Question 1

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

Accepted Answer

The value of the next best alternative that is forgone when a choice is made.

Question 2

Suppose a city has $$12 million to spend on either road repairs or new bicycle paths. Road repairs cost 1 $$million per km and new paths cost $0.5 million per km. What is the opportunity cost of building 1 km of road repairs?

Accepted Answer

$$2 km of $$new paths

Question 3

Which of the following points on a Production Possibilities Boundary (PPB) diagram represents inefficiency?

Accepted Answer

A point inside the PPB

Question 4

Which of the following is NOT considered a factor of production?

Accepted Answer

Money

Question 5

If an economy is operating inside its production possibilities boundary, what does this imply?

Accepted Answer

Some resources are idle or used inefficiently.

Question 6

Which of the following is a microeconomic issue?

Accepted Answer

The determination of the price of smartphones.

Question 7

Adam Smith argued that the market economy is self-organizing. What does this mean?

Accepted Answer

Individual self-interest leads to coordinated economic outcomes.

Question 8

Which of the following is a result of specialization and division of labour?

Accepted Answer

Increased efficiency and output.

Question 9

Why is money important in a modern economy?

Accepted Answer

It facilitates trade by eliminating the need for barter.

Question 10

Which of the following is NOT a pure type of economic system?

Accepted Answer

Mixed

Question 11

A government policy that aims to correct market failures is most likely addressing which economic problem?

Accepted Answer

What is produced and how?

Question 12

Which of the following best explains why points outside the PPB are unattainable?

Accepted Answer

They require more resources than are currently available.

Question 13

Which of the following is a macroeconomic issue?

Accepted Answer

The total output of the Canadian economy.

Question 14

If economic growth occurs, what happens to the production possibilities boundary (PPB)?

Accepted Answer

It shifts outward.

Question 15

Which of the following is an example of a government intervention to address fairness in the distribution of consumption?

Accepted Answer

Providing unemployment insurance.

Question 16

Which of the following is a plausible reason for resources being idle in an economy?

Accepted Answer

Unemployment due to economic downturn.

Question 17

Which of the following is a direct result of globalization?

Accepted Answer

Increased importance of international trade.

Question 18

Which of the following statements about mixed economies is correct?

Accepted Answer

They combine elements of traditional, command, and free-market systems.

Question 19

Suppose you decide to attend university full-time instead of working a job that pays $$30,000 per year. Tuition and books cost 8$$,000 per year. What is your total opportunity cost for attending university for one year?

Accepted Answer

$38,000

Question 20

Which of the following is NOT a reason for government intervention in a market economy?

Accepted Answer

To maximize individual profits

Chapter 1: Economic Issues and Concepts – Study Notes

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