The absence of incentives to prevent the overuse of a common resource that arises
when its users have no incentive to conserve it and use it sustainably is referred to as
A) unsustainable production.
B) sustainable production.
C) the tragedy of the commons.
D) rational ignorance.
E) irrational production.
Use the figure below to answer the following questions.
Figure 2.1.6
Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet
food. Point A is ________ and point B is ________.
A) unattainable; attainable.
B) attainable; unattainable.
C) unattainable; unattainable.
D) attainable; attainable.
E) inefficient; efficient
Larry consumes only beer (B) and chips (C). The equation of his budget line (with beer
measured on the vertical axis) is
A) QB= Y/PB– (PC/PB)QC.
B) QB = Y – (PC/PB)QC.
C) QB= Y/PC– (PB/PC)QC.
D) QB= Y/PB– (PC/PB)QB.
E) QC = Y/PC– (PB/PC)QB.
The higher and more unpredictable the changes in the monetary unit, the
A) lower the opportunity cost of using it as a medium of exchange.
B) lower the opportunity cost of using it as a store of value.
C) higher the opportunity cost of using it as a store of value.
D) less likely barter exchange will replace it.
E) lower the opportunity cost of using it as a standard of deferred payment.
A common resource is
A) regulated and excludable.
B) rival and nonexcludable.
C) nonrival and excludable.
D) rival and excludable.
E) nonrival and nonexcludable.
Choose the statement that is incorrect.
A) Firms that have a high marginal abatement cost sell pollution permits.
B) A cap is an upper limit.
C) A cap is a pollution quota.
D) A government that uses cap-and-trade must first estimate the efficient quantity of
pollution and set the overall cap at that level.
E) The government solves the problem of allocating the cap by making an initial
distribution of the cap across firms and allowing them to trade in a market for pollution
permits.
If we observe a decrease in the equilibrium quantity of good A, we know that
A) either the demand for A has increased or the supply of A has decreased or both.
B) either the demand for A has increased or the supply of A has increased or both.
C) either the demand for A has decreased or the supply of A has increased or both.
D) either the demand for A has decreased or the supply of A has decreased or both.
E) the price of A has fallen.
The total product curve is a graph that shows the
A) minimum cost of producing a given amount of output using a given technology.
B) maximum profit from each unit of output sold.
C) maximum output that a given quantity of labour can produce.
D) maximum output that can be produced as technology advances.
E) change in total product for a given change in marginal product.
Refer to Figure 26.3.1. When the economy of Econoworld is in short-run
macroeconomic equilibrium, the price level is
A) 100.
B) 90.
C) 75.
D) 70.
E) 85.
An increase in the cost of labour shifts the
A) total, average, and marginal product curves upward and total, average, and marginal
cost curves upward.
B) total, average, and marginal product curves upward and total, average, and marginal
cost curves downward.
C) total, average, and marginal product curves downward and total, average, and
marginal cost curves upward.
D) total, average, and marginal product curves downward and total, average, and
marginal cost curves downward.
E) none of the above
If the real interest rate rises from 3 percent to 5 percent,
A) the nominal interest rate falls.
B) the demand for loanable funds curve shifts rightward.
C) there is a movement up along the demand for loanable funds curve.
D) the supply of loanable funds curve shifts rightward.
E) there is a movement down along the supply of loanable funds curve.
Choose the correct statement.
A) Producer surplus is an external cost.
B) Consumer surplus is an external benefit.
C) A government subsidy paid to a producer is an external benefit.
D) Consumer surplus is an external cost.
E) Subsidies lead to overproduction.
If the penalty on sellers of an illegal good is less than the penalty on buyers of an illegal
good, then supply of the good will ________ by ________ demand and the price of the
good will ________.
A) decrease; more than; rise
B) decrease; less than; rise
C) decrease; less than; fall
D) decrease; more than; fall
E) increase; less than; rise
A firm uses capital and labour in production. To determine if the firm is technologically
efficient, it
A) must know the cost of labour and the cost of capital.
B) does not need to know the cost of labour or the cost of capital.
C) must know the cost of labour but not the cost of capital.
D) must know the cost of capital but not the cost of labour.
E) must use unionized labour.
A decrease in the demand for loanable funds occurs when
A) the real interest rate rises.
B) government expenditure increases.
C) the government cuts taxes.
D) expected profit decreases.
E) expected profit increases.
Which one of the following goods is excludable?
A) a city bus
B) a bridge that does not charge a toll
C) the atmosphere
D) protection from the police force
E) air traffic control
Use the information below to answer the following questions.
Fact 18.5.1
The Burning Belly Taco Stand is considering buying some new special ovens. Each
oven will cost $1,000, and will last for 2 years before it wears out. The ovens will be
used to make the Taco Stands famous “Burning Ring of Fire” tacos, and will generate a
value of marginal product of $600 for the first oven, $570 for the second oven, and
$530 for the third oven. (Assume all revenues are earned at the end of the year.)
Refer to Fact 18.5.1. If the rate of interest is 5 percent, how many ovens will the
Burning Belly Taco Stand buy?
A) zero
B) 1
C) 2
D) 3
E) insufficient information to answer
Use the table below to answer the following question.
Table 2.1.3
Production possibilities for a society that produces only two
goods hockey sticks and maple leaves
Refer to Table 2.1.3. In moving from combination C to combination B, the opportunity
cost of producing one additional hockey stick is
A) 2 maple leaves.
B) 1/2 maple leaves.
C) 6 maple leaves.
D) 1/6 maple leaves.
E) 3 maple leaves.
Research and development ________ create an external benefit. With no intervention,
we produce too ________ research and development.
A) does; little
B) does not; much
C) does not; little
D) does; much
E) none of the above. Research and development create an external cost.
The aggregate expenditure curve will become steeper if
A) people become thriftier.
B) people show an increased preference for foreign-made products.
C) firms expect an increase in future profit.
D) income tax rates are lowered.
E) income tax rates are raised.
Which one of the following newspaper quotations describes a rightward shift of the
LAS curve?
A) “The decrease in consumer spending may lead to a recession.”
B) “The increase in consumer spending is expected to lead to inflation, without any
increase in real GDP.”
C) “Recent higher wage settlements are expected to cause higher inflation this year.”
D) “Growth has been unusually high the last few years due to more women entering the
work force.”
E) “The recent tornadoes destroyed many factories in Calgary and Edmonton.”
A rent ceiling
A) results in a shortage of housing if the rent ceiling is below the equilibrium rent.
B) results in a surplus of housing if the rent ceiling is above the equilibrium rent.
C) always results in a shortage of housing.
D) always results in a surplus of housing.
E) Both A and B are correct.
Which of the following will shift the supply curve of good X rightward?
A) a decrease in the wages of workers employed to produce good X
B) an increase in the cost of capital used to produce good X
C) an increase in the price of energy
D) a decrease in the number of suppliers of good X
E) the price of Y, a substitute in production for good X, rises
Which one of the following is a necessary consequence of scarcity?
A) no choices required
B) high profits
C) the requirement of making choices
D) all wants are satisfied
E) low profits
Canada has a comparative advantage in producing hardwood if the Canadian price of
hardwood before international trade is ________ the world price.
A) equal to
B) greater than
C) not comparable to
D) at least double
E) less than
The velocity of circulation is
A) the average number of times a dollar of money is used annually to buy the goods and
services that make up GDP.
B) the average number of times that a dollar of money is used annually to buy the goods
and services that make up consumption expenditure.
C) calculated as Y M.
D) constantly increasing over time.
E) equal to zero in the long run.
Refer to Figure 19.3.6. If this is the market for a group of workers who are
discriminated in favour of by consumers and point A represents the equilibrium without
discrimination, which point represents the equilibrium for the workers who receive
favourable discrimination?
A) D
B) B
C) I
D) C
E) H
Table 31.1.1 shows Glazeland’s doughnut market before international trade. Glazeland
opens up to international trade. If the world price is $0.40, then Glazeland will produce
________ doughnuts and will ________ doughnuts.
A) 3 million; import 3 million
B) 3 million; export 3 million
C) 4 million; import 1 million
D) 4 million; export 1 million
E) 6 million; export 3 million
A voucher can eliminate the deadweight loss and lead to an efficient outcome if the
value of the voucher equals the ________ of the good.
A) marginal external benefit
B) marginal social benefit
C) marginal private benefit
D) marginal social cost
E) marginal external cost
The vertical distance between the consumption function and the 45 line measures
A) disposable income.
B) consumption.
C) saving or dissaving.
D) the marginal propensity to consume.
E) the marginal propensity to save.
Refer to Table 20.2.5. From the data in the table, compute Southton’s real GDP in the
base year.
A) $208
B) $197
C) $209
D) $226
E) It cannot be calculated given the data.
The AFC curve shifts upward if
A) factor prices rise.
B) a new technology is introduced.
C) more workers are hired.
D) all of the above
E) none of the above
First-come, first-served allocates housing to those
A) whose names are on waiting lists.
B) who share similar views to the owner of the housing.
C) who are rich.
D) who are poor.
E) who are lucky.
If ATC is falling, then MC must be
A) rising.
B) falling.
C) equal to ATC.
D) above ATC.
E) below ATC.
The current overnight loans rate is 3 percent, with the Bank of Canada’s operating band
set at 2.75 to 3.25 percent. If the Bank of Canada lowers their operating band to 2.25 to
2.75 percent, which of the following is one of the reasons the overnight rate will fall to
within this new range?
A) Since the banking system can now borrow from the Bank of Canada at 2.75 percent,
no bank would borrow on the overnight loan market at 3 percent.
B) Since the banking system can now borrow from the Bank of Canada at 2.25 percent,
no bank would borrow on the overnight loan market at 3 percent.
C) Since the banking system can now earn 2.75 percent from the Bank of Canada, no
bank would lend on the overnight loan market at 3 percent.
D) Since the banking system can now earn 2.25 percent from the Bank of Canada, no
bank would lend on the overnight loan market at 3 percent.
E) There is a legal requirement that the overnight rate must be within the Bank of
Canada’s operating band.