Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
Chapter 01: Understanding the Canadian Business System
1. Profit is
a. what remains after business expenses are subtracted from business revenues.
b. equal to the market value of shares in a company.
c. equal to total revenue minus cash expenses.
d. the amount of sales minus 50 percent.
e. double the amount the company pays in taxes.
Difficulty: 1 Page-Reference: 6
Question ID: 01-1-01 Skill: Knowledge
Objective: 1.1
2. In 2011, the most profitable Canadian companies were all in the ______ industry.
a. banking
b. oil
c. computer
d. automobile
e. insurance
Difficulty: 2 Page-Reference: 6
Question ID: 01-1-02 Skill: Knowledge
Objective: 1.1
3. The sales revenues of TransCanada Distributors have increased since last year. The sales
manager thinks that as a result the company should now be more profitable. Which of the following would
most strongly support his contention?
a. TransCanada is a relatively new company.
b. TransCanada is a for-profit company.
c. TransCanada’s costs have decreased from the previous year.
d. TransCanada’s competitors have had increased revenue.
e. TransCanada has hired more employees recently.
Difficulty: 2 Page-Reference: 6
Question ID: 01-1-03 Skill: Analysis
Objective: 1.1
4. The sales revenues of TransCanada Distributors have increased since last year. The sales
manager thinks that as a result the company should now be more profitable. Which of the following would
weaken the sales manager’s argument?
a. TransCanada’s customers are happy with the company’s services.
b. Shipping costs for the industry have increased since last year.
c. TransCanada’s employees are dissatisfied with the company’s working conditions.
d. There has been a slowdown in the industry.
e. Most of TransCanada’s employees are new to the business.
Difficulty: 2 Page-Reference: 6
Question ID: 01-1-04 Skill: Analysis
Objective: 1.1
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
5. The sales revenues of TransCanada Distributors have increased since last year. The sales
manager thinks that as a result the company should now be more profitable. Which of the following points
out a flaw in the sales manager’s reasoning?
a. Information about the company’s expenses is necessary to tell whether it is profitable.
b. TransCanada may have actually lost money the previous year.
c. Most of the company’s employees are relatively new.
d. Sometimes sales revenue does not contribute toward profitability.
e. TransCanada’s competitors are having financial problems.
Difficulty: 2 Page-Reference: 6
Question ID: 01-1-05 Skill: Analysis
Objective: 1.1
6. Barry, a manager, says that if his company’s revenue had not increased last year, it would not have
been able to increase its profits. What is the flaw in Barry‘s reasoning?
a. Other similar companies have increased their profits, too.
b. Revenue does not contribute to profitability.
c. Profitability may not be the only objective of the company.
d. The company can increase revenue by advertising more.
e. Profits can also be increased by lowering costs, not just by increasing revenue.
Difficulty: 2 Page-Reference: 6
Question ID: 01-1-06 Skill: Analysis
Objective: 1.1
7. In a 2011 study, Forbes magazine ranked 134 countries in terms of how attractive they were to do
business in. Where did Canada rank?
a. First
b. Second
c. Fifth
d. Twenty-fifth
e. Eighty-seventh
Difficulty: 2 Page-Reference: 7
Question ID: 01-1-07 Skill: Knowledge
Objective: 1.1
8. This week, Jessica’s Variety Store had sales of $4,000, employees were paid $1,000, the cost of
goods was $1,500, and rent was $500. Profit for the week was
a. $3,000.
b. $1,000.
c. $4,000.
d. $2,000.
e. $1,500.
Difficulty: 2 Page-Reference: 6
Question ID: 01-1-08 Skill: Application
Objective: 1.1
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
9. Profit is
a. the market value of shares of stock in a company.
b. the level of expenses divided by the firm’s assets.
c. what remains after business expenses are subtracted from business revenues.
d. gross revenue minus taxes a company pays.
e. gross sales minus taxes a company pays.
Difficulty: 1 Page-Reference: 6
Question ID: 01-1-09 Skill: Knowledge
Objective: 1.1
10. Which one of the following organizations is a non-profit organization?
a. General Motors of Canada
b. Research in Motion
c. The Canadian Forces
d. Air Canada
e. Saskatchewan Potash Corporation
Difficulty: 1 Page-Reference: 7
Question ID: 01-1-10 Skill: Knowledge
Objective: 1.1
11. Most of the goods and services consumed in Canada are produced by
a. countries in the European Union.
b. businesses in the U.S.
c. countries of the Pacific Rim.
d. the Canadian government.
e. business firms.
Difficulty: 1 Page-Reference: 7
Question ID: 01-1-11 Skill: Knowledge
Objective: 1.1
12. An economic system is
a. an agreement between countries that deal with free trade.
b. the way in which a nation allocates its resources among its citizens.
c. a government decree that requires certain goods and services to be provided.
d. a long-standing agreement between citizens and governments on how an economy is run.
e. a large government department that oversees how the economy is running.
Difficulty: 2 Page-Reference: 7
Question ID: 01-1-12 Skill: Knowledge
Objective: 1.2
13. The key difference between economic systems is
a. the structure of government.
b. the management of capital and labour.
c. the management of the factors of production.
d. who controls the banks.
e. who controls large industries like steel and auto manufacturing.
Difficulty: 2 Page-Reference: 7
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
Question ID: 01-1-13 Skill: Knowledge
Objective: 1.2
14. A nation’s economic system is its way of
a. allocating resources among its citizens.
b. collecting taxes.
c. managing the money supply.
d. regulating business firms by government laws.
e. supplementing low-income families.
Difficulty: 2 Page-Reference: 7
Question ID: 01-1-14 Skill: Knowledge
Objective: 1.2
15. In terms of factors of production, Imperial Oil’s crude oil reserves are an example of _______,
while market forecasts are an example of ________.
a. labour; entrepreneurs
b. information; labour
c. capital; information
d. natural resources; information
e. information; natural resources
Difficulty: 2 Page-Reference: 8
Question ID: 01-1-15 Skill: Comprehension
Objective: 1.2
16. If two people exchange an apple, they each still have just one apple, but if they exchange ideas,
they now each have two ideas. This is an illustration of
a. the importance of natural resources.
b. the principle of specialization of labour.
c. the difference between information and all the other factors of production.
d. the importance of profit in market economies.
e. all of these.
Difficulty: 2 Page-Reference: 9
Question ID: 01-1-16 Skill: Comprehension
Objective: 1.2
17. Entrepreneurs are important because they
a. make lots of money.
b. are good at making decisions.
c. take risks to start new businesses.
d. are good managers.
e. are rich.
Difficulty: 2 Page-Reference: 8
Question ID: 01-1-17 Skill: Application
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
18. Natural resources, as a factor of production for mining, are a practical consideration when a
mining company considers
a. the ease with which ore could be mined.
b. the number of miners available to mine the ore.
c. the amount of capital required to build the mine.
d. the profit that could be made from mining the ore.
e. the number of customers who want to buy ore.
Difficulty: 3 Page-Reference: 8
Question ID: 01-1-18 Skill: Application
Objective: 1.2
19. What is the difference between a command economy and a market economy?
a. A command economy is found only in communist countries, while a market economy is found
only in capitalist countries.
b. A command economy is more efficient than a market economy.
c. A market economy gives greater “life satisfaction” to people.
d. A command economy relies on centralized government control of the factors of production, while in
a market economy supply and demand determine production and allocation decisions.
e. There really are no significant differences between a command economy and a market economy.
Difficulty: 3 Page-Reference: 9
Question ID: 01-1-19 Skill: Knowledge
Objective: 1.2
20. The economic system in which producers and consumers control production and allocation
decisions through supply and demand is called
a. a centrally planned economy.
b. privatization.
c. a market economy.
d. communism.
e. socialism.
Difficulty: 2 Page-Reference: 9
Question ID: 01-1-20 Skill: Knowledge
Objective: 1.2
21. Which of the following is correct with regard to the communist economic system?
a. The centralized planning emphasis on capital equipment and military hardware has caused
declines in the prices of consumer goods.
b. Government ownership of the means of production is only temporary.
c. Most government-operated enterprises are very efficient because of central planning.
d. Overall production expands rapidly because of central planning.
e. The government owns and operates all sources of production.
Difficulty: 2 Page-Reference: 9
Question ID: 01-1-21 Skill: Knowledge
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
22. Stan lives in a country where all the factors of production are owned by the government. The
economic system in his country is
a. communism.
b. capitalism.
c. mixed market.
d. socialism.
e. not possible to tell with the information provided.
Difficulty: 2 Page-Reference: 9
Question ID: 01-1-22 Skill: Comprehension
Objective: 1.2
23. “Embrace the opportunities and accept the risks” is a phrase that best characterizes the
__________ attitude.
a. entrepreneurial
b. capitalist
c. communist
d. socialist
e. mixed market
Difficulty: 2 Page-Reference: 8
Question ID: 01-1-23 Skill: Comprehension
Objective: 1.2
24. John lives in a country where producers and consumers control production, and allocation
decisions are made through the mechanism of supply and demand. John lives in a country with a
_________ economy.
a. privatized
b. socialist
c. communist
d. market
e. it is not possible to tell with the information given
Difficulty: 2 Page-Reference: 9-10
Question ID: 01-1-24 Skill: Comprehension
Objective: 1.2
25. Something that would contribute directly to improving labour as a factor of production would be
a. finding new oil reserves.
b. better education for more of the population.
c. increasing the purchasing power of employees.
d. programs designed to decrease unemployment.
e. finding more efficient ways to produce products.
Difficulty: 2 Page-Reference: 7
Question ID: 01-1-25 Skill: Comprehension
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
26. What is the major source of capital for small businesses?
a. Bank loans
b. Sale of shares of stock
c. Personal investment by owners
d. Venture capital firms
e. It is not known what the major source of capital is
Difficulty: 2 Page-Reference: 7
Question ID: 01-1-26 Skill: Knowledge
Objective: 1.2
27. What can we say about the number of business–to-business (B2B) transactions compared to the
number of business–to-consumer (B2C) transactions?
a. There are fewer B2B transactions because there are fewer businesses than there are consumers.
b. There are more B2B transactions than B2C transactions.
c. The number of B2B transactions must equal the number of B2C transactions.
d. It is not possible to determine whether the number of B2B transactions is less than or more than the
number of B2C transactions because of industrial secrecy.
e. It is not possible to determine whether the number of B2B transactions is less than or more than the
number of B2C transactions because of data limitations.
Difficulty: 2 Page-Reference: 10
Question ID: 01-1-27 Skill: Comprehension
Objective: 1.2
28. Which of the following is an example of a natural resource?
a. Computer software
b. The mental and physical capabilities of people
c. Land, water, and mineral deposits
d. Money
e. Trained engineers
Difficulty: 1 Page-Reference: 8
Question ID: 01-1-28 Skill: Comprehension
Objective: 1.2
29. Which factor of production is Imperial Oil trying to increase when it spends large sums of money
in an attempt to find new oil fields?
a. Information
b. Entrepreneurship
c. Labour
d. Capital
e. Natural resources
Difficulty: 2 Page-Reference: 8
Question ID: 01-1-29 Skill: Comprehension
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
30. A major drawback to communism as an economic system is that
a. government control of the factors of production is only temporary.
b. people don’t like communism.
c. individuals contribute according to their ability.
d. individuals receive economic benefits according to their needs.
e. production of goods and services is inefficient because of the lack of a profit incentive.
Difficulty: 3 Page-Reference: 9
Question ID: 01-1-30 Skill: Knowledge
Objective: 1.2
31. Helga lives in a country where the government owns and operates selected major industries. The
economic system in her country is most likely to be
a. privatization.
b. mixed market.
c. deregulation.
d. communism.
e. socialism.
Difficulty: 2 Page-Reference: 9
Question ID: 01-1-31 Skill: Comprehension
Objective: 1.2
32. An economic system that permits private ownership and control of small businesses but where
the government controls large critical industries is known as
a. a mixed economy.
b. socialism.
c. communism.
d. capitalism.
e. mercantilism.
Difficulty: 1 Page-Reference: 9
Question ID: 01-1-32 Skill: Knowledge
Objective: 1.2
33. Socialism is best described as
a. a kind of command economy in which the government owns and operates all industries.
b. a kind of command economy in which the government owns and operates large critical industries.
c. an economy that is free from any regulation or planning.
d. a market economy in which markets decide what, when, and how much to produce.
e. an economic system with elements of market economy, but not a planned economy.
Difficulty: 2 Page-Reference: 9
Question ID: 01-1-33 Skill: Knowledge
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
34. Canada is home to a(n) ________ economy.
a. mixed market
b. oligopolistic
c. socialist
d. market
e. command
Difficulty: 2 Page-Reference: 11
Question ID: 01-1-34 Skill: Knowledge
Objective: 1.2
35. Market economies are considered beneficial for small businesses because they
a. provide small businesses with lots of government assistance and protection.
b. provide a central economic plan within which small businesses can easily prosper.
c. protect small businesses from the power of large corporations.
d. allow small businesses to fail.
e. allow the business to do whatever it wants as long as it doesn’t break the law.
Difficulty: 2 Page-Reference: 11
Question ID: 01-1-35 Skill: Application
Objective: 1.2
36. In which economic system will profit motivate entrepreneurs to use resources efficiently and to
produce goods that consumers want?
a. A centrally planned economy
b. Communism
c. A market economy
d. Socialism
e. A barter economy
Difficulty: 1 Page-Reference: 11
Question ID: 01-1-36 Skill: Knowledge
Objective: 1.2
37. Which of the following is correct with respect to mixed market economies?
a. They have features that are not found in either command or market economies.
b. As a result of the fragile world economy, there is a trend toward increased government regulation of
business in mixed market economies.
c. Very few countries have this type of system.
d. There is a trend toward increased government ownership of business in mixed market economies.
e. The mixed market economy is the best type of economic system.
Difficulty: 2 Page-Reference: 11
Question ID: 01-1-37 Skill: Knowledge
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
38. The federal government sold the Lester B. Pearson International Airport in Toronto to a group of
entrepreneurs, which then set up the Greater Toronto Airports Authority. This sale is an example of
a. socialism.
b. freedom of choice.
c. entrepreneurship.
d. deregulation.
e. privatization.
Difficulty: 2 Page-Reference: 11
Question ID: 01-1-38 Skill: Comprehension
Objective: 1.2
39. Which of the following is correct with respect to input and output markets?
a. In the input market, firms supply good and services in response to demand on the part of
households.
b. In the output market, firms buy resources from households, which then supply those resources.
c. Consumer buying patterns provide information that helps companies decide which products to
produce.
d. Consumers are restricted in the companies they can work for.
e. Input and output markets exist only in communist countries.
Difficulty: 3 Page-Reference: 10–11
Question ID: 01-1-39 Skill: Knowledge
Objective: 1.2
40. Sandy is responsible for monitoring compliance with regulations in her company. She needs to
know that the important areas of government regulation are
a. protecting competition and upholding environmental regulations.
b. protecting social goals, upholding environmental regulations, and protecting shareholder rights.
c. protecting competition, protecting consumers, and upholding environmental regulations.
d. protecting competition, protecting consumers, protecting social goals, and protecting the
environment.
e. protecting shareholder rights, and following business law.
Difficulty: 2 Page-Reference: 13
Question ID: 01-1-40 Skill: Comprehension
Objective: 1.2
41. Why are income taxes called progressive taxes?
a. Because poorer people spend proportionally more on necessities
b. Because the more one makes, the greater the proportion of additional amounts paid in income
taxes
c. Because the more one makes, the higher the income tax rate that is applied to one’s entire income
d. Because they increase total consumption
e. Because the more one progresses in a company, the more one pays in income taxes
Difficulty: 2 Page-Reference: 16
Question ID: 01-1-41 Skill: Knowledge
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
42. Why are sales taxes called regressive taxes?
a. Because food and drugs are often exempt
b. Because the more one makes, the lower the rate of sales tax that is applied to one‘s purchases
c. Because poorer people pay a higher percentage of their income than richer people
d. Because it applies to sales taxes
e. Because they discourage the purchase of some products
Difficulty: 3 Page-Reference: 16
Question ID: 01-1-42 Skill: Knowledge
Objective: 1.2
43. The textbook describes three main ways in which business can influence government policy.
They are
a. advertising, lobbyists, trade associations.
b. political contributions, letters to the editors of newspapers, advertising.
c. advertising, trade associations, political contributions.
d. trade associations, lobbyists, letters to the editors of newspapers.
e. lobbyists, political contributions, advertising.
Difficulty: 2 Page-Reference: 16
Question ID: 01-1-43 Skill: Knowledge
Objective: 1.2
44. If a semiconductor firm is opening a new manufacturing facility in Canada and is looking for ways
to better influence government policy in their industry, it could
a. hire a lobbyist or join a trade association.
b. obtain a government contract for supplies and equipment.
c. ensure worker safety in its business facilities.
d. keep its manufacturing plants in Canada.
e. obtain export business for the new facility.
Difficulty: 2 Page-Reference: 16
Question ID: 01-1-44 Skill: Comprehension
Objective: 1.2
45. Which law forbids most monopolies in Canada?
a. Consumer Protection Act
b. Lobbyists Registration Act
c. Fair Trade Act
d. Competition Act
e. Environmental Contaminants Act
Difficulty: 1 Page-Reference: 23
Question ID: 01-1-45 Skill: Knowledge
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
46. Nutrition labelling and claims are intended to provide consumers with information to aid them in
the selection of a healthy diet aimed at reducing risk of premature illness and death due to diet-related
chronic diseases. Insufficient labelling is violation of which act?
a. Food and Drug Act
b. Weights and Measures Act
c. Advertising and Packaging Act
d. Textile Labeling Act
e. Consumer Protection Act
Difficulty: 2 Page-Reference: 15
Question ID: 01-1-46 Skill: Comprehension
Objective: 1.2
47. The Canada Consumer Product Safety Act replaces the
a. Hazardous Products Act.
b. Food and Drug Act.
c. Weights and Measures Act.
d. Advertising and Packaging Act.
e. Textile Labeling Act.
Difficulty: 2 Page-Reference: 15
Question ID: 01-1-47 Skill: Knowledge
Objective: 1.2
48. Which of the following statements is most correct with respect to government in its role as
regulator?
a. Business complains that the Competition Bureau is too slow in approving or denying merger
plans.
b. The government really has very little power in its role as regulator.
c. Because of the move toward deregulation, federal and provincial governments have become less
and less involved in regulating business activity.
d. The main areas of government regulation of business are achieving social goals, protecting
consumers, and providing assistance to small business firms.
e. Studies have shown that government regulation reduces the effectiveness of business firms.
Difficulty: 2 Page-Reference: 14
Question ID: 01-1-48 Skill: Application
Objective: 1.2
49. In 2011, the Canada Consumer Product Safety Act came into effect. One of the concerns
expressed about the Act was that
a. small businesses would be hurt.
b. it was not strong enough in protecting consumers.
c. business profits would decline.
d. it is inferior to the Hazardous Products Act, which it replaced.
e. it applies only to manufacturers of hazardous products, not retailers.
Difficulty: 2 Page-Reference: 15
Question ID: 01-1-49 Skill: Knowledge
Objective: 1.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
50. When Labatt Brewing sales representatives gave money to store operators who agreed to not
lower prices on some brands of beer, the company was prosecuted for engaging in
a. bait-and-switch advertising.
b. resale price maintenance.
c. a pyramid scheme.
d. selling mislabelled products.
e. a violation of the Beer Act.
Difficulty: 2 Page-Reference: 14
Question ID: 01-1-50 Skill: Knowledge
Objective: 1.2
51. Which of the following is correct with respect to the issue of government taxation?
a. Progressive revenue taxes are harder on low-income people than on high-income people.
b. Revenue taxes are designed primarily to encourage people to buy certain kinds of goods and avoid
buying other kinds.
c. Restrictive taxes prevent businesses from expanding.
d. Regressive revenue taxes are levied at the same rate regardless of a person’s income.
e. All of the statements are correct.
Difficulty: 2 Page-Reference: 16
Question ID: 01-1-51 Skill: Application
Objective: 1.2
52. G.S.T. is considered a regressive tax because
a. food and drugs are often exempt.
b. the more a person makes, the lower the rate of sales tax that is applied to that person’s purchase.
c. it is unfair.
d. poorer people pay a higher percentage of their income than richer people.
e. it is designed to discourage the purchase of certain products.
Difficulty: 2 Page-Reference: 16
Question ID: 01-1-52 Skill: Comprehension
Objective: 1.2
53. The term “demand” refers to
a. the stock exchange.
b. the willingness and ability of buyers to purchase a product or service.
c. the willingness and ability of businesses to sell a product or service.
d. the willingness of buyers to accept high prices for high-quality goods.
e. the willingness of government to sell goods and services.
Difficulty: 2 Page-Reference: 18
Question ID: 01-1-53 Skill: Knowledge
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
54. The law of demand states that
a. producers will offer more of a product as the price falls.
b. demand and supply meet at an equilibrium point.
c. buyers will purchase more of a product as the price falls.
d. producers will offer more of a product as the price rises.
e. buyers will purchase more of a product as the price rises.
Difficulty: 1 Page-Reference: 18
Question ID: 01-1-54 Skill: Knowledge
Objective: 1.3
55. The law of supply states that
a. buyers will purchase more of a product as the price falls.
b. demand and supply meet at an equilibrium point.
c. producers will offer more of a product as the price rises.
d. producers will offer more of a product as the price falls.
e. buyers will purchase more of a product as the price rises.
Difficulty: 1 Page-Reference: 18
Question ID: 01-1-55 Skill: Knowledge
Objective: 1.3
56. Ian, the owner of 5-for-1 Pizza, has noticed that when he increases the price of his pizzas by
$2.00, the number of pizzas that he sells drops by 30 percent. Ian has discovered
a. the law of supply and demand.
b. the supply curve.
c. the demand curve.
d. the law of supply.
e. the law of demand.
Difficulty: 1 Page-Reference: 18
Question ID: 01-1-56 Skill: Comprehension
Objective: 1.3
57. A demand and supply schedule
a. allows assessment of the relationship between different levels of demand and supply at different
prices.
b. describes the supply for a product.
c. describes the demand for a product.
d. is a formula by which one determines market equilibrium.
e. is the contractual agreement made between the buyer and seller.
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-57 Skill: Knowledge
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
58. A producer of automobile batteries notes that the price of batteries has risen over each of the past
three years. The firm decides to expand its battery production. This illustrates
a. the law of supply.
b. the law of market price.
c. the law of equilibrium.
d. the law of demand.
e. the law of supply and demand.
Difficulty: 2 Page-Reference: 18
Question ID: 01-1-58 Skill: Comprehension
Objective: 1.3
59. A producer of televisions is experiencing difficulty in selling its products. A corporate decision is
made to lower the price, anticipating that sales will increase as a result of the lower price. This illustrates
a. the law of supply and demand.
b. the law of supply.
c. the law of market price.
d. the law of demand.
e. the law of equilibrium.
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-59 Skill: Comprehension
Objective: 1.3
60. The point at which the quantity of a product or service demanded is the same as the quantity
supplied is called
a. the surplus point.
b. the equilibrium point.
c. the supply point.
d. the profit point.
e. the demand point.
Difficulty: 1 Page-Reference: 19
Question ID: 01-1-60 Skill: Knowledge
Objective: 1.3
61. At the point where the supply curve crosses the demand curve on a graph, it could be said that
a. no profits will be made.
b. all products offered for sale will be sold.
c. a shortage will result if the price is too low.
d. no sales will be made.
e. a surplus will result if the price is too low.
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-61 Skill: Knowledge
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
62. Equilibrium in the market is attained when
a. the laws of supply and demand interact to set the price and quantity of a product at which buyers
and sellers agree.
b. there are no dramatic changes in the market over time.
c. suppliers are willing to produce the quantity demanded.
d. no single firm has more than 50 percent of the market.
e. consumers are willing to pay the price being charged.
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-62 Skill: Knowledge
Objective: 1.3
63. Suppose the equilibrium point of 5-for–1 Pizza is 2000 pizzas per week and the price is $10.00 per
pizza. If the owner decides to make 2200 pizzas and sell them at the same price, what is the likely
outcome?
a. The business will have less expenses and also have greater profit.
b. The business will have a shortage.
c. The business will make more profit.
d. The business will have a surplus.
e. The business will have less expenses but no more profit.
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-63 Skill: Application
Objective: 1.3
64. 5-for–1 Pizza is operating at the point where the supply curve intersects the demand curve. If the
owner decides to increase the price and not change the production level, what will result?
a. A shortage
b. A surplus
c. More profit
d. A shift in the supply curve
e. A shift in the demand curve
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-64 Skill: Application
Objective: 1.3
65. If the market for chocolate was at the equilibrium point and suddenly half of the chocolate in the
world disappeared, what would be the immediate effect?
a. The price would increase due to a shortage.
b. The price would decrease due to market equilibrium.
c. The price would increase due to a surplus.
d. The price would decrease due to a surplus.
e. There would be no change in either price or demand.
Difficulty: 2 Page-Reference: 19
Question ID: 01-1-65 Skill: Application
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
66. An exchange process between buyers and sellers of a particular good or service is known as
a. a market.
b. economic trade.
c. mercantilism.
d. supply utility.
e. bartering.
Difficulty: 2 Page-Reference: 17
Question ID: 01-1-66 Skill: Knowledge
Objective: 1.3
67. Tim won $50 000 on a Lotto 649 ticket and now he wants to buy a Harley Davidson. The term
used to identify his willingness and ability to purchase the motorcycle is
a. money supply.
b. demand.
c. obligation.
d. windfall profits.
e. unanticipated wealth.
Difficulty: 2 Page-Reference: 18
Question ID: 01-1-67 Skill: Comprehension
Objective: 1.3
68. In economic terms, a “market” is
a. available in capitalist nations, but not in communist nations.
b. located where buyers can most easily access it.
c. the physical location (for example, a grocery store) where exchanges take place between buyers
and sellers.
d. an exchange process between sellers and buyers.
e. all of these
Difficulty: 2 Page-Reference: 17
Question ID: 01-1-68 Skill: Knowledge
Objective: 1.3
69. What is likely to happen when demand for a commodity is high?
a. Consumers will try to find substitutes for the commodity.
b. The price of the commodity will rise.
c. Criminal behaviour increases with regard to the commodity (e.g., stealing).
d. The price of substitute commodities will increase.
e. All of these statements are correct.
Difficulty: 2 Page-Reference: 20
Question ID: 01-1-69 Skill: Analysis
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
70. A demand and supply schedule
a. allows a person to assess the relationship between different levels of demand and supply at
different prices.
b. is the contractual agreement made between a buyer and a seller.
c. describes the demand for a product.
d. is a formula used to determines the market equilibrium price.
e. All of the statements are correct.
Difficulty: 3 Page-Reference: 19
Question ID: 01-1-70 Skill: Knowledge
Objective: 1.3
71. Suppose that in 2012 a Canadian city experiences a big increase in the amount of commercial
space that is available for rent. What is most likely to occur?
a. The rents for commercial space will not be affected.
b. Rents will go up.
c. Rents will go down as long as there is not a big increase in demand.
d. Resource prices will increase.
e. Demand will increase in line with supply.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-71 Skill: Analysis
Objective: 1.3
72. How would a cell phone manufacturer most effectively determine the market price of a new line of
cell phones?
a. Put several of the new phones on sale at a watch store and see which sells most quickly.
b. Arrange to sell the phones in a number of diverse auctions.
c. Set the price of one phone higher than another and see which sells the most quickly.
d. Survey potential customers and retailers on what they think the price should be.
e. Ask executives from competing companies about what they think the price should be.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-72 Skill: Analysis
Objective: 1.3
73. Barrett Corp. has introduced a new smart phone feature that is very popular. What should Barrett
do to maximize profits?
a. Produce more units of the phone.
b. Produce fewer units of the phone.
c. Lower the price of the phone.
d. Keep supply stable until demand goes down.
e. It is not possible to know what the company should do.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-73 Skill: Analysis
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
74. If the number of pizza restaurants in a region increases from 50 to 100 in the last year, what is the
likely result?
a. There will be no increase in supply, hence there will have no effect on the equilibrium price.
b. There will be an increase in supply, which will lead to a decrease in demand.
c. There will be an increase in supply, which will lead to a decrease in the equilibrium price.
d. There will be an increase in supply, which will lead to an increase in demand.
e. It is not possible to predict what will happen.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-74 Skill: Analysis
Objective: 1.3
75. Joe’s Pizza introduces a new variety of a personal pizza. Which of the following actions would
most likely prevent a surplus or a shortage of the personal pizzas in the first week?
a. Limit the supply of the personal pizza.
b. Lower demand for the personal pizza.
c. Set the price of substitute goods.
d. Estimate the market price of the personal pizza.
e. Lower the price of the pizza throughout the week.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-75 Skill: Analysis
Objective: 1.3
76. Executives at Kelsey Corp. are arguing about whether or not they should increase prices for the
company’s products by 15-20 percent. Which of the following could be used as an argument to increase
prices?
a. Substitutes for Kelsey’s products are available in the market.
b. The price of materials consumed along with widgets has gone up.
c. Demand for Kelsey’s products is increasing.
d. Competitors have announced that they intend to keep prices at current levels.
e. Planned relaxation of import restrictions will cause foreign competitors to enter the market.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-76 Skill: Analysis
Objective: 1.3
77. Executives at Kelsey Corp. are arguing about whether or not they should increase prices for the
company’s products by 15-20 percent. Which of the following could be used as an argument against
increasing prices?
a. The input costs of raw materials are expected to increase further in the coming months.
b. Customers are loyal to the Kelsey brand because they know that the company uses high-quality
ingredients.
c. Kelsey’s competitors have announced price increases.
d. One of Kelsey‘s major competitors recently went bankrupt.
e. Market research reveals that demand for Kelsey’s products is very much affected by the price.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-77 Skill: Analysis
Objective: 1.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 1—Understanding the Canadian Business System
78. Other things being equal, a company would have the most power to raise prices if the product it is
selling is
a. life-saving drugs.
b. automobiles.
c. beverages.
d. toys.
e. car tires.
Difficulty: 3 Page-Reference: 19–20
Question ID: 01-1-78 Skill: Application
Objective: 1.3
79. Private enterprise requires which four elements to function effectively?
a. Communism, capitalism, socialism, and privatization
b. The right to product safety, consumer choice, freedom of information, and no government
intervention in business
c. Land, labour, capital, and entrepreneurship
d. Supply, demand, equilibrium, and monopoly
e. Private property rights, freedom of choice, profits, and competition
Difficulty: 2 Page-Reference: 21
Question ID: 01-1-79 Skill: Knowledge
Objective: 1.4
80. A few years ago, General Motors decided to develop a new car model. Sally checked it out at her
local dealership and decided to buy one. We can conclude that
a. Sally exercised her freedom of choice.
b. General Motors exercised its freedom of choice.
c. both General Motors and Sally exercised their freedom of choice.
d. this example doesn’t relate to freedom of choice.
e. neither General Motors nor Sally exercised their freedom of choice.
Difficulty: 2 Page-Reference: 21–22
Question ID: 01-1-80 Skill: Application
Objective: 1.4
81. Which of the following motivates an entrepreneur to operate his or her business efficiently?
a. Freedom of choice
b. Private property rights
c. Privatization
d. The right to vote
e. Competition
Difficulty: 2 Page-Reference: 21–22
Question ID: 01-1-81 Skill: Knowledge
Objective: 1.4