Consider the market for cell phones. Suppose the price of a cell phone falls. Explain the
effect of this event on the quantity of cell phones demanded and on the demand for cell
phones.
A) The quantity of cell phones demanded is unchanged and the demand for cell phones
increases.
B) The quantity of cell phones demanded decreases and the demand for cell phones is
unchanged.
C) The quantity of cell phones demanded increases and the demand for cell phones is
unchanged.
D) The quantity of cell phones demanded increases and the demand for cell phones also
increases.
E) The quantity of cell phones demanded is unchanged and the demand for cell phones
decreases.
Demand is inelastic if
A) a small change in price results in a large change in quantity demanded.
B) the quantity demanded is very responsive to a change in price.
C) the price elasticity of demand is 0.2.
D) the price does not change when supply increases.
E) a 10 percent change in price results in a 1 percent change in the quantity supplied.
Last year you earned $45,000 and paid $9,000 in income taxes. This year you earned
$60,000 and paid $15,000 in income taxes. What type of income tax do you face?
A) regressive
B) proportional
C) progressive
D) flat
E) Both B and D are correct.
Prior to international trade, if the price of good X is lower in country A than in country
B,
A) country B has an absolute advantage in the production of good X.
B) country B has a comparative advantage in the production of good X.
C) country A has an absolute advantage in the production of good X.
D) country A has a comparative advantage in the production of good X.
E) country B should stop producing good X.
Suppose that the E.U. economy goes into an expansion. Canadian real GDP ________
and Canadian unemployment ________ in the short run.
A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases
E) does not change; does not change
Import quotas and tariffs both
A) decrease deadweight loss.
B) cause a loss of revenue to domestic producers.
C) lower prices on imported goods.
D) decrease producer surplus.
E) restrict foreign trade.
Who are the members of the Bank of Canada’s Governing Council?
A) the Ministers of Finance from each province as well as the Federal Minister of
Finance
B) the Prime Minister, the Minister of Finance, and the Bank’s Governor
C) the Minister of Finance, the Governor, and four Deputy Governors
D) the Bank’s Governor, Senior Deputy Governor, and four Deputy governors who are
appointed by the Prime Minister to represent the public interest
E) the Bank’s Governor, Senior Deputy Governor, and four Deputy Governors
Methods of rent seeking include which of the following?
I. Buying a monopoly
II. Creating a monopoly
III. Price discrimination
A) I and II
B) I and III
C) II and III
D) III only
E) II only
If there is a successful collusive agreement in a duopoly to maximize profit,
A) the market price will equal the marginal cost of production.
B) the market price will equal the average total cost of production.
C) the price will be the same as the price in a perfectly competitive market.
D) the price will be the monopoly price.
E) the market marginal revenue will be the same as the demand curve.
A tariff on watches which are imported by Atlantis ________ the price of watches in
Atlantis and ________.
A) lowers; imports of watches increase
B) raises; watch production in Atlantis increases
C) raises; watch production in Atlantis decreases
D) lowers; watch production in Atlantis increases
E) lowers; watch production in Atlantis decreases
The marginal cost (MC) curve intersects the
A) ATC, AVC, and AFC curves at their minimum points.
B) ATC and AFC curves at their minimum points.
C) AVC and AFC curves at their minimum points.
D) ATC and AVC curves at their minimum points.
E) TC and TVC curves at their minimum points.
Use the table below to answer the following question.
Table 4.1.4
Refer to Table 4.1.4. The table shows the demand schedule for computer chips. As the
price rises from $200 a chip to $300 a chip, total revenue ________. So at a price of
$250 a chip, demand is ________.
A) falls; inelastic
B) rises; inelastic
C) falls; rises
D) rises; elastic
E) rises; unit elastic
Chanel has the option of purchasing one of three products: Brand A, Brand B, or Brand
C. The price of each product is $10. If Chanel decides to purchase Brand A, the
opportunity cost of this decision is
A) $20.
B) Brand B or Brand C, depending on which she considers to be the highest-valued
alternative forgone.
C) Brand A.
D) Brand B and Brand C.
E) zero if this is a frivolous purchase with no marginal benefit.
Use the information below to answer the following questions.
Fact 15.1.1 An Energy Drink with a Monster of a Stock
The $5.7 billion energy-drink category, in which Monster holds the No. 2 position
behind industry leader Red Bull, has slowed down as copycat brands jostle for shelf
space. Over the past five years Red Bull’s market share in dollar terms has gone from 91
percent to well under 50 percent and much of that loss has been Monster’s gain.
Refer to Fact 15.1.1. During the past few years, the energy-drink market has changed
from ________ to ________.
A) oligopoly; perfectly competitive
B) monopolistically competitive; perfectly competitive
C) oligopoly; monopolistically competitive
D) near monopoly; oligopoly
E) near monopoly; perfectly competitive
Refer to Fact 31.3.1. The quantity of Canadian exports to Mexico has ________ and the
Canadian government’s tariff revenue from trade with Mexico has ________.
A) not changed; not changed
B) decreased; increased
C) increased; increased
D) increased; decreased
E) increased; not changed
In long-run equilibrium, a firm in monopolistic competition
A) makes zero economic profit and operates with excess capacity.
B) makes zero economic profit and produces above capacity output.
C) makes a positive economic profit and operates with excess capacity.
D) makes a positive economic profit and produces above capacity output.
E) incurs an economic loss and exits the market.
Refer to the production possibilities frontier in Figure 2.1.1. Which one of the following
is true about point C?
A) It is attainable only if we consume more of good X.
B) It is unattainable.
C) It is attainable only if we consume less of good Y.
D) It is attainable only if we consume less of good X.
E) It is attainable only if we consume more of good Y.
When a market is in equilibrium,
A) there is neither a surplus nor a shortage.
B) the number of buyers equals the number of sellers.
C) firms are producing the maximum quantity possible given the existing technology.
D) supply equals demand.
E) the quantity supplied is greater than or equal to the quantity demanded.
An increase in investment shifts the AE curve upward by an amount equal to the
________, and shifts the AD curve rightward by an amount equal to the ________.
A) change in investment; change in investment times the multiplier
B) change in investment times the multiplier; change in investment times the multiplier
C) change in investment times the multiplier; change in investment
D) change in investment; change in investment
E) change in investment divided by the multiplier; change in investment
Refer to Figure 5.3.2. If the level of output is 200 units, the deadweight loss is area
A) BCF.
B) ACG.
C) DCE.
D) ACH.
E) HCG.
Refer to Figure 6.3.2. Between 200 and 300 units, demand is
A) inelastic.
B) unit elastic.
C) elastic.
D) perfectly inelastic.
E) perfectly elastic.
Use the figure below to answer the following questions.
Figure 13.5.2
Consider the natural monopoly depicted in Figure 13.5.2. If a regulator uses a marginal
cost pricing rule to set price, what is the quantity produced?
A) 0
B) Q0
C) Q1
D) Q2
E) Q3
If a consumer’s income increases and if all goods are normal goods,
A) the quantity bought of each good decreases.
B) the quantity bought of some normal goods increases and of other normal goods
decreases, but we can’t make an accurate prediction.
C) some goods become inferior because it isn’t possible to buy all goods.
D) the quantity bought of each good increases.
E) the supply of all goods increases and the marginal utility from all goods decreases.
Initially, the demand curve for good A is D2 in Figure 3.5.1. If income increases and A
is a normal good, we would expect to see a movement from point A to point
A) B.
B) C.
C) D.
D) E.
E) C and back to point A.
Counting involuntary part-time workers as unemployed would
A) not change the actual 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.
A trigger strategy is one in which a player
A) cooperates in the current period if the other player cooperated in the previous period,
but cheats in the current period only if the other player cheated in the previous period.
B) cheats in the current period if the other player cooperated in the previous period, but
cooperates in the current period if the other player cheated in the previous period.
C) cooperates in the current period if the other player has always cooperated, but cheats
forever if the other player ever cheats.
D) cheats in the current period if the other player has always cheated, but cooperates
forever if the other player has ever cooperated.
E) changes his or her strategy in a random manner.
There exists an incentive to cheat on a collusive agreement as long as
A) price equals marginal cost.
B) price equals marginal revenue.
C) price exceeds marginal cost.
D) price is above minimum average total cost.
E) the market is perfectly competitive.
The key ripple effect in real business cycle theory is the ________ decision and it
depends on the ________.
A) when-to-invest; real interest rate
B) when-to-work; real interest rate
C) what-to-save; nominal interest rate
D) where-to-work; real wage rate
E) when-to-work; rigidity of the money wage rate
People become unemployed when they
A) retire.
B) are on maternity leave.
C) quit working to go to university.
D) leave university and start seeking work.
E) become discouraged searchers.
Choose the statement that is incorrect.
A) The actual path of the CPI was on trend from 1995 through 1998.
B) Between 1999 and 2001, the CPI moved below the 2 percent trend line.
C) The actual path of the CPI was below trend from 2001 through 2007.
D) The Bank of Canada and the Government of Canada agree that the inflation-control
target range will be 1 percent to 3 percent.
E) After 2008, the CPI was below trend.
Which market is an example of a market for factors of production?
A) furniture market
B) apple market
C) automobile market
D) haircut market
E) labour market
A perfectly competitive firm’s supply curve includes its marginal cost curve at all prices
above minimum
A) average total cost.
B) average fixed cost.
C) total cost.
D) average variable cost.
E) total variable cost.
Which of the following is an explanation for the existence of trade restrictions?
A) tariffs generate revenue for the government
B) rent seeking
C) inefficient quotas
D) both A and B
E) both A and C
According to the real business cycle theory, during a recession the demand for labour
________ and the supply of labour ________.
A) increases; decreases
B) decreases; does not change
C) does not change; decreases
D) decreases; decreases
E) decreases; increases
The economy starts out at a full-employment equilibrium. Some events then occur that
generate a demand-pull inflation. All of the following events except an increase in
________ might start a demand-pull inflation.
A) the money wage rate
B) exports
C) the quantity of money
D) government expenditure
E) transfer payments