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Economics 1010B (Spring 2011) Lab Chapter Questions: Chapter 1

Introduction to Microeconomics

K. Tran/D. Townley

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 make choices among alternatives.

E) individuals need not work to obtain goods.

2) Which of the following is a microeconomic topic? 2) _______

A) the cause of increasing unemployment

B) the reasons why the labour force in a country decreases

C) the reasons why the average price level in a country falls

D) the reasons why a consumer buys less honey

E) the effect of the government budget deficit on inflation

3) Which of the following newspaper headlines concerns a macroeconomic

issue?

3) _______

A) Why is Japan's economy stagnant?

B) Why do grain producers purchase less pesticides?

C) Why are people buying more SUVs and fewer minivans?

D) How would an unexpected freeze in Oxford, Nova Scotia change

the price of blueberries in the Maritimes?

E) How would a tax on e-commerce affect chapters.indigo.ca?

4) Which one of the following topics does microeconomics study? 4) _______

A) effect of interest rates on national economic growthB) effect of the government budget deficit on employment

C) determination of total production in a country

D) the effect of a rise in the Canadian dollar on Canada's exports

E) reasons for a fall in the price of orange juice

5) The problem of scarcity exists 5) _______

A) only in economies that lack incentives.

B) now but will be eliminated with economic growth.

C) only when people are unemployed.

D) only in economies that have incentives.

E) in all economies.

6) The inescapable economic fact is that 6) _______

A) there are unlimited wants and limited resources.

B) there are unlimited resources, and we just have to figure out how

to allocate them.

C) unions are always exploiting firms.

D) capitalists and unions cannot work together.

E) capitalists are always exploiting the workers.

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13) During the next hour John can choose one of the following three

activities: playing basketball, watching television, or reading a book.

The opportunity cost of reading a book

13) ______

A) depends on how much John enjoys the book.

B) is the value of playing basketball if John prefers that to watchingtelevision.

C) is the value of watching television if John prefers playing

basketball to watching television.

D) depends on how much the book cost when it was purchased.

E) is the value of playing basketball and the value of watching

television.

14) When asked in an interview what she missed the most because of the

time she spent training for the Olympics, a rower, who lived on her own,

answered "a normal social life." She also revealed that she had given up

a job that paid $30,000 per year to train fulltime. She received a grant of

$8,000 per year from Sport Canada, but this failed to cover all her

training expenses. Her food and rent were $5,000 per year and training

expenses were $12,000 per year. Aside from the value of a normal social

life, what is the annual opportunity cost, expressed in dollars, to this

rower of "Going for Gold"?

14) ______

A) $30,000

B) $34,000

C) $4,000

D) $25,000

E) $39,000

15) Saskatchewan had more hospitals than Ontario, despite havingone-tenth the population. The Saskatchewan government closed many

of these hospitals in spite of widespread local protests. Which one of the

following arguments is true?

15) ______

A) If Saskatchewan had more hospitals than Ontario, it must have

had too many hospitals.

B) The Saskatchewan government must have thought the marginal

benefit from one of these hospitals was less then its marginal cost.

C) The communities where these hospitals existed bore no costs from

these decisions, because they did not pay for any of the hospital

operating costs.

D) Since hospitals have positive benefits, they should never be closed.E) The Saskatchewan government must have thought the marginal

benefit from one of these hospitals exceeded its marginal cost.

16) Monika will choose to eat a seventh pizza slice if 16) ______

A) the marginal benefit from the seventh slice is greater than its

marginal cost.

B) the marginal benefit from the seventh slice is less than its marginal

cost.

C) the total benefit from all seven slices is less than their total cost.

D) she has enough money to pay for it.

E) the total benefit from all seven slices is greater than their total cost.

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17) Which of the following statements is normative? 17) ______

A) As compact disc prices fall, people buy more of them.

B) Warts are caused by handling toads.

C) If income increases, sales of luxury goods fall.

D) Scientists should not make normative statements.

E) There is more caffeine in a cup of tea than in a cup of coffee.

18) Which of the following is an example of a positive statement? 18) ______

A) Increasing the minimum wage results in more unemployment.

B) Canada should cut back on its use of carbon-based fuels such as

coal and oil.

C) Every Canadian should have equal access to health care.

D) The Bank of Canada ought to cut the interest rate.

E) Canada should have lower tax rates for wealthier Canadians.

19) The scientific purpose of simplifying assumptions in an economic model

is to

19) ______

A) eliminate the need for further testing of the implications of the

model.

B) avoid confronting difficult issues.

C) add necessary hypotheses to the problem.

D) eliminate the possibility of personal bias in the model.

E) abstract from the complexities of the real world those issues that

are not important for the issues under examination.

20) An economic model is 20) ______

A) tested by examining the realism of its assumptions.

B) tested by the Testing Committee of the Canadian Economic

Association.C) useful if it predicts well, even if its assumptions are not realistic.

D) not useful because it simplifies real problems.

E) not useful unless it predicts with 100 percent accuracy.

21) The role of marginal analysis in the use of economics as a policy tool is

to ________.

21) ______

A) find the outcome with the least possible cost

B) find the outsome that satisfies the greatest number of people

C) evaluate marginal benefit and marginal cost to find the solution

that brings the greatest available gain

D) find the outcome that will give a political party the most votesE) evaluate marginal benefit and marginal cost to find the solution

that provides employment to the greatest number of people

22) The change in the value of the variable measured on they- axis divided

by the change in the value of the variable measures on the x-axis is

22) ______

A) decreasing.

B) constant.

C) a maximum or minimum.

D) increasing.

E) slope.

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23) Refer to Figure 1A.3.2. The slope across the arc betweenA and B is 23) ______

A) 3. B) 1/2. C) 1. D) 2. E) 2/3.

24) Refer to Figure 1A.3.9. Which one of the graphs shows a line with a zero

slope?

24) ______

A) (a)

B) (b)

C) (c)

D) (d)

E) (a), (b), and (c)

25) Refer to Figure 1A.3.11. The graph shows a ________ relationship. The

absolute value of the slope of the relationship ________ as the value of x

increases.

25) ______

A) positive; decreases

B) positive; increases

C) negative; decreases

D) negative; increases

E) negative; does not change

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