Question 1

What is the economy experiencing when a society cannot produce all the goods and services people wish to have?

Accepted Answer

A)  scarcity
B)  communism
C)  externalities
D)  market failureE) None of the above
F) A) and B)

Question 2

A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand?

Accepted Answer

A)  Yes, because making tables is profitable.
B)  No, because she may not be able to sell the additional tables.
C)  It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables.
D)  It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables.E) B) and C)
F) A) and C)

Question 3

Guns and butter are used to represent the classic societal tradeoff between spending on which two items?

Accepted Answer

A)  durable and nondurable goods
B)  imports and exports
C)  national defense and consumer goods
D)  law enforcement and agricultureE) C) and D)
F) B) and D) C

Question 4

Which of the following does NOT result when seat belt laws alter a driver's cost-benefit calculation?

Accepted Answer

A)  Fewer drivers are killed
B)  More pedestrians are killed
C)  Drivers drive faster
D)  More accidents occurE) C) and D)
F) A) and C)

Question 5

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 6

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world making 25 percent more, but has decided to stay in teaching. What might change her decision?

Accepted Answer

A)  if the marginal cost of teaching increased
B)  if the marginal benefit of teaching increased
C)  if the marginal cost of teaching decreased
D)  if the marginal cost of a corporate job increasedE) B) and C)
F) B) and D)

Question 7

Which of the following display a direct or positive relationship?

Accepted Answer

A)  a country's productivity and its standard of living
B)  a country's government spending and its tax rates
C)  a country's total population and its per-capita income
D)  a country's prices for its goods and services and its exportsE) A) and B)
F) C) and D)

Question 8

Which of the following is the best example of a marginal change?

Accepted Answer

A)  The price of water rose in Calgary by 2% last year.
B)  Kim gets a big promotion at work. She also gets a raise from $25,000 per year to $40,000 per year.
C)  Mark graduates from university and takes a job. His income increases from $10,000 per year to $50,000 per year.
D)  A drought hits Saskatchewan and the price of wheat increases from $4.00 per bushel to $8.00 per bushel.E) B) and C)
F) A) and D)

Question 9

Which of the following policy targets will NOT affect the combination of inflation and unemployment the economy experiences?

Accepted Answer

A)  taxes.
B)  government spending.
C)  the money supply.
D)  market prices.E) A) and C)
F) A) and B)

Question 10

Henry decides to spend 2 hours playing golf rather than working at his job which pays $8 per hour. What is Henry's tradeoff?

Accepted Answer

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 golfE) A) and C)
F) B) and C)

Question 11

When was Adam Smith's book The Wealth of Nations published?

Accepted Answer

A)   1692.
B)   1776.
C)   1816.
D)   1936.E) A) and B)
F) A) and D)

Question 12

Which of the following is the best statement about markets?

Accepted Answer

A)  Markets are usually a good way to organize economic activity.
B)  Markets are usually inferior to central planning as a way to organize economic activity.
C)  Markets fail and are therefore not an acceptable way to organize economic activity.
D)  Markets are a good way to organize economic activity in developed nations, but not in less developed nations.E) A) and B)
F) A) and C)

Question 13

What is the term when a single entity has the ability to influence market prices?

Accepted Answer

A)  competition
B)  market power
C)  efficiency
D)  productivityE) B) and C)
F) All of the above B

Question 14

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?

Accepted Answer

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 mostE) None of the above
F) All of the above

Question 15

Over the past century, by how much has the average income in Canada risen?

Accepted Answer

A)  twofold
B)  fivefold
C)  eightfold
D)  tenfoldE) A) and B)
F) A) and C)

Question 16

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $2.00. Since this shop does not sell day-old donuts the next day, what should the manager do if she still has 10 dozen left at 2:30 p.m.?

Accepted Answer

A)  	lower the price of the remaining donuts even if the price falls below $2.00
B)  	lower the price of the remaining donuts as long as it's more than $2.00
C)  	lower the price on all donuts so they will all be sold earlier in the day
D)  	throw them away and produce 10 fewer dozen tomorrowE) B) and D)
F) All of the above

Question 17

With what concept does economics deal primarily with?

Accepted Answer

A)  scarcity
B)  poverty
C)  change
D)  powerE) B) and D)
F) A) and B)

Question 18

In 2003, what was the average Canadian income?

Accepted Answer

A)  $25,368.
B)  $29,000.
C)  $36,800
D)  $41,240E) A) and B)
F) B) and D)

Question 19

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 20

What would happen without government's protection of property rights?

Accepted Answer

A)  Businesses would have less incentive to provide goods and services.
B)  There would be less government regulation of businesses and prices would be lower for consumers.
C)  Taxes would be lower causing less market inefficiencies.
D)  Businesses would have more freedom with production processes.E) B) and C)
F) A) and B) A

Exam 1: Ten Principles of Economics

What is the economy experiencing when a society cannot produce all the goods and services people wish to have?

Correct AnswerverifiedShow Answer

A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand?

Correct AnswerverifiedShow Answer

Guns and butter are used to represent the classic societal tradeoff between spending on which two items?

Correct AnswerverifiedC

Which of the following does NOT result when seat belt laws alter a driver's cost-benefit calculation?

Correct AnswerverifiedShow Answer

Market failure refers to a situation in which the market does not allocate resources efficiently.

Correct AnswerverifiedShow Answer

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world making 25 percent more, but has decided to stay in teaching. What might change her decision?

Correct AnswerverifiedShow Answer

Which of the following display a direct or positive relationship?

Correct AnswerverifiedShow Answer

Which of the following is the best example of a marginal change?

Correct AnswerverifiedShow Answer

Which of the following policy targets will NOT affect the combination of inflation and unemployment the economy experiences?

Correct AnswerverifiedShow Answer

Henry decides to spend 2 hours playing golf rather than working at his job which pays $8 per hour. What is Henry's tradeoff?

Correct AnswerverifiedShow Answer

When was Adam Smith's book The Wealth of Nations published?

Correct AnswerverifiedShow Answer

Which of the following is the best statement about markets?

Correct AnswerverifiedShow Answer

What is the term when a single entity has the ability to influence market prices?

Correct AnswerverifiedB

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?

Correct AnswerverifiedShow Answer

Over the past century, by how much has the average income in Canada risen?

Correct AnswerverifiedShow Answer

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $2.00. Since this shop does not sell day-old donuts the next day, what should the manager do if she still has 10 dozen left at 2:30 p.m.?

Correct AnswerverifiedShow Answer

With what concept does economics deal primarily with?

Correct AnswerverifiedShow Answer

In 2003, what was the average Canadian income?

Correct AnswerverifiedShow Answer

A marginal change is a small incremental adjustment to an existing plan of action.

Correct AnswerverifiedShow Answer

What would happen without government's protection of property rights?

Correct AnswerverifiedA

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C

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B

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A