Lecture 1

Question 1

Scarcity is likely to be

A) a result of the work ethic.
B) a problem that will always exist.
C) unique to the twentieth century.
D) eliminated with a better understanding of economics.
E) a problem that will be solved by the proper use of available resources.

Answer 1

B) a problem that will always exist

Question 2

Suppose an individual wheat farmer’s income is influenced by the region’s average daily temperature. When examining the determinants of individual farmer income, the average daily temperature is a(n) ________ variable.

A) exogenous
B) endogenous
C) induced
D) flow
E) dependent

Answer 2

A) exogenous

Question 3

An economist has data showing Canadian GDP for the years 1945-2015. The best way to illustrate these data is

A) a logarithmic scale diagram.
B) a scatter diagram.
C) a cross-sectional bar-chart graph.
D) a time-series pie chart.
E) a time-series line graph.

Answer 3

E) a time-series line graph

Question 4

Which is the best description of positive statements? Positive statements

A) are falsifiable in principle by appeal to factual evidence.
B) are seldom employed in social sciences like economics.
C) have no place in economics because economics deals only with value judgments.
D) form the basis of all normative arguments.
E) have been verified by appeal to factual evidence.

Answer 4

A) are falsifiable in principle by appeal to factual evidence.

Question 5

Which of the following results from the introduction of money for use in transactions?

A) exchange becomes easier and this promotes the specialization of labour
B) the specialization of labour becomes more difficult
C) society is able to satisfy all wants
D) an increased use of barter
E) self-sufficiency is assured

Answer 5

A) exchange becomes easier and this promotes the specialization of labour

Question 6

The base year for an index number is

A) chosen arbitrarily by those who construct the data.
B) declared by the federal government.
C) determined by the year the variable equals exactly 100.
D) the year in which 2 or more index numbers are equal to 100.
E) dependant upon the type of data.

Answer 6

A) chosen arbitrarily by those who construct the data.

Question 7

Choose the statement that best characterizes an economic theory. An economic theory

A) is only useful if its underlying assumptions are realistic.
B) must be judged on its ability to explain and predict real-world phenomena.
C) will be useful as long as it is logically consistent.
D) will predict more accurately if it contains a greater number of mathematical equations.
E) will be useful only if all human behaviour is rational.

Answer 7

B) must be judged on its ability to explain and predict real-world phenomena

Question 8

The statement that a country’s rate of economic growth is influenced by its firms’ investment behaviour is an example of a(n)

A) theory.
B) economic law.
C) normative statement.
D) variable.
E) prediction.

Answer 8

A) theory

Question 9

The statement that a 2% increase in the money supply leads to a 2% increase in the price level is an example of a(n)

A) variable.
B) normative statement.
C) assumption.
D) prediction.
E) model.

Answer 9

D) prediction

Question 10

Because resources are scarce, individuals are required to

A) improve distribution but not production.
B) make choices among alternatives.
C) sacrifice production but not consumption.
D) improve production but not distribution.
E) use resources inefficiently.

Answer 10

B) make choices among alternatives.

Question 11

An assertion about the desirability of reducing unemployment by lowering payroll taxes is most likely

A) a theory.
B) a testable proposition.
C) a hypothesis.
D) a positive statement.
E) a normative statement.

Answer 11

E) a normative statement

Question 12

Which of the following statements belongs more properly in the field of normative economics than positive economics?

A) Technological change has reduced the cost of cell phone service.
B) When a drought occurs, the price of vegetables tends to rise.
C) Canadian governments should provide assistance to the auto industry.
D) The price of one Canadian dollar is $0.85 U.S.
E) An increase in the minimum wage leads to more unemployment.

Answer 12

C) Canadian governments should provide assistance to the auto industry.

Question 13

Suppose an economist tells you that the unemployment rate in Canada last year was 7.8%. This is an example of a(n) ________ statement.

A) autonomous
B) induced
C) normative
D) positive
E) imputed

Answer 13

D) positive

Question 14

During economic recessions, the opportunity cost of going to university ________ because the wages a student can expect to earn working in the best alternative ________.

A) increases; decrease
B) increases; increase
C) decreases; decrease
D) decreases; increase
E) remains the same; remain the same

Answer 14

C) decrease; decrease

Question 15

According to the Bank of Canada’s website, Canada’s Consumer Price Index (CPI) in August 2012 was 121.8, August 2013 was 123.1, August 2014 was 125.7 and August 2015 was 127.3. Given this set of index numbers, what can we conclude about average prices in Canada between August 2012 and August 2015?

A) average prices decreased over this time period by 5.5%
B) average prices increased over this time period by 5.5%
C) average prices increased over this time period by 27.3%
D) average prices increased each year
E) average prices decreased each year

Answer 15

D) average prices increased each year

Question 16

Income redistribution in a mixed economy

A) is only accomplished through government intervention.
B) risks reducing individual incentives to work and produce.
C) rarely occurs
D) is not allowed.
E) is supported by all individuals.

Answer 16

B) risks reducing individual incentives to work and produce.

Question 17

Specialization of labour led to greater efficiency in the allocation of resources because of

A) an increase in total work effort.
B) greater reliance on self-sufficiency.
C) the use of barter.
D) the principle of comparative advantage.
E) the opportunity cost of labour increased.

Answer 17

E) the opportunity cost of labour increased.

Question 18

When an economist assumes that the owners of firms are motivated only by the desire to maximize profits, the economist most likely believes that

A) individuals entering business are quite narrow in their personal objectives.
B) it doesn’t matter whether or not the assumption is descriptively accurate; what matters is whether a theory built on the assumption predicts well.
C) the assumption is descriptively accurate, since surveys have been taken and the owners of firms have admitted that their only objective is to maximize profits.
D) all people enter business for their own selfish gain.
E) the assumption is inaccurate, since surveys have been taken and the owners of firms have admitted that they care about more than just profits.

Answer 18

B) it doesn’t matter whether or not the assumption is descriptively accurate; what matters is whether a theory built on the assumption predicts well.

Question 19

For a given year, an index number of average prices across the economy (in Canada, the Consumer Price Index) is the ratio of the

A) price of several goods in the given year to that in the base year.
B) simple average price of all goods in the given year to that in the base year.
C) average price of several goods in the base year to that in the given year.
D) weighted prices of a typical bundle of goods purchased in the base year to that in the given year.
E) weighted prices of a typical bundle of goods purchased in a given year to that in the base year.

Answer 19

E) weighted prices of a typical bundle of goods purchased in a given year to that in the base year.

Question 20

Most modern economies in the world today

A) have a mix of traditional, command and market elements.
B) are complex systems that defy description and analysis.
C) are mostly run by government decree.
D) have pure market exchange.
E) are similar to feudal systems.

Answer 20

A) have a mix of traditional, command and market elements.