Choose the statement that is incorrect.
A) Free trade destroys some jobs.
B) Imports create jobs for retailers that sell imported goods and for firms that service
those goods.
C) Imports create income in the rest of the world, some of which is spent on
Canadian-made goods and services.
D) Free trade brings about a global rationalization of labour.
E) Protection saves jobs at a low cost.
Use the table below to answer the following questions.
Table 3.5.1
The Market for Car-Seat Heaters
Refer to Table 3.5.1. The equilibrium price is $________ and the equilibrium quantity
is ________ heaters per month.
A) 80; 500
B) 80; 300
C) 50; 450
D) 50; 350
E) 60; 400
If resources are allocated efficiently,
A) consumer surplus exceeds producer surplus.
B) producer surplus exceeds consumer surplus.
C) the sum of consumer surplus and producer surplus is maximized.
D) marginal social benefit is maximized.
E) marginal social cost is minimized.
Suppose a firm has an investment project which will cost $200,000 and result in
$30,000 profit. The firm will not undertake the project if the interest rate is
A) greater than 15 percent.
B) greater than 10 percent.
C) greater than 5 percent.
D) positive.
E) greater than 7.5 percent.
Use the figure below to answer the following questions.
Figure 27.1.1
This figure describes the relationship between consumption expenditure and disposable
income for an economy.
Refer to Figure 27.1.1. Consumption and disposable income are equal
A) at all points along the consumption function.
B) when saving equals $40 billion and disposable income equals $540 billion.
C) when disposable income is $500 billion.
D) when disposable income is $600 billion.
E) when disposable income is greater than or equal to $500 billion.
The substitution effect
A) always dominates the income effect.
B) is always dominated by the income effect.
C) results in an increase in the quantity of the good consumed when the price rises.
D) results in a decrease in the quantity of the good consumed when the price falls.
E) is greater than the price effect.
If net taxes exceed government expenditures, the government sector has a budget
________ and government saving is ________.
A) surplus; positive
B) surplus; negative
C) deficit; positive
D) deficit; negative
E) balance that is zero; zero
In comparing the United States and China we find that
A) real GDP per person is about the same in the two countries.
B) U.S. real GDP per person is less than China’s real GDP per person once we adjust for
currency differences.
C) China’s real GDP per person is less than real GDP per person in the United States.
D) U.S. real GDP per person is much larger than China’s real GDP per person when
purchasing power parity prices are used but is less than China’s real GDP per person
when exchange rate prices are used.
E) the standard of living is higher in China than in the United States.
The price of apples falls by 5 percent and quantity of apples demanded increases by 6
percent. We conclude that the demand for apples is
A) perfectly elastic.
B) unit elastic.
C) elastic.
D) perfectly inelastic.
E) inelastic.
Firms coordinate economic activity more efficiently than markets when firms have
A) lower transactions costs.
B) economies of scale.
C) economies of scope.
D) economies of team production.
E) all of the above
A lottery allocates housing to those
A) who are poor.
B) who share similar views to the owner of the housing.
C) who are rich.
D) whose names are on waiting lists.
E) who are lucky.
A price ceiling set below the equilibrium price will result in
A) excess supply.
B) excess demand.
C) the equilibrium price.
D) an increase in supply.
E) a decrease in demand.
Refer to Figure 13.5.1. Suppose the firm is regulated by the government that imposes
marginal cost pricing. The price of a bottle of water is
A) $0.
B) $0.50.
C) $0.30.
D) $0.10.
E) $0.20.
Refer to Table 27.3.1. If investment increases by $25 billion, the real GDP becomes
A) $525 billion.
B) $625 billion.
C) $725 billion.
D) $600 billion.
E) $675 billion.
The law of demand states that, other things remaining the same,
A) the higher the price of a good, the smaller is the quantity demanded.
B) the higher the price of a good, the smaller is the quantity supplied.
C) price and quantity supplied are positively related.
D) as income increases, willingness to pay for the last unit increases.
E) the higher the price of a good, the greater is the quantity demanded.
The principle of decreasing marginal benefit implies that the
A) additional benefit from obtaining one more unit of a good or service decreases as
more of that good or service is consumed.
B) additional benefit from obtaining one more unit of a good or service increases as
more of that good or service is consumed.
C) total benefit from obtaining more of a good or service decreases as more is
consumed.
D) total benefit from obtaining more of a good or service remains the same as more is
consumed.
E) additional benefit from producing one more unit of a good or service decreases as
more of that good or service is produced.
Structural unemployment arises in part because
A) there are not enough jobs available.
B) of technological change.
C) people become discouraged when they cannot find jobs.
D) people will not quit their present jobs until they can find suitable employment
elsewhere.
E) of unrealistic wage expectations.
Which statement below best expresses the relationship between the 3-month Treasury
bill rate and the overnight loans rate? The rates are
A) not similar because banks can not readily substitute between them.
B) similar because they are both required to remain with the Bank of Canada’s
operating band.
C) similar because banks can readily substitute between them.
D) not similar because the treasury bill rate is established through the financial markets
whereas the overnight loans rate is set by the Bank of Canada.
E) not similar because the treasury bill rate is set by the Government of Canada whereas
the overnight loans rate is set by the Bank of Canada.
Refer to Figure 26.3.5. The shift of the aggregate demand curve from AD0 to AD1 might
have been the result of
A) an increase in government expenditure.
B) a decrease in taxes.
C) an increase in the quantity of money.
D) a fall in the foreign exchange rate
E) all of the above.
Use the information below to answer the following question.
Fact 1.3.2 Cost of Sochi Winter Olympics
The Russian government spent $6.7 billion on Olympic facilities and $16.7 billion
upgrading Sochi area infrastructure. Sponsors spent $27.6 billion on hotels and facilities
hoping to turn Sochi into a year-round tourist magnet.
Refer to Fact 1.3.2. The opportunity cost of the Sochi Olympics was
A) $51 billion because the Russian government would have spent this money anyway to
revitalize Sochi.
B) $6.7 billion because that was the cost of the Olympic facilities.
C) $51 billion if the Russian government would not have spent this money had the
Olympics not been held in Sochi.
D) $23.4 billion because spending on hotels and facilities of $27.6 billion was
unnecessary.
E) zero because the Russian government competed with other countries to host the
Olympics.
If the demand for a good is perfectly elastic, then a tax on the good will be paid
A) completely by the buyers.
B) completely by the sellers.
C) equally by the buyers and sellers.
D) mostly but not completely by the buyers.
E) mostly but not completely by the sellers.
A budget line is drawn with
A) quantity of one good on the vertical axis and the quantity of the second good on the
horizontal axis.
B) price of one good on the vertical axis and the price of the second good on the
horizontal axis.
C) quantity of one good on the vertical axis and its price on the horizontal axis.
D) quantity of one good on the horizontal axis and its price on the vertical axis.
E) quantity of one good on the horizontal axis and its total utility on the vertical axis.
What is the overnight loans rate?
A) the percentage change in the volume of loans that take place overnight
B) the interest rate that the Bank of Canada charges chartered banks
C) the interest rate on loans that the big banks make to each other
D) the volume of loans that take place during the night
E) the interest rate that the Bank of Canada pays when it buys securities from chartered
banks
Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a
substitute for beans in production, rises, what is the new beans equilibrium, ceteris
paribus?
A) 8
B) 3
C) 9
D) 5
E) 6
Refer to Fact 1.4.1. To control the crowd Costco hires traffic police. When Costco hires
traffic police, it faces a tradeoff that could include all of the following except
A) hiring more customer service representatives.
B) having a larger inventory of stock.
C) having large seasonal displays.
D) taking business away from gas stations in the area.
E) expansion of the warehouse.
Refer to Table 3.5.1. If the price is set at $80, there will be a
A) shortage of 200 units and price will rise.
B) shortage of 200 units and demand will fall.
C) surplus of 200 units and demand will rise.
D) surplus of 200 units and supply will fall.
E) surplus of 200 units and price will fall.
Disposable income is aggregate income
A) minus taxes and benefits.
B) minus taxes plus transfer payments.
C) minus fixed expenses such as rent and utilities.
D) plus transfer payments.
E) minus taxes.
Which one of the following concepts is illustrated by a production possibilities frontier?
A) profit
B) consumption
C) investment
D) monetary exchange
E) the tradeoff between producing one good versus another
Use the table below to answer the following questions.
Table 4.1.1
Demand schedule for good A.
Refer to Table 4.1.1. The price elasticity of demand when the price rises from $6 a unit
to $7 a unit is
A) 1.0.
B) 2.0.
C) 2.6.
D) 0.5.
E) 1.3.
Refer to Figure 26.3.5. When the economy is at full employment, real GDP is
A) $13 trillion.
B) $13.5 trillion.
C) more than $13 trillion and less than $13.5 trillion.
D) less than $13 trillion.
E) 100.
Use the information below to answer the following questions.
Fact 21.2.1 Some Firms Struggle to Hire Despite High Unemployment
Matching people with available jobs is always difficult after a recession as the economy
remakes itself. But labour market data suggest the disconnect is particularly acute this
time. Since the recovery began, the number of job openings has risen more than twice
as fast as actual hires. If the job market were working normally, openings would be
getting filled as they appear. Some 5 million more would be employed and the
unemployment rate would be 6.8%, instead of 9.5%.
Consider Fact 21.2.1. The 5 million workers who cannot find jobs because of
mismatching in the labour market are counted as part of the economy’s ________
unemployment because ________.
A) cyclical; the economy is rebounding from a recession
B) cyclical; there is a mismatch between their skills and the skills required for the
available jobs
C) structural; there is a mismatch between their skills and the skills required for the
available jobs
D) structural; the economy is rebounding from a recession
E) frictional; finding jobs after a recession is a normal part of the labour market
Refer to Table 6.3.1. Suppose a sales tax of $2 a unit is imposed on the good described
in the table. Government revenue from the tax is
A) $1,200.
B) $1,000.
C) $800.
D) $600.
E) zero.
Refer to Figure 26.3.3. In which of the graphs would we predict that eventually the
price level will fall and real GDP will increase, all else remaining the same?
A) (a) only
B) (b) only
C) (c) only
D) (d) only
E) (c) and (d)