If we produce one more bottle of water,
A) we cannot be acting efficiently.
B) we incur a marginal cost.
C) we must move away from market equilibrium.
D) the price of a bottle of water must rise.
E) the marginal social benefit from bottled water increases.
Use the figure below to answer the following questions.
Figure 11.4.4
Refer to Figure 11.4.4, which illustrates the long-run average total cost curve. Which
one of the following statements is false?
A) Economies of scale exist between 0 and Q0 units of output.
B) Diseconomies of scale exist between 0 and Q1 units of output.
C) Constant returns to scale exist between Q1 and Q2 units of output.
D) Diseconomies of scale exist at quantities greater than Q2 units of output.
E) Constant returns to scale exist between Q0 and Q1 units of output.
Refer to Figure 14.2.4. The figure represents a monopolistically competitive firm in
short-run equilibrium. What price does the firm charge?
A) P2
B) P1
C) P4
D) P3
E) P5
Suppose the cost of breaking the law is imposed on the buyers of an illegal good. This
action will have its biggest impact on quantity if the demand for the good is
A) inelastic or the supply is inelastic.
B) elastic or the supply is elastic.
C) elastic or the supply is inelastic.
D) inelastic or the supply is elastic.
E) perfectly inelastic.
A well-maintained waterfront property that is enjoyed by other property owners is an
example of
A) an inefficient allocation of resources.
B) a negative consumption externality.
C) a positive consumption externality.
D) a negative production externality.
E) a positive production externality.
Refer to Fact 24.4.1. Huck Finn comes along and deposits $10. After Huck’s deposit,
but before any other actions occur, the total amount of money in the economy
A) has stayed the same, with its components unchanged.
B) has stayed the same, with currency decreasing and deposits increasing.
C) has fallen, with currency decreasing and deposits staying the same.
D) has risen, with currency unchanged and deposits increasing.
E) has fallen, with currency decreasing and deposits unchanged.
Refer to Table 15.2.5. Two software firms have developed an identical new software
application. They are debating whether to give the new application away free and then
sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the
payoffs are profits in millions of dollars. What is the Nash equilibrium of the game?
A) Both Firm 1 and 2 will sell the software application at $30 a copy.
B) Both Firm 1 and 2 will give the software application away free.
C) Firm 1 will give the application away free and Firm 2 will sell it at $30.
D) Firm 1 will sell the application for $30 and Firm 2 will give it away.
E) There is no Nash equilibrium to this game.
If outlays exceed revenues, the government’s budget balance is ________, and the
government has a budget ________.
A) negative; deficit
B) positive; surplus
C) positive; deficit
D) negative; surplus
E) zero; surplus
If a nation’s central bank increased domestic interest rates, the nation’s exchange rate
would change if the country’s exchange rate was
A) a flexible exchange rate.
B) a fixed exchange rate.
C) a crawling peg.
D) a nominally fixed exchange rate.
E) none of the above
In 2011, the mean household income in Canada was
A) $63,000.
B) $50,700.
C) $25,000.
D) $48,300.
E) $65,000.
Which one of the following is an example of land?
A) Bono’s singing voice
B) a computer program
C) Lake Erie
D) a road
E) a dam
Choose the correct statement.
A) The quantity of land demanded cannot be changed by people’s decisions.
B) The supply of each particular block of land is perfectly inelastic.
C) The lower the rental rate, other things remaining the same, the smaller is the quantity
of land demanded.
D) Profit-maximizing firms rent the quantity of land at which the value of marginal
product of land is equal to the quantity of land demanded.
E) The supply of land is based on the value of marginal product of land.
Which one of the following items is not included in the M1 definition of money?
A) currency outside banks.
B) personal chequable deposits
C) non-personal chequable deposits
D) fixed term deposits
E) Neither B nor D are part of M1.
A unit elastic demand
A) means that the ratio of a change in quantity demanded to a change in price is equal
to 1.
B) means that the ratio of a percentage change in quantity demanded to a percentage
change in price is equal to 1.
C) means that the ratio of a change in price to a change in quantity demanded is equal
to 1.
D) is illustrated by a horizontal demand curve.
E) is illustrated by a vertical demand curve.
The firm that printed your textbook bought the paper from XYZ Paper Mills. This
purchase of paper ________ part of GDP because the paper is ________ good.
A) is not; a final
B) is not; an intermediate
C) is; an intermediate
D) is; a final
E) is; a nonrenewable
Which of the following would an economist classify as capital?
A) natural resources
B) a deposit of silver
C) entrepreneurship
D) a computer
E) land
In recent history, real GDP has risen less rapidly than nominal GDP. This is because
A) the general price level fell.
B) capital increased.
C) the goal of zero population growth has been reached.
D) the general price level rose.
E) the level of population rose.
Consider graph (a) of Figure 1A.1.5. Which one of the following statements is true?
A) x and y are negatively related.
B) x and y are unrelated.
C) x and y are positively related.
D) x and y move in opposite directions.
E) both A and D are correct.
Use the table below to answer the following questions.
Table 6.3.2
Refer to Table 6.3.2. You are in the business of producing and selling hamburgers,
French fries, pizza, and ice cream. The mayor of your city plans to impose a sales tax
on one of these products. Based on the elasticities in the table, on which of these goods
would your customers least like to be taxed?
A) hamburgers
B) French fries
C) pizza
D) ice cream
E) Your customers are indifferent about which good is taxed.
According to the Laffer curve, raising the tax rate
A) always increases the amount of tax revenue.
B) always decreases the amount of tax revenue.
C) does not change the amount of tax revenue.
D) might increase, decrease, or not change the amount of tax revenue.
E) has no effect on the amount of tax revenue.
Deflation is
A) a one-time fall in the price level.
B) a persistent and ongoing falling price level.
C) always accompanied by an increase in the natural unemployment rate.
D) always accompanied by a decrease in the natural unemployment rate.
E) unknown in the twenty-first century.
An increase in the tax on capital income ________ the supply of loanable funds and
________ investment.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) decreases the demand for loanable funds; decreases or increases
Suppose that people expect that the Canadian exchange rate will decrease in the near
future. How will this situation affect the Canadian exchange rate?
A) The supply of Canadian dollars decreases, the demand for Canadian dollars
increases and the exchange rate rises.
B) The supply of Canadian dollars increases, the demand for Canadian dollars
decreases and the exchange rate falls.
C) The supply of Canadian dollars decreases, the demand for Canadian dollars
decreases and the exchange rate falls.
D) The supply of Canadian dollars increases, the demand for Canadian dollars
decreases and the exchange rate rises.
E) Neither the supply of Canadian dollars nor the demand for Canadian dollars changes.
In a prisoners’ dilemma game, which of the following strategies gives the best outcome
for both prisoners?
A) Both players deny.
B) Both players confess.
C) One player confesses and the other player denies.
D) Both players hire good lawyers.
E) None of the above
Which of the following statements about the overnight loans rate is false?
A) The overnight loans rate and the treasury bill rate move closely together.
B) The overnight loans rate and the long-term bond rate trend in the same direction.
C) The overnight loans rate is most often less than the long-term bond rate.
D) The long-term bond rate fluctuates less than the short-term rates.
E) The higher the overnight loans rate, the greater the quantity of money.
With the exception of the real interest rate, all real variables of macroeconomics are
calculated by
A) subtracting the inflation rate from the nominal value.
B) dividing a nominal variable by the price level.
C) adding the inflation rate to the nominal value.
D) multiplying the nominal variable by the price level.
E) subtracting off the most volatile components of the variable.
A decrease in the price of a firm’s output
A) decreases the supply of labour.
B) increases the supply of labour.
C) increases the value of marginal product of labour.
D) decreases the quantity of labour demanded.
E) decreases the value of marginal product of labour.
Refer to Fact 11.3.1. The deal with farmers to avoid fluctuations in costs benefits
PepsiCo for all the following reasons except
A) the type of corn it is buying is best suited to its products.
B) it eliminates variable costs.
C) transportation costs are lower.
D) corn costs remain low and stable.
E) the type of corn it is buying is best suited to its processes.
If discrimination takes the form of consumers discriminating against a group of
workers, the effect on this group of workers will be to shift their
A) value of marginal product curve rightward and increase their wage rate.
B) value of marginal product curve leftward and decrease their wage rate.
C) value of marginal product curve rightward and decrease their wage rate.
D) supply of labour curve leftward and increase their wage rate.
E) supply of labour curve rightward and decrease their wage rate.
Use the figure below to answer the following questions.
Figure 6.3.2
Refer to Figure 6.3.2. The amount of the tax per unit is
A) zero.
B) $0.50.
C) $1.00.
D) $1.50.
E) $2.00.
The larger the multiplier, the ________ the AE curve and the ________ the AD curve
from a given increase in investment.
A) steeper; greater the rightward shift of
B) steeper; greater the movement upward along
C) flatter; greater the rightward shift of
D) flatter; greater the movement upward along
E) steeper; greater the movement downward along
Aggregate demand
A) measures the amount of a nation’s goods and services that people are willing to buy.
B) measures the amount of a nation’s labour, capital, and technology that people are
willing to buy.
C) is the relationship between the quantity of real GDP demanded and the price level.
D) increases when the price level falls.
E) increases when factor prices fall.