A forecast based on all the relevant information is
A) an adaptive expectation.
B) a future expectation.
C) a rational expectation.
D) always a correct expectation.
E) a perfect forecast.
Refer to Fact 9.3.2. If the price of used clothing falls and income remains the same, the
substitution effect ________ the quantity of used clothing bought and the income effect
________ the quantity of used clothing bought.
A) increases; decreases
B) increases; increases
C) decreases; increases
D) decreases; decreases
E) does not change; increases
If Sam is producing at a point inside his production possibilities frontier, then he
A) can increase production of both goods with zero opportunity cost.
B) is fully using all his resources and allocating his resources to their best use.
C) must be doing the best he can with limited resources.
D) is unaffected by costs and technology.
E) has a high opportunity cost of moving from this point.
When the government chooses to use resources to build a dam, those resources are no
longer available to build a highway. This illustrates the concept of
A) a market.
B) macroeconomics.
C) opportunity cost.
D) a “how” tradeoff.
E) the big tradeoff.
Refer to Figure 28.2.2. Consider the market for labour as the short-run aggregate supply
curve shifts leftward from SAS0 to SAS1. This shift could have been the result of an
agreement between workers and employers for a
A) 10 percent decrease in the money wage rate.
B) 10 percent increase in the money wage rate.
C) 15 percent decrease in the money wage rate.
D) 15 percent increase in the money wage rate.
E) 10 percent increase in the real wage rate.
When considering rent seeking, which of the following is true?
A) The anti-free trade group generally will lobby more than the pro-free trade group.
B) The pro-free trade group generally will lobby more than the anti-free trade group.
C) Usually only the anti-free trade group is concerned about what is best for society at
large.
D) Only the pro-free trade group is concerned about the government’s revenue from
tariffs.
E) Rent seeking is the primary reason why consumers gain from free trade.
Microsoft’s marginal cost of the 100th copy of Microsoft Windows 8 is
A) the maximum amount that someone is willing to pay for the 100th copy of Windows
8.
B) equal to the marginal benefit of the 100th copy of Windows 8.
C) the opportunity cost of producing the 100th copy of Windows 8.
D) the maximum amount that someone is willing to pay Microsoft to obtain the code
that supports Windows 8.
E) greater than the marginal benefit from the 100th copy of Windows 8.
Counting discouraged searchers as unemployed would
A) not change the measured unemployment rate.
B) lower the measured unemployment rate.
C) raise the natural unemployment rate.
D) raise the full employment rate.
E) raise the measured unemployment rate.
The two parts of the inflation-control target are that the inflation-control target range
will be ________ percent a year, and policy will aim at keeping the trend of inflation at
________ percent a year.
A) 3 to 5; 4
B) 1 to 3; 2
C) 2 to 4; 3
D) 0 to 2; 1
E) -1 to 1; 0
A merger is unlikely to be approved if
A) there are fewer than 6 firms in a market.
B) it prevents or substantially lessens competition.
C) the good produced in the market has been deemed a necessity.
D) the industry is government regulated.
E) all of the above
Anti-combine law attempts to
A) support prices.
B) establish Crown corporations.
C) prevent monopoly behaviour.
D) establish fair trade laws.
E) deregulate monopolies.
When the Bank of Canada raises the overnight loans rate, other short-term interest rates
A) fall, consumption expenditure, investment and net exports increase, and the
aggregate demand curve shifts rightward.
B) fall, consumption expenditure, investment and net exports decrease, and the
aggregate demand curve shifts leftward.
C) rise, consumption expenditure, investment and net exports decrease, and the
aggregate demand curve shifts leftward.
D) rise, consumption expenditure, investment and net exports increase, and the
aggregate demand curve shifts rightward.
E) none of the above
At a price of $15, Jack’s quantity demanded of good A is the same as when the price
rises to $16. Jack’s demand for good A is
A) elastic.
B) inelastic.
C) perfectly elastic.
D) unit elastic.
E) perfectly inelastic.
Which factor of production includes the “gifts of nature”?
A) labour
B) capital
C) human capital
D) entrepreneurship
E) land
If property rights are assigned to a common resource, then the
A) government needs to set an ITQ to achieve efficiency.
B) government needs to set a production quota to achieve efficiency.
C) more than the efficient quantity is produced.
D) marginal social benefit increases.
E) marginal private cost becomes equal to the marginal social cost.
Use the figure below to answer the following questions.
Figure 20.3.2
Refer to Figure 20.3.2. In the figure, a recession begins at point ________ and an
expansion begins at point ________.
A) A; B
B) B; C
C) B; A
D) D; C
E) C; D
Redistribution of income from the rich to the poor will lead to a reduction in total
output. This is known as the
A) market distribution.
B) Robin Hood principle.
C) inheritance principle.
D) big tradeoff.
E) capitalist dilemma.
Suppose the country of Tiny Town experiences frictional unemployment. This frictional
unemployment would
A) signal that the country is in a recession.
B) be considered a natural occurrence in a growing economy.
C) signal the number of discouraged searchers is growing.
D) increase structural unemployment.
E) decrease the output gap.
Refer to Table 3.1.1. In 2014, the relative price of coffee in terms of cola is
A) 1.25.
B) 1.00.
C) 0.67.
D) 1.56.
E) unknown without more information.
Refer to the figure below to answer the following questions.
Figure 23.2.3
Refer to Figure 23.2.3. In Figure 23.2.3, if the real interest rate is 6 percent, the quantity
of loanable funds demanded is
A) $150 billion.
B) $300 billion.
C) $450 billion.
D) $600 billion.
E) any amount less than $450 billion.
Consumer surplus
A) plus producer surplus is maximized when resources are used efficiently.
B) is maximized when the market outcome is efficient.
C) equals total revenue minus opportunity cost.
D) equals total revenue minus marginal cost.
E) is maximized in the short run but not in the long run.
Complete the following sentence. As you consume more and more of a good,
A) marginal benefit increases.
B) marginal benefit decreases.
C) marginal benefit always equals marginal cost.
D) marginal benefit increases or decreases depending on where you are on the
production possibilities frontier.
E) the price of the good falls.
Refer to Figure 14.2.3. Assume this firm faces demand curve D2. To maximize
economic profit, this firm in monopolistic competition will charge a price of ________
and produce an output of ________ units.
A) $40; 100
B) $90; 220
C) $80; 200
D) $55; 140
E) $70; 100
If the supply of labour curve is upward sloping but not vertical, and if the value of
marginal product of labour increases,
A) the supply of labour increases.
B) the wage rate rises.
C) the marginal cost of production increases.
D) the exploitation of workers decreases.
E) employment is unchanged.
The aggregate expenditure curve shows the relationship between aggregate planned
expenditure and
A) disposable income.
B) real GDP.
C) the interest rate.
D) consumption expenditure.
E) the price level.
An art collector recently sold a piece of pottery for $300. He had purchased it for $200
two years earlier. How will the most recent sale affect GDP?
A) GDP will increase by $100.
B) GDP is unaffected.
C) GDP will increase by $300.
D) GDP will increase by $200.
E) GDP 2 years ago must be adjusted downwards by $200, and current GDP will rise by
$300.
The supply of loanable funds curve
A) has a positive slope.
B) is vertical.
C) is horizontal.
D) has a negative slope.
E) is upward sloping at low real interest rates and downward sloping at high real
interest rates.
The operating band is
A) the interest rate that is established through an open market operation.
B) the target overnight interest rate plus or minus 25 basis points.
C) the target inflation rate plus or minus a quarter of a percentage point.
D) a half percentage point range in the target inflation rate.
E) the range between the lending rate and the borrowing rate.
Use the figure below to answer the following questions.
Figure 27.2.3
There are no taxes in this economy.
In Figure 27.2.3, the marginal propensity to consume, assuming no income taxes, is
A) 0.3.
B) 0.6.
C) 0.9.
D) 1.0.
E) 0.93.
Which of the following statements is false? Human capital
A) is the accumulated skill and knowledge of human beings.
B) is costly to acquire.
C) increases from on-the-job training.
D) increases from higher wages.
E) increases from education.