Free riding can occur if a good is
A) excludable and rival.
B) excludable and nonrival.
C) a private good.
D) nonexcludable and rival.
E) nonexcludable and nonrival.
Which of the following situations illustrates how monetary policy can influence
aggregate demand?
A) The Bank of Canada raises interest rates so people plan to buy less consumer
durables. As a result, aggregate demand decreases.
B) Investors, anticipating an erosion of financial wealth due to inflation, decide to save
more. As a result, aggregate demand decreases.
C) The government reduces the goods and services tax. As a result, consumption
expenditure increases and aggregate demand increases.
D) The exchange rate value of the Canadian dollar rises. As a result, people living near
the U.S.-Canada border increase their imports of goods and net exports decrease.
E) The government increases its expenditures. The demand for loanable funds
increases, which raises the real interest rate. Investment increases.
If a duopoly collusive agreement is made that maximizes joint profit,
A) each of the duopolists has no incentive to cheat on the agreement.
B) each duopolist has the incentive to cheat on the duopoly agreement by lowering the
price.
C) each duopolist has the incentive to cheat on the agreement by increasing the price to
make monopoly profit.
D) there is no concern over the entrance of potential rivals, since they cannot decrease
the duopolists’ profit.
E) the dominant strategy is to collude.
Foreign exchange dealers expect the Canadian dollar next year to appreciate against all
currencies. 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.
Suppose that the desired reserve ratio is 0.25 and the currency drain ratio is 0.25. The
money multiplier is
A) 1.71.
B) 2.50.
C) 2.40.
D) 1.40.
E) 2.08.
If real GDP is greater than potential GDP, we would expect
A) the money wage rate to fall.
B) the money wage rate to rise.
C) potential GDP to increase.
D) potential GDP to decrease.
E) the expected future inflation rate to decrease.
If marginal revenue equals zero, then demand at this level of output is
A) perfectly inelastic.
B) inelastic.
C) unit elastic.
D) elastic.
E) perfectly elastic.
Rate of return regulation can end up serving the self-interest of the firm if
A) there is a great demand for the good.
B) there is a competitive struggle to determine which firms will supply the market.
C) the regulated firm overstates its costs of production.
D) price is set at average total cost.
E) the rate is set too low.
Refer to Figure 17.2.1. Curve MBA is Andrew’s marginal benefit curve for a public good
and curve MBB is Betty’s marginal benefit curve for the same public good. If Andrew
and Betty are the only two consumers in the economy, which point would be on the
economy’s marginal social benefit curve?
A) price of $20, quantity of 3
B) price of $20, quantity of 4
C) price of $10, quantity of 4
D) price of $30, quantity of 0
E) price of $60, quantity of 1
The total output produced with any quantity of labour is equal to the sum of the
A) average products of each of the workers hired.
B) marginal costs of each of the workers hired.
C) marginal products of each of the workers hired.
D) average costs of each of the workers hired.
E) fixed products of each of the workers hired.
The Coase theorem tells us that in the presence of external costs in production,
A) the government must intervene in the market to assure that the efficient level of
output is produced.
B) private parties can negotiate to produce the good at a level where marginal
willingness to pay for the good by consumers is zero.
C) private parties can never arrive at the efficient solution.
D) then under certain conditions, private parties can arrive at the efficient solution
without government involvement.
E) and if transactions costs are high, then only the private sector will be able to produce
the efficient amount of the good.
A rise in the price of gasoline, everything else remaining the same, ________ the
relative price of a restaurant meal and ________ real income in terms of restaurant
meals.
A) increases; does not change
B) does not change; decreases
C) decreases; does not change
D) does not change; increases
E) decreases; decreases
Refer to Figure 3.5.2, which represents the market for beer. If the price of pizza, a
complement of beer rises, what is the new beer equilibrium, ceteris paribus?
A) 8
B) 3
C) 9
D) 5
E) 6
The gap between real GDP per person in Canada and Hong Kong has ________ since
1960. During this period, the growth rate of real GDP per person in Canada has been
________ than in Hong Kong.
A) reversed; faster
B) increased; faster
C) remained constant; equal
D) reversed; slower
E) decreased; faster
The policy tools used by the Bank of Canada include
A) prime rate and bank rate.
B) the operating band and open market operations.
C) open market operations and prime rate.
D) prime rate and the exchange rate.
E) the exchange rate and open market operations.
The higher the exchange rate, all other things remaining the same, the
A) smaller is the supply of Canadian imports.
B) smaller is the volume of Canadian imports.
C) greater is the volume of Canadian imports.
D) greater is the supply of Canadian imports.
E) greater is the demand for Canadian exports.
In China, suppose that the price level was 100 in 2007, 110 in 2008, 120 in 2009, and
130 in 2011. Over this time period,
A) zero inflation occurred.
B) the inflation rate increased.
C) the inflation rate was positive.
D) the inflation rate decreased.
E) Both C and D are correct.
Coal in an Alberta coal mine is ________ natural resource. Algonquin Park is ________
natural resource.
A) a nonrenewable; a nonrenewable
B) a renewable; a renewable
C) a nonrenewable; a renewable
D) a renewable; a nonrenewable
E) a nonrenewable; not a
Intermediate goods are
A) sold to their ultimate user.
B) produced by one firm, bought by another firm, and used as a component of a final
good or service.
C) included directly in the measure of GDP.
D) capital.
E) purchased this year but consumed in future years.
The implicit rental rate to a firm of owning a building is
A) the sum of economic depreciation and foregone interest.
B) economic depreciation only.
C) foregone interest only.
D) the cost of using an alternative building.
E) the rent paid on the building.
Consider the budget line and indifference curve in Figure 9.3.1. At the best affordable
point, the marginal rate of substitution is
A) 1/2.
B) 2.
C) 4/3.
D) 3/4.
E) 4.
Which one of the following would not shift the supply curve of good X to the right?
A) a fall in the price of the factors of production used in producing X
B) an improvement in technology used in the production of X
C) a rise in the price of X
D) an increase in the price of Y, a complement in production of X
E) a fall in the price of Y, a substitute in production of X
The price of plums falls by 7 percent and quantity of plums demanded increases by 6.75
percent. We conclude that the demand for plums is
A) inelastic.
B) perfectly elastic.
C) perfectly inelastic.
D) elastic.
E) unit elastic.
A decrease in the tax on capital income ________ the real interest rate and ________
investment and economic growth.
A) decreases; increases
B) increases; increases
C) decreases; decreases
D) increases; decreases
E) decreases; does not change
The short-run Phillips curve shows the relationship between ________, holding
constant the expected inflation rate and the natural unemployment rate.
A) the inflation rate and the economic growth rate
B) unemployment and the economic growth rate
C) the inflation rate and the unemployment rate
D) growth and potential GDP.
E) the inflation rate and the growth of the money wage rate.
Refer to Figure 19.3.6. This is the market for a group of workers. If point A represents
the equilibrium for workers with higher human capital, which point represents the
equilibrium for the workers with less human capital?
A) D
B) B
C) I
D) C
E) H
If capital per worker decreases, real GDP per hour of labour
A) decreases because the level of technology decreases.
B) increases because the level of technology increases.
C) increases for a given level of technology.
D) decreases for a given level of technology.
E) none of the above
If aggregate planned expenditure is less than real GDP, then inventories
A) increase and real GDP increases.
B) increase and real GDP falls.
C) decrease and real GDP increases.
D) decrease and real GDP decreases.
E) remain constant and real GDP remains constant.
Operators of private dog parks in your city decide to eliminate their fees and allow dog
owners to exercise their dogs in the parks at no charge.
This statement means that the incentive to exercise dogs at the dog park ________.
The operators’ decision is a ________.
A) remains the same; macroeconomic decision
B) changes; microeconomic decision
C) remains the same; microeconomic decision
D) changes; macroeconomic decision
E) changes; decision in the self-interest but not in the social interest
Suppose the minimum wage is $4 per hour, and 1,100 units of labour are hired. Then
the government raises the minimum wage to $6 per hour, and 900 units are now hired.
Choose the correct statement.
A) Total wages paid to workers has increased.
B) The price elasticity of demand for labour is 0.5.
C) There is unemployment in this labour market.
D) The quantity of labour supplied is greater at the higher minimum wage.
E) The labour market is efficient.