Question 1

According to the cost-benefit principle,the incentive to save $10 on a product is

Accepted Answer

A)   directly dependent on the price of the product.
B)   purely a question of whether it is worth it to do what is necessary to receive the $10 of savings.
C)   stronger if the $10 is a large percentage of the list price of the product.
D)   inversely related to the price of the product.
E)   weaker if the $10 is a small percentage of the list price of the product.

Question 2

Which of the following statements is an example of positive economics?

Accepted Answer

A)   Unemployment is a more serious problem than inflation because we all need to work for money to survive.
B)   Inflation is a more serious problem than unemployment,because we do not want our income to shrink with rising prices.
C)   Immigration is bad for the economy because we allow new immigrants to get some of the better jobs.
D)   Growth in income should be accomplished through government intervention.
E)   If wages increase,firms may have to fire some of their workers.

Question 3

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

Accepted Answer

A)   $7.
B)   $30.
C)   $37.
D)   $37 minus the benefit of seeing the movie.
E)   indeterminatE.

Question 4

The following table provides the costs (Cost A and Cost B) and the benenfits associated with each unit of activity
 
-The total cost of 5 units of the activity is

Accepted Answer

A)   $260.
B)   $100.
C)   $90.
D)   $10.
E)   indeterminatE.

Question 5

The range of topics,or issues,that fit within the definition of economics is

Accepted Answer

A)   limited to market activities,e.g. ,buying soap.
B)   limited to individuals and firms.
C)   extremely wide,requiring only the ideas of choice and scarcity.
D)   limited to governments and nations.
E)   very limited.

Question 6

Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is

Accepted Answer

A)   not rational.
B)   an application of the cost-benefit principle.
C)   an application of the scarcity principle.
D)   the relevant opportunity cost.
E)   less desirable than studying for the entire evening.

Question 7

The opportunity cost of a new public highway is the

Accepted Answer

A)   money cost of hiring contractors and construction workers for the new highway.
B)   other goods and services that must be sacrificed to construct the new highway.
C)   cost of constructing the new highway in a future year.
D)   increased traffic from the use of the new highway.
E)   cost of constructing the new highway in a previous year.

Question 8

After graduating from high school,Ron Willis plans to go to college.The college tuition is $15,000 a year.But,instead of going to college,Ron could take a full-time job paying $20,000.If Ron decides to go to college,what is his total cost for attending for one year?

Accepted Answer

A)   $5,000.
B)   $15,000.
C)   $20,000.
D)   $35,000.
E)   $40,000.

Question 9

Whether studying the size of the Canadian economy or the number of children a couple will choose to have,the unifying concept is

Accepted Answer

A)   wants are limited,resources are limited,and thus trade-offs must be made.
B)   wants are unlimited,resources are limited,and thus trade-offs must be made.
C)   wants are unlimited,resources are limited to some but not to others,and thus some people must make trade-offs.
D)   wants are unlimited,resources are unlimited,and thus no trade-offs need to be made.
E)   wants are unlimited,resources are limited,and thus government needs to do morE.

Question 10

Which of the following decisions would NOT be part of microeconomics?

Accepted Answer

A)   What university major to select.
B)   How to make the largest profit.
C)   Whether to study or watch TV tonight.
D)   How will an early frost in Prince Edward Island affect the price of potatoes.
E)   Should the federal budget always be balanced.

Question 11

The opportunity cost of a new national park is the

Accepted Answer

A)   cost of hiring staff and park rangers to provide services for visitors.
B)   cost of constructing park buildings.
C)   alternative uses for the land.
D)   increased pollution to the wildlife habitat at the park.
E)   cost of constructing highways to access the park.

Question 12

The cost-benefit principle indicates that an action should be taken

Accepted Answer

A)   if the total benefits exceed the total costs.
B)   if the extra benefits are positive.
C)   if the average benefits exceed the average costs.
D)   if the resulting economic surplus is zero.
E)   if the extra benefits are greater than the extra costs.

Question 13

Tim is at a party.The 7th beer that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero.The cost-benefit principle predicts that Tim will

Accepted Answer

A)   realize he has had too much to drink and go home.
B)   drink the 7th beer and continue until the marginal benefit of drinking another beer is zero.
C)   drink the 7th beer and continue until the marginal benefit of drinking another beer is negative.
D)   not drink the 7th beer.
E)   drink the 7th beer and then stop.

Question 14

The following table shows the total benefit from painting 0,1,2,3,or 4 rooms in a home.
 
-What is the marginal benefit of painting the second room?

Accepted Answer

A)   $0.
B)   $200.
C)   $300.
D)   $400.
E)   $500.

Question 15

Decisions that involve doing something or not (e.g. ,seeing a movie) and decisions that involve choosing a level (e.g. ,square footage of an apartment) are

Accepted Answer

A)   dissimilar,requiring two different models on how to decide.
B)   dissimilar,with the cost-benefit principle useful only when deciding on the level.
C)   similar,requiring a comparison of total benefits and total costs.
D)   similar,requiring a comparison of marginal benefits and marginal costs.
E)   similar,requiring a comparison of average benefits and average costs.

Question 16

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,

Accepted Answer

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.

Question 17

A student who has paid non-refundable tuition of $45 a lecture estimates the marginal benefit of each lecture to be $60.She should attend the class if

Accepted Answer

A)   the tuition for other classes is less than $60.
B)   the opportunity cost of attending class is $50.
C)   the opportunity cost of teaching the class is $70.
D)   the tuition is less than the marginal benefit.
E)   the opportunity cost of attending class is $65.

Question 18

-The total labour cost of 4 employees is

Accepted Answer

A)   $21,500.
B)   $22,000.
C)   $38,000.
D)   $43,121.
E)   $44,750.

Question 19

The following table shows the relationship between the speed of a computer's CPU and the benefits and costs.Assume that all other features of the computer are the same,i.e. ,CPU speed is the only source of variation.
 
-The marginal benefit of upgrading from a 1 GHz computer to a 2 GHz computer is

Accepted Answer

A)   $1,500.
B)   $500.
C)   $50.
D)   $5.
E)   $100.

Question 20

Which is the best example of a sunk cost of production to a firm?

Accepted Answer

A)   Rent on the factory.
B)   Wages paid to production workers.
C)   Electricity charges.
D)   Cost of production materials.
E)   Transportation costs.

Exam 1: Measuring Macroeconomic Performance: Output and Prices

Which of the following statements is an example of positive economics?

Correct AnswerverifiedShow Answer

After graduating from high school,Ron Willis plans to go to college.The college tuition is $15,000 a year.But,instead of going to college,Ron could take a full-time job paying $20,000.If Ron decides to go to college,what is his total cost for attending for one year?

Correct AnswerverifiedShow Answer

The opportunity cost of a new public highway is the

Correct AnswerverifiedShow Answer

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,

Correct AnswerverifiedShow Answer

Decisions that involve doing something or not (e.g. ,seeing a movie) and decisions that involve choosing a level (e.g. ,square footage of an apartment) are

Correct AnswerverifiedShow Answer

Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is

Correct AnswerverifiedShow Answer

The cost-benefit principle indicates that an action should be taken

Correct AnswerverifiedShow Answer

The following table shows the total benefit from painting 0,1,2,3,or 4 rooms in a home. -What is the marginal benefit of painting the second room?

Correct AnswerverifiedShow Answer

The following table shows the relationship between the speed of a computer's CPU and the benefits and costs.Assume that all other features of the computer are the same,i.e. ,CPU speed is the only source of variation. -The marginal benefit of upgrading from a 1 GHz computer to a 2 GHz computer is

Correct AnswerverifiedShow Answer

According to the cost-benefit principle,the incentive to save $10 on a product is

Correct AnswerverifiedShow Answer

A student who has paid non-refundable tuition of $45 a lecture estimates the marginal benefit of each lecture to be $60.She should attend the class if

Correct AnswerverifiedShow Answer

Which of the following decisions would NOT be part of microeconomics?

Correct AnswerverifiedShow Answer

Whether studying the size of the Canadian economy or the number of children a couple will choose to have,the unifying concept is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-The total labour cost of 4 employees is

Correct AnswerverifiedShow Answer

Tim is at a party.The 7th beer that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero.The cost-benefit principle predicts that Tim will

Correct AnswerverifiedShow Answer

The opportunity cost of a new national park is the

Correct AnswerverifiedShow Answer

The range of topics,or issues,that fit within the definition of economics is

Correct AnswerverifiedShow Answer

The following table provides the costs (Cost A and Cost B) and the benenfits associated with each unit of activity -The total cost of 5 units of the activity is

Correct AnswerverifiedShow Answer

Which is the best example of a sunk cost of production to a firm?

Correct AnswerverifiedShow Answer

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Tim is at a party.The 7^th beer that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero.The cost-benefit principle predicts that Tim will

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