Use the figure below to answer the following questions.
Figure 20.1.1
Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for
Venus. During 2014, A was $100, B was $50, C was $30 and D was $10. How much is
GDP?
A) $75
B) $50
C) $90
D) $100
E) $30
Refer to Fact 3.5.1. The price of cream falls. Simultaneously, there is an increase in the
wages of farm workers who harvest coffee beans. The equilibrium quantity of coffee
A) increases.
B) decreases.
C) remains the same.
D) increases or decreases depending on the slope of the supply and demand curves.
E) increases, decreases, or remains the same depending on the relative shifts of the
supply and demand curves.
A perfectly competitive market is characterized by
A) firms that are price setters.
B) firms that each face a downward-sloping demand curve.
C) firms that each sell a unique good or service.
D) buyers who are unaware of the price charged by each firm.
E) no restrictions on entry into the market.
An example of a public good is
A) national defence.
B) a Ford truck.
C) a loaf of bread.
D) a home computer.
E) a television.
If a country imposes a tariff on an imported good, the tariff ________ the price in the
importing country and ________ the quantity of imports.
A) raises; increases
B) raises; does not change
C) lowers; does not change
D) lowers; increases
E) raises; decreases
Use the information below to answer the following questions.
Fact 31.3.2
With free trade between Australia and Canada, Australia would export beef to Canada.
But Canada imposes an import quota on Australian beef.
Refer to Fact 31.3.2. If Canada imposes an import quota on Australian beef, the price
that Canadian consumers pay for beef will ________ and the quantity of beef produced
in Canada will ________.
A) not change; decrease
B) not change; increase
C) rise; not change
D) rise; increase
E) fall; decrease
When the demand for electricity peaks during the hottest days of summer, Hydro One
can generate more electricity by using more fuel and increasing the working hours of
many of its employees. The company cannot, however, increase electric power
production by building additional generating capacity. This means that the company is
operating in the
A) market run.
B) intermediate run.
C) long run.
D) immediate run.
E) short run.
Saskatchewan had more hospitals than Ontario, despite having one-tenth the
population. The Saskatchewan government closed many of these hospitals in spite of
widespread local protests. Which one of the following arguments is true?
A) Since hospitals have positive benefits, they should never be closed.
B) If Saskatchewan had more hospitals than Ontario, it must have had too many
hospitals.
C) The Saskatchewan government must have thought the marginal benefit from one of
these hospitals exceeded its marginal cost.
D) The Saskatchewan government must have thought the marginal benefit from one of
these hospitals was less than its marginal cost.
E) The communities where these hospitals existed bore no costs from these decisions,
because they did not pay for any of the hospital operating costs.
Refer to Fact 12.2.1. GM will start producing the Chevy Volt again when price is
greater than
A) average variable cost.
B) total variable cost.
C) average fixed cost.
D) total fixed cost.
E) total cost.
The defining feature of the Keynesian view of macroeconomics is
A) that the economy is rarely at full employment.
B) that the economy is self-regulating and always at full employment.
C) that the quantity of money is the most significant influence on aggregate demand.
D) that the economy is constantly bombarded by shocks that arise from the uneven pace
of technological change.
E) that no active stabilization is needed to offset changes in aggregate demand.
Other things remaining the same, marginal utility theory implies that a rise in the price
of a good
A) increases the consumer surplus.
B) decreases the consumer surplus.
C) leaves consumer surplus unchanged.
D) has an effect on consumer surplus that cannot be determined.
E) decreases consumer surplus by the amount equal to the total utility of all goods
consumed before the price rise but not after the price rise.
Which of the following is correct?
A) As disposable income increases, the real interest rate rises.
B) As disposable income decreases, saving decreases.
C) The higher a household’s wealth the greater is its saving.
D) Both B and C are correct.
E) Both A and C are correct.
The marginal private benefit curve (MB) is a negatively-sloped straight line. If marginal
external benefit decreases as output increases, the marginal social benefit curve is a
negatively-sloped straight line
A) parallel to and above the MB curve.
B) parallel to and below the MB curve.
C) above the MB curve and steeper than the MB curve.
D) above the MB curve and flatter than the MB curve.
E) below the MB curve and flatter than the MB curve.
Real business cycle theorists believe that the intertemporal substitution effect
________. Many other economists believe that the intertemporal substitution effect
________.
A) is large; is negligible
B) is negligible; is large
C) occurs in the money market; occurs in the labour market
D) occurs in the labour market; occurs in the money market
E) none of the above
Use the figure below to answer the following questions.
Figure 1A.2.3
Refer to Figure 1A.2.3. If you were told that economic theory predicts that higher levels
of the rate of interest (x) lead to lower levels of sales of houses (y), which graph would
you pick to represent this economic relationship?
A) (a)
B) (b)
C) (c)
D) (d)
E) (a) or (d)
Use the table below to answer the following question.
Table 20.2.9
Refer to Table 20.2.9. The base year is 2013 and the table gives the quantities produced
and the prices in 2013 and 2014. Nominal GDP in 2013 is
A) $5,500.
B) $6,100
C) $7,400.
D) greater than real GDP in 2013.
E) $7,600.
Refer to the table below for the following question.
Table 3.4.2
Refer to Table 3.4.2. The table shows the demand and supply schedules for shampoo. If
the price is $6 a bottle, there is a ________ of shampoo. So the price of a bottle of
shampoo ________, the quantity demanded ________ and the quantity supplied
________. The market moves to equilibrium.
A) shortage; rises; decreases; increases
B) shortage; falls; decreases; increases
C) surplus; rises; increases; decreases
D) surplus; falls; increases; decreases
E) shortage; rises; increases; decreases
Refer to Fact 14.3.2. Tommy Hilfiger uses advertising as a signal because
A) when Tommy Hilfiger advertises, it forces its competitors to advertise, which raises
the competition’s average total cost and increases the possibility of the competition
incurring an economic loss and leaving the market.
B) only firms that can afford advertising have longevity and will be able to honour any
future obligations to its customers.
C) by spending large sums of advertising Tommy Hilfiger is signalling that its jackets
are high quality.
D) advertising encourages people to spend regardless of the quality.
E) advertising always increases demand and creates a more efficient market.
Researchers produce the efficient quantity of research and development if they receive a
voucher equal to the marginal ________ benefit, or a subsidy equal to the marginal
________ benefit.
Patents and copyrights ________ result in an efficient amount of research and
development.
A) social; social; cannot
B) social; social; can
C) external; external; cannot
D) external; external; can
E) external; social; can
The private sector balance and the government sector balance tend to move in
________. Net exports respond ________.
A) opposite directions; closely to the government sector balance
B) the same direction; to the sum of the government sector and private sector balances
C) the same direction; closely to the government sector balance
D) opposite directions; to the sum of the government sector and private sector balances
E) the same direction; to changes in the exchange rate
If we compare Canada to France and the United Kingdom, Canada’s tax wedge is
________ the French tax wedge and ________ the U.K. tax wedge.
A) larger than; smaller than
B) equal to; larger than
C) smaller than; smaller than
D) larger than; larger than
E) smaller than; larger than
Suppose this coming winter France will have unusually bad weather, and that next
year’s wine crop will be substantially reduced. Select the best statement.
A) The French wine supply will increase as price rises.
B) If the demand for French wine is elastic, wine producers will experience an increase
in total revenue.
C) The initial change in the market will create a surplus of French wine.
D) In the final equilibrium, price and quantity will be higher.
E) None of the above
In real business cycle theory, a decrease in productivity leads to all of the following
events EXCEPT
A) a decrease in the demand for labour.
B) a decrease in the demand for loanable funds.
C) a rise in the real wage rate.
D) a fall in the real interest rate.
E) a decrease in the supply of labour.
Canada has a comparative advantage in producing airplanes if
A) it can produce them at a lower dollar cost than another country.
B) it can produce a larger quantity than another country.
C) it has a larger quantity of skilled workers than another country.
D) it can produce them at a higher opportunity cost than another country.
E) it can produce them at a lower opportunity cost than another country.
Use the information below to answer the following questions.
Fact 24.1.2
In July 2011, currency held by individuals and businesses was $57 billion; chequable
deposits owned by individuals and businesses were $211 billion; non-chequable
personal deposits were $163 billion; non-chequable business deposits were $29 billion;
and fixed term deposits were $303 billion.
Consider Fact 24.1.2. M1 is
A) $57 billion.
B) $268 billion.
C) $431 billion
D) $460 billion.
E) $763 billion.
Which of the following quotations describes a rival good?
A) “Mom, Ashley is looking at me.”
B) “Mom, Morgan won’t let me watch the Backyardigans because she is watching Dora
the Explorer.”
C) “Mom, Harrison won’t let me in his room.”
D) “Mom, Taylor told me on the phone that he is also watching the Backyardigans on
TV at his house.”
E) “Mom said everyone in this house gets to enjoy the flowers in the garden.”
If the wage rate decreases, the income effect gives a household the incentive to
A) raise its reservation wage.
B) increase leisure and decrease work.
C) increase work and decrease leisure.
D) increase both work and leisure.
E) decrease both work and leisure.
Which of the following events would shift the consumption function upward?
A) an increase in disposable income
B) a decrease in disposable income
C) a decrease in wealth
D) a decrease in expected future disposable income
E) an increase in wealth
Which of the following is not a reason for GDP incorrectly measuring the value of total
output?
A) leisure time
B) household production
C) underground economic activity
D) depreciation
E) environmental quality
Which one of the following characteristics is not shared by single-price monopoly and
monopolistic competition?
A) Firms face a downward-sloping demand curve.
B) Profit-maximizing quantity occurs where MC = MR.
C) Price charged is the highest consumers are willing to pay.
D) Firms make an economic profit in the long run.
E) The marginal revenue curve lies below the demand curve.
The winner of the men’s or women’s tennis singles at the Canadian Open is paid twice
as much as the runner-up, but it takes two players to have a singles final. This
compensation arrangement is
A) always unfair.
B) fair by the results view because the players make a salary that is higher than the
average Canadian and fair by the rules view because the players agree to abide by the
rules of tennis.
C) fair by the results view because the prize money is not equally distributed, and fair
by the rules view because the players voluntarily enter the tournament.
D) always fair.
E) fair by the rules view because the prize money is not equally distributed, and fair by
the results view because the players voluntarily enter the tournament.
The development of new goods and better ways of producing goods and services is
A) capital accumulation.
B) technological change.
C) the big tradeoff.
D) allocative efficiency.
E) production efficiency.