A n s w e r s t o t h e Re v i e w Q u i z z e s
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1. List some examples of the scarcity that you face.
Examples of scarcity common to students include not enough income to afford both tuition
and a car, not enough learning capacity to study for both an economics exam and a chemistry
exam in one night, and not enough time to allow for extensive studying and extensive
socializing.
2. Find examples of scarcity in today’s headlines.
Scarcity is our inability to satisfy all our wants. An example of scarcity is the headline on
cbc.ca on September 14, 2017, which states “Ontario won’t offer subsidies to lure Amazon.”
Amazon is searching for a second North American headquarters. With a subsidy from the
Ontario government, Ontario faces scarcity because it has less money to satisfy other wants.
Without the subsidy, Amazon may locate elsewhere, depriving Ontario of thousands of jobs
and potential billions of dollars in investment.
3. Find an example of the distinction between microeconomics and
macroeconomics in today’s headlines.
Microeconomics: On September 13, 2017, a headline in The Globe and Mail was “A New
Problem: How to sell a $1,300 iPhone.” This story covers a microeconomic topic because it
discusses choices made by Apple to make certain features available on the iPhone. It also
discusses choices by individuals to buy an iPhone 7, keep an existing iPhone, or buy a
smartphone produced by another firm.
Macroeconomics: On September 2, 2017, a headline in The Globe and Mail was “Hot
economy briefly boosts the loonie past 81-cent mark.” This story covers a macroeconomic
topic because it concerns the effect of the Canadian and world economy on the Canadian
dollar.
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1. Describe the broad facts about what, how, and for whom goods and services are
produced.
What we produce varies over time. In Canada today, services account for 70 percent of
production, manufactured goods for 28 percent, and agriculture for 2 percent. What we
produce also varies over countries. Agriculture and manufacturing are small percentages of
production in rich countries and large percentages of production in poorer countries.
How goods and services are produced is by businesses determining how the factors of
production, land, labour, capital, and entrepreneurship, are combined to make the goods and
services we consume. Land includes all natural resources, both renewable natural resources
such as wood, and nonrenewable natural resources such as natural gas. The quality of labour
depends on human capital. In Canada in 2016, 25.3 percent of the adult population had a
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university degree, a further 38.4 percent had some post-secondary education, and 94.8
percent had completed high school.
For whom goods and services are produced depends on the incomes that people earn.
People with large incomes can buy a wide range of goods and services. People with small
incomes can afford a smaller range of goods and services.
2. Use headlines from the recent news to illustrate the potential for conflict between
self-interest and the social interest.
One example of an issue that illustrates the potential for conflict between self-interest and the
social interest is the proposed Trans Mountain Pipeline. In The Globe and Mail on June 3,
2017, the headline “A pipeline rattles the political landscape; Future of Kinder Morgan project
is emblematic of debate over resource development across the country” appears. The
potential for conflict exists between the self-interest of the potential workers whose
employment is being delayed or possibly eliminated and the social interest of those concerned
about the environment.
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1. Explain the idea of a tradeoff and think of three tradeoffs that you have made
today.
A tradeoff is an exchange—giving up one thing to get something else. What is given up is the
opportunity cost of whatever is obtained. Three examples of tradeoffs are: a) When a student
sleeps in rather than attending his early morning economics class, the student trades
additional sleep for study time. The opportunity cost of the decision is the difference between
the A and the C he receives on the exam. b) When a student running late for class parks her
car illegally, the student trades saving time for the risk of a ticket. The potential opportunity
cost of the decision is the goods and services that cannot be purchased if the student
receives an expensive parking ticket. c) A student trades higher income by spending time