All of the following are possible sources of bias in using the Consumer Price Index to
measure inflation except
A) the introduction of new goods.
B) an improvement in the quality of goods.
C) commodity substitution.
D) an increase in the cost of living.
E) rising prices.
The substitution effect on labour supply refers to the degree to which
A) the firm can substitute other factors of production for labour.
B) buyers can substitute other products for the products that are made by organized
labour.
C) labour is willing to substitute nonlabour income for wages.
D) labour prefers to substitute nonmonetary payments for money wages.
E) labour is willing to substitute work for leisure.
Refer to Figure 26.3.2. Currently in Mythlo
A) there is a below full-employment equilibrium.
B) the actual unemployment rate is less than the natural unemployment rate.
C) potential GDP is greater than equilibrium GDP.
D) the actual unemployment rate is equal to the natural unemployment rate.
E) there is a recessionary gap.
For a normal good, the income effect
A) is negative and the substitution effect is positive.
B) reinforces the substitution effect.
C) is positive and the substitution effect is negative.
D) is equal and opposite to the substitution effect.
E) is zero.
Billy likes candy and popcorn. Candy sells for $0.50 a bag and popcorn sells for $1 per
bag. Currently he is in consumer equilibrium. Then the price of candy rises to $1 a bag.
Which statement is true in the new consumer equilibrium?
A) The marginal utility from popcorn will increase.
B) Marginal utility per dollar on candy will be equal to 2.
C) Total utility will increase.
D) The marginal utility from candy will decrease.
E) The marginal utility from candy will be equal to the marginal utility from popcorn.
The demand for the services of labour ________ a derived demand and the demand for
the services of land ________ a derived demand.
A) is not; is not
B) is not; is
C) is; is not
D) is; is
E) sometimes is and sometimes is not; sometimes is and sometimes is not
Suppose aggregate demand increases by more than expected. Which of the following
does not occur?
A) Real GDP is greater than potential GDP.
B) The price level rises.
C) Unemployment falls.
D) The natural unemployment rate does not change.
E) Stagflation occurs.
Marginal benefit is
A) the cost of an increase in an activity.
B) the sum of benefit and cost that arises from an increase in an activity.
C) the cost of a decrease in an activity.
D) the benefit that arises from an increase in an activity.
E) the benefit that arises from a decrease in an activity.
Where the Herfindahl-Hirschman Index is less than 1,000, the market is regarded as
A) a monopoly.
B) an oligopoly.
C) competitive.
D) regulated.
E) none of the above
Martha and Sarah have the same preferences, face the same prices, and have the same
income. Sarah’s utility is measured in units while Martha’s is measured in units squared.
Select the best response.
A) Martha and Sarah will choose to consume the same set of goods.
B) Martha’s and Sarah’s marginal utility per dollar will be equal.
C) Martha’s and Sarah’s marginal utilities will be equal.
D) Martha and Sarah will have equal total utility.
E) Martha and Sarah will not choose to consume the same set of goods.
Refer to Figure 28.4.1. The figure illustrates an economy’s Phillips curves. If the current
inflation rate is 4 percent, what is the current unemployment rate?
A) 9 percent
B) 6 percent
C) 4 percent
D) 3 percent
E) cannot be determined without more information
A cartel is a group of firms which agree to
A) behave competitively.
B) raise the price of their products.
C) lower the price of their products.
D) increase the amount they produce.
E) cheat on each other.
Use the figure below to answer the following questions.
Figure 28.4.1
Refer to Figure 28.4.1. The figure illustrates an economy’s Phillips curves. What is the
natural unemployment rate?
A) 9 percent
B) 6 percent
C) 4 percent
D) 7 percent
E) cannot be determined without more information
In 2012, Northland had real GDP of $4.21 billion and a population of 2.98 million. In
2013, real GDP was $4.59 billion and population was 2.97 million. What was
Northland’s growth rate of real GDP in 2013?
A) 0.38 percent
B) 3.8 percent
C) 8.3 percent
D) 9.0 percent
E) 11.1 percent
Albert is consuming at a point where his budget line is not as steep as indifference
curve. To reach consumer equilibrium, Albert
A) consumes less of the good that is measured on the horizontal axis.
B) consumes none of the good that is measured on the horizontal axis.
C) must increase his income.
D) must shop at stores that have lower prices.
E) consumes more of the good that is measured on the horizontal axis.
At that amount of output where diminishing marginal returns first sets in,
A) average product begins to decrease.
B) total product begins to decrease.
C) marginal cost begins to decrease.
D) marginal product begins to decrease.
E) average product is at its maximum.
Choose the statement that is incorrect.
A) Resources are used efficiently when marginal social benefit equals marginal social
cost.
B) Competitive equilibrium achieves an efficient outcome.
C) Competitive equilibrium maximizes the gains from trade.
D) When firms in perfect competition are away from long-run equilibrium, either entry
or exit is taking place and the market is still efficient.
E) Producer surplus is maximized at the competitive equilibrium.
Refer to the production possibilities frontier in Figure 2.1.2. At point C, the opportunity
cost of producing one more unit of X is
A) 1 unit of Y.
B) 1 unit of X.
C) 8 units of X.
D) 20 units of X.
E) 20 units of Y.
Neuroeconomics studies all of the following concepts except
A) the prefrontal cortex.
B) the hippocampus.
C) the production possibilities frontier.
D) dopamine.
E) anxiety and fear.
Suppose Mail Boxes Etc. buys a new copier for its store for $1,000. A year later, when
the firm wants to upgrade to a new copier, it finds that the old copier is only worth
$750. Over the year the copier was used, ________ has occurred.
A) depreciation
B) demarcation
C) devaluation
D) denouement
E) disparity
The fact that a fall in the price of a good results in a decrease in the quantity of the good
supplied illustrates
A) the law of supply.
B) the law of demand.
C) a change in supply.
D) the nature of an inferior good.
E) technological improvement.
In 2011, the middle 20 percent of households received what percentage of total
Canadian after-tax income?
A) 10.6 percent
B) 16.3 percent
C) 25 percent
D) 43 percent
E) 52 percent
When the marginal product of labour is greater than the average product of labour,
A) the average product of labour is increasing.
B) the marginal product of labour is increasing.
C) the total product curve is negatively sloped.
D) the firm is experiencing diminishing marginal returns.
E) the firm is experiencing constant returns.
Which of the following are true? The similarities between perfect competition and
monopolistic competition include:
(1) no barriers to entry.
(2) profit-maximizing output occurs where MC = MR.
(3) long-run economic profit equals zero.
A) (1) only
B) (2) only
C) (1) and (2) only
D) (2) and (3) only
E) (1), (2), and (3)
If demand decreases and supply increases, then the
A) equilibrium quantity increases, but the effect on the equilibrium price is unknown.
B) equilibrium quantity decreases, but the effect on the equilibrium price is unknown.
C) equilibrium price falls, but the effect on the equilibrium quantity is unknown.
D) equilibrium price rises, but the effect on the equilibrium quantity is unknown.
E) effect on both equilibrium price and quantity is unknown.
You are told that a 5 percent increase in the price of a good increases the quantity
supplied by 10 percent after one month. Supply of this good is ________. This good is
most likely produced using productive resources that are ________.
A) inelastic; plentiful or easily obtained
B) decreasing; unique or rare
C) elastic; plentiful or easily obtained
D) unit elastic; unique or rare
E) elastic; unique or rare
If Sam is producing at a point on his production possibilities frontier, then he
A) cannot produce any more of either good.
B) is unaffected by costs and technology.
C) can produce more of both goods.
D) is not subject to scarcity.
E) can increase the production of one good only by decreasing the production of the
other.
Mrs. Smith’s bakery shop is a firm in monopolistic competition. The firm’s marginal
revenue curve
A) is upward sloping.
B) is downward sloping and above the demand curve.
C) is a horizontal line.
D) is the same as the demand curve.
E) is downward sloping and lies below the demand curve.
Choose the statement that is incorrect.
A) Labour services are the physical and mental work effort that people supply to
produce goods and services.
B) A labour market is a collection of people and firms who trade labour services.
C) The price of labour services is the wage rate.
D) Most labour services are traded on a contract, called a job.
E) All labour markets are competitive.
Complete the following sentence. Passing on wealth from one generation to another
A) can decrease the inequality of wealth.
B) will decrease the inequality of income.
C) is limited since the government taxes this at a very high marginal tax rate.
D) is one of the main causes of social unrest.
E) will make the distribution of wealth more closely match the distribution of human
capital.
Globalization means that firms recruit top talent from the global talent pool. As a result,
the payoffs won by the contest winners
A) are increasing.
B) are decreasing.
C) are remaining relatively constant.
D) are paid in U.S. dollars.
E) are limited by the number of people in a given competition.
An increase in the price of ground beef
A) increases the demand for chicken, a substitute for ground beef.
B) increases the demand for hamburger buns, a complement of ground beef.
C) increases the quantity demanded of ground beef.
D) decreases the quantity demanded of ground beef.
E) both A and D
At price P1 in Figure 3.4.1
A) there is a surplus in the amount of Q4 – Q2.
B) there is a shortage in the amount of Q4 – Q2.
C) there is a tendency for the price to fall.
D) the equilibrium quantity is Q2.
E) the equilibrium quantity is Q4.
Usually the removal of trade barriers affecting a particular good benefits ________
people domestically, each of whom gains a ________.
A) a few; little
B) a few; lot
C) many; little
D) many; lot
E) We can’t determine the relative benefits from the removal of trade barriers.