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Economics For Life: Smart Choices For All?, 1st Edition Test Bank

Economics For Life: Smart Choices For All?, 1st Edition Test Bank prepares you thoroughly with real-world examples, key concepts, and solved practice questions.

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    Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Inputs in the circular flow of economic life include 1) A) businesses. B) households. C) governments. D) churches. E) people. Answer: E Explanation: A) B) C) D) E) Use the table below to answer the following question(s). Table 1.3.2 Monthly Production Possibilities for a Country Producing Only Butter and Guns Possibility Butter Guns a b c 8 6 0 0 1 4 2) According to the production possibilities in Table 1.3.2, 2) A) a combination of 1 butter and 6 gun is possible. B) the opportunity cost of producing guns stays the same as more guns are produced. C) a combination of 4 butter and 0 guns is possible. D) the opportunity cost of producing guns decreases as more guns are produced. E) the opportunity cost of producing guns increases as more guns are produced. Answer: B Explanation: A) B) C) D) E) 1

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    3) You can't get everything you want because you are limited by 3) A) money. B) time. C) energy. D) all of the above. Answer: D Explanation: A) B) C) D) Use the table below to answer the following question(s). Table 1.3.1 Monthly Production Possibilities for a Country Producing Only Hockey Sticks and Maple Leaves Possibility Hockey Sticks Maple Leaves a b c 3 2 0 0 3 9 4) According to Table 1.3.1, 4) A) the opportunity cost of producing hockey sticks increases as more hockey sticks are produced. B) the best possibility is 2 hockey sticks and 3 maple leaves. C) a combination of 3 hockey sticks and 2 maple leaves is possible. D) a combination of 3 hockey sticks and 9 maples leaves is not possible. E) the opportunity cost of producing hockey sticks decreases as more hockey sticks are produced. Answer: D Explanation: A) B) C) D) E) 5) Andrew decides to open a laboratory in his basement. He quits his job, sacrificing $30,000 a year; cashes in $200,000 of Canada Savings Bonds that were paying him an interest rate of 5 percent per year; and evicts a tenant who was paying $10,000 a year in rent to live in the basement. The opportunity cost of Andrew's decision is 5) A) $50,000. B) $30,000. C) $40,000. D) $0. E) $240,000. Answer: A Explanation: A) B) C) D) E) 2

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    Use the information below to answer the following question(s). Fact 1.3.4 In an eight - hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight - hour day, Rolfe can produce either 8 loaves of bread or 8 kilograms of butter. 6) The opportunity cost of producing 1 loaf of bread is 6) A) 8 kilograms of butter for both Andy and Rolfe. B) not calculable from the given information. C) 3 kilograms of butter for Andy and 1 kilogram of butter for Rolfe. D) 1/3 kilogram of butter for Andy and 1 kilogram of butter for Rolfe. E) 1 hour for Andy and 20 minutes (1/3 hour) for Rolfe. Answer: D Explanation: A) B) C) D) E) Use the table below to answer the following question(s). Table 1.3.1 Monthly Production Possibilities for a Country Producing Only Hockey Sticks and Maple Leaves Possibility Hockey Sticks Maple Leaves a b c 3 2 0 0 3 9 7) According to Table 1.3.1, 7) A) the opportunity cost of producing hockey sticks stays the same as more hockey sticks are produced. B) a combination of 3 hockey sticks and 9 maples leaves is possible. C) the opportunity cost of producing hockey sticks decreases as more hockey sticks are produced. D) a combination of 3 hockey sticks and 2 maple leaves is possible. E) the opportunity cost of producing hockey sticks increases as more hockey sticks are produced. Answer: A Explanation: A) B) C) D) E) 3

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    8) Microeconomics analyzes the 8) A) effect of a rise in the value of the Canadian dollar on Canada's exports. B) reasons for a fall in the inflation rate. C) reasons for a fall in the price of oil. D) effect of a government budget deficit on employment. E) effect of interest rates on Canada's economic growth rate. Answer: C Explanation: A) B) C) D) E) 9) Key 1 to smart choices says: Choose only when 9) A) additional benefits are greater than additional opportunity costs. B) average benefits are greater than average implicit costs. C) total benefits are greater than total opportunity costs. D) average benefits are greater than average opportunity costs. E) additional benefits are greater than additional implicit costs. Answer: A Explanation: A) B) C) D) E) 10) The value of the fork in the road not taken is called 10) A) marginal cost. B) cutlery cost. C) monetary cost. D) fiduciary cost. E) opportunity cost. Answer: E Explanation: A) B) C) D) E) 11) Smart choices require that 11) A) additional benefits exceed average costs. B) typical benefits exceed typical costs. C) additional benefits exceed additional costs. D) expected benefits exceed total costs. E) average benefits exceed additional costs. Answer: C Explanation: A) B) C) D) E) 4

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    12) Mutually beneficial trade occurs only if both persons 12) A) increase production of the product for which they have a higher opportunity cost. B) increase production of the product for which they have a comparative advantage. C) decrease production of the product for which they have a lower opportunity cost. D) increase consumption of the product for which they have a higher opportunity cost. E) increase production of the product for which they have an absolute advantage. Answer: B Explanation: A) B) C) D) E) Use the information below to answer the following question(s). Fact 1.3.2 In an eight - hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight - hour day, Rolfe can produce either 24 loaves of bread or 24 kilograms of butter. 13) Which of the following statements is true ? 13) A) Andy has an absolute advantage is producing bread. B) Rolfe has a comparative advantage in producing bread. C) Andy has an absolute advantage in producing butter. D) Andy has a comparative advantage in producing bread. E) Rolfe has an absolute advantage in producing bread. Answer: D Explanation: A) B) C) D) E) 14) In one hour, Chloe can bake 24 cookies or 12 blueberry muffins; Zabeen can bake 6 cookies or 2 blueberry muffins. For mutually beneficial trade, Chloe should 14) A) bake muffins because she has an absolute advantage. B) bake cookies because she has an absolute advantage. C) bake cookies because she has a comparative advantage. D) bake muffins because she has a comparative advantage. E) give up. Mutually beneficial trade is impossible in this situation. Answer: D Explanation: A) B) C) D) E) 5

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    15) The problem of scarcity exists 15) A) only in economies without incentives. B) now but will be eliminated with economic growth. C) in all economies. D) only when people are unemployed. E) only in economies with incentives. Answer: C Explanation: A) B) C) D) E) 16) If Canada specializes in the production of wine we can produce 10,000 bottles per month. If Canada specializes in the production of wheat we can produce 200,000 bushels per month. The opportunity cost of a bottle of wine in Canada is 16) A) 120,000 bottles of wine. B) 1/20 of a bushel of wheat. C) 2,500 bottles of wine. D) 20 bushels of wheat. E) 200 bushels of wheat. Answer: D Explanation: A) B) C) D) E) 17) Who wrote The Wealth of Nations ? 17) A) Adam Smith B) Alfred E. Newman C) Alfred Pennyworth D) Adam West E) Alfred Marshall Answer: A Explanation: A) B) C) D) E) 6

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    Use the table below to answer the following question(s). Table 1.3.3 Monthly Production Possibilities for a Country Producing Only Butter and Guns Possibility Butter Guns a b c 8 6 0 0 1 2 18) According to the production possibilities in Table 1.3.3, 18) A) the opportunity cost of producing guns decreases as more guns are produced. B) a combination of 1 butter and 6 gun is possible. C) a combination of 0 butter and 4 guns is possible. D) the opportunity cost of producing guns stays the same as more guns are produced. E) the opportunity cost of producing guns increases as more guns are produced. Answer: E Explanation: A) B) C) D) E) 19) Economics is about 19) A) how governments make the best possible choices. B) how choices interact in markets. C) how individuals make the best possible choices. D) how businesses make the best possible choices. E) all of the above. Answer: E Explanation: A) B) C) D) E) 7

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    20) Mutual gains from voluntary trade require differences in 20) A) external costs. B) comparative advantage. C) implicit costs. D) depreciation costs. E) absolute advantage. Answer: B Explanation: A) B) C) D) E) Use the table below to answer the following question(s). Table 1.3.1 Monthly Production Possibilities for a Country Producing Only Hockey Sticks and Maple Leaves Possibility Hockey Sticks Maple Leaves a b c 3 2 0 0 3 9 21) In Table 1.3.1, moving from possibility c to possibility b , the opportunity cost of producing one additional hockey stick is 21) A) 6 maple leaves. B) 1/6 maple leaves. C) 1/3 maple leaves. D) 3 maple leaves. E) 2 maple leaves. Answer: D Explanation: A) B) C) D) E) 8

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    22) The inability to satisfy all of our wants is called the problem of 22) A) comparative advantage. B) incentives. C) opportunity cost. D) scarcity. E) marginal cost. Answer: D Explanation: A) B) C) D) E) Use the information below to answer the following question. Fact 1.3.3 Tova and Ron are the only two people on the planet Melmac. It takes Tova 3 hours to produce a widget and 3 hours to produce a woggle. It takes Ron 1 hour to produce a widget and 2 hours to produce a woggle. 23) Tova and Ron 23) A) can trade, but only Tova will gain. B) can both gain from trade if Tova specializes in producing widgets and Ron specializes in producing woggles. C) cannot both gain from trade because Tova has an absolute advantage in producing widgets and woggles. D) can both gain from trade if Tova specializes in producing woggles and Ron specializes in producing widgets. E) can trade, but only Ron will gain. Answer: D Explanation: A) B) C) D) E) 24) In the circular flow of economic life , the role that only governments can play is to 24) A) own the assets of all large corporations. B) hire entrepreneurial abilities from corporations. C) sell businesses' labour services. D) boldly go where no one has gone before. E) set the rules of the game. Answer: E Explanation: A) B) C) D) E) 9

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    25) George spends $2,000 for a plane ticket to Vancouver and gives up $500 because he has to take time off work. He spends $1,500 on his hotel room. In Vancouver, George is trying to decide whether he should spend $1,000 to take a side trip to go snowboarding in Whistler or just snooze in the hotel. Going to Whistler would be a smart decision as long as his benefits from the side trip are at least 25) A) $5,000. B) $1,000. C) $1,500. D) $500. E) $4,000. Answer: B Explanation: A) B) C) D) E) 26) In two hours of work, Clinton can catch 4 fish or he can pick 5 pints of berries. In two hours, Dong can catch 6 fish or she can pick 9 pints of berries. Which statement is true ? 26) A) Clinton has a comparative advantage in picking berries. B) Clinton will lose if he engages in trade. C) Clinton has an absolute advantage in picking berries. D) Clinton has a comparative advantage in catching fish. E) Clinton has an absolute advantage in catching fish. Answer: D Explanation: A) B) C) D) E) 27) Which of the following is an example of a positive externality ? 27) A) government B) a statue in your closet C) non - refundable deposits D) scarcity E) anti - virus software on your computer Answer: E Explanation: A) B) C) D) E) 28) If the resource-rich sector of Alberta's economy starts to slow down, 28) A) incentives to drop out of college will increase. B) opportunity costs of upgrading to a college diploma will increase. C) opportunity costs of upgrading to a college diploma will decrease. D) all of the above Answer: C Explanation: A) B) C) D) 10

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    29) Mexico and Canada produce both oil and apples using labour only. A barrel of oil can be produced with 8 hours of labour in Mexico and 4 hours of labour in Canada. A bushel of apples can be produced with 12 hours of labour in Mexico and 8 hours of labour in Canada. Mexico has 29) A) a comparative advantage in producing oil. B) an absolute advantage in producing apples. C) an absolute advantage in producing oil. D) a comparative advantage in producing apples. E) none of the above. Answer: D Explanation: A) B) C) D) E) 30) Which of the following statements is/are true ? 1 If unemployment increases, the opportunity cost of attending college decreases. 2 If men generally earn more than women, the opportunity cost of attending college is higher for men than for women. 30) A) 1 only B) 2 only C) 1 and 2 D) neither 1 nor 2 E) impossible to tell without more information Answer: C Explanation: A) B) C) D) E) 31) Macroeconomics analyzes 31) A) the performance of the global economy. B) effects of government safety regulations on the price of cars. C) the effects of federal taxes on the price of gasoline. D) prices of individual products and services. E) decisions of individual businesses. Answer: A Explanation: A) B) C) D) E) 11

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    32) Economics is about 32) A) overcoming scarcity. B) greed. C) making choices because of scarcity. D) overcoming greed. E) making money. Answer: C Explanation: A) B) C) D) E) 33) In a zero - sum game 33) A) one player can gain only when another player loses. B) both players can win. C) both players get zero gains. D) both players can lose. E) the number of players is zero. Answer: A Explanation: A) B) C) D) E) 34) Lydia is deciding whether to study for her economics test or her accounting test. If she chooses to study accounting, her opportunity cost is 34) A) the lost future wages if she fails her accounting test. B) less than the value of studying economics. C) not comparable to the value of studying economics. D) studying economics. E) equal to the value of studying economics. Answer: D Explanation: A) B) C) D) E) 35) The study of how wages are set for New Brunswick call centre workers is a 35) A) macroeconomic topic. B) bore. C) positive externality. D) negative externality. E) microeconomic topic. Answer: E Explanation: A) B) C) D) E) 12

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    36) Which of the following is not a microeconomic choice for businesses? 36) A) what products/services to supply B) how many workers to hire C) what interest rates to set D) what quantity of output to produce Answer: C Explanation: A) B) C) D) 37) Which of the following is an example of a negative externality ? 37) A) education B) a peace treaty C) brand proliferation D) automobile emissions E) a cut in pay Answer: D Explanation: A) B) C) D) E) 38) Opportunity cost does not include 38) A) external consequences associated with making a choice. B) income that you sacrifice from making a choice. C) legal costs associated with making a choice. D) benefits that you get from making a choice. E) monetary costs associated with making a choice. Answer: D Explanation: A) B) C) D) E) 39) From 1991 to 2001, the proportion of 25- to 29-year-old women with university degrees rose from 21 percent to 34 percent, while the proportion of 25- to 29-year-old men with degrees rose from 16 percent to 21 percent. There is a similar trend for college diplomas. More woman than men are getting post-secondary education because 39) A) the opportunity cost of going to post-secondary education is lower for women. B) the cost of not going to post-secondary education is higher for women. C) the gap in pay between post-secondary and high-school graduates is higher for women than it is for men. D) all of the above. Answer: D Explanation: A) B) C) D) 13

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    40) Canada and Chile produce both oil and apples using labour only. A barrel of oil can be produced with 4 hours of labour in Canada and 8 hours of labour in Chile. A bushel of apples can be produced with 8 hours of labour in Canada and 12 hours of labour in Chile. Chile has 40) A) an absolute advantage in producing oil. B) an absolute advantage in producing apples. C) a comparative advantage in producing apples. D) a comparative advantage in producing oil. E) none of the above. Answer: C Explanation: A) B) C) D) E) 41) Which of the following is a macroeconomic decision? 41) A) How you divide your spending between food and clothing. B) How many hours a week you will work at a wage of $20 an hour. C) You decide to buy a hybrid car in order to protect the environment. D) Whether or not you adopt a pet. E) The Bank of Canada decides to raise interest rates. Answer: E Explanation: A) B) C) D) E) 42) The easiest way to calculate opportunity cost is: 42) A) Give up - get B) Get - give up C) give up get D) get give up Answer: C Explanation: A) B) C) D) 43) Which of the following sayings best describes opportunity cost? 43) A) "Boldly go where no one has gone before." B) "Baseball has been very good to me." C) "Love of money is the root of all evil." D) "There's no such thing as a free lunch." E) "Make hay while the sun shines." Answer: D Explanation: A) B) C) D) E) 14

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    44) Monika will choose to eat a seventh pizza slice if 44) A) the total benefit from all seven slices is less than their total cost. B) she has enough money to pay for it. C) the marginal benefit from the seventh slice is less than its marginal cost. D) the marginal benefit from the seventh slice is greater than its marginal cost. E) the total benefit from all seven slices is greater than their total cost. Answer: D Explanation: A) B) C) D) E) 45) The three sets of players in the circular flow of economic life include 45) A) wheat. B) houses. C) governments. D) buildings. E) machines. Answer: C Explanation: A) B) C) D) E) 46) Governments can try and correct the problem of negative externalities associated with smoking by 46) A) investing in tobacco companies. B) providing free medical care for smokers. C) using taxes and fines to penalize smokers. D) using subsidies to lower the cost of buying cigarettes. E) using taxes and fines to reward smoking. Answer: C Explanation: A) B) C) D) E) 47) Opportunity cost measures the cost of 47) A) the best alternative given up. B) the top two alternatives. C) the top ten alternatives. D) the worst case scenario. E) all alternatives given up. Answer: A Explanation: A) B) C) D) E) 15

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