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Two variables are positively related if
A) increases in one are associated with decreases in the other.
B) increases in one are associated with increases in the other.
C) decreases in one are associated with increases in the other.
D) any change in one causes an increase in the other.
E) any change in one causes a decrease in the other.
Suppose a profit-maximizing firm hires labour in a competitive labour market. If the
value of marginal product of labour is less than the wage rate, the firm should
A) increase the wage rate.
B) decrease the wage rate.
C) increase the quantity of labour it hires.
D) decrease the quantity of labour it hires.
E) shut down.
Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for
Venus. During 2014, A was $100, B was $50, C was $30 and D was $10. How much is
net exports?
A) $10
B) $25
C) $30
D) $50
E) $100
Lotteries work best
A) under any circumstances.
B) under the first-come, first served allocation method.
C) when there is no effective way to distinguish among potential users of a scarce
resource.
D) when potential users of scarce resources are unknown.
E) under a command system.
Refer to Figure 9.1.2. Which budget line shows the greatest real income in terms of
carrots?
A) AD
B) BD
C) CD
D) Real income is equal for all three budget lines.
E) Cannot be determined without studying the indifference curves.
NX =
A) C + I + G.
B) (S + I) - (T + G).
C) (G - T) + (I - S).
D) (S - I) + (G - T).
E) (T - G) + (S - I).
Market income equals
A) the wages, interest, rent, and profit earned in factor markets after paying income
taxes.
B) the wages, interest, and profit earned in factor markets before paying income taxes.
C) the wages, interest, and rent earned in factor markets before paying income taxes.
D) the wages, interest, rent, and profit earned in factor markets before paying income
taxes.
E) the wages, rent, and profit earned in factor markets before paying income taxes.
All of the following statements about legalizing and taxing drugs are true except
A) legalizing and taxing drugs would eliminate the black market in drugs.
B) the quantity of a drug bought could be decreased if the drug was legalized and taxed.
C) a sufficiently high tax could be imposed to decrease supply, raise the price, and
achieve the same decrease in the quantity bought as with a prohibition of drugs.
D) an extremely high tax rate would be needed to cut the quantity of drugs bought to
the level prevailing with a prohibition.
E) tax revenue can be used to make law enforcement more effective.
Economic growth ________ overcome scarcity because ________.
A) does; with economic growth the PPF rotates outward and eventually becomes a
horizontal line
B) does; we will eventually reach the point where we have too much
C) does not; we can produce more goods and services but it is still impossible to satisfy
all our wants
D) does not; economic growth requires capital accumulation and technological change
E) does; with economic growth the PPF rotates outward and eventually becomes a
vertical line
As a result of a recession, the default risk increases. How does this change affect the
loanable funds market?
A) There is a movement up along the supply of loanable funds curve.
B) There is a leftward shift of the supply of loanable funds curve.
C) There is a movement down along the demand for loanable funds curve.
D) There is a rightward shift of the supply of loanable funds curve.
E) There is a rightward shift of the demand for loanable funds curve.
Three ways governments can encourage production of goods with external benefits are
A) private subsidies, pollution permits, and intellectual property rights.
B) private subsidies, pollution permits, and vouchers.
C) intellectual property rights, pollution permits, and vouchers.
D) taxes, emission charges, and pollution permits.
E) private subsidies, vouchers, and intellectual property rights.
Excess reserves are
A) desired reserves minus actual reserves.
B) required reserves minus actual reserves.
C) liquidity funds minus actual reserves.
D) actual reserves minus desired reserves.
E) required reserves minus desired reserves.
Suppose that in China, investment is $400 billion, saving is $400 billion, tax revenues
are $500 billion, exports are $300 billion, and imports are $200 billion. ________ in
government expenditure or ________ in taxes will further increase China's budget
________, increase investment and speed economic growth.
A) A decrease; an increase; surplus
B) An increase; a decreases; deficit
C) An increase; an increase; surplus
D) A decrease; a decrease; deficit
E) A decrease; an increase; deficit
Refer to Figure 26.3.3(b). You might expect the government to
A) do nothing except maintain the current equilibrium.
B) cut government expenditure.
C) increase government expenditure.
D) pursue trade policies that reduce exports.
E) raise taxes.
Which of the following industries in Canada has the highest four-firm concentration
ratio?
A) audio and video equipment
B) clothing
C) bakery items
D) fabrics
E) tobacco products
Refer to Figure 1A.2.3. Suppose our theory predicted that for low levels of quantity
produced (x) a firm's profits (y) were low, for medium levels of output their profits were
high, and for high levels of output their profits were low again. Which one of the graphs
would represent this relationship?
A) (a)
B) (b)
C) (c)
D) (d)
E) none of the graphs
Refer to Figure 6.3.3. Suppose a tax of $1 is imposed. In which market would tax
revenue be the highest?
A) (a)
B) (b)
C) (c)
D) (d)
E) all markets equally
Use the figure below to answer the following questions.
Figure 3.2.2
Which one of the following would result in the demand curve shifting from D1 to D2 in
Figure 3.2.2?
A) an increase in the supply of pizza
B) a rise in the price of hamburgers, a substitute for pizza
C) a rise in the price of pizza
D) a fall in the price of pizza
E) a rise in the price of Coke, a complement of pizza
In Figure 19.1.3, the middle 20 percent of all families receive what share of income?
A) 10 percent
B) 20 percent
C) 30 percent
D) 40 percent
E) 50 percent
Which of the following would unions be least likely to support?
A) an increase in the minimum wage
B) immigration restrictions
C) increasing the value of marginal product of their workers
D) increasing demand for the goods their workers produce
E) reducing barriers to imports
Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity
cost of increasing production of Y to 80 units is
A) 10 units of Y.
B) 80 units of Y.
C) 2 units of X.
D) 3 units of X.
E) 1 unit of X.
Rent seeking
A) is a variable cost and with rent seeking the monopoly becomes more efficient.
B) decreases average total cost and with rent seeking the monopoly becomes more
efficient.
C) increases deadweight loss above the original monopoly deadweight loss, but the
monopoly continues to produce the same inefficient quantity.
D) decreases consumer surplus and with rent seeking the monopoly becomes more
efficient.
E) decreases deadweight loss.
What is the most an investor would be willing to pay for a stock that will pay $210 next
year and nothing before or after?
A) $200 regardless of the interest rate.
B) $200 if the interest rate is 5 percent per year.
C) $190.91 if the interest rate is 10 percent per year.
D) B and C.
E) None of the above.
If the inflation rate is negative, the price level in an economy is
A) rising rapidly.
B) rising slowly.
C) falling.
D) constant.
E) negative.
According to the Coase theorem, if transactions costs are low and property rights exist,
A) negative externalities cause deadweight losses.
B) positive externalities cause deadweight losses.
C) private transactions are efficient.
D) public transactions are efficient.
E) the efficient level of pollution will be zero.
Use the figure below to answer the following question.
Figure 30.3.3
Refer to Figure 30.3.3. The figure shows the economy of Freezone. Potential GDP is
$350 billion.
To return the economy to full employment, the central bank can ________ the
overnight rate and ________ securities.
A) raise; sell
B) lower; sell
C) lower; buy
D) raise; buy
E) lower; not change its holdings of
The inescapable economic fact is that
A) there are unlimited wants and limited resources.
B) there are unlimited resources, and we just have to decide how to allocate them.
C) capitalists are always exploiting the workers.
D) unions are always exploiting firms.
E) capitalists and unions cannot work together.
Canadian firms build new pipelines across the nation. What is the effect on the quantity
of real GDP demanded or aggregate demand in Canada?
A) The quantity of Canadian real GDP demanded increases.
B) The quantity of Canadian real GDP demanded decreases.
C) Canadian aggregate demand increases.
D) Canadian aggregate demand decreases.
E) There is no change to either the quantity of real GDP demanded or to aggregate
demand.
If people decide to transfer their currency into their bank deposits then, all else
constant, their decisions will
A) cause the quantity of money to decrease.
B) cause lower inflation.
C) cause higher real interest rates.
D) cause the quantity of money to increase immediately.
E) increase the actual reserves of banks.
Along the short-run Phillips curve, everything remaining the same, the higher the
A) unemployment rate, the lower the inflation rate.
B) price level, the lower the inflation rate.
C) money wage rate, the lower is the unemployment rate.
D) quantity of money, the lower the unemployment rate.
E) growth rate of the quantity of money, the higher the inflation rate.
A market is open to international trade. At the world price, the quantity demanded is
150 units and the quantity supplied is 200 units. This country will
A) import 50 units.
B) export 200 units.
C) import 150 units.
D) import 200 units.
E) export 50 units.
The bowed-out (concave) shape of a production possibilities frontier
A) is due to the equal usefulness of resources in all activities.
B) is due to capital accumulation.
C) is due to technological change.
D) reflects the existence of increasing opportunity cost.
E) reflects the existence of decreasing opportunity cost.
A tariff is imposed on imports. Surplus will be redistributed from
A) consumers to producers only.
B) consumers to government only.
C) government to producers only.
D) government to consumers only.
E) consumers to producers and government.
An economy's marginal social benefit curve for a private good is obtained by summing
the individual marginal
A) cost curves horizontally.
B) cost curves vertically.
C) benefit curves horizontally.
D) benefit curves vertically.
E) benefit curves diagonally.
Refer to Figure 27.2.1. When real GDP is equal to Yc, then
A) actual expenditure is less than planned expenditure.
B) actual expenditure is greater than planned expenditure.
C) planned expenditure is equal to actual expenditure.
D) the economy is in equilibrium.
E) real GDP increases.
