MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Which version of the exam do you have? (This is Version C.)

A) Version A B) Version B C) Version C D) Version D
1)
2) A price elasticity of demand of 2 in absolute value means that a 10 percent increase in price
will result in a
A) 2 percent increase in quantity demanded.
B) 2 percent decrease in quantity demanded.
C) 20 percent increase in quantity demanded.
D) 20 percent decrease in quantity demanded.
E) 5 percent decrease in quantity demanded.
2)
Use the information below to answer the following question(s).
Fact 2.1
In an eight -hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight -hour day,
Rolfe can produce either 8 loaves of bread or 8 kilograms of butter.
3) Refer to Fact 2.1. Which one of the following statements is true?
A) Andy has a comparative advantage in butter production.
B) Andy has an absolute advantage in bread production.
C) Rolfe has an absolute advantage in butter production.
D) Andy has an absolute advantage in butter production.
E) Rolfe has a comparative advantage in bread production.
3)
4) Given Fact 2.1, the opportunity cost of producing 1 loaf of bread is
A) 20 minutes (1/3 hour) for Andy and 1 hour for Rolfe.
B) not calculable from the given information.
C) 1/3 kilogram of butter for Andy and 1 kilogram of butter for Rolfe.
D) 8 kilograms of butter for both Andy and Rolfe.
E) 3 kilograms of butter for Andy and 1 kilogram of butter for Rolfe.
4)
5) Which one of the following is an example of capital as a factor of production?
A) money held by General Motors
B) a high school teacher
C) an automobile factory owned by General Motors
D) natural gas
E) a General Motors bond
5)
2
Use the figure below to answer the following question(s).
Figure A1.6
6) The equation of the line in Figure A1.6 is
A) y = -3 + 2x.
B) y =1.5 + 2x.
C) y = 1.5 - 0.5x.
D) y = 1.5 + 0.5x.
E) dependent on where you measure it.
6)
7) The slope of the line in Figure A1.6 is
A) 1/2.
B) 1.
C) -1.
D) 2.
E) dependent on where you measure it.
7)
3
Use the information below to answer the following question(s).
Fact 2.2
Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units
of Y in an hour.
8) Given Fact 2.2, what would be the total output of X and Y in an eight -hour day if Agnes and
Brenda each specialized in producing the good for which they have a comparative
advantage?
A) 24 units of X and 40 units of Y
B) 3 units of X and 5 units of Y
C) 8 units of X and 16 units of Y
D) 16 units of X and 8 units of Y
E) 8 units of X and 32 units of Y
8)
9) Given Fact 2.2, the opportunity cost of producing a unit of Y is
A) 1 unit of X for Agnes and 1/2 unit of X for Brenda.
B) 1 unit of Y for Agnes and 1/2 unit of Y for Brenda.
C) 1 hour for Agnes and 1/2 hour for Brenda.
D) 1 unit of Y for Agnes and 2 units of Y for Brenda.
E) 1 hour for Agnes and 2 hours for Brenda.
9)
4
Use the figure below to answer the following question(s).
Figure 3.2
10) Refer to Figure 3.2. If a consumer's income increases,
A) the supply of pizzas will increase.
B) the demand for pizzas will shift from D
1
to D
2
if pizza is a normal good.
C) a movement from point a to point b on D
1
occurs.
D) the quantity supplied of pizzas decreases.
E) the quantity demanded of pizzas will increase.
10)
11) Refer to Figure 3.2. Which one of the following represents a decrease in quantity demanded?
A) A movement from b to a.
B) A movement from a to b.
C) A shift from D1
to D2
.
D) A shift from D2
to D1
.
E) none of the above
11)
12) The fact that individual productive resources are not equally useful in all activities
A) follows from the law of demand.
B) implies a linear production possibilities frontier.
C) implies that a production possibilities frontier will be bowed out.
D) implies that an economy should not produce certain goods.
E) implies that gains from specialization and trade are unlikely.
12)
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13) In general, if country A is accumulating capital at a faster rate than country B, then country
A
A) will have more unemployment than country B.
B) is using a larger proportion of resources to produce consumption goods.
C) will soon have a comparative advantage in the production of most goods.
D) will have a production possibilities frontier that is shifting out faster than country B's.
E) will have a higher rate of inflation than country B.
13)
14) Which one of the following concepts is not illustrated by a production possibilities frontier?
A) opportunity cost
B) attainable and unattainable points
C) the tradeoff between producing one good versus another
D) monetary exchange
E) scarcity
14)
Use the figure below to answer the following question(s).
Figure 2.3
15) Refer to the production possibilities frontier in Figure 2.3. Which one of the following
movements requires the largest opportunity cost of increased Y?
A) d to c
B) c to b
C) e to d
D) b to a
E) The opportunity cost is the same in each case.
15)
6
16) Which one of the following illustrates an inelastic demand?
A) A price elasticity measure of infinity.
B) A 10 percent increase in price leads to a 5 percent decrease in quantity demanded.
C) A price elasticity measure of 2.0.
D) A 10 percent increase in price leads to a 20 percent decrease in quantity demanded.
E) A price elasticity measure of 1.0.
16)
17) Suppose Lisa's production possibilities frontier is given by 7X +2Y=150. Marge's production
possibilities frontier is described by the equation 2X +6Y=180. At which of the following prices
of good X (in terms of good Y) would Lisa and Marge be willing to trade with each other?
(1) 7
(2) 1/9
(3) 5/3
(4) 1/2
A) prices (3) and (4) B) prices (1) and (2)
C) None of the prices given above. D) All of the prices given above.
17)
18) Consider a country that has two industries. In the north, they grow wild rice, which requires
a lot of rainfall. In the south, they grow wheat, which requires just a moderate amount of
rainfall (too much rainfall is bad for wheat production). One year, there is a record rainfall.
This will result in
A) a parallel shift outward of the production possibilities frontier.
B) the production possibilities frontier swiveling, with the wild rice intercept shifting
outward, and the wheat intercept shifting inward.
C) a parallel shift inward of the production possibilities frontier.
D) the production possibilities frontier swiveling, with the wild rice intercept shifting
inward, and the wheat intercept shifting outward.
E) none of the above.
18)
19) Some sales managers are talking shop. Which one of the following quotations refers to a
rightward shift in the demand curve?
A) "Since our competitors raised their prices, our sales have doubled."
B) "It has been an unusually harsh winter; our sales of wool scarves are up from last year."
C) "We decided to cut our prices, and the increase in our sales has been remarkable."
D) "The Green movement has sparked an increase in our sales of biodegradable products."
E) All of the above except C.
19)
7
Use the figure below to answer the following question(s).
Figure A1.18
20) Consider the values for x and y given in the following table:
x 2 4 6 8 10
y 12 8 5 3 2
Which one of the graphs in Figure A1.18 represents the relationship between x and y?
A) (a)
B) (b)
C) (c)
D) (d)
E) (a) and (b)
20)
8
21) The relative price of a good is all of the following except:
A) the ratio of one price to another.
B) the same as the nominal price of a good.
C) the money price of the good divided by a price index.
D) an opportunity cost.
E) all of the above.
21)
22) The study of how wages are set for New Brunswick teachers would be considered
A) normative economics.
B) economics of private interest.
C) economics of social interest.
D) macroeconomics.
E) microeconomics.
22)
23) Which of the following statements is/are normative?
A) Warts are caused by handling toads.
B) If income increases, sales of luxury goods will fall.
C) As compact disc prices fall, people will buy more of them.
D) Scientists should not make normative statements.
E) none of the above
23)
24) The big tradeoff is between
A) guns and butter.
B) taxes and transfers.
C) equity and efficiency.
D) current consumption and a higher future standard of living.
E) output and inflation.
24)
Use the table below to answer the following question(s).
Table 3.1
Year Coffee Price Tea Price Cola Price
2000 $1.25 $1.10 $0.80
2001 $1.50 $1.00 $1.00
2002 $1.25 $1.20 $1.00
25) Consider Table 3.1. In 2002, the relative price of coffee in terms of cola is
A) 1.00.
B) 1.56.
C) 0.67.
D) 1.25.
E) not determinable without more information.
25)
9
26) An increase in the price of ground beef will
A) increase the demand for chicken, a substitute for beef.
B) increase the demand for hamburger buns, a complement for beef.
C) increase the quantity demanded of ground beef.
D) decrease the quantity demanded of ground beef.
E) both A and D.
26)
27) Suppose Shery's demand for a good is given by Q =45-5P, where Q denotes quantity
demanded and P denotes the price of the good. Then if the price of the good is 7, Shery's
demand is
A) elastic. B) unit elastic.
C) perfectly inelastic. D) inelastic.
27)
28) A welder makes $25 an hour and must take two hours off work (without pay) to go to the
dentist for a filling. The dentist charges $100. The opportunity cost of the welder's trip to the
dentist is
A) $125. B) $150. C) $100. D) $50. E) $75.
28)
29) In a competitive market
A) consumers and producers are thought of as price takers.
B) some consumers has the ability to lower price by simply refusing to buy the good.
C) consumers are price takers but producers can affect price.
D) consumers and producers are thougth of as price makers.
29)
30) The scientific purpose of simplifying assumptions in an economic model is to
A) eliminate the possibility of personal bias in the model.
B) avoid confronting difficult issues.
C) abstract from the complexities of the real world those issues that are not important for
the issues under examination.
D) eliminate the need for further testing of the implications of the model.
E) add necessary hypotheses to the problem.
30)
31) Which of the following is true regarding marginal benefit?
I. The marginal benefit curve shows the benefit firms receive by producing another
unit of a good.
II. Marginal benefit increases as more and more of a good is consumed.
III. Marginal benefit shows the maximum amount a person is willing to pay to
obtain one more unit of a good.
A) I and II.
B) I only.
C) I and III.
D) III only.
E) I, II, and III.
31)
10
Use the figure below to answer the following question(s).
Figure 4.2
32) Figure 4.2 illustrates a linear demand curve. If the price falls from $13 to $11, we know
A) total revenue will remain unchanged.
B) the effect on total revenue cannot be determined.
C) the effect on total revenue can be determined only with information on the quantities.
D) total revenue will decrease.
E) total revenue will increase.
32)
33) During the next hour John can choose one of the following three activities: playing
basketball, watching television, or reading a book. The opportunity cost of reading a book
A) is the value of playing basketball and the value of watching television.
B) depends on how much John enjoys the book.
C) is the value of playing basketball if John prefers that to watching television.
D) depends on how much the book cost when it was purchased.
E) is the value of watching television if John prefers playing basketball to watching
television.
33)
11
Use the figure below to answer the following question(s).
FigureA1.7
34) In FigureA1.7, the variables x and y
A) are negatively related.
B) move up and down together.
C) are positively related.
D) reach a maximum when x is zero.
E) are negatively related such that an increase in x causes y to decrease.
34)
35) If turnips are an inferior good, then, ceteris paribus, an increase in the price of turnips will
A) increase the supply of turnips.
B) increase the demand for turnips.
C) decrease the supply of turnips.
D) decrease the demand for turnips.
E) none of the above.
35)
12
Use the figure below to answer the following question(s).
Figure A1.12
36) Refer to Figure A1.12. The slope across the arc between a and b is
A) 1/2.. B) 3. C) 2. D) 2/3. E) 1.
36)
Use the figure below to answer the following question(s).
Table 2.4 The planets of Vulcan and Romulus each produce goods X and Y. The following table gives points on their
production possibilities frontiers.
Vulcan Romulus
Good X Good Y Good X Good Y
0 16 0 12
2 12 2 9
4 8 4 6
6 4 6 3
8 0 8 0
37) Refer to Table 2.4. Each country will gain from trade if
A) Romulus specializes in good X.
B) Romulus specializes in both goods.
C) Vulcan specializes in good X .
D) they both continue to produce both goods.
E) Vulcan specializes in both goods.
37)
13
38) Suppose Tom's production possibilities frontier is given by 3X+2Y =100. Jerry's production
possibilities frontier is described by the equation X+5Y =80. If the only input in each
production process is labour and Tom has exactly 10 units of labour, then the amount of
labour required to produce one unit of good X in Tom's economy is
A) 3/10 B) 2 C) 10/3 D) 5/10
38)
39) Which of the following is an example of a positive economics?
A) Every Canadian should have equal access to health care.
B) The Central Bank of Canada ought to cut the interest rate.
C) Increasing the minimum wage results in more unemployment.
D) Canada should cut back on its use of carbon -based fuels such as coal and oil.
E) Canada should decrease the rate of unemployment.
39)
40) Which of the following is a macroeconomic topic?
A) Why do grain producers purchase less pesticides?
B) Why are people buying more SUVs and fewer minivans?
C) How would an unexpected freeze in Oxford, Nova Scotia reduce the price of
blueberries in the Maritimes?
D) How would a tax on e -commerce affect Chapters.ca?
E) Why is Japan's economy stagnated?
40)
41) An economy in which the behaviour of consumers and producers determines what, how,
and for whom goods and services get produced is known as
A) the centrally planned economy.
B) the global economy.
C) the new economy.
D) the market economy.
E) the positive economy.
41)
42) A person who has an absolute advantage in the production of all goods will
A) not have a comparative advantage in the production of any goods.
B) not be able to gain from specialization and exchange.
C) generally have a comparative advantage in the production of only some goods and not
others.
D) produce all goods at the lowest opportunity cost.
E) also have a comparative advantage in the production of all goods.
42)
14
Use the figure below to answer the following question(s).
Figure 4.1
43) Figure 4.1 illustrates a linear demand curve. Comparing the price elasticity in the $2 to $3
price range with the elasticity in the $8 to $9 range, we can conclude
A) that demand is more elastic in the $2 to $3 price range.
B) that demand is more elastic in the $8 to $9 price range.
C) nothing without numerical information about quantities.
D) that the elasticity of demand is zero in both price ranges, since we have a straight -line
demand curve.
E) that the elasticity of demand is the same in both price ranges.
43)
44) Suppose that the price elasticity of demand for bottled water in Sackville, New Brunswick is
1.5, while the price elasticity of demand for bottled water in Prince Albert, Saskatchewan is
0.93. This implies that the demand in Sackville is ________ and demand in Prince Albert is
________.
A) perfectly elastic; inelastic
B) inelastic; elastic
C) unitary elastic; unit elastic
D) elastic; unit elastic
E) elastic; inelastic
44)
45) Suppose a rise in the price of a good from $6.50 to $7.50 leads to a decrease in quantity
demanded from 10,500 to 9,500 units. In this range of the demand curve, the price elasticity
of demand is
A) 1,000. B) 7. C) 14. D) 0.7. E) 1.
45)
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46) Peter lives in a bachelor appartment in Toronto. Fifty dollars out of his monthly rent is used
to pay for his water consumption. If Peter's demand for water is Q =100-P/5, where Q
denotes the amount of water he demands given the price of water is P, then Peter's home
consumption of water will be
A) 90 units of water B) 100 units of water
C) efficient. D) Both (A) and (C) are correct.
46)
Use the figure below to answer the following question(s).
Figure 2.4
47) In Figure 2.4, when 4,000 bicycles are made each month, we can see that
A) more bicycles should be produced to reach the efficient level of output.
B) the marginal benefit from another bicycle is greater than the marginal cost of another
bicycle.
C) the economy is very efficient at this level of production of bicycles.
D) fewer bicycles should be produced to reach the efficient level of output.
E) both A and B.
47)
48) Suppose Lan can produce two goods, X and Y, using her 8 units of labour. If Lan's has
constant opportunity cost of good X equal to 3 and the maximum amount of good Y she can
produce is 160, then Lan's production possibilities frontier is given by the equation
A) None of the other choices given is correct.
B) 3X +Y=160
C) X/60+Y/20=8
D) X+3Y=480
48)
49) If a 10 percent rise in price leads to an 8 percent decline in quantity demanded, the price
elasticity of demand is
A) 1.25. B) 0.125. C) 0.8. D) 8. E) 80.
49)
16
Use the figure below to answer the following question(s).
Figure A1.10
50) In Figure A1.10, what is the relationship between quantity demanded and income, ceteris
paribus?
A) the relationship depends on the value of income
B) independent
C) positive
D) the relationship depends on the value of price
E) negative
50)
51) California has superior soil, more water, and better weather than Saskatchewan. It
frequently has more than one crop a year, and can grow more of any crop than can
Saskatchewan. Select the best statement.
A) California will gain from trading.
B) Saskatchewan will gain from trading.
C) California has an absolute advantage in the production of all products.
D) Saskatchewan has an absolute advantage in the production of all products.
E) California has a comparative advantage in the production of all products.
51)
17