False
290. A country has a comparative advantage in the production of DVD players if it can produce DVD players at a lower opportunity cost than others.
a.
True
b.
False
ANSWER:
True
291. Since it is possible to grow coffee in greenhouses in Canada, we should clearly create a Canadian coffee industry and no longer import coffee from Brazil.
a.
True
b.
False
ANSWER:
False
292. Small, developing countries must first become self-sufficient before they can benefit from international trade.
a.
True
b.
False
ANSWER:
False
293. In a market economy, government officials make most production decisions in a centralized manner.
a.
True
b.
False
ANSWER:
False
294. Consumer sovereignty means that consumers vote with their dollars in a market economy, which helps determine what is produced.
a.
True
b.
False
ANSWER:
True
295. In a market economy, prices help determine the distribution of goods and services but NOT the allocation of resources.
a.
True
b.
False
ANSWER:
False
296. Capital-intensive production techniques tend to be utilized most commonly in countries where labour is relatively cheap.
a.
True
b.
False
ANSWER:
False
297. High-wage countries like Canada tend to use less labour-intensive production methods than low-wage countries like China.
a.
True
b.
False
ANSWER:
True
298. Identify whether each of the following topics would be primarily a concern of microeconomics or macroeconomics:
a. a decision by a household to travel to the Caribbean during the winter break
b. the inflation rate increasing from 2.5 to 2.8%
c. a decision by the Bank of Canada to increase interest rates
d. the gross domestic product increasing by 1%
e. the price of fruits and vegetables increasing by 5%
f. a small bookstore closing due to increased competition from online retailers
ANSWER:
Microeconomic topics: a, e, and f
Macroeconomic topics: b, c, and d
299. How does microeconomics relate to macroeconomics?
ANSWER:
Microeconomics primarily examines the behaviour of individual households and firms, whereas macroeconomics concentrates on the behaviour of consumers and firms in the aggregate. Macroeconomics studies economic problems as they influence the whole of society.
300. What is the difference between a hypothesis and a theory?
ANSWER:
A hypothesis about behaviour is the first step in developing and constructing a theory. A hypothesis is testable and makes a prediction about behaviour in response to changed circumstances. If a hypothesis is shown to be consistent with real-world data, it can be tentatively accepted as an economic theory.
301. The United Nations asks you to help it understand the causes of income disparities around the world. You develop the following two hypotheses. Test each hypothesis against the given facts, identify which fits the facts better, and offer a theory based on your observation.
I. Countries with high populations have lower incomes because the large supply of labour drives down the wage rate.
II. Countries with high literacy rates have higher incomes because labour is more productive.
Country
Per Capita GDP
(in U.S. dollars)
Literacy Rate
(%)
Population
(in thousands)
Canada
48 400
99
35 881
United States
59 800
99
329 256
Switzerland
52 100
99
8293
Germany
50 800
99
80 458
Cambodia
4000
77.2
16 450
Indonesia
12 400
95.4
262 787
Afghanistan
2000
38.2
34 940
India
7200
71.2
1 296 834
Source: CIA World Factbook https://www.cia.gov/library/publications/the-world-factbook/