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Questions and Answers
Which of the following statements provides the best definition of economics?
Which of the following statements provides the best definition of economics?
- The study of production and increasing its efficiency.
- The study of the most equitable distribution of scarce resources.
- The study of the use of scarce resources to satisfy unlimited human wants. (correct)
- The study of the productive capacity of a nation's factors of production.
- The study of the production of goods and services.
Society's resources are often divided into broad categories. They are
Society's resources are often divided into broad categories. They are
- land, labour, and capital. (correct)
- goods and services.
- factors of consumption.
- population and natural resources.
- tangible commodities and intangible commodities.
Consider the following list: a worker with training in video gaming technology, 10 hectares of arable land in southern Ontario, a fishing trawler in Nova Scotia, an ice-cream truck at a park in Quebec. Each of these is an example of
Consider the following list: a worker with training in video gaming technology, 10 hectares of arable land in southern Ontario, a fishing trawler in Nova Scotia, an ice-cream truck at a park in Quebec. Each of these is an example of
- an economic service.
- a factor of production. (correct)
- a commodity.
- a capital resource.
- goods and services.
Which of the following is NOT considered a "factor of production" in economics?
Which of the following is NOT considered a "factor of production" in economics?
Consider the following factors of production:
- a pharmaceutical research centre
- a hairstylist's scissors
- Google headquarters
- a cloud computing system
- a stapler at a checkout counter.
Each of these is an example of
Consider the following factors of production:
- a pharmaceutical research centre
- a hairstylist's scissors
- Google headquarters
- a cloud computing system
- a stapler at a checkout counter. Each of these is an example of
In economics, what word is used to describe the act of using goods or services to satisfy wants?
In economics, what word is used to describe the act of using goods or services to satisfy wants?
A basic underlying point in economics is that
A basic underlying point in economics is that
Which of the following best describes the study of economics?
Which of the following best describes the study of economics?
Economics can best be described as
Economics can best be described as
Scarcity is likely to be
Scarcity is likely to be
Which of the following statements best describes the economic concept of scarcity?
Which of the following statements best describes the economic concept of scarcity?
Which of the following statements best describes the underlying feature of most economic problems?
Which of the following statements best describes the underlying feature of most economic problems?
Because resources are scarce, individuals are required to
Because resources are scarce, individuals are required to
Scarcity implies that choices must be made. Making choices implies
Scarcity implies that choices must be made. Making choices implies
Which of the following best completes the definition of opportunity cost? The opportunity cost of choosing any one alternative is the
Which of the following best completes the definition of opportunity cost? The opportunity cost of choosing any one alternative is the
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. For the government, the opportunity cost of one search and rescue helicopter is
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. For the government, the opportunity cost of one search and rescue helicopter is
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. For the government, the opportunity cost of one kilometre of highway repair is
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. For the government, the opportunity cost of one kilometre of highway repair is
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. If the government chooses to allocate all $200 million to highway repair, we can say that
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. If the government chooses to allocate all $200 million to highway repair, we can say that
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. Which of the following combinations of kilometres of highway repair and helicopters is unaffordable, given the government's budget of $200 million?
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.
FIGURE 1-1
Refer to Figure 1-1. Which of the following combinations of kilometres of highway repair and helicopters is unaffordable, given the government's budget of $200 million?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. For the school board, what is the opportunity cost of one additional laptop computer?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. For the school board, what is the opportunity cost of one additional laptop computer?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. For the school board, what is the opportunity cost of one additional textbook?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. For the school board, what is the opportunity cost of one additional textbook?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. Suppose the school board chooses to allocate all $500 000 to the purchase of laptop computers. What is the opportunity cost of this entire purchase?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. Suppose the school board chooses to allocate all $500 000 to the purchase of laptop computers. What is the opportunity cost of this entire purchase?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. Which of the following combinations of textbooks and laptops is unaffordable, given the school board's budget of $500 000?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. Which of the following combinations of textbooks and laptops is unaffordable, given the school board's budget of $500 000?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. What is the price of a textbook in this example?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. What is the price of a textbook in this example?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. What is the price of a laptop computer in this example?
With a budget of $500 000, a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination) for use in classrooms.
FIGURE 1-2
Refer to Figure 1-2. What is the price of a laptop computer in this example?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3
Thomas 6 6
TABLE 1-1
Refer to Table 1-1. What is Tristan's opportunity cost of producing one fishing lure?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3 Thomas 6 6
TABLE 1-1
Refer to Table 1-1. What is Tristan's opportunity cost of producing one fishing lure?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3
Thomas 6 6
TABLE 1-1
Refer to Table 1-1. What is Tristan's opportunity cost of producing one mowed lawn?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3 Thomas 6 6
TABLE 1-1
Refer to Table 1-1. What is Tristan's opportunity cost of producing one mowed lawn?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3
Thomas 6 6
TABLE 1-1
Refer to Table 1-1. If Tristan and Thomas want to maximize their joint output from one day of work, how should they specialize their production?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3 Thomas 6 6
TABLE 1-1
Refer to Table 1-1. If Tristan and Thomas want to maximize their joint output from one day of work, how should they specialize their production?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3
Thomas 6 6
TABLE 1-1
Refer to Table 1-1. Which of the following statements about Tristan's and Thomas's opportunity costs is correct?
The table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns.
Fishing Lures Mowed Lawns
Tristan 12 3 Thomas 6 6
TABLE 1-1
Refer to Table 1-1. Which of the following statements about Tristan's and Thomas's opportunity costs is correct?
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. For Madeleine, the opportunity cost of one regular coffee is
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. For Madeleine, the opportunity cost of one regular coffee is
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. For Madeleine, the opportunity cost of one latte is
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. For Madeleine, the opportunity cost of one latte is
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. If Madeleine chooses to allocate all $100 to buying lattes, we can say that her opportunity cost in one month is
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. If Madeleine chooses to allocate all $100 to buying lattes, we can say that her opportunity cost in one month is
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. Which of the following combinations of regular coffees and lattes is affordable over the one-month period, given Madeleine's budget?
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. Which of the following combinations of regular coffees and lattes is affordable over the one-month period, given Madeleine's budget?
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. What is the price of a regular coffee in this example?
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. What is the price of a regular coffee in this example?
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. What is the price of a coffee latte in this example?
Madeleine allows herself $100 per month for purchasing coffee. The diagram below illustrates the choices available to her in each month.
FIGURE 1-3
Refer to Figure 1-3. What is the price of a coffee latte in this example?
Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs $60 000 to purchase, and Model B, which costs $50 000 to purchase. You have a budget of $300 000 for the purchase of new vehicles. If you were to draw a budget line to illustrate the choice between Model A and Model B vehicles, with A on the vertical axis and B on the horizontal axis, the vertical intercept and the horizontal intercept, respectively, would be
Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs $60 000 to purchase, and Model B, which costs $50 000 to purchase. You have a budget of $300 000 for the purchase of new vehicles. If you were to draw a budget line to illustrate the choice between Model A and Model B vehicles, with A on the vertical axis and B on the horizontal axis, the vertical intercept and the horizontal intercept, respectively, would be
Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs $60 000 to purchase, and Model B, which costs $50 000 to purchase. You have a budget of $300 000 for the purchase of new vehicles. What is the opportunity cost of one Model A vehicle?
Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs $60 000 to purchase, and Model B, which costs $50 000 to purchase. You have a budget of $300 000 for the purchase of new vehicles. What is the opportunity cost of one Model A vehicle?
Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs $60 000 to purchase, and Model B, which costs $50 000 to purchase. You have a budget of $300 000 for the purchase of new vehicles. Which of the following statements best describes the shape of your budget line?
Suppose you own a courier service and you use two types of delivery vehicles — Model A, which costs $60 000 to purchase, and Model B, which costs $50 000 to purchase. You have a budget of $300 000 for the purchase of new vehicles. Which of the following statements best describes the shape of your budget line?
Scarcity arises from limited resources. For this reason, all economic choices involve
Scarcity arises from limited resources. For this reason, all economic choices involve
Flashcards
What is economics?
What is economics?
Economics studies how scarce resources are used to satisfy unlimited human wants.
Factors of production
Factors of production
Resources used to produce goods and services. They include land, labor, and capital.
What is NOT a factor of production?
What is NOT a factor of production?
The final good or service produced is not a factor of production.
Consumption
Consumption
The act of using goods and services to satisfy wants.
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What is scarcity?
What is scarcity?
Scarcity means our wants exceed the available resources. This forces choices and opportunity costs.
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How does scarcity affect choices?
How does scarcity affect choices?
Scarcity forces individuals to make choices among alternatives.
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What is opportunity cost?
What is opportunity cost?
The value of the best alternative given up when making a choice.
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Opportunity cost and budget lines
Opportunity cost and budget lines
A budget line shows the trade-offs between two goods, representing opportunity costs.
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Explain a concave PPB
Explain a concave PPB
A production possibilities boundary (PPB) concave to the origin reflects increasing opportunity costs as production shifts.
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Points inside the PPB
Points inside the PPB
Points inside the production possibilities boundary represent underutilization of resources.
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Explain a straight-line PPB
Explain a straight-line PPB
A PPB that is a straight line represents constant opportunity costs across production shifts.
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How is economic growth shown on the PPB?
How is economic growth shown on the PPB?
Economic growth is represented by an outward shift of the production possibilities boundary.
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What is a self-organizing economy?
What is a self-organizing economy?
A market economy is self-organizing, where order emerges from decentralized decisions made by individuals and firms.
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Adam Smith and self-interest
Adam Smith and self-interest
Adam Smith argued that self-interest, not benevolence, drives economic order and efficiency.
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What drives decisions in a market economy?
What drives decisions in a market economy?
Individuals and firms maximize their utility and profits, respectively, in a market economy.
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Circular flow of income
Circular flow of income
The circular flow of income illustrates the interaction of individuals and firms in goods and factor markets.
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How does specialization drive trade?
How does specialization drive trade?
Specialization of labor creates a need for trade to obtain goods that individuals or firms cannot produce themselves.
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What is barter?
What is barter?
Barter is the direct exchange of goods for other goods without the use of money.
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Why is barter inefficient?
Why is barter inefficient?
Barter can be inefficient because it requires a double coincidence of wants.
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What is a traditional economy?
What is a traditional economy?
A traditional economy relies heavily on custom and habit for economic decision-making.
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What is a command economy?
What is a command economy?
A command economy is centrally planned, with the government making most economic decisions.
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What is a mixed economy?
What is a mixed economy?
A mixed economy combines elements of free markets, tradition, and government intervention.
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Why is transitioning to a market economy difficult?
Why is transitioning to a market economy difficult?
Transitioning from a command economy to a market economy can be challenging, often leading to temporary economic hardship.
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What is the role of government in a pure market economy?
What is the role of government in a pure market economy?
In a pure market economy, the government mainly provides a legal framework for transactions and protects property rights.
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Key institutions in a mixed economy
Key institutions in a mixed economy
A mixed economy needs institutions like courts, regulators, and free markets to facilitate transactions.
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1.1 What Is Economics?
- Economics definition: The study of how scarce resources are used to satisfy unlimited human wants.
- Factors of production: Land, labor, and capital.
- Examples of factors of production: A trained video game technician, 10 hectares of farmland, a fishing trawler, an ice-cream truck.
- Not a factor of production: The good or service itself (e.g., an espresso drink).
- Consumption: Using goods and services to meet wants.
- Scarcity: A fundamental economic problem; unlimited wants clash with limited resources.
- Economic problem: Allocation of scarce resources among competing uses.
- Choice and opportunity cost: Scarcity necessitates choices, each choice involves sacrificing alternative options. Opportunity cost is the value of the next best alternative forfeited.
- Opportunity Cost Calculation: The value of the next-best alternative sacrificed when a choice is made.
1.2 The Complexity of Modern Economics
- Self-organizing economy: Order emerges from decentralized decisions.
- Adam Smith's insight: Self-interest, not benevolence, is the foundation of economic order.
- Efficiency: A key concept in economics; producing desired goods and services with the least possible resources.
- Resource allocation: In modern economies, resource allocation is largely determined by interactions between consumers and producers in markets.
- Circular flow of income: Illustrates the interaction of individuals and firms through factor markets (where resources are exchanged for payment) and goods markets (where goods and services are exchanged).
- Economic agents: Individuals, firms, and government.
- Economic Goals: Individuals and firms often act to maximize utility and profits, respectively.
- Barter vs Money: Barter (direct exchange of goods) is inefficient due to the "double coincidence of wants." Money facilitates exchange and specialization.
- Specialization of labor: Increased need for trade arises from labor specialization.
- Comparative advantage: A key concept for specialization and trade; specialization where opportunity cost is less than the cost of performing the tasks yourself.
1.3 Is There an Alternative to the Market Economy?
- Traditional economic system: Based on custom and habit.
- Command economy: Decisions on production and consumption are made by central authorities.
- Mixed economy: Combines elements of market, command, and traditional systems (most economies today).
- Government Role: In a pure market economy, the government's role is limited to providing a basic legal and institutional structure.
- Market vs Command Economies: Market economies usually coordinate resource allocation more efficiently than command economies.
- Transitioning Economies: Switching from command economies to market economies often results in initial economic downturns.
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