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 government has $$20 million to spend on either building new parks or repairing roads. If each park costs 4 $$million and each road repair costs $2 million, what is the opportunity cost of building one additional park?

Accepted Answer

2 road repairs

Question 3

Which of the following points on a Production Possibilities Boundary (PPB) 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 at a point outside its PPB, what does this indicate?

Accepted Answer

The economy is producing an unattainable combination of goods with current resources.

Question 6

Which of the following is a microeconomic issue?

Accepted Answer

The price of smartphones in the Canadian market

Question 7

According to Adam Smith, what motivates the butcher, the brewer, and the baker to provide goods in a market economy?

Accepted Answer

Their own self-interest

Question 8

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

Accepted Answer

Increased efficiency and output

Question 9

What is the main function of money in facilitating trade?

Accepted Answer

It separates the transactions involved in the exchange of products, making trade easier.

Question 10

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

Accepted Answer

Mixed

Question 11

A government policy that provides public education is primarily aimed at addressing which economic problem?

Accepted Answer

Providing public goods

Question 12

If economic growth shifts the PPB outward, what happens to previously unattainable points?

Accepted Answer

They become attainable.

Question 13

Which of the following best explains why scarcity leads to the need for choice?

Accepted Answer

Because resources are limited relative to wants.

Question 14

Which of the following is an example of a macroeconomic issue?

Accepted Answer

The unemployment rate in Canada

Question 15

Which of the following is a plausible reason for a government to intervene in a market economy?

Accepted Answer

To correct market failures

Question 16

Which of the following is a direct effect of globalization?

Accepted Answer

Increased importance of international trade

Question 17

If a student chooses to attend university instead of working full-time, what is the opportunity cost of attending university?

Accepted Answer

The value of the next best alternative, which is the income from the full-time job forgone

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

Which of the following is NOT a reason why resources might be idle in an economy?

Accepted Answer

Unlimited wants

Question 20

Which of the following best describes the circular flow of income and expenditure?

Accepted Answer

It shows the flow of goods and services and the payments made to purchase them.

Chapter 1: Economic Issues and Concepts – Study Notes

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