Question 1: (16 marks)

Provide a clear and specific definition, an equation, and an example for each of the following, except as noted:

-The natural rate of unemployment (definition only)

-If Canada can produce 300 tons of wheat per person and the USA can produce 200 tons of wheat per person, or Canada could make 30 cars per person and the USA could produce 40 cars per person, (i) which country has an absolute advantage in making cars and (ii) which country has a comparative advantage in producing wheat?

(No definitions or graphs but show all calculations)

-A tariff - a definition only

- A demand gap - just a diagram and a definition . No example

-Draw a graph for a perfectly competitive firmwith the Cost and Quantity as the two axes on the graph and (i) showing the short-run AVC and ATC, wherethe short-term price=ATC.

(ii) Also indicate on the graph where the firm would exit the business in the short-term and when the same firm would shut down in the short run.

-The four prime causes of unemployment in a nation - a listing, and a definition of each, no examples.

Question2: (8 marks)

(a) Calculate the real GDP for all yearsfrom2004to 2008, using the following information. :

YearNominal GDPGDP DeflatorReal GDP

2004$720 billion100

2005$750 billion102

2006$800 billion110

2007$900 billion114

2008$960 billion120

(b) What was the real economic growth rate in 2008 compared to 2007?

Question 3: (16 marks)

On the attached list of multiple choice questions, answer ONLY questions3,4,5,10,11,12,13,14,15,18,19,20,25,29,30, 31.

Place your answers below (e.g. 1D). Do not answer all the questions.

IGNORE THE BOLD ANSWERS.

ANSWERS :

QuestionAnswer

3

4

5

10

11

12

13

14

15

18

19

20

25

29

30

31

BONUSQUESTION(6 MARKS )

A person is a lobster fisherwoman and spends $50 a year on purchasing 5 kiloslobster at a store in 2010 ( the base year)and spends $60 a year on purchasing4 kilos of lobster at a store in 2013.

She earnsher living being a fisherwoman of lobster and her price for what she catches is $5 per kilo in 2010 and $6 per kilo in 2010:

(a) What is the inflation rate per year for what she pays for lobster in the store in 2013 compared to the base year in 2010?

(b) Is she better off or worse off in 2013 vs. 2010?

(Multiple choice attachment follows)

1.Economic resources do NOT include:

A.natural resources

B.real capital assets

C.human effort

D.stocks and bonds

E.human ingenuity

2.Which of the following is a correct statement?

A.Economics is concerned only with explaining the way that economies actually operate and not with how they should operate.

B.Though not quantitatively exact, economic laws are useful because they allow us to predict and, therefore, to control or to adjust to events.

C.Economics is as scientific as physics and chemistry because economic laws are as quantitatively precise as the laws of physics or chemistry.

D.Because economics is concerned with questions of "ought," it is a branch of applied ethics and not scientific.

E.Economics is concerned with how economies should operate and not with how they do operate.

3..Suppose an economist says "Ceteris paribus, the lower the price of the breakfast cereal, Wheaties, the larger the amount of Wheaties purchased." This statement indicates that:

A.the quantity of Wheaties purchased determines the price of Wheaties

B.all factors other than the price of Wheaties (for example, consumer preferences and incomes) are assumed to be constant

C.economists can conduct controlled laboratory experiments

D.one cannot generalize about the relationship between the price of Wheaties and quantity purchased

E.the price and quantity demanded of Wheaties are directly related

4.Referringto the above table, A total output of 3 TVs and 4 stereos:

A.would never be chosen because the economy is capable of producing a larger total output

B.represents the full employment of available resources

C.involves the employment of an economy's scarce resources at less than their full capacity

D.is unobtainable in this economy

E.would always be chosen because this is the product combination that gives the economy's citizens the most satisfaction

5.Referring to the above table,To produce a total output of 3 TVs and 13 stereos, this economy must:

A.undergo an outward shift in its production possibilities curve

B.ignore the notion of opportunity cost

C.distribute its available resources more efficiently among alternative uses

D.achieve the full employment of available resources

E.leave some of its available resources idle

6.Refer to the diagram below, The concept of opportunity cost is best represented by the:

A.shift of the production possibilities curve from PP₁ to PP₂

B.move from point B on PP₁ to point E on PP₂

C.move from point E on PP₂ to point A on PP₁

D.move from point D inside PP₁ to point B on PP₁

E.move from point B to point C along PP₁

7.The achievement of full employment frequently conflicts with the economic goal of:

A.economic efficiency

B.economic growth

C.income equity

D.a viable balance of payments

E.price stability

8.According to Adam Smith, the most significant single cause of economic progress has been:

A.due to the increase in the fertility of land used in agriculture

B.the result of the use of more specialized forms of machinery in manufacturing

C.the result of a more educated workforce

D.due to the division of labour

E.due to the rise of large companies that dominate particular industries

9.One reason that the quantity demanded of a product increases when its price falls is that:

A.consumer incomes have decreased

B.the product is no longer new on the market

C.the product has greater value in terms of satisfaction per dollar spent

D.there are more producers making the product

E.the prices of other products must have fallen as well

10.Which of the following does not cause the demand for product K to change?

A.a change in the price of substitute product J

B.an increase in consumer incomes

C.a change in the price of K

D.a change in consumer preferences

E.a change in the price of complementary product L

11.Which of the following causes the demand curve for product A to shift to the left?

A.population growth that increases the number of persons consuming A

B.an increase in consumer incomes if A is a normal product

C.a decrease in consumer incomes if A is an inferior product

D.a decrease in the price of complementary product C

E.a general expectation that the price of A will decrease in the near future

12.An increase in the wages of construction workers will:

A.lead to an increase the quantity supplied of new homes

B.shift the supply curve of new homes to the left

C.shift the demand curve for construction workers to the right

D.decrease the average annual incomes of construction workers

E.shift the demand curve for construction workers to the left

13.Assuming competitive markets with typical supply and demand curves, which of the following statements is correct?

A.An increase in supply with a decrease in demand will result in an increase in price.

B.An increase in supply with no change in demand will result in an increase in price.

C.An increase in supply with no change in demand will result in a decline in the quantity exchanged in the market.

D.An increase in demand with no change in supply will result in a decrease in the quantity exchanged in the market.

E.An increase in demand with no change in supply will result in an increase in the quantity exchanged in the market.

14.Given a downward-sloping demand curve and an upward-sloping supply curve for product A, all else constant, if the price of product B, a substitute in production for A increases, while the price of a compliment in demand for A decreases, then,A. The equilibrium price and quantity of A will increaseB. The equilibrium price of A will increase but the equilibrium quantity will decreaseC. The equilibrium price of A will decrease and the equilibrium quantity will increaseD. The equilibrium price of A will increase, but the change in equilibrium quantity will depend on the relative sizes of the shifts in demand and supplyE. The equilibrium quantity will decrease, but the change in equilibrium price will depend on the relative sizes of the shifts in demand and supply

15.Given a downward-sloping demand curve and an upward-sloping supply curve for product A, an increase in the price of complementary product B and the decrease in the price of a resource used in making product A will:

A.increase equilibrium quantity, but the change in equilibrium price will depend on the relative sizes of the shifts in demand and supply

B.decrease equilibrium quantity, but the change in equilibrium price will depend on the relative sizes of the shifts in demand and supply

C.increase equilibrium price, but the change in equilibrium quantity will depend on the relative sizes of the shifts in demand and supply

D.decrease equilibrium price, but the change in equilibrium quantity will depend on the relative sizes of the shifts in demand and supply

E.keep equilibrium price and quantity the same

16.Given a downward-sloping demand curve and an upward-sloping supply curve for product A, an increase in the price of substitute product B and a simultaneous technological innovation in making product A will:

A.increase equilibrium quantity, but the change in equilibrium price will depend on the relative sizes of the shifts in demand and supply

B.decrease equilibrium quantity, but the change in equilibrium price will depend on the relative sizes of the shifts in demand and supply

C.increase equilibrium price, but the change in equilibrium quantity will depend on the relative sizes of the shifts in demand and supply

D.decrease equilibrium price, but the change in equilibrium quantity will depend on the relative sizes of the shifts in demand and supply

E.keep equilibrium price and quantity the same

17.The effect on the new car market of a lower price for used cars can best be described by:

A.a shift in the supply curve to the right, decreasing the equilibrium price

B.a shift in the supply curve to the left, increasing the equilibrium price

C.a shift in the demand curve to the left, decreasing the equilibrium price

D.a shift in both the supply and demand curves to the right, leaving the equilibrium price the same

E.a shift in the demand curve to the right and a shift in the supply curve to the left, increasing the equilibrium price

18.If a business can sell 3000 units of a product at $10 per unit and 5000 units at $8 per unit, its demand is:

A.elastic

B.perfectly elastic

C.inelastic

D.unit-elastic

E.perfectly inelastic

19.If a business can sell 20 000 units of a product at $2 per unit and 10 000 units at $4 per unit, its demand is:

A.unit-elastic

B.inelastic

C.perfectly inelastic

D.elastic

E.perfectly elastic

20.A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. It can be concluded that:

A.the demand for pizza is elastic above $5 and inelastic below $5

B.the demand for pizza is elastic both above and below $5

C.the demand for pizza is inelastic above $5 and elastic below $5

D.the demand for pizza is inelastic both above and below $5

E.$5 is not the equilibrium price of pizza

21.Assume the demand for a product is perfectly inelastic. If government establishes a price floor that is $2 above the equilibrium price, the resulting:

A.shortage will be greater the more elastic the supply

B.shortage will be greater the less elastic the supply

C.surplus will be greater the more elastic the supply

D.surplus will be greater the less elastic the supply

E.the shortage will be the same regardless of the elasticity of the supply curve

22.If a legal ceiling price is set above the equilibrium price:

A.a shortage of the product will occur

B.a surplus of the product will occur

C.an underground market will evolve

D.neither the equilibrium price nor equilibrium quantity will be affected

E.a surplus for the product will first appear and then disappear

23.Which of the following generalizations is correct?

A.The more elastic the demand and supply of a product, the larger the portion of an excise tax which is borne by buyers.

B.The more elastic the demand for a product, the larger the portion of an excise tax which is borne by buyers.

C.The more inelastic the supply of a product, the larger the portion of an excise tax which is borne by buyers.

D.The more inelastic the demand for a product, the larger the portion of an excise tax which is borne by sellers.

E.The more elastic the supply of a product, the larger the portion of an excise tax which is borne by buyers.

24..Consider the following table:

If the price of capital is $1 per unit and the price of labour is $2 per unit, the method that maximizes Simply Cotton's productive efficiency is:

A.F

B.A

C.E

D.E or D

E.B

25..Suppose that a business had implicit costs of $500 000 and had explicit costs of $5 million in a specific year. If in that year the firm sold 100 000 units of its output at $50 per unit, its accounting:

A.profits were $100 000 and economic profits were zero

B.losses were $500 000 and its economic losses were zero

C.profits were $500 000 and its economic profits were $1 million

D.profits were zero and its economic profits were $500 000

E.profits were zero and its economic losses were $500 000

26.Which of the following statements concerning the relationships among total product (TP), average product (AP), and marginal product (MP) is not correct?

A.AP continues to rise so long as TP is rising.

B.AP reaches a maximum before TP reaches a maximum.

C.TP reaches a maximum when the MP of the variable input becomes zero.

D.MP cuts AP at the maximum of AP.

E.MP reaches a maximum before AP reaches a maximum

27.If in the short run a business's total product is increasing, we know that:

A.marginal product must also be increasing

B.marginal product must be decreasing

C.marginal product could be either increasing or decreasing

D.average product must also be increasing

E.average product must be decreasing

28..Which of the following statements is correct?

A.When total product is rising, both average product and marginal product must also be rising.

B.When marginal product is falling, total product must be falling.

C.When marginal product is falling, average product must also be falling.

D.Marginal product rises faster than average product, but falls more slowly than average product.

E.Marginal product rises faster than average product and also falls faster than average product.

29.If the difference between average cost (AC) and average variable cost (AVC) at 200 units is $5, at 400 units of output, the difference between AC and AVC must be:

A.less than $5

B.greater than $5

C.equal to $2

D.equal to $0.50

E.equal to $10

30.Which of the following statements is correct?

A.Average variable cost intersects marginal cost at the latter's minimum point.

B.Marginal cost intersects average cost at the latter's minimum point.

C.Average fixed cost intersects marginal cost at the latter's minimum point.

D.Marginal cost intersects average fixed cost at the latter's minimum point.

E.Average variable cost intersects average fixed cost at the latter's minimum point

31.The relationship between the marginal cost and the average cost schedules is such that:

A.the behaviour of one schedule does not affect the other

B.if AC exceeds MC, MC must be rising

C.if MC is declining, AC may be either declining or rising

D.if AC exceeds MC, MC must be declining

E.if MC is below AC, AC must be declining