principle.
C. the same as a normative statement.
D. always the result of induction.
33. From the perspective of economists, which term provides the highest degree of confidence for explaining
economic behaviour?
A. an economic principle or a law
B. a fact
C. a hypothesis
D. an assumption
34. In constructing models, economists:
A. make simplifying assumptions.
B. include all available information.
C. must use mathematical equations.
D. attempt to duplicate the real world.
35. Economic models:
A. are of limited use because they cannot be tested empirically.
B. are limited to variables which are directly related to one another.
C. emphasize basic economic relationships by abstracting from the complexities of the real world.
D. are unrealistic and therefore of no practical consequence.
Student: ___________________________________________________________________________
1. The key economic concept that serves as the basis for the study of economics is:
A. inflation.
B. unemployment.
C. money.
D. scarcity.
2. As a consequence of the condition of scarcity:
A. there is never enough of anything.
B. production has to be centrally planned.
C. things which are plentiful have relatively high prices.
D. individuals and communities have to make choices among alternatives.
3. In every economic system, choices must be made because resources are:
A. infinite, but economic wants are finite.
B. finite, but economic wants are insatiable.
C. unlimited, but economic wants are limited.
D. limited, and so are economic wants.
4. Opportunity cost is best defined as:
A. marginal cost minus marginal benefit.
B. the time spent on an economic activity.
C. the value of the best foregone alternative.
D. the money cost of an economic decision.
5. Tammie makes $150 a day as a bank clerk. She takes off two days of work without pay to fly to another
city to attend the concert of her favourite music group. The cost of transportation for the trip is $250. The
cost of the concert ticket is $50. The opportunity cost of Tammie's trip to the concert is:
A. $300.
B. $450.
C. $500.
D. $600.
6. When a provincial government chooses to build more roads, the required resources are no longer
available for spending on public education. This dilemma illustrates the concept of:
A. marginal analysis.
B. full employment.
C. full production.
D. opportunity cost.
7. Specialization and trade are beneficial to society because:
A. the output of economic goods may be increased with no increase in resources.
B. scarce resources are utilized more efficiently.
C. a division of labour lowers prices for products.
D. All of these are correct.
8. When economists describe "a market," they mean:
A. a place where stocks and bonds are traded.
B. information networks that allow individuals to keep in touch with each other.
C. a hypothetical place where the production of goods and services takes place.
D. a mechanism which coordinates actions of consumers and producers to establish equilibrium prices
and quantities.
,9. The institution that coordinates actions of consumers and producers to establish prices for goods and
services is known as:
A. a market.
B. a monopoly.
C. an economic system.
D. consumer sovereignty.
10. A major argument for economic growth is that it:
A. creates an equal distribution of income.
B. protects common property resources.
C. leads to a higher standard of living.
D. reduces the amount of taxation.
11. One of the basic economic defences of economic growth rests on the conclusion that:
A. growth makes workers less obsolete and more secure in employment.
B. growth reduces the cost of "common property" resources to society.
C. growth makes the gap between unlimited wants and scarce resources less acute.
D. a growth-oriented society confers a "work and look to the future" attitude on the members of society.
12. Concern about the general level of prices in an economy is primarily a concern about the economic goal
of:
A. economic efficiency.
B. economic security.
C. price-level stability.
D. equity.
13. Assume that a tradeoff exists in the short run between inflation and unemployment. This relationship
means that:
A. a low rate of unemployment causes a low rate of inflation.
B. a high rate of inflation causes a low rate of unemployment.
C. less unemployment can be achieved with more inflation.
D. less unemployment can be achieved with less inflation.
14. The study of economics is primarily concerned with:
A. keeping private businesses from losing money.
B. demonstrating that capitalistic economies are superior to socialistic economies.
C. choices which are made in seeking to use scarce resources efficiently.
D. determining the most equitable distribution of society's output.
15. The assertion that "There is no free lunch" means:
A. there are always tradeoffs between economic goals.
B. all production involves the use of scarce resources and thus the sacrifice of alternative goods.
C. marginal analysis is not used in economic reasoning.
D. choices do not need be made if behaviour is rational.
16. The study of economics exists because:
A. government interferes with the efficient allocation of scarce resources.
B. resources are scarce in relation to human material wants.
C. the market system is an obstacle to the efficient use of plentiful resources to satisfy constrained wants.
D. resources are overly abundant as compared to wants; thus, an allocation problem exists.
17. Economics may best be defined as:
A. the interaction between macro and micro considerations.
B. the study of the behaviour of people and institutions in the production, distribution, and consumption
of scarce goods.
C. the empirical testing of value judgments through the use of induction and deduction.
D. the use of policy to refute facts and hypotheses.
,18. Purposeful behaviour suggests that:
A. everyone will make identical choices.
B. resource availability exceeds material wants.
C. individuals will make different choices because their information and constraints differ.
D. an individual's economic goals cannot involve tradeoffs.
19. "Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services
they purchase." This is a reflection of:
A. resource scarcity and the necessity of choice.
B. purposeful behaviour.
C. marginal costs which exceed marginal benefits.
D. the tradeoff problem which exists between competing goals.
20. The "economic perspective" refers to:
A. macroeconomic phenomena, but not microeconomic phenomena.
B. microeconomic phenomena, but not macroeconomic phenomena.
C. the making of rational decisions in a context of marginal costs and marginal benefits.
D. unlimited resources in a context of limited material wants.
21. The "economic perspective" entails:
A. rational behaviour by individuals and institutions.
B. a comparison of marginal benefits and marginal costs in decision making.
C. the altering of behaviour when marginal benefits and marginal costs change.
D. All of these.
22. The economic perspective used in customer decision making at fast-food restaurants is reflected in:
A. customers selecting the shortest line.
B. customers leaving rather than waiting if all lines are long.
C. all customer lines tending to be of equal length.
D. All of these.
23. How is the economic perspective reflected in lines for fast food?
A. Customers select the shortest line because they have perfect information.
B. Customers select the shortest line because they believe it will reduce their time cost of obtaining food.
C. Lines will typically be of unequal length because of the inefficiencies in counter service.
D. The set of food choices is often too complex for most customers and thus creates long lines.
24. From an economic perspective, when consumers leave a fast-food restaurant because the lines to be
served are too long, they have concluded that the:
A. marginal cost of waiting is less than the marginal benefit of being served.
B. marginal cost of waiting is greater than the marginal benefit of being served.
C. management is exhibiting irrational behaviour by not maximizing profits.
D. management is making an assumption that other things are equal.
25. Consumers might leave a fast-food restaurant without being served because:
A. they are misinformed about the marginal cost and marginal benefits of the food being served.
B. they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit.
C. the environment is not conducive to a rational choice.
D. the lines waiting for service are not of equal length.
26. At fast-food restaurants:
A. consumers enjoy complete and accurate information.
B. decisions are usually made by trial and error.
C. decisions entail comparisons of marginal costs and marginal benefits.
D. benefits always exceed costs.
, 27. Economics involves "marginal analysis" because:
A. most decisions involve changes in the status quo.
B. marginal benefits always exceed marginal costs.
C. marginal costs always exceed marginal benefits.
D. much economic behaviour is irrational.
28. You should decide to go to a movie:
A. if the marginal cost of the movie exceeds its marginal benefit.
B. if the marginal benefit of the movie exceeds its marginal cost.
C. if your income will allow you to buy a ticket.
D. because movies are inherently good products.
29. Marginal costs exist because:
A. the decision to produce more of some product means the sacrifice of other products.
B. wants are scarce relative to resources.
C. households and businesses make rational decisions.
D. most decisions do not involve sacrifices or tradeoffs.
30. Even though local newspapers are very inexpensive, people rarely buy more than one of them each day.
This fact:
A. is an example of irrational behaviour.
B. implies that reading should be taught through phonics rather than the whole language method.
C. contradicts the economic perspective.
D. implies that, for most people, the marginal benefit of reading a second newspaper is less than the
marginal cost.
31. The process of developing hypotheses, testing them against facts, and using the results to construct
theories is called:
A. opportunity cost calculation.
B. the scientific method.
C. marginal analysis.
D. microeconomics.
32. A "hypothesis" is:
A. a fundamental truth which all economists accept.
B. a tentative, untested principle.
C. the same as a normative statement.
D. always the result of induction.
33. From the perspective of economists, which term provides the highest degree of confidence for explaining
economic behaviour?
A. an economic principle or a law
B. a fact
C. a hypothesis
D. an assumption
34. In constructing models, economists:
A. make simplifying assumptions.
B. include all available information.
C. must use mathematical equations.
D. attempt to duplicate the real world.
35. Economic models:
A. are of limited use because they cannot be tested empirically.
B. are limited to variables which are directly related to one another.
C. emphasize basic economic relationships by abstracting from the complexities of the real world.
D. are unrealistic and therefore of no practical consequence.
