Question 1

In an economic sense,scarcity means that there are
A) limited resources available,so consumers never have to make choices.
B) unlimited resources available,so consumers never have to make choices.
C) not many products available to consumers.
D) limited resources available,so consumers have to make choices.
E) unlimited resources available,so consumers have to make choices.

Accepted Answer

Scarcity refers to the limited availability of resources relative to their demand. As a result, consumers must make choices about how to allocate the resources available to them. Therefore, option D correctly defines the concept of scarcity. Options A, B, C, and E are incorrect because they are either in contradiction to the definition of scarcity or do not accurately describe the concept.

Question 2

The concept of scarcity applies both to Bill Gates and a homeless person because
A) both have the same legal rights.
B) they have the same access to the markets for goods and services.
C) there are only 24 hours in the day for both of them.
D) they are both consumers.
E) both must breathe air in order to livE.

Accepted Answer

Scarcity refers to the limited availability of resources relative to unlimited wants and needs. Both Bill Gates and a homeless person have the same amount of time in a day, which is a scarce resource that must be allocated efficiently to meet their respective needs and desires. Therefore, the correct answer is C - there are only 24 hours in the day for both of them. The other choices are not relevant to the concept of scarcity.

Question 3

Deciding to pursue an activity as long as the extra benefits are at least equal to the extra costs defines the
A) cost-benefit principle.
B) scarcity principle.
C) No-Free-Lunch principle.
D) marginal principle.
E) extra principlE.

Accepted Answer

The description given is of the cost-benefit principle. This principle suggests that individuals should engage in an activity only if the extra benefits exceed the extra costs.

Question 4

The core problem of economics is
A) that unemployment is too high.
B) that governments do not spend enough money on education.
C) understanding the Great Depression.
D) the scarcity problem.
E) determining the best price for oil.

Accepted Answer

The core problem of economics is the scarcity problem, which refers to the fact that resources are limited while our wants and needs are infinite. This problem creates the need to make choices and allocate resources efficiently in order to maximize societal welfare. The other options address specific issues, but do not represent the broader problem that economics aims to address.

Question 5

When economists say there is no such thing as a free lunch,they mean that
A) we must pay money for everything we get.
B) it is against the law to accept goods or services without paying for them.
C) when we eat lunch,our time has no value.
D) each day we decide to eat lunch is another day we must pay out money.
E) every choice we make involves a trade-off.

Accepted Answer

The phrase "there's no such thing as a free lunch" is rooted in the concept of opportunity cost – the idea that every choice has a cost, even if it is not a direct monetary cost. Choosing to have a free lunch may mean giving up the opportunity to do something else with that time or money, so every choice involves a trade-off. This is the essence of economic decision-making.

Question 6

Amy is thinking about going to the movies tonight.A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30.The total cost of seeing the movie is
A) $7.
B) $30.
C) $37.
D) $37 minus the benefit of seeing the movie.
E) indeterminatE.

Accepted Answer

The total cost of seeing the movie is the cost of the ticket plus the cost of canceling the dog-sitting job. The cost of the ticket is $7, and the cost of canceling the dog-sitting job is $30. Therefore, the total cost of seeing the movie is $7 + $30 = $37.

Question 7

The cost-benefit principle states that a consumer will be better off to follow a particular course of action,only if the
A) total benefits increase.
B) total costs decrease.
C) total costs remain unchanged.
D) extra benefits from taking the action are at least equal to the extra costs.
E) total benefits do not decreasE.

Accepted Answer

The cost-benefit principle states that a consumer will be better off to follow a particular course of action, only if the extra benefits from taking the action are at least equal to the extra costs. Therefore, option D is the correct choice as it represents the principle accurately.

Question 8

The existence of the cost-benefit principle stems from
A) the limited nature of wants.
B) the trade-offs the scarcity problem indicates must be made.
C) the necessity of government intervention.
D) opportunity costs.
E) the unlimited nature of resources.

Accepted Answer

The cost-benefit principle is based on the recognition that resources are scarce and trade-offs must be made when allocating them. Therefore, choice B, which refers to the trade-offs implied by the scarcity problem, is the best answer. Choices A, C, and E are not directly related to the cost-benefit principle, while choice D is a concept that is closely related to the principle but does not fully capture its essence.

Question 9

The Web site for this textbook can be viewed simultaneously by thousands of students around the world without paying money to view it.Does this suggest that the concept of scarcity does not apply to Web sites?
A) No,because each of the students incurs an opportunity cost,measured by the next best alternative to viewing the Web site.
B) Yes,because an additional student viewing the Web site does not prevent another student from viewing it.
C) Yes,because the students do not have to pay money to view the Web site and thus they do not have to forgo something else to view it.
D) No,because the more students who view it,the slower the transmission of the information to each of the students.
E) Yes,because the technology of the internet has made the principles of economics outdated.

Accepted Answer

The concept of scarcity still applies to the Web site because each student incurs an opportunity cost when viewing it, which is measured by the next best alternative they could have spent their time doing. Even though the Web site may be viewed by many students simultaneously, the fact remains that each student has a limited amount of time and attention they can devote to it, which makes it scarce in those terms.

Question 10

Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20.After the movie,she says to one of her friends that the movie was not worth it.Apparently,
A) Jenna failed to apply the cost-benefit model to her decision.
B) Jenna was not rational.
C) the economic model of cost-benefit analysis failed.
D) Jenna overestimated the benefits of the movie.
E) this proves the limitations of economic models,specifically the cost-benefit principlE.

Accepted Answer

The answer of Jenna decides to see a movie that...

Question 11

Applying the cost-benefit principle to the issues of large class sizes and recent tuition hikes in Canadian universities and colleges will help to find
A) a fair solution to the problems of such increases.
B) the best solution to the problems of such increases.
C) a plausible explanation of the problems of such increases.
D) out who could best bear the full burden of such increases.
E) out whether the government is doing their best to avert the problems of such increases.

Accepted Answer

The answer of Applying the cost-benefit principle to the issues...

Question 12

The fundamental problem that is studied in economics is that
A) consumers have limited wants in the face of unlimited resources.
B) markets should function without government interference.
C) Canada is too wealthy.
D) consumers have unlimited wants in the face of limited resources.
E) there are unlimited resources.

Accepted Answer

The fundamental economic problem is that human wants and needs are unlimited, but resources are scarce or limited. This creates the problem of how to allocate limited resources to satisfy unlimited wants and needs. Choice A, E, and C are incorrect because they do not reflect the core economic problem. Choice B is a proposition concerning the role of government in the market, rather than an economic problem.

Question 13

The opportunity cost of an activity is the value of
A) an alternative forgone.
B) the next-best alternative forgone.
C) the least-best alternative forgone.
D) the difference between the chosen activity and the next-best alternative forgone.
E) the alternative one would have preferred to choosE.

Accepted Answer

Opportunity cost is defined as the value of the next-best alternative that is forgone when a decision is made to pursue a particular action.

Question 14

Cost-benefit analysis can help to shed light in the decision-making process
A) even if we can at times describe costs and benefits in vague qualitative form only.
B) even if we have absolutely no information at all.
C) only if we know the precise dollar value of all costs and benefits.
D) only if we know the maximum dollar value of all costs and benefits.
E) only if we have information on all the relevant market data.

Accepted Answer

Even if costs and benefits are described in vague qualitative form, cost-benefit analysis can still help in decision-making by providing a framework for comparing the relative merits of different options. While having precise dollar values for costs and benefits can be helpful, it is not always necessary for cost-benefit analysis to be useful.

Question 15

The cost-benefit principle
A) states that an action should be taken only if the total benefit is at least as great as the total cost.
B) implies that the cost of all alternatives should be included when choosing among alternatives.
C) states that an action should be taken only if the extra benefit is at least as great as the extra cost.
D) states that an action should be taken only if the average benefit is greater than the average cost.
E) states that an action should be taken only if the extra benefit is less than the extra cost.

Accepted Answer

The cost-benefit principle states that an action should be taken only if the extra benefit is at least as great as the extra cost. This means that the benefits of the action should outweigh the costs incurred beyond what would already be incurred. The other answer choices are not accurate descriptions of the cost-benefit principle.

Question 16

With banking machines,it is possible to retrieve cash from the bank at any time.100 years ago,one could only get cash from the bank during business hours,say,9 am to 3 pm.The difference is because
A) flexibility was not valued 100 years ago.
B) it was impossible to provide 24 hour a day service 100 years ago.
C) the cost of providing 24 hour a day service is much lower today.
D) the government forced banks to become more convenient.
E) cash is a more popular means of making payments today.

Accepted Answer

Technological advancements have significantly reduced the cost and increased the feasibility of providing 24-hour banking services today compared to 100 years ago.

Question 17

Imagine a world with unlimited resources,including time.On that planet,
A) personal strife would not exist.
B) the scarcity problem would not apply but the cost-benefit principle would.
C) the cost-benefit principle would be irrelevant because trade-offs would be unnecessary.
D) the scarcity problem would still apply.
E) the discipline of economics would be more important.

Accepted Answer

The answer of Imagine a world with unlimited resources,including time.On...

Question 18

To determine the best course of action,one needs to consider
A) the benefits.
B) the costs.
C) neither the benefits nor the costs.
D) both the benefits and the costs.
E) either the benefits or the costs,but not both.

Accepted Answer

To make an informed decision, it is essential to consider both the benefits and the costs associated with each possible course of action. Ignoring one or the other could lead to unfavorable outcomes. Taking both into consideration can help in weighing the pros and cons of each option and determining the best course of action.

Question 19

In applying the cost-benefit principle,one should calculate the
A) total cost and total benefit,and choose that quantity of an activity where they are equal.
B) average cost and average benefit,and choose that quantity of an activity where the average benefit exceeds the average cost by the greatest amount.
C) total cost and total benefit,and choose that quantity of an activity where the total cost exceeds the total benefit by the greatest amount.
D) marginal cost and marginal benefit,and choose that quantity of an activity where the marginal benefit at least equals the marginal cost.
E) marginal cost,total cost,marginal benefit,and marginal cost,and choose that quantity of an activity where the marginal cost equals the total cost and the marginal benefit equals the total benefit.

Accepted Answer

The cost-benefit principle involves comparing the additional (marginal) costs and additional (marginal) benefits of an activity. Therefore, we should choose the quantity of an activity where the marginal benefit at least equals the marginal cost. This helps us achieve the optimal level of the activity where the additional benefits from producing one more unit are equal to the additional costs, maximizing overall benefit.

Question 20

The scarcity problem refers to the fact that
A) consumers do not have to make choices.
B) consumers have limited wants in the face of unlimited resources.
C) there are not many products available to consumers.
D) consumers have unlimited needs and wants,but there are limited resources.
E) there are unlimited resources available so consumers never have to make choices.

Accepted Answer

The scarcity problem refers to the limited nature of resources relative to unlimited wants and needs. Therefore, the option that best reflects this concept is D, which states that consumers have unlimited needs and wants, but there are limited resources. The other options are either incorrect (A, C, E) or only partially correct (B).

Quiz 1: Measuring Macroeconomic Performance: Output and Prices

In an economic sense,scarcity means that there are

The concept of scarcity applies both to Bill Gates and a homeless person because

Deciding to pursue an activity as long as the extra benefits are at least equal to the extra costs defines the

The core problem of economics is

When economists say there is no such thing as a free lunch,they mean that

Amy is thinking about going to the movies tonight.A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30.The total cost of seeing the movie is

The cost-benefit principle states that a consumer will be better off to follow a particular course of action,only if the

The existence of the cost-benefit principle stems from

The Web site for this textbook can be viewed simultaneously by thousands of students around the world without paying money to view it.Does this suggest that the concept of scarcity does not apply to Web sites?

Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20.After the movie,she says to one of her friends that the movie was not worth it.Apparently,

Applying the cost-benefit principle to the issues of large class sizes and recent tuition hikes in Canadian universities and colleges will help to find

The fundamental problem that is studied in economics is that

The opportunity cost of an activity is the value of

Cost-benefit analysis can help to shed light in the decision-making process

The cost-benefit principle

With banking machines,it is possible to retrieve cash from the bank at any time.100 years ago,one could only get cash from the bank during business hours,say,9 am to 3 pm.The difference is because

Imagine a world with unlimited resources,including time.On that planet,

To determine the best course of action,one needs to consider

In applying the cost-benefit principle,one should calculate the

The scarcity problem refers to the fact that