If the demand curve for a good is a horizontal line, then the good has
A) zero income elasticity.
B) price elasticity of demand equal to zero.
C) infinite price elasticity of demand.
D) a price elasticity of demand that is likely to rise in the short run.
E) a price elasticity of demand that is likely to fall in the short run.
An increase in autonomous consumption
A) shifts the consumption function upward.
B) shifts the consumption function downward.
C) creates a movement downward along the consumption function.
D) creates a movement upward along the consumption function.
E) changes the slope of the consumption function.
Sue’s Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price
discriminate. For Sue’s Surfboards, the change in total revenue from each additional
surfboard rented is her
A) marginal revenue, which is less than the rental price of a surfboard.
B) marginal cost, which is constant regardless of how many surfboards are rented.
C) marginal revenue, which is equal to the rental price of a surfboard.
D) marginal cost, which is greater than the rental price of a surfboard.
E) marginal revenue, which is equal to average total cost in the long run.
A south sea island produces only coconuts. In 2005, the price of a coconut is $2.00 and
the quantity produced is 400. In 2012, the price of a coconut is $1.50 and the quantity
produced is 350.
2005 is the reference base year. Real GDP in 2012 in terms of base-year prices is
A) $600.
B) $525.
C) $800.
D) $700.
E) $750.
Which one of the following is true?
A) Y = C + I + G + M – X
B) I + G + X = Y + I + M
C) Y = C + S + I
D) Y + M = C + I + G
E) Y = C + I + G + X – M
Refer to Figure 26.3.1. Consider statements (1) and (2) and select the correct answer.
(1) The economy of Econoworld is experiencing a below full-employment equilibrium.
(2) The actual unemployment rate equals the natural unemployment rate.
A) (1) is true; (2) is false.
B) (2) is true; (1) is false.
C) (1) and (2) are false.
D) (1) and (2) are true.
E) (1) is true; (2) is true if the natural unemployment rate is too high.
In monopolistic competition
A) firms can collude.
B) each firm has a small market share.
C) each firm pays attention to every other firm.
D) firms make a profit in the long run.
E) no firms advertise.
A point inside a production possibilities frontier
A) indicates some unused or misallocated resources.
B) is unattainable.
C) is preferred to a point on the production possibilities frontier.
D) indicates a point of production efficiency.
E) illustrates the idea of opportunity cost.
If national saving equals $100,000, net taxes equal $100,000 and government
expenditure equals $25,000, what is private saving?
A) $25,000
B) $225,000
C) -$25,000
D) zero
E) $175,000
Most establishments in Canada
A) employ between 5 and 99 people.
B) employ more than 100 people.
C) employ fewer than 5 people.
D) employ more than 500 people.
E) are partnerships.
Use the table below to answer the following question.
Table 1A.2.3
Refer to Table 1A.2.3. What type of relationship exists between w and u?
A) positive
B) negative
C) direct
D) No consistent relationship exists.
E) first a positive relationship, then a negative one
Use the figure below to answer the following questions.
Figure 12.2.2
Refer to Figure 12.2.2, which shows a perfectly competitive firm’s economic profit and
loss. The firm is incurring a loss at
A) point A.
B) point B.
C) point C.
D) point D.
E) both points B and D.
Total utility equals
A) the sum of the marginal utilities of each unit consumed.
B) the area below the demand curve but above the market price.
C) the slope of the marginal utility curve.
D) the marginal utility of the last unit divided by price.
E) the marginal utility of the last unit consumed multiplied by the total number of units
consumed.
In industrial countries, there is more reliance on ________ as opposed to ________ for
government revenue.
A) tariffs; tax collection
B) import quotas; tariffs
C) tariffs; import quotas
D) import quotas; tax collection
E) tax collection; tariffs
Use the figure below to answer the following question.
Figure 13.4.1
Which area in Figure 13.4.1 indicates the deadweight loss from a perfect
price-discriminating monopoly?
A) EACF
B) ACD
C) ABD
D) BCD
E) None of the above
A dominant strategy equilibrium occurs when
A) there is a clear strategy for each player independent of the other player’s actions.
B) each player takes the best possible action given the other player’s action.
C) each player complies with the collusive agreement.
D) you cooperate until the other player cheats, and then you cheat forever.
E) the outcome is the best possible.
Use the information below to answer the following question.
Fact 1.3.1 Costs Soar for London Olympics
The regeneration of East London, the site of the 2012 Olympic Games, is set to add
extra 1.5 billion to taxpayers’ bill.
Refer to Fact 1.3.1. The cost of regenerating East London ________ an opportunity cost
of hosting the 2012 Olympic Games ________.
A) is not; because few people attending the 2012 Olympics will spend much time
outside Olympic venues
B) is; if the costs of the East London regeneration is equal to a significant percentage of
the total amount spent by London taxpayers to host the 2012 Olympics
C) is; if the regeneration of East London would not occur unless London hosted the
2012 Olympics
D) is not; because regenerating East London is an unnecessary expense
E) is; if the property taxes of people living in East London increase
In a country with a working-age population of 22 million, 16 million are employed, 2
million are unemployed, and 1 million of the employed are working part-time, half of
whom wish to work full-time. If 500,000 of those unemployed are cyclically
unemployed, what is the natural unemployment rate?
A) 11.1 percent
B) 5.6 percent
C) 8.3 percent
D) 9.4 percent
E) 1.5 percent
If the price level rises, then the wealth effect leads to
A) an increase in real wealth, an increase in current consumption expenditure, and an
increase in saving.
B) an increase in real wealth, an increase in current consumption expenditure, and a
decrease in saving.
C) a decrease in real wealth, an increase in current consumption expenditure, and an
increase in saving.
D) a decrease in real wealth, an increase in current consumption expenditure, and a
decrease in saving.
E) a decrease in real wealth, a decrease in current consumption expenditure, and an
increase in saving.
If ATC is rising then MC must be
A) rising.
B) falling.
C) equal to ATC.
D) above ATC.
E) both A and D
Refer to Table 11.2.3. The maximum value of marginal product occurs where output
equals ________, while the maximum value of average product occurs where output
equals ________.
A) 5; 6
B) 6; 5
C) 7; 14
D) 9; 14
E) 14; 11
Everything else remaining the same, which one of the following increases aggregate
demand?
A) an increase in taxes
B) an increase in transfer payments
C) a decrease in government spending
D) a decrease in the price level
E) a decrease in the quantity of money
Refer to Table 8.2.1. Consider Sam’s utility from sailing and skiing. The price of sailing
is $10 per hour and the price of skiing is $20 per hour; Sam’s income to spend on these
activities is $80. In consumer equilibrium, Sam will sail for
A) 3 hours and ski for 2 hours.
B) 2 hours and ski for 4 hours.
C) 4 hours.
D) 4 hours and ski for 2 hours.
E) 8 hours.
In monopolistic competition, firms compete on the basis of
A) price only.
B) price, quality, and marketing.
C) marketing only.
D) quality and marketing, but not price.
E) quality only.
Which of the following barriers to rational choices are studied by behavioural
economics?
A) bounded rationality
B) bounded willpower
C) bounded self-interest
D) the endowment effect
E) all of the above
According to ________, the business cycle is the result of aggregate demand growing at
a fluctuating rate.
A) the Keynesian cycle theory only
B) only the Keynesian and monetarist cycle theories
C) the Keynesian, monetarist, and real business cycle theories
D) the Keynesian, monetarist, and new classical cycle theories
E) real business cycle theory
The economy is in a recession and the recessionary gap is large. Discretionary fiscal
policy that might occur is ________. Automatic fiscal policy that might occur is
________.
A) a decrease in transfer payments and an increase in taxes with no interference by
Parliament; a decrease in government expenditure and an increase in taxes by a decision
of Parliament
B) an increase in transfer payments and a fall in taxes with no interference by
Parliament; an increase in government expenditure and a cut in taxes by a decision of
Parliament
C) an increase in government expenditure and a cut in taxes by a decision of
Parliament; an increase in transfer payments and a fall in taxes
D) a decrease in government expenditure and an increase in taxes by a decision of
Parliament; a decrease in transfer payments and an increase in taxes with no
interference by Parliament
E) a decrease in the interest rate; an increase in the quantity of money
If the market for Twinkies is in equilibrium, then
A) Twinkies must be a normal good.
B) producers would like to sell more at the current price.
C) consumers would like to buy more at the current price.
D) there is a surplus.
E) the equilibrium quantity equals the quantity demanded.
Jim has made his best affordable choice of muffins and coffee. He spends all of his
income on 10 muffins at $1 each and 20 cups of coffee at $2 each. Now the price of a
muffin rises to $1.50 and the price of coffee falls to $1.75 a cup. Jim can still afford to
buy 10 muffins and 20 cups of coffee. Jim will buy ________ muffins and ________
coffee.
A) more; fewer
B) fewer more
C) more; more
D) fewer; fewer
E) the same quantity of; the same quantity of
If Canada imposes a tariff on imported steel, the tariff
A) raises the Canadian price of imported steel.
B) decreases Canadian production of steel.
C) increases the total Canadian consumption of steel.
D) decreases employment in the Canadian steel industry.
E) Both B and D are correct.
Of the following, in which decade were Canada’s tariffs at their lowest level?
A) 2000s
B) 1970s
C) 1950s
D) 1930s
E) 1890s