Consider some type of industrial pollution that generates air pollution. This industry, if
left unregulated, will produce
A) more than the efficient level because they will ignore the marginal external costs.
B) the efficient level of output.
C) less than the efficient level because they will ignore the marginal external costs.
D) less than the efficient level because they will ignore the marginal external benefits.
E) more than the efficient level because they will ignore the marginal external benefits.
Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters – they
malfunction and occasionally cause serious burns. As a result, demand decreases by 100
heaters at each price. The new equilibrium price is $________ and the new equilibrium
quantity is ________ heaters per month.
A) 70; 450
B) 70; 350
C) 50; 450
D) 50; 350
E) 60; 400
An increase in population results in
A) an upward shift in the production function.
B) a movement along the production function.
C) a leftward shift of the labour supply curve.
D) a rightward shift of the labour demand curve.
E) a rise in the real wage rate.
A production possibilities frontier will shift outward FOR ALL OF THE FOLLOWING
REASONS EXCEPT
A) a technological improvement.
B) an increase in the stock of capital.
C) an increase in the labour force.
D) an increase in opportunity cost.
E) an increase in human capital.
The economy’s demand curve for a public good is obtained by summing the individual
A) marginal cost curves horizontally.
B) marginal cost curves vertically.
C) marginal benefit curves horizontally.
D) marginal benefit curves vertically.
E) benefit curves diagonally.
Use the table below to answer the following questions.
Table 23.3.7
The table shows an economy’s demand for loanable funds schedule and supply of
loanable funds schedule when the government’s budget is balanced.
Consider Table 23.3.7. If the government’s budget becomes a deficit of $1.0 trillion,
what is the quantity of investment?
A) $8.0 trillion
B) $7.5 trillion
C) $8.5 trillion
D) $7.0 trillion
E) $6.5 trillion
If the Bank of Canada lowers the overnight loans rate,
A) other short-term interest rates fall.
B) other short-term interest rates rise.
C) the exchange rate falls.
D) the long-term interest rate falls.
E) A, C, and D are correct.
Consider the following household. In 5 hours, Bob can cook 5 meals or clean 6 rooms.
In 5 hours, Mary can cook 30 meals or clean 10 rooms. Select the best statement.
A) Bob has an absolute advantage in the production of both goods.
B) Since Mary is better at producing both goods, she should produce both.
C) Bob has a comparative advantage in cooking.
D) Mary has a comparative advantage in cooking.
E) Mary has a comparative advantage in cooking and cleaning.
Consider a graph that shows an upward-sloping supply curve and a downward-sloping
demand curve. The equilibrium price and equilibrium quantity are found at the
A) horizontal intercept of the demand curve.
B) vertical intercept of the supply curve.
C) lowest possible price.
D) point at which demand equals supply.
E) point at which the quantity demanded equals the quantity supplied.
The income effect on labour supply refers to
A) the fact that at higher wages the worker earns more income.
B) the fact that as the wage rate increases and income increases, labourers demand more
of all normal goods, including leisure activities.
C) the increase in the income of firms that is necessary to pay higher wages.
D) the fact that as workers become more productive, they earn more income.
E) the fact that as the wage rate increases and income increases, labourers demand more
of all normal goods, including labour.
Use the figure below to answer the following question.
Figure 28.2.4
Refer to Figure 28.2.4. The figure illustrates an economy initially in equilibrium at
point A. If the quantity of money is expected to increase by 50 percent, what is the
rational expectation of the price level?
A) 100
B) 120
C) 130
D) 150
E) We cannot tell without more information on wage negotiations.
Marginal cost is equal to
A) total cost divided by output.
B) the increase in total cost divided by the increase in output.
C) the increase in total cost divided by the increase in labour input, given the amount of
capital.
D) total variable cost minus total fixed cost.
E) the increase in total cost divided by the increase in variable cost.
Under a marginal cost pricing rule, a regulated natural monopoly
A) makes an economic profit and a deadweight loss arises.
B) makes an economic profit with no deadweight loss.
C) incurs an economic loss with no deadweight loss.
D) incurs an economic loss and a deadweight loss arises.
E) breaks even.
Refer to Table 15.2.6. Firms A and B can conduct research and development (R&D) or
not conduct it. R&D is costly but can increase the quality of the product and increase
sales. The payoff matrix is the economic profits of the two firms and is given above,
where the numbers are millions of dollars. The Nash equilibrium
A) occurs when both A and B conduct R&D.
B) occurs when only A conducts R&D.
C) occurs when only B conducts R&D.
D) occurs when neither A nor B conduct R&D.
E) does not occur
If Ms. Petersen is maximizing her utility in the consumption of goods A and B, which
one of the following statements must be true?
A) MUA = MUB
B) MUA/PA = MUB/PB
C) MUA/PB = MUB/PA
D) TUA = TUB
E) TUA/PA = TUB/PB
The factor leading to business cycles in the ________ cycle theory is unexpected
fluctuations in aggregate demand while in the ________ cycle theory both unexpected
and expected fluctuations in aggregate demand are factors that lead to business cycles.
A) new classical; monetarist
B) new classical; new Keynesian
C) new Keynesian; Keynesian
D) monetarist; new Keynesian
E) real business; monetarist
Refer to Table 3.4.1. A shortage occurs if
A) the price is $7 a unit.
B) the price is $4 a unit.
C) the price is $5 a unit.
D) the price is below $4 a unit.
E) the price is $6 a unit.
Refer to Figure 26.3.3. Which of the graphs illustrates an above full-employment
equilibrium?
A) (a) only
B) (b) only
C) (c) only
D) (d) only
E) both (c) and (d)
Refer to Fact 27.5.2. What is the multiplier for this economy?
A) 0.5
B) 3.33
C) 10
D) 2
E) 1
Which one of the following characteristics applies to oligopolistic markets?
A) There is a large number of firms.
B) The absence of barriers to entry of firms.
C) Firms are large relative to the size of the market.
D) All firms are price takers.
E) Firms produce only differentiated products.
To derive net domestic income at market prices from GDP (income approach),
A) subtract gross investment from GDP.
B) subtract the statistical discrepancy from GDP.
C) add the statistical discrepancy to GDP.
D) subtract depreciation from GDP.
E) add depreciation to GDP.
Refer to Table 2.1.1. The opportunity cost of increasing the production of X from 8 to
12 units is
A) 4 units of X.
B) 4 units of Y.
C) 8 units of Y.
D) 12 units of Y.
E) 16 units of Y.
If we observe a rise in the equilibrium price of good A, we know that the demand for A
has
A) increased or the supply of A has decreased or both.
B) increased or the supply of A has increased or both.
C) decreased or the supply of A has increased or both.
D) decreased or the supply of A has decreased or both.
E) not changed.
When a supply curve
A) intersects the origin, the good has an elasticity of supply equal to 1.
B) is vertical, the good has an elasticity of supply equal to infinity.
C) is horizontal, the good has an elasticity of supply equal to zero.
D) intersects the origin, the good has an elasticity of supply equal to zero.
E) intersects the origin, the good has an elasticity of supply that is negative.
If the Bank of Canada buys government bonds, all of the following happens except
A) bank reserves increase.
B) the quantity of money increases.
C) the supply of loanable funds increases.
D) the bank rate rises.
E) net exports increase.
Use the information below to answer the following questions.
Fact 30.1.1 Inflation Control Target Renewal
The 2011 inflation control target agreement between the Government of Canada and the
Bank of Canada runs to the end of 2016.
Refer to Fact 30.1.1. In the inflation control agreement, the Government of Canada and
the Bank of Canada agree to all of the following except that
A) the target will continue to be defined in terms of the 12-month rate of change in the
total CPI.
B) the inflation target will continue to be 2 percent.
C) the agreement will run until December 31, 2016.
D) if the CPI becomes too volatile, in the future the target will be defined in terms of
the 12-month rate of change in the core CPI.
E) the inflation-control range is 1 percent to 3 percent a year.
A firm’s total opportunity cost of production is the sum of the cost of using resources
A) bought in the market.
B) owned by the firm.
C) supplied by the firm’s owner.
D) bought in the market and supplied by the firm’s owner.
E) bought in the market, owned by the firm, and supplied by the firm’s owner.
Statements about “what is” are called
A) positive statements.
B) normative statements.
C) economic statements.
D) scientific statements.
E) hypotheses.
In competitive equilibrium, which of the following statements is false?
A) Marginal social benefit equals marginal social cost.
B) Willingness to pay equals marginal cost of production.
C) The sum of consumer surplus and producer surplus is maximized.
D) Deadweight loss is maximized.
E) Resources are used efficiently to produce goods and services that people value most
highly.
Refer to Figure 1A.3.9. Which one of the graphs shows a line with an infinite slope?
A) (a)
B) (b)
C) (c)
D) (d)
E) (b) and (c)