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 planner has a budget of $$12 million to allocate between repairing roads at 1 $$million per km and building bicycle paths at $$0.5 million per km. If the planner spends 8 $$million on road repairs, what is the maximum length of bicycle paths that can be built?

Accepted Answer

$$(12 - 8) \div 0.5 = 8 km$$

Question 3

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

Accepted Answer

Consumption

Question 4

A student decides to attend university instead of working a full-time job. Which of the following is the opportunity cost of this decision?

Accepted Answer

The salary the student could have earned from the full-time job.

Question 5

If a production possibilities boundary (PPB) shows points b and c as fully and efficiently utilized, and point d as unattainable, what does point 2 represent?

Accepted Answer

Under-utilization of resources.

Question 6

Which statement best explains why scarcity leads to the problem of choice in economics?

Accepted Answer

Because resources are limited, not all wants can be satisfied, so choices must be made.

Question 7

In a market economy, what is meant by the term 'self-organizing'?

Accepted Answer

Individual consumers and producers act independently, and their collective actions result in coordinated outcomes.

Question 8

Which of the following is an example of a marginal decision?

Accepted Answer

Deciding to buy one more unit of a product.

Question 9

If the opportunity cost of producing 1 more unit of food is 2.5 units of clothing, what is the opportunity cost of producing 1 more unit of clothing?

Accepted Answer

$$0.4$$ units of food

Question 10

Which of the following best describes the role of government in a mixed economy?

Accepted Answer

The government provides institutions such as private property and freedom of contract, and intervenes when markets fail.

Question 11

Why is specialization of labour important in modern economies?

Accepted Answer

It allows workers to focus on tasks they perform best, increasing efficiency and output.

Question 12

Which of the following is a direct result of trade facilitated by money?

Accepted Answer

Exchange of goods and services is simplified, promoting specialization.

Question 13

Suppose Canada implements protectionist policies. What is a likely consequence for Canadian consumers?

Accepted Answer

Reduced access to foreign products and potentially higher prices.

Question 14

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

Accepted Answer

Mixed

Question 15

If a country is operating inside its production possibilities boundary, what does this indicate?

Accepted Answer

Some resources are under-utilized or used inefficiently.

Question 16

Which of the following best illustrates the concept of intertemporal trade-offs?

Accepted Answer

Deciding to save money today for future consumption.

Question 17

Adam Smith argued that free-market economies are relatively efficient because:

Accepted Answer

Resources are allocated by the 'invisible hand' of self-interested individuals.

Question 18

Which of the following is a plausible reason for rising income inequality in Canada, according to the study materials?

Accepted Answer

High market returns on savings and investments.

Question 19

If the opportunity cost of building 1 km of new bicycle path is 0.5 km of road repair, what is the opportunity cost of repairing 1 km of road?

Accepted Answer

$$2 km of $$bicycle path

Question 20

Which of the following is a key insight from Karl Marx regarding free-market economies?

Accepted Answer

They can produce high levels of output but may not ensure fair distribution of income.

Economic Issues and Concepts: Foundations of Microeconomics

Study Guide - Practice Questions

Study Guide - Flashcards