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Suppose in an industry a firm realizes economies of scale over the entire length of its
LRAC curve. In this situation, the firm is
A) a natural monopoly.
B) a fixed-cost monopoly.
C) an output-discriminating monopoly.
D) a perfect-price discriminating monopoly.
E) a constant total variable cost monopoly.
A technological change that increases the value of marginal product of labour shifts the
labour
A) demand curve leftward.
B) demand curve rightward.
C) supply curve leftward.
D) supply curve rightward.
E) demand curve rightward and the labour supply curve rightward.
Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of
a perfectly competitive firm. If the firm produces 2 units of output, it
A) makes an economic profit of $9.
B) makes an economic profit of $60.
C) incurs an economic loss of $9.
D) incurs an economic loss of $60.
E) incurs an economic loss of $69.
Which of the following quotes by a store manager describes price discrimination in
action?
A) "Since bulk goods are cheaper to package, I can offer a lower price."
B) "I can get a 4-litre jug of milk from the supplier for less than four 1-litre cartons, so I
can sell it for less per litre."
C) "We offer our employees a 10 percent price discount."
D) "I offer discounts if you buy 12 apple juices in one box, although it costs me the
same as if I split it up and sell them separately."
E) "We set price equal to average variable cost."
A firm's total product curve describes
A) the minimum cost of producing a given amount of output.
B) the maximum output that a given quantity of labour can produce.
C) how the maximum attainable output varies as the size of the firm's plant varies,
given the quantity of labour employed.
D) how the management of the firm makes decisions over the short run.
E) how the amount of labour varies as the amount of output varies.
Which theory of economic growth argues that, in the long run, people do not benefit
from growth?
A) classical growth theory
B) neoclassical growth theory
C) new growth theory
D) all of the theories
E) none of the theories
Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a
substitute for beans, rises, and the cost of producing beans decreases, what is the new
beans equilibrium, ceteris paribus?
A) 2
B) 3
C) 9
D) 4
E) 7
Dissaving occurs when a household
A) spends less than it receives in disposable income.
B) spends more than it saves.
C) saves more than it spends.
D) consumes more than it receives in disposable income.
E) borrows.
One factor that distinguishes a monopoly from monopolistic competition is that
A) firms in monopolistic competition practice collusion.
B) no barriers to entry exist in a monopoly.
C) barriers to exit exist in monopolistic competition.
D) close substitutes are available in monopolistic competition.
E) firms are price-takers in monopolistic competition.
Use the figure below to answer the following questions.
Figure 3.4.1
At price P3 in Figure 3.4.1,
A) this market is in equilibrium.
B) there is a shortage in the amount of Q5 - Q1.
C) there is a tendency for the price to rise.
D) equilibrium quantity is Q5.
E) there is a surplus in the amount of Q5 - Q1.
Marginal cost ________ as the quantity produced increases.
A) initially decreases and then decreases
B) always decreases
C) always increases
D) initially increases and then decreases
E) becomes negative
The elasticity of supply is a units-free measure of the responsiveness of the
A) quantity demanded to a change in supply.
B) quantity supplied to a change in demand.
C) quantity supplied to a change in price.
D) price of one good to a change in the quantity supplied of a second good.
E) quantity supplied of one good to a change in the price of another good.
A difference between a quota and a tariff is that
A) a tariff generates a higher price than does an import quota.
B) a tariff generates a greater reduction in exports than does an import quota.
C) an import quota increases profits of domestic producers more than a tariff.
D) the government collects revenue from a tariff but does not collect revenue from an
import quota.
E) an import quota generates a deadweight loss and a tariff does not.
Use the figure below to answer the following question.
Figure 4.1.3
Given the relationship shown in Figure 4.1.3 between total revenue from the sale of a
good and the quantity of the good sold, then
A) this is an inferior good.
B) this is a normal good.
C) the price elasticity of demand is zero.
D) demand for this good is perfectly elastic.
E) the price elasticity of demand is 1.
The price at which sellers are not willing to supply a good is $700 per unit. If the supply
curve passes through the point (3,718), what is the equation of the supply curve?
A) P = 700 + 6QS
B) QS = 700 - 6P
C) P = 718 + 3QS
D) QS = 718 + 3P
E) QS = 718 - 6P
The objective of the Bank of Canada's monetary policy is
A) to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3
percent a year, and long-term real GDP growth above 4 percent a year.
B) to control the quantity of money and interest rates to avoid inflation and when
possible prevent excessive swings in real GDP growth and unemployment.
C) to keep the unemployment rate below 5 percent, the inflation rate between 1 and 3
percent a year, and long-term interest rates below 4 percent a year.
D) to keep the labour force participation rate above 80 percent, the inflation rate below
2 percent a year, and the exchange rate fluctuating by less than 3 percent a year.
E) to keep the overnight loans rate below 2 percent a year and the unemployment rate at
its natural rate.
The quantity of real GDP demanded is the sum of real consumption expenditure (C),
investment (I),
A) government expenditure (G), exports (X), and imports (M).
B) government expenditure (G), and exports (X) minus imports (M).
C) exports (X), and imports (M).
D) and exports (X) minus imports (M).
E) and government expenditure (G).
Which of the following are valid reasons advanced by almost all economists?
Protection
A) saves jobs.
B) prevents rich countries from exploiting developing countries.
C) is a good way for governments in developed nations to raise revenue.
D) penalizes lax environmental standards.
E) Economists would not support any of the above reasons.
If households and firms find they are holding more money than desired, they will
A) sell bonds, and the interest rate will rise.
B) sell bonds, and the interest rate will fall.
C) buy bonds, and the interest rate will rise.
D) buy bonds, and the interest rate will fall.
E) buy goods, and the price level will rise.
A monopoly arises for two key reasons, which are
A) barriers to entry and no close substitutes.
B) franchises and barriers to entry.
C) barriers to entry and close substitutes.
D) close substitutes and no barriers to entry.
E) natural and legal
The distinguishing features of oligopoly are ________ and ________ in the industry.
A) no barriers to entry; a small number of firms
B) barriers to entry; a large number of firms
C) no barriers to entry; a large number of firms
D) barriers to entry; one firm
E) barriers to entry; a small number of firms
Given the data in Table 1A.4.2, holding price constant, the graph of the purchases of
strawberries, measured on the x-axis and family income, measured on the y-axis is a
A) vertical line.
B) horizontal line.
C) positively sloped line.
D) negatively sloped line.
E) positively or negatively sloped line, depending on the price that is held constant.
How is responsibility for monetary policy set forth in Canada?
A) The Canadian Government administers monetary policy through the office of the
Minister of Finance.
B) The Bank of Canada administers monetary policy as directed by the Minister of
Finance.
C) The Bank of Canada Act places responsibility for the conduct of monetary policy on
the Bank's Governing Council.
D) The Prime Minister bears ultimate responsibility for monetary policy.
E) Both B and D
The growth of capital resources, including human capital is
A) technological change.
B) capital accumulation.
C) depreciation.
D) opportunity cost.
E) shown by a movement along the PPF.
At current output, the marginal social benefit from Furbys is greater than marginal
social cost. To achieve an efficient allocation, which of the following must occur? (1)
Furby output must increase. (2) Furby output must decrease. (3) the marginal social
benefit of Furbys will rise. (4) the marginal social cost of Furbys will fall.
A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4
E) 1 only
The relative price of a good is all of the following except
A) the ratio of one price to another.
B) an opportunity cost.
C) the money price of the good divided by a price index.
D) the same as the money price of a good.
E) determined in a market.
When real GDP equals potential GDP of $12 trillion, the budget deficit is $1 trillion.
Real GDP actually equals $14 trillion and the budget surplus is $3 trillion. The
economy has a structural ________ and a cyclical ________.
A) deficit of $1 trillion; surplus of $4 trillion
B) deficit of $1 trillion; surplus of $2 trillion
C) surplus of $4 trillion; deficit of $1 trillion
D) surplus of $3 trillion; surplus of $2 trillion
E) deficit of $4 trillion; surplus of $1 trillion
During an expansion, revenues
A) and government outlays decrease.
B) decrease and government outlays increase.
C) increase and government outlays decrease.
D) and government outlays increase.
E) remain constant and government outlays increase.
Refer to Figure 28.2.3. Assume that the figure illustrates an economy initially in
equilibrium at the intersection of the SAS0 curve and the AD0 curve. If the aggregate
demand curve is expected to remain at AD0 but shifts to AD1, the new equilibrium real
GDP is ________ and the new equilibrium price level is ________.
A) $380 billion; 125
B) $500 billion; 150
C) $500 billion; 100
D) $620 billion; 125
E) $500 billion; 125
Human capital is the
A) machinery used by humans to produce GDP.
B) technology used by humans to produce GDP.
C) skill and knowledge accumulated by humans.
D) plant and equipment produced by humans and not by machines.
E) technology used by humans to produce real GDP.
In Table 21.2.1, which person is cyclically unemployed?
A) A
B) B
C) C
D) D and B
E) A and C
Production efficiency is achieved when
A) the production possibilities frontier shifts outward at an even pace.
B) there are no more tradeoffs.
C) all resources are equally productive in all activities.
D) resources are not equally productive in all activities.
E) we produce goods and services at the lowest possible cost.
The aggregate production function shows how ________ varies with ________.
A) real GDP; labour
B) labour; leisure
C) real GDP; leisure
D) labour; capital
E) real GDP; capital
