Refer to Figure 12.1.1. The firm competes in a perfectly competitive market. Curve A is
a straight line because the firm
A) is a price taker.
B) faces constant returns to scale.
C) wants to maximize profits.
D) has perfect information.
E) has constant marginal cost.
Jay has an income of $10 to buy peanuts and popcorn. The price of peanuts is $1 a bag
and the price of popcorn is $2 a bag. He chooses to consume 5 bags of peanuts and 2
bags of popcorn. What can we say about this consumption choice?
A) It is not the best affordable choice. He should consume more peanuts, more popcorn,
or more of both.
B) It is the best affordable choice, and his marginal rate of substitution equals the slope
of the budget line.
C) The consumption choice is on the budget line.
D) The consumption choice is outside the budget line.
E) both B and C
Rochelle lost her job as a salesperson when sales fell off during the recession. Now she
is looking for a new job. Rochelle is
A) frictionally unemployed.
B) structurally unemployed.
C) not unemployed.
D) cyclically unemployed.
E) not in the labour force.
The four-firm concentration ratio measures the share of the largest four firms in total
industry
A) profit.
B) sales.
C) cost.
D) capital.
E) loss.
For a monopolistically competitive firm to be making an economic profit,
A) the production period must be the short run.
B) the production period must be the long run.
C) rival firms must not exist.
D) its rivals must also be making an economic profit.
E) barriers to entry must exist.
If positive externalities exist and production is left to the private market, then at the
quantity produced,
A) MSC = MSB.
B) MSC < MSB.
C) MSC > MSB.
D) MSB = marginal external benefit.
E) MSB = 1/MSC.
Which of the following statements are positive?
1. The federal government should increase production of biofuels.
2. Air travel has increased since September 11.
3. The greatest number of accidents are caused by drunk drivers.
4. We ought to have a cure for cancer.
A) Statements 1 and 4 are positive.
B) Statements 2 and 3 are positive.
C) Statements 1 and 2 are positive.
D) Statements 3 and 4 are positive.
E) Statements 2 and 4 are positive.
If A and B are substitutes and the price of A rises, we will observe
A) an increase in the equilibrium price and the equilibrium quantity ofB.
B) a decrease in the equilibrium price and the equilibrium quantity of B.
C) an increase in the equilibrium price but a decrease in the equilibrium quantity of B.
D) a decrease in equilibrium price but an increase in the equilibrium quantity of B.
E) a decrease in the demand for A.
Use the figure below to answer the following questions.
Figure 28.1.1
Refer to Figure 28.1.1. Suppose the economy moves from point A to point C. According
to the monetarist theory of the business cycle, what could have caused this movement?
A) an increase in the money wage rate
B) an increase in the growth rate of the quantity of money
C) a decrease in the growth rate of the quantity of money
D) an increase in uncertainty
E) animal spirits
Refer to Table 6.5.1. If a $2-per-unit cost of breaking the law is imposed on both the
buyers and the sellers, the new price is ________ and the new equilibrium quantity is
________ units.
A) $8; 400
B) $8; 300
C) $7; 300
D) $9; 300
E) $8; 200
Refer to Table 16.2.3. The first two columns of the table show the demand schedule for
electricity from a coal burning utility; the second and third columns show the utility’s
cost of producing electricity.
The marginal external cost of the pollution created is equal to the marginal cost.
Suppose the government levies a pollution tax such that the utility generates the
efficient quantity of electricity. The pollution tax is ________ cents a kilowatt hour.
A) 2
B) 4
C) 6
D) 8
E) 10
An income tax ________ potential GDP by shifting the labour ________.
A) increases; demand curve rightward
B) decreases; demand curve rightward
C) increases; supply curve rightward
D) decreases; supply curve leftward
E) increases; supply curve and labour demand curve rightward
Canada has a comparative advantage in producing hardwood if the Canadian price of
hardwood before international trade is ________ the world price.
A) equal to
B) greater than
C) not comparable to
D) at least double
E) less than
Refer to Figure 7.3.1. The Canadian government’s revenue from the tariff is ________.
A) $64 million
B) $32 million
C) $128 million
D) $48 million
E) $480 million
A production quota is set equal to the equilibrium quantity. At the quota quantity,
marginal social benefit is ________ marginal social cost and the level of production is
________.
A) less than; efficient
B) greater than; efficient
C) less than; efficient
D) less than; inefficient
E) equal to; efficient
Government transfer payments, such as welfare payments, redistribute income and
A) increase the incentive to work.
B) improve economic efficiency.
C) increase tax receipts.
D) decrease the incentive to work.
E) push the Lorenz curve further away from the line of equality.
Refer to Figure 28.2.2. If SAS shifts from SAS0 to SAS1, then
A) inflation is expected to be 10 percent.
B) inflation will be 10 percent.
C) potential GDP will decrease
D) unemployment will fall.
E) deflation occurs.
For a common resource, the marginal private cost curve slopes ________ and the
marginal social cost curve slopes ________.
A) upward; upward
B) upward; downward
C) downward; upward
D) downward; downward
E) upward or downward; in the same direction as the marginal private cost curve
Refer to Table 5.2.1. If the price is $6 a unit, the producer surplus on the third unit is
A) $3.
B) $6.
C) $5.
D) $4.
E) $2.
Quantitative easing
A) is an open market sale of securities by the U.S. Federal Reserve.
B) is an open market purchase of securities by the U.S. Federal Reserve.
C) decreases bank reserves.
D) raises the nominal interest rate.
E) is an open market purchase of securities by Congress.
Refer to Fact 5.3.1. If there were a global market in water like there is in oil,
A) the supply of water would decrease.
B) less water would be made available to countries that experience drought.
C) supply and demand would determine the price of water and those who are willing to
pay the equilibrium price would get the water.
D) the demand for water would increase.
E) countries with a shortage of water would pay an exorbitant price for water.
Which of the following statements is true?
A) International trade raises wages in developing countries.
B) International trade with rich industrial countries forces people in the developing
countries to work for lower wages.
C) International trade leads to job losses in both import competing industries and
exporting industries.
D) Unlike other types of international trade, offshoring does not bring any gains from
trade.
E) All of the above
Refer to the production possibilities frontier in Figure 2.1.2. At point C, what is the
opportunity cost of increasing the production of Y from 20 to 50 units?
A) 6 units of X
B) 2 units of X
C) 8 units of X
D) 20 units of Y
E) 30 units of Y
Refer to Figure 9.2.3. When Rashid chooses the consumption point of 2 books and 6
albums, his marginal rate of substitution is
A) 1/3 books per album.
B) 0.5 books per album.
C) 3 books per album.
D) 1 book per album.
E) 2 books per album.
Consider the following data from the economy of Adanac:
∙ Currency outside banks: $15 billion
∙ Personal and non-personal chequable deposits: $40 billion
∙ Personal non-chequable deposits: $50 billion
∙ Non-personal non-chequable deposits: $125 billion
∙ Fixed term deposits: $200 billion
The value of MI is $________ billion and the value of M2 is $________ billion.
A) 105; 230
B) 110; 235
C) 55; 430
D) 55; 230
E) 60; 430
The seller pays most of a tax if demand is relatively elastic because
A) the buyer can easily substitute to other markets.
B) the seller can easily substitute to other markets.
C) the government forces the seller to bear the burden of the tax.
D) there is a black market for this good.
E) the seller cannot easily substitute to other goods.
A market where no single buyer or seller can influence the price is
A) a buyer’s market.
B) a seller’s market.
C) a competitive market.
D) an output market.
E) an input market.
In Figure 7.2.2, international trade ________ total surplus in Canada by ________.
A) decreases; $2.56 billion
B) increases; $4.8 billion
C) decreases; $3.6 billion
D) decreases; $1.92 billion
E) increases; $1.92 billion
The demand curve is P = 700 – 10QD. The supply curve is P = 400 + 5QS. At market
equilibrium, the equilibrium quantity is ________ and the equilibrium price is
________.
A) 20; 500
B) 5; 0.05
C) 0.05; 5
D) 500; 20
E) 300; 15
In the prisoners’ dilemma, with players Art and Bob, the dominant strategy equilibrium
is that
A) both prisoners confess.
B) neither prisoner confesses.
C) Art denies and Bob confesses.
D) Art denies if Bob denies, and Art confesses if Bob confesses.
E) Bob denies and Art confesses.
Investment is financed by which of the following?
I. Government spending
II. Household saving
III. Borrowing from the rest of the world
A) I, II, and III
B) I and II only
C) I and III only
D) II and III only
E) None of the above
Which of the following policies shifts the AD curve the farthest leftward?
A) a decrease in government expenditure of $10 billion
B) an increase in taxes of $10 billion
C) a decrease in taxes of $10 billion
D) an increase in government expenditure of $10 billion
E) a simultaneous increase in government expenditure of $10 billion and taxes of $10
billion
Which of the following is not a factor of production?
A) the water used to cool a nuclear power plant
B) the effort of farmers raising cattle
C) the wages paid to workers
D) the management skill of a small business owner
E) the land used by a farmer to grow wheat