CH.

1
1. Economics is about how individuals, businesses, and governments make the best
possible choices to get what they want, and how those choices interact in markets. T  F
2. People who win the lottery don’t have to make smart choices. T  F
3. Opportunity cost equals money cost. T  F
4. The Government of Canada announced a $1000 Apprenticeship Incentive Grant to pay
for tuition, travel, and tools for apprentices in the sealing trades. This will eliminate the
opportunity cost of being an apprentice. T  F
5. According to Economics Out There on p. 6, men have a larger incentive to get a
post-secondary education because not getting a post-secondary education results in a
relatively worse outcome compared to women. T  F
6. Traditionally, women specialized in unpaid work at home and men specialized in paid
work outside the house. One possible explanation is that men have a comparative
advantage in performing housework (for example, cooking, cleaning, and child care). T
 F
7. Combinations of products inside a production possibilities frontier are impossible to
produce. T  F
8. Comparative advantage is the ability to produce at a lower absolute cost, compared to
another producer. T  F
9. Voluntary trade is a zero-sum game, where one person’s gain is the other’s loss. T  F
10. Traditionally, women specialized in unpaid work at home and men specialized in paid
work outside the house. One possible explanation is that men have a comparative
advantage in performing housework (for example, cooking, cleaning, and child care). T
 F
11. Combinations of products inside a production possibilities frontier are impossible to
produce. T  F
12. Comparative advantage is the ability to produce at a lower absolute cost, compared to
another producer. T  F
13. Decisions to go to college or take out a loan are macroeconomic choices. T  F
14. Microeconomics analyzes choices that individuals in households, individual businesses,
and governments make, and how those choices interact in markets. T  F
15. Negative externalities are benefits that affect others external to a choice or a trade. T F

You can’t get everything you want because you are limited by

1. time.
2. money.
3. energy.
4. all of the above.
Scarcity is

1. not a challenge for governments.

2. not a challenge for celebrities.
3. not a challenge for people who win the lottery.
4. a challenge for everyone.

Economics does not focus on

1. individuals.
2. animals.
3. businesses.
4. Government.

Opportunity cost includes

1. time you give up.

2. energy you spend.
3. money you spend.
4. all of the above.

In deciding whether to study or sleep for the next hour, you should consider all of the following
except

1. how much tuition you paid.

2. how tired you are.
3. how productive you will be in that hour.
4. how much value you place on sleeping in that hour.

Recently, the proportion of 25- to 29-year-old women with university degrees rose from 21
percent to 34 percent, while the proportion of 25- to 29-year-old men with degrees rose from 16
percent to 21 percent. There is a similar trend for college diplomas. More women than men are
getting post-secondary education because

1. the gap in pay between post-secondary and high-school graduates is higher for women.
2. the cost of not going to post-secondary education is higher for women.
3. the opportunity cost of going to post-secondary education is lower for women.
4. all of the above.

If the resource-rich sector of Alberta’s economy slows down,

1. opportunity costs of upgrading to a college diploma increase.

2. opportunity costs of upgrading to a college diploma decrease.
3. incentives to drop out of college increase.
4. all of the above.
Mutually beneficial gains from trade come from

1. absolute advantage.
2. comparative advantage.
3. self-sufficiency.
4. China.

The easiest way to calculate opportunity cost is

1. Give up / get

In one hour, Chloe can bake 24 cookies or 12 muffins. Zabeen can bake 6 cookies or 2 muffins.
For mutually beneficial trade, Chloe should

1. bake cookies because she has a comparative advantage.

2. bake cookies because she has an absolute advantage.
3. bake muffins because she has a comparative advantage.
4. bake muffins because she has an absolute advantage.

Which of the following statements is normative?

1. Economists should not make normative statements.

2. Warts are caused by handling toads.
3. As smartphone prices fall, people will buy more of them.
4. As test dates get closer, students study more hours.

In the circular-flow model,

1. households ultimately own all inputs of an economy.

2. governments set the rules of the game.
3. businesses are sellers and households are buyers in output markets.
4. all of the above.

Which of the following is not a microeconomic choice for businesses?

1. what interest rate to set

2. what products to supply
3. what quantity of output to produce
4. how many workers to hire

Which of the following is not a microeconomic choice for governments?

1. increasing tuition rates

2. taxing automobile emissions
3. increasing the exchange rate of the Canadian dollar
4. increasing the number of taxi licences
All of the following should be considered when making smart choices, except

1. external costs and benefits.

2. past costs and benefits.
3. implicit costs.
4. additional costs and additional benefits.

CH. 2
1. Demand is the same as wants. T  F
2. Your willingness to pay for a product depends on what substitutes are available, and
what they cost. T  F
3. What you can afford is just about money. T  F
4. Marginal cost is the same as additional cost. T  F
5. The flat fee charged at an all-you-can-eat restaurant should not influence how much
food you eat once you are seated. T  F
6. Marginal benefit always equals average benefit. T  F
7. Willingness to pay depends on marginal benefit, not total benefit. T  F
8. Quantity demanded is the same as demand. T  F
9. If the price of a product or service changes, quantity demanded changes. T  F
10. Market demand is the sum of the demands of all individuals. T  F
11. Demand curves may be straight lines or curves, but always slope downwards to the left.
T  F
12. If your willingness to pay decreases, demand decreases. T  F
13. If your ability to pay decreases, demand increases. T  F
14. Throughout the month of December, the quantity of video game consoles
purchasedincreases even as the price rises. This violatesthe law of demand. T  F
15. A decrease in income always shifts the demand curve leftward. T  F

Economists describe the list of your wants and their intensities as

1. demand.
2. supply.
3. benefit.
4. preferences.

Costs are

1. worth money.
2. whatever we are willing to give up.
3. the answer to the question “What do we want?”
4. whatever we are willing to get.
Your preferences measure

1. the availability of substitutes.

2. how limited your time is.
3. the price of a product.
4. how badly you want something

All-you-can-eat buffet restaurants charge a fixed fee for eating. With each plate that Anna eats,
she experiences

1. decreasing marginal costs.

2. increasing marginal costs.
3. decreasing marginal benefits.
4. increasing marginal benefits.

Thinking like economists, a dating couple should break up when the

5. total benefits of dating are greater than the total costs of dating.
6. total costs of dating are greater than the total benefits of dating.
7. additional benefits of dating are greater than the additional costs of dating.
8. additional costs of dating are greater than the additional benefits of dating.

Peter wants two cars, one for everyday and the other for special occasions. He has only $15
000, so he buys only one car. His quantity demanded of cars is

9. 1.
10. 2.
11. 15 000.
12. 30 000.

The price of diamonds is higher than the price of water because

13. total benefits from water are relatively low.

14. total benefits from diamonds are relatively high.
15. marginal benefits from water are relatively high.
16. marginal benefits from diamonds are relatively high.

When the price of a product rises,

1. consumers look for more expensive substitutes.

2. quantity demanded increases.
3. consumers look for cheaper substitutes.
4. consumers use more of the product.
If homeowners were charged for garbage collection by the number of garbage bags used, there
would be a(n)

1. increase in demand for garbage collection.

2. decrease in demand for garbage collection.
3. increase in quantity demanded of garbage collection.
4. decrease in quantity demanded of garbage collection.

A sociology class is a substitute for an economics class if

1. attending the two classes has the same opportunity cost.

2. the two classes satisfy the same want.
3. both classes are at the same time.
4. both classes are taught by the same instructor.

What is most likely to be an inferior good?

1. fast food
2. antique furniture
3. school bags
4. textbooks

Demand

1. increases with a rise in price.

2. is the same as quantity demanded.
3. changes with income.
4. decreases with a rise in price.

If the price of cars rises, the demand for tires

1. increases.
2. decreases.
3. stay the same.
4. depend on the price of tires.

Which of the following could cause a rightward shift of the demand curve for a product?

1. increase in income
2. decrease in income
3. increase in the price of a substitute
4. all of the above
If Kraft Dinner is an inferior good, a rise in the price of Kraft Dinner

1. decreases demand for Kraft Dinner.

2. increases demand for Kraft Dinner.
3. increases the quantity demanded of Kraft Dinner.
4. decreases the quantity demanded of Kraft Dinner.

CH 3
1. When higher-paying jobs are harder to find for workers, a business will pay more to hire
labour. T  F
2. Any smart business supply decision involves a choice between a business’s marginal
benefit (or reward) from supplying (or selling) its product and the business’s marginal
opportunity cost of producing the product. T  F
3. Any smart worker supply decision involves a choice between a worker’s marginal benefit
(or reward) from supplying (or selling) her work and the worker’s marginal opportunity
cost of working. T  F
4. Gordie’s marginal opportunity cost of spending an extra hour on Facebook increases if
he suddenly has the opportunity to go on a date with his high school crush. T  F
5. Businesses should consider the monthly rent when deciding whether to produce more of
a product or service. T  F
6. Sunk costs are part of opportunity costs. T  F
7. Businesses must receive higher prices as output increases to compensate for increasing
marginal opportunity costs. T  F
8. Opportunity cost equals what you get divided by what you give up. T  F
9. As you shift time away from watching TV to working more hours, the marginal
opportunity cost of working decreases. T  F
10. All opportunity costs are marginal costs, and all marginal costs are opportunity costs. T
 F
11. To read a supply curve as a marginal cost curve, you start with price and go over and
down to quantity supplied. T  F
12. A rise in the price of inputs used by businesses decreases market supply. T  F
13. A rise in the price of a related product a business produces increases market supply of
the other product. T  F
14. A rise in expected future prices shifts today’s supply curve leftward. T  F
15. Moving up along a supply curve is an increase in supply. T  F
Your opportunity cost of watching The Big Bang Theory increases if

1. it is your favourite TV show.

2. you have an expensive television.
3. you have an exam the next day.
4. all of the above.

The opportunity cost of going to school is highest for someone who

1. has to give up a job paying $10 an hour.

2. has to give up a job paying $15 an hour.
3. loves school.
4. has to give up a volunteer opportunity.

Which statement is false?

1. Marginal costs are opportunity costs.

2. Opportunity costs are marginal costs.
3. Sunk costs are marginal costs.
4. Marginal opportunity costs increase as quantity supplied increases.

Gamblers on slot machines often believe that the more they lose, the greater are their chances
of winning on the next turn. However, the chances of winning on any turn are actually random —
they do not depend on past turns. Therefore, the money lost on the previous turn is a(n)

1. total cost.
2. sunk cost.
3. smart cost.
4. opportunity cost.

Your friend Larry is deciding whether to break up with his current girlfriend, Lucy. He tells you
that his number-one reason for staying with her is his tattoo, which says “I love Lucy.” Based on
economic thinking, you advise him to ignore his tattoo because it is a(n)

1. opportunity cost.
2. marginal cost.
3. sunk cost.
4. total cost.
If all workers and equipment are equally productive in all activities, the opportunity cost of
increasing output is always

1. increasing.
2. decreasing.
3. the same.
4. low.

The law of supply applies to an individual’s decision to work because

5. as the wage rises, the quantity of hours a worker is willing to supply increases.
6. as the price workers receive rises, the quantity of hours a worker is willing to
supply increases.
7. workers need to be compensated with higher wages to work more hours to cover
increasing marginal opportunity costs.
8. all of the above.

When a fall in price causes businesses to decrease the quantity supplied of a product, this
illustrates

9. the law of supply.

10. the law of demand.
11. a decrease in supply.
12. an increase in supply.

Suppose that all inputs in a business are equally productive at all activities. As the business
increases its output, marginal opportunity cost

13. increases.
14. decreases.
15. is constant.
16. is zero.

Which factor below does not change supply?

1. prices of inputs
2. expected future prices
3. price of the supplied product or service
4. number of businesses

The supply of a product or service increases with a(n)

1. improvement in technology producing it.

2. rise in the price of a related product or service produced.
3. rise in the price of an input.
4. rise in the future price of the product or service.
The market supply of tires decreases if

1. the price of oil — a major input used to produce tires — rises.

2. tire-making technology improves.
3. the expected future price of tires falls.
4. new tire businesses enter the market.

The furniture industry shifts to using particleboard (glued wood chips), rather than real wood,
which reduces costs. This

1. increases supply.
2. decreases supply.
3. leaves furniture supply unchanged.
4. effect on supply depends on demand.

Which factor below can change supply?

1. income
2. environmental change
3. number of consumers
4. price of a complement

Popeye’s Parlour supplies both piercing and tattoo services. Higher prices for piercings will
cause Popeye’s

1. quantity supplied of tattoos to increase.

2. quantity supplied of tattoos to decrease.
3. supply of tattoos to increase.
4. supply of tattoos to decrease.