Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The highest valued alternative that must be given up to engage in an activity.

Question 2

Suppose a government increases the carbon tax on gasoline. According to economic theory, what is the most likely outcome?

Accepted Answer

People will drive less because the higher price creates an incentive to reduce consumption.

Question 3

Which of the following is NOT one of the three fundamental economic questions?

Accepted Answer

How much profit will firms earn?

Question 4

A country decides to produce more military equipment, resulting in fewer resources for healthcare. This scenario best illustrates which economic concept?

Accepted Answer

Trade-off

Question 5

If the marginal benefit (MB) of an activity is less than its marginal cost (MC), what should a rational individual do?

Accepted Answer

Decrease the activity.

Question 6

Which of the following best describes a market economy?

Accepted Answer

Private ownership of resources and decentralized decision-making.

Question 7

Productive efficiency occurs when:

Accepted Answer

Goods and services are produced at the lowest possible cost.

Question 8

Allocative efficiency is achieved when:

Accepted Answer

The last unit produced provides a marginal benefit equal to the marginal cost.

Question 9

Which of the following statements is an example of positive economic analysis?

Accepted Answer

Raising taxes will reduce consumer spending by 5\%.

Question 10

A simplified version of reality used to analyze economic situations is called:

Accepted Answer

An economic model

Question 11

Suppose the price of coffee in Canada rises sharply. According to the study materials, which of the following could be a plausible explanation?

Accepted Answer

Heavy rain in Colombia reduces coffee supply, increasing prices globally.

Question 12

Which of the following best illustrates the concept of voluntary exchange?

Accepted Answer

A buyer and seller both benefit from trading a good.

Question 13

If a demand curve shifts to the right, which of the following is the most likely cause?

Accepted Answer

An increase in consumer income.

Question 14

Which formula correctly calculates the percentage change in a variable?

Accepted Answer

$$\frac{	ext{Value in 2nd period} - 	ext{Value in 1st period}}{	ext{Value in 1st period}} 	imes 100$$

Question 15

Which of the following is a characteristic of a centrally planned economy?

Accepted Answer

The government answers the three fundamental economic questions.

Question 16

A firm must decide whether to use more workers or more machines in production. This decision is most closely related to which fundamental economic question?

Accepted Answer

How will the goods be produced?

Question 17

Which of the following best describes the trade-off between efficiency and equity?

Accepted Answer

Policies that increase equity may reduce efficiency due to higher taxes and government spending.

Question 18

Which of the following is an example of a normative economic statement?

Accepted Answer

Canada should adopt a policy to lower the inflation rate.

Question 19

If the slope of a line on a graph is calculated as $$\frac{\Delta y}{\Delta x}$$, what does a positive slope indicate?

Accepted Answer

The variables are positively related.

Question 20

A firm invests in new machinery, which increases its productivity. This decision is an example of:

Accepted Answer

A microeconomic decision that can have macroeconomic effects.

Microeconomics Foundations: Scarcity, Choice, and Economic Models

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