1) If a rise in the price of productAcauses the supply of productBto decrease, then

Select one:

a.

AandBare substitutes for consumers.

b.

AandBcomplements for consumers.

c.

AandBare related products for businesses.

d.

AandBare unrelated products for businesses.

e.

none of the above are true.

2) An increase in the cost of rent doesnotchange a business's profit-maximizing quantity of output.

Select one:

True

False

3) Nominal GDP per person is the best measure of a country's material standard of living.

Select one:

True

False

4) In perfect competition,

Select one:

a.

patents and copyrights are common.

b.

businesses can sell more if they increase their price.

c.

businesses are price takers.

d.

businesses have no incentive to keep prices low.

e.

every business produces a different product.

5) If marginal costs are zero, a business maximizes profits by choosing the highest quantity of output where marginal revenue equals zero.

Select one:

True

False

6) An example of fiscal policy is changing

Select one:

a.

the interest rate.

b.

the money supply.

c.

the tax rate.

d.

the exchange rate.

e.

all of the above.

7)A negative demand shock causes the Canadian dollar to depreciate because

Select one:

a.

the Canadian interest rate differential increases.

b.

investor confidence in Canada is reduced.

c.

negative demand shocks cause inflation.

d.

import spending is reduced.

e.

Canadian resources will be less valuable in international markets.

8) Before dropping room prices from $100 to $90, the No-Tell Motel rented 3 rooms. Total costs were $150. After the price drop, total costs increased to $240. The motel's marginal costs of increasing output are

Select one:

a.

$240.

b.

$90.

c.

$60.

d.

$50.

e.

$150.

9) Game theory predicts that when the instructor for your course assigns a group project,

Select one:

a.

each group member has an incentive to cooperate and do their fair share of the work.

b.

things will not get started until the night before the project is due.

c.

each group member has an incentive to slack off and let others do the work.

d.

students with a higher grade in the course probably do most of the work.

e.

the group will need to get an extension on the deadline.

10)An individual business in perfect competition faces a demand curve that is

Select one:

a.

vertical.

b.

steeply sloped.

c.

slightly sloped.

d.

horizontal.

e.

none of the above.

11) Voluntary trade is a zero-sum game.

Select one:

True

False

12) Unemployment caused by a permanent collapse of the East Coast fishery is

Select one:

a.

frictional unemployment.

b.

structural unemployment.

c.

cyclical unemployment.

d.

underutilized unemployment.

e.

discouraged unemployment.

13) A private garbage company charges a condominium association $2.50 per bag of garbage. The 10 households in the condominium produce a total of 40 bags of garbage per week and each household is charged a weekly fee of $10 to cover this cost. Problems arise because some environmentally conscious families produce little garbage, while other families produce a lot. An economist would suggest that the problem could be solved if households

Select one:

a.

are required to produce zero garbage.

b.

that recycle get free garbage disposal.

c.

are limited to one bag per week.

d.

are directly charged $10 for each bag.

e.

are directly charged $2.50 for each bag

14) The "Yes - Markets Self-Adjust" camp agrees with all of the following statementsexceptwhich one?

Select one:

a.

Government spending is determined by political influence rather than need.

b.

Private individuals should make smart choices about how to spend their money.

c.

Tax cuts are less effective than government spending for speeding up the economy because savings can cause transmission breakdowns.

d.

Government should keep its hands off of the economy wherever possible.

e.

Reduced government spending is preferred to tax cuts for slowing the economy.

15) A once-in-a-lifetime trip to Paris will give you marginal benefits that will be the same as total benefits.

Select one:

True

False

16) When there are part-time workers who wish to work full-time, the official unemployment rate

Select one:

a.

overstates the unemployment problem.

b.

rises when these workers find full-time jobs.

c.

counts these workers as discouraged.

d.

falls when these workers find full-time jobs.

e.

understates the unemployment problem.

17) Falling average prices and higher unemployment most likely come from

Select one:

a.

investor pessimism.

b.

investor optimism.

c.

lower income tax rates.

d.

lower exchange rates.

e.

lower interest rates.

18)Before Andrew took a prestigious accounting job, he estimated that he would have to spend $10,000 on new suits. For a job with a less prestigious company he would only have to spend $2,000 on new suits. When making a smart choice between jobs, the $8,000 difference in clothing costs is irrelevant because it is a sunk cost.

Select one:

True

False

19)When a product or service has a positive externality and does not have a negative externality,

Select one:

a.

marginal private benefit equals marginal social benefit.

b.

marginal social cost equals marginal social benefit.

c.

marginal private cost equals marginal social cost.

d.

marginal private benefit equals marginal social cost.

e.

marginal external cost equals marginal external benefit.

20) Sue's Sea Shells sold 200 cases of shells last season. Her total costs were $1,000. She sells 300 cases this season. Sue's Sea Shells has economies of scale if her

Select one:

a.

average total costs are less than $200.

b.

total costs are less than $1,500.

c.

average total costs are more than $300.

d.

total costs are less than $1,000.

e.

average total costs are more than $5.