Prime Pharmaceuticals has developed a new asthma inhaler, for which it has a patent.
An inhaler can be produced at a constant marginal cost of $2 per inhaler. The demand
curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are
shown in Figure 13.4.6. The patent gives Prime Pharmaceuticals a monopoly for its new
inhaler. If prime Pharmaceuticals can perfectly price discriminate, deadweight loss is
A) $16 million.
B) zero.
C) $32 million.
D) $64 million.
E) $24 million.
Refer to Figure 28.4.1. The figure illustrates an economy’s Phillips curves. What is the
expected inflation rate?
A) 9 percent
B) 4 percent
C) 2 percent
D) 7 percent
E) cannot be determined without more information
Convergence between real GDP per person in Canada and Japan was relatively
________ during the 1960s; convergence has recently been ________.
A) slow; increasing
B) rapid; decreasing
C) rapid; increasing at an even faster rate
D) slow; decreasing
E) rapidly; continuing at the 1960s pace
Money market equilibrium occurs
A) when interest rates are constant.
B) when the level of real GDP is constant.
C) when the quantity of real money supplied equals the quantity of real money
demanded.
D) only under a fixed exchange rate.
E) when bond prices are constant.
Knowledge capital is different from physical capital because knowledge capital
A) does not experience diminishing returns.
B) experiences diminishing returns.
C) is free.
D) increases with investment.
E) plays a part in economic growth.
Refer to Figure 30.3.1. Everything else remaining the same, which graph best illustrates
the effect of the Bank of Canada raising the overnight loans rate?
A) (a) only
B) (b) only
C) (c) only
D) (d) only
E) Both (b) and (d)
A key difference between tariffs and import quotas is that
A) consumers are hurt with import quotas but not with tariffs.
B) consumers are hurt with tariffs but not with import quotas.
C) the government receives revenue with a tariff, but the importer makes a profit with
an import quota.
D) the government receives revenue with an import quota, but the importer makes a
profit with a tariff.
E) domestic producers gain with a tariff and lose with an import quota.
Refer to Figure 27.3.1. The multiplier for this economy is
A) 2.
B) 4.
C) 2.5.
D) 1.
E) 3.
According to real business cycle theory, workers’ decisions to work now versus later
depend on
A) the real wage rate today but not the real wage rate in the future.
B) the money wage rate.
C) the real interest rate.
D) labour productivity.
E) none of the above
Choose the statement that is incorrect.
A) The Bank of Canada’s choice of monetary policy instrument is the overnight loans
rate.
B) Although the Bank of Canada can change the overnight rate by any reasonable
amount that it chooses, it normally changes the overnight rate by a single point at a
time.
C) In recent years, the overnight loans rate has been at historically low levels.
D) Since late 2000, the Bank has established eight fixed dates on which it announces its
overnight loans rate target for the coming period of approximately six weeks.
E) The Bank sometimes acts in an emergency between normal announcement dates.
Refer to Figure 24.5.2. Which one of the following best describes the response to a rise
in the market price of bonds?
A) A movement from A to B
B) A movement from A to C
C) A movement from A to F
D) A movement from A to E
E) A movement from C to A
Refer to Figure 16.3.2. The figure shows the market for good B. Under public
production, consumers pay ________ for each unit of B.
A) zero
B) $1
C) $2
D) $3
E) $4
Choose the statement that is incorrect.
A) Entrepreneurship is a factor of production.
B) Entrepreneurs receive the profit or bear the loss that results from their business
decisions.
C) Entrepreneurship consists of all the gifts of nature.
D) Entrepreneurial services are traded in markets.
E) Both C and D are incorrect.
Refer to Figure 14.2.1. If this firm is in monopolistic competition, then it will charge a
price
A) of $20 a unit.
B) of $50 a unit.
C) of $40 a unit.
D) of $30 a unit.
E) that is impossible to determine without information concerning the behaviour of the
rival firms.
Which one of the following shifts the demand curve for dollars rightward?
A) An increase in the demand for foreign goods by Canadians
B) A decrease in the demand for Canadian goods by foreigners
C) The dollar is expected to appreciate.
D) The dollar is expected to depreciate.
E) U.S. interest rates rise.
Refer to Table 3.5.2. A premature frost destroys half the coffee trees. This change would
be represented as a
A) leftward shift of the demand curve.
B) rightward shift of the demand curve.
C) leftward shift of the supply curve.
D) rightward shift of the supply curve.
E) movement down along the supply curve.
The quantity of apples demanded decreases by 8 percent when the price rises by 8
percent. The demand for apples is
A) unit elastic.
B) inelastic.
C) elastic.
D) perfectly elastic.
E) perfectly inelastic.
The price of a good will tend to fall if
A) there is a surplus at the current price.
B) the current price is below the equilibrium price.
C) the quantity supplied exceeds the quantity demanded at the current price.
D) Both A and C are true.
E) None of the above are true.
Fred’s income increases from $1,950 per week to $2,050 per week. As a result, he
decides to increase the number of movies he attends each month by 10 percent. Fred’s
demand for movies is
A) price elastic.
B) price inelastic.
C) income elastic.
D) income inelastic.
E) income inferior.
If real GDP is greater than potential GDP, the economy is
A) not in short-run equilibrium.
B) in a recessionary equilibrium.
C) in an above full-employment equilibrium.
D) in a below full-employment equilibrium.
E) in long-run equilibrium.
Refer to Figure 14.2.2. If this firm in monopolistic competition is maximizing economic
profit,
A) there will be entry of rival firms into the industry.
B) rival firms will exit the industry.
C) its profit will rise over time.
D) this firm will exit the industry in the long run.
E) it is in long-run equilibrium.
The principal reason that production possibilities have grown more rapidly in Hong
Kong than in Canada over the last 50 years is because
A) of cheap Hong Kong labour.
B) of foreign aid to Hong Kong.
C) Hong Kong has fewer workers.
D) Hong Kong has more natural resources.
E) Hong Kong has devoted a larger proportion of its resources to capital accumulation.
A given percentage rise in the price of a good is likely to result in a larger percentage
decrease in the quantity of the good demanded
A) the shorter the passage of time.
B) the larger the proportion of income spent on it.
C) the harder it is to obtain good substitutes.
D) all of the above
E) none of the above
Use the information below to answer the following questions.
Fact 12.2.1 Chevy Volt Production Temporarily Shut Down
GM will temporarily lay off 1,300 employees as the company stops production of the
electric car, Chevy Volt, for five weeks. GM had hoped to sell 10,000 Volts last year,
but ended up selling just 7,671. It plans to maintain inventory levels by adjusting
production to match demand.
Refer to Fact 12.2.1. The shutdown decision ________ total fixed cost and ________
total variable cost.
A) decreases; decreases
B) does not change; decreases
C) does not change; does not change
D) increases; does not change
E) does not change; increases
Which one of the following will definitely decrease the equilibrium quantity?
A) an increase in both demand and supply
B) a decrease in both demand and supply
C) an increase in demand combined with a decrease in supply
D) a decrease in demand combined with an increase in supply
E) an increase in price
Which one of the following variables is not held constant along a given aggregate
demand curve?
A) fiscal policy
B) monetary policy
C) the exchange rate
D) expectations about inflation
E) the price level
According to ________ theory, a decrease in productivity growth shifts the ________.
A) real business cycle; AD curve rightward
B) Keynesian cycle; SAS curve leftward
C) real business cycle; demand for loanable funds curve leftward
D) Keynesian cycle; SAS curve rightward
E) real business cycle; AD curve leftward
Refer to Fact 10.4.1. The four-firm concentration ratio for the game market in the
United States ________. The HHI for the game market in the United States ________.
A) equals 100; equals 10,000
B) exceeds 60; is less than 1,000
C) is less than 60; is less than 1,000
D) ranges from approximately 40 percent to 85 percent; ranges from approximately 900
to 2,025
E) is close to zero; is close to zero
In the market for loanable funds, a larger government surplus leads to
A) a higher real interest rate, and increased investment.
B) a higher real interest rate, and decreased investment.
C) a lower real interest rate, and increased investment.
D) a lower real interest rate, and decreased investment.
E) no effect on the real interest rate or investment.
Sarah has an income of $100. She purchases 5 pizzas at $10 each and 10 subs at $5
each. Then the government taxes subs, and the price rises to $10 each. Simultaneously,
the government gives Sarah a grant of $50 in income to make up for this change. As a
result, Sarah’s budget line
A) becomes steeper.
B) becomes flatter.
C) shifts leftward and parallel to the original budget line.
D) shifts rightward and parallel to the original budget line.
E) swivels around the original consumption choice.
A decrease in tuition fees will decrease the university’s total revenue if the price
elasticity of demand for university education is
A) negative.
B) greater than zero but less than 1.
C) equal to 1.
D) greater than 1.
E) less than the elasticity of supply.
Consider Fact 2.4.1. After specialization, total consumption will
A) depend on the preferences of Andy and Rolfe.
B) be 8 loaves of bread and 24 kilograms of butter.
C) be 32 loaves of bread and 16 kilograms of butter.
D) be 8 loaves of bread and 8 kilograms of butter.
E) be 24 loaves of bread and 8 kilograms of butter.