Question 1

Which concept best defines efficiency?

Accepted Answer

A)   absolute fairness
B)   equal distribution
C)   minimum waste
D)   consumer satisfactionE) A) and C)
F) None of the above

Question 2

Which policy target 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 pricesE) None of the above
F) All of the above

Question 3

The government can potentially improve market outcomes if market inequalities or market failure exist.

Accepted Answer

A) True 
 B)False

Question 4

What is the best example of a marginal change?

Accepted Answer

A)   After graduating from university, Neville's income increases from $1000 per month to $1,100 per month.
B)   Jadelyn completes the six-month probationary period at her job and is now paid $11.25 per hour instead of $11.00.
C)   Housing prices in an area increase by 50% when a new freeway is built in a small town.
D)   A hard freeze wipes out half of the potato crop in Prince Edward Island and the price of potatoes doubles.E) A) and B)
F) A) and C)

Question 5

Although the tenth principle of economics is controversial, what do most economists believe?

Accepted Answer

A)   Society faces a tradeoff between unemployment and inflation in the short run only.
B)   Society faces a tradeoff between unemployment and inflation in the long run only.
C)   No tradeoff exists between unemployment and inflation.
D)   Society faces a continuous tradeoff between unemployment and inflation.E) A) and B)
F) None of the above

Question 6

What happens when the government attempts to cut the economic pie into more equal slices?

Accepted Answer

A)   It is easier to cut the pie, and therefore the economy can produce a larger pie.
B)   The government can more easily allocate the pie to those most in need.
C)   The pie gets smaller, and there will be less pie for everyone.
D)   The economy will spend too much time cutting the pie and lose the ability to produce enough pie for everyone.E) None of the above
F) A) and D)

Question 7

How could you justify higher income tax rates on rich people in Canada?

Accepted Answer

A)   on the basis of market efficiency
B)   on the basis of the lack of other sources of government revenue
C)   on the basis of equity for society
D)   on the basis of government bias against the wealthyE) B) and D)
F) All of the above

Question 8

What will be the probable outcome if Japan chooses to engage in trade?

Accepted Answer

A)   It will only benefit if it trades with countries that produce goods it cannot produce.
B)   It cannot benefit if it trades with less developed countries.
C)   It will only benefit if it trades with countries that are geographically close Japan.
D)   It can benefit by trading with any other country.E) A) and B)
F) None of the above

Question 9

According to an economic principle, what is the effect of government intervention in the presence of a market failure?

Accepted Answer

A)   Government action does not improve on the market outcome because sometimes public policies simply reward the politically powerful.
B)   Government action does not improve on the market outcome because some leaders are not fully informed.
C)   Government action can sometimes improve on the market outcome.
D)   Government action will always improve on the market outcome.E) None of the above
F) B) and C)

Question 10

What does trade NOT achieve?

Accepted Answer

A)   increased competition
B)   equal gains for both countries involved
C)   some gains for both countries involved
D)   greater production efficiencyE) A) and B)
F) A) and C)

Question 11

Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society's resources.

Accepted Answer

A) True 
 B)False

Question 12

When the government redistributes income from the rich to the poor, what is the result?

Accepted Answer

A)   Efficiency is improved, but equity is not.
B)   Both rich people and poor people benefit directly.
C)   People work less and produce fewer goods and services.
D)   Rich people consume fewer goods, but poor people consume more goods, resulting in no real change.E) B) and D)
F) B) and C)

Question 13

Equity refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 14

What does economics study?

Accepted Answer

A)   how society manages its scarce resources
B)   the government's role in society
C)   how to increase production
D)   how firms make profitsE) B) and C)
F) A) and B)

Question 15

To increase living standards, what should public policy do?

Accepted Answer

A)   ensure that workers are well educated and have the necessary tools and technology
B)   make unemployment benefits easier to obtain
C)   move workers into jobs directly from high school
D)   ensure that workers have access to union membership and benefitsE) A) and B)
F) All of the above

Question 16

Economics is the study of how fairly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Question 17

One tradeoff society faces is between efficiency and equity. Define each term. If the Canadian government redistributes income from the rich to the poor, explain how this action affects equity as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge...

Question 18

A typical worker in Italy can produce 24 units of product in an eight-hour day, where a typical worker in Poland produces 25 units of product in a 10-hour day. What can we conclude?

Accepted Answer

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 three units per hour and 2.5 units per hour for the Italian worker.
D)   There will be no difference between the standard of living in Italy and Poland.E) None of the above
F) A) and B)

Question 19

Which statement best describes the concept represented by the adage "There is no such thing as a free lunch"?

Accepted Answer

A)   Melissa can only attend the concert if she takes her sister with her.
B)   Greg is hungry and homeless.
C)   Brian must repair the tire on his bike before he can ride it to class.
D)   Olivia must decide between skiing at Whistler or Lake Louise for spring break.E) B) and D)
F) All of the above

Question 20

Which of the following displays 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) All of the above

Exam 1: Ten Principles of Economics

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

Correct AnswerverifiedShow Answer

Which of the following displays a direct, or positive, relationship?

Correct AnswerverifiedShow Answer

What is the best example of a marginal change?

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How could you justify higher income tax rates on rich people in Canada?

Correct AnswerverifiedShow Answer

Equity refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Correct AnswerverifiedShow Answer

What does trade NOT achieve?

Correct AnswerverifiedShow Answer

According to an economic principle, what is the effect of government intervention in the presence of a market failure?

Correct AnswerverifiedShow Answer

A typical worker in Italy can produce 24 units of product in an eight-hour day, where a typical worker in Poland produces 25 units of product in a 10-hour day. What can we conclude?

Correct AnswerverifiedShow Answer

Although the tenth principle of economics is controversial, what do most economists believe?

Correct AnswerverifiedShow Answer

When the government redistributes income from the rich to the poor, what is the result?

Correct AnswerverifiedShow Answer

Since taxes affect only the price paid by the buyer, they cannot have an adverse impact on the allocation of society's resources.

Correct AnswerverifiedShow Answer

The government can potentially improve market outcomes if market inequalities or market failure exist.

Correct AnswerverifiedShow Answer

What does economics study?

Correct AnswerverifiedShow Answer

One tradeoff society faces is between efficiency and equity. Define each term. If the Canadian government redistributes income from the rich to the poor, explain how this action affects equity as well as efficiency in the economy.

Correct AnswerverifiedEfficiency is the property of society ge...View AnswerShow Answer

What will be the probable outcome if Japan chooses to engage in trade?

Correct AnswerverifiedShow Answer

Which statement best describes the concept represented by the adage "There is no such thing as a free lunch"?

Correct AnswerverifiedShow Answer

Which concept best defines efficiency?

Correct AnswerverifiedShow Answer

To increase living standards, what should public policy do?

Correct AnswerverifiedShow Answer

Economics is the study of how fairly goods and services are distributed within society.

Correct AnswerverifiedShow Answer

What happens when the government attempts to cut the economic pie into more equal slices?

Correct AnswerverifiedShow Answer

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Efficiency is the property of society ge...
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