Chapter 1 – Review Questions – Flashcards
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Which of the following statements is NOT true? Households and economies both a. must allocate scarce resources. b. face many decisions. c. face tradeoffs. d. must have a central decision maker.
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D
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Which of the following is NOT included in the decisions that every society must make? a. what goods will be produced b. who will produce the goods c. what determines consumer preferences d. who will consume the goods
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C
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For what reason do both households and societies face many decisions? a. because resources are scarce b. because populations may increase or decrease over time c. because wages for households and therefore society fluctuate with business cycles d. because people, by nature, tend to disagree
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A
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When does scarcity exist? a. when there is less than an infinite amount of a resource or good b. when society can meet the wants of every individual c. when there is less of a good or resource available than people wish to have d. when the government fails to produce goods
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C
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Which of the following goods best meets the definition of scarcity? a. air b. water in the ocean c. water in a city d. wood in a forest
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C
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6. What does economics study? a. how society manages its scarce resources b. the government's role in society c. how to increase production d. how firms make profits
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A
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7. What concept is illustrated by the adage, "There is no such thing as a free lunch"? a. tradeoffs b. scarcity c. productivity d. efficiency
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A
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Henry decides to spend 2 hours playing golf rather than working at his job which pays $8 per hour. What is Henry's tradeoff? a. the $16 he could have earned working for 2 hours b. nothing, because he enjoys playing golf more than working c. the increase in skill he obtains from playing golf for those 2 hours d. nothing, because he spent $16 for green fees to play golf
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A
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Which of the following best defines efficiency? a. absolute fairness b. equal distribution c. minimum waste d. consumer sovereignty
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C
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In which of the following situations would economists use the word equity? a. Each member of society has the same income. b. Society is getting the most it can from its scarce resources. c. Those in society who have the least will receive the most. d. The benefits of society's resources are distributed fairly among society's members.
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D
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11. When government policies such as the welfare system try to help the neediest members of society, what happens? a. It increases equity and reduces efficiency. b. It reduces charitable contributions in an economy. c. It increases the productivity of the needy in the society. d. It causes market failure to occur.
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A
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In economics, what is the cost of something? a. the dollar amount of obtaining it b. always measured in units of time given up to get it c. what you give up to get it d. usually higher than people think it will be
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C
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For most students, what is the largest single cost of a university education? a. the wages given up to attend school b. tuition, fees, and books c. room and board d. transportation, parking, and entertainment
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A
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Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns $8 an hour. What is her opportunity cost of working? a. the $24 she earns working b. the $24 minus the enjoyment she would have received from watching the video c. the enjoyment she would have received had she watched the video d. nothing, since she would have received less than $24 of enjoyment from the video
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C
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What do we know about college-age athletes who drop out of college to play professional sports? a. They are not rational decision makers. b. They are well aware that their opportunity cost of attending college is very high. c. They are concerned more about present circumstances than their future. d. They underestimate the value of a college education.
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B
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How do people make decisions at the margin? a. by following tradition b. by experience c. by calculating dollar costs d. by comparing costs and benefits
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D
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What is a marginal change? a. a long-term trend b. a large, significant adjustment c. a change for the worse, and so is usually short-term d. a small incremental adjustment
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D
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After much consideration, you have chosen Cancun over Ft. Lauderdale for your Spring Break trip this year. For this decision to change, which of the following must occur? a. The marginal benefit of Cancun must increase. b. The marginal cost of Cancun must decrease. c. The marginal benefit of Ft. Lauderdale must increase. d. The marginal cost of Ft. Lauderdale must increase.
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C
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The average cost per seat on a bus trip from Montreal to Toronto is $140. Suppose no refreshments are served and 3 seats are empty. How could the bus company increase its profit? a. if it charged no less than $140 for the 3 remaining seats b. if it charged more than $140 for the 3 remaining seats c. if it charged any ticket price above $0 for the remaining seats d. if it left the seats empty
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C
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According to economists, what do people respond to? a. laws b. incentives c. threats more than rewards d. positives, but not negatives
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B
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In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers? a. to produce good quality products so that society benefits from the resources used b. to conserve on costs, so as to maintain efficiency in the economy c. to produce enough to meet the output target, without regard for quality or cost d. to produce those products that society desires most
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C
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Which of the following statements about trade is NOT true? a. Trade increases competition. b. One country wins and one country loses. c. Canada can benefit from trade with any country. d. Trade allows people to buy a greater variety of goods and services at lower cost.
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B
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How can Canada benefit from trade? a. only with nations that can produce goods Canada cannot produce b. with any nation c. with any nation not in economic competition with Canada d. only with less developed nations
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B
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Which would NOT be true in a market economy? a. Firms decide whom to hire and what to produce. b. Government policies do not affect the decisions of firms and households. c. Households decide which firms to work for and what to buy with their incomes. d. Profit and self-interest guide the decisions of firms and households.
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B
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In a market economy, what guides economic activity? a. the government b. corporations c. central planners d. prices
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D
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How do prices direct economic activity in a market economy? a. by influencing the actions of buyers and sellers b. by reducing scarcity of the goods and services produced c. by eliminating the need for government intervention d. by allocating goods and services produced in the most equitable way
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A
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Which is the most correct statement about the invisible hand? a. The invisible hand always ensures both equity and efficiency. b. The invisible hand cannot ensure either equity or efficiency. c. The invisible hand is more effective at ensuring efficiency than it is at ensuring equity. d. The invisible hand is more effective at ensuring equity than it is at ensuring efficiency.
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C
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How does a market economy reward people? a. according to their need for goods and services b. according to how willing they are to work c. according to their ability to produce things that other people are willing to pay for d. according to their ability to produce things of cultural importance
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C
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What is one component necessary for markets to work? a. government intervention b. a benevolent society c. property rights d. abundant resources
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C
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What does the term market failure refer to? a. a situation in which the market on its own fails to allocate resources efficiently b. an unsuccessful advertising campaign that reduces buyer demand c. a situation in which competition among firms becomes ruthless d. a firm that is forced out of business because of losses
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A
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What are two causes of market failure? a. externalities and market power b. market power and incorrect forecasts of consumer demand c. externalities and foreign competition d. incorrect forecasts of consumer demand and foreign competition
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A
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What is an example of market power? a. a fast food restaurant in a university town b. a wheat farmer in Saskatchewan c. the last gas station in Manitoba for 100 miles d. a shoe store in Ontario
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C
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What is an example of an externality? a. the impact of bad weather on the income of farmers b. the impact of the personal income tax on a person's ability to purchase goods and services c. the impact of pollution from a factory on the health of people in the vicinity of the factory d. the impact of increases in health care costs on the health of individuals in society
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C
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What is market power? a. the power of a single person or group to influence market prices b. the ability of a person or group of people to successfully market new products c. the power of the government to regulate a market d. the relative importance of a market to the overall economy
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A
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What is the primary determinant of a country's standard of living? a. the ability to reduce foreign competition b. the ability to produce goods and services c. the total supply of money in the economy d. the average age of the country's labour force
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B
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A typical worker in Italy can produce 24 units of product in an 8 hour day, where a typical worker in Poland produces 25 units of product in a 10 hour day. What can we conclude? a. Worker productivity in Poland is higher than in Italy. b. The standard of living will be higher in Italy than in Poland. c. Productivity for the Polish worker is 3 units per hour and 2 1/2 units per hour for the Italian worker. d. There will be no difference between the standard of living in Italy and Poland.
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B
