Firms in monopolistic competition have rivals that
A) will always match their price increases.
B) will always match their price decreases but not their price increases.
C) all agree on a common price.
D) set their price where the demand curve is tangent to the average cost curve.
E) set their price according to the demand they face.
The government is proposing to increase the tax rate on labour income and asks you to
report on the supply-side effects of such an action. According to the research of Edward
C. Prescott, cross-country evidence for Canada, the United States, the United Kingdom,
and France shows all of the following except
A) the greater the tax wedge, the smaller the level of employment and the smaller the
potential GDP.
B) potential GDP per person in France is 14 percent below that of the United States (per
person) and the entire difference can be attributed to the difference in the tax wedge in
the two countries.
C) potential GDP per person in the United Kingdom is 41 percent below that of the
United States (per person) and about a third of the difference arises from the different
tax wedges.
D) between Canada, the United States, France, and the United Kingdom, the tax wedge
is greatest in the United Kingdom, and the country with the smallest tax wedge has the
smallest potential GDP.
E) potential GDP per person in Canada is 16 percent below that of the United States but
this difference is due to different productivities.
Which of the following statements about Canada’s international trade in 2013 is
correct?
A) The value of Canada’s exports exceeded the value of Canada’s imports.
B) The value of Canada’s exports was about 45 percent of the value of total expenditure
in Canada.
C) Canada imported only goods.
D) Canada was the world’s second largest trader.
E) Canada exported only goods.
All of the following statements are correct except
A) the supply of capital is derived from the value of marginal product of capital.
B) the lower the rental rate of capital, other things remaining the same, the greater is the
quantity of capital demanded.
C) the higher the rental rate, other things remaining the same, the greater is the quantity
of capital supplied.
D) profit-maximizing firms hire the quantity of capital services that makes the value of
marginal product of capital equal to the rental rate of capital.
E) if the present value of the future rental payments of an item of capital equipment is
less than the cost of buying the capital, the firm will rent or lease the equipment.
Refer to Figure 14.2.3. Assume this firm faces demand curve D2. If the firm produces
the efficient quantity, it
A) makes an economic profit.
B) makes zero economic profit.
C) incurs an economic loss.
D) is in a long-run equilibrium.
E) will face competition from new firms entering the industry.
If the exchange rate is too high in the foreign exchange market,
A) there is a surplus and the exchange rate will rise.
B) there is a surplus and the exchange rate will fall.
C) exports are cheap, and the demand curve for Canadian dollars will shift rightward.
D) there is a shortage and the exchange rate will fall.
E) there is a shortage and the exchange rate will rise.
The economy is in a recession and the recessionary gap is large. A discretionary fiscal
stimulation package that would avoid a budget deficit is a simultaneous and equal
A) increase in government expenditure and an increase in taxes.
B) decrease in government expenditure and taxes.
C) increase in transfer payments and a decrease in taxes.
D) decrease in transfer payments and increase in the quantity of money.
E) increase in transfer payments and decrease in the quantity of money.
The demand for a good is price inelastic if
A) a rise in price results in an increase in total revenue.
B) a rise in price results in a decrease in total revenue.
C) an increase in income results in a decrease in total revenue.
D) an increase in income results in an increase in total revenue.
E) the good is a luxury.
If a government imposes a quota on imports of a popular doll, the price of the doll in
the importing country ________ and the quantity purchased in the importing country
________.
A) rises; increases
B) rises; decreases
C) falls; increases
D) falls; decreases
E) rises; does not change
Which one of the following would not be counted as part of this year’s GDP?
A) the lumber you purchase when building bookshelves for your room
B) the government bond you buy for your newborn niece
C) the purchase of a new personal computer that was produced in the current year
D) the purchase of wheat that was produced in the current year by a Saskatchewan
farmer
E) the purchase of a house that was produced in the current year
Which of the following are not included in the working-age population?
A) discouraged searchers
B) involuntary part-time workers
C) retired workers
D) students over the age of 15
E) children under the age of 15
Usually the imposition of trade barriers affecting a particular good benefits ________
people domestically, each of whom gains a ________.
A) a few; little
B) a few; lot
C) many; little
D) many; lot
E) We can’t determine the relative benefits from the imposition of trade barriers.
A decrease in the marginal propensity to import ________, everything else remaining
the same.
A) makes the multiplier larger
B) makes the multiplier smaller
C) has no effect on the multiplier
D) sometimes increases the multiplier and sometimes decreases the multiplier
E) increases the marginal propensity to consume
Suppose the interest rate is 5 percent per year. What is the present value of the $210 that
will be received two years from today?
A) $210
B) $190.48
C) $231.53
D) $200
E) $42
The price elasticity of demand depends on
A) the units used to measure price and the units used to measure quantity.
B) the units used to measure price but not the units used to measure quantity.
C) the units used to measure quantity but not the units used to measure price.
D) neither the units used to measure price nor the units used to measure quantity.
E) the relative price of the good.
Refer to Figure 26.3.3(a). You might expect the government to
A) do nothing except maintain the current equilibrium.
B) cut government expenditure.
C) increase government expenditure.
D) pursue trade policies that reduce exports.
E) raise taxes.
Use the table below to answer the following question.
Table 4.1.3
Refer to Table 4.1.3. The price elasticity of demand for Jolt is
A) 1.
B) 2.5.
C) 3.0.
D) 0.33.
E) cannot be calculated because income is not constant.
________ states that the main source of economic fluctuations is fluctuations in
business confidence.
A) Real business cycle theory
B) New classical cycle theory
C) Keynesian cycle theory
D) Monetarist cycle theory
E) None of the above
At West, a restaurant in Vancouver, reservations are essential. At Cibo, a restaurant in
downtown Vancouver, reservations are recommended. At Vij’s, a restaurant near the
University of British Columbia, reservations are not accepted.
West allocates scarce table resources by ________, Cibo allocates scarce table
resources by ________, and Vij’s allocates scarce table resources by ________.
A) market price; market price and force; force
B) personal characteristics; personal characteristics and first-come, first-served;
first-come, first-served
C) a command system; a combination of a command system and first-come,
first-served; first-come, first-served
D) first-come, first-served; first-come, first-served; first-come, first-served
E) personal characteristics; personal characteristics; first-come, first-served
Suppose the government of Nova Scotia wants to reduce the consumption of electricity
by 5 percent. The price elasticity of demand for electricity is 0.40. You advise the Nova
Scotia government to
A) raise the price of electricity by 12.5 percent.
B) raise the price of electricity by 2 percent.
C) lower the price of electricity by 12.5 percent.
D) stay away from the market for electricity and let the market mechanism fix the
problem.
E) lower the price of electricity by 2 percent.
If households and firms find they are holding less money than desired, they will
A) sell bonds, and the interest rate will rise.
B) sell bonds, and the interest rate will fall.
C) buy bonds, and the interest rate will rise.
D) buy bonds, and the interest rate will fall.
E) buy goods, and the price level will rise.
The efficient use of a common resource requires that the ________ equals the
________.
A) marginal private benefit; marginal social cost
B) marginal social benefit; marginal social cost
C) marginal private benefit; marginal social benefit
D) marginal social cost; marginal private cost
E) total benefit; total cost
The multiplier shows that as ________ expenditure changes, real GDP changes by
________ amount.
A) autonomous; an even larger
B) autonomous; the same
C) induced; the same
D) induced; an even larger
E) induced; a smaller
Use the figure below to answer the following questions.
Figure 18.3.3
Refer to Figure 18.3.3. For the monopsonist employer illustrated in this figure, the
profit-maximizing wage rate is ________ and the quantity of labour hired is ________.
A) $9 per hour; 300 hours
B) $8 per hour; 350 hours
C) $8 per hour; 500 hours
D) $7 per hour; 400 hours
E) $6 per hour; 300 hours
If A and B are substitutes in production and the price of A falls, the supply of B
A) increases, and the price of B rises.
B) increases, and the price of B falls.
C) decreases, and the price of B falls.
D) decreases, and the price of B rises.
E) does not change.
Refer to Table 16.2.1. Given in the table are the marginal private cost and the marginal
social cost of the production of chemical fertilizer and the marginal social benefit from
the consumption of fertilizer. If the market is unregulated, the quantity produced is
A) 1 unit.
B) 2 units.
C) 3 units.
D) 4 units.
E) 5 units.
Use the information below to answer the following questions.
Fact 25.4.1
You are given the following information about the country of Ecoland, whose currency
is the turkey, and whose official settlements balance is zero.
Refer to Fact 25.4.1. What is the value of the private sector deficit or surplus?
A) zero
B) -3 billion turkeys
C) -1 billion turkeys
D) -2 billion turkeys
E) +1 billion turkeys
If the annual rate of interest is 10 percent per year, what is the present value of $100
received one year from now?
A) $90.00
B) $90.91
C) $95.45
D) $100.00
E) $110.00
Use the figure below to answer the following question.
Figure 30.3.2
Refer to Figure 30.3.2. The figure shows the economy of Freezone. Potential GDP is
$250 billion.
To return the economy to full employment, the central bank can ________ the
overnight rate and ________ securities.
A) lower; sell
B) raise; sell
C) raise; buy
D) lower; buy
E) lower; not change its holdings of
The paradox of value asks why
A) bad things happen to good people.
B) the price of water is low and the price of a diamond is high, but water is essential to
life while diamonds are not.
C) the good die young.
D) total utility is greater than marginal utility.
E) the standard of living is higher in North America than in South America.
Suppose all prices double and income also doubles. Which statement is true?
A) The budget line does not change.
B) The slope of the budget line increases.
C) The slope of the budget line decreases.
D) The budget line shifts rightward.
E) The budget line shifts leftward.