Chapters 1-24 ECON

9) The determination of prices in individual markets is primarily a concern of A) positive economics. B) negative economics. C) macroeconomics. D) microeconomics. E) descriptive economics. Answer: D Diff: 2 Type: MC Topic: Definition of Economics 10) Which one of the following topics does macroeconomics study? A) decisions of individual firms B) effects of government safety regulations on the price of cars C) the performance of the global economy D) prices of individual goods and services E) effects of taxes on the price of gasoline Answer: C Diff: 2 Type: MC Topic: Definition of Economics 11) Which one of the following topics does microeconomics study? A) reasons for a fall in the price of orange juice B) the effect of a rise in the Canadian dollar on Canada's exports C) effect of interest rates on national economic growth D) effect of the government budget deficit on employment E) determination of total production in a country Answer: A Diff: 2 Type: MC Topic: Definition of Economics 12) Complete the following sentence. Microeconomics is A) not concerned with factors of production. B) concerned with normative issues only. C) concerned with the size of the total amount of income earned by all households in an economy. D) the branch of economics that studies the choices of individuals and businesses. E) concerned exclusively with the role of the government in the economy. Answer: D Diff: 2 Type: MC Topic: Definition of Economics

1.2 Two Big Economic Questions 1) The two big economic questions A) involve self-interest only. B) involve only social interest. C) involve neither self-interest nor social interest. D) do not arise from scarcity. E) involve both self-interest and social interest. Answer: E Diff: 1 Type: MC Topic: Two Big Economic Questions 2) The two big economic questions A) summarize the scope of economics. B) are "what goods and services are produced?" and "how are goods and services produced?" C) have nothing to do with goods and services. D) do not consider for whom goods and services are produced. E) have nothing to do with the way goods and services are produced. Answer: A Diff: 1 Type: MC Topic: Two Big Economic Questions 3) The two big economic questions include all of the following except A) what to produce. B) why to produce. C) how to produce. D) for whom to produce. E) can choices made in the pursuit of self-interest also promote the social interest. Answer: B Diff: 2 Type: MC Topic: Two Big Economic Questions 4) When a firm decides to produce more hybrid cars and fewer gas guzzlers, it is answering the ________ question. A) "how" B) "what" C) "who" D) "where" E) "when" Answer: B Diff: 2 Type: MC Topic: Two Big Economic Questions

13) The fact that a hockey star earns $3 million a year while a teacher earns $50,000 annually is an example of an economy facing the ________ question. A) "what" B) "how" C) "where" D) "for whom" E) "when" Answer: D Diff: 2 Type: MC Topic: Two Big Economic Questions 14) Complete the following sentence. Entrepreneurship is A) defined as money. B) traded on the stock market. C) categorized as capital. D) the human resource that organizes labour, land and capital. E) categorized as the factor of production labour. Answer: D Diff: 2 Type: MC Topic: Two Big Economic Questions 15) Sue, who has a law degree, earns $200,000 a year, while Chris, a high-school dropout, earns $5.00 an hour. This is an example of an economy facing the ________ question. A) "what" B) "how" C) "for whom" D) "where" E) "when" Answer: C Diff: 2 Type: MC Topic: Two Big Economic Questions 16) A star athlete can afford a garage full of exotic cars while other people can only afford to take a city bus for transportation. This is an example of an economy facing the ________ question. A) "what" B) "how" C) "for whom" D) "where" E) "when" Answer: C Diff: 2 Type: MC Topic: Two Big Economic Questions

25) Which one of the following is an example of capital as a factor of production? A) money held by Tim Hortons B) a Bell Canada bond C) an automobile factory owned by Ford D) a high school teacher E) natural gas Answer: C Diff: 1 Type: MC Topic: Two Big Economic Questions 26) Which of the following would an economist classify as capital? A) natural resources B) a deposit of silver C) entrepreneurship D) a computer E) land Answer: D Diff: 1 Type: MC Topic: Two Big Economic Questions 27) Which one of the following is labour? A) money B) a carpenter's hammer C) a shoe factory D) a bread-slicing machine E) a singer's voice Answer: E Diff: 1 Type: MC Topic: Two Big Economic Questions 28) Which one of the following would economists classify as land? A) an automotive plant in British Columbia B) rich agricultural soil in Saskatchewan C) an oil rig in the Atlantic Ocean D) an elementary school in Nova Scotia E) automobiles parked in a parking lot in Manitoba Answer: B Diff: 2 Type: MC Topic: Two Big Economic Questions

1.3 The Economic Way of Thinking 1) Opportunity cost is A) the value of your favourite activity. B) your value of leisure. C) the money you spend on food, shelter, and clothing. D) the marginal benefit from an activity. E) the highest-valued alternative that we give up to get something. Answer: E Diff: 2 Type: MC Topic: The Economic Way of Thinking 2) 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) depends on how much the book cost when it was purchased. B) is the value of playing basketball if John prefers that to watching television. C) is the value of playing basketball and the value of watching television. D) depends on how much John enjoys the book. E) is the value of watching television if John prefers playing basketball to watching television. Answer: B Diff: 3 Type: MC Topic: The Economic Way of Thinking 3) Sally has to decide whether to study for her economics test or her accounting test. If she chooses to study for accounting, her opportunity cost of studying accounting is A) studying economics. B) less than the value of studying economics. C) not comparable to the value of studying economics. D) equal to the value of studying economics. E) the future lost wages that will occur if she fails her accounting exam. Answer: A Diff: 2 Type: MC Topic: The Economic Way of Thinking 4) When the government of Alberta chooses to build more roads, the required resources are no longer available to provide better health care facilities. This situation illustrates the concept of A) marginal benefit. B) monetary cost. C) opportunity cost. D) human capital. E) entrepreneurship. Answer: C Type: MC Topic: The Economic Way of Thinking

12) "There can be too much of a good thing." This statement suggests that A) choices made in self-interest cannot be applied to many economic decisions. B) a good may be produced to the point where its marginal cost exceeds its marginal benefit. C) certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits. D) a good may be produced to the point where its marginal benefit exceeds its marginal cost. E) a good may be produced to the point where its marginal benefit is equal to its marginal cost. Answer: B Diff: 2 Type: MC Topic: The Economic Way of Thinking 13) Which of the following sayings best describes opportunity cost? A) "Make hay while the sun shines." B) "Love of money is the root of all evil." C) "Boldly go where no one has gone before." D) "There's no such thing as a free lunch." E) "Baseball has been very good to me." Answer: D Diff: 2 Type: MC Topic: The Economic Way of Thinking Source: Study Guide 14) If you take an additional class this term, you can graduate earlier. This is an example of A) opportunity cost. B) total cost. C) the pursuit social interest. D) marginal benefit. E) social cost. Answer: D Diff: 2 Type: MC Topic: The Economic Way of Thinking 15) Marginal benefit is the A) total benefit from an activity. B) additional benefit from a decrease in an activity. C) additional benefit from an increase in an activity. D) opportunity cost of a decrease in an activity. E) opportunity cost of an increase in an activity. Answer: C Diff: 1 Type: MC Topic: The Economic Way of Thinking Source: Study Guide

Use the information below to answer the following question. Fact 1.1.1 Costs Soar for London Olympics The regeneration of East London, the site of the 2012 Olympic Games, is set to add extra £1.5 billion to taxpayers' bill. The Times , London, July 6, 2006 22) Refer to Fact 1.1.1. The cost of regenerating East London ________ an opportunity cost of hosting the 2012 Olympic Games ________. A) is not; because few people attending the 2012 Olympics will spend much time outside Olympic venues B) is; if the costs of the East London regeneration is equal to a significant percentage of the total amount spent by London taxpayers to host the 2012 Olympics C) is; if the regeneration of East London would not occur unless London hosted the 2012 Olympics D) is not; because regenerating East London is an unnecessary expense E) is; if the property taxes of people living in East London increase Answer: C Diff: 1 Type: MC Topic: The Economic Way of Thinking Source: MyEconLab 23) You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip is ________. A) working and doing fix-up projects B) working or doing fix-up projects, depending on which you would have done otherwise C) working, because you would be giving up dollars D) nothing because you will enjoy the trip to Florida E) variable depending on the weather you leave behind in Canada Answer: B Type: MC 24) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares ________. A) the total revenue from sales of printers to the total cost of producing all the printers B) the extra revenue from selling a few additional printers to the extra costs of producing the printers C) the extra revenue from selling a few additional printers to the average cost of producing the additional printers D) the revenue from selling HP's printers as compared to printers from competing companies, such as Lexmark E) the cost of producing HP's printers as compared to printers from competing companies, such as Lexmark Answer: B

Type: MC 25) Which of the following creates an incentive to increase the amount of an activity? A) an increase in the marginal cost of the activity and a decrease in the marginal benefit from the activity B) a decrease in the marginal cost of the activity and an increase in the marginal benefit from the activity C) constant marginal cost and constant marginal benefit from the activity D) an increase in the marginal cost of the activity and an equal increase in the marginal benefit from the activity E) a decrease in the marginal cost of the activity and an equal decrease in the marginal benefit from the activity Answer: B Type: MC

1.4 Economics as Social Science and Policy Tool 1) Statements about "what ought to be" are called A) positive statements. B) normative statements. C) economic statements. D) scientific statements. E) hypotheses. Answer: B Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool 2) Statements about "what is" are called A) positive statements. B) normative statements. C) economic statements. D) scientific statements. E) hypotheses. Answer: A Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool 3) Which of the following statements is normative? A) Scientists should not make normative statements. B) Warts are caused by handling toads. C) As e-book prices fall, people buy more of them. D) If income increases, sales of luxury goods fall. E) There is more caffeine in a cup of tea than in a cup of coffee. Answer: A Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool Source: Study Guide 4) A positive statement is A) about what ought to be. B) about what is. C) always true. D) capable of evaluation as true or false by observation and measurement. E) B and D. Answer: E Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool Source: Study Guide

5) A positive statement is A) always true. B) always false. C) about what ought to be. D) what is currently believed about the way the world operates. E) an opinion that cannot be verified. Answer: D Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool 6) A normative statement is A) about what should be. B) about what is. C) always true. D) always false. E) capable of evaluation, as true or false, by observation and measurement. Answer: A Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool 7) "The rich should face higher income tax rates than the poor." This is an example of A) a normative statement. B) a positive statement. C) a negative statement. D) economic reasoning. E) neither a normative nor a positive statement. Answer: A Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 8) Which of the following is an example of a positive statement? A) Canada should cut back on its use of carbon-based fuels such as coal and oil. B) Increasing the minimum wage results in more unemployment. C) Every Canadian should have equal access to health care. D) The Bank of Canada ought to cut the interest rate. E) Canada should have lower tax rates for wealthier Canadians. Answer: B Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool

9) Complete the following sentence. Economic models A) do not answer questions about the economic world. B) include most of the details of the economic world. C) describe some aspect of the economic world, but include only those features needed for the purpose at hand. D) answer questions that arise from normative statements. E) were first developed in the 1970s. Answer: C Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 10) The scientific purpose of simplifying assumptions in an economic model is to A) avoid confronting difficult issues. B) eliminate the need for further testing of the implications of the model. C) abstract from the complexities of the real world those issues that are not important for the issues under examination. D) eliminate the possibility of personal bias in the model. E) add necessary hypotheses to the problem. Answer: C Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 11) Model A is superior to model B if A) it contains more real world detail than model B . B) it contains fewer unrealistic assumptions than model B . C) its predictions correspond more closely to the facts than the predictions of model B . D) it is preferred by a majority of researchers in a public opinion poll. E) it is scientifically "elegant." Answer: C Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 12) In choosing among alternative models, economists generally have the strongest preference for models that A) have assumptions that are close to exact replicas of reality. B) are detailed and complex, with every available fact and figure included. C) have few assumptions and are as simple as possible, even if they cannot predict very well. D) predict better than any other that is available. E) have assumptions that are complicated. Answer: D Type: MC Topic: Economics as Social Science and Policy Tool

13) A normative statement is a statement regarding A) what is usually the case. B) the assumptions of an economic model. C) what ought to be. D) the predictions of an economic model. E) what is. Answer: C Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool Source: Study Guide 14) "The rich face higher income tax rates than the poor" is an example of a A) a normative statement. B) a positive statement. C) a predictive statement. D) a theoretical statement. E) an analytical statement. Answer: B Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool 15) An economic model is tested by A) examining the realism of its assumptions. B) comparing its predictions with the facts. C) comparing its complexity to other models that deal with similar issues. D) the Testing Committee of the Canadian Economic Association. E) comparing its descriptions and examining the realism of its assumptions. Answer: B Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 16) Which of the following is a positive statement? A) Low rents restrict the supply of housing. B) Low rents are better for a city than high rents. C) Housing costs too much. D) Owners of apartment buildings ought to be free to charge whatever rent they want. E) Government should control the rents that apartment owners charge. Answer: A Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool Source: Study Guide

17) "The rich face higher income tax rates than the poor, which is not good since it is the rich who provide jobs for the poor." This is an example of A) a normative statement. B) a positive statement. C) a negative statement. D) a theoretical statement. E) a descriptive statement. Answer: A Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 18) An economic model is A) tested by examining the realism of its assumptions. B) useful if it predicts well, even if its assumptions are not realistic. C) tested by the Testing Committee of the Canadian Economic Association. D) not useful unless it predicts with 100 percent accuracy. E) not useful because it simplifies real problems. Answer: B Diff: 1 Type: MC Topic: Economics as Social Science and Policy Tool 19) Select the best statement about economic models. A) An economic model must always be correct in its predictions or it must be discarded. B) An economic model is evaluated based on the realism of its assumptions. C) An economic model should not generate predictions about actual events in the real world, since it discusses only abstract events. D) An economic model will be discarded if its predictions are often in conflict with the facts. E) Economic models are all false. Answer: D Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool 20) To disentangle cause and effect, economists use economic models and use ________ to test the predictions of those models. A) the what , how , and for whom questions B) positive statements and normative statements C) personal economic policy, business economic policy, and government economic policy D) natural experiments, statistical investigations, and economic experiments E) marginal benefit and marginal cost Answer: D Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool Source: MyEconLab

21) Which of the following statements are positive? 1. The federal government should increase production of biofuels. 2. Air travel has increased since September 11. 3. The greatest number of accidents are caused by drunk drivers. 4. We ought to have a cure for cancer. A) statements 1 and 4 are positive B) statements 2 and 3 are positive C) statements 1 and 2 are positive D) statements 3 and 4 are positive E) statements 2 and 4 are positive Answer: B Diff: 2 Type: MC Topic: Economics as Social Science and Policy Tool Source: MyEconLab 22) Which of the following statements are true regarding "positive" statements? I. They describe what "ought to be." II. They describe what is believed about how the world appears. III. They can be tested as to their truthfulness. A) I and II B) II and III C) I and III D) I, II and III E) None of the statements are true. Answer: B Type: MC 23) Which of the following is a normative statement? A) Next year's inflation rate will be under 4 percent. B) Consumers will buy more gasoline over the December holiday period than they bought during the summer holiday period even if the price of gas is 10 cents a litre higher than it was during the summer. C) Government cuts in welfare spending impose an unfair hardship on the poor. D) A wheat shortage or surplus is always the result of federal government policies. E) Hurricane Irene caused more damage in the United States than Hurricane Katrina. Answer: C Type: MC Chapter 3 Demand and Supply 3.1 Markets and Prices 1) The relative price of a good is all of the following except A) the ratio of one price to another. B) an opportunity cost. C) the money price of the good divided by a price index. D) the same as the money price of a good.

E) determined in a market. Answer: D Diff: 2 Type: MC Topic: Markets and Prices 2) How many sides does a market have? A) one side - buyers B) one side - sellers C) two sides - buyers and sellers D) three sides - buyers, sellers, and the government E) two sides - domestic and foreign Answer: C Diff: 1 Type: MC Topic: Markets and Prices 3) Which market is an example of a market for goods? A) labour market B) haircut market C) manufactured input market D) apple market E) energy market Answer: D Diff: 1 Type: MC Topic: Markets and Prices 4) Which market is an example of a market for services? A) orange market B) tennis lessons market C) manufactured input market D) energy market E) labour market Answer: B Diff: 1 Type: MC Topic: Markets and Prices

5) Which market is an example of a resource market? A) furniture market B) apple market C) automobile market D) haircut market E) labour market Answer: E Diff: 1 Type: MC Topic: Markets and Prices 6) The demand and supply model determines A) relative prices. B) money prices. C) supply prices. D) demand prices. E) absolute prices. Answer: A Diff: 1 Type: MC Topic: Markets and Prices Use the table below to answer the following questions. Table 3.1.1 7) Refer to Table 3.1.1. In 2010, the relative price of coffee in terms of tea is A) 1.25. B) 1.10. C) 1.00. D) 0.88. E) 1.14. Answer: E Diff: 2 Type: MC Topic: Markets and Prices

8) Refer to Table 3.1.1. In 2012, 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. Answer: A Diff: 2 Type: MC Topic: Markets and Prices 9) Refer to Table 3.1.1. In 2012, the relative price of cola in terms of tea is A) 1.00. B) 1.20. C) 0.83. D) 1.25. E) unknown without more information. Answer: C Diff: 2 Type: MC Topic: Markets and Prices 10) Refer to Table 3.1.1. Between 2010 and 2011, the price of coffee relative to the price of tea ________ while the price of coffee relative to the price of cola ________. A) rose; rose B) rose; fell C) fell; rose D) fell; fell E) fell; stayed constant Answer: B Diff: 2 Type: MC Topic: Markets and Prices 11) Refer to Table 3.1.1. Between 2011 and 2012, the price of coffee relative to the price of tea ________ while the price of coffee relative to the price of cola ________. A) rose; rose B) rose; fell C) fell; rose D) fell; fell E) fell; stayed constant Answer: D Diff: 2 Type: MC Topic: Markets and Prices

12) A market where no single buyer or seller can influence the price is A) a buyer's market. B) a seller's market. C) a competitive market. D) an output market. E) an input market. Answer: C Diff: 1 Type: MC Topic: Markets and Prices 13) A relative price is A) the ratio of one price to another. B) an opportunity cost. C) a quantity of a "basket" of goods and services forgone. D) determined by demand and supply. E) all of the above. Answer: E Diff: 2 Type: MC Topic: Markets and Prices Source: Study Guide 14) William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the Edgehill Advertister announcing his willingness to exchange cloth for food and other items. Here is an extract: 1 yard of cloth for 1 pound of bacon 2 yards of cloth for 1 pound of butter 4 yards of cloth for 1 pound of wool 8 yards of cloth for 1 bushel of salt If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, people would ________. A) buy bacon and trade it for cloth because they could buy 8 yards of cloth for only $1.60, and use that cloth to obtain a bushel of salt B) not buy bacon and trade it for cloth because they would have to buy 8 yards of cloth for $1.60 and then give Mr. Gregg an extra $0.40 to buy a bushel of salt C) buy bacon and trade it for cloth and then trade the cloth for salt because salt is more important for life than either cloth or bacon D) not buy bacon and trade it for cloth because the relative price of 1 bushel of salt is only 1/8 yard of cloth E) buy bacon and trade it for cloth because cloth is more expensive than bacon Answer: A Diff: 2 Type: MC Topic: Markets and Prices Source: MyEconLab

15) The opportunity cost of good A in terms of good B is equal to the A) money price of good A minus the money price of good B. B) money price of good B minus the money price of good A. C) ratio of the money price of good A to the money price of good B. D) ratio of the money price of good B to the money price of good A. E) money price of good A plus the money price of good B. Answer: C Type: MC 16) Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The ________ of a football is ________. A) relative price; 2 basketballs per football B) relative price; 1/2 basketball per football C) opportunity cost; $15.00 D) opportunity cost; $10.00 E) relative price; $10 Answer: A Type: MC

3.2 Demand 1) The law of demand states that, other things remaining the same, A) the higher the price of a good, the smaller is the quantity demanded. B) the higher the price of a good, the smaller is the quantity supplied. C) price and quantity supplied are positively related. D) as income increases, willingness to pay for the last unit increases. E) the higher the price of a good, the greater is the quantity demanded. Answer: A Diff: 1 Type: MC Topic: Demand 2) Which one of the following events shifts the demand curve for grape jelly to the right? A) an increase in income if grape jelly is a normal good B) a decrease in the price of strawberry preserves, a substitute for grape jelly C) a decrease in the price of grape jelly D) an increase in the price of peanut butter, a complement of grape jelly E) a decrease in the population Answer: A Diff: 2 Type: MC Topic: Demand 3) The demand curve slopes downward to the right because A) an increase in income leads to increased consumption. B) of the law of supply. C) of the law of demand. D) of comparative advantage. E) as income rises, the quantity demanded increases. Answer: C Diff: 1 Type: MC Topic: Demand 4) An increase in the price of ground beef A) increases the demand for chicken, a substitute for ground beef. B) increases the demand for hamburger buns, a complement of ground beef. C) increases the quantity demanded of ground beef. D) decreases the quantity demanded of ground beef. E) both A and D. Answer: E Diff: 2 Type: MC Topic: Demand

5) An increase in income A) increases the demand for turnips if a turnip is an inferior good. B) increases the demand for turnips if a turnip is a normal good. C) increases the supply of turnips. D) decreases the demand for turnips if turnips have a very low price. E) decreases the supply of turnips. Answer: B Diff: 2 Type: MC Topic: Demand 6) A turnip is an inferior good if A) an increase in the price of a turnip decreases the quantity of turnips that consumers want to buy. B) an increase in income decreases the demand for turnips. C) an increase in income increases the demand for turnips. D) turnips violate the law of demand. E) turnips are a low quality good. Answer: B Diff: 2 Type: MC Topic: Demand 7) If a turnip is an inferior good, then, ceteris paribus , an increase in the price of a turnip will A) decrease the demand for turnips. B) increase the demand for turnips. C) decrease the supply of turnips. D) increase the supply of turnips. E) none of the above. Answer: E Diff: 3 Type: MC Topic: Demand 8) Suppose income increases. Choose the correct statement. A) The equilibrium price of turnips falls if a turnip is an inferior good. B) The equilibrium price of turnips rises if a turnip is an inferior good. C) The equilibrium quantity of turnips decreases if a turnip is an inferior good. D) The supply of turnips decreases whether or not a turnip is an inferior good. E) Both A and C. Answer: E Diff: 3 Type: MC Topic: Demand

Use the figure below to answer the following questions. Figure 3.2.1 9) Point A in Figure 3.2.1 indicates that A) $1 is the least that consumers are willing to pay for the 4,000th apple. B) consumers will not be in equilibrium if the price of an apple is $1. C) consumers will only pay $1 for any apple. D) if the price is $1, consumers will plan to buy 4,000 apples. E) if the price is more than $1, consumers will buy 9,000 apples. Answer: D Diff: 2 Type: MC Topic: Demand 10) Which one of the following statements best characterizes point B in Figure 3.2.1? A) Producers would be unwilling to sell the 9,000th apple for less than $0.50. B) The most that consumers would be willing to pay for the 9,000th apple is $0.50. C) At a price of $0.50, consumers will be unwilling to buy any apples. D) At a price of $0.50, there will be an apple shortage. E) At point B , the market is in equilibrium. Answer: B Diff: 2 Type: MC Topic: Demand

11) Given Figure 3.2.1, under what condition are consumers willing to buy more than 9,000 apples per week? A) if the price is above $1 B) if the price is between $1 and $0.50 C) if the price is below $0.50 D) if the price is between $1 and $1.50 E) if the price is $0.75 Answer: C Diff: 2 Type: MC Topic: Demand 12) Which one of the following would result in a movement from point A to point B in Figure 3.2.1? A) a fall in the price of apples B) a rise in the price of oranges C) an increase in population size D) public concern about chemicals sprayed on apples E) a rise in the price of bananas Answer: A Diff: 2 Type: MC Topic: Demand

Use the figure below to answer the following questions. Figure 3.2.2 13) Which one of the following would result in the demand curve shifting from D 1 to D 2 in Figure 3.2.2? A) an increase in the supply of pizza B) a rise in the price of hamburgers, a substitute for pizza C) a rise in the price of pizza D) a fall in the price of pizza E) a rise in the price of Coke, a complement of pizza Answer: B Diff: 2 Type: MC Topic: Demand 14) Refer to Figure 3.2.2. Which one of the following represents a decrease in quantity demanded? A) a shift from D 1 to D 2 B) a shift from D 2 to D 1 C) a movement from A to B D) a movement from B to A E) none of the above Answer: D Diff: 2 Type: MC Topic: Demand

15) Refer to Figure 3.2.2. If consumers' income increases, A) the quantity of pizzas demanded increases. B) the demand curve for pizzas shifts from D 1 to D 2 if a pizza is a normal good. C) the supply of pizzas increases. D) the quantity of pizzas supplied decreases. E) a movement from point A to point B on D 1 occurs. Answer: B Diff: 2 Type: MC Topic: Demand 16) The price of good A rises, and the demand curve for good B shifts leftward. We can conclude that A) A and B are substitutes. B) A and B are complements. C) A and B are complements in production. D) B is an inferior good. E) B is a normal good. Answer: B Diff: 2 Type: MC Topic: Demand 17) The price of good X falls and the demand for good Y decreases. We can conclude that A) X and Y are complements. B) X and Y are independent of each other. C) X is an inferior good. D) X is a normal good. E) X and Y are substitutes. Answer: E Diff: 2 Type: MC Topic: Demand 18) Which one of the following would lead to an increase in the demand for hamburgers? A) a new fad hamburger diet B) a decrease in population size C) a rise in the price of French fries, a complement of hamburgers D) a decrease in consumer income if hamburgers are a normal good E) a news report that hamburgers can cause skin diseases Answer: A Diff: 2 Type: MC Topic: Demand

19) Which of the following "other things" are not held constant along a demand curve? A) income B) prices of related goods C) the price of the good itself D) preferences E) expected future income and credit Answer: C Diff: 1 Type: MC Topic: Demand Source: Study Guide 20) Good A is a normal good if A) a rise in the price of a complement causes the demand for A to decrease. B) income and the demand for A are negatively related. C) a rise in the price of a substitute causes the demand for A to increase. D) the demand for A increases when income rises. E) good A satisfies the law of demand. Answer: D Diff: 1 Type: MC Topic: Demand 21) A decrease in quantity demanded is represented by a A) rightward shift of the supply curve. B) rightward shift of the demand curve. C) leftward shift of the demand curve. D) movement upward and to the left along the demand curve. E) movement downward and to the right along the demand curve. Answer: D Diff: 1 Type: MC Topic: Demand Source: Study Guide 22) Some sales managers are talking shop. Which of the following quotations refers to a movement along the demand curve? A) "Since our competitors raised their prices, our sales have doubled." B) "It has been an unusually mild winter; our sales of wool scarves are down 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) None of the above. Answer: C Diff: 2 Type: MC Topic: Demand Source: Study Guide

23) Some sales managers are talking shop. Which one of the following quotations refers to a rightward shift of 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. Answer: E Diff: 2 Type: MC Topic: Demand 24) Some sales managers are talking shop. Which one of the following quotations refers to a leftward shift of the demand curve? A) "Since our competitors raised their prices, our sales have doubled." B) "It has been an unusually mild winter; our sales of wool scarves are down 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) None of the above. Answer: B Diff: 2 Type: MC Topic: Demand 25) If Hamburger Helper is an inferior good, then, ceteris paribus , a decrease in income will lead to A) a leftward shift of the demand curve for Hamburger Helper. B) a rightward shift of the demand curve for Hamburger Helper. C) a movement up along the demand curve for Hamburger Helper. D) a movement down along the demand curve for Hamburger Helper. E) an initial movement up and then down along the demand curve for Hamburger Helper. Answer: B Diff: 2 Type: MC Topic: Demand Source: Study Guide

26) 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. Answer: C Diff: 2 Type: MC Topic: Demand Source: MyEconLab 27) People buy more of good 1 when the price of good 2 rises. Good 1 and good 2 are A) complements. B) substitutes. C) normal goods. D) inferior goods. E) substitutes in production Answer: B Type: MC 28) Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement of oatmeal. Which of the following increases the demand for oatmeal? A) an increase in the price of raisins B) a decrease in income C) a decrease in population D) an increase in the price of cold cereal E) an increase in the supply of oatmeal Answer: D Type: MC

3.3 Supply 1) The law of supply tells us that other things remaining the same, as the A) price of gasoline falls, the quantity of gasoline supplied decreases. B) price of gasoline rises, the quantity of gasoline supplied decreases. C) supply of gasoline increases, the price of gasoline falls. D) cost of producing gasoline falls, the supply of gasoline will increase. E) cost of producing gasoline increases, the price of gasoline rises. Answer: A Diff: 2 Type: MC Topic: Supply 2) The supply curve of a good slopes upward to the right because of A) technological improvements over time. B) the law of supply. C) the law of demand. D) the existence of substitutes in production. E) the fact that prices tend to rise over time. Answer: B Diff: 1 Type: MC Topic: Supply 3) An increase in supply is shown by A) a movement down along the supply curve. B) a movement up along the supply curve. C) a rightward shift of the supply curve. D) a leftward shift of the supply curve. E) an initial movement up and then down along the same supply curve. Answer: C Diff: 1 Type: MC Topic: Supply 4) If goods X and Y are substitutes in production, then a rise in the price of good X A) increases the demand for good Y . B) decreases the demand for good Y . C) increases the supply of good Y . D) decreases the supply of good Y . E) might change the supply of Y ; it depends on whether X and Y are also substitutes. Answer: D Diff: 2 Type: MC Topic: Supply

5) If a producer can use its factors of production to produce either good A or good B , then a rise in the price of A A) increases the supply of B . B) decreases the supply of A . C) increases the supply of A . D) decreases the supply of B . E) both C and D. Answer: D Diff: 3 Type: MC Topic: Supply 6) The fact that a fall in the price of a good results in a decrease in the quantity of the good supplied illustrates A) the law of supply. B) the law of demand. C) a change in supply. D) the nature of an inferior good. E) technological improvement. Answer: A Diff: 1 Type: MC Topic: Supply Source: Study Guide 7) Which one of the following would not shift the supply curve of good X to the right? A) a fall in the price of the factors of production used in producing X B) an improvement in technology used in the production of X C) a rise in the price of X D) an increase in the price of Y , a complement in production of X E) a fall in the price of Y , a substitute in production of X Answer: C Diff: 2 Type: MC Topic: Supply 8) A decrease in the quantity supplied is shown by a A) movement down along the supply curve. B) movement up along the supply curve. C) rightward shift of the supply curve. D) leftward shift of the supply curve. E) rightward shift of the demand curve. Answer: A Diff: 1 Type: MC Topic: Supply

9) Which one of the following will shift the supply curve of good X leftward? A) a decrease in the wages of workers employed to produce X B) an increase in the cost of machinery used to produce X C) a technological improvement in the production of X D) a situation where quantity demanded exceeds quantity supplied E) a decrease in the cost of capital used to produce X Answer: B Diff: 2 Type: MC Topic: Supply Source: Study Guide 10) Which of the following will shift the supply curve of good X rightward? A) a decrease in the wages of workers employed to produce good X B) an increase in the cost of capital used to produce good X C) an increase in the price of energy D) a decrease in the number of suppliers of good X E) the price of Y , a substitute in production for good X , rises Answer: A Diff: 2 Type: MC Topic: Supply 11) If a factor of production can be used to produce either good A or good B , then A and B are A) substitutes in production. B) complements in production. C) substitutes. D) complements. E) normal goods. Answer: A Diff: 1 Type: MC Topic: Supply Source: Study Guide 12) A rise in the price of a good A) decreases demand for the good. B) creates a movement up along the supply curve. C) creates a movement down along the demand curve. D) increases the supply of the good. E) increases preferences for the good. Answer: B Diff: 1 Type: MC Topic: Supply

13) If the number of suppliers of good Y increases, then A) a movement up along the supply curve of good Y will occur. B) a movement down along the supply curve of good Y will occur. C) the supply curve of good Y shifts rightward. D) the supply curve of good Y shifts leftward. E) the supply curve of good Y will remain unchanged. Answer: C Diff: 1 Type: MC Topic: Supply 14) A shift of the supply curve for rutabagas occurs if there is A) a change in preferences for rutabagas. B) a change in the price of a related good that is a substitute for rutabagas. C) a change in income. D) a change in the price of rutabagas. E) none of the above. Answer: E Diff: 2 Type: MC Topic: Supply Source: Study Guide 15) Some producers are chatting over a beer. Which one of the following quotations refers to a movement along the supply curve? A) "Wage increases have forced us to raise our prices." B) "Our new, sophisticated equipment will enable us to undercut our competitors." C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers." D) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output." E) "New competitors in the industry are causing prices to fall." Answer: D Diff: 2 Type: MC Topic: Supply Source: Study Guide 16) Some producers are chatting over a beer. Which one of the following quotations refers to a rightward shift of the supply curve? A) "Wage increases have forced us to raise our prices." B) "Our new, sophisticated equipment will enable us to undercut our competitors." C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers." D) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output." E) Both A and C. Answer: B Diff: 2 Type: MC Topic: Supply

17) Some producers are chatting over a beer. Which one of the following quotations refers to a leftward shift of the supply curve? A) "Wage increases have forced us to raise our prices." B) "Our new, sophisticated equipment will enable us to undercut our competitors." C) "Raw material prices have sky-rocketed; we will have to pass the cost on to our customers." D) "We anticipate a big increase in demand. Our product price should rise, so we are planning for an increase in output." E) Both A and C. Answer: E Diff: 2 Type: MC Topic: Supply 18) A decrease in the quantity supplied of a good is shown by A) a movement down along the supply curve. B) a leftward shift of the supply curve. C) a movement up along the supply curve. D) a rightward shift of the supply curve. E) an initial rightward shift and then leftward shift of the supply curve. Answer: A Diff: 1 Type: MC Topic: Supply 19) Which of the following decreases the supply of popcorn? A) a decrease in the price of popcorn B) an increase in the price of popcorn C) a technological advance in the production of popcorn D) a decrease in the demand for popcorn E) a decrease in the number of popcorn producers Answer: E Type: MC 20) Which of the following shifts the supply curve for good X leftward? A) a situation in which the quantity demanded of X exceeds the quantity supplied of X B) an increase in the cost of the machinery used to produce X C) a technological advance in the production of X D) a decrease in the wages of workers employed to produce X E) a situation in which the quantity supplied of X exceeds the quantity demanded of X Answer: B Type: MC

3.4 Market Equilibrium Use the table below to answer the following questions. Table 3.4.1 Price (dollars per unit) Quantity Demanded (units) Quantity Supplied (units) 1 1,100 50 2 800 200 3 600 420 4 500 500 5 420 580 6 350 640 7 320 680 8 300 700 1) Refer to Table 3.4.1. At a price of $3 a unit A) the market is in equilibrium. B) there is a 180-unit surplus. C) there is a 180-unit shortage. D) there is a tendency for the price to rise. E) C and D. Answer: E Diff: 2 Type: MC Topic: Market Equilibrium 2) In Table 3.4.1, the equilibrium price is A) $7 a unit. B) $5 a unit. C) $4 a unit. D) $3 a unit. E) $1 a unit. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium 3) In Table 3.4.1, the equilibrium quantity is A) 200 units. B) 320 units. C) 420 units. D) 500 units. E) none of the above; there is no equilibrium. Answer: D Diff: 1 Type: MC

Topic: Market Equilibrium 4) Refer to Table 3.4.1. The equilibrium quantity is 420 units if A) the price is fixed at $3 a unit. B) the price is fixed at $4 a unit. C) the price is fixed at $5 a unit. D) both A and C are correct. E) none of the above. Answer: E Diff: 2 Type: MC Topic: Market Equilibrium 5) Refer to Table 3.4.1. A shortage occurs if A) the price is $7 a unit. B) the price is $4 a unit. C) the price is $5 a unit. D) the price is below $4 a unit. E) the price is $6 a unit. Answer: D Diff: 1 Type: MC Topic: Market Equilibrium 6) Refer to Table 3.4.1. A surplus occurs if A) the price is $2 a unit. B) the price is $3 a unit. C) the price is above $4 a unit. D) the price is $1 a unit. E) the price is $4 a unit. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium 7) 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. Answer: A Diff: 1 Type: MC Topic: Market Equilibrium

8) Refer to Table 3.4.1. If the price is $3, then the shortage is A) zero units. B) 1,050 units. C) 180 units. D) 600 units. E) 160 units. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium Use the figure below to answer the following questions. Figure 3.4.1 9) At price P 3 in Figure 3.4.1, A) this market is in equilibrium. B) there is a shortage in the amount of Q 5 - Q 1 . C) there is a tendency for the price to rise. D) equilibrium quantity is Q 5 . E) there is a surplus in the amount of Q 5 - Q 1 . Answer: E Diff: 3 Type: MC Topic: Market Equilibrium

10) At price P 2 in Figure 3.4.1, which one of the following is not true? A) This market is in equilibrium. B) The quantity demanded is equal to the quantity supplied. C) The quantity demanded is Q 1 . D) There is no surplus. E) The quantity supplied is Q 3 . Answer: C Diff: 1 Type: MC Topic: Market Equilibrium 11) At price P 1 in Figure 3.4.1 A) there is a surplus in the amount of Q 4 - Q 2 . B) there is a shortage in the amount of Q 4 - Q 2 . C) there is a tendency for the price to fall. D) the equilibrium quantity is Q 2 . E) the equilibrium quantity is Q 4 . Answer: B Diff: 2 Type: MC Topic: Market Equilibrium 12) At price P 1 in Figure 3.4.1, A) producers can sell all they plan to sell. B) consumers can buy all they want. C) producers are unwilling to sell any goods. D) a surplus exists. E) both sides of the market are able to carry out their desired transactions. Answer: A Diff: 2 Type: MC Topic: Market Equilibrium

Use the figure below to answer the following questions. Figure 3.4.2 13) The equilibrium price in the market illustrated by Figure 3.4.2 is A) $2 a unit. B) $4 a unit. C) $6 a unit. D) $8 a unit. E) $10 a unit. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium 14) Refer to Figure 3.4.2. When the price is $10 a unit A) consumers will buy only 100 units of output. B) consumers will buy 500 units of output. C) consumers will buy nothing. D) a shortage occurs. E) the surplus is zero. Answer: A Diff: 1 Type: MC Topic: Market Equilibrium

15) At a price of $10 a unit in Figure 3.4.2 A) there is a surplus of 200 units. B) there is a shortage of 200 units. C) there is a surplus of 400 units. D) there is a shortage of 400 units. E) quantity will rise. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium 16) At a price of $4 a unit in Figure 3.4.2 A) the equilibrium quantity is 400 units. B) there is a surplus of 200 units. C) the quantity supplied is 400 units. D) there is a shortage of 200 units. E) the quantity demanded is 200 units. Answer: D Diff: 1 Type: MC Topic: Market Equilibrium 17) Which one of the following correctly describes how price adjustment eliminates a surplus? A) As the price rises, the quantity demanded decreases and the quantity supplied increases. B) As the price rises, the quantity demanded increases and the quantity supplied decreases. C) As the price falls, the quantity demanded decreases and the quantity supplied increases. D) As the price falls, the quantity demanded increases and the quantity supplied decreases. E) As the price falls, the demand for substitutes decreases, which eliminates the surplus. Answer: D Diff: 2 Type: MC Topic: Market Equilibrium 18) Which one of the following correctly describes how price adjustment eliminates a shortage? A) As the price rises, the quantity demanded decreases and the quantity supplied increases. B) As the price rises, the quantity demanded increases and the quantity supplied decreases. C) As the price falls, the quantity demanded decreases and the quantity supplied increases. D) As the price falls, the quantity demanded increases and the quantity supplied decreases. E) As the price falls, the quantity demanded increases and the quantity supplied increases. Answer: A Diff: 2 Type: MC Topic: Market Equilibrium

19) If the price is above the equilibrium price, then A) none of the good will be sold. B) the price must rise further to reach the new market equilibrium. C) a surplus exists. D) a shortage exists. E) price will not change; producers will cut back production until the market is in equilibrium. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium 20) A shortage will exist if A) the price is above the equilibrium price. B) the price is below the equilibrium price. C) there are not enough producers. D) there are not enough consumers. E) demand decreases. Answer: B Diff: 1 Type: MC Topic: Market Equilibrium 21) The price of a good will tend to fall if A) there is a surplus at the current price. B) the current price is below the equilibrium price. C) the quantity supplied exceeds the quantity demanded at the current price. D) both A and C are true. E) none of the above are true. Answer: D Diff: 2 Type: MC Topic: Market Equilibrium 22) If the market for Twinkies is in equilibrium, then A) Twinkies must be a normal good. B) producers would like to sell more at the current price. C) consumers would like to buy more at the current price. D) there is a surplus. E) the equilibrium quantity equals the quantity demanded. Answer: E Diff: 1 Type: MC Topic: Market Equilibrium Source: Study Guide

23) A shortage is the amount by which quantity A) demanded exceeds quantity supplied. B) supplied exceeds quantity demanded. C) demanded increases when the price rises. D) demanded exceeds the equilibrium quantity. E) supplied exceeds the equilibrium quantity. Answer: A Diff: 1 Type: MC Topic: Market Equilibrium Source: Study Guide 24) Complete the following sentence. A surplus A) exists if the price is above the equilibrium price. B) is the amount by which the quantity demanded exceeds the quantity supplied. C) is the amount by which the quantity demanded exceeds the equilibrium quantity. D) is the amount by which the quantity supplied exceeds the equilibrium quantity. E) will lead to rising prices. Answer: A Diff: 2 Type: MC Topic: Market Equilibrium 25) When a shortage occurs, there is a tendency for the A) price to fall. B) price to remain unchanged. C) price to rise. D) quantity demanded to increase. E) quantity supplied to decrease. Answer: C Diff: 1 Type: MC Topic: Market Equilibrium

Refer to the table below for the following question. Table 3.4.2 Price (dollars per bottle) Quantity demanded (bottles per week) Quantity supplied (bottles per week) 2 6 10 14 18 180 140 100 60 20 60 100 140 180 220 26) Refer to Table 3.4.2. The table shows the demand and supply schedules for shampoo. If the price is $6 a bottle, there is a ________ of shampoo. So the price of a bottle of shampoo ________, the quantity demanded ________ and the quantity supplied ________. The market moves to equilibrium. A) shortage; rises; decreases; increases B) shortage; falls; decreases; increases C) surplus; rises; increases; decreases D) surplus; falls; increases; decreases E) shortage; rises; increases; decreases Answer: A Diff: 1 Type: MC Topic: Market Equilibrium Source: MyEconLab 27) If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 8,000 per year, there is a ________ in the market and the price will ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall E) surplus; either rise or fall depending on whether supply increases to meet the surplus Answer: D Type: MC 28) If the market for Twinkies is in equilibrium, then A) Twinkies must be a normal good. B) producers would like to sell more at the current price. C) consumers would like to buy more at the current price. D) the quantity supplied equals the quantity demanded. E) the supply of Twinkies will never increase and the demand for Twinkies will never decrease. Answer: D Type: MC

3.5 Predicting Changes in Price and Quantity 1) Since 1980, there has been a dramatic increase in the number of working mothers. Based on this information alone, we can predict that the market for child care services has experienced A) an increase in demand. B) a decrease in demand. C) an increase in quantity demanded. D) a decrease in quantity supplied. E) an increase in supply. Answer: A Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity Source: Study Guide Use the figure below to answer the following questions. Figure 3.5.1 2) If the demand curve is D 2 in Figure 3.5.1, A) the equilibrium price is P 2 and the equilibrium quantity is Q 2 . B) the equilibrium price is P 2 and the equilibrium quantity is Q 0 . C) there is a shortage in the amount of Q 2 – Q 0 . D) a rise in price will shift the demand curve to D 3 . E) price will rise. Answer: A Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity

3) Initially, the demand curve for good A is D 2 in Figure 3.5.1. Suppose good B is a substitute for good A . If the price of B falls A) the price of A will rise. B) there will be a surplus of good A at P 2 . C) the demand curve for good A will shift from D 2 to D 3 . D) the equilibrium quantity of good A will increase. E) all of the above are true except B. Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 4) Initially, the demand curve for good A is D 2 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 . Answer: B Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 5) The price of a good will rise if A) demand for the good decreases. B) supply of the good decreases. C) there is a surplus of the good. D) the price of a substitute for the good decreases. E) the good is an inferior good and income increases. Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 6) The price of a good will fall if A) there is a shortage of the good. B) if demand for the good increases. C) there is a surplus of the good. D) if the supply of the good decreases. E) if demand for the good does not change. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

7) The price of a good will fall if A) demand for the good increases. B) supply of the good decreases. C) supply of the good increases. D) demand for the good remains constant. E) supply of the good remains constant. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 8) Suppose we observe a rise in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation? A) The law of demand is violated. B) The demand for A decreased. C) The demand for A increased. D) The supply of A increased. E) The supply of A decreased. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 9) Suppose we observe a rise in the price of good A and a decrease in the quantity of good A bought and sold. Which one of the following is a likely explanation? A) The law of supply is violated. B) The demand for A decreased. C) The demand for A increased. D) The supply of A increased. E) The supply of A decreased. Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 10) Suppose we observe a fall in the price of good A and an increase in the quantity of good A bought and sold. Which one of the following is a likely explanation? A) The law of supply is violated. B) The demand for A decreased. C) The demand for A increased. D) The supply of A increased. E) The supply of A decreased. Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

11) Suppose we observe a fall in the price of good A and a decrease in the quantity of good A bought and sold. Which one of the following is a likely explanation? A) The law of demand is violated. B) The demand for A decreased. C) The demand for A increased. D) The supply of A increased. E) The supply of A decreased. Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 12) When the demand for good A increases, A) the equilibrium price and equilibrium quantity will increase. B) the equilibrium price will rise but the equilibrium quantity will decrease. C) the equilibrium price and equilibrium quantity will decrease. D) the equilibrium price will decrease but the equilibrium quantity will increase. E) a surplus will result. Answer: A Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 13) When the supply of good A decreases, A) the equilibrium price and the equilibrium quantity will increase. B) the equilibrium price will increase but the equilibrium quantity will decrease. C) the equilibrium price and the equilibrium quantity will decrease. D) the equilibrium price will decrease but the equilibrium quantity will increase. E) a surplus will result. Answer: B Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 14) If A is an inferior good and consumer income rises, the demand for A A) increases and the equilibrium price and the equilibrium quantity increase. B) increases and the equilibrium price rises but the equilibrium quantity decreases. C) decreases and the equilibrium price and the equilibrium quantity decrease. D) decreases and the equilibrium price falls but the equilibrium quantity increases. E) decreases and the equilibrium price rises; as a result, the equilibrium quantity decreases. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

15) If A and B are substitutes and the price of A rises, we will observe A) an increase in the equilibrium price and the equilibrium quantity of B . B) a decrease in the equilibrium price and the equilibrium quantity of B . C) an increase in the equilibrium price but a decrease in the equilibrium quantity of B . D) a decrease in equilibrium price but an increase in the equilibrium quantity of B . E) none of the above. Answer: A Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 16) If A and B are substitutes and the cost of a factor of production used in the production of A increases, then the price of A) B falls but the price of A rises. B) B rises but the price of A falls. C) A falls, and the price of B will stay unchanged. D) A and B fall. E) A and B rise. Answer: E Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 17) If A and B are substitutes in production and the price of A falls, the supply of B A) increases and the price of B rises. B) increases and the price of B falls. C) decreases and the price of B falls. D) decreases and the price of B rises. E) does not change. Answer: B Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 18) If A and B are complements in production and the price of A falls, the supply of B A) increases and the price of B rises. B) increases and the price of B falls. C) decreases and the price of B falls. D) decreases and the price of B rises. E) does not change. Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

19) Crude oil is a very important factor of production used in the production of gasoline. If the price of crude oil rises, we would expect the A) price of gasoline to rise due to an increase in demand. B) price of gasoline to fall due to an increase in demand. C) price of gasoline to rise due to a decrease in supply. D) equilibrium quantity of gasoline to fall due to an increase in supply. E) equilibrium quantity of gasoline to rise due to an increase in demand. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 20) If demand increases and supply decreases, then the A) equilibrium quantity increases but the effect on the equilibrium price is unknown. B) equilibrium quantity decreases but the effect on the equilibrium price is unknown. C) equilibrium price falls but the effect on the equilibrium quantity is unknown. D) equilibrium price rises but the effect on the equilibrium quantity is unknown. E) effect on both equilibrium price and quantity is unknown. Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 21) If demand decreases and supply increases, then the A) equilibrium quantity increases but the effect on the equilibrium price is unknown. B) equilibrium quantity decreases but the effect on the equilibrium price is unknown. C) equilibrium price falls but the effect on equilibrium quantity is unknown. D) equilibrium price rises but the effect on equilibrium quantity is unknown. E) effect on both equilibrium price and quantity is unknown. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 22) If we observe a rise in the equilibrium price of good A , we know that either the demand for A has A) increased or the supply of A has decreased or both. B) increased or the supply of A has increased or both. C) decreased or the supply of A has increased or both. D) decreased or the supply of A has decreased or both. E) none of the above. Answer: A Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

23) If we observe a fall in the equilibrium price of good A , we know that either the demand for A has A) increased or the supply of A has decreased or both. B) increased or the supply of A has increased or both. C) decreased or the supply of A has increased or both. D) decreased or the supply of A has decreased or both. E) none of the above. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 24) If we observe an increase in the equilibrium quantity of good A , we know that A) either the demand for A has increased or the supply of A has decreased or both. B) either the demand for A has increased or the supply of A has increased or both. C) either the demand for A has decreased or the supply of A has increased or both. D) either the demand for A has decreased or the supply of A has decreased or both. E) none of the above. Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 25) If we observe a decrease in the equilibrium quantity of good A , we know that A) either the demand for A has increased or the supply of A has decreased or both. B) either the demand for A has increased or the supply of A has increased or both. C) either the demand for A has decreased or the supply of A has increased or both. D) either the demand for A has decreased or the supply of A has decreased or both. E) none of the above. Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 26) Which of the following will definitely result in an increase in the equilibrium price? A) an increase in both demand and supply B) a decrease in both demand and supply C) an increase in demand combined with a decrease in supply D) a decrease in demand combined with an increase in supply E) an increase in supply combined with a decrease in demand Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity Source: Study Guide

27) Which one of the following will definitely lower the equilibrium price? A) an increase in both demand and supply B) a decrease in both demand and supply C) an increase in demand combined with a decrease in supply D) a decrease in demand combined with an increase in supply E) a decrease in supply combined with an increase in demand Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 28) Which one of the following will definitely decrease the equilibrium quantity? A) an increase in both demand and supply B) a decrease in both demand and supply C) an increase in demand combined with a decrease in supply D) a decrease in demand combined with an increase in supply E) none of the above Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 29) A technological improvement in the production of good A A) decreases the supply of A . B) increases the demand for A . C) decreases the equilibrium price of A and decreases the equilibrium quantity. D) decreases the quantity demanded of A . E) increases the supply of A . Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 30) Which of the following events leads to a rise in the price of oranges? A) a rise in the price of apples if apples and oranges are substitutes B) a scientific discovery that oranges cause hair loss C) a decrease in income if oranges are a normal good D) good growing weather in Florida E) a technological improvement in the production of oranges Answer: A Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

31) If A and B are complements and the cost of a factor of production used in the production of A decreases, then the price of A) both A and B will rise. B) both A and B will fall. C) A will fall and the price of B will rise. D) A will rise and the price of B will fall. E) A will fall and the price of B will remain unchanged. Answer: C Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity Source: Study Guide 32) If both demand and supply increase, then the equilibrium price A) and equilibrium quantity increases. B) falls but the equilibrium quantity increases. C) could either rise or fall, but the equilibrium quantity increases. D) rises and the equilibrium quantity could either increase or decrease. E) falls and the equilibrium quantity could either increase or decrease. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 33) There have been severe problems in the Atlantic fishing industry, with large falls in the fish stocks. As a result, A) the price of fish will fall. B) the quantity of fish sold will increase as fishermen will catch more to make up for the shortage. C) the equilibrium price and the equilibrium quantity will fall or rise depending on how large the fall in fish stocks. D) both the equilibrium price and the equilibrium quantity will rise, as consumers will desire even more fish, because they are scarce. E) the fall in the fish stocks will lead to a shortage, and a rise in the equilibrium price and a decrease in the equilibrium quantity. Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

34) There have been severe falls in the fish stocks in the Atlantic fishing industry. As a result, we would expect A) an increase in the demand for meat (e.g., beef), because meat is a complement of fish. B) a fall in the price of fish, leading to a decrease in the demand for meat, because meat and fish are substitutes. C) a fall in the price of fish, leading to an increase in the demand for meat, because meat and fish are substitutes. D) an increase in the demand for meat, because meat is a substitute for fish. E) a rise in the price of fish, leading to a decrease in the demand for meat, because meat and fish are complements. Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 35) If Canadians suddenly develop a strong urge to escape the cold winter by taking vacations in Hawaii, the A) price of a vacation in Hawaii rises and the quantity demanded of Hawaiian vacations decreases. B) price of a skiing vacation in the mountains rises. C) initial result of the change is a surplus of vacations in Hawaii, leading to a price rise. D) price of airline tickets falls as ticket agents make deals in response to this change. E) price of luggage will rise, because luggage and vacations are complements. Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 36) The Genius Software Company has developed an amazing new software package to be used only with Einstein Computers. As a result, the equilibrium price of A) all computers rises. B) rival software packages falls leading to an overall increase in the equilibrium quantity of these packages. C) all software packages rises. D) Einstein computers rises, accompanied by an increase in the equilibrium quantity. E) Einstein computers rises, leading to a decrease in the equilibrium quantity. Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

Use the information below to answer the following questions. Fact 3.5.1 The market for coffee is initially in equilibrium. Pepsi is a substitute for coffee; cream is a complement of coffee. Consider the market for coffee. Assume that all ceteris paribus assumptions continue to hold except for the event listed. 37) Refer to Fact 3.5.1. If coffee is a normal good, then a decrease in income will A) increase the price and the quantity demanded of coffee. B) increase the price and the quantity supplied of coffee. C) decrease the price and the quantity demanded of coffee. D) decrease the price and the quantity supplied of coffee. E) cause none of the above. Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity Source: Study Guide 38) Refer to Fact 3.5.1. An increase in the price of Pepsi, a substitute for coffee will A) increase the price and the quantity demanded of coffee. B) increase the price and the quantity supplied of coffee. C) decrease the price and the quantity demanded of coffee. D) decrease the price and the quantity supplied of coffee. E) cause none of the above. Answer: B Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity Source: Study Guide 39) Refer to Fact 3.5.1. A technological improvement lowers the cost of producing coffee. At the same time, preferences for coffee decrease. The equilibrium quantity of coffee A) increases. B) decreases. C) remains the same. D) increases or decreases depending on whether the price of coffee falls or rises. E) increases, decreases, or remains the same depending on the relative shifts of the demand and supply curves. Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity Source: Study Guide

40) Refer to Fact 3.5.1. If there is an increase in the wages of farm workers who harvest coffee beans, the equilibrium quantity of coffee A) increases. B) decreases. C) remains the same. D) increases or decreases depending on the slope of the supply and demand curves. E) increases or decreases depending on the relative shifts of the supply and demand curves. Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 41) Refer to Fact 3.5.1. The price of cream falls. Simultaneously, there is an increase in the wages of farm workers who harvest coffee beans. The equilibrium quantity of coffee A) increases. B) decreases. C) remains the same. D) increases or decreases depending on the slope of the supply and demand curves. E) increases, decreases, or remains the same depending on the relative shifts of the supply and demand curves. Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 42) Refer to Fact 3.5.1. A new study comes out, revealing that drinking Pepsi increases your ability to study. The equilibrium quantity of coffee A) increases. B) decreases. C) remains the same. D) increases or decreases depending on the slope of the supply and demand curves. E) increases or decreases depending on the relative shifts of the supply and demand curves. Answer: B Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 43) Farm land can be used to produce either cattle or corn. If the demand for cattle increases, then the A) demand for corn increases. B) supply of corn increases. C) demand for corn decreases. D) supply of corn decreases. E) both B and C. Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

44) When the price of good A rises, the supply curve of good B shifts rightward. Which of the following statements are true? A) A and B are substitutes. B) A and B are complements. C) A and B are substitutes in production. D) A and B are complements in production. E) A is a factor used in the production of B . Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 45) "As domestic car prices have increased, consumers have found foreign cars to be a better bargain. Consequently, domestic car sales have fallen and foreign car sales have risen." Based on this information alone, there has been a A) shift in the demand curves for both domestic and foreign cars. B) shift in the supply curves for both domestic and foreign cars. C) movement along the demand curves for both domestic and foreign cars. D) movement along the demand curve for domestic cars and a shift of the demand curve for foreign cars. E) shift of the demand curve for domestic cars and a movement along the demand curve for foreign cars. Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

Use the figure below to answer the following questions. Figure 3.5.2 Original equilibrium at 1. 46) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans rises, what is the new beans equilibrium, ceteris paribus ? A) 8 B) 3 C) 9 D) 5 E) 6 Answer: A Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 47) Refer to Figure 3.5.2, which represents the market for beer. If the price of pizza, a complement of beer rises, what is the new beer equilibrium, ceteris paribus ? A) 8 B) 3 C) 9 D) 5 E) 6 Answer: B Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

48) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans in production, rises, what is the new beans equilibrium, ceteris paribus ? A) 8 B) 3 C) 9 D) 5 E) 6 Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 49) Refer to Figure 3.5.2, which represents the market for cow manure. If the price of milk, a complement in production of manure, rises, what is the new manure equilibrium, ceteris paribus ? A) 8 B) 3 C) 9 D) 5 E) 6 Answer: E Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 50) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans and a substitute in production, rises, what is the new beans equilibrium, ceteris paribus ? A) 2 B) 3 C) 9 D) 4 E) 7 Answer: E Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 51) Refer to Figure 3.5.2, which represents the market for beans. If the price of peas, a substitute for beans, rises, and the cost of producing beans decreases, what is the new beans equilibrium, ceteris paribus ? A) 2 B) 3 C) 9 D) 4 E) 7 Answer: C Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

52) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad breath. Simultaneously, the cost of producing tacos decreases. What is the new equilibrium, ceteris paribus ? A) 2 B) 3 C) 9 D) 4 E) 7 Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 53) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad breath. Simultaneously, the cost of producing tacos increases. What is the new equilibrium, ceteris paribus ? A) 2 B) 3 C) 9 D) 4 E) 7 Answer: A Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

Use the table below to answer the following questions. Table 3.5.1 The Market for Car-Seat Heaters Price (dollars per heater) Quantity Demanded (heaters per month) Quantity Supplied (heaters per month) 40 50 60 70 80 90 100 500 450 400 350 300 250 200 300 350 400 450 500 550 600 54) Refer to Table 3.5.1. The equilibrium price is $________ and the equilibrium quantity is ________ heaters per month. A) 80; 500 B) 80; 300 C) 50; 450 D) 50; 350 E) 60; 400 Answer: E Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 55) Refer to Table 3.5.1. If the price is set at $80, there will be a A) shortage of 200 units and price will rise. B) shortage of 200 units and demand will fall. C) surplus of 200 units and demand will rise. D) surplus of 200 units and supply will fall. E) surplus of 200 units and price will fall. Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 56) Refer to Table 3.5.1. Suppose the cost of production rises, causing supply to decrease by 100 units at each price. The new equilibrium price is $________ and equilibrium quantity is ________ units. A) 70; 450 B) 70; 350 C) 50; 450 D) 50; 350 E) 60; 400 Answer: B Diff: 2 Type: MC

Topic: Predicting Changes in Price and Quantity 57) Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious burns. As a result, demand decreases by 100 heaters at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ heaters per month. A) 70; 450 B) 70; 350 C) 50; 450 D) 50; 350 E) 60; 400 Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 58) Refer to Table 3.5.1. Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious burns. As a result, demand decreases by 100 heaters at each price. Simultaneously, the cost of production rises, and supply decreases by 100 heaters at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ heaters per month. A) 70; 450 B) 70; 350 C) 50; 450 D) 50; 350 E) 60; 300 Answer: E Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

Use the figure below to answer the following questions. Table 3.5.2 Demand and Supply Schedules for Cups of Coffee each day at CoolU Price (dollars per cup) Quantity Demanded (cups of coffee per day) Quantity Supplied (cups of coffee per day) 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1,200 1,100 1,000 900 800 700 600 500 400 0 200 400 600 800 1,000 1,200 1,400 1,600 59) Refer to Table 3.5.2. The equilibrium price is $________ and the equilibrium quantity is ________ cups a day. A) 1.30; 1200 B) 0.90; 1000 C) 1.10; 900 D) 1.10; 800 E) 1.00; 800 Answer: D Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 60) Refer to Table 3.5.2. If the price is set at $0.80 per cup, there is a ________ leading to a price ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall E) equilibrium; rise Answer: A Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity

61) Refer to Table 3.5.2. If the price is set at $1.30 per cup, there is a ________ leading to a price ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall E) equilibrium; rise Answer: D Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 62) Refer to Table 3.5.2. A premature frost destroys half the coffee trees. This change would be represented as a A) leftward shift of the demand curve. B) rightward shift of the demand curve. C) leftward shift of the supply curve. D) rightward shift of the supply curve. E) movement down along the supply curve. Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 63) 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 Answer: A Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 64) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students. Students double their demand for coffee. This change would be represented as a A) leftward shift of the demand curve. B) rightward shift of the demand curve. C) leftward shift of the supply curve. D) rightward shift of the supply curve. E) movement up along the demand curve. Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

65) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students. Students double their demand for coffee and the quantity of coffee demanded at each price doubles. The new equilibrium price is $________, and the new equilibrium quantity is ________ cups a day. A) 1.20; 1,000 B) 1.30; 1,200 C) 1.50; 1,600 D) 1.40; 1,400 E) none of the above Answer: B Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 66) Refer to Table 3.5.2. Professor Hyper publishes a new study, showing that coffee raises the test performance of students. Students double their demand for coffee and the quantity of coffee demanded at each price doubles. In addition, 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) 1.10; 400 B) 1.10; 1,600 C) 1.10; 800 D) 1.50; 800 E) 1.50; 400. Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

Use the table below to answer the following questions. Table 3.5.3 Demand and supply schedules for designer sport t-shirts at CoolU Price (dollars per t-shirt) Quantity Supplied (t-shirts per month) Quantity Demanded (t-shirts per month) 3 4 5 6 7 8 9 10 11 12 150 160 170 180 190 200 210 220 230 240 300 280 260 240 220 200 180 160 140 120 67) Refer to Table 3.5.3. The equilibrium price is $________ and the equilibrium quantity is ________ t-shirts per month. A) 6; 200 B) 7; 220 C) 8; 180 D) 8; 220 E) 8; 200 Answer: E Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 68) Refer to Table 3.5.3. Suppose that the price of a designer sport t-shirt is $6. The market has ________ leading to ________. A) an equilibrium; no change in the price B) a shortage; a fall in the price C) a shortage; a rise in the price D) a surplus; a fall in the price E) a surplus; a rise in the price Answer: C Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

69) Refer to Table 3.5.3. Suppose that the price of a designer sport t-shirt is $10. The market has ________ leading to ________. A) an equilibrium; no change in the price B) a shortage; a fall in the price C) a shortage; a rise in the price D) a surplus; a fall in the price E) a surplus; a rise in the price Answer: D Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 70) Refer to Table 3.5.3. In a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that doubles business at the sportswear establishments. This would be represented as a A) movement up along the demand curve. B) rightward shift of the demand curve. C) leftward shift of the demand curve. D) rightward shift of the supply curve. E) leftward shift of the supply curve. Answer: B Diff: 1 Type: MC Topic: Predicting Changes in Price and Quantity 71) Refer to Table 3.5.3. In a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that doubles business at the sportswear establishments. The quantity of t- shirts demanded doubles at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ t-shirts per month. A) 12; 240 B) 8; 400 C) 16; 400 D) 12; 120 E) 16; 200 Answer: A Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity 72) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. This would be represented as a A) movement up along the demand curve. B) rightward shift of the demand curve. C) leftward shift of the demand curve. D) rightward shift of the supply curve. E) leftward shift of the supply curve. Answer: D Diff: 2 Type: MC Topic: Predicting Changes in Price and Quantity

73) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ t-shirts per month. A) 8; 400 B) 3; 300 C) 0; 400 D) 16; 200 E) 4; 400 Answer: B Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 74) Refer to Table 3.5.3. A new store opens up on the edge of campus, Great Wild North Sportswear, which has the capacity to do as much business as all the existing businesses. The quantity of t-shirts supplied doubles at each price. In addition, in a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that doubles business at the local sportswear establishments. The quantity of t-shirts demanded doubles at each price. The new equilibrium price is $________ and the new equilibrium quantity is ________ t-shirts per month. A) 8; 400 B) 8; 200 C) 3; 400 D) 12; 240 E) 16; 400 Answer: A Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

Use the table below to answer the following questions. Table 3.5.4 Quantities demanded and supplied in equilibrium before and after a drought strikes potato farms Potatoes Hamburgers Rice before after before after before after Region 1 100 30 50 20 3 50 Region 2 10 5 4 50 50 60 75) Refer to Table 3.5.4. In Region 1, potatoes and hamburgers are A) substitutes. B) complements. C) normal goods. D) unrelated goods. E) inferior goods. Answer: B Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity 76) In Table 3.5.4 potatoes and rice are A) substitutes in Region 1 and complements in Region 2. B) substitutes in Region 2 and complements in Region 1. C) complements in both regions. D) substitutes in both regions. E) unrelated goods in both regions. Answer: D Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity

77) "As fewer people buy computers, the demand for Internet service will decrease and the price of Internet service will increase. The rise in the price of Internet service will increase the supply of Internet service." This statement is ________ because ________. A) false; the decrease in the demand for Internet service creates a surplus and to eliminate the surplus, supply increases B) true; when the demand for Internet service increases, the supply of Internet service increases so that the price of Internet service does not increase C) true, when the demand for Internet service increases, the supply of Internet service increases too so that no surplus occurs D) true; the increase in the price of Internet service increases the supply of Internet service to eliminate the shortage E) false; a decrease in demand for Internet service does not increase the price of Internet service and an increase in the price of Internet service does not increase the supply of Internet service Answer: E Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity Source: MyEconLab 78) The following events occur one at a time: I. The price of crude oil rises. II. The price of a car rises. III. All speed limits on highways are abolished. IV. Robots cut car production costs. The quantity of gasoline supplied ________. A) increases when all speed limits on highways are abolished B) increases when the price of crude oil rises C) decreases when robots cut car production costs D) increases when the price of a car rises E) decreases when the price of crude oil rises Answer: A Diff: 3 Type: MC Topic: Predicting Changes in Price and Quantity Source: MyEconLab 79) What will happen to the equilibrium price and quantity of coffee if it is discovered to help prevent colds and, at the same time, Brazil and Vietnam emerge in the global market as massive producers of coffee? A) The equilibrium price will fall and the effect on the equilibrium quantity is uncertain. B) The equilibrium price will rise and the effect on the equilibrium quantity is uncertain. C) The equilibrium quantity will decrease and the equilibrium price will rise. D) The equilibrium quantity will increase and the equilibrium price will remain unchanged. E) The equilibrium quantity will increase and the effect on the equilibrium price is uncertain. Answer: E Type: MC

80) All shredded wheat producers have decided to add a new ingredient, the "crunch enhancer" to shredded wheat. Crunch enhancer keeps cereals crisper longer in milk and, as a result, consumers decide they like shredded wheat more than before. What happens to the supply and demand curves for shredded wheat now that it costs more to produce and consumers like it better? A) The supply and demand curves both shift rightward. B) The supply curve shifts rightward and the demand curve remains unchanged. C) The supply curve shifts leftward and the demand curve shifts rightward. D) The supply curve shifts leftward and the demand curve remains unchanged. E) Neither curve changes but a movement occurs up along the demand curve and a movement occurs up along the supply curve. Answer: C Type: MC

3.6 Mathematical Note 1) The demand curve for knobs is P = 75 - 6 Q D and the supply curve for knobs is P = 35 + 2 Q S . What is the equilibrium price of a knob? A) $5 B) $10 C) $40 D) $45 E) None of the above. Answer: D Diff: 2 Type: MC Topic: Mathematical Note: Demand, Supply, and Equilibrium Source: Study Guide 2) The y - axis intercept of the supply curve is 40 and the slope is 6. The equation of the supply curve is ________. A) P = 3 + 40 Q S B) P = 40 + 6 Q S C) P = 40 - 6 Q S D) Q S = 40 + 6 P E) Q S = 40 - 6 P Answer: B Diff: 2 Type: MC Topic: Mathematical Note: Demand, Supply, and Equilibrium Source: MyEconLab 3) The y - axis intercept of the demand curve is 60 and the slope is - 8. The equation of the demand curve is ________. A) P = 8 - 60 Q D B) P = 60 - 8 Q D C) Q D = 60 - 8 P D) P = 60 + 8 Q D E) Q D = 60 + 8 P Answer: B Diff: 2 Type: MC Topic: Mathematical Note: Demand, Supply, and Equilibrium Source: MyEconLab

4) The demand curve is P = 700 - 10 Q D . The supply curve is P = 400 + 5 Q S . At market equilibrium, the equilibrium quantity is ________ and the equilibrium price is ________. A) 20; 500 B) 5; 0.05 C) 0.05; 5 D) 500; 20 E) 300; 15 Answer: A Diff: 2 Type: MC Topic: Mathematical Note: Demand, Supply, and Equilibrium Source: MyEconLab 5) The demand curve is P = 700 - 20 Q D . The supply curve is P = 300 + 20 Q S . At market equilibrium, the equilibrium quantity is ________ and the equilibrium price is ________. A) 10; 500 B) 500; 10 C) 0.10; 20 D) 20; 0.10 E) 400; 40 Answer: A Diff: 2 Type: MC Topic: Mathematical Note: Demand, Supply, and Equilibrium Source: MyEconLab 6) The demand curve is P = 800 - 25 Q D . The supply curve is P = 500 + 25 Q S . At market equilibrium, the equilibrium quantity is ________ and the equilibrium price is ________. A) 25; 0.17 B) 650; 6.0 C) 0.17; 25 D) 6.0; 650 E) 1,300; zero Answer: D Diff: 2 Type: MC Topic: Mathematical Note: Demand, Supply, and Equilibrium Source: MyEconLab Chapter 20 Measuring GDP and Economic Growth 20.1 Gross Domestic Product 1) Gross domestic product is A) the final value of all goods produced in a country in a given time period. B) the market value of all goods and services produced in a country during a given time period. C) the market value of all the final goods and services produced in a country during a given time period. D) the average value of output produced in a country in a given time period.

E) the market value of all the intermediate goods and services produced in a country during a given time period. Answer: C Diff: 3 Type: MC Topic: Gross Domestic Product 2) In calculating GDP, economists use the value of final goods and services because A) by using final goods and services, they avoid double counting. B) final goods can be exported to other countries. C) intermediate goods are imported from other countries. D) GDP is underestimated if intermediate goods are used instead. E) none of the above. Answer: A Diff: 3 Type: MC Topic: Gross Domestic Product 3) Which of the following statements is true? A) Final goods and services produced abroad by Canadians are part of Canadian GDP. B) Final goods and services produced in Canada by foreigners are part of the foreign country's GDP. C) Final goods and services produced in Canada by foreigners are part of Canada's GDP. D) Final goods and services produced in Canada by foreigners are imports. E) Final goods and services produced in Canada by foreigners are exports. Answer: C Diff: 3 Type: MC Topic: Gross Domestic Product 4) The circular flow diagram illustrates the expenditures made by A) households only. B) households and firms only. C) households and investors only. D) firms, households, and governments only. E) households, firms, governments, and the rest of the world. Answer: E Diff: 1 Type: MC Topic: Gross Domestic Product

5) In the circular flow model, A) households are sellers of factor services in goods markets. B) households are buyers of goods and services in the factor markets. C) firms are sellers of the factors in factor markets. D) firms are sellers of goods and services in goods markets. E) firms are buyers of goods and services in final markets. Answer: D Diff: 1 Type: MC Topic: Gross Domestic Product 6) The purchasers in the goods markets are A) households and government only. B) households and firms only. C) households and net exporters only. D) households, firms, and government only. E) households, firms, government, and those who import our goods. Answer: E Diff: 1 Type: MC Topic: Gross Domestic Product 7) Of the following items, which one would be considered as investment in the National Income and Expenditure Accounts ? A) The purchase of a new van by a potter who packs it with his wares and travels to art shows on weekends. B) The purchase of 100 shares of Bell Canada stock on the Toronto Stock Exchange. C) The purchase of a 100-year-old house that was put on the protected historic sites list. D) The purchase of a Canadian government bond. E) All of the above. Answer: A Diff: 1 Type: MC Topic: Gross Domestic Product 8) Complete the following sentence. Net exports equals A) exports divided by imports. B) exports plus imports. C) exports minus imports. D) imports minus exports. E) foreign borrowing by residents of Canada minus domestic borrowing by nonresidents of Canada. Answer: C Diff: 1 Type: MC Topic: Gross Domestic Product

9) Which one of the following is an expenditure flow from households to firms? A) goods and services B) factor services C) payments for goods and services D) payments for factor services E) loans Answer: C Diff: 1 Type: MC Topic: Gross Domestic Product 10) Which one of the following is an income flow from firms to households? A) goods and services B) factor services C) payments for goods and services D) payments for factor services E) loans Answer: D Diff: 1 Type: MC Topic: Gross Domestic Product 11) Which one of the following flows from firms to households? A) goods and services B) factor services C) payments for goods and services D) payments for loans E) loans Answer: A Diff: 1 Type: MC Topic: Gross Domestic Product 12) For the aggregate economy, income equals A) expenditure, but these are not generally equal to GDP. B) GDP, but expenditure is generally less than these. C) expenditure equals GDP. D) expenditure equals GDP only if there is no government or foreign sectors. E) expenditure equals GDP only if there is no depreciation. Answer: C Diff: 2 Type: MC Topic: Gross Domestic Product Source: Study Guide

13) Which one of the following is false ? A) Y = C + I + G + M - X B) Y - C - I - G - X + M = 0 C) X - M = Y - C - I - G D) Y + M = C + I + G + X E) Y = C + I + G + X - M Answer: A Diff: 3 Type: MC Topic: Gross Domestic Product 14) Which one of the following is true ? A) Y = C + I + G + M - X B) I + G + X = Y + I + M C) Y = C + S + I D) Y + M = C + I + G E) Y = C + I + G + X - M Answer: E Diff: 3 Type: MC Topic: Gross Domestic Product 15) Which of the following is not correct? A) Investment is the purchase of new plant, equipment, and buildings and the additions to inventories. B) Net investment equals gross investment minus depreciation. C) Depreciation decreases the value of a firm's capital. D) Gross investment is the amount by which the value of capital increases. E) Gross investment is the total amount spent buying new capital and replacing depreciated capital. Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product 16) Suppose the economy's capital increases over the year. It must be true that A) net investment was greater than gross investment. B) net investment was positive. C) depreciation was greater than net investment. D) depreciation was greater than gross investment. E) depreciation is less than zero. Answer: B Diff: 2 Type: MC Topic: Gross Domestic Product

17) SaskWidget produces plastic parts. At the beginning of the year, they held $24 million worth of capital. At the end of the year, they held $20 million worth of capital. One can conclude that A) net investment increased by $4 million. B) gross investment decreased by $4 million. C) gross investment increased by $4 million. D) depreciation exceeded gross investment by $4 million. E) depreciation equals $4 million. Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product 18) One of the reasons why real GDP grows is that A) prices increase. B) governments collect more taxes. C) capital grows as a result of investment. D) imports increase. E) people have more income. Answer: C Diff: 2 Type: MC Topic: Gross Domestic Product 19) Which of the following would be an example of a consumption expenditure? A) More spending by the government on children's programs. B) An increase in welfare payments to single mothers. C) The purchase of a new car by the IPSCO steel company. D) The purchase of a new car by the Singh household. E) All of the above. Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product Source: Study Guide 20) The change in capital from year to year is equal to A) gross investment. B) gross investment minus net investment. C) savings. D) net investment minus depreciation E) gross investment minus depreciation. Answer: E Diff: 2 Type: MC Topic: Gross Domestic Product

21) Capital in year 2012 equals capital in year 2011 A) minus depreciation. B) plus net investment plus depreciation. C) plus gross investment. D) plus net investment. E) plus net investment minus depreciation. Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product Source: Study Guide Use the figure below to answer the following questions. Figure 20.1.1 22) Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. How much is GDP? A) $75 B) $50 C) $90 D) $100 E) None of the above Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product

23) Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. How much is net exports? A) $10 B) $25 C) $30 D) $50 E) None of the above Answer: A Diff: 2 Type: MC Topic: Gross Domestic Product 24) Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. How much is aggregate expenditure? A) $50 B) $75 C) $90 D) $100 E) None of the above Answer: D Diff: 3 Type: MC Topic: Gross Domestic Product 25) Refer to Figure 20.1.1, which shows the circular flow of expenditure and income for Venus. During 2012, A was $100, B was $50, C was $30 and D was $10. What is aggregate income? A) $25 B) $50 C) $75 D) $90 E) $100 Answer: E Diff: 2 Type: MC Topic: Gross Domestic Product

Use the information below to answer the following questions. Fact 20.1.1 At the beginning of 2012, Peter's Perfectly Prickly Piercing Parlour had $5,000 worth of bellybutton and eyebrow rings on hand, 2 computers (each worth $1,000), 1 cash register worth $100, electrical equipment worth $500, and one piercing needle worth $500. At the end of 2012, they had $5,000 worth of bellybutton and eyebrow rings, a new high speed computer worth $3,000 (they had to throw out the old ones), the same cash register, which was now worthless, electrical equipment worth $600, and they had upgraded the needle at a cost of $700 which was valued at $1,000. 26) Refer to Fact 20.1.1. Peter's capital at the beginning of 2012 is A) $8,100. B) $7,000. C) $3,100. D) $7,600. E) $5,000. Answer: A Diff: 2 Type: MC Topic: Gross Domestic Product 27) Refer to Fact 20.1.1. Peter's capital at the end of 2012 is A) $7,000. B) $9,600. C) $4,400. D) $7,600. E) $4,000. Answer: B Diff: 2 Type: MC Topic: Gross Domestic Product 28) Refer to Fact 20.1.1. Peter's gross investment in 2012 is A) $2,800. B) $3,800. C) $1,800. D) $7,800. E) $5,800. Answer: B Diff: 3 Type: MC Topic: Gross Domestic Product

29) Refer to Fact 20.1.1. Peter's depreciation in 2012 is A) $2,300. B) $800. C) zero. D) $1,000. E) $3,000. Answer: A Diff: 2 Type: MC Topic: Gross Domestic Product 30) Refer to Fact 20.1.1. Peter's net investment in 2012 is A) $2,000. B) $3,800. C) $1,800. D) $7,800. E) $1,500. Answer: E Diff: 2 Type: MC Topic: Gross Domestic Product 31) The value of intermediate goods is not counted in GDP A) to keep from including goods that reduce society's welfare. B) because of the tremendous difficulty in keeping track of all the intermediate goods produced in an economy as large as that of Canada. C) because they are only sold in factor markets. D) to avoid counting their value twice and overstating the value of GDP. E) because they are not consumed in the current year. Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product 32) Intermediate goods are A) sold to their ultimate user. B) produced by one firm, bought by another firm, and used as a component of a final good or service. C) included directly in the measure of GDP. D) capital. E) purchased this year but consumed in future years. Answer: B Diff: 1 Type: MC Topic: Gross Domestic Product

33) 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 will not change. 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. Answer: B Diff: 2 Type: MC Topic: Gross Domestic Product 34) Which of the following would not be included in GDP for 2011? A) A car produced in 2011 and held in inventory until 2012. B) A car produced in 2011 and sold in 2012. C) The value of all cars produced in 2011. D) A car produced in January of 2011 and sold in November of 2011. E) A car produced in 2010 and sold in 2011. Answer: E Diff: 2 Type: MC Topic: Gross Domestic Product 35) Stock and bond sales are not included in GDP because they A) do not occur in the year in which the production represented by them takes place. B) represent corporate production. C) represent indebtedness. D) are not goods and services. E) are not sold in the country in which they are produced. Answer: D Diff: 2 Type: MC Topic: Gross Domestic Product 36) In calculating GDP, all of the following are excluded except A) the value of intermediate goods. B) the value of all homes built in the year in question. C) the value of used goods. D) purchases of stocks and bonds. E) subsidies from the government. Answer: B Diff: 2 Type: MC Topic: Gross Domestic Product

37) From the following list, choose the item that would be included in a current measure of GDP. A) the purchase of a previously owned house that was built last year B) a social security cheque for $500 C) the purchase of 10 litres of gasoline for your car D) a $2,000 cheque from your Aunt Grace E) income from the sale of your Canadian Snowfun stocks Answer: C Diff: 1 Type: MC Topic: Gross Domestic Product 38) Which one of the following would not be counted as part of this year's GDP? A) The lumber you purchase when building bookshelves for your room. B) The government bond you buy for your newborn niece. C) The purchase of a new personal computer that was produced in the current year. D) The purchase of wheat that was produced in the current year by a Saskatchewan farmer. E) The purchase of a house that was produced in the current year. Answer: B Diff: 1 Type: MC Topic: Gross Domestic Product 39) How much would the production of a kayak add to GDP if the shell costs $250, the paint costs $20, the finisher costs $35, the manufacturer sold it to the dealer for $500, and the dealer sold it to his customer for $800? A) $1,605 B) $1,300 C) $500 D) $305 E) $800 Answer: E Diff: 2 Type: MC Topic: Gross Domestic Product 40) Which of the following adds to Canadian GDP? A) I shovel my own driveway. B) I sell my used Honda. C) The production and sale of flour to a bakery. D) The purchase of a CD made in China. E) The ice cream I buy from my grocery store. Answer: E Type: MC Topic: Gross Domestic Product Source: Study Guide

41) A bakery uses flour to produce bread. When calculating GDP, we include ________, because when we add the value of the flour to the value of the loaf of bread to calculate GDP, the result is ________. A) only the value of the bread sold in a store; double counting B) only the value of the flour used to produce the bread; double counting C) both the value of the bread sold in a store and the value of the flour used to produce the bread; double counting D) both the value of the bread sold in a store and the value of the flour used to produce the bread; the true value of the economy's output E) none of the above Answer: A Type: MC Topic: Gross Domestic Product Source: MyEconLab 42) The firm that printed your textbook bought the paper from XYZ Paper Mills. This purchase of paper ________ part of GDP because the paper is ________ good. A) is not; a final B) is not; an intermediate C) is; an intermediate D) is; a final E) is; a nonrenewable Answer: B Type: MC Topic: Gross Domestic Product Source: MyEconLab 43) In the circular flow diagram, aggregate expenditure includes ________. A) consumption expenditure, saving, investment and government expenditure B) saving, investment, and taxes C) consumption expenditure, investment, government expenditure, and exports D) consumption expenditure, investment, government expenditure and net exports E) government expenditure, transfer payments, and taxes Answer: D Type: MC 44) Which of the following are equal to one another? I. aggregate production II. aggregate expenditure III. aggregate income A) I equals II, but I does not equal III. B) I equals III, but I does not equal II. C) II equals III, but II does not equal I. D) III equals II, but III does not equal I E) I equals II equals III. Answer: E

Type: MC 45) Suppose Mail Boxes Etc. buys a new copier for its store for $1,000. A year later, when the firm wants to upgrade to a new copier, it finds that the old copier is only worth $750. Over the year the copier was used, ________ has occurred. A) depreciation B) demarcation C) devaluation D) denouement E) disparity Answer: A Type: MC 46) Which of the following relationships is correct? A) Gross Investment = Net Investment + Depreciation B) Consumption expenditure = Net Investment - Depreciation C) Net Investment = Gross Investment + Depreciation D) Depreciation = Gross Investment - Consumption expenditure E) Saving = Gross Investment - Taxes Answer: A Type: MC

20.2 Measuring Canada's GDP 1) To measure GDP, Statistics Canada uses A) the expenditure approach. B) the income approach. C) the value-added approach. D) only A and B. E) A, B and C. Answer: D Diff: 2 Type: MC Topic: Measuring Canada's GDP 2) A hypothetical economy produced four final goods during the year: plates, TVs, bicycles, and computers. Forty plates were produced and sold for $10 each. Five TVs were produced and sold for $300 each. Fifty bicycles were produced and sold for $100 each. Three computers were produced and sold for $750 each. With this information, one could determine A) gross investment for this economy. B) net investment for this economy. C) indirect taxes less subsidies for this economy. D) whether factors had been fully employed in this economy. E) total income for this economy. Answer: E Diff: 2 Type: MC Topic: Measuring Canada's GDP 3) Suppose the economy of Econoworld produces only two goods, kayaks and birdseed. In one year 20 kayaks are produced and sold for $1,000 each and 10 bags of birdseed are produced and sold for $30 each. The value of nominal GDP for this year is A) $20,000. B) $300. C) $20,300. D) $23,000. E) 20 kayaks plus 10 bags of birdseed. Answer: C Diff: 1 Type: MC Topic: Measuring Canada's GDP

4) The expenditure approach measures GDP by adding together A) wages, salaries and supplementary labour income, and other factor incomes. B) wages, salaries and supplementary labour income, other factor income, subsidies paid by the government, indirect taxes paid, and income of nonfarm unincorporated businesses. C) compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and capital consumption expenditures, and by subtracting subsidies paid by the government. D) the total expenditures of consumers, firms, net exporters, and by governments at all levels. E) the total expenditures of consumers and firms. Answer: D Diff: 2 Type: MC Topic: Measuring Canada's GDP Use the table below to answer the following questions. Table 20.2.1 Data From Eastland Wages, salaries, and supplementary labour income 800 Other factor incomes 260 Government expenditures on goods and services 240 Depreciation 240 Investment 400 Personal income taxes net of transfer payments 140 Indirect taxes 120 Net exports 80 Consumption expenditure 640 5) Refer to Table 20.2.1. From the information given in the table, the value of gross domestic product is A) $1,280. B) $1,290. C) $1,360. D) $1,120. E) $1,100. Answer: C Diff: 2 Type: MC Topic: Measuring Canada's GDP

6) Refer to Table 20.2.1. From the information given in the table, the value of net domestic income at factor cost is A) $1,280. B) $1,290. C) $1,360. D) $1,060. E) $1,100. Answer: D Diff: 3 Type: MC Topic: Measuring Canada's GDP 7) Refer to Table 20.2.1. From the data in the table, what additional data are needed to compute net domestic income at market prices? A) statistical discrepancy B) transfer payments C) subsidies D) depreciation E) net taxes Answer: C Diff: 2 Type: MC Topic: Measuring Canada's GDP 8) Refer to Table 20.2.1. From the data in the table, what is total income in Eastland? A) $1,120 B) $1,180 C) $1,360 D) $1,420 E) $1,280 Answer: C Diff: 2 Type: MC Topic: Measuring Canada's GDP 9) The largest component of GDP using the expenditure approach is A) investment B) consumption expenditure C) exports D) government expenditure E) imports Answer: B Diff: 1 Type: MC Topic: Measuring Canada's GDP

10) Which one of the following would be included in the calculation of GDP by the expenditure approach? A) the purchase of 20 shares of a new issue of IBM stock B) the purchase of an original eighteenth century work of art C) the value of your brother's services when he mows the lawn for the family D) the cost of adding a new kitchen to your house E) the income you pay to your gardener Answer: D Diff: 2 Type: MC Topic: Measuring Canada's GDP Use the table below to answer the following questions. Table 20.2.2 Government expenditures on goods and services $ 500 Wages, salaries, and supplementary labour income 2,000 Depreciation 400 Investment 400 Consumption expenditure 2,200 Net exports -50 Indirect taxes 150 Statistical discrepancy 0 11) Refer to Table 20.2.2. Gross domestic product equals A) $3,050. B) $3,150. C) $3,400. D) $5,600. E) $5,050. Answer: A Diff: 1 Type: MC Topic: Measuring Canada's GDP 12) Refer to Table 20.2.2. Net domestic income at market prices equals A) $3,050. B) $3,150. C) $3,400. D) $4,650. E) $2,650. Answer: E Diff: 2 Type: MC Topic: Measuring Canada's GDP

13) Which one of the following is not an example of investment in the expenditure approach to measuring GDP? General Motors A) buys a new auto stamping machine. B) adds 500 new cars to inventories. C) buys shares in another company. D) builds another assembly plant. E) replaces some worn-out stamping machines. Answer: C Diff: 1 Type: MC Topic: Measuring Canada's GDP Use the table below to answer the following questions. Table 20.2.3 14) Refer to Table 20.2.3. Consider the economy represented in the table. GDP in this economy, in millions of dollars, is A) $1,150,000 B) $850,000. C) $1,350,000. D) $1,050,000. E) none of the above. Answer: D Diff: 2 Type: MC Topic: Measuring Canada's GDP 15) Refer to Table 20.2.3. Consider the economy represented in the table. Total income, in millions of dollars, is A) $800,000. B) $850,000. C) $1,350,000. D) $1,050,000. E) none of the above. Answer: D

Diff: 2 Type: MC Topic: Measuring Canada's GDP 16) Net domestic income at market prices can be derived by which one of the following? GDP (income approach) minus A) taxes. B) corporate profits. C) subsidies. D) consumption expenditure. E) depreciation. Answer: E Diff: 1 Type: MC Topic: Measuring Canada's GDP 17) The sum of wages, salaries and supplementary labour income, and other factor incomes is A) gross domestic product. B) gross domestic income. C) net domestic income at factor cost. D) net domestic product. E) total output of the economy. Answer: C Diff: 2 Type: MC Topic: Measuring Canada's GDP 18) In the Canadian economy, market prices and factor costs would be the same except for A) depreciation. B) exports. C) personal taxes. D) indirect taxes and subsidies. E) capital consumption. Answer: D Diff: 2 Type: MC Topic: Measuring Canada's GDP 19) Net domestic income at market prices equals A) consumption expenditure plus government expenditure plus net exports plus investment. B) consumption expenditure plus government expenditure plus exports plus personal taxes. C) indirect business taxes plus personal income plus net exports. D) all incomes plus indirect taxes minus subsidies. E) all incomes minus depreciation. Answer: D Diff: 1 Type: MC Topic: Measuring Canada's GDP

Use the table below to answer the following questions. Table 20.2.4 Other factor incomes $570 Indirect taxes 230 Depreciation 250 Wages, salaries and supplementary labour income 1,350 Consumption expenditure 1,400 Government expenditure on goods and services 500 Government transfer payments 50 Net exports 40 Subsidies 0 20) Refer to Table 20.2.4. Gross domestic product is equal to A) $2,400. B) $1,920. C) $2,150. D) $1,940. E) $2,350. Answer: A Diff: 2 Type: MC Topic: Measuring Canada's GDP 21) Refer to Table 20.2.4. Net domestic income at market prices is equal to A) $2,150. B) $1,920. C) $2,400. D) $1,940. E) $2,350. Answer: A Diff: 2 Type: MC Topic: Measuring Canada's GDP 22) Refer to Table 20.2.4. Gross investment is equal to A) $460. B) $260. C) $400. D) $560. E) $250. Answer: A Diff: 3 Type: MC Topic: Measuring Canada's GDP

23) Refer to Table 20.2.4. Net investment is equal to A) $250. B) $210. C) $510. D) $560. E) $150. Answer: B Diff: 3 Type: MC Topic: Measuring Canada's GDP 24) Which approach to measuring GDP is being used when Statistics Canada sums wages, salaries and supplementary labour income, and other factor incomes? A) opportunity cost approach B) expenditure approach C) value-added approach D) factor cost approach E) income approach Answer: E Diff: 1 Type: MC Topic: Measuring Canada's GDP 25) Which approach to measuring GDP is being used when Statistics Canada sums spending on goods and services for consumer goods, government, business investments and exports, net of imports? A) value added B) income C) factor cost D) expenditure E) opportunity cost Answer: D Diff: 1 Type: MC Topic: Measuring Canada's GDP 26) To derive net domestic income at market prices from gross domestic product, we A) subtract gross investment from GDP. B) subtract the statistical discrepancy from GDP. C) add the statistical discrepancy to GDP. D) subtract depreciation from GDP. E) add depreciation to GDP. Answer: D Diff: 1 Type: MC Topic: Measuring Canada's GDP

27) To obtain the factor cost of a good from its market price A) add indirect taxes and subtract subsidies. B) subtract indirect taxes and add subsidies. C) subtract both indirect taxes and subsidies. D) add both indirect taxes and subsidies. E) subtract depreciation. Answer: B Diff: 1 Type: MC Topic: Measuring Canada's GDP Source: Study Guide 28) Wages, salaries, and supplementary labour income are components of which approach to measuring GDP? A) income approach B) expenditure approach C) injections approach D) output approach E) value-added approach Answer: A Diff: 1 Type: MC Topic: Measuring Canada's GDP 29) Real GDP equals A) nominal GDP minus the value of intermediate goods. B) nominal GDP adjusted for the depreciation of capital. C) the value of final goods and services produced in a given year when valued at the prices of a reference base year. D) nominal GDP minus the value of goods exported to foreign countries. E) nominal GDP minus the rate of inflation. Answer: C Diff: 1 Type: MC Topic: Measuring Canada's GDP 30) Suppose in current dollar terms, GDP increased by approximately 7 percent between one period and the next, but real GDP fell by 2 percent. Which one of the following explanations is most likely? A) Prices fell by 9 percent. B) Prices fell by 2 percent. C) Output rose by 2 percent. D) Prices increased by 7 percent. E) Prices increased by 9 percent. Answer: E Diff: 2 Type: MC Topic: Measuring Canada's GDP

31) Real GDP will increase only if the A) average level of prices rises. B) quantity of goods and services produced increases. C) unemployment rate rises. D) employment rate rises. E) employment rate falls. Answer: B Diff: 1 Type: MC Topic: Measuring Canada's GDP 32) In recent history, real GDP has risen less rapidly than nominal GDP. This is because A) the general price level fell. B) capital increased. C) the goal of zero population growth has been reached. D) the general price level rose. E) the level of population rose. Answer: D Diff: 2 Type: MC Topic: Measuring Canada's GDP 33) If nominal GDP increased by 11 percent during a year while real GDP increased by only 5 percent, then the A) price level decreased by 6 percent. B) price level increased by 16 percent. C) price level remained steady but real output fell by 6 percent. D) unemployment rate fell during the year. E) price level increased by 6 percent. Answer: E Diff: 2 Type: MC Topic: Measuring Canada's GDP 34) If you want to investigate the claim that more goods and services were produced in the economy during 2011 than 2012, what should you look at? A) real GDP B) nominal GDP C) intermediate GDP D) GDP calculated using the expenditure approach E) either B or D Answer: A Diff: 1 Type: MC Topic: Measuring Canada's GDP

35) Nominal GDP will increase A) only if the average level of prices rises. B) only if the quantity of goods and services produced increases. C) only if the unemployment rate rises. D) only if both the average level of prices rises and the quantity of goods and services produced increases. E) if either the average level of prices rises or the quantity of goods and services produced increases. Answer: E Diff: 2 Type: MC Topic: Measuring Canada's GDP Use the table below to answer the following questions. Table 20.2.5 Data From Southton 36) Refer to Table 20.2.5. From the data in the table, compute Southton's nominal GDP in the current year. A) $197 B) $208 C) $209 D) $226 E) It cannot be calculated given the data. Answer: C Diff: 2 Type: MC Topic: Measuring Canada's GDP Source: Study Guide 37) Refer to Table 20.2.5. From the data in the table, compute Southton's nominal GDP in the base year. A) $208 B) $197 C) $209 D) $226 E) It cannot be calculated given the data. Answer: A Diff: 2 Type: MC Topic: Measuring Canada's GDP Source: Study Guide

38) Refer to Table 20.2.5. From the data in the table, compute Southton's real GDP in the base year. A) $208 B) $197 C) $209 D) $226 E) It cannot be calculated given the data. Answer: A Diff: 2 Type: MC Topic: Measuring Canada's GDP Source: Study Guide Use the table below to answer the following questions. Table 20.2.6 There are only two goods in this economy. 39) Refer to Table 20.2.6. Consider the data in this table. What is current nominal GDP? A) $189,900 B) $192,000 C) $95,000 D) $93,000 E) None of the above Answer: A Diff: 2 Type: MC Topic: Measuring Canada's GDP 40) Refer to Table 20.2.6. Consider the data in this table. What is current real GDP in terms of base-year prices? A) $189,900 B) $192,000 C) $95,000 D) $93,000 E) None of the above Answer: D Diff: 3 Type: MC Topic: Measuring Canada's GDP