The demand for corn increases. As a result, the price of corn ________, and the less
elastic the supply of corn, the ________ will be the effect on the price.
A) falls; smaller
B) falls; greater
C) rises; smaller
D) rises; greater
E) does not change; smaller
Sally and Eric are the only people in an economy. Sally buys 3 bottles of water when
the price is $2 a bottle and 4 bottles of water when the price is $1 a bottle. Eric buys 10
bottles of water when the price is $0.50 a bottle and 5 bottles of water when the price is
$1 a bottle. In the market for water, the quantity demanded
A) increases as the price rises.
B) is 4 bottles at a price of $1 a bottle.
C) increases as the price falls.
D) is 8 bottles at a price of $2 a bottle.
E) is 15 bottles at a price of $0.50 a bottle.
To earn income, people sell the services of the factors of production they own. Land
earns ________and labour earns ________.
A) profit; wages
B) wages; interest
C) rent; wages
D) profit; interest
E) rent; minimum wage
If a rise in price results in a decrease in total revenue, then the price elasticity of
demand is
A) negative.
B) zero.
C) greater than zero but less than 1.
D) equal to 1.
E) greater than 1.
Sarah’s Soothing Diapers, Inc. and Orville’s Odorless Diapers, Inc. are duopolists, who
have agreed to collude. Orville has decided that he will comply with the collusive
agreement as long as Sarah cooperated in the previous period. But if Sarah cheated in
the previous period, Orville will punish Sarah by cheating in the current period.
Orville’s strategy is referred to as a
A) Nash strategy.
B) tit-for-tat strategy.
C) trigger strategy.
D) monkey-see, monkey-do strategy.
E) dominant firm strategy.
Use the table below to answer the following questions.
Table 16.2.1
Refer to Table 16.2.1. Given in the table are the marginal private cost and the marginal
social cost of the production of chemical fertilizer and the marginal social benefit from
the consumption of fertilizer. Under these circumstances,
A) there are positive externalities in this market.
B) there are negative externalities in this market, equal to $10 per unit.
C) there are no externalities in this market.
D) not enough information is provided to determine whether or not there are
externalities.
E) there are negative externalities in this market, equal to $20 per unit.
Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15
minutes to cook an egg and 3 minutes to make a sandwich. Both individuals gain if
A) Jerry produces eggs and trades them to Tom for sandwiches.
B) Jerry produces sandwiches and trades them to Tom for eggs.
C) they trade with each other regardless of who produces sandwiches and who produces
eggs.
D) the opportunity cost of producing an egg is greater than the opportunity cost of
producing a sandwich.
E) the opportunity cost of producing a sandwich is greater than the opportunity cost of
producing an egg.
Choose the correct statements.
1. The exchange rate is the value of the Canadian dollar expressed in units of foreign
currency per Canadian dollar.
2. The real exchange rate is the relative price of Canadian-produced goods and services
to foreign-produced goods and services.
3. The exchange rate is a measure of the quantity of the real GDP of other countries that
a unit of Canadian real GDP buys.
4. The exchange rate is the relative price of Canadian-produced goods and services to
foreign-produced goods and services.
A) Statements 1 and 2 are correct.
B) Statements 3 and 4 are correct.
C) Statements 1 and 3 are correct.
D) Statements 2 and 4 are correct.
E) Statements 2 and 3 are correct.
Peter’s income increases and so does his consumption of both movies and pop, but his
consumption of pop increases by less than his consumption of movies increases. Which
one of the following statements is true for Peter?
A) A movie is an inferior good; pop is a normal good.
B) A movie is a normal good; pop is an inferior good.
C) A movie is an inferior good; pop is an inferior good.
D) Movies and pop are both normal goods.
E) A movie is a normal good; we cannot tell whether pop is a normal good or an
inferior good.
All shredded wheat producers have decided to add a new ingredient, the “crunch
enhancer” to shredded wheat. Crunch enhancer keeps cereals crisper longer in milk and,
as a result, consumers decide they like shredded wheat more than before. What happens
to the supply and demand curves for shredded wheat now that it costs more to produce
and consumers like it better?
A) The supply and demand curves both shift rightward.
B) The supply curve shifts rightward and the demand curve remains unchanged.
C) The supply curve shifts leftward and the demand curve shifts rightward.
D) The supply curve shifts leftward and the demand curve remains unchanged.
E) Neither curve changes but a movement occurs up along the demand curve and a
movement occurs up along the supply curve.
Refer to Fact 14.2.1. Samuel Adams makes the market for beer inefficient if
A) the loss that arises from having greater product variety offsets the gain that arises
because the quantity produced is less than the efficient quantity.
B) more firms enter the market.
C) the loss that arises because the quantity produced is less than the efficient quantity is
not offset by the gain that arises from having greater product variety.
D) firms exit the market.
E) the marginal social cost of production equals the marginal social benefit received by
consumers.
If aggregate planned expenditure exceeds real GDP then
A) inventories decrease, and the AE curve shifts downward.
B) inventories increase, and the AE curve shifts upward.
C) inventories decrease, and as real GDP increases, a movement up along the AE curve
occurs.
D) inventories increase, and as real GDP increases, a movement up along the AE curve
occurs.
E) inventories increase, and the short-run aggregate supply curve shifts rightward.
In new classical cycle theory, ________ bring fluctuations in real GDP around potential
GDP.
A) unexpected changes in aggregate demand
B) expected changes in aggregate demand
C) fluctuations in money growth with rigid wages
D) fluctuations in investment coupled with rigid wages
E) expected changes in labour productivity
The most efficient way to encourage the growth of an infant-industry is through
A) a voluntary export restraint.
B) a tariff.
C) a subsidy.
D) an import quota.
E) none of the above
A shift in a firm’s demand curve for labour occurs for all of the following reasons
except a change in
A) the prices of other factors of production.
B) technology.
C) the price of the firm’s output.
D) wage rate.
E) marginal product of labour.
Choose the correct statement.
A) The quantity of money measured in constant dollars is nominal money.
B) The quantity of money measured in dollars is nominal money.
C) The quantity of nominal money demanded is inversely related to the price level.
D) As real GDP increases, the quantity of nominal money demanded decreases.
E) As the interest rate rises, the quantity of real money demanded increases.
Growing voter income can lead to the growth of the government sector because
A) public goods are income elastic.
B) public goods are income inelastic.
C) richer voters are more likely to be rationally ignorant.
D) richer voters do not care about overprovision of government goods.
E) as income increases, more public goods become private goods.
Rational ignorance suggests that
A) all voters are ignorant.
B) all voters will be ignorant on issues that are not of special interest to them.
C) all voters will pursue information about each issue before voting.
D) low voter turnout is due to a lack of understanding of the importance of the political
platforms.
E) it is easier to aim at the median voter because it is a less costly strategy for the
politicians.
A very small country is an international lender and its supply of loanable funds
increases. As a result, the equilibrium quantity of loanable funds used in the country
________ and the country’s foreign lending ________.
A) increases; decreases
B) does not change; does not change
C) does not change; increases
D) increases; does not change
E) does not change; decreases
Consider a production possibilities frontier with corn production measured on the
vertical axis and car production measured on the horizontal axis. Unusually good
weather for growing corn shifts
A) the horizontal intercept of the PPF rightward and the vertical intercept of the PPF
upward.
B) the horizontal intercept of the PPF rightward but does not shift the vertical intercept
of the PPF.
C) the vertical intercept of the PPF upward but does not shift the horizontal intercept of
the PPF.
D) neither the horizontal intercept nor the vertical intercept of the PPF.
E) the vertical intercept of the PPF downward and the horizontal intercept of the PPF
leftward.
Which of the following is a function of money?
A) a medium of exchange
B) a measure of liquidity
C) a means of pooling risk
D) a store of exchange
E) a means of reducing transactions costs
Refer to Figure 5.3.1. If the price is $15 a unit,
A) production is efficient.
B) marginal social benefit equals marginal social cost.
C) deadweight loss is zero.
D) the sum of consumer surplus and producer surplus is maximized.
E) all of the above
In 2010, the largest item in the current account was
A) exports.
B) imports.
C) net interest income.
D) net transfers.
E) foreign investment in Canada.
Bikes and roller blades are substitutes. Marginal utility theory predicts that when the
price of a bike rises, the quantity of bikes demanded
A) decreases and the demand curve for roller blades shifts rightward.
B) decreases and the demand curve for roller blades shifts leftward.
C) decreases and a movement occurs down along the demand curve for roller blades.
D) increases and the demand curve for roller blades shifts rightward.
E) increases and the demand curve for roller blades shifts leftward.
Money can take the form of any one of the following except
A) a credit card.
B) a chequing deposit.
C) a savings deposit.
D) Bank of Canada notes.
E) coins.
A financial firm that takes deposits from households and firms is
A) a usurer.
B) a depository institution.
C) a credit company.
D) a pawn shop.
E) a central bank.
The marginal benefit curve from a good
A) shows the benefit a firm receives from producing one more unit of that good.
B) shows the most a consumer is willing to pay for one more unit of that good.
C) is upward-sloping.
D) is bowed outward.
E) is vertical.
Refer to the table below to answer the following question.
Table 15.2.9
Refer to Table 15.2.9. Two students are assigned a group project. Each has the option to
work or not work to achieve a high grade. The payoffs are shown in the above table.
Student 1
A) works only if student 2 works.
B) works regardless of the decision made by student 2.
C) does not work if student 2 works.
D) does not work regardless of what student 2 decides.
E) works only if student 2 does not work.
Use the figure below to answer the following questions.
Figure 27.1.2
Refer to Figure 27.1.2. Autonomous consumption is
A) -$200.
B) $200.
C) $800.
D) $600.
E) zero.
If capital is a variable input in a production process, the law of diminishing marginal
returns implies that
A) total product is minimized.
B) capital’s marginal product is positive and less than one.
C) total product is maximized.
D) marginal product of capital eventually decreases.
E) marginal product of capital is constant.