Department of Economics
University of Lethbridge
Econ 1010A
Practice Questions – Chapter 1
1. Maintaining objectivity is easiest in
A) positive economics.
B) the science of economics.
C) normative economics.
D) subjective economics.
2. The slopes of curves at their maximum and minimum points are
A) zero and zero.
B) infinity and zero.
C) zero and one.
D) one and zero.
3. The study of economics does NOT include which of the following?
A) Decisions made by individuals with finite resources.
B) Decisions made by individuals with infinite resources.
C) The Canadian government deciding whether to send troops to support the American
war effort in Iraq.
D) General Motors deciding where to build a new plant.
4. Value judgments in economics
A) are necessary when objective analysis cannot address a question.
B) can always be avoided with the use of objective analysis.
C) are an essential part of positive economics.
D) can be avoided through the use of normative economics.
5. Which of the following statements support the behavioural postulates of economics?
A) Minh would never give up any of her child's food for any price.
B) Homer Simpson likes the first few donuts he eats. However, after the first 50 or
so, finds that they are not worth the effort of lifting his arm to eat them.
C) Suicide bombers are irrational.
D) Recently, Conrad Black has been forced to sell many of his assets. He finds that
the less art work he has, the less he values each remaining piece.
E) None of the above.
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6. All of the following are questions involving normative economic issues except
A) How should the government deal with the next recession?
B) Should the government transfer money from the rich to the poor?
C) How are price and quantity demanded related?
D) Should government allow two large companies to merge?
7. For presenting real world data through graphs you generally use all of the following
except
A) line graphs.
B) bar graphs.
C) circle charts.
D) pie charts.
8. The determination of prices and the behaviour of individual markets are studied in
__________, whereas topics such as business cycles, unemployment, and inflation are
studied in ___________.
A) macroeconomics, microeconomics
B) positive analysis, normative analysis
C) microeconomics, normative analysis
D) microeconomics, macroeconomics
9. Economic reasoning
A) provides a framework with which to conduct analysis.
B) provides correct answers to just about every question.
C) is only used by economists.
D) should only be applied to economic matters.
10. Which of the following would be part of economics?
A) The federal government deciding which Quebec advertising firms receive money
under its former Cultural Sponsorship Program.
B) A student deciding whether to take an economics course or an English literature
course.
C) A three-year old deciding whether to play with his or her colouring book or take a
nap.
D) All of the above are economic choices.
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11. Which of the following people was not a well-known Classical economist or not a critic
of Classical economics?
A) Adam Smith.
B) Thomas Malthus.
C) Winston Churchill.
D) Karl Marx.
12. The opportunity cost of reading Chapter 1 of the text
A) is about 1/20 of the price you paid for the book because one chapter is about 1/20 of
the book.
B) zero since you have already paid for the book.
C) has nothing to do with the price you paid for the book.
D) is 1/20 the price of the book plus 1/20 of the price of the tuition.
13. The extra cost associated with undertaking some action is its
A) marginal benefit.
B) marginal cost.
C) total net loss.
D) total cost.
14. If you choose not to answer this question, an economist is likely to infer that
A) your opportunity cost of answering the question is too high.
B) your opportunity cost of answering the question is too low.
C) your opportunity cost of not answering the question is too high.
D) you are irrational.
15. ________ relates positive economics to normative economics.
A) Microeconomics
B) Macroeconomics
C) The science of economics
D) Marshallian economics
16. In arriving at a decision, a good economist would say that
A) one should consider only total costs and total benefits.
B) one should consider only marginal costs and marginal benefits.
C) after one has considered marginal costs and benefits, one should integrate the social
and moral implications and reconsider those costs and benefits.
D) after considering the marginal costs and benefits, one should make the decision on
social and moral grounds.
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17. The opportunity cost of obtaining more of a good is
A) most likely zero.
B) not likely to influence the amount of it purchased.
C) equal to the net benefit sacrificed to obtain it.
D) equal to its price.
18. An inverse relationship occurs between two variables when
A) as one goes up, the other goes up.
B) as one goes up, the other goes down.
C) as one goes up, the other does not change.
D) as one goes down, the other goes down.
19. Economic forces
A) are the product of scarcity.
B) give rise to scarcity.
C) are not related to scarcity.
D) are not related to rationing.
20. The table below shows how the marginal benefit of video tape rentals varies according
to the number rented per month.
Tapes rented
per month
1
2
3
4
5
Marginal benefit of
Renting an additional tape
$6.00
$5.00
$4.00
$3.00
$2.00
The price of each tape rental is reduced from $2.99 to $1.99. Assuming that the price of
a rental accurately reflects the marginal cost and that the renter is rational
A) the renter will increase the number of tapes rented per month from 1 to 2.
B) the renter will increase the number of tapes rented per month from 2 to 3.
C) the renter will increase the number of tapes rented per month from 3 to 4.
D) the renter will increase the number of tapes rented per month from 4 to 5.
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21. Economics is the study of
A) the best way of training business students to be good managers who will make
profits for the firms they will work for when they graduate.
B) how to make money on the stock market.
C) how individuals, firms, and governments make optimal choices from among a set of
alternatives when facing no constraints.
D) how individuals, firms, and governments make optimal choices from among a set of
alternatives when facing scarce resources.
22. The concept of the invisible hand comes from
A) microeconomics.
B) macroeconomics.
C) normative economics.
D) Marshallian economics.
23. Suppose the quantity of apples demanded equals the quantity of apples supplied. If this
is the case, the invisible hand would
A) predict an increase in apple prices.
B) predict a decrease in apple prices.
C) predict no change in apple prices.
D) be unable to predict what would happen to apple prices.
24. The study of individual choice is a topic in
A) microeconomics.
B) macroeconomics.
C) normative economics.
D) Ricardian economics.
25. If it takes you an hour to make a rational decision, and the opportunity cost of that hour
is $100, then
A) you will always make rational decisions.
B) you will make rational decisions only if the benefit from doing so exceeds $100.
C) you will make rational decisions only if the benefit from doing so is less than $100.
D) you will never make rational decisions.
26. Normative economics seeks to
A) determine the most appropriate economic goals for a society.
B) determine how government policies affect the economy.
C) objectively explain how the economy functions.
D) objectively explain economic problems such as inflation and unemployment.
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27. Suppose the quantity of cars demanded is less than the quantity of cars supplied. If this
is the case, the invisible hand theory would
A) predict an increase in car prices.
B) predict a decrease in car prices.
C) predict no change in car prices.
D) be unable to predict what would happen to car prices.
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