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In monopolistically competitive industries,
A) firms compete on quality, price and marketing.
B) the range of choice of products is the same as in perfectly competitive industries.
C) firms are insensitive to changes in consumer demand.
D) all firms produce a quantity at which marginal cost is greater than marginal benefit.
E) all firms make an economic profit.
If the economy has a structural deficit of $25 billion and a cyclical deficit of $75, we
can conclude that the current budget deficit is ________ billion.
A) $25
B) $50
C) $75
D) $100
E) $125
The price elasticity of demand for oranges ________ if the quantity is measured in
pounds instead of kilograms and ________ if the price is measured in dollars instead of
cents.
A) changes; changes
B) changes; does not change
C) does not change; changes
D) does not change; does not change
E) increases; decreases
If a quota is set at the same quantity of imports that results from a tariff,
A) the deadweight loss from the tariff is greater than the deadweight loss from the
import quota.
B) the deadweight loss from the tariff equals the deadweight loss from the import quota.
C) the deadweight loss from the import quota is greater than the deadweight loss from
the tariff.
D) the government tariff revenue is greater than the importers' profit from the import
quota.
E) the government tariff revenue is less than the importers' profit from the import quota.
When the population increases with no change in labour productivity, employment
________ and potential GDP ________.
A) decreases; decreases
B) increases; increases
C) decreases; increases
D) increases; decreases
E) increases; does not change
Business people speak about price elasticity of demand without using the actual term.
Which one of the following statements reflects elastic demand for a good?
A) "A price cut won't help me. It won't increase sales, and I'll just get less money for
each unit."
B) "I don't think a price cut will make any difference to my bottom line. What I may
gain from selling more I would lose on the lower price."
C) "My customers are real bargain hunters. Since I set my prices just a few cents below
my competitors, customers have flocked to the store, and sales are booming."
D) "With the recent economic recovery, people have more income to spend and sales
are booming, even at the previous prices."
E) "A very cold winter has increased my sales of skates and hockey sticks."
The possibility that an employee may not work hard is an example of the
A) limited liability problem.
B) principal-agent problem.
C) transactions cost problem.
D) technological efficiency problem.
E) partnership problem.
If the Bank of Canada wants to eliminate an inflationary gap, which of the following
would be an appropriate policy?
A) Raise the overnight loans rate.
B) Lower the overnight loans rate.
C) Buy government securities.
D) Decease the government budget deficit.
E) Lower the exchange rate.
A fall in the real interest rate
A) shifts the demand for loanable funds curve rightward.
B) shifts the demand for loanable funds curve leftward.
C) creates a movement up along the demand for loanable funds curve.
D) creates a movement down along the demand for loanable funds curve.
E) decreases the inflation rate.
Which of the following relates factors of production to the sources of income correctly?
A) Land earns interest.
B) Land earns rent.
C) Labour earns rent.
D) Capital earns profit.
E) Entrepreneurship earns rent.
The Consumer Price Index measures inflation by using
A) all goods and services that are produced using a current-year basket.
B) all goods and services that are produced using a base-year basket.
C) only consumption goods and services purchased using a current-year basket.
D) only consumption goods and services purchased using a base-year basket.
E) the goods and services produced in the base year and goods and services produced in
the current year.
Customer discrimination against female realtors ________ the number of female
realtors and ________ their perceived value of marginal product.
A) decreases; decreases
B) decreases; increases
C) increases; increases
D) increases; decreases
E) decreases; does not change
Which one of the following is an example of a natural barrier to entry of new firms into
an industry?
A) licensing of professions
B) economies of scale
C) issuing a patent
D) a public franchise
E) ownership of a significant portion of a key resource
Some sales managers are talking shop. Which of the following quotations refers to a
movement along the demand curve?
A) "Since our competitors raised their prices, our sales have doubled."
B) "It has been an unusually mild winter; our sales of wool scarves are down from last
year."
C) "We decided to cut our prices, and the increase in our sales has been remarkable."
D) "The Green movement has sparked an increase in our sales of biodegradable
products."
E) "More firms are producing biodegradable products."
Suppose the country of Mooland imposes tariffs on imported beef from the country of
Aqualand. As a result of the tariffs, the
A) price of beef in Mooland falls.
B) quantity of beef exported by Mooland increases.
C) quantity of beef imported by Mooland decreases.
D) quantity of beef imported by Mooland increases.
E) price of beef in Mooland does not change.
Refer to the table below to answer the following question.
Table 23.3.3
Refer to Table 23.3.3. The table shows the demand for loanable funds schedule and the
private supply of loanable funds schedule when the government's budget is balanced. If
the Ricardo-Barro effect occurs, and if the government budget deficit is $2.0 trillion, the
real interest rate is ________ percent a year and the quantity of investment is ________
trillion.
A) 5.0; $5.0
B) 9.0; $7.0
C) 3.0; $7.5
D) 5.0; $7.0
E) 7.0; $6.0
Choose the correct statement.
A) The competitive market pushes the quantity produced to its efficient level.
B) When the efficient quantity is produced in a competitive market, consumer surplus is
maximized.
C) Competitive equilibrium occurs when demand equals supply.
D) When the efficient quantity is produced in a competitive market, producer surplus is
maximized.
E) When the efficient quantity is produced in a competitive market, producer surplus is
minimized.
When demand is perfectly elastic, then consumer surplus is
A) infinite.
B) zero.
C) 1.00.
D) -1.00.
E) between zero and 1.00.
National saving equals
A) private saving + private wealth.
B) private saving + government saving.
C) private saving - net taxes.
D) government saving.
E) investment.
Suppose that the economy is at full employment, the price level is 100, and the
multiplier is 2. Investment increases by $10 billion. In the short run ________, and in
the long run ________.
A) real GDP increases by less than $20 billion; real GDP does not change
B) real GDP increases by more than $20 billion; real GDP does not change
C) real GDP does not change; real GDP increases by at least $20 billion
D) real GDP does not change; real GDP increases by less than $20 billion
E) real GDP does not change; real GDP does not change
Refer to Fact 8.4.1. The idea of ________ is consistent with the information in the news
clip.
A) the endowment effect
B) bounded self-interest
C) bounded rationality
D) bounded willpower
E) bounded social interest
A movement along the production possibilities frontier will result from
A) technological change.
B) a change in the stock of capital.
C) a change in the labour force.
D) a change in human capital
E) none of the above.
Refer to Fact 25.4.1. What is the current account balance for Ecoland, given the value
of net interest income plus net transfers is +3 billion turkeys?
A) -3 billion turkeys
B) -6 billion turkeys
C) +3 billion turkeys
D) +1 billion turkeys
E) zero
Smoking tobacco creates a ________ externality.
A) negative consumption
B) negative production
C) positive consumption
D) positive production
E) marginal
If Harold must decrease production of some other good to increase production of good
X, then Harold
A) is producing on his production possibilities frontier.
B) is producing outside his production possibilities frontier.
C) is producing inside his production possibilities frontier.
D) must prefer good X to any other good.
E) has too few capital goods.
The gains from free trade are enjoyed by a ________ number of people and the costs of
free trade are imposed on a ________ number of people.
A) small; large
B) large; small
C) small; small
D) large; large
E) We can't determine the relative number of people who benefit and lose from free
trade.
Marginal revenue is
A) the change in total quantity that results from a one-unit increase in the price of the
good.
B) the change in total revenue that results from a one-unit increase in the quantity sold.
C) economic profit divided by the quantity sold.
D) the change in economic profit that results from a one-unit increase in the quantity
sold.
E) total revenue minus total cost.
Which of the following best explains why firms in monopolistic competition face a
downward-sloping demand curve while perfectly competitive firms do not?
A) Monopolistically competitive industries have only a few firms.
B) Monopolistically competitive firms face barriers to entry.
C) Only industries with free entry and exit have firms that face horizontal demand
curves.
D) Firms in monopolistic competition are price takers.
E) Firms in monopolistic competition sell a differentiated good.
Which of the following news quotes best describes a new classical view of a recession?
A) "Rapid computerization is creating obsolete workers and higher unemployment."
B) "The unexpectedly tight fiscal policy is raising spending and lowering
unemployment."
C) "The anti-inflationary policy of the Bank of Canada is increasing spending."
D) "The cuts in government spending have helped lower consumer spending and
created unemployment."
E) "Businesses are very worried about future sales and have lowered their purchases of
capital equipment."
Two firms are trying to decide how much to budget for research and development. Once
a new discovery is made, each firm benefits regardless of which firm developed the
innovation. In this R&D game of chicken, the Nash equilibrium is that
A) both firms conduct R&D.
B) neither firm conducts R&D.
C) only one firm conducts R&D but which firm conducts the R&D cannot be
determined.
D) the larger firm conducts the R&D.
E) the smaller firm conducts the R&D.
