A firm’s efficient scale is the quantity at which ________ is a minimum.
A firm has excess capacity if it produces ________ its efficient scale.
A) average total cost; below
B) marginal cost; above
C) average total cost; above
D) marginal cost; below
E) average variable cost; below
Consider Devon’s total utility from snorkeling and windsurfing in Table 8.2.1. Suppose
Devon’s total income is $35. If the price of windsurfing rises to $20 per hour, how long
does Devon choose to windsurf and to snorkel?
A) 1 hour of windsurfing and 3 hours of snorkeling
B) 2 hour of windsurfing and 7 hours of snorkeling
C) 3 hours of windsurfing and 5 hours of snorkeling
D) 4 hours of windsurfing and 3 hours of snorkeling
E) 5 hours of windsurfing and 1 hour of snorkeling
A small country is an international borrower. Its real interest rate without foreign
borrowing is ________ the world real interest rate.
A) higher than
B) equal to
C) lower than
D) not comparable to
E) either higher than or equal to
Demand will be more inelastic the
A) higher the income level.
B) lower the income level.
C) longer the passage of time after a price increase.
D) fewer good substitutes that are available.
E) larger the fraction of income spent on the good.
Full employment does not mean that there is zero unemployment because
A) some cyclical unemployment is always present.
B) some frictional and structural unemployment is always present.
C) business fluctuations are inevitable.
D) of the existence of discouraged workers.
E) of unrealistic wage expectations.
In a market that moves from a situation of no trade to a situation where a good is
exported, in the exporting country the price of the good ________, and producer surplus
________.
A) rises; increases
B) falls; decreases
C) does not change; increases
D) does not change; decreases
E) rises; decreases
Keynesian macroeconomists recommend
A) an increase in the quantity of money to offset decreases in aggregate demand and a
decrease in the quantity of money to offset increases in aggregate demand.
B) policies that actively offset changes in long-run aggregate supply that result in
negative economic growth.
C) policies that minimize the disincentive effects of taxes on employment, investment,
and technological change.
D) policies that actively offset changes in aggregate demand that bring recession.
E) none of the above
The Ricardo-Barro effect of a government budget deficit is
A) an increase in private saving.
B) a large crowding-out effect that decreases investment.
C) a large crowding-out effect that decreases national saving.
D) a decrease in net exports.
E) a decrease in private saving.
If the average variable cost of producing 10 units is $18 and the average variable cost of
producing 11 units is $20, we know that, between 10 and 11 units of output,
A) marginal cost is increasing.
B) average total cost is increasing.
C) average fixed cost is increasing.
D) total cost is either increasing or decreasing.
E) none of the above
Use the information below to answer the following questions.
Fact 25.3.1 Aussie Dollar Hit by Interest Rate Talk
The Australian dollar fell against the U.S. dollar to its lowest value in the past two
weeks. The CPI inflation rate was reported to be generally as expected but not high
enough to justify previous expectations for an aggressive interest rate rise by Australia’s
central bank next week.
Consider Fact 25.3.1. Australia’s exchange rate policy is a flexible exchange rate. An
expected rise in the Australian interest rate with no change in the Canadian interest rate,
everything else remaining the same, ________ the demand for Australian dollars and
________ the supply of Australian dollars.
A) increases; increases
B) increases; decreases
C) decreases; decreases
D) decreases; increases
E) does not change; does not change
Use the information below to answer the following questions.
Fact 20.1.1
At the beginning of 2014, Peter’s Perfectly Prickly Piercing Parlour had $5,000 worth of
bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash
register worth $100, electrical equipment worth $500, and one piercing needle worth
$500. At the end of 2014, they had $5,000 worth of bellybutton and eyebrow rings, a
new high speed computer worth $3,000 (they had to throw out the old ones), the same
cash register, which was now worthless, electrical equipment worth $600, and they had
upgraded the needle at a cost of $700 which was valued at $1,000.
Refer to Fact 20.1.1. Peter’s capital at the beginning of 2014 is
A) $8,100.
B) $7,000.
C) $3,100.
D) $7,600.
E) $5,000.
A tax that is imposed by the importing country when an imported good crosses its
international boundary is called
A) an import quota.
B) dumping.
C) a voluntary export restraint.
D) a tariff.
E) a sales tax.
The opportunity cost of holding money increases when the
A) purchasing power of money increases.
B) nominal interest rate rises.
C) price of goods and services decrease.
D) income of consumers increases.
E) income of consumers decreases.
Refer to Figure 27.2.2. When real GDP is $300 billion, real GDP
A) is less than aggregate planned expenditure by $25 billion, and firms decrease
production.
B) exceeds aggregate planned expenditure by $25 billion, and firms increase
production.
C) is the same as aggregate planned expenditure, and firms do not change production.
D) exceeds aggregate planned expenditure by $25 billion, and firms decrease
production.
E) exceeds aggregate planned expenditure by $50 billion, and firms increase
production.
Refer to Fact 12.1.1. The price of gasoline is determined by ________. The marginal
revenue from gasoline equals ________.
A) the quantity of gasoline that Rutter’s and Sheetz sells; average variable cost
B) the number of tourists who drive by Rutter’s and Sheetz; average fixed cost
C) the other goods and services that Rutter’s and Sheetz sell; average total cost
D) market demand and market supply; price
E) the price elasticity of demand of gasoline; the change in total revenue that occurs
when the price of a litre of gasoline rises by an incremental amount
Total utility is always
A) greater than marginal utility.
B) less than marginal utility.
C) decreasing when marginal utility is decreasing.
D) decreasing when marginal utility is increasing.
E) increasing when marginal utility is positive.
A key difference between tariffs and import quotas is that
A) consumers are hurt with import quotas but not with tariffs.
B) consumers are hurt with tariffs but not with import quotas.
C) the government receives revenue with a tariff, but the importer makes a profit with
an import quota.
D) the government receives revenue with an import quota, but the importer makes a
profit with a tariff.
E) producer surplus increases with a tariff and decreases with an import quota.
Canada’s exports to the European Union boom. What is the effect on the quantity of real
GDP demanded or aggregate demand in Canada?
A) The quantity of Canadian real GDP demanded increases.
B) The quantity of Canadian real GDP demanded decreases.
C) Canadian aggregate demand increases.
D) Canadian aggregate demand decreases.
E) There is no change to either the quantity of real GDP demanded or to aggregate
demand.
If a household’s disposable income increases from $12,000 to $22,000 and at the same
time its consumption expenditure increases from $4,000 to $9,000, then
A) the household is dissaving.
B) the slope of the consumption function is 0.6.
C) the slope of the consumption function is 0.5.
D) the marginal propensity to consume over this range is negative.
E) the marginal propensity to save over this range is negative.
Which of the following quotations illustrates the idea of the multiplier?
A) “The new stadium will generate $200 million in spinoff spending.”
B) “Higher expected profits are leading to higher investment spending by business, and
will lead to higher consumer spending.”
C) “The projected cuts in government jobs will hurt the local retail industry.”
D) “Taking the grain elevator out of our small town will destroy 300 jobs.”
E) All of the above
Everything else remaining the same, an increase in real GDP
A) increases the demand for real money.
B) decreases the demand for real money.
C) does not change the demand for real money.
D) increases the demand for real money up to a point, and then demand will
automatically fall.
E) decreases the demand for real money up to a point, and then demand will
automatically rise.
A battery acid producer pollutes the water upstream from the Polar Bear Club, a
swimming club. If transactions costs are low, the quantity of pollution will be efficient
A) only if Ronald Coase is a member of the Polar Bear Club.
B) only if Ronald Coase is not a member of the Polar Bear Club.
C) only if water property rights are assigned to the producer.
D) only if water property rights are assigned to the Polar Bear Club.
E) if water property rights are assigned either to the producer or to the Polar Bear Club.
Refer to Fact 15.2.1. What is the Nash equilibrium?
A) Both firms cheat on the agreement.
B) One firm cheats and one firm complies.
C) Both firms comply with the agreement.
D) New firms enter the market.
E) Both firms charge the price that would exist in a perfectly competitive market.
Refer to Fact 27.5.1. What is the multiplier for this economy?
A) 1.43
B) 3.33
C) 0.3
D) 10
E) 5
Which one of the following concepts is not illustrated by a production possibilities
frontier?
A) scarcity
B) monetary exchange
C) opportunity cost
D) attainable and unattainable points
E) the tradeoff between producing one good versus another
At full employment, an increase in the quantity of money (ceteris paribus) can start
A) demand-pull inflation, as can an increase in government expenditure.
B) demand-pull inflation, but an increase in government expenditure cannot.
C) cost-push inflation, as can an increase in government expenditure.
D) cost-push inflation, but an increase in government expenditure cannot.
E) demand-pull and a cost-push inflation, as can an increase in government
expenditure.
A hypothetical economy produced four final goods during the year: plates, TVs,
bicycles, and computers. Forty plates were produced and sold for $10 each. Five TVs
were produced and sold for $300 each. Fifty bicycles were produced and sold for $100
each. Three computers were produced and sold for $750 each. With this information,
one could determine
A) gross investment for this economy.
B) net investment for this economy.
C) indirect taxes less subsidies for this economy.
D) whether factors had been fully employed in this economy.
E) total income for this economy.
Use the figure below to answer the following question.
Figure 2.1.5
The graph in Figure 2.1.5 shows Sunland’s PPF for food and sunscreen. Sunland faces
________ opportunity cost of food and ________ opportunity of sunscreen.
A) an increasing; a decreasing
B) a constant; a constant
C) a decreasing; an increasing
D) an increasing; an increasing
E) a decreasing; a decreasing
Use the figure below to answer the following questions.
Figure 12.2.2
Refer to Figure 12.2.2, which shows a perfectly competitive firm’s economic profit and
loss. The firm is breaking even at points
A) A and C.
B) A and D.
C) B and C.
D) B and D.
E) C and D.
An import quota is
A) a tariff that is a fixed percentage of the price of a good.
B) a tariff that is a fixed dollar amount per unit of a good.
C) an agreed upon price for a good to be imported at a specified future date.
D) a restriction that specifies the maximum quantity of a good that may be imported in
a given time period.
E) the same as an export subsidy.
Use the figure below to answer the following questions.
Figure 13.3.4
Consider the natural monopoly depicted in Figure 13.3.4. Total surplus is at a maximum
when quantity is
A) Q1 and price is P1.
B) Q1 and price is P3.
C) Q2 and price is P2.
D) Q3 and price is P0.
E) Q4 and price is 0.
Use the figure below to answer the following questions.
Figure 16.3.1
Refer to Figure 16.3.1. The figure shows the marginal private benefit curve, the
marginal social benefit curve, and the market supply curve. If production is left to the
private market, then the quantity produced is
A) zero.
B) Q1.
C) Q2.
D) Q3.
E) between 0 and Q1.
The effect of a change in taxes is less than the same sized change in government
expenditure because
A) the amount by which consumption initially changes is equal to MPC times the tax
change.
B) some people do not pay their taxes.
C) changes in government expenditure do not directly affect consumption.
D) tax rates are the same regardless of income levels.
E) none of the above
Susan invests $1,000 to buy shares of TooNew stock. The company declares
bankruptcy, leaving many debts unpaid, including Susan’s $1,000 investment. Susan has
a personal net worth of $50,000. What will be Susan’s final net worth if TooNew has
total unpaid debts of $30,000?
A) $19,000
B) $21,000
C) $49,000
D) $51,000
E) $20,000
The ripple effects that occur when the Bank of Canada raises the overnight loan rate
include
A) a decrease in consumption expenditure and investment.
B) an increase in net exports.
C) a decrease in short-run interest rates.
D) an increase in short-run aggregate supply.
E) a decrease in short-run aggregate supply.