,ACCESS Test Bank for Understanding Economics 9th Canadian Edition
Lovewell
Chapter 1
Student Solutions Manual
Answers to Chapter Problems
1.1 Practice Problems
1.
a) The smoker is not behaving rationally because of a physical addiction that has led them
to continue engaging in an action they wish to stop.
b) By providing themselves with small rewards for abstaining from smoking, and penalizing
themselves when they do smoke, the smoker is much more likely to be able to quit.
2. Rent is a payment to owners of natural resources, interest is paid to owners of capital
resources, and human resources receive wages for their labour and profit for their
entrepreneurship. A loan repayment is not a resource income because loans are not an
economic resource. (Recall that interest on a loan can be a resource income. But repayment
of the principle is not income.)
1.2 Practice Problems
1.
a) The opportunity cost of the first fish is 4 coconuts, since coconut production is reduced
from 24 to 20 when the first fish is caught. Similarly, the opportunity costs of the second
and third fish are 8 (= 20 − 12) and 12 (= 12 − 0) coconuts.
b) These results conform with the law of increasing opportunity costs, because as fish
production is increased so does the opportunity cost of each newly caught fish.
c) The curve bows out to the right, reflecting the law of increasing opportunity costs.
d) Besides the assumption that only two goods are produced, we must assume that the
quantity of the castaway’s resources and the technology they use are fixed, and that their
resources are employed to their full capacity.
e) With 12 instead of eight hours of labour devoted each day to acquiring coconuts and fish,
the castaway’s production possibilities curve shifts outwards, with both its vertical and
horizontal intercepts increasing. If there are six instead of eight hours devoted each day
by the castaway, the production possibilities curve shifts inwards.
f) With a new capital asset that can be used to acquire fish (a fishing rod), the castaway’s
production possibilities curve shifts outwards, with its horizontal or fish intercept (but not
its vertical coconut intercept) increasing.
3. In the case of constant costs, the production possibilities curve will be a downward-sloping
straight line. Because the slope of the production possibilities curve is based on the two
products’ opportunity costs, if both these opportunity costs are constant then the slope of the
production possibilities curve will be constant as well.
1-1
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,ACCESS Test Bank for Understanding Economics 9th Canadian Edition
Lovewell
1.3 Practice Problems
1.
a) Beta is likely to have more economic freedom, given the greater importance of Beta’s
private sector and the consumer sovereignty it promotes.
b) Alpha is likely to have more economic stability, because of the relative importance of its
traditional and public sectors. Both of these sectors tend to reduce economic instability.
c) In Alpha, traditional culture and national planners are more likely to conflict, given its
relatively large traditional and public sectors.
d) In terms of this triangle, Alpha will be southeast of Beta because it has stronger elements
of both a traditional economy and a command economy.
1-2
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, ACCESS Test Bank for Understanding Economics 9th Canadian Edition
Lovewell
End of Chapter Problems
1.
a) Paying $10 per visit is most logical. Given your past behaviour of “not always following
through with your plans,” there is a good chance that you will not increase your visits to
the gym. Therefore, the cost of the $60 monthly contract is likely to be more than the cost
of visiting the club two or three times a month at $10 per visit − $60 per month is greater
than $20 or $30.
b) Your past behaviour is an important factor. If you could be sure that you would follow
through with your plans, the $60 per month might be less than the monthly cost of $10
per visit.
3.
a) The two variables are the price of digitally streamed music and the quantity of CDs
purchased. The price of digitally streamed music is the independent variable, since it is
the cause, and the quantity of CDs purchased is the dependent variable, since it is the
effect.
b) The two variables are Canadian household incomes and transfer payments to households.
Canadian household incomes is the independent variable, since it is the cause, and
transfer payments to households is the dependent variable, since it is the effect.
c) The two variables are the average salary of computer programmers and the number of
people seeking a career in computer programming. The average salary of computer
programmers is the independent variable, since it is the cause, and the number of people
seeking a career in computer programming is the dependent variable, since it is the effect.
d) The two variables are the price of wheat fertilizer and the amount of wheat planted by
farmers. The price of wheat fertilizer is the independent variable, since it is the cause, and
the amount of wheat planted by farmers is the dependent variable, since it is the effect.
e) The two variables are output per worker in the Canadian economy and Canada’s rate of
economic growth. Output per worker in the Canadian economy is the independent
variable, since it is the cause, and Canada’s rate of economic growth is the dependent
variable, since it is the effect.
f) The two variables are the number of cases of an infectious disease in Canada and
Canada’s economic output. The number of cases of the infectious disease in Canada is
the independent variable, since it is the cause, and Canada’s economic output is the
dependent variable, since it is the effect.
5.
a) The statement deals with a topic in microeconomics because it focuses on a particular
market − in this case the one associated with collectibles.
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Lovewell
Chapter 1
Student Solutions Manual
Answers to Chapter Problems
1.1 Practice Problems
1.
a) The smoker is not behaving rationally because of a physical addiction that has led them
to continue engaging in an action they wish to stop.
b) By providing themselves with small rewards for abstaining from smoking, and penalizing
themselves when they do smoke, the smoker is much more likely to be able to quit.
2. Rent is a payment to owners of natural resources, interest is paid to owners of capital
resources, and human resources receive wages for their labour and profit for their
entrepreneurship. A loan repayment is not a resource income because loans are not an
economic resource. (Recall that interest on a loan can be a resource income. But repayment
of the principle is not income.)
1.2 Practice Problems
1.
a) The opportunity cost of the first fish is 4 coconuts, since coconut production is reduced
from 24 to 20 when the first fish is caught. Similarly, the opportunity costs of the second
and third fish are 8 (= 20 − 12) and 12 (= 12 − 0) coconuts.
b) These results conform with the law of increasing opportunity costs, because as fish
production is increased so does the opportunity cost of each newly caught fish.
c) The curve bows out to the right, reflecting the law of increasing opportunity costs.
d) Besides the assumption that only two goods are produced, we must assume that the
quantity of the castaway’s resources and the technology they use are fixed, and that their
resources are employed to their full capacity.
e) With 12 instead of eight hours of labour devoted each day to acquiring coconuts and fish,
the castaway’s production possibilities curve shifts outwards, with both its vertical and
horizontal intercepts increasing. If there are six instead of eight hours devoted each day
by the castaway, the production possibilities curve shifts inwards.
f) With a new capital asset that can be used to acquire fish (a fishing rod), the castaway’s
production possibilities curve shifts outwards, with its horizontal or fish intercept (but not
its vertical coconut intercept) increasing.
3. In the case of constant costs, the production possibilities curve will be a downward-sloping
straight line. Because the slope of the production possibilities curve is based on the two
products’ opportunity costs, if both these opportunity costs are constant then the slope of the
production possibilities curve will be constant as well.
1-1
mynursytest.store
,ACCESS Test Bank for Understanding Economics 9th Canadian Edition
Lovewell
1.3 Practice Problems
1.
a) Beta is likely to have more economic freedom, given the greater importance of Beta’s
private sector and the consumer sovereignty it promotes.
b) Alpha is likely to have more economic stability, because of the relative importance of its
traditional and public sectors. Both of these sectors tend to reduce economic instability.
c) In Alpha, traditional culture and national planners are more likely to conflict, given its
relatively large traditional and public sectors.
d) In terms of this triangle, Alpha will be southeast of Beta because it has stronger elements
of both a traditional economy and a command economy.
1-2
mynursytest.store
, ACCESS Test Bank for Understanding Economics 9th Canadian Edition
Lovewell
End of Chapter Problems
1.
a) Paying $10 per visit is most logical. Given your past behaviour of “not always following
through with your plans,” there is a good chance that you will not increase your visits to
the gym. Therefore, the cost of the $60 monthly contract is likely to be more than the cost
of visiting the club two or three times a month at $10 per visit − $60 per month is greater
than $20 or $30.
b) Your past behaviour is an important factor. If you could be sure that you would follow
through with your plans, the $60 per month might be less than the monthly cost of $10
per visit.
3.
a) The two variables are the price of digitally streamed music and the quantity of CDs
purchased. The price of digitally streamed music is the independent variable, since it is
the cause, and the quantity of CDs purchased is the dependent variable, since it is the
effect.
b) The two variables are Canadian household incomes and transfer payments to households.
Canadian household incomes is the independent variable, since it is the cause, and
transfer payments to households is the dependent variable, since it is the effect.
c) The two variables are the average salary of computer programmers and the number of
people seeking a career in computer programming. The average salary of computer
programmers is the independent variable, since it is the cause, and the number of people
seeking a career in computer programming is the dependent variable, since it is the effect.
d) The two variables are the price of wheat fertilizer and the amount of wheat planted by
farmers. The price of wheat fertilizer is the independent variable, since it is the cause, and
the amount of wheat planted by farmers is the dependent variable, since it is the effect.
e) The two variables are output per worker in the Canadian economy and Canada’s rate of
economic growth. Output per worker in the Canadian economy is the independent
variable, since it is the cause, and Canada’s rate of economic growth is the dependent
variable, since it is the effect.
f) The two variables are the number of cases of an infectious disease in Canada and
Canada’s economic output. The number of cases of the infectious disease in Canada is
the independent variable, since it is the cause, and Canada’s economic output is the
dependent variable, since it is the effect.
5.
a) The statement deals with a topic in microeconomics because it focuses on a particular
market − in this case the one associated with collectibles.
1-3
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