If a profit-maximizing firm in a perfectly competitive market is incurring an economic
loss, then it must be producing a level of output where
A) price is greater than marginal cost.
B) price is greater than marginal revenue.
C) marginal cost is greater than marginal revenue.
D) average total cost is greater than marginal cost.
E) average total cost is less than marginal cost.
Refer to the production possibilities frontier in Figure 2.1.3. The opportunity cost of
moving from C to B will be
A) greater than moving from D to C but less than moving from B to A.
B) less than moving from D to C but greater than moving from B to A.
C) the same as moving from D to C or moving fromB to A.
D) greater than moving either from D to C or from B toA.
E) less than moving from E to D.
Suppose the exchange rate between the Canadian dollar and the British pound is 0.5
pounds per dollar. If a radio sells for 38 pounds in Britain and purchasing power parity
holds, what is the dollar price of the radio?
A) $19
B) $26
C) $38
D) $57
E) $76
Use the figure below to answer the following question.
Figure 12.2.1
Refer to Figure 12.2.1, which shows a perfectly competitive firm’s total revenue and
total cost curves. Which one of the following statements is false?
A) Economic profit is the vertical distance between the total revenue curve and the total
cost curve.
B) At an output of Q1 units a day, the firm makes zero economic profit.
C) At an output greater than Q3 units a day, the firm incurs an economic loss.
D) At an output of Q2 units a day, the firm incurs an economic loss.
E) At an output less than Q1 units a day, the firm incurs an economic loss.
With a given income and prices of goods, Marcus is in consumer equilibrium when
A) he purchases the same amounts of all goods.
B) his marginal utility from all goods is maximized.
C) his marginal utility from all goods is equal.
D) he maximizes total utility.
E) his total utility per dollar is equal for all goods.
If Sean thinks that the choice between going to Olive Garden or Red Lobster is simply
too confusing, a behavioural economist will explain that Sean is showing
A) the endowment effect.
B) bounded rationality.
C) bounded self-interest.
D) bounded willpower.
E) irrational behaviour.
When the unemployment rate is less than the natural unemployment rate, real GDP is
________ than potential GDP and the output gap is ________.
A) greater; positive
B) smaller; positive
C) greater; negative
D) smaller; negative
E) greater; equal to zero
Use the table below to answer the following questions.
Table 11.2.2
Refer to Table 11.2.2 which gives Tania’s total product schedule. The average product
when the firm employs four workers is
A) 2 teapots per worker.
B) 8 teapots per worker.
C) 12 teapots per worker.
D) 15 teapots per worker.
E) 3.75 teapots per worker.
Refer to Table 26.3.1. Consider the economy represented in the table. The economy is
in
A) a long-run equilibrium, and resource prices will not change.
B) an above full-employment equilibrium, and factor prices will increase.
C) an above full-employment equilibrium, and factor prices will decrease.
D) a below full-employment equilibrium, and factor prices will decrease.
E) a below full-employment equilibrium, and factor prices will increase.
In the National Income and Expenditure Accounts, government expenditure refers to
spending on goods and services by
A) federal and provincial governments only.
B) the federal government only. Provincial and local government expenditures are
included in provincial GDP calculations.
C) provincial and local governments only.
D) federal, provincial, and local governments.
E) the federal government and local governments only. Provincial government
expenditures are included in provincial GDP calculations.
Refer to Table 3.4.1. If the price is $7, then the surplus is
A) 360 units.
B) 400 units.
C) 160 units.
D) zero units.
E) 290 units.
Choose the statement that is incorrect.
A) Gains from trade do not bring gains for every single person.
B) Canadians, on average, gain from offshore outsourcing.
C) The losers from offshore outsourcing are those who have invested in the human
capital to do a specific job that has now gone offshore.
D) The costs from offshore outsourcing outweigh the gains.
E) Offshore outsourcing brings gains from trade identical to those of any other type of
trade.
Toyota and Honda build additional plants in Canada. This event ________ short-run
aggregate supply and ________ long-run aggregate supply.
A) does not change; increases
B) increases; increases
C) increases; does not change
D) does not change; does not change
E) decreases; increases
Total revenue is more likely to rise when the price falls if
A) there are few substitutes for the good.
B) a low proportion of income is spent on the good.
C) some extended period of time passes.
D) all of the above
E) none of the above
Which of the following ideas apply to the neoclassical growth theory?
I. The rate of technological change influences the rate of economic growth.
II. Technological change promotes saving and investment.
III. Convergence of economic growth rates across countries.
A) I only
B) II only
C) III only
D) I and II only
E) I, II, and III
Everything else remaining the same, as the economy enters a recession,
A) tax revenues rise and interest payments on the debt rise.
B) tax revenues and transfer payments rise.
C) government outlays rise and tax revenues fall.
D) government outlays tend to fall and tax revenues fall.
E) interest payments on the debt rise and tax revenues fall.
In Figure 25.3.1, suppose the demand for dollars permanently decreases to D2. To
maintain the target, the Bank of Canada
A) buys dollars.
B) sells dollars.
C) must decrease the country’s net exports.
D) cannot permanently maintain the exchange rate target of 90 U.S. cents per Canadian
dollar.
E) must increase the country’s net exports.
The elasticity of supply for airplane travel one year in advance of the departure date is
most likely to be
A) substantially lower than -1.
B) between -1 and zero.
C) between zero and 1.
D) around 1.
E) substantially greater than 1.
Suppose a profit-maximizing firm hires labour in a competitive labour market. If the
value of marginal product of labour is greater than the wage rate, the firm should
A) increase the wage rate.
B) decrease the wage rate.
C) increase the quantity of labour it hires.
D) decrease the quantity of labour it hires.
E) shift to a more labour-intensive production process.
Refer to Figure 7.3.1. With the tariff, Canada imports ________ million shirts per year.
A) 24
B) 8
C) 32
D) 16
E) 40
Use the table below to answer the following questions.
Table 23.2.3
The table shows an economy’s demand for loanable funds schedule and supply of
loanable funds schedule.
Consider Table 23.2.3. If planned saving decreases by $1.0 trillion at each real interest
rate, what is the new equilibrium real interest rate?
A) 2 percent a year
B) 5 percent a year
C) 2.5 percent a year
D) 3.5 percent a year
E) There is no new equilibrium real interest rate.
Barter can only take place if there is
A) money.
B) a double coincidence of wants.
C) a double coincidence of money.
D) no inflation.
E) low transaction costs.
The current Governor of the Bank of Canada is
A) Stephen Harper.
B) Stephen Poloz
C) David Dodge.
D) Paul Martin.
E) Ben Bernanke.
An externality is
A) the amount by which price exceeds marginal private cost.
B) the amount by which price exceeds marginal social cost.
C) the effect of government regulation on market price and output.
D) someone who consumes a good without paying for it.
E) a cost or benefit that arises from an activity but affects people not part of the original
activity.
Refer to Figure 11.2.1 which illustrates Tania’s total product curve. Marginal product of
labour reaches its maximum when the number of workers increases from
A) zero to 1.
B) 1 to 2.
C) 2 to 3.
D) 3 to 4.
E) 4 to 5.
Refer to Table 3.5.2. A premature frost destroys half the coffee trees and the supply of
coffee is cut in half. The new equilibrium price is $________ and the new equilibrium
quantity is ________ cups a day.
A) 1.30; 600
B) 1.50; 400
C) 0.90; 400
D) 1.20; 700
E) 1.30; 500
If a profit-maximizing monopoly is producing an output at which marginal cost exceeds
marginal revenue, it
A) should raise the price and decrease output.
B) should lower the price and increase output.
C) should lower the price and decrease output.
D) is incurring an economic loss.
E) is maximizing profit.
Tariffs and import quotas differ in that
A) one is a form of trade restriction, while the other is not.
B) one is a tax, while the other is a limit.
C) one is imposed by the government, while the other is imposed by the private sector.
D) one is legal, while the other is not.
E) one increases imports, while the other decreases imports.
The idea of dynamic comparative advantage is the basis for which of the following
arguments for protection from foreign competition?
A) the cheap foreign labour argument
B) the infant-industry argument
C) the dumping argument
D) the saves jobs argument
E) the prevents rich countries from exploiting developing countries argument
The infant-industry argument is based on the idea of
A) global comparative advantage.
B) global absolute advantage.
C) tariff maximization.
D) learning-by-doing.
E) tariff minimization.
Refer to Figure 27.1.2. The marginal propensity to consume is
A) 800.
B) 0.8.
C) 0.2.
D) 0.25.
E) 0.75.
Suppose the demand for CDs is elastic, but not perfectly elastic, and the supply is
inelastic, but not perfectly inelastic. A tax on CDs is paid
A) equally by buyers and sellers.
B) mostly by sellers.
C) mostly by buyers.
D) by neither buyers nor sellers.
E) totally by sellers.
A $10 per-unit tax on MP3 players raises the equilibrium price paid by consumers by
$5. The quantity sold before the tax was 5,000 per year. The revenue from the tax is
A) zero.
B) positive but less than $50,000 per year.
C) $50,000 per year.
D) more than $50,000 per year.
E) greater the more elastic is demand.