Department of Economics

University of Lethbridge
Econ 1010A
Practice Questions Chapter
1. Market economies are based upon
A) private property and individual good will towards others.
B) government planning and individual good will towards others.
C) government planning and individual self-interest.
) private property and individual planning.
!. "istorically# the distinction between socialism and capitalism has become
A) more pronounced as capitalist countries have eliminated reliance on government
planning.
B) more pronounced as socialist countries have eliminated reliance on markets.
C) less pronounced as both capitalist and socialist countries have both eliminated
reliance on government planning.
) less pronounced as government$s economic role in capitalist countries has increased
and socialist countries have integrated some capitalist institutions.
%se the following to answer &uestion '(
C
D
A
B
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'. )hich of the following would be most likely to shift *ra&$s production possibility curve
in+
A) amage done to its human and capital resources during the %.,.-led invasion.
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B) Attacks by insurgents opposed to the %.,. presence.
C) Aid given by foreign countries.
) All of the above.
.) A and B.
%se the following to answer &uestion /(
Good X
G
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Y
A
B
C
D
/. 0efer to the graph above. *f the production possibility curve shifts along its y-a1is# point
22 will remain an efficient point of production(
A) A
B) B
C) C
)
3. )hich two systems re&uire the least amount of government intervention+
A) Mercantilism and capitalism.
B) 4eudalism and socialism.
C) Capitalism and feudalism.
) Mercantilism and socialism.
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5. )hich of the following is 678 one of the three principal components of a command
economy compared to a market economy+
A) 9overnment ownership of means of production# rather than private ownership as in
capitalism.
B) )orkers directed by a government planning board as to where they will work and
how much they will be paid.
C) .ntrepreneurs are encouraged by the profit motive# rather than government
directive# to satisfy consumer wants in the most efficient manner possible.
) istribution is according to need# as determined by central planners# rather than by
ability.
:. A mi1ed economy is
A) a blend of a market economy and a command economy.
B) the government makes all the economic decisions.
C) the government has no role to play in the economy.
) another name for communism.
.) an economy based on altruism.
;. ,oviet-style socialism is an economic system
A) that tries to organi<e society the way that most families are organi<ed and strives to
see that individuals get what they need.
B) based on central planning and government ownership of the means of production.
C) based on private property rights.
) based on markets.
=. 8he production possibility curve is least useful when
A) choices are se&uential and institutions are changing.
B) choices are se&uential and institutions are not changing.
C) choices are not se&uential and institutions are not changing.
) choices are not se&uential and institutions are changing.
1>. 8he principle of increasing marginal opportunity holds in which of the following cases+
A) All inputs are e&ually adaptable to the production of all goods.
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B) 8he production possibility curve is a downward sloping straight line.
C) All inputs are not e&ually adaptable to the production of all goods.
) .ach input can be used to produce more than one good.
11. 8he two economic groups competing for power during the transition from mercantilism
to capitalism were
A) craft guilds and industrialists.
B) serfs and craft guilds.
C) craft guilds and the lords of the manor.
) merchants and the lords of the manor.
1!. 8he invisible hand e1plains how
A) self-interested individuals can undermine the public interest.
B) self-interested individuals can promote the public interest.
C) altruistic individuals can promote the public interest.
) altruistic individuals can undermine the public interest.
1'. )hich of the following is the best e1ample of a command economy+
A) Canada.
B) 8he %nited ,tates of America.
C) 6orth ?orea.
) All of the above are good e1amples of command economies.
.) 6one of the above are good e1amples of command economies
1/. Capitalism and socialism have not e1isted forever. Capitalism came into e1istence in the
2222222222222222 and socialism came into e1istence in the 222222222222222222.
A) mid 1;>>s@ early 1=>>s
B) early 1=>>s@ mid 1;>>s
C) mid 1:>>s@ early 1=>>s
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) early 1=>>s@ mid 1:>>s
13. 8he principle of increasing marginal opportunity costs states that the
A) initial opportunity costs are high# but they decrease the more you concentrate on the
activity.
B) initial opportunity costs are low# but they increase the more you concentrate on the
activity.
C) initial opportunity costs are high# but they increase the more you concentrate on the
activity.
) initial opportunity costs are low# but they decrease the more you concentrate on the
activity.
15. )hich of the following was not one of Mar1$s predictions+
A) Capitalism would evolve into feudalism.
B) Competition among capitalists would fall.
C) 4irms would become larger and larger.
) Capitalism in its pure form had to change.
%se the following to answer &uestion 1:(
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A
A
B
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1:. 0efer to the graphs above. 8he discovery of a new supply of resources used only in the
production of guns can be shown by which movement+
A) 4rom A-B to C- in 9raph A.
B) 4rom C- to A-B in 9raph A.
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C) 4rom A-B to A-C in 9raph B.
) 4rom A-C to A-B in 9raph B.
1;. 8he ,oviet socialist economy fell apart primarily because
A) it was based on barter rather than monetary e1change.
B) individuals are not motivated by self interest.
C) workers lacked incentives to work and production was inefficient.
) markets failed to develop.
1=. 8he production possibility curve of a particular decision
A) depends on e1isting institutions.
B) depends on purely technical phenomenon.
C) depends on purely economic phenomenon.
) does not depend on the economic system.
!>. )hich of the following is 678 a characteristic of a market economy+
A) 9overnment ownership of capital.
B) -rivate ownership of land.
C) 4reedom of enterprise.
) )orkers are free to seek the Aobs of their choice.
!1. 8he difference between capitalism and mercantilism is that under capitalism#
A) craft guilds rather than merchants own capital.
B) the Binvisible handB is more important than the government.
C) industrialists$ views are represented by craft guild organi<ations.
) the state plays a more active role in coordinating economic activity.
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%se the following to answer &uestion !!(
Mary -aul
.conomics Math .conomics Math
3 > 13 >
/ 1 1! 1
' ! = !
! ' 5 '
1 / ' /
> 3 > 3
!!. 9iven Mary and -aul$s production possibility tables for answering economics and math
problems in a day# if they work together# what is the least number of days they would
need to solve /3 economics problems and 13 math problems+
A) '.
B) /.
C) 3.
) 5.
%se the following to answer &uestion !'(
4irst Bakery ,econd Bakery
Cookies -ies Cookies -ies
> 13 > !>
1> 1! !> 15
!> = /> 1!
'> 5 5> ;
/> ' ;> /
3> > 1>> >
!'. 9iven the production possibility tables for 4irst and ,econd Bakeries presented above#
the opportunity cost of producing cookies
A) is higher at 4irst Bakery.
B) is higher at ,econd Bakery.
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C) is the same at both bakeries.
) cannot be computed without further information.
!/. *f a country takes advantage of the comparative advantage of some resources over
others its production possibility curve is likely to be
A) flat.
B) straight.
C) bowed outward.
) bowed inward.
!3. 8reating efficiency as identical to productive efficiency
A) assumes that consumption above some minimum is immoral.
B) makes sense only if society wants what is produced to be fairly distributed.
C) would be wrong under any assumption.
) assumes society prefers more to less and that the distributional effects of the chosen
production method are not undesirable.
!5. *f no resources had a comparative advantage in the production of any good# the
production possibility curve would be
A) bowed outward.
B) bowed inward.
C) a hori<ontal line.
) a downward sloping straight line.
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%se the following to answer &uestion !:(
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!:. 0efer to the graph above. 8he production possibility curve demonstrates the tradeoff
between initial cost of a car relative to repair costs. *t tells us that as initial costs increase
A) repair costs increase at an increasing rate.
B) repair costs decrease at an increasing rate.
C) repair costs increase at a decreasing rate.
) none of the above.
!;. B)elfare capitalismB is meant to describe an economic system in which
A) market forces are modified by government intervention.
B) capitalists rather than managers make the primary decisions affecting society$s
welfare.
C) capitalists rather than political pressure groups set welfare policies.
) market forces rather than governments make the fundamental welfare decisions for
society.
!=. A resource is said to have a comparative advantage if
A) it is better suited to the production of one good than to the production of an
alternative good.
B) it is e&ually suited to the production of all goods.
C) its suitability to the production of one good changes as it produces more of that
good.
) its suitability to the production of one good does not change as it produces more of
that good.
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%se the following to answer &uestion '>(
A
B
G
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Y
Good X
'>. 0efer to the graph above. 0ecent proposals by %.,. lawmakers to cut down the si<e of
government programs and e1pand the private sector through maAor changes in e1isting
institutions will# if enacted# have what effect on the production possibility curve in the
short run+
A) ,hift from A to B.
B) ,hift from B to A.
C) 0emain at A.
) 0emain at B.

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