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The distribution of income primarily determines which of the fundamental economic questions?


A) What goods and services are to be produced?
B) How are the goods and services to be produced?
C) Who will receive the goods and services produced?
D) How will the economy be planned?

E) B) and D)
F) All of the above

Correct Answer

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Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that:


A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.

E) B) and C)
F) A) and B)

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Voluntary exchange ________ economic efficiency because neither the buyer nor the seller would agree to a trade unless ________.


A) increases; they both benefit
B) increases; only one party benefits
C) decreases; neither benefit
D) decreases; they both benefit

E) B) and C)
F) A) and D)

Correct Answer

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The prevalence of Alzheimer's dementia is very high among residents living in nursing homes. A student concludes that it is likely that living in a nursing home causes Alzheimer's dementia. What is the flaw in the student's reasoning?


A) The student has failed to take into account other causes of Alzheimer's disease.
B) The student is drawing a false conclusion; he is confusing cause and effect.
C) The student is using an inadequate sample size.
D) The student is drawing a false conclusion by making the mistake of omitting critical variables such as the age and gender of the residents.

E) None of the above
F) B) and C)

Correct Answer

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Which of the following correctly describes the relationship between economic efficiency and economic equity?


A) They are both automatically achieved in a free market economy.
B) They always call for opposite outcomes.
C) There is no conflict between the two goals.
D) There is often a trade-off between the two.

E) None of the above
F) A) and B)

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The decisions Apple made in determining production levels for its iPhone is an example of a microeconomics topic.

A) True
B) False

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Economists assume that rational people do all of the following except:


A) use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) weigh the benefits and costs of all possible alternative actions.
D) respond to economic incentives.

E) A) and D)
F) None of the above

Correct Answer

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Economics does not study correct or incorrect behaviours but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits.


A) equitably
B) rationally
C) emotionally
D) selfishly

E) B) and C)
F) A) and B)

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The relationship between consumer spending and disposable personal income is:


A) an inverse relationship.
B) a direct relationship.
C) a negative relationship.
D) independent.

E) B) and C)
F) A) and D)

Correct Answer

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Suppose the extra cost to a doctor of keeping his office open on Saturdays is $1 200. Then, the doctor should stay open on Saturdays if keeping the office open brings in additional revenue of $1 200 or more.

A) True
B) False

Correct Answer

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Examining the conditions that could lead to unemployment in an economy is an example of a microeconomics topic.

A) True
B) False

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Figure 1.4 Figure 1.4 -Refer to Figure 1.4. Which of the following statements is false? A) The slope of the tangent at E is positive. B) The slope of the tangent at F is negative. C) The slope of the tangent at E and the slope of the tangent at F are equal. D) Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero. -Refer to Figure 1.4. Which of the following statements is false?


A) The slope of the tangent at E is positive.
B) The slope of the tangent at F is negative.
C) The slope of the tangent at E and the slope of the tangent at F are equal.
D) Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero.

E) A) and B)
F) B) and D)

Correct Answer

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Economists assume that rational behaviour is useful in explaining choices people make:


A) because irrational people do not make economic choices.
B) even though people may not behave rationally all the time.
C) because individuals act rationally all the time in all circumstances.
D) even though people rarely, if ever, behave in a rational manner.

E) A) and D)
F) B) and C)

Correct Answer

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An economic ________ is a simplified version of some aspect of economic life used to analyse an economic issue.


A) market
B) trade-off
C) variable
D) model

E) C) and D)
F) None of the above

Correct Answer

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What is 'equity', and how does it differ from 'efficiency'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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Equity refers to the fair distribution o...

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'Macroeconomics' is the study of:


A) how households make choices.
B) how firms make choices.
C) how households and firms make choices.
D) the economy as a whole.

E) B) and C)
F) C) and D)

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What is a 'marginal benefit'? _____________________________________________________________________________________________ _____________________________________________________________________________________________

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Marginal benefit is ...

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The ________ the sale of an additional unit of a product is a marginal benefit to the firm.


A) revenue received from
B) extra cost of
C) total value of
D) sales tax on

E) None of the above
F) C) and D)

Correct Answer

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The decision about what goods and services will be produced in a market economy is made by:


A) lawmakers in the government voting on what will be produced.
B) workers deciding to produce only what the boss says must be produced.
C) producers deciding what society wants most.
D) consumers and firms choosing which goods and services to buy or produce.

E) A) and B)
F) B) and C)

Correct Answer

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How are the fundamental economic questions answered in a market economy?


A) The government alone decides the answers.
B) Individuals, firms and the government interact in markets to decide the answers to these questions.
C) Households and firms interact in markets to decide the answers to these questions.
D) Large corporations alone decide the answers.

E) A) and B)
F) C) and D)

Correct Answer

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