TOTAL MARKS: 100 (4 marks each). Answer all questions on the scantron.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is the best definition of economics? 1) _______
A) The study of how consumers spend their income.
B) The study of how consumers and producers meet each other at the market.
C) The study of how producers decide what inputs to hire and what outputs to produce.
D) The study of how individuals, businesses, governments, and entire societies make choices
as they cope with scarcity and the incentives that influence and reconcile those choices.
E) The study of how a provincial government allocates tax dollars.
2) The two big economic questions include all of the following except 2) _______
A) for whom to produce.
B) why to produce.
C) what to produce.
D) how to produce.
E) can choices made in the pursuit of self-interest also promote the social interest.
3) Complete the following sentence. Capital is 3) _______
A) "gifts of nature."
C) money in the bank.
D) stocks and bonds.
E) tools, instruments, machines, buildings, and other constructions that businesses use to
produce goods and services.
4) When the government of Alberta chooses to build more roads, the required resources are no 4) _______
longer available to provide better health care facilities. This situation illustrates the concept of
A) opportunity cost.
B) human capital.
C) monetary cost.
D) marginal benefit.
5) If Sam is producing at a point inside his production possibilities frontier, then he 5) _______
A) is unaffected by costs and technology.
B) can increase production of both goods with zero opportunity cost.
C) has a high opportunity cost of moving from this point.
D) is fully using all his resources and allocating his resources to their best use.
E) must be doing the best he can with limited resources.
6) A medical clinic has 10 workers. Each worker can produce a maximum of either 2 units of 6) _______
medical services or 5 units of secretarial services a day. The opportunity cost of one more unit of
medical services is
A) 5 units of secretarial services.
B) dependent on the level of services.
C) 2.5 units of secretarial services
D) 0.4 units of secretarial services.
E) 2 units of secretarial services. Use the figure below to answer the following questions.
7) Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity cost of 7) _______
increasing production of Y to 80 units is
A) 80 units of Y.
B) 2 units of X.
C) 10 units of Y.
D) 3 units of X.
E) 1 unit of X.
Use the figure below to answer the following questions.
8) In Figure 2.2.1, the curve labeled B shows 8) _______
A) that the benefits of producing more bicycles is greater than the benefits of producing more
B) the bottles of pop that people are willing to forgo to get another bicycle.
C) the bicycles that people are willing to forgo to get another bottle of pop. D) the bottles of pop that people must forgo to get another bicycle.
E) that the benefits of producing more pop is greater than the benefits of producing more
Use the table below to answer the following questions.
Ethanol Food crops
(barrels per day) (tonnes per day)
70 and 0
64 and 1
54 and 2
40 and 3
22 and 4
0 and 5
9) Refer to Table 2.2.1. Marginal benefit from food crops 9) _______
A) equals 70 barrels of ethanol.
B) remains constant as the quantity of food crops increases from 1 tonne a day to 2 tonnes a
C) cannot be calculated from the table.
D) increases as the quantity of food crops increases from 1 tonne a day to 2 tonnes a day.
E) equals the marginal cost of food crops.
10) Consider a country that has two industries. In the north, they grow wild rice, which requires a 10) ______
lot of rainfall. In the south, they grow wheat, which requires just a moderate amount of rainfall
(too much rainfall is bad for wheat production). One year, there is a record rainfall. This will
A) the production possibilities frontier swiveling, with the wild rice intercept increasing, and
the wheat intercept decreasing.
B) the production possibilities frontier swiveling, with the wild rice intercept decreasing, and
the wheat intercept increasing.
C) a parallel shift outward of the production possibilities frontier.
D) a parallel shift inward of the production possibilities frontier.
E) none of the above.
11) Which of the following quotations illustrates economic growth? 11) ______
A) "The more and more gadgets the firm produces, the bigger the fall in widget production."
B) "The firm has been able to lower costs due to its extensive experience in building widgets."
C) "The firm should sell more gadgets, even if it means less widget sales."
D) "The firm should lower the price it charges for widgets and gadgets."
E) "If the firm invests more in capital equipment, it can expand production next year." Use the information below to answer the following questions.
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe
can produce either 8 loaves of bread or 8 kilograms of butter.
12) Given Fact 2.4.1, the opportunity cost of producing 1 loaf of bread is 12) ______
A) 8 kilograms of butter for both Andy and Rolfe.
B) 20 minutes (1/3 hour) for Andy