To decrease aggregate demand, the Bank of Canada can
A) raise the overnight loans rate, which decreases the quantity of money.
B) lower the overnight loans rate, which increases the quantity of money.
C) lower the overnight loans rate, which decreases the quantity of money.
D) raise the overnight loans rate, which increases the quantity of money.
E) raise the overnight loans rate, which decreases the government budget deficit.
Choose the correct statement.
A) Demand and supply in the loanable funds market determine the long-term real
interest rate.
B) The long-term real interest rate influences expenditure decisions.
C) In the short run, the supply of loanable funds is influenced by the supply of bank
loans.
D) A fall in the overnight loans rate that increases the supply of bank loans increases the
supply of loanable funds and lowers the equilibrium real interest rate.
E) All of the above are correct.
The decreasing slope of the aggregate production function reflects
A) diminishing returns.
B) rising unemployment.
C) decreasing costs.
D) increasing aggregate demand.
E) a decrease in potential GDP.
When an import quota is imposed, the gap between the domestic price and the price
received in the exporting country is captured by
A) consumers in the importing country.
B) the domestic producers of the good.
C) the government of the importing country.
D) foreign exporters.
E) the importers of the good.
Use the figure below to answer the following questions.
Figure 2.1.1
Refer to the production possibilities frontier in Figure 2.1.1. Which one of the following
is true about point A?
A) It is unattainable.
B) While no more of good Y can be produced, more of good X can be produced.
C) It is preferred to point B.
D) Resources are either unused or misallocated or both.
E) It is attainable only if the amount of capital goods is increased.
Refer to Figure 18.3.1. This figure shows the value of marginal product of labour curve,
the labour supply curve, and the marginal cost of labour curve. If this labour market is
controlled by a monopsony, then the monopsonist
A) pays a wage rate that is greater than the value of marginal product of labour.
B) pays a wage rate exactly equal to the value of marginal product of labour.
C) pays a wage rate that is less than the value of marginal product of labour.
D) employs more labour hours per week than in a competitive labour market.
E) pays a wage equal to the marginal cost of labour.
Use the table below to answer the following questions.
Table 15.2.2
Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when
there are two strategies facing each firm: (1) charge a low price, or (2) charge a high
price. The equilibrium in this game (played once) will be a dominant strategy
equilibrium because
A) firm B will reduce profit by more than A if both charge a lower price.
B) firm B is the dominant firm.
C) the best strategy for each firm does not depend on the strategy chosen by the other
firm.
D) there is no credible threat by either firm to “punish” the other if it breaks the
agreement.
E) each firm will charge the higher price.
Refer to Table 2.4.1. For Vulcan, the opportunity cost of producing an additional unit of
Y is
A) 2/3 units of X.
B) 1/2 units of X.
C) 2 units of X.
D) 3 units of X.
E) 4 units of X.
Emma owns a firm that produces umbrellas. Currently, Emma produces 2,500
umbrellas a day. Emma cannot produce more umbrellas in a day unless she purchases
another machine or else hires more workers. Emma is ________ efficient.
A) economically
B) economically and technologically
C) technologically
D) not
E) capital and labour
Refer to Fact 13.3.1. Suppose the smartphone market becomes perfectly competitive.
Choose the statement that is incorrect when we compare the perfectly competitive
market to a monopoly.
A) Society gains.
B) Producers of smartphones gain.
C) Consumers of smartphones gain.
D) Total surplus increases.
E) Deadweight loss is eliminated.
In recent years, as provincial governments attempt to balance their budgets, they have
increased tuition fees considerably. This increase will likely result in
A) more students.
B) fewer students.
C) underprovision of education compared to the efficient level.
D) overprovision of education compared to the efficient level.
E) B and C.
The cost of producing aspirin increases at the same time as doctors discover that taking
one aspirin per day reduces the risk of heart attacks. As a result, the
A) supply of aspirin decreases and the demand for aspirin increases.
B) supply of aspirin decreases by more than the demand for aspirin increases.
C) supply of aspirin increases and the demand for aspirin decreases.
D) equilibrium quantity of aspirin increases and the equilibrium price of aspirin rises.
E) equilibrium quantity of aspirin decreases and the equilibrium price of aspirin rises.
A decrease in demand brings all of the following except
A) a lower equilibrium price.
B) economic losses in the short run.
C) exit in the long run.
D) a decrease in the equilibrium quantity.
E) inefficiency.
In the short run, a firm in a perfectly competitive market
A) can make an economic profit, incur an economic loss, or break even.
B) always makes an economic profit.
C) chooses the price that maximizes its economic profit.
D) chooses the price that minimizes its marginal cost.
E) shuts down if it incurs an economic loss.
The long run is a time frame in which
A) the firm can hire all the workers it wants to employ, but it does not have sufficient
time to buy more equipment.
B) the firm is able to maximize revenue.
C) the firm may want to build a bigger plant, but cannot do so.
D) economic efficiency is achieved.
E) the quantities of all factors of production can be varied.
In an economy, autonomous spending is $20 trillion and the slope of the AE curve is
0.8.
Equilibrium expenditure is ________. With a fixed price level, the multiplier is
________.
A) $25 trillion; 1.25
B) $100 trillion; 1.25
C) $25 trillion; 5
D) $20 trillion; 4
E) $100 trillion; 5
Advise Sarah how to maximize her utility if MUA = 8, MUB = 20, PA = 4 and PB = 5.
A) Consume equal amounts of both goods.
B) Consume more of good A and less of good B.
C) Consume more of good B and less of good A.
D) Lower the price of good B.
E) Raise the price of good A.
Provincial governments across Canada recently started legalizing and then heavily
taxing gambling at casinos. The new taxes are lower than the cost of breaking the law
was to the sellers of the previously illegal casino services. The costs of breaking the law
to the buyers of these services also fell to zero. This change will likely lead to
A) a rise in the equilibrium price, and a decrease in the equilibrium quantity.
B) a rise in the equilibrium price, and an increase in the equilibrium quantity.
C) a fall in the equilibrium price, and an increase in the equilibrium quantity.
D) a fall in the equilibrium price, and a decrease in the equilibrium quantity.
E) an unknown change in equilibrium price and equilibrium quantity.
The Herfindahl-Hirschman Index is calculated as
A) the cube of the percentage market share of each firm summed over the largest 100
firms.
B) the square of the percentage market share of each firm summed over the largest 50
firms or summed over all the firms if there are fewer than 50.
C) the square of the percentage market share of each firm summed over the largest 20
firms.
D) double the market share of the five largest firms.
E) none of the above
If a union forms to face the monopsonist in Figure 18.3.2, the situation is one of
A) binding arbitration.
B) derived demand.
C) duopoly.
D) collusive oligopoly.
E) bilateral monopoly.
When a city street is congested, it is
A) a common resource.
B) nonrival and nonexcludable.
C) nonrival and excludable.
D) a private good.
E) a public good.
A change in the price of a good has
A) an income effect only.
B) a substitution effect only.
C) a substitution effect and an income effect.
D) an income effect that exceeds the substitution effect.
E) a substitution effect that exceeds the income effect.
The average fixed cost curve slopes downward due to
A) diminishing marginal utility.
B) diminishing marginal returns.
C) technological inefficiency.
D) economic inefficiency.
E) spreading total fixed cost over increasing output.
________ occurs when a foreign firm sells its exports at a lower price than its cost of
production.
A) Comparative advantage
B) Learning-by-doing
C) A tariff
D) An infant industry
E) Dumping
Complete the following sentence. Marginal cost is
A) the total cost of an activity.
B) the total cost of a decrease in an activity.
C) the opportunity cost of an increase in an activity.
D) the opportunity cost of a decrease in an activity.
E) equal to marginal benefit.
Suppose a fall from $110 to $90 in the price of playing golf on a public golf course
results in an increase in the quantity of golf balls demanded (at the current price of golf
balls) from 9,950 units to 10,050 units. The cross elasticity of demand of playing golf
with respect to the price of golf balls is
A) -0.05.
B) -0.1.
C) 0.01.
D) 0.08.
E) 0.05.
________ specifies the maximum quantity of a good that may be imported in a given
period of time.
A) An import restriction
B) A legislative restriction
C) A trade restriction
D) An import quota
E) An import subsidy
Use the figure below to answer the following questions.
Figure 13.4.5
Consider the cost and revenue curves in Figure 13.4.5. If this is a perfect
price-discriminating monopoly, what is consumer surplus?
A) EADH
B) EABH
C) ABD
D) KEA
E) None of the above
The budget of a government department is likely to increase beyond the efficient
quantity if
A) voters are well informed.
B) there is rational voter ignorance combined with special interest lobbying.
C) the political equilibrium can be described in terms of social interest theory.
D) bureaucrats are rationally ignorant.
E) there are negative externalities.
Opportunity cost is
A) the value of your favourite activity.
B) your value of leisure.
C) the money you spend on food, shelter, and clothing.
D) the marginal benefit from an activity.
E) the highest-valued alternative that we give up to get something.