Exam

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) What do economists mean when they say that the economy faces scarcity? 1) _______
A) There are fewer resources available than there were in the 1960s.
B) It is quite evident that the world is running out of resources.
C) The economy is producing far below its capacity to produce.
D) The resources available are not sufficient to produce all that everyone wants.

2) What do economists assume is true about human wants? 2) _______

A) They are easily defined.
B) That we are on the verge of being able to satisfy them.
C) They are unlimited.
D) They haven't changed much over the centuries.

3) All of the following except one are positive statements. Which is the exception? 3) _______
A) The government needs to reduce its budget deficit.
B) A decrease in price will lead to a larger quantity bought.
C) Production is subject to the law of increasing costs.
D) The degree of competition in our economy has been increasing in the last ten
years.

Below is a production possibilities curve involving tea and videos.

4) Refer to the graph above to answer this question. Which of the following illustrates the 4) _______
law of increasing costs?
A) Any point outside the production possibilities curve.
B) A "bowed-out" production possibilities curve.
C) A straight-line production possibilities curve.
D) Any point inside the production possibilities curve.

Below are some production possibilities data for the mystical land of Ghandor.

A B C D E
Arrows 0 1 2 3 4
Viners 20 18 14 8 0

5) Refer to the information above to answer this question. Suppose that Ghandor is 5) _______
currently producing combination B. How many Viners could be produced if the
production of Arrows increased by 2?
A) 3 units of Viners. B) 4 units of Viners.
C) 8 units of Viners. D) 14 units of Viners.

Below is a production possibilities curve involving tea and videos.

6) Refer to the graph above to answer this question. Assume that the economy is facing 6) _______
PPI and that the economy is currently producing the combination of tea and videos
represented by point A. What is the opportunity cost of increasing the output of videos
to 400,000?
A) 400 tons of tea. B) 800 tons of tea.
C) 100,000 videos. D) 300,000 videos.

7) Refer to the graph above to answer this question. Assume that the economy is facing 7) _______
PPI and that 2,000 tons of tea are produced; how many videos could be produced?
A) 600,000. B) 500,000. C) 2,000. D) 0.

8) Refer to the graph above to answer this question. What might point U indicate? 8) _______
A) Not all resources available to the economy are being used.
B) The resources being used are not being used efficiently.
C) The technology being used is not the most appropriate one.
D) All of these.

9) All of the following statements, except one, are positive statements. Which is the 9) _______
exception?
A) Economics is a social science.
B) Economics is sometimes referred as the science of choice.
C) A majority of economists argue that economics is a very relevant discipline.
D) Economics should be a mandatory course in all Canadian colleges and
universities.
E) Economics is a possible undergraduate major for students who want to go to law
school.
 10) Which of the following is a capital good? 10) ______
A) An oven in a bakery.
B) A home computer.
C) The first application of CD ROM technology to an economics textbook.
D) An investment in IBM stock.

11) Which of the following statements describes the law of increasing costs? 11) ______
A) As the economy's production level of any particular item decreases, its
opportunity cost rises.
B) As the economy's production level of any particular item increases, its opportunity
cost rises.
C) The prices of consumer goods always rise and never fall.
D) If someone waits to make a purchase, she will pay a higher price.
E) The total cost of production rises as output goes up.

The graph below is Mendork's production possibility curve for the only two goods that it produces-quirks and
quarks.

12) Refer to the graph above to answer this question. If this society chooses to produce 10 12) ______
quirks, what is the maximum quantity of quarks it can produce?
A) 500 quarks. B) 800 quarks. C) No quarks. D) 600 quarks.

13) Refer to the graph above to answer this question. What is the opportunity cost of 13) ______
producing the first 700 quarks?
A) It is 6 quirks.
B) It is 10 quirks.
C) It is 14 quirks.
D) The answer cannot be determined from the information given.

14) Refer to the graph above to answer this question. If Mendork's current production is at 14) ______
point A, what is the (approximate) cost of producing one more quirk?
A) 100 quarks.
B) 50 quarks.
C) 25 quarks.
D) 200 quarks.
E) One more quark.

15) Which of the following terms describes the next best alternative that must be sacrificed 15) ______
as a result of making a particular choice?
 A) Microeconomics.
B) Opportunity cost.
C) Macroeconomics.
D) The law of increasing costs.
E) Scarcity.

16) What is the opportunity cost of a particular product? 16) ______

A) The price paid for that product.
B) The value put on that product by the person who bought it.
C) The value of the next-best alternative that is given up as a result of buying that
particular product.
D) The combined value of all the other alternatives that are given up as a result of
buying that particular product.

17) Gwen had only $10 yesterday. She was uncertain whether to go out for lunch or to buy 17) ______
beer. In the end, she bought beer. Which of the following statements is correct?
A) The choice of the beer and not lunch is an example of constant costs.
B) The cost of buying beer is less than lunch.
C) The opportunity cost of beer is lunch.
D) The opportunity cost of beer is $10.

18) Which of the following is correct? 18) ______

A) Scarcity forces choice which involves opportunity costs.
B) Choice causes scarcity which involves increasing costs.
C) Choice causes scarcity which involves opportunity costs.
D) Scarcity forces choice which involves increasing costs.

19) All of the following except one are factors of production. Which is the exception? 19) ______
A) Land.
B) Labour.
C) Capital.
D) Money.
E) Enterprise.

20) Which of the following is an alternative for the term, "factors of production"? 20) ______
A) Methods of organizing an economy. B) Ways of coordinating an economy.
C) Productive resources or inputs. D) Goods and services.