Air pollution generated by a paper mill factory is an example of a
A) positive production externality.
B) positive consumption externality.
C) negative consumption externality.
D) marginal external benefit.
E) negative production externality.
Refer to Table 27.1.1. The marginal propensity to save is
A) decreasing as YD increases.
B) equal to zero when YD equals $600.
C) 0.75.
D) 0.25.
E) 4.
Which one of the following statements is always true of the substitution effect?
A) It leads to a positive income effect.
B) It is positive.
C) It decreases consumption.
D) It leads to a negative income effect.
E) It is negative.
Use the table below to answer the following questions.
Table 20.2.3
Refer to Table 20.2.3. Consider the economy represented in the table. GDP in this
economy, in millions of dollars, is
A) $1,150,000.
B) $850,000.
C) $1,350,000.
D) $1,050,000.
E) $1,100,000.
Alvin Roth of Harvard University designed a system that matches donated kidneys to
recipients waiting for such donations. This system takes into account the needs of each
perspective recipient, their blood type, and the urgency of their case. Based on this
information, this allocation method for kidneys is
A) first-come, first-served.
B) force.
C) personal characteristics.
D) a contest.
E) a lottery.
In Figure 1A.3.4, the slope across arc AB is
A) 2/3.
B) -1.
C) -3/2.
D) -3.
E) -9/4.
Suppose that the following situation exists in the foreign exchange market: 1 Canadian
dollar buys $1.01 U.S, and 1 Canadian dollar buys 6.63 South African rand. How many
U.S. dollars will one rand buy?
A) $6.56
B) $1.01
C) $0.17
D) $0.15
E) $6.63
Table 13.4.1 shows the demand schedule faced by a monopoly. If the monopoly is a
perfect price-discriminating monopoly the marginal revenue from the sale of the 3rd
unit of output is
A) $2.
B) $6.
C) $4.
D) $3.
E) $5.
You are consuming hot dogs and Cokes and believe you are maximizing utility for your
entire budget of $12. The price of a hot dog is $2 and the price of a Coke is $2. Suppose
the price of hot dogs rises to $4 and the price of a Coke remains at $2. You adjust your
consumption of hot dogs and Cokes and believe you are once again receiving maximum
total utility from the meal. Which one of the following can you conclude?
A) The total utility from hot dogs is maximized.
B) The marginal utilities from hot dogs and Cokes must be equal.
C) The marginal utility from hot dogs must rise compared to the marginal utility from
Cokes.
D) You are purchasing 2 hot dogs and 2 Cokes.
E) You are purchasing 1 hot dog and 4 Cokes.
If the area between the line of equality and the Lorenz curve is 1,250 and the entire area
beneath the line of equality is 5,000, the Gini ratio is
A) 1,250.
B) 0.80.
C) 0.25.
D) 0.33.
E) 4.00.
The slope of the AE curve equals
A) aggregate expenditure divided by real GDP.
B) the change in aggregate expenditure divided by the change in real GDP.
C) the change in consumption divided by the change in real GDP.
D) the change in consumption plus government expenditure divided by the change in
aggregate income.
E) the change in income divided by the change in autonomous expenditure.
The overnight rate is determined by equilibrium in the market for ________. The
overnight rate ________.
A) loanable funds; equals the real interest rate minus the inflation rate
B) reserves; is the rate that sets the quantity of reserves demanded equal to the quantity
of reserves supplied
C) loanable funds; equals the real interest rate
D) reserves; equals the real interest rate minus the inflation rate
E) money; equals the real interest rate
Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study
reveals that tacos cause bad breath. Simultaneously, the cost of producing tacos
increases. What is the new equilibrium, ceteris paribus?
A) 2
B) 3
C) 9
D) 4
E) 7
Consider the cost and revenue curves in Figure 13.3.3. Which area indicates the
deadweight loss from a single-price monopoly?
A) EACF
B) ACD
C) ABD
D) BCD
E) EADCF
Refer to Figure 6.3.2. The deadweight loss from the sales tax is
A) $50.
B) $100.
C) $200.
D) $1,000.
E) $150.
Suppose the Canadian Dairy Commission sets a production quota for dairy production
above the equilibrium quantity. Then,
A) the policy will increase the quantity of milk produced in Canada.
B) the policy will raise the price of milk in the international market.
C) the policy will have no impact on the dairy industry.
D) the policy will increase revenue received by dairy producers.
E) the policy will decrease revenue received by dairy producers.
The demand curve is P = 800 – 25QD. The supply curve is P = 500 + 25QS. At market
equilibrium, the equilibrium quantity is ________ and the equilibrium price is
________.
A) 25; 0.17
B) 650; 6.0
C) 0.17; 25
D) 6.0; 650
E) 1,300; zero
Use the figure below to answer the following questions.
Figure 9.1.1
Shelly’s budget line is shown in Figure 9.1.1 Which point is unaffordable given her
income and current prices?
A) A and B
B) B only
C) C only
D) C and D only
E) All points are unattainable.
The demand and supply model determines
A) relative prices.
B) money prices.
C) supply prices.
D) demand prices.
E) absolute prices.
Suppose a trade union and a firm agree to increase the wage rate by the same
percentage as the increase in the Consumer Price Index. If the CPI increases by 5
percent, then the real income of workers will
A) increase by 5 percent as well.
B) remain unchanged, accounting for bias in the calculation of the CPI.
C) decrease by 5 percent, accounting for bias in the calculation of the CPI.
D) increase by more than 5 percent, accounting for bias in the calculation of the CPI.
E) increase by less than 5 percent, accounting for bias in the calculation of the CPI.
Discrimination ________ workers in the group being discriminated against and
________ workers in the group being favoured.
A) decreases the supply of; increases the supply of
B) decreases the demand for and the supply of; increases the demand for and the supply
of
C) does not change the demand for; increases the demand for
D) decreases the demand for; increases the demand for
E) decreases the demand for; does not change the demand for
If the money wage rate is $10.00 an hour and the price level is 60, the real wage rate is
A) $16.67 an hour.
B) $18.75 an hour.
C) $10.00 an hour.
D) $12.50 an hour.
E) $6.00 an hour.
The depletion of fish stocks in Eastern Canada, with its accompanying unemployment,
will lead to a
A) movement from the existing production possibilities frontier to a point inside the
production possibilities frontier.
B) shift inward of the existing production possibilities frontier and production at a point
on the new PPF.
C) shift outward of the existing production possibilities frontier.
D) movement along the existing production possibilities frontier to a point of less fish
production.
E) shift inward of the existing production possibilities frontier plus a movement to a
point inside the new production possibilities frontier.
The new classical theory argues that the primary factor leading to business cycles is
A) expected fluctuations in aggregate demand.
B) expected fluctuations in short-run aggregate supply.
C) unexpected fluctuations in aggregate demand.
D) unexpected fluctuations in short-run aggregate supply.
E) unexpected fluctuations in long-run aggregate supply.
Demand is unit elastic when
A) an increase in supply does not change the price of the good.
B) a decrease in supply raises the price of the good.
C) a change in price does not change total revenue.
D) the slope of the demand curve is -1.
E) the slope of the demand curve is +1.
People end unemployment when they
A) retire from a job.
B) quit work to go to school.
C) quit work to raise a family.
D) are recalled from a layoff.
E) are laid off.
Refer to Figure 16.3.1. The figure shows the marginal private benefit curve, the
marginal social benefit curve, and the market supply curve. If a subsidy is granted that
generates an efficient quantity, then the quantity produced is
A) zero.
B) Q1.
C) Q2.
D) Q3.
E) greater than Q3.
If the budget deficit is $50 billion and the structural deficit is $10 billion, the cyclical
deficit is
A) $10 billion.
B) $40 billion.
C) $60 billion.
D) $50 billion
E) $20 billion.
Real GDP
A) fluctuates from year to year but is always below potential GDP.
B) grows at a constant 3 percent per year.
C) fluctuates around potential GDP.
D) equals potential GDP when the price level is constant.
E) equals potential GDP in the base year.
When the demand for good A increases,
A) the equilibrium price and equilibrium quantity will increase.
B) the equilibrium price will rise, but the equilibrium quantity will decrease.
C) the equilibrium price and equilibrium quantity will decrease.
D) the equilibrium price will decrease, but the equilibrium quantity will increase.
E) a surplus will result.
If a consumer spends all his income and his marginal utility per dollar is equal for all
goods, then
A) marginal utility is maximized.
B) total utility is maximized.
C) he cannot be better off even with more income.
D) the proportion of income spent on each good must be equal.
E) the number of units bought of each good must be equal.
Use the information below to answer the following question.
Fact 11.1.2 A Bakery on the Rise
Some 500 customers a day line up to buy Avalon’s breads, scones, muffins, and coffee.
Staffing and management are worries. Avalon now employs 35 and plans to hire 15
more. Its payroll will climb by 30 percent to 40 percent. The new CEO has executed an
ambitious agenda that includes the move to a larger space, which will increase the rent
from $3,500 to $10,000 a month.
Refer to Fact 11.1.2. Avalon’s decision to ________ is a short-run decision. Avalon’s
decision to ________ is a long-run decision.
A) serve 500 customers a day; hire 15 more people
B) move to a larger space; hire 15 more people
C) hire 15 more people; serve 500 customers a day
D) hire 15 more people; move to a larger space
E) pay more for rent; have a larger payroll
Use the figure below to answer the following questions.
Figure 27.2.1
There are no exports or imports in this economy.
Refer to Figure 27.2.1. When real GDP is equal to Ya, then
A) actual expenditure is less than planned expenditure.
B) actual expenditure is greater than planned expenditure.
C) planned expenditure is equal to actual expenditure.
D) the economy is in equilibrium.
E) real GDP decreases.