Test Bank For Macroeconomics for Life Smart Choices for All, 2nd edition Avi J. Cohen Chapter 1-13 by digitaldownload87

Test Bank For Macroeconomics for Life Smart Choices for All, 2nd edition Avi J. Cohen Chapter 1-13 Chapter 1 What's in Economics for You? Scarcity, Opportunity Cost, Trade, and Models 1.1 Are You Getting Enough? Scarcity and Choice 1) Economics is about A) making money. B) greed. C) making choices because of scarcity. D) overcoming scarcity. E) overcoming greed. Answer: C Diff: 1 Type: MC Page Ref: 4 Skill: Recall Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 2) Economics is about A) how individuals make the best possible choices. B) how businesses make the best possible choices. C) how governments make the best possible choices. D) how choices interact in markets. E) all of the above. Answer: E Diff: 1 Type: MC Page Ref: 4 Skill: Recall Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 3) Which of the following limits our ability to get everything we want? A) scarcity B) specialization C) socialism D) socialization E) time Answer: E Diff: 1 Type: MC Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants.

4) Which of the following limits our ability to get everything we want? A) capitalism B) scarcity C) socialism D) democracy E) money Answer: E Diff: 1 Type: MC Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 5) Some social activists believe that scarcity occurs because we always want more. This idea is called A) activism. B) paternalism. C) monetarism. D) materialism. E) socialism. Answer: D Diff: 2 Type: MC Page Ref: 4 Skill: Recall Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 6) In a world of scarcity, A) all products are free. B) opportunity cost is zero. C) you are not limited by time. D) you do not need to work. E) you must make choices among alternatives. Answer: E Diff: 1 Type: MC Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 7) The inability to satisfy all of our wants is called the problem of A) opportunity cost. B) scarcity. C) incentives. D) marginal cost. E) comparative advantage. Answer: B Diff: 1 Type: MC Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 2 Copyright © 2021 Pearson Canada Inc.

8) The problem of scarcity exists A) only in economies without incentives. B) only in economies with incentives. C) in all economies. D) only when people are unemployed. E) now but will be eliminated with economic growth. Answer: C Diff: 2 Type: MC Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 9) The textbook title - Economics for Life - comes from a quote by George Bernard Shaw. Answer: TRUE Diff: 2 Type: TF Page Ref: 4 Skill: Recall Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 10) The textbook title - Economics for Life - comes from the quote "Economy is the art of making the most of life." Answer: TRUE Diff: 2 Type: TF Page Ref: 4 Skill: Recall Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 11) Scarcity is not a problem for a wealthy professional athlete like Tiger Woods. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 12) Scarcity arises because we all have limited money, time, and energy. Answer: TRUE Diff: 1 Type: TF Page Ref: 4 Skill: Recall Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 13) The National Ballet of Canada does not face a problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 3 Copyright © 2021 Pearson Canada Inc.

14) There are some people and organizations who do not face the problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 15) If you could be immortal and infinitely rich, you would not face the problem of scarcity. Answer: TRUE Diff: 2 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 16) Economics is about overcoming scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 17) Economics is about overcoming greed. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 18) A government that has a budget surplus does not face the problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 19) The main implication of scarcity in economics is that people must be selfish. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 20) The main implication of scarcity in economics is that people must make choices. Answer: TRUE Diff: 1 Type: TF Page Ref: 4 Skill: Applied 4 Copyright © 2021 Pearson Canada Inc.

Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 21) The main implication of scarcity in economics is that people must be unhappy. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 22) Scarcity is a problem only for materialistic people. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 23) Markets overcome the problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 24) Voluntary trade solves the problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 25) If we all wanted less, instead of always wanting more, this would solve the problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 4 Skill: Applied Objective: 1.1 Explain scarcity and describe why you must make smart choices among your wants. 1.2 Give It Up for Opportunity Cost! Opportunity Cost 1) Opportunity cost measures the cost of A) the top two alternatives. B) the worst case scenario. C) the best alternative given up. D) all alternatives given up. E) the top ten alternatives. 5 Copyright © 2021 Pearson Canada Inc.

Answer: C Diff: 1 Type: MC Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 2) The value of the fork in the road not taken is called A) marginal cost. B) opportunity cost. C) monetary cost. D) fiduciary cost. E) cutlery cost. Answer: B Diff: 2 Type: MC Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 3) John gave Margaret a $20,000 painting for her birthday. Last week, an art dealer offered to buy the painting from Margaret for $25,000. Margaret said no. The opportunity cost of her decision is A) $5,000. B) $45,000. C) $0. D) $20,000. E) $25,000. Answer: E Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 4) Gina missed her shift at the restaurant in order to attend a soccer game. She paid $30 for the ticket, $20 for parking, and ate $10 worth of popcorn. Had she worked her shift, Gina would have earned $100. Her opportunity cost of attending the game is A) $60. B) $150. C) $160. D) $0. E) $100. Answer: C Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 5) Gina missed her shift at the restaurant in order to attend a soccer game. She paid $30 for the ticket, $20 for parking, and ate $10 worth of popcorn. Had she worked her shift, Gina would have earned $100. Her money cost of attending the game is A) $60. B) $150. C) $160. 6 Copyright © 2021 Pearson Canada Inc.

D) $0. E) $100. Answer: A Diff: 2 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 6) Andrew decides to open a laboratory in his basement. He quits his job, sacrificing $30,000 a year; cashes in $200,000 of Canada Savings Bonds that were paying him an interest rate of 5 percent per year; and evicts a tenant who was paying $10,000 a year in rent to live in the basement. The opportunity cost of Andrew's decision is A) $40,000. B) $50,000. C) $0. D) $30,000. E) $240,000. Answer: B Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 7) Last week Santiago found a new pair of red Nike Air Soles in the parking lot. He had just paid $120 to buy a pair of blue Nike Air Soles a few days earlier. A friend offers $80 to buy the pair of red Air Soles. Santiago says no and decides to keep both pairs for himself. The opportunity cost of this decision is A) $80. B) $120. C) $40. D) $0. E) $200. Answer: A Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 8) Charu can earn $200 an hour playing online poker. If she spends an hour in the backyard, she can rake up 2 bags of leaves. Her opportunity cost of playing online poker is measured in units of A) bags per rake. B) rakes per dollar. C) dollars per bag. D) hours per hour. E) bags per hour. Answer: E Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost.

9) Mario divides his time between fishing and farming. In one day he can catch 20 kilograms of fish or harvest 10 bushels of potatoes. Mario's opportunity cost of farming is A) 1/2 bushel potatoes per kilogram of fish. B) 1/2 kilogram fish per bushel of potatoes. C) 2 bushels potatoes per kilogram of fish. D) 2 potatoes per fish. E) 2 kilograms fish per bushel of potatoes. Answer: E Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 10) Lydia is deciding whether to study for her economics test or her accounting test. If she chooses to study accounting, her opportunity cost is A) studying economics. B) less than the value of studying economics. C) not comparable to the value of studying economics. D) equal to the value of studying economics. E) the lost future wages if she fails her accounting test. Answer: A Diff: 2 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 11) When the government of Manitoba chooses to build more roads, the required inputs are no longer available to build better health care facilities. This illustrates the concept of A) marginal benefit. B) monetary cost. C) opportunity cost. D) incentives. E) entrepreneurship. Answer: C Diff: 2 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 12) When the government of New Brunswick chooses to use inputs to build a dam, those inputs are no longer available to build a highway. This illustrates the concept of A) a market. B) macroeconomics. C) opportunity cost. D) incentives. E) gains from trade. Answer: C Diff: 2 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 8 Copyright © 2021 Pearson Canada Inc.

13) Which of the following sayings best describes opportunity cost? A) "Make hay while the sun shines." B) "Love of money is the root of all evil." C) "Boldly go where no one has gone before." D) "There's no such thing as a free lunch." E) "Baseball has been very good to me." Answer: D Diff: 1 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 14) Because of scarcity, we must give up some of one product in order to get more of another. This is the concept of A) specialization. B) implicit cost. C) comparative advantage. D) opportunity cost. E) absolute advantage Answer: D Diff: 2 Type: MC Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 15) The opportunity cost of attending college A) depends on your major. B) depends on what you could earn now. C) depends on what you expect to earn with your college degree. D) must be greater than the money cost. E) must be less than the money cost. Answer: B Diff: 2 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 16) Which statement(s) is/are true? 1 If unemployment increases, the opportunity cost of attending college decreases. 2 If men generally earn more than women, the opportunity cost of attending college is higher for men than for women. A) 1 only B) 2 only C) 1 and 2 D) neither 1 nor 2 E) impossible to tell without more information 9 Copyright © 2021 Pearson Canada Inc.

Answer: C Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 17) Which statement(s) is/are true? 1 If unemployment decreases, the opportunity cost of attending college decreases. 2 If men generally earn more than women, the opportunity cost of attending college is higher for men than for women. A) 1 only B) 2 only C) 1 and 2 D) neither 1 nor 2 E) impossible to tell without more information Answer: B Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 18) Which statement(s) is/are true? 1 If unemployment increases, the opportunity cost of attending college decreases. 2 If men generally earn more than women, the opportunity cost of not attending college is higher for men than for women. A) 1 only B) 2 only C) 1 and 2 D) neither 1 nor 2 E) impossible to tell without more information Answer: A Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 19) Which statement(s) is/are true? 1 If unemployment decreases, the opportunity cost of attending college decreases. 2 If men generally earn more than women, the opportunity cost of not attending college is higher for men than for women. A) 1 only B) 2 only 10 Copyright © 2021 Pearson Canada Inc.

C) 1 and 2 D) neither 1 nor 2 E) impossible to tell without more information Answer: D Diff: 3 Type: MC Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 20) Scarcity means every choices involves a trade-off. Answer: TRUE Diff: 1 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 21) To make a smart choice, the value of what you get must be greater than the value of what you give up. Answer: TRUE Diff: 2 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 22) The true cost of any choice is the cost of the best alternative given up. Answer: TRUE Diff: 1 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 23) The true cost of any choice is the cost of all alternatives given up. Answer: FALSE Diff: 1 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 24) The true cost of any choice is the money cost. Answer: FALSE Diff: 1 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 25) There is no such thing as a free lunch. Answer: TRUE Diff: 1 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 26) Opportunity cost includes money cost. Answer: TRUE Diff: 2 Type: TF Page Ref: 5-6 11 Copyright © 2021 Pearson Canada Inc.

Skill: Recall Objective: 1.2 Define and describe opportunity cost. 27) Opportunity cost is always greater than money cost. Answer: FALSE Diff: 1 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 28) Opportunity cost is always less than money cost. Answer: FALSE Diff: 1 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 29) Money cost includes opportunity cost. Answer: FALSE Diff: 1 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 30) Germaine plans to attend college next year. Tuition costs $3,000, books cost $600, and residence fees cost $4,000. She currently earns $24,000 a year working at Chapters but would have to quit work. Germaine's opportunity cost of attending college is $7,600. Answer: FALSE Diff: 3 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 31) Germaine plans to attend college next year. Tuition costs $3,000, books cost $600, and residence fees cost $4,000. She currently earns $24,000 a year working at Chapters but would have to quit work. Germaine's opportunity cost of attending college is $24,000. Answer: FALSE Diff: 3 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 32) Germaine plans to attend college next year. Tuition costs $3,000, books cost $600, and residence fees cost $4,000. She currently earns $24,000 a year working at Chapters but would have to quit work. Germaine's opportunity cost of attending college is $31,600. Answer: TRUE Diff: 3 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 33) Incentives work because these rewards and penalties change the costs and benefits of the choices you make. Answer: TRUE 12 Copyright © 2021 Pearson Canada Inc.

Diff: 2 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 34) Smart choices will not change when incentives change. Answer: FALSE Diff: 2 Type: TF Page Ref: 5-6 Skill: Recall Objective: 1.2 Define and describe opportunity cost. 35) You should include the risk of getting a parking ticket in opportunity cost when making a smart choice between parking illegally and buying a parking permit. Answer: TRUE Diff: 2 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 36) When you have no alternatives, the opportunity cost is zero. Answer: TRUE Diff: 2 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 37) Women who do not go to college or university give up a bigger income gain than men who do not go. Answer: TRUE Diff: 2 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 38) The opportunity cost of going to college or university is the same for men and women. Answer: FALSE Diff: 2 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost. 39) To encourage a child to do his chores, you should either increase the reward for doing, or increase the penalty for not doing the chores. Answer: TRUE Diff: 2 Type: TF Page Ref: 5-6 Skill: Applied Objective: 1.2 Define and describe opportunity cost.

1.3 Why Don't You Cook Breakfast? Gains From Trade 1) Mutually beneficial trade occurs if both persons A) increase production of the product for which they have a comparative advantage. B) decrease production of the product for which they have a lower opportunity cost. C) increase production of the product for which they have a higher opportunity cost. D) increase production of the product for which they have an absolute advantage. E) increase consumption of the product for which they have a higher opportunity cost. Answer: A Diff: 2 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 2) Mutually beneficial trade is also called A) a zero-sum game. B) self-sufficiency. C) international subsidization. D) voluntary trade. E) involuntary trade. Answer: D Diff: 2 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 3) Mutual gains from voluntary trade require differences in A) depreciation costs. B) comparative advantage. C) external costs. D) implicit costs. E) absolute advantage. Answer: B Diff: 2 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

4) Mutual gains from voluntary trade require differences in A) internal costs. B) implicit costs. C) opportunity costs. D) import tariffs. E) external costs. Answer: C Diff: 2 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 5) In a zero-sum game A) both players can lose. B) the number of players is zero. C) both players can win. D) one player gains only when another player loses. E) both players get zero gains. Answer: D Diff: 2 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 6) Specialization eliminates A) scarcity. B) dependency. C) self-sufficiency. D) mutual benefits. E) opportunity cost. Answer: C Diff: 1 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 7) It takes Mom 30 minutes to cook dinner. In the same time, she can iron 6 shirts. Dad takes an hour to cook dinner and 30 minutes to iron a single shirt. A) Dad has an absolute advantage in ironing shirts. B) Mom's opportunity cost of cooking dinner is ironing 6 shirts. C) Mom has a comparative advantage in cooking dinner. D) Dad's opportunity cost of cooking dinner is ironing half a shirt. E) Dad's opportunity cost of cooking dinner is 6 shirts. Answer: B Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 15 Copyright © 2021 Pearson Canada Inc.

8) It takes Mom 30 minutes to cook dinner. In the same time, she can iron 6 shirts. Dad takes an hour to cook dinner and 30 minutes to iron a single shirt. A) Dad has an absolute advantage in cooking. B) Mom should cook dinner and iron; trade is impossible. C) Dad has an absolute advantage in ironing shirts. D) Dad should cook dinner; the opportunity cost is only 2 shirts. E) Dad should cook dinner; the opportunity cost is only 1 shirt. Answer: D Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 9) It takes Mom 30 minutes to cook dinner. In the same time, she can iron 6 shirts. Dad takes an hour to cook dinner and 30 minutes to iron a single shirt. A) Mom should cook dinner; even though the opportunity cost is 12 shirts. B) there are no gains from trade. C) Dad has an absolute advantage in cooking dinner. D) Dad has an absolute advantage in ironing shirts. E) Mom shouldn't cook dinner; her opportunity cost is 6 shirts. Answer: E Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 10) In one hour, Chloe can bake 24 cookies or 12 blueberry muffins; Zabeen can bake 6 cookies or 2 blueberry muffins. Which statement is true? A) Zabeen's opportunity cost of a cookie is 2 muffins. B) Zabeen's opportunity cost of a cookie is 6 muffins. C) Chloe's opportunity cost of a muffin is 12 cookies. D) Chloe's opportunity cost of a muffin is 2 cookies. E) Zabeen's opportunity cost of a cookie is 4 muffins. Answer: D Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 11) In one hour, Chloe can bake 24 cookies or 12 blueberry muffins; Zabeen can bake 6 cookies or 2 blueberry muffins. For mutually beneficial trade, Chloe should A) bake muffins because she has a comparative advantage. B) give up. Mutually beneficial trade is impossible in this situation. C) bake cookies because she has an absolute advantage. D) bake cookies because she has a comparative advantage. E) bake muffins because she has an absolute advantage. Answer: A 16 Copyright © 2021 Pearson Canada Inc.

Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 12) If Canada specializes in the production of wine we can produce 10,000 bottles per month. If Canada specializes in the production of wheat we can produce 200,000 bushels per month. The opportunity cost of a bottle of wine in Canada is A) 120,000 bottles of wine. B) 20 bushels of wheat. C) 200 bushels of wheat. D) 2,500 bottles of wine. E) 1/20 of a bushel of wheat. Answer: B Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 13) In two hours of work, Clinton can catch 4 fish or he can pick 5 pints of berries. In two hours, Dong can catch 6 fish or she can pick 9 pints of berries. Which statement is true? A) Clinton has a comparative advantage in catching fish. B) Clinton has an absolute advantage in picking berries. C) Clinton has an absolute advantage in catching fish. D) Clinton has a comparative advantage in picking berries. E) Clinton will lose if he trades. Answer: A Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 14) In two hours of work, Clinton can catch 4 fish or he can pick 5 pints of berries. In two hours, Dong can catch 6 fish or she can pick 9 pints of berries. Which statement is true? A) Clinton and Dong will trade and both persons will benefit. B) Clinton and Dong will trade but only Dong will benefit. C) Clinton and Dong will not trade. D) Clinton and Dong will trade but only Clinton will benefit. E) Clinton and Dong will both lose if they trade. Answer: A Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 15) Canada has an absolute advantage in situations where A) we can produce the product on weekends. 17 Copyright © 2021 Pearson Canada Inc.

B) we consume less of this product than do people in other countries. C) we consume more of this product than do people in other countries. D) our opportunity cost of production is very high. E) we can produce at lower cost than producers in other countries. Answer: E Diff: 2 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 16) Tova and Ron are the only two people on the planet Melmac. It takes Tova 1 hour to produce a widget and 2 hours to produce a woggle. It takes Ron 3 hours to produce a widget and 3 hours to produce a woggle. Based on the information above, Tova and Ron A) can both gain from trade if Tova specializes in producing widgets and Ron specializes in producing woggles. B) can both gain from trade if Tova specializes in producing woggles and Ron specializes in producing widgets. C) cannot both gain from trade because Tova has an absolute advantage in producing widgets and woggles. D) can trade, but only Tova will gain. E) can trade, but only Ron will gain. Answer: A Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. Figure 1.3.2 Monthly Production Possibilities for a Country Producing Only Hockey Sticks and Maple Leaves

Possibility

Hockey Sticks

Maple Leaves

A) 2 hockey sticks. B) 3 hockey sticks. C) 6 hockey sticks. D) 1/6 hockey stick. E) 1/3 hockey stick. Answer: E Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 18) According to Figure 1.3.2, A) the opportunity cost of producing hockey sticks stays the same as more hockey sticks are produced. B) a combination of 3 hockey sticks and 9 maples leaves is possible. C) a combination of 3 hockey sticks and 2 maple leaves is possible. D) the opportunity cost of producing hockey sticks increases as more hockey sticks are produced. E) the opportunity cost of producing hockey sticks decreases as more hockey sticks are produced. Answer: A Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 19) In Figure 1.3.2, moving from possibility c to possibility b, the opportunity cost of producing one additional hockey stick is A) 2 maple leaves. B) 3 maple leaves. C) 6 maple leaves. D) 1/6 maple leaves. E) 1/3 maple leaves. Answer: B Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 20) According to Figure 1.3.2, A) the best possibility is 2 hockey sticks and 3 maple leaves. B) a combination of 3 hockey sticks and 9 maples leaves is not possible. C) a combination of 3 hockey sticks and 2 maple leaves is possible. D) the opportunity cost of producing hockey sticks increases as more hockey sticks are produced. E) the opportunity cost of producing hockey sticks decreases as more hockey sticks are produced. 19 Copyright © 2021 Pearson Canada Inc.

Answer: B Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 21) In Portugal, the opportunity cost of a bale of wool is 3 bottles of wine. In England, the opportunity cost of 1 bottle of wine is 3 bales of wool. Based on this information, A) England has an absolute advantage in producing wine. B) England has an absolute advantage in producing wool. C) no trade will occur. D) Portugal has a comparative advantage in producing wool. E) Portugal has a comparative advantage in producing wine. Answer: E Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 22) Figure 1.3.3 Monthly Production Possibilities for a Country Producing Only Butter and Guns

Possibility

Butter

Guns

According to the production possibilities in Figure 1.3.3, A) a combination of 1 butter and 6 gun is possible. B) a combination of 4 butter and 0 guns is possible. C) the opportunity cost of producing guns increases as more guns are produced. D) the opportunity cost of producing guns decreases as more guns are produced. E) the opportunity cost of producing guns stays the same as more guns are produced. Answer: E Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

23) 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 24 loaves of bread or 24 kilograms of butter. Based on the information above, which statement is true? A) Andy has an absolute advantage in producing butter. B) Rolfe has an absolute advantage in producing bread. C) Andy has an absolute advantage is producing bread. D) Andy has a comparative advantage in producing bread. E) Rolfe has a comparative advantage in producing bread. Answer: D Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 24) 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. Based on the information above, the opportunity cost of producing 1 loaf of bread is A) 1 hour for Andy and 20 minutes (1/3 hour) for Rolfe. B) 1/3 kilogram of butter for Andy and 1 kilogram of butter for Rolfe. C) 3 kilograms of butter for Andy and 1 kilogram of butter for Rolfe. D) 8 kilograms of butter for both Andy and Rolfe. E) not calculable from the given information. Answer: B Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 25) Mexico and Canada produce both oil and apples using labour only. A barrel of oil can be produced with 8 hours of labour in Mexico and 4 hours of labour in Canada. A bushel of apples can be produced with 12 hours of labour in Mexico and 8 hours of labour in Canada. Mexico has A) an absolute advantage in producing oil. B) an absolute advantage in producing apples. C) a comparative advantage in producing oil. D) a comparative advantage in producing apples. E) none of the above. Answer: D Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

26) Canada and Chile produce both oil and apples using labour only. A barrel of oil can be produced with 4 hours of labour in Canada and 8 hours of labour in Chile. A bushel of apples can be produced with 8 hours of labour in Canada and 12 hours of labour in Chile. Chile has A) an absolute advantage in producing oil. B) an absolute advantage in producing apples. C) a comparative advantage in producing oil. D) a comparative advantage in producing apples. E) none of the above. Answer: D Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 27) Tova and Ron are the only two people on the planet Melmac. It takes Tova 3 hours to produce a widget and 3 hours to produce a woggle. It takes Ron 1 hour to produce a widget and 2 hours to produce a woggle. Based on the information above, Tova and Ron A) can both gain from trade if Tova specializes in producing widgets and Ron specializes in producing woggles. B) can both gain from trade if Tova specializes in producing woggles and Ron specializes in producing widgets. C) cannot both gain from trade because Tova has an absolute advantage in producing widgets and woggles. D) can trade, but only Tova will gain. E) can trade, but only Ron will gain. Answer: B Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

28) Figure 1.3.7 Monthly Production Possibilities for a Country Producing Only Butter and Guns

Possibility

Butter

Guns

According to the production possibilities in Figure 1.3.7, A) a combination of 1 butter and 6 gun is possible. B) a combination of 0 butter and 4 guns is possible. C) the opportunity cost of producing guns increases as more guns are produced. D) the opportunity cost of producing guns decreases as more guns are produced. E) the opportunity cost of producing guns stays the same as more guns are produced. Answer: C Diff: 3 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 29) To gain from comparative advantage, countries must trade, and must A) save. B) invest. C) do research and development. D) add add capital equipment. E) specialize. Answer: E Diff: 1 Type: MC Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

30)

Figure 1.3.8

The graph in Figure 1.3.8 shows Adam's PPF for food and cloth. The shape of the PPF tells us that Adam has ________ opportunity cost of food and ________ opportunity of cloth. A) increasing; decreasing B) constant; constant C) decreasing; increasing D) increasing; increasing E) decreasing; decreasing Answer: B Diff: 2 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

31) On a graph of a production possibilities frontier (PPF), opportunity cost is measured by A) the points inside the PPF. B) the points outside the PPF. C) where the PPF touches the vertical axis. D) the slope of the PPF. E) where the PPF touches the horizontal axis. Answer: D Diff: 1 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 32) On a graph of a production possibilities frontier (PPF), possible combinations of outputs are represented by A) points inside the PPF. B) points outside the PPF. C) points only on the PPF. D) the slope of the PPF. E) all of the above. Answer: A Diff: 1 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 33) On a graph of a production possibilities frontier (PPF), impossible combinations of outputs are represented by A) points inside the PPF. B) points outside the PPF. C) points on the PPF. D) the slope of the PPF. E) none of the above. Answer: B Diff: 1 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

34) On a graph of a production possibilities frontier (PPF), maximum combinations of outputs are represented by A) points inside the PPF. B) points outside the PPF. C) points on the PPF. D) the slope of the PPF. E) none of the above. Answer: C Diff: 1 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 35) If Ying must decrease production of some other product to increase his production of houses, then Ying A) is producing on his production possibilities frontier. B) is producing outside his production possibilities frontier. C) is producing inside his production possibilities frontier. D) must prefer houses to any other product. E) has too little capital equipment. Answer: A Diff: 2 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 36) If Ying can increase production of houses without decreasing production of any other product, then Ying A) is producing on his production possibilities frontier. B) is producing outside his production possibilities frontier. C) is producing inside his production possibilities frontier. D) must have constant opportunity costs. E) must prefer houses to any other product. Answer: C Diff: 2 Type: MC Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 37) Specializing and trading makes us all better off. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

38) Specializing and trading makes us dependent on others. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 39) Specializing and trading makes each of us less able to support ourselves compared to Canadian pioneers. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 40) Opportunity cost is the key to achieving the mutual benefits from trade. Answer: TRUE Diff: 1 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 41) Opportunity cost can be calculated as Get divided by Give Up. Answer: FALSE Diff: 1 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 42) Absolute advantage is the ability to produce a product or service at a lower opportunity cost than another producer. Answer: FALSE Diff: 3 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 43) Differences in comparative advantage are the key to mutually beneficial gains from trade. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

44) Specialization and voluntary trade eliminate the problem of scarcity. Answer: FALSE Diff: 1 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 45) Voluntary trade is a smart choice because the value of what you give up is less than the value of what you get. Answer: TRUE Diff: 1 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 46) It takes Amber 5 minutes to iron a shirt and 20 minutes to wash her car. Gina can wash her car in 15 minutes but it takes her 10 minutes to iron a shirt. There is a mutually beneficial trade if Amber specializes in ironing shirts and Gina specializes in washing cars. Answer: TRUE Diff: 3 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 47) Absolute advantage is the key to mutually beneficial gains from trade. Answer: FALSE Diff: 1 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 48) Differences in opportunity costs are the key to mutually beneficial gains from trade. Answer: TRUE Diff: 1 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 49) Voluntary trade is a smart decision because we can specialize and produce what we are good at producing, rather than work at producing only what we wish to consume. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

50) Voluntary trade is a zero-sum game. Answer: FALSE Diff: 1 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 51) In a zero-sum game, one person's gain equals another person's loss. Answer: TRUE Diff: 1 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 52) In a zero-sum game, there is a loser for every winner. Answer: TRUE Diff: 1 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 53) Trade is only mutually beneficial if the traders have different comparative advantages. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 54) If China has an absolute advantage in producing everything at lower cost then Canada, mutually benefical trade is impossible. Answer: FALSE Diff: 2 Type: TF Page Ref: 7-12 Skill: Recall Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 55) In one hour, Francis can read 10 pages of an economics textbook or read 20 pages of an accounting textbook. Francis' opportunity cost of reading a page of accounting is 2 pages of economics. Answer: FALSE Diff: 2 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off.

56) In one hour, Francis can read 10 pages of an economics textbook or read 20 pages of an accounting textbook. Francis' opportunity cost of reading a page of economics is 2 pages of accounting. Answer: TRUE Diff: 2 Type: TF Page Ref: 7-12 Skill: Applied Objective: 1.3 Describe how comparative advantage, specialization, and trade make us all better off. 1.4 Economists As Mapmakers and Scientists: Thinking Like An Economist 1) All of the following are inputs except A) natural resources. B) capital equipment. C) entrepreneurial ability. D) government. E) labour. Answer: D Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 2) Who wrote the 1890 book, Principles of Economics? A) Adam Smith B) Alfred Pennyworth C) Alfred Marshall D) Adam West E) Alfred E. Newman Answer: C Diff: 1 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 3) Who wrote The Wealth of Nations? A) Alfred Marshall B) Alfred Pennyworth C) Alfred E. Newman D) Adam West E) Adam Smith Answer: E Diff: 1 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 30 Copyright © 2021 Pearson Canada Inc.

4) The three sets of players in the circular flow of economic life include A) wheat. B) machines. C) buildings. D) houses. E) governments. Answer: E Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 5) Inputs in the circular flow of economic life include A) businesses. B) people. C) households. D) churches. E) governments. Answer: B Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 6) In the circular flow of economic life, the role that only governments can play is to A) boldly go where no one has gone before. B) hire entrepreneurial abilities from corporations. C) own the assets of all large corporations. D) sell businesses' labour services. E) set the rules of the game. Answer: E Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 7) Activities in input markets include A) households paying businesses money for labour services. B) businesses paying households money for labour services. C) households paying businesses money for services. D) households paying businesses money for food. E) households paying businesses money for products. Answer: B Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 31 Copyright © 2021 Pearson Canada Inc.

8) Positive statements are A) evaluated by checking the facts. B) inefficient. C) rarely used in economics. D) unfair. E) value judgements. Answer: A Diff: 2 Type: MC Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 9) Normative statements A) can be rejected simply by checking the facts. B) are unfair. C) are never used in economics. D) can be evaluated as true simply by checking the facts. E) involve value judgements. Answer: E Diff: 2 Type: MC Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 10) A positive statement is about A) what ought to be. B) value judgements. C) what is. D) what should never be. E) what the future should be. Answer: C Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier.

11) A normative statement is about A) what might happen in the future. B) what has happened in the past. C) what ought to be. D) the assumptions of economists. E) the predictions of economists. Answer: C Diff: 2 Type: MC Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 12) Which statement is normative? A) Drinking 14 beers in one hour will probably make you ill. B) Young drivers cause more accidents than older drivers. C) Women live longer than men. D) You should call your mother at least once a week. E) Men live longer than women. Answer: D Diff: 1 Type: MC Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 13) Which statement is normative? A) People who have high grades in economics have more friends. B) People who have high grades in calculus have no friends. C) Sound travels faster than light. D) Everyone is entitled to his or her own opinion. E) A 2-litre carton of milk can survive being dropped from a 20-story building. Answer: D Diff: 2 Type: MC Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 14) A good economic model A) leaves out unnecessary information. B) is difficult to test. C) assumes that "other things are unchanged." D) is the mental equivalent of controlled experiments in a laboratory. E) does all of the above. Answer: E Diff: 1 Type: MC Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 33 Copyright © 2021 Pearson Canada Inc.

15) A good economic model A) includes as much information as possible. B) helps you understand or predict the economic world around you. C) changes many factors at the same time. D) is easier to test than experiments in a laboratory. E) does all of the above. Answer: B Diff: 1 Type: MC Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 16) Individuals in households ultimately own all of the inputs of an economy. Answer: TRUE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 17) Businesses are sellers and households are buyers in input markets. Answer: FALSE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 18) Businesses are buyers and households are sellers in input markets. Answer: TRUE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 19) Businesses are sellers and households are buyers in output markets. Answer: TRUE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 20) Businesses are buyers and households are sellers in output markets. Answer: FALSE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 34 Copyright © 2021 Pearson Canada Inc.

21) An investor purchases 1,000 shares of stock in General Motors. This interaction takes place in input markets. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 22) Businesses are sellers in input markets. Answer: FALSE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 23) Businesses are buyers in input markets. Answer: TRUE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 24) Households are buyers in input markets. Answer: FALSE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 25) When you get hired as a cashier at Canadian Tire, that interaction happens in an input market. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 26) Households are buyers in output markets. Answer: TRUE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier.

27) Businesses are buyers in output markets. Answer: FALSE Diff: 2 Type: TF Page Ref: 1-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 28) Businesses are sellers in output markets. Answer: TRUE Diff: 2 Type: TF Page Ref: 13-17 Skill: Recall Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 29) When the government hires contractors to repair potholes, that is an example of setting the rules of the game. Answer: FALSE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 30) Positive statements can be evaluated as true or false simply by checking the facts. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 31) Normative statements can be evaluated as true or false simply by checking the facts. Answer: FALSE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 32) Normative statements involve value judgments. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier.

33) "Men live longer than women" is a positive statement. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 34) "Who was the greatest rock star?" is a positive question. Answer: FALSE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 35) "Who was the greatest rock star?" is a normative question. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 36) The suggestion that "cats have nine lives" is a normative statement. Answer: FALSE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 37) Student leaders who argue that "tuition should be free" are making a positive statement. Answer: FALSE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier. 38) Student leaders who argue that "75 percent of students live below the poverty line" are making a positive statement. Answer: TRUE Diff: 1 Type: TF Page Ref: 13-17 Skill: Applied Objective: 1.4 Explain how models like the circular flow of economic life make smart choices easier.

1.5 Where and How to Look: Models for Microeconomics and Macroeconomics 1) Opportunity cost does not include A) external consequences from making a choice. B) legal costs from making a choice. C) monetary costs from making a choice. D) income that you sacrifice from making a choice. E) benefits that you get from making a choice. Answer: E Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 2) Which is a macroeconomic decision? A) How you divide your spending between food and clothing. B) You decide to buy a hybrid car in order to protect the environment. C) The Bank of Canada decides to raise interest rates. D) Whether or not you adopt a pet. E) How many hours a week you will work at a wage of $20 an hour. Answer: C Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 3) Which is a macroeconomic decision? A) The Government of Canada reduces the HST. B) You switch your cellular plan from Fido to Bell. C) You switch your cellular plan from Rogers to Fido. D) You add international calling to your cellular plan. E) You add Canada-wide calling to your cellular plan. Answer: A Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

4) Which is a microeconomic decision? A) A reduction in the HST intended to stimulate consumer spending. B) A decision by the Bank of Canada to allow the Canadian dollar to depreciate in response to world trade patterns. C) The Government of Canada lends Peru 7 billion dollars. D) A decision by the Conservative Party to reduce the role of government in the economy. E) A 10% tariff on imported wines to protect the Canadian wine-making industry. Answer: E Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 5) Which is a microeconomic topic? A) why a consumer buys more chai lattes B) why the average price level in Canada falls C) the cause of increasing unemployment D) the effect of a government budget deficit on inflation E) why the labour force in Canada decreases Answer: A Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 6) The study of how wages are set for New Brunswick call centre workers is a A) macroeconomic topic. B) microeconomic topic. C) positive externality. D) negative externality. E) bore. Answer: B Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

7) Which headline is about macroeconomics? A) Consumers switching from minivans to hybrids B) Chapters/Indigo bookstores fight tax on e-commerce C) Unexpected freeze in Nova Scotia will make blueberry pie more expensive in the Maritimes D) Japan's economy still stagnating E) Farmers avoiding pesticides Answer: D Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 8) All are macroeconomic topics except the A) reasons for increasing unemployment. B) cause of recessions. C) effect of a government budget deficit on inflation. D) rising value of the Canadian dollar. E) switch from workers to robots in automobile factories. Answer: E Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 9) Macroeconomics analyzes A) the operation of individual markets in the economy. B) the economic choices of individual households. C) government decisions to regulate the cellular phone industry. D) insider trading in the stock market. E) the performance of the national economy and the global economy. Answer: E Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 10) Macroeconomics analyzes A) decisions of individual businesses. B) effects of government safety regulations on the price of cars. C) the performance of the global economy. D) prices of individual products and services. E) the effects of federal taxes on the price of gasoline. Answer: C Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 40 Copyright © 2021 Pearson Canada Inc.

11) Microeconomics analyzes the A) reasons for a fall in the price of oil. B) effect of a rise in the value of the Canadian dollar on Canada's exports. C) effect of interest rates on Canada's economic growth rate. D) effect of a government budget deficit on employment. E) reasons for a fall in the inflation rate. Answer: A Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 12) Microeconomics analyzes the A) length of a recession. B) cause of unemployment in the economy. C) effect of a government budget surplus on election outcomes. D) the determination of aggregate income. E) size of prize money awards for kite-boarding competitions. Answer: E Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 13) George spends $2,000 for a plane ticket to Vancouver and gives up $500 because he has to take time off work. He spends $1,500 on his hotel room. In Vancouver, George is trying to decide whether he should spend $1,000 to take a side trip to go snowboarding in Whistler or just snooze in the hotel. Going to Whistler would be a smart decision as long as his benefits from the side trip are at least A) $1,500. B) $4,000. C) $5,000. D) $1,000. E) $500. Answer: D Diff: 3 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

14) Charles paid $12 for a ticket to see the Blue Jays play baseball at the Rogers Centre. Once inside, he must decide whether or not he wants to pay $8 for a beer. Buying a beer would be a smart decision only if Charles gets benefits of at least A) $12. B) $8. C) $16. D) $4. E) $20. Answer: B Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 15) Viki paid $12 to see the new Star Trek movie. Once inside, she must decide whether or not to buy a bag of popcorn for $4. Buying the popcorn would be a smart decision if Viki gets benefits of at least A) $12. B) $16. C) $4. D) $8. E) $20. Answer: C Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 16) Matthew spent $20 at an all-you-can eat sushi buffet. Several hours later, he is trying to decide whether to order a bowl of ice cream for $2. Ordering the ice cream would be a smart decision if Matthew gets benefits of at least A) $18. B) $22. C) $24. D) $20. E) $2. Answer: E Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

17) Which is an example of a negative externality? A) second-hand smoke B) an outdoor statue C) free bus rides for seniors D) charity E) specialization Answer: A Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 18) Which is an example of a negative externality? A) automobile emissions B) a cut in pay C) a peace treaty D) brand proliferation E) education Answer: A Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 19) Which is an example of a positive externality? A) non-refundable deposits B) scarcity C) a statue in your closet D) government E) anti-virus software on your computer Answer: E Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 20) Failure to consider the impact of a positive externality from an activity results in A) an internality. B) too little of that activity. C) scarcity. D) too much of that activity. E) a negative externality. Answer: B Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 43 Copyright © 2021 Pearson Canada Inc.

21) Failure to consider the impact of a negative externality results in A) scarcity. B) an internality. C) a positive externality. D) too little of that activity. E) too much of that activity. Answer: E Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 22) Governments can try and correct the problem of negative externalities from smoking by A) providing free medical care for smokers. B) investing in tobacco companies. C) using taxes and fines to reward smoking. D) using taxes and fines to penalize smokers. E) using subsidies to lower the cost of buying cigarettes. Answer: D Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 23) Amber baked five chocolate cheesecakes. When all costs, including implicit and external costs are included, the five cheesecakes cost her a total of $100. Producing a sixth cheesecake would increase these costs from $100 to $120. The smart choice for Amber is to produce the sixth cheesecake only if the benefits from the sixth cheesecake are more than A) $25. B) $20. C) $24. D) $120. E) $30. Answer: B Diff: 3 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

24) Julia's total benefit from taking four university courses is $10,000. If she takes a fifth course, her total benefits increase to $12,000. Julia should take this fifth course only if her A) total costs are less than $10,000. B) additional costs are less than $2,000. C) additional costs are less than $2,400. D) total costs are less than $12,000. E) course is free. Answer: B Diff: 3 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 25) Smart choices require that A) typical benefits exceed typical costs. B) additional benefits exceed average costs. C) additional benefits exceed additional costs. D) average benefits exceed additional costs. E) expected benefits exceed total costs. Answer: C Diff: 1 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 26) Key 1 to smart choices says: Choose only when A) average benefits are greater than average opportunity costs. B) additional benefits are greater than additional opportunity costs. C) average benefits are greater than average implicit costs. D) total benefits are greater than total opportunity costs. E) additional benefits are greater than additional implicit costs. Answer: B Diff: 2 Type: MC Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

27) Marginal benefits are the A) additional costs from your next choice. B) average costs from your next choice. C) benefits that affect others external to a choice of a trade. D) additional benefits from your next choice. E) average benefits from your next choices. Answer: D Diff: 2 Type: MC Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 28) Saskatchewan used to have more hospitals than Ontario, despite having far fewer people. The Saskatchewan government closed many of these hospitals despite local protests. Which statement is true? A) Since hospitals have positive benefits, they should never be closed. B) If Saskatchewan had more hospitals than Ontario, it must have had too many hospitals. C) The Saskatchewan government must have thought the marginal benefit from one of these closed hospitals exceeded its marginal cost. D) The Saskatchewan government must have thought the marginal benefit from one of these closed hospitals was less then its marginal cost. E) These closures did not impose costs on the communities where the hospitals were located because the communities did not pay any of the hospital operating costs. Answer: D Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 29) Monika will choose to eat a seventh pizza slice if A) the marginal benefit from the seventh slice is greater than its marginal cost. B) the marginal benefit from the seventh slice is less than its marginal cost. C) the total benefit from all seven slices is greater than their total cost. D) the total benefit from all seven slices is less than their total cost. E) she has enough money to pay for it. Answer: A Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

30) Before starring in Iron Man, Robert Downey Jr. had played in many movies with firstweekend box office revenues averaging about $5 million. Iron Man earned $102 million in its first weekend. The success of Iron Man ________ the opportunity cost of hiring Robert Downey Jr. and ________ the marginal benefit to movie producers of hiring him. A) increases; decreases B) decreases; decreases C) decreases; increases D) increases; increases E) decreases; does not change Answer: D Diff: 2 Type: MC Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 31) The Three Keys to Smart Choices focus your attention on information most useful for making a smart choice, leaving all other information in the background. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 32) A university adds a 10% surcharge to tuition fees to pay for a new cafeteria. This is a microeconomic decision. Answer: TRUE Diff: 1 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 33) In response to a wage increase, a manufacturer decides to hire fewer workers. This a microeconomic decision. Answer: TRUE Diff: 1 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 34) When your employer offers a higher wage, you decide to work more hours. This is a macroeconomic decision. Answer: FALSE Diff: 1 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 47 Copyright © 2021 Pearson Canada Inc.

35) More drivers in Canada are buying imported automobiles. This is a macroeconomic decision. Answer: FALSE Diff: 1 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 36) Microeconomics analyzes choices that individuals in households, individual businesses, and governments make, and how those choices interact in markets. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 37) Macroeconomics analyzes performance of the whole Canadian economy and global economy; the combined outcomes of all individual microeconomic choices. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 38) Macroeconomics analyzes choices that individuals in households, individual businesses, and governments make, and how those choices interact in markets. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 39) Microeconomics analyzes performance of the whole Canadian economy and global economy; the combined outcomes of all individual microeconomic choices. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 40) When you buy macrobiotic food at a health food store, that is a macroeconomic decision. Answer: FALSE Diff: 1 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

41) The Three Keys to Smart Choices summarize the core of macroeconomics. Answer: FALSE Diff: 1 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 42) The Three Keys to Smart Choices summarize the core of microeconomics. Answer: TRUE Diff: 1 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 43) A smart choice is based on a comparison of marginal benefits and marginal opportunity costs. Answer: TRUE Diff: 1 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 44) Costs paid in the past are not relevant in making smart choices about your future. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 45) Resale value is irrelevant when you are deciding about leasing a car. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 46) Deciding how many hours to study should not depend on how much you have paid for tuition. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

47) Implicit costs measure the opportunity costs of investing your own money or time. Answer: TRUE Diff: 1 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 48) Andrew decides to open a tattoo parlour in his basement and quits his job at TD Securities, sacrificing an annual salary of $64,000. Andrew will have to evict his tenant who currently pays $16,000 a year to rent the basement. Andrew's implicit cost of opening the tattoo parlour is $80,000. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 49) Andrew decides to open a tattoo parlour in his basement and quits his job at TD Securities, sacrificing an annual salary of $64,000. Andrew will have to evict his tenant who currently pays $16,000 a year to rent the basement. Andrew's implicit cost of opening the tattoo parlour is $64,000. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 50) Failure to recognize the negative externality costs of producing electricity with coal-burning generators results in over-production of electricity. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 51) A generous roommate who buys a large number of the latest DVDs creates a positive externality for you. Answer: TRUE Diff: 1 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

52) A roommate who throws wild parties every weekend might create positive externalities or negative externalities, depending on your mood. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 53) The decision to take this economics course creates a positive externality because your skills will help businesses who might hire you. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 54) If you are thinking about starting to smoke, a smart choice will not consider the external costs associated with smoking. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 55) If you are thinking about starting to smoke, a smart choice will consider the effects of second-hand smoke on others. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Applied Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 56) Implicit costs are costs that affect others external to a choice or a trade. Answer: FALSE Diff: 1 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 57) Positive externalities are costs that affect others external to a choice or a trade. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

58) Negative externalities are costs that affect others external to a choice or a trade. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 59) Positive externalities are benefits that affect others external to a choice or a trade. Answer: TRUE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices. 60) Negative externalities are benefits that affect others external to a choice or a trade. Answer: FALSE Diff: 2 Type: TF Page Ref: 17-21 Skill: Recall Objective: 1.5 Differentiate microeconomic and macroeconomic choices, and explain the Three Keys model to Smart Choices.

Macroeconomics for Life: Smart Choices for All?, Updated 2e (Cohen) Chapter 2 Making Smart Choices: The Law of Demand 2.1 Put Your Money Where Your Mouth Is: Weighing Benefits, Costs, and Substitutes 1) Your preferences measure A) the availability of alternatives. B) how badly you want something. C) the availability of substitutes. D) how limited your time is. E) the price of a product. Answer: B Diff: 1 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 2) A Sociology class is a substitute for an Economics class if A) attending the two classes has the same opportunity cost. B) the two classes satisfy the same want. C) the tuition for the two classes is the same. D) both classes are taught by the same professor. E) both classes are at the same time. Answer: B Diff: 2 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 3) Substitutes must A) have the same price. B) satisfy the same want. C) be sold in the same store. D) have the same opportunity cost. E) be exactly the same product or service. Answer: B Diff: 2 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service.

4) To get tickets to see the Spice Girls reunion tour Sue missed a day at work, which cost her $300, drove her car downtown and parked, which cost her $30, and paid $170 for the tickets. Sue's expected benefits from attending the concert are at least A) $300. B) $200. C) $130. D) $500. E) $170. Answer: D Diff: 2 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 5) What you can afford is limited by A) preferences. B) demand. C) substitutes. D) money. E) externalities. Answer: D Diff: 2 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 6) What you can afford is limited by A) preferences. B) externalities. C) substitutes. D) demand. E) time. Answer: E Diff: 2 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service.

7) Your demand for tickets to the Lady Gaga concert depends on A) how much you like Lada Gaga. B) your income. C) what other live concerts you are interested in. D) what else you might spend the money on. E) all of the above. Answer: E Diff: 1 Type: MC Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 8) Economists describe all of your wants - and how intense each want is - as your preferences. Answer: TRUE Diff: 1 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 9) For economists, the terms wants and demands mean the same thing. Answer: FALSE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 10) Your preferences can be affected by advertising. Answer: TRUE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 11) Your preferences are determined only by your logical needs. Answer: FALSE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 12) Making a smart choice depends on what substitutes are available and what they cost. Answer: TRUE Diff: 1 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 55 Copyright © 2021 Pearson Canada Inc.

13) Sam will drink anything that is cold, while Dave will only drink Gatorade. We expect Sam is willing to pay more for Gatorade than is Dave. Answer: FALSE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 14) Sam will drink anything that is cold, while Dave will only drink Gatorade. We expect Dave is willing to pay more for Gatorade than is Sam. Answer: TRUE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 15) Smart choices are based on a comparison of expected benefits and opportunity costs. Answer: TRUE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 16) Substitutes need to be exactly the same product or service as the product or service you want. Answer: FALSE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 17) Substitutes can be different products or services as long as they satisfy the same want. Answer: TRUE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 18) What you can afford is limited by more than just money. Answer: TRUE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service.

19) What you can afford is just about money. Answer: FALSE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 20) If you buy a product or service that has no substitutes, your expected benefits must be zero. Answer: FALSE Diff: 2 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 21) You are generally willing to pay more for a product or service that has no close substitutes. Answer: TRUE Diff: 2 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 22) The term demand describes a consumer's willingness and ability to pay for a product or service. Answer: TRUE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 23) The term demand describes a consumer's wants for a product or service. Answer: FALSE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 24) When you download music for free, you have a demand for music. Answer: FALSE Diff: 2 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service.

25) Your demand for a product or service depends only on your preferences, not on your income. Answer: FALSE Diff: 2 Type: TF Page Ref: 28-29 Skill: Recall Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 26) If you feel strongly about protecting the environment, this affects your demand for cars and your demand for public transit. Answer: TRUE Diff: 1 Type: TF Page Ref: 28-29 Skill: Applied Objective: 2.1 Describe what determines your willingness and ability to pay for a product or service. 2.2 Living On the Edge: Smart Choices Are Marginal Choices 1) You have a bet that you can eat more pizza slices than your friend. The loser has to pay for all the pizza. Which statement is true ? A) Your total benefit increases with each slice of pizza you choose to eat. B) As long as you don't get sick, there will be some positive marginal benefit from every slice you choose to eat. C) Each additional slice of pizza has a lower marginal benefit than the slice before. D) You will stop eating when the expected marginal benefit of the last slice is zero. E) All of the above are true. Answer: E Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 2) People take their parents for granted because parents typically have ________ total benefits and ________ marginal benefits. A) low; low. B) low; high. C) zero; infinite. D) high; high. E) high; low. Answer: E Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits.

3) Your instructor advised you to study for at least a week before your economics test. If you ignored his advice and only studied for one hour just before the test, your studying probably has ________ total benefits and ________ marginal benefits. A) zero; infinite. B) high; low. C) low; high. D) high; high. E) low; low. Answer: C Diff: 3 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 4) Products and services that are rare and essential will typically have A) many alternatives. B) a high total benefit. C) a low price. D) a low marginal benefit. E) a high marginal benefit. Answer: E Diff: 2 Type: MC Page Ref: 30-32 Skill: Recall Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 5) Products and services that are plentiful and essential will typically have A) few alternatives. B) a low total benefit. C) a high price. D) a low marginal benefit. E) a high marginal benefit. Answer: D Diff: 2 Type: MC Page Ref: 30-32 Skill: Recall Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits.

6) A person's marginal growth (in height) decreases as they age because A) people grow more quickly when they are younger. B) older people prefer Pepsi over Coke. C) our parents lose their ability to measure us as we get older. D) circumstances change as we age. E) total growth is decreasing; we begin to get shorter once we get old enough. Answer: A Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 7) Total growth (in height) is best described by the question, A) "How much have you grown since I last saw you?" B) "Have you had a growth spurt?" C) "How tall are you?" D) "When did you get taller than your mother?" E) "Did they stretch you on the rack to make you taller?" Answer: C Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 8) Phone data plans often charge a high price for the first 10 megabytes, a lower price for the next 100 megabytes, and a very low price for the next 1,000 megabytes. An economist would say this is because A) not many people have cell phones these days. B) marginal benefits decrease as you use more megabytes. C) marginal benefits always decrease as circumstances change. D) 1,000 megabytes can be transmitted more cheaply than 100 megabytes. E) total benefits decrease as you use more megabytes. Answer: B Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits.

9) Phone data plans often charge a high price for daytime use and a lower price on evenings and weekends. An economist would say this is because A) total benefits decrease as you use more minutes. B) it is less expensive to provide service when it is dark outside. C) marginal benefits increase as you talk longer. D) not many people have cell phones these days. E) marginal benefits can decrease as circumstances change. Answer: E Diff: 3 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 10) People pay more for diamonds than for water because A) total benefits from diamonds are high and total benefits from water are low. B) there are no substitutes for water. C) people don't make smart choices. D) water is scarce. E) marginal benefits from water are low and marginal benefits from diamonds are high. Answer: E Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 11) The high price of diamonds relative to the price of water is due to the fact that A) total benefits from water are relatively low. B) total benefits from diamonds are relatively high. C) marginal benefits from water are relatively high. D) marginal benefits from diamonds are relatively low. E) none of the above is true. Answer: E Diff: 3 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits.

12) The high price of diamonds relative to the price of water is due to the fact that A) total benefits from water are relatively low. B) total benefits from diamonds are relatively high. C) marginal benefits from water are relatively low. D) marginal benefits from diamonds are relatively low. E) none of the above is true. Answer: C Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 13) The high price of diamonds relative to the price of water is due to the fact that A) total benefits from water are relatively low. B) total benefits from diamonds are relatively high. C) marginal benefits from water are relatively high. D) marginal benefits from diamonds are relatively high. E) none of the above is true. Answer: D Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits. 14) The diamond/water paradox can be explained by A) water having a low price relative to diamonds. B) water having high total benefits relative to diamonds. C) water having higher marginal benefits in the summer than in the spring. D) distinguishing between total benefits and price. E) distinguishing between total benefits and marginal benefit. Answer: E Diff: 2 Type: MC Page Ref: 30-32 Skill: Applied Objective: 2.2 Identify why smart choices depend on marginal benefits, not total benefits, and explain what changes marginal benefits.