Federal Express enters into contracts with independent truck operators who offer FedEx
service and who are rewarded by the volume (cubic feet) of packages they carry.
FedEx does not hire more independent drivers because
A) it is concerned about a possible downturn in the economy and the effects of
overexpansion.
B) it cannot afford more trucks and more drivers.
C) of the principal-agent problem.
D) it is a corporation, so it wants to have a limited number of independent truck owners
operating as proprietorships.
E) trucks are not a technologically efficient method of transporting parcels.
According to Adam Smith
A) government intervention in markets is not desirable because an invisible hand leads
decisions made in pursuit of self-interest to unintentionally promote the social interest.
B) in a market transaction buyers can either get what they want for less than they would
be willing to pay or sellers can make a profit, but both buyers and sellers can’t gain
simultaneously.
C) politicians are well-equipped to regulate corporations and intervene in markets to
improve market outcomes.
D) when big corporations pursue their self-interest of maximum profit, they will
inevitably conflict with social interest.
E) the self-interest and the social interest never conflict.
Poverty is
A) an income below the national average income level.
B) an income below the national median income level.
C) a state in which a family’s income is too low to be able to buy the quantities of food,
shelter, and clothing that are deemed necessary.
D) the income earned by the poorest 20 percent of households.
E) a state in which a family spends more than 50 percent of its income on food, shelter,
and clothing.
One reason that international trade is restricted is that
A) the individual gain to parties who benefit from the protection will be much larger
than the individual loss to parties who lose.
B) the government completely pays the losers from international trade for their losses.
C) protectionism benefits consumers.
D) the government cannot measure the cost of protectionism.
E) tariff revenue raises more income than income taxes in industrial countries.
Under monopolistic competition, long-run economic profit is zero because of
A) product differentiation.
B) no barriers to entry.
C) excess capacity.
D) economic inefficiency.
E) the downward-sloping demand curve facing each firm.
Which of the following central banks does not follow an inflation rate targeting
strategy?
A) The Federal Reserve (the central bank of the United States)
B) The Bank of Canada
C) The Reserve Bank of Australia
D) The Bank of England
E) The European Central Bank (the central bank of the Eurozone)
Diseconomies of scale refer to the range of output over which
A) long-run average cost rises as output increases.
B) average cost exceeds marginal cost.
C) long-run average cost falls as output increases.
D) the marginal product of labour increases.
E) marginal product equals average product.
The existence of increasing opportunity cost
A) explains why specialization is frequently useful.
B) explains why resources are scarce.
C) explains the bowed-out shape of the production possibilities frontier.
D) follows from the existence of property rights.
E) explains why some societies produce inside their production possibilities frontier.
Refer to Table 20.2.1. From the information given in the table, the value of net domestic
income at factor cost is
A) $1,280.
B) $1,290.
C) $1,360.
D) $1,060.
E) $1,100.
Suppose initially Canada has all its international payments accounts in balance (no
surplus or deficit). Then Canadian firms increase the amount they export to Japan, and
the Japanese finance the increase by borrowing from Canada. In Canada, everything
else remaining the same, there will now be a
A) current and financial account surplus and capital account surplus.
B) current and financial account surplus and capital account deficit.
C) current and financial account deficit and capital account surplus.
D) current and financial account deficit and capital account deficit.
E) current and financial account deficit and capital account balance.
The exchange rate is the
A) volume of currency exchanged between importers and exporters.
B) price at which one currency exchanges for another currency.
C) rate of currency appreciation or depreciation.
D) percentage change in the volume of currency exchanges.
E) average rate at which foreign currencies are exchanged.
Water from the Mackenzie River is an example of
A) a nonrenewable natural resource.
B) a natural resource that can be used repeatedly.
C) capital.
D) a static resource.
E) a capital service.
If the inflation rate is lower than the expected inflation rate,
A) unemployment is above the natural rate.
B) the natural unemployment rate will increase.
C) the expected inflation rate will increase.
D) unemployment is below the natural rate.
E) the economy is not operating on the short-run Phillips curve.
Refer to the figure below to answer the following questions.
Figure 7.2.2
The figure shows the market for helicopters in Canada, where D is the domestic
demand curve and S is the domestic supply curve. Canada trades helicopters with the
rest of the world at a price of $36 million per helicopter.
In Figure 7.2.2, with international trade, Canadian firms buy ________ helicopters per
year.
A) 240
B) 480
C) 720
D) 360
E) 600
Complete the following sentence. Macroeconomics
A) is primarily concerned with the operation of individual markets in the economy.
B) deals mainly with the economic behaviour of households.
C) is the only part of economics to deal with government decisions.
D) is primarily concerned with the behaviour of the stock market.
E) is the study of the performance national economy and the global economy.
Refer to Fact 14.3.3. If the nearby firms’ advertising decreases the demand for Roots’
jackets and makes the demand more elastic, the price of a Roots’ jacket ________. If
Roots’ advertising increases the demand for Roots’ jackets and makes the demand less
elastic, the price of a Roots’ jacket ________.
A) falls; rises
B) rises; rises
C) rises; falls
D) falls; falls
E) does not change; does not change
Money’s function as a unit of account can best be described as
A) an agreed measure for stating the prices of goods and services.
B) an entry in an accounting ledger.
C) a method of recording transactions.
D) a commodity that can be exchanged for another commodity.
E) a generally accepted medium of exchange.
If negative externalities exist, then in a market with no property rights,
A) MSC = MSB.
B) MSC < MSB.
C) MSC > MSB.
D) MSC = marginal external cost.
E) MC > MSC.
Refer to Figure 1A.2.3. If your theory predicted that a rise in the wage rate (x) leads to a
rise in the amount of labour supplied in the economy (y), which graph would you use to
represent this relationship?
A) (a)
B) (b)
C) (c)
D) (d)
E) (a) or (c)
A bakery uses flour to produce bread. When calculating GDP, we include ________,
because when we add the value of the flour to the value of the loaf of bread to calculate
GDP, the result is ________.
A) only the value of the bread sold in a store; double counting
B) only the value of the flour used to produce the bread; double counting
C) both the value of the bread sold in a store and the value of the flour used to produce
the bread; double counting
D) both the value of the bread sold in a store and the value of the flour used to produce
the bread; the true value of the economy’s output
E) none of the above
Of the groups listed below, which is most likely to lobby for protection?
A) workers in the import industry
B) workers in the export industry
C) consumers in the import industry
D) producers in the export industry
E) workers and consumers in the import industry
Use the information below to answer the following questions.
Fact 9.2.1 You May Be Paid More (or Less) Than You Think
It’s so hard to put a price on happiness, isn’t it? But if you’ve ever had to choose
between a jobs you like and a better-paying one that you like less, you probably wished
some economist would tell you how much job satisfaction is worth. Trust in
management is by far the biggest component to consider. Say you get a new boss and
your trust in management goes up a bit (say, up 1 point on a 10-point scale). That’s like
getting a 36 percent pay raise. In other words, that increased level of trust will boost
your level of overall satisfaction in life by about the same amount as a 36 percent raise
would.
Refer to Fact 9.2.1. What is the marginal rate of substitution?
A) 3.6
B) 1
C) 36
D) 10
E) 10 + 36
Use the table below to answer the following questions.
Table 17.2.1
In Table 17.2.1, which one of the proposals will have the greatest support?
A) Current income distribution
B) Proposal A
C) Proposal B
D) Proposal C
E) Proposal A or C
3.4 Market Equilibrium
Use the table below to answer the following questions.
Table 3.4.1
Refer to Table 3.4.1. At a price of $3 a unit
A) the market is in equilibrium.
B) there is a 180-unit surplus.
C) there is a 180-unit shortage.
D) there is a tendency for the price to rise.
E) C and D
Which of the following explains why the demand for loanable funds is negatively
related to the real interest rate?
A) Consumers are willing to spend less so they save more at higher real interest rates.
B) Interest rate flexibility in financial markets assures an equilibrium in which saving
equals investment.
C) A lower real interest rate makes more investment projects profitable.
D) All of the above are reasons why the demand for loanable funds is negatively related
to the real interest rate.
E) None of the above are reasons why the demand for loanable funds is negatively
related to the real interest rate.
In a perfectly competitive market, the four-firm concentration ratio is
A) almost zero.
B) 50 percent.
C) 100 percent.
D) 75 percent.
E) 25 percent.
If a perfectly competitive firm’s marginal revenue is greater than its marginal cost, the
firm
A) cannot increase its economic profit.
B) must be making an economic profit.
C) will decrease its output to increase economic profit.
D) will increase its output to increase economic profit.
E) will lower the price.
A negative value for
A) price elasticity of supply implies an upward-sloping supply curve.
B) cross elasticity of demand implies that the goods are complements.
C) price elasticity of demand implies an inferior good.
D) income elasticity of demand implies a normal good.
E) income elasticity of demand implies an error in your calculation.
To determine consumer equilibrium we need to know only
A) prices and income.
B) total utility and income.
C) marginal utility and income.
D) prices, income, and marginal utility.
E) prices and marginal utility.
With respect to water and diamonds, water
A) has a higher marginal utility.
B) has a lower marginal utility.
C) has a lower total utility.
D) is cheaper than diamonds because it has a lower total utility.
E) has zero marginal utility.