Use the figure below to answer the following questions.
Figure 26.3.5
Refer to Figure 26.3.5. At point B the economy has
A) an inflationary gap with real GDP in excess of potential GDP.
B) an inflationary gap with real GDP less than potential GDP.
C) a recessionary gap with real GDP in excess of potential GDP.
D) a recessionary gap with real GDP less than potential GDP.
E) neither an inflationary gap nor a recessionary gap.
Offshoring occurs when a firm in Canada
A) hires foreign labour and produces in other countries.
B) buys finished goods, components, or services from other firms in other countries.
C) hires Canadian labour and produces in Canada.
D) buys finished goods, components, or services from other firms in Canada.
E) both A and B
What will happen to the equilibrium price and quantity of coffee if it is discovered to
help prevent colds and, at the same time, Brazil and Vietnam emerge in the global
market as massive producers of coffee?
A) The equilibrium price will fall and the effect on the equilibrium quantity is
uncertain.
B) The equilibrium price will rise and the effect on the equilibrium quantity is
uncertain.
C) The equilibrium quantity will decrease and the equilibrium price will rise.
D) The equilibrium quantity will increase and the equilibrium price will remain
unchanged.
E) The equilibrium quantity will increase and the effect on the equilibrium price is
uncertain.
Daisy and Donald live in a community with rent ceilings. Both are looking for an
apartment to rent. Daisy has a job paying $10 per hour and Donald has a job paying $8
per hour. Both value an apartment equally. What is the most likely outcome?
A) Daisy will spend more time than Donald searching for an apartment.
B) Donald will spend more time than Daisy searching for an apartment.
C) Both of them will spend the same amount of time searching for an apartment.
D) Daisy will find the apartment.
E) Donald will find the apartment.
Excess capacity and high advertising expenditures are encountered in
A) monopoly.
B) oligopoly.
C) monopolistic competition.
D) perfect competition.
E) all markets.
The consumer price index is a measure of
A) the average of the prices paid by urban consumers for a fixed basket of consumer
goods and services.
B) the commodity prices paid by urban consumers for a fixed basket of consumer goods
and services.
C) the consumer prices paid by average households for a fixed basket of goods and
services.
D) the average of the prices paid by rural consumers for a fixed basket of consumer
goods and services.
E) the lowest prices paid by urban consumers for a fixed basket of consumer goods and
services.
If the real interest rate is below the equilibrium real interest rate,
A) lenders are unable to find borrowers willing to borrow all of the available funds and
the real interest rate falls.
B) borrowers are unable to borrow all of the funds they want to borrow and the real
interest rate rises.
C) lenders are unable to find borrowers willing to borrow all of the available funds and
the real interest rate rises.
D) borrowers are unable to borrow all of the funds they want to borrow and the real
interest rate falls.
E) a surplus of loanable funds exists.
Which of the following sayings best describes opportunity cost?
A) “Make hay while the sun shines.”
B) “Love of money is the root of all evil.”
C) “Boldly go where no one has gone before.”
D) “There’s no such thing as a free lunch.”
E) “Baseball has been very good to me.”
If the price of the firm’s output decreases, the value of marginal product curve
A) remains unchanged.
B) becomes more elastic.
C) becomes more inelastic.
D) shifts leftward.
E) shifts rightward.
Marginal benefit from a good or service is the benefit received from consuming
________. It is measured by the most that people are willing to pay for ________.
A) goods that you prefer; an additional unit of it
B) goods that you prefer; more of it
C) one more unit of it; an additional unit of it
D) one more unit of it; more of it
E) as much as is available; the total amount consumed
Which of the following are reasons economists consider valid for trade protection?
I. Protection penalizes countries that have weak environmental standards.
II. Protection limits dumping of low-wage jobs into the domestic economy.
III. Protection prevents low-wage jobs in foreign countries from lowering wages in
Canada.
A) I and II
B) II and III
C) I, II, and III
D) I and III
E) None of the above
Choose the statement that is incorrect.
A) A chartered bank is a private firm, chartered under the Bank Act of 1992 to receive
deposits and make loans.
B) A credit union is a cooperative organization that operates under the Co-operative
Credit Association Act of 1992.
C) A caisse populaire is similar to a credit union.
D) Trust and mortgage loan companies receive deposits, make loans, and act as trustee
for pension funds and for estates.
E) Trust and mortgage loan companies have the bulk of the deposits in M1 and M2.
Table 15.2.2 gives the payoff matrix in terms of economic profit for firms A and B when
there are two strategies facing each firm: (1) charge a low price, or (2) charge a high
price. Refer to the nonrepeated game in the table. In Nash equilibrium, firm A will
make an economic profit of
A) -$10.
B) $2.
C) $10.
D) $20.
E) $5.
Oligopoly is similar to
A) perfect competition because both market types produce identical goods.
B) perfect competition because both firms in both market types make zero economic
profit in the long run.
C) monopoly because both market types have barriers to entry.
D) monopoly because both market types have a single firm.
E) monopolistic competition because firms in both markets face a perfectly elastic
demand.
Suppose Angela falls in love with and subsequently marries her regularly employed
housekeeper, Tony. What effect would this action have on GDP?
A) It would stay the same.
B) It would fall.
C) It would rise.
D) It would fall but then increase after the honeymoon was over.
E) It depends on whether he starts to work in the house free of charge or whether she
still pays him.
Demand will be more elastic the
A) higher the income level.
B) lower the income level.
C) longer the passage of time after a price increase.
D) fewer substitutes are available.
E) smaller the fraction of income spent on the good.
According to the real business cycle theory, what effects follow from a change in
productivity?
I. Investment demand changes.
II. The demand for labour changes.
III. Government expenditure changes.
A) I
B) I and II
C) I and III
D) II and III
E) I, II and III
When the quantity of labour demanded exceeds the quantity of labour supplied, the real
wage rate
A) rises to eliminate the labour market shortage.
B) falls to eliminate the labour market surplus.
C) rises to eliminate the labour market surplus.
D) falls to eliminate the labour market shortage.
E) does not change, but the money wage rate rises to eliminate the labour market
shortage.
Refer to Figure 26.3.3. In which of the graphs would we predict that eventually the
price level will fall and real GDP will decrease, all else remaining the same?
A) (a)
B) (b)
C) (c)
D) (d)
E) none of the graphs
Refer to Figure 26.2.1. Which graph illustrates what happens when expected future
income increases?
A) (a) only
B) (b) only
C) (c) only
D) (d) only
E) Both (a) and (c)
Advertising costs in monopolistic competition increase a firm’s
A) total fixed cost.
B) marginal cost.
C) total variable cost.
D) average variable cost.
E) marginal revenue.
Refer to Figure 12.4.3, which shows the cost curves and marginal revenue curve of a
firm in a perfectly competitive market. Firms are
A) making an economic profit, and some firms leave the market. Market supply
decreases.
B) making an economic profit, and some firms enter the market. Market supply
increases.
C) incurring an economic loss, and some firms leave the market. Market supply
decreases.
D) incurring an economic loss, and some firms enter the market. Market supply
increases.
E) incurring an economic loss, but since they are covering average variable cost, no one
will exit the market in the long run.
Discretionary fiscal policy is risky because it is hampered by
A) recognition lag, impact lag, and law-making lag.
B) recognition lag, business cycle lag, and law-making lag.
C) business cycle lag, impact lag, and law-making lag.
D) recognition lag, impact lag, and business cycle lag.
E) recognition lag, inflation lag, and law-making lag.
The elasticity of supply for airplane travel one day in advance of the departure date is
most likely to be
A) substantially lower than -1.
B) between -1 and zero.
C) between zero and 1.
D) around 1.
E) substantially greater than 1.
A consumer maximizes his utility by purchasing 2 units of good X at $5 per unit and 3
units of good Y at $7 per unit. What is the ratio of the marginal utility from X to the
marginal utility from Y?
A) 5/7
B) 7/5
C) 2/3
D) 3/2
E) 10/21
Refer to Table 27.1.2. What is the value of the marginal propensity to consume?
A) 0.75
B) 0.25
C) 1.33
D) 0.34
E) 0.67
Which one of the following characteristics is shared by perfect competition and
monopolistic competition?
A) Firms face a downward-sloping demand curve.
B) Profit-maximizing quantity occurs where MC = MR.
C) Long-run equilibrium price equals minimum ATC.
D) Firms make an economic profit in the long run.
E) Demand is perfectly elastic.
Refer to Figure 7.3.1. Canadian producers’ ________ from the tariff is ________.
A) loss; $32 million
B) loss; $64 million
C) gain; $80 million
D) gain; $128 million
E) gain; $64 million
Leah consumes at a point on her budget line where her marginal rate of substitution is
less than the magnitude of the slope of her budget line. As Leah moves towards her best
affordable point, she will move to
A) a lower budget line.
B) a higher budget line.
C) a lower indifference curve.
D) a higher indifference curve.
E) a tangent point on the same indifference curve.
A firm with a sales department, a production department, and a marketing department is
an example of
A) team production.
B) joint production.
C) economies of scale.
D) economies of scope.
E) transactions costs.
Suppose a fall in the price of a good from $10 to $8 leads to an increase in quantity
demanded from 20 to 24 units. The price elasticity of demand is
A) 1.
B) 9/11.
C) 11/9.
D) 2.0.
E) 4.5/11.
Technological progress that increases expected profit shifts the demand for loanable
funds curve
A) leftward and decreases the real interest rate.
B) rightward and increases the real interest rate.
C) rightward and decreases the real interest rate.
D) leftward and increases the real interest rate.
E) rightward and the supply of loanable funds curve leftward.
Refer to the figure below to answer the following questions.
Figure 23.2.4
In Figure 23.2.4, the economy is at point A on the supply of loanable funds curve SLF0.
What happens if disposable income decreases?
A) Nothing; the economy would remain at point A.
B) There is a movement to a point such as B on the supply of loanable funds curve
SLF0.
C) The supply of loanable funds curve shifts rightward to a curve such as SLF2.
D) The supply of loanable funds curve shifts leftward to a curve such as SLF1.
E) The supply of loanable funds curve becomes downward sloping.