Untitled Economics Exam Paper PDF

Which statement best describes the "law of demand"? Other things being equal, the quantity of tennis rackets demanded will be greater if the Question 1 Select one: a. incomes of tennis players are higher. b. price of tennis rackets is lower. Correct c. demand for tennis rackets rises. d....

Which statement best describes the "law of demand"? Other things being equal, the quantity of tennis rackets demanded will be greater if the Question 1 Select one: a. incomes of tennis players are higher. b. price of tennis rackets is lower. Correct c. demand for tennis rackets rises. d. number of tennis players is higher. e. price of badminton rackets is higher. Feedback The correct answer is: price of tennis rackets is lower. Question 2 Correct Mark 1.00 out of 1.00 Flag question Question text Consider a negatively sloped demand curve for natural gas. If the supply of natural gas increases, the new equilibrium will have Question 2 Select one: a. the same price and larger quantity. b. a higher price and a larger quantity. c. a lower price and a greater quantity.  Correct d. a lower price and a smaller quantity. e. a higher price and a smaller quantity. Feedback The correct answer is: a lower price and a greater quantity. Question 3 Correct Mark 1.00 out of 1.00 Flag question Question text This table shows how much wine and cheese can be produced in Spain and Portugal with one unit of equivalent resources. Initially there is no trade. Once trade opens up, transportation costs are assumed to be zero.  Wine Cheese (units) (units) Spain 2 8 Portugal 2 3 TABLE 32-5 Refer to Table 32-5. The comparative advantage in cheese is held by Question 3 Select one: a. Insufficient information to know. b. both countries. c.  Spain. Correct d. Portugal. e. neither country. Feedback The correct answer is: Spain. Question 4 Correct Mark 1.00 out of 1.00 Flag question Question text Which of the following illustrates elastic demand? Question 4  Select one: a. a price elasticity of 1.0 b. a price elasticity of 0.8 c. A 10% increase in price causes a 20% decrease in quantity demanded. Correct d. A 10% increase in price causes a 10% reduction in quantity demanded. e. A 10% increase in price causes a 5% decrease in quantity demanded. Feedback The correct answer is: A 10% increase in price causes a 20% decrease in quantity demanded. Question 5 Correct Mark 1.00 out of 1.00 Flag question Question text Normal goods Question 5 Select one: a. have negative income elasticity of demand. b. have positive income elasticity of demand. Correct c. are sometimes also inferior goods. d. have negative elasticity of supply. e.  do not have elasticity of demand. Feedback The correct answer is: have positive income elasticity of demand. Question 6 Correct Mark 1.00 out of 1.00 Flag question Question text Suppose that the free-market equilibrium price of natural gas would be $2.00 per unit, but in an effort to protect consumers the government has fixed the price at $1.50. At this ceiling price the quantity ________ will be greater than the quantity ________, resulting in a ________ of natural gas. Question 6 Select one: a. demanded; supplied; shortage Correct  b. demanded; supplied; surplus c. supplied; demanded; shortage d. supplied; demanded; surplus e. demanded; supplied; reduction in equilibrium price Feedback The correct answer is: demanded; supplied; shortage Question 7 Correct Mark 1.00 out of 1.00 Flag question Question text Economists use the term "marginal utility" to describe the Question 7 Select one: a. total satisfaction received from consumption of a good. b. price paid for every unit consumed. c. change in total satisfaction caused by consumption of an additional unit of a good. Correct d. inverse of the measure of total utility. e. average utility of each unit of a good consumed. Feedback The correct answer is: change in total satisfaction caused by consumption of an additional unit of a good. Question 8 Correct Mark 1.00 out of 1.00 Flag question Question text Any consumption point that is on the budget line Question 8 Select one: a. implies the household is paying below-market prices for the goods in question. b. indicates consumption spending beyond current income. c. implies that the household is spending all of its income on the goods in question.  Correct d. implies that the household is not spending all of its income on the goods in question. e. implies the household is paying above-market prices for the goods in question. Feedback The correct answer is: implies that the household is spending all of its income on the goods in question. Question 9 Correct Mark 1.00 out of 1.00 Flag question Question text The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital. When answering the questions, you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100. Labour per unit of time Total output 0 0 1 25 2 75 3 175 4 250 5 305 TABLE 7-4 Refer to Table 7-4. The marginal product of labour is at its maximum when the firm changes the amount of labour hired from Question 9 Select one: a. 2 to 3 units.  Correct b. 4 to 5 units. c. 0 to 1 unit. d. 1 to 2 units. e. 3 to 4 units. Feedback The correct answer is: 2 to 3 units. Question 10 Incorrect Mark 0.00 out of 1.00 Flag question Question text A short-run average total cost curve and a long-run average cost curve are tangent Question 10 Select one: a. where the short-run cost curve is downward sloping and the plant size is optimal. b. where the short-run cost curve is upward sloping. c. where the short-run cost curve is downward sloping. Incorrect d. by coincidence. e. when the plant size is at the optimal level for that level of output. Feedback  The correct answer is: when the plant size is at the optimal level for that level of output. Question 11 Correct Mark 1.00 out of 1.00 Flag question Question text Any firm's average revenue is defined as Question 11 Select one: a. the change in total revenue resulting from the sale of an additional unit of the product. b. the total amount received by the seller from the sale of a product. c.  the change in price resulting from the sale of an additional unit of the product. d. price times quantity of the product sold. e. total revenue divided by the number of units sold. Correct Feedback The correct answer is: total revenue divided by the number of units sold. Question 12 Correct Mark 1.00 out of 1.00 Flag question Question text Suppose a typical firm in a competitive industry has the following data in the short run: price = $10; output = 100 units; ATC = $8; AVC = $7. What will likely happen in the long run? Question 12 Select one: a. The typical firm would shut down, until the remaining firms have a higher price. b. The size of the industry will remain the same in the long run. c. In the long run the industry will contract because firms are suffering losses. d. There is not enough information to formulate an answer. e. In the long run the industry will expand because firms are earning economic profits. Correct Feedback The correct answer is: In the long run the industry will expand because firms are earning economic profits. Question 13 Correct Mark 1.00 out of 1.00 Flag question Question text Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5 Refer to Figure 10-5. A profit-maximizing single-price monopolist would charge the price Question 13 Select one: a. P4. Correct b. P3. c. P0. d. P1. e.  P2. Feedback The correct answer is: P4. Question 14 Correct Mark 1.00 out of 1.00 Flag question Question text The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales. This protection gives the firm monopoly power for the 20 years of the patent. FIGURE 10-6 Refer to Figure 10-6. Assume this pharmaceutical firm charges a single price for its drug. At its profit-maximizing level of output, consumer surplus is represented by Question 14 Select one: a.  areas H + I. b. There is no consumer surplus generated. c. areas D + E. Correct d. areas C + D + E + F. e. It is not possible to determine with the information provided. Feedback The correct answer is: areas D + E. Question 15 Correct Mark 1.00 out of 1.00 Flag question Question text Which of the following products is best considered a differentiated product? Question 15 Select one: a. topsoil b. clothing Correct c. wheat d. sugar e. steel  Feedback The correct answer is: clothing Question 16 Incorrect Mark 0.00 out of 1.00 Flag question Question text The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11-1 Refer to Figure 11-1. If this firm is maximizing its profits, does the diagram depict a long-run equilibrium situation? Question 16 Select one: a. No, because this firm is earning profits which will attract new firms to this market. b. Yes, because this firm is producing where MC = MR and is earning zero profits. c. No, because this firm is suffering losses and firms will exit this market. Incorrect d.  Yes, because this firm is producing where MC = MR and is earning economic profits. e. No, because this firm is a natural monopoly. Feedback The correct answer is: No, because this firm is earning profits which will attract new firms to this market. Question 17 Correct Mark 1.00 out of 1.00 Flag question Question text Which of the following statements is the best description of a Nash equilibrium? Question 17 Select one: a.  An outcome where each player's best strategy is to maintain its present behaviour given the present behaviour of the other players. Correct b. An equilibrium outcome that is achieved by collusion, and no party has an incentive to change their behaviour. c. An outcome that is achieved when players in the game have jointly maximized profits and divided those profits according to market share of each player. d. An outcome where each player's strategy depends on the behaviour of its opponents. e. An equilibrium outcome achieved by cooperation between players in the game. Feedback The correct answer is: An outcome where each player's best strategy is to maintain its present behaviour given the present behaviour of the other players. Question 18 Correct Mark 1.00 out of 1.00 Flag question Question text The figure below show a simplified version of the current (2015) Canadian federal income-tax system. The marginal income-tax rates for the four ranges of income are 15%, 22%, 26%, and 29%, respectively. FIGURE 18-2 Refer to Figure 18-2. This income-tax system can be characterized as Question 18 Select one: a. regressive. b. progressive. Correct c. cumbersome. d. proportional. e. fair.  Feedback The correct answer is: progressive. Question 19 Incorrect Mark 0.00 out of 1.00 Flag question Question text Suppose taxes are levied in the following way. No individual pays any taxes on the first $10 000 of their income. And for every dollar earned above this amount, all individuals pay 20% in taxes. This income-tax system is Question 19 Select one: a. progressive. b. an accurate description of the Canadian system.  c. regressive. d. indexed. e. proportional. Incorrect Feedback The correct answer is: progressive. Question 20 Correct Mark 1.00 out of 1.00 Flag question Question text Consider an industry producing good X. The quantity of good X produced in a competitive free market will be less than the socially optimal level if Question 20 Select one: a. the government is subsidizing the production of good X. b. the consumption of good X generates a negative externality. c. the production of good X generates a negative externality. d. the consumption of good X generates a positive externality. Correct e. good X has negative third party effects associated with its consumption. Feedback  The correct answer is: the consumption of good X generates a positive externality. Question 21 Correct Mark 1.00 out of 1.00 Flag question Question text Which of the following is the best example of a public good? Question 21 Select one: a. a publicly owned subway system b. a municipal swimming pool c.  light from a lighthouse Correct d. a seat on an airplane flight e. a school bus Feedback The correct answer is: light from a lighthouse Question 22 Correct Mark 1.00 out of 1.00 Flag question Question text Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 Refer to Figure 9-2. If the market price is $1, the firm will produce ________ units of output in the short run. Question 22 Select one: a. 300 b.  100 c. 400 d. 200 e. 0 Correct Feedback The correct answer is: 0 Question 23 Correct Mark 1.00 out of 1.00 Flag question Question text Jodi recently went into business producing widgets. Which of the following would be a fixed cost for her firm? 1. labour costs of $1000 per month 2. raw material costs of $5000 per month 3. a one-year lease on a building of $12 000 Question 23 Select one: a. 3 only Correct b. 1 only c. 1 and 2 d. 2 and 3  e. 2 only Feedback The correct answer is: 3 only Question 24 Correct Mark 1.00 out of 1.00 Flag question Question text FIGURE 5-5 Refer to Figure 5-5. At the market-clearing price and quantity of $30 per hour and 4000 hours of gardening services purchased, the economic surplus is Question 24 Select one: a. the sum of the areas below the demand curve i.e., areas 1, 2, 3, 4, 5, 6, 7, 8, 9. b. the sum of the areas below the demand curve, but above the market-clearing price of $30 i.e., areas 1, 2, 6. c. the sum of the areas above the supply curve, but below the market-clearing price of $30 i.e., areas 3, 4, 7. d.  the sum of the areas below the demand curve, up to 4000 hours i.e., areas 1, 2, 3, 4, 5, 6, 7, 8. e. the sum of the areas above the supply curve and below the demand curve i.e., areas 1, 2, 3, 4, 6, 7. Correct Feedback The correct answer is: the sum of the areas above the supply curve and below the demand curve i.e., areas 1, 2, 3, 4, 6, 7. Question 25 Incorrect Mark 0.00 out of 1.00 Flag question Question text The elasticity of supply for some product will tend to be larger Question 25 Select one: a. the higher is the elasticity of demand for the product. Incorrect b. the less time firms have to adjust to price changes. c. the lower is the elasticity of demand for the product. d. the harder it is for firms to shift from the production of this product to another. e. the easier it is for firms to shift from the production of this product to another.