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The magnitude of the slope of an indifference curve is
A) the marginal rate of substitution.
B) the marginal rate of transformation.
C) the marginal propensity to consume.
D) the marginal propensity to substitute.
E) the relative price of good Y.
Refer to Figure 6.1.1. If the demand for rental housing increases and the demand curve
shifts rightward from D0 to D1, and there is a strictly enforced rent ceiling of $150 per
room,
A) the number of rooms rented will increase to 2,000.
B) the number of rooms rented is 1,500.
C) there is a housing shortage of 500 rooms.
D) the number of rooms rented decreases to 1,000.
E) both B and C
Deadweight loss is
A) borne entirely by consumers.
B) gained by producers.
C) the social loss from inefficiency.
D) not a problem with overproduction.
E) eliminated by a monopoly.
The study of how wages are set for New Brunswick teachers is classified as
A) a macroeconomic topic.
B) a microeconomic topic.
C) economics of social interest.
D) economics of private interest.
E) normative economics.
When Canada exports a good, Canada's consumer surplus ________ and Canada's total
surplus ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) decreases and Canada's producer surplus increases; does not change
In the long run, a firm has no factors of production that are
A) variable.
B) marginal.
C) significant.
D) taxable.
E) fixed.
Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.
If the quantity sold by the firm rises from 5 to 6, marginal revenue is
A) $15.
B) $30.
C) $75.
D) $90.
E) $105.
Refer to Figure 26.3.2. As the economy of Mythlo automatically adjusts to long-run
equilibrium, the
A) SAS curve shifts rightward.
B) AD curve shifts rightward.
C) SAS curve shifts leftward.
D) AD curve shifts leftward.
E) LAS curve shifts rightward.
A shift in a firm's demand curve for labour occurs when there is a change in the
A) wage rate.
B) opportunity cost of labour.
C) price of the output.
D) working-age population.
E) marginal cost of labour.
Suppose the economy is in long-run equilibrium when the price of oil rises. Which one
of the following is not a short-run effect of this situation?
A) an increase in real GDP above long-run real GDP
B) an increase in the price level
C) a decrease in real GDP
D) an increase in unemployment
E) a decrease in consumer spending
Individuals A and B can both produce goods X and Y. Individual A has a comparative
advantage in the production of X if
A) A is faster than B at producing X.
B) the amount by which A must reduce production of Y is less than the amount by
which B must reduce production of Y to produce an additional unit of X.
C) B has superior knowledge about how to produce X.
D) A has a preference to consume X.
E) the amount by which A must reduce production of Y is more than the amount by
which B must reduce production of Y to produce an additional unit of X.
The amount of time elapsed since a price change influences the price elasticity of
demand because as more time passes,
A) consumers find more substitutes and the price elasticity of demand for the original
good decreases.
B) consumers find more substitutes and the price elasticity of demand for the original
good increases.
C) the price of the good will return to its original value.
D) the income of consumers rises and the price elasticity of demand for the good
increases.
E) the income of consumers rises and the price elasticity of demand for the good
decreases.
Use the table below to answer the following questions.
Table 2.1.2
Production Possibilities
Refer to Table 2.1.2. In moving from combination B to combination C, the opportunity
cost of producing one additional unit of guns is
A) 2 kilograms of butter.
B) 1/2 kilogram of butter.
C) 6 kilograms of butter.
D) 1/6 kilogram of butter.
E) 3 kilograms of butter.
Bianca consumes pizza. Marginal utility theory predicts that when the price of pizza
increases,
A) Bianca's total utility from pizza will increase.
B) Bianca's marginal utility from pizza will not change.
C) Bianca's demand curve for pizza will shift leftward.
D) Bianca will buy less pizza.
E) Bianca will buy more pizza.
According to mainstream business cycle theory, ________ grows at a steady rate and
________ grows at a fluctuating rate.
A) aggregate demand; long-run aggregate supply
B) potential GDP; aggregate demand
C) potential GDP; short-run aggregate supply
D) short-run aggregate supply; long-run aggregate supply
E) short-run aggregate supply; aggregate demand
Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $5 a
unit, what is the profit-maximizing number of workers if the wage rate is $30?
A) 1
B) 3
C) 5
D) 6
E) 7
The relationship between two variables that are positively related is shown graphically
by a line that
A) slopes upward to the right.
B) is horizontal.
C) slopes downward to the right.
D) is vertical.
E) is above the x-axis and to the right of the y-axis.
When a production quota is used to remedy the problem of the commons, then
A) the production quota is set so that use of the resource is where marginal private
benefit equals marginal cost.
B) the production quota is set so that use of the resource is where marginal private
benefit equals marginal social benefit.
C) the market equilibrium, but not the efficient outcome, is achieved.
D) all users of the resource have an incentive to cheat on the production quota.
E) the production quota is set so that marginal social benefit is maximized.
A firm's decision to invest in a project is based on the
A) real interest rate and expected total revenue.
B) nominal interest rate and expected total revenue.
C) nominal interest rate and the expected profit.
D) real interest rate and the expected profit.
E) expected future income, wealth, and default risk.
The crowding-out effect refers to
A) government spending crowding out private spending.
B) private saving crowding out government saving.
C) a government deficit crowding out investment.
D) private investment crowding out government saving.
E) private saving crowding out net taxes.
If the economy is in an expansion, and the federal government is running a deficit, then
a recession would automatically
A) decrease the deficit.
B) increase taxes.
C) increase government outlays.
D) increase the deficit.
E) both C and D
The vertical distance between the TC and TVC curves
A) decreases as output increases.
B) increases as output increases.
C) is equal to AFC.
D) is equal to TFC.
E) is equal to MC.
Monopolistic competition differs from monopoly because in monopolistic competition
A) firms maximize profits.
B) firms set marginal revenue equal to marginal cost to maximize profit.
C) firms are free to enter and exit.
D) All of the above are differences between monopoly and monopolistically
competitive firms.
E) None of the above are differences between monopoly and monopolistically
competitive firms.
To maximize profit, a firm hires labour until
A) there is no more labour available at the market wage rate.
B) they can sell that labour for no more than what they paid for it.
C) the wage rate paid to the labour equals the marginal cost of production.
D) the additional benefit from hiring the labour is equal to the additional revenue the
labour generates.
E) the value of marginal product equals the wage rate.
In monopolistic competition, each firm supplies a ________ part of the total industry
output and its actions ________ the actions of the other firms.
A) small; do not directly affect
B) small; directly affect
C) large; do not directly affect
D) large; directly affect
E) large; may or may not directly affect
All of the following statements are included in new growth theory except
A) discoveries are a public capital good.
B) discoveries result from choices.
C) the forces of competition destroy incentives to make new discoveries.
D) discoveries bring profit, and competition destroys profit.
E) knowledge is capital that is not subject to the law of diminishing returns.
Refer to Figure 18.3.2. If the labour market illustrated in this figure becomes
competitive, the equilibrium wage rate is ________ and the quantity of labour hired is
________.
A) $4 per hour; 800 hours
B) $4 per hour; 400 hours
C) $7 per hour; 600 hours
D) $9 per hour; 400 hours
E) $4 per hour; 680 hours.
Refer to Fact 7.3.2. Canadian gains from trade will ________ and Australian gains from
trade will ________.
A) increase; decrease
B) decrease; decrease
C) decrease; increase
D) increase; increase
E) not change; not change
If real GDP is less than potential GDP, which of the following fiscal policies would
increase real GDP?
A) a decrease in taxes
B) an increase in government expenditures
C) a fall in the interest rate
D) Both A and B are correct
E) Both B and C are correct.
Which one of the following statements about illegal goods is true?
A) Taxes are more effective in changing preferences than prohibition.
B) Prohibition is more effective in generating revenue than an equivalent tax.
C) Taxes and penalties cannot be set to yield equivalent outcomes.
D) Taxes generate revenues while prohibition sends a signal that might influence
preferences.
E) Taxes and prohibition eliminate the market for illegal goods.
To disentangle cause and effect, economists use economic models and use ________ to
test the predictions of those models.
A) the what, how, and for whom questions
B) positive statements and normative statements
C) personal economic policy, business economic policy, and government economic
policy
D) natural experiments, statistical investigations, and economic experiments
E) marginal benefit and marginal cost
Airbus is a European producer of airliners. Indian Airlines wants to buy 23 Airbus
planes from Airbus because of an increased demand for world travel. The currency of
India is the rupee. The currency of the European Union is the euro. As a result,
A) the supply curve of euros shifts rightward.
B) the supply curve of euros shifts leftward.
C) the demand curve for rupees shifts rightward.
D) the demand curve for euros shifts leftward.
E) demand curve for euros shifts rightward.
When speaking of the price of the good measured on the horizontal axis relative to the
price of the good measured on the vertical axis, which statement is true?
A) The steeper the slope of the budget line, the more expensive the good measured on
the horizontal axis.
B) The steeper the slope of the budget line, the less expensive the good measured on the
horizontal axis.
C) The steeper the slope of the budget line, the more expensive the good measured on
the vertical axis.
D) The slope of the budget line is independent of relative prices.
E) The flatter the slope of the budget line, the more expensive the good measured on the
horizontal axis.
Rational ignorance suggests that voters will
A) understand defence technology before voting for defence policy.
B) understand the auditing procedures of the Canada Revenue Agency before voting for
tax reform.
C) understand the chemistry of the atmosphere before voting for a clean-air act.
D) vote without complete information on many issues.
E) vote based on their complete trust in politicians and bureaucrats.
Fred's income increases from $800 per week to $1,200 per week. As a result, he decides
to purchase 40 percent more bubble gum each week. The income elasticity of Fred's
demand for bubble gum is
A) 0.40.
B) 40.
C) 1.0.
D) 0.12.
E) 10.
