Economics 1012B (Fall 2009) Lab Chapter Questions: Chapter 1

Introduction to icroeconomics
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1) In a world characterized by scarcity 1) _______ A) we are not limited by time. B) all goods are
free. C) opportunity cost is zero. D) people must mae choices among alternati!es. ") indi!iduals
need not wor to obtain goods.
#) $hich of the following is a microeconomic topic% #) _______ A) the cause of increasing
unemployment B) the reasons why the labour force in a country decreases C) the reasons why the
a!erage price le!el in a country falls D) the reasons why a consumer buys less honey ") the e&ect
of the go!ernment budget de'cit on in(ation )) $hich of the following newspaper headlines
concerns a macroeconomic issue% )) _______ A) $hy is *apan+s economy stagnant% B) $hy do
grain producers purchase less pesticides% C) $hy are people buying more ,-.s and fewer
mini!ans% D) /ow would an une0pected freeze in 10ford2 3o!a ,cotia change the price of
blueberries in the 4aritimes% ") /ow would a ta0 on e-commerce a&ect chapters.indigo.ca% 5)
$hich one of the following topics does microeconomics study% 5) _______ A) e&ect of interest rates
on national economic growth B) e&ect of the go!ernment budget de'cit on employment C)
determination of total production in a country D) the e&ect of a rise in the Canadian dollar on
Canada+s e0ports ") reasons for a fall in the price of orange 6uice 7) 8he problem of scarcity e0ists
7) _______ A) only in economies that lac incenti!es. B) now but will be eliminated with economic
growth. C) only when people are unemployed. D) only in economies that ha!e incenti!es. ") in
all economies. 9) 8he inescapable economic fact is that 9) _______ A) there are unlimited wants
and limited resources. B) there are unlimited resources2 and we 6ust ha!e to 'gure out how to
allocate them. C) unions are always e0ploiting 'rms. D) capitalists and unions cannot wor
together. ") capitalists are always e0ploiting the worers.
:) 8he two big economic ;uestions :) _______ A) are <what goods and ser!ices are produced%< and
<how are goods and ser!ices produced%< B) ha!e nothing to do with goods and ser!ices. C) do
not consider for whom goods and ser!ices are produced. D) ha!e nothing to do with the way
goods and ser!ices are produced. ") summarize the scope of economics. =) $hen a 'rm decides
to produce more hybrid cars and fewer gas guzzlers2 it is answering the ________ ;uestion. =)
_______ A) <how< B) <when< C) <where< D) <what< ") <who< >) $hen a farmer decides to har!est
tomatoes using machines instead of migrant worers2 the farmer is answering the ________
;uestion. >) _______ A) <when< B) <how< C) <where< D) <what< ") <who< 1?) ,elf-interest choices
are 1?) ______ A) those choices that are best for all residents of a region. B) those choices which
are best for the person maing them. C) choices that are agreed to by ma6ority !ote. D) ne!er in
the social interest. ") always in the social interest. 11) $hich one of the following is an e0ample
of capital as a factor of production% 11) ______ A) an automobile factory owned by @ord B) money
held by 8im /ortons C) natural gas D) a Bell Canada bond ") a high school teacher 1#)
1pportunity cost is 1#) ______ A) the marginal bene't from an acti!ity. B) the !alue of your
fa!ourite acti!ity. C) the highest-!alued alternati!e that we gi!e up to get something. D) your
!alue of leisure. ") the money you spend on food2 shelter2 and clothing.
1)) During the ne0t hour *ohn can choose one of the following three acti!itiesA playing basetball2
watching tele!ision2 or reading a boo. 8he opportunity cost of reading a boo 1)) ______ A)
depends on how much *ohn en6oys the boo. B) is the !alue of playing basetball if *ohn prefers
that to watching tele!ision. C) is the !alue of watching tele!ision if *ohn prefers playing
basetball to watching tele!ision. D) depends on how much the boo cost when it was purchased.
") is the !alue of playing basetball and the !alue of watching tele!ision. 15) $hen ased in an
inter!iew what she missed the most because of the time she spent training for the 1lympics2 a
rower2 who li!ed on her own2 answered <a normal social life.< ,he also re!ealed that she had
gi!en up a 6ob that paid B)?2??? per year to train fulltime. ,he recei!ed a grant of B=2??? per
year from ,port Canada2 but this failed to co!er all her training e0penses. /er food and rent were
B72??? per year and training e0penses were B1#2??? per year. Aside from the !alue of a normal
social life2 what is the annual opportunity cost2 e0pressed in dollars2 to this rower of <Coing for
Cold<% 15) ______ A) B)?2??? B) B)52??? C) B52??? D) B#72??? ") B)>2??? 17) ,asatchewan had
more hospitals than 1ntario2 despite ha!ing one-tenth the population. 8he ,asatchewan
go!ernment closed many of these hospitals in spite of widespread local protests. $hich one of the
following arguments is true% 17) ______ A) If ,asatchewan had more hospitals than 1ntario2 it
must ha!e had too many hospitals. B) 8he ,asatchewan go!ernment must ha!e thought the
marginal bene't from one of these hospitals was less then its marginal cost. C) 8he communities
where these hospitals e0isted bore no costs from these decisions2 because they did not pay for
any of the hospital operating costs. D) ,ince hospitals ha!e positi!e bene'ts2 they should ne!er
be closed. ") 8he ,asatchewan go!ernment must ha!e thought the marginal bene't from one of
these hospitals e0ceeded its marginal cost. 19) 4onia will choose to eat a se!enth pizza slice if
19) ______ A) the marginal bene't from the se!enth slice is greater than its marginal cost. B) the
marginal bene't from the se!enth slice is less than its marginal cost. C) the total bene't from all
se!en slices is less than their total cost. D) she has enough money to pay for it. ") the total
bene't from all se!en slices is greater than their total cost. 1:) $hich of the following statements
is normati!e% 1:) ______ A) As compact disc prices fall2 people buy more of them. B) $arts are
caused by handling toads. C) If income increases2 sales of lu0ury goods fall. D) ,cientists should
not mae normati!e statements. ") 8here is more ca&eine in a cup of tea than in a cup of co&ee.
1=) $hich of the following is an e0ample of a positi!e statement% 1=) ______ A) Increasing the
minimum wage results in more unemployment. B) Canada should cut bac on its use of carbon-
based fuels such as coal and oil. C) "!ery Canadian should ha!e e;ual access to health care. D)
8he Ban of Canada ought to cut the interest rate. ") Canada should ha!e lower ta0 rates for
wealthier Canadians. 1>) 8he scienti'c purpose of simplifying assumptions in an economic model
is to 1>) ______ A) eliminate the need for further testing of the implications of the model. B) a!oid
confronting diDcult issues. C) add necessary hypotheses to the problem. D) eliminate the
possibility of personal bias in the model. ") abstract from the comple0ities of the real world those
issues that are not important for the issues under e0amination. #?) An economic model is #?)
______ A) tested by e0amining the realism of its assumptions. B) tested by the 8esting Committee
of the Canadian "conomic Association. C) useful if it predicts well2 e!en if its assumptions are not
realistic. D) not useful because it simpli'es real problems. ") not useful unless it predicts with
1?? percent accuracy. #1) 8he role of marginal analysis in the use of economics as a policy tool
is to ________. #1) ______ A) 'nd the outcome with the least possible cost B) 'nd the outsome that
satis'es the greatest number of people C) e!aluate marginal bene't and marginal cost to 'nd the
solution that brings the greatest a!ailable gain D) 'nd the outcome that will gi!e a political party
the most !otes ") e!aluate marginal bene't and marginal cost to 'nd the solution that pro!ides
employment to the greatest number of people ##) 8he change in the !alue of the !ariable
measured on the y-a0is di!ided by the change in the !alue of the !ariable measures on the x-a0is
is ##) ______ A) decreasing. B) constant. C) a ma0imum or minimum. D) increasing. ") slope.

#)) Eefer to @igure 1A.).#. 8he slope across the arc between A and B is #)) ______ A) ). B) 1F#. C) 1. D) #.
") #F).
#5) Eefer to @igure 1A.).>. $hich one of the graphs shows a line with a zero slope% #5) ______ A) Ga) B) Gb)
C) Gc) D) Gd) ") Ga)2 Gb)2 and Gc)
#7) Eefer to @igure 1A.).11. 8he graph shows a ________ relationship. 8he absolute !alue of the slope of the
relationship ________ as the !alue of x increases. #7) ______ A) positi!eH decreases B) positi!eH increases C)
negati!eH decreases D) negati!eH increases ") negati!eH does not change