Which is not a characteristic of oligopoly?
A) Each firm faces a downward-sloping demand curve.
B) Firms are profit-maximizers.
C) The sales of one firm will not have a significant effect on other firms.
D) There is more than one firm in the industry.
E) Firms set prices.
Which one of the following must be true if demand is income inelastic?
A) A large percentage increase in income will result in a small percentage increase in
quantity demanded.
B) A small percentage increase in income will result in a large percentage increase in
quantity demanded.
C) An increase in income will decrease the quantity demanded.
D) The good is an inferior good.
E) A percentage rise in price increases the quantity demanded by a smaller percentage.
Factors that influence the price elasticity of demand include
A) the closeness of substitutes.
B) the price of complements but not the price of substitutes.
C) income.
D) preferences.
E) the price of substitutes and complements.
Use the figure below to answer the following question.
Figure 22.3.3
Refer to Figure 22.3.3. As a result of the rightward shift in the demand curve for labour
from LD0 to LD1, potential GDP ________, and potential GDP per hour of labour
________.
A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases
E) increases; does not change
Refer to Figure 6.4.1. The graph shows the market for tomatoes. When the government
introduces a subsidy for tomatoes at $4 a kilogram, the quantity produced is ________
because ________.
A) efficient; marginal social cost is less than marginal social benefit
B) efficient; marginal social benefit equals marginal social cost
C) inefficient; marginal social cost is less than marginal social benefit
D) inefficient; marginal social benefit is less than marginal social cost
E) inefficient; marginal social cost is zero
The burden of the tax on buyers is greater the more
(1) elastic is demand.
(2) inelastic is demand.
(3) elastic is supply.
(4) inelastic is supply.
A) (2) only
B) (1) and (3)
C) (1) and (4)
D) (2) and (3)
E) (2) and (4)
Donna owns the only dog grooming salon on Lonely Island. If Donna can price
discriminate between dog owners who are seniors and those who are not, her economic
profit will be ________ than if she does not price discriminate and the number of dog
groomings will be ________ if she does not price discriminate.
A) greater; more than
B) greater; less than
C) less; more than
D) less; less than
E) greater; the same as
Increasing a tariff ________ the domestic quantity consumed of the good and ________
the domestic production of the good.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) decreases; does not change
Use the figure below to answer the following questions.
Figure 5.3.2
Refer to Figure 5.3.2. If the level of output is 150 units, the consumer surplus is area
A) BCF.
B) ACG.
C) DCE.
D) ACH.
E) HCG.
Refer to the table below to answer the following questions.
Table 15.2.7
Refer to Table 15.2.7. Disney and Fox must decide when to release their next films. The
revenues received by each studio depend in part on when the other studio releases its
film. Each studio can release its film at Thanksgiving or at Christmas. The revenues
received by each studio, in millions of dollars, are given in the payoff matrix above.
Which of the following statements correctly describes Fox’s strategy given what
Disney’s release choice may be?
A) If Disney chooses a Thanksgiving release, Fox should choose a Christmas release.
B) If Disney chooses a Christmas release, Fox should choose a Thanksgiving release.
C) Fox should release on Christmas regardless of what Disney does.
D) Fox should release on Thanksgiving regardless of what Disney does.
E) Both answers A and B are correct.
Consider Table 23.2.2. What is the equilibrium quantity of investment?
A) $6.5 trillion
B) $6.0 trillion
C) $5.5 trillion
D) $5.0 trillion
E) $4.5 trillion
A tariff ________ the domestic price of the good and an import quota ________ the
domestic price of the good.
A) lowers; lowers
B) lowers; raises
C) raises; lowers
D) raises; raises
E) does not change; does not change
To combat a recession, the Bank of Canada ________ the overnight loans rate, which
________ the quantity of money.
A) raises; increases
B) lowers; increases
C) raises; decreases
D) lowers; decreases
E) lowers; decreases the demand for bank reserves and increases
A Canada Day fireworks display
A) does not have a free-rider problem.
B) has a free-rider problem that cannot be eliminated.
C) has a free-rider problem that can be eliminated by using taxes paid by area residents
to finance the display.
D) is a private good.
E) is a natural monopoly good.
Use the information below to answer the following questions.
Fact 2.4.1
In one hour, Sue can produce 50 caps or 10 jackets, and Tessa can produce 70 caps or 7
jackets.
Refer to Fact 2.4.1. Sue’s opportunity cost of producing a cap is ________ jackets and
Tessa’s opportunity cost of producing a cap is ________ jackets.
A) 10; 7
B) 5; 10
C) 0.1; 0.2
D) 0.2; 0.1
E) 10; 5
13.2 A Single-Price Monopoly’s Output and Price Decision
Use the figure below to answer the following question.
Figure 13.2.1
Refer to Figure 13.2.1. This single-price monopoly produces ________ units per day
and charges a price of $________ per unit.
A) zero; 0
B) 20; 75
C) 40; 50
D) 20; 50
E) 20; 20
The short-run Phillips curve shows the relationship between
A) the price level and real GDP in the short run.
B) the price level and unemployment in the short run.
C) unemployment and real GDP in the short run.
D) inflation and unemployment, when inflation expectations can change.
E) inflation and unemployment, when the expected inflation rate and the natural
unemployment rate remain constant.
Use the table below to answer the following question.
Table 8.2.5
Refer to Table 8.2.5. Cindy enjoys golf and tennis. The table shows the marginal utility
she gets from each activity.
Cindy has $70 a month to spend, and she can spend as much time as she likes on her
leisure pursuits. The price of an hour of golf is $10, and the price of an hour of tennis is
$5.
Cindy decides to golf for 5 hours a month and play tennis for 4 hours a month.
If Cindy spends a dollar more on golf and a dollar less on tennis, her total utility
________.
If Cindy spends a dollar less on golf and a dollar more on tennis, her total utility
________.
A) decreases; decreases
B) increases; decreases
C) decreases; increases
D) increases; increases
E) does not change; does not change
Which of the following statements correctly describes an anti-inflationary monetary
policy?
A) “The Bank of Canada’s recent purchases of government securities is stimulating the
housing sector.”
B) “The Bank of Canada’s recent moves to lower interest rates are behind the recent
decreases in the value of the Canadian dollar.”
C) “The Bank of Canada’s recent moves to increase the overnight loans rate are leading
to less lending and less consumer spending.”
D) “The Bank of Canada’s recent sales of government securities are stimulating the
housing sector.”
E) “The Bank of Canada’s recent moves to decrease the value of the Canadian dollar are
leading to more spending in the economy.”
Expenditures on advertising
A) can lower average total cost if the advertising increases the quantity sold by a large
enough amount.
B) cannot lower average total cost because when a firm advertises it increases its costs.
C) always lower average total cost because whenever a firm advertises, it increases the
quantity sold.
D) are variable costs so do not affect the average total cost.
E) lower total cost if the advertising increases the quantity sold by a large enough
amount.
Rent seeking is one reason why countries choose to
A) export and import the same goods.
B) work for freer trade.
C) follow the theory of comparative advantage.
D) hire foreign labour.
E) restrict trade.
Let MUA and MUB stand for the marginal utility of goods A and B, respectively. Let PA
and PB stand for the price of goods A and B, respectively. Assume that for a given
consumer MUA and MUB are equal to each other, and PA is greater than PB. In this case,
the consumer is better off if he consumes
A) more of good A and less of good B.
B) less of good A and more of good B.
C) equal amount of goods A and B.
D) good B only.
E) neither good A nor good B.
The labour force is the total number of
A) people employed.
B) people aged 15 years and over.
C) people in the working-age population who are employed.
D) people in the working-age population who are either employed or unemployed.
E) full-time workers.
Refer to Figure 5.3.2. If the level of output is 100 units, the deadweight loss is area
A) BCF.
B) ACG.
C) DCE.
D) ACH.
E) HCG.
The working-age population is the total number of people
A) in the labour force.
B) in the labour force who are employed.
C) aged 15 years and over.
D) in the labour force, aged 15 years and over.
E) in the labour force, aged 15 years and over, and employed.
The concept used by economists to indicate the responsiveness of the quantity
demanded of a good to a change in its price is the
A) cross elasticity of demand.
B) income elasticity of demand.
C) substitute elasticity of demand.
D) price elasticity of demand.
E) elasticity of supply.
Refer to Fact 13.1.1. The firm described in statement ________ is a natural monopoly.
The firm described in statement ________ is a legal monopoly.
A) 7; 6
B) 2; 7
C) 6; 7
D) 2; 6
E) 1; 4
If the saving function is S = -25 + 0.4YD, then autonomous consumption is
A) 25.
B) -25.
C) 15.
D) 10.
E) 0.6.
Suppose the economy’s capital increases over the year. It must be true that
A) net investment was greater than gross investment.
B) net investment was positive.
C) depreciation was greater than net investment.
D) depreciation was greater than gross investment.
E) depreciation is less than zero.
Slowdonia’s current growth rate of real GDP per person is 2 percent a year. How long
will it take to double real GDP per person?
A) half a year
B) approximately 10 years
C) 28.6 years
D) 35 years
E) 2 years
Lowering the tariff on good X
A) increases domestic employment in industry X.
B) increases domestic imports of good X.
C) increases the domestic price of good X.
D) has no effect unless the nation’s trading partners also lower their tariffs on good X.
E) increases government revenue.
A preference map is
A) a series of points that represent levels of equal satisfaction.
B) a series of demand curves.
C) a series of supply curves.
D) a map that shows contour lines.
E) a series of indifference curves.
When firms plan to restock their inventories, equilibrium expenditure ________ and
real GDP ________.
A) increases; decreases
B) decreases; increases
C) decreases; decreases
D) increases; increases
E) decreases; does not change
If the desired reserve ratio is 3 percent and deposits totaled $5.75 billion, banks hold
A) $172.5 million in reserves.
B) $0.1725 million in reserves.
C) $172.5 million in excess reserves.
D) $0.1725 million in excess reserves.
E) $192 million in reserves.
The demand curve is P = 700 – 20QD. The supply curve is P = 300 + 20QS. At market
equilibrium, the equilibrium quantity is ________ and the equilibrium price is
________.
A) 10; 500
B) 500; 10
C) 0.10; 20
D) 20; 0.10
E) 400; 40