Test Bank for Macroeconomics: Canada in the Global Environment, 10th Edition

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ExamName___________________________________MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)In a world characterized by scarcityA)individuals need not work to obtain goods.B)all goods are free.C)we are not limited by time.D)opportunity cost is zero.E)people must make choices among alternatives.Answer:E2)Which of the following is the best definition of economics?A)the study of how consumers spend their incomeB)the study of how individuals, businesses, governments, and entire societies make choices as they copewith scarcity and the incentives that influence and reconcile those choicesC)the study of how a provincial government allocates tax dollarsD)the study of how producers decide what inputs to hire and what outputs to produceE)the study of how consumers and producers meet each other in the marketAnswer:B3)Which of the following is a microeconomic topic?A)the effect of the government budget deficit on inflationB)the reasons why the labour force in a country decreasesC)the cause of increasing unemploymentD)the reasons why the average price level in a country fallsE)the reasons why a consumer buys less honeyAnswer:E4)The study of how wages are set for New Brunswick teachers is classified asA)a macroeconomic topic.B)a microeconomic topic.C)normative economics.D)economics of social interest.E)economics of private interest.Answer:B5)Which of the following newspaper headlines concerns a macroeconomic issue?A)How would a tax on e-commerce affect chapters.indigo.ca?B)Why do grain producers purchase less pesticides?C)Why are people buying more SUVs and fewer minivans?D)Why is Japan's economy stagnant?E)How would an unexpected freeze in Oxford, Nova Scotia change the price of blueberries in theMaritimes?Answer:D1

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6)The branch of economics that studies the choices of individuals and businesses isA)microeconomics.B)positive economics.C)normative economics.D)macroeconomics.E)social economics.Answer:A7)Each of the following would be considered a macroeconomic topicexceptA)the reasons for a decrease in the unemployment rate.B)the selection of production techniques.C)the effect of the government budget deficit on inflation.D)the determination of aggregate income.E)the cause of recessions.Answer:B8)Complete the following sentence. MacroeconomicsA)deals mainly with the economic behaviour of households.B)is primarily concerned with the operation of individual markets in the economy.C)is the only part of economics to deal with government decisions.D)is the study of the performance of the national economy and the global economy.E)is primarily concerned with the behaviour of the stock market.Answer:D9)The determination of prices in individual markets is primarily a concern ofA)macroeconomics.B)positive economics.C)negative economics.D)descriptive economics.E)microeconomics.Answer:E10)Which one of the following topics does macroeconomics study?A)the performance of the global economyB)effects of taxes on the price of gasolineC)decisions of individual firmsD)prices of individual goods and servicesE)effects of government safety regulations on the price of carsAnswer:A11)Which one of the following topics does microeconomics study?A)determination of total production in a countryB)effect of interest rates on national economic growthC)effect of the government budget deficit on employmentD)reasons for a fall in the price of orange juiceE)the effect of a rise in the Canadian dollar on Canada's exportsAnswer:D2

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12)Complete the following sentence. Microeconomics isA)not concerned with factors of production.B)concerned exclusively with the role of the government in the economy.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 with normative issues only.Answer:D13)Which of the following would be considered a microeconomic topic?A)theseverity of a recessionB)the studyof how wages are set formine workersC)thedetermination of aggregate incomeD)thecause of unemployment in the economyE)theeffect of the government budget deficit on inflationAnswer:B14)The branch of economics that studies the performance of the national economy and the global economy isA)normative economics.B)Keynesian economics.C)microeconomics.D)positive economics.E)macroeconomics.Answer:E15)The fact that human wants cannot be fully satisfied with available resources is called the problem ofA)marginal cost.B)opportunity cost.C)scarcity.D)the big tradeoff.E)normative economics.Answer:C16)The problem of scarcity existsA)in all economies.B)only when people are unemployed.C)now but will be eliminated with economic growth.D)only in economies that lack incentives.E)only in economies that have incentives.Answer:A17)The inescapable economic fact is thatA)capitalists are always exploiting the workers.B)there are unlimited resources, and we just have to decide how to allocate them.C)unions are always exploiting firms.D)there are unlimited wants and limited resources.E)capitalists and unions cannot work together.Answer:D3

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18)An incentiveA)could be either a reward or a penalty.B)is the opposite of a tradeoff.C)occurs in the macroeconomy but not in the microeconomy.D)could be a penalty but could not be a reward.E)could be a reward but could not be a penalty.Answer:A19)Scarcity confrontsA)only families with incomes less than $25,000 a year.B)the poor but not the rich.C)neither the poor nor the rich.D)the rich but not the poor.E)the rich and the poor.Answer:E20)The problem of scarcity appliesA)only in countries that are over-populatedB)to all countries, regardless of their level of development.C)only in developing countries because resources are scarce in these countriesD)only in industrially developed countries because resources are scarce in these countries.E)only in countries that use natural resources in most of their production processesAnswer:B21)Operators of private dog parks in your city decide to eliminate their fees and allow dog owners to exercise theirdogs in the parks at no charge.This statement means that the incentive to exercise dogs at the dog park ________.The operators' decision is a ________.A)remains the same; microeconomic decisionB)changes; microeconomic decisionC)changes; macroeconomic decisionD)remains the same; macroeconomic decisionE)changes; decision in the self-interest but not in the social interestAnswer:B22)The two big economic questionsA)involve neither self-interest nor social interest.B)do not arise from scarcity.C)involve self-interest only.D)involve both self-interest and social interest.E)involve only social interest.Answer:D23)The two big economic questionsA)do not consider for whom goods and services are produced.B)have nothing to do with the way goods and services are produced.C)are "what goods and services are produced?" and "how are goods and services produced?"D)summarize the scope of economics.E)have nothing to do with goods and services.Answer:D4

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24)The two big economic questions include all of the followingexceptA)for whomto produce.B)howto produce.C)whatto produce.D)whyto produce.E)a determination of whether the pursuit of self-interest also promotes the social interest.Answer:D25)When a firm decides to produce more hybrid cars and fewer gas guzzlers, it is answering the________question.A)"when"B)"where"C)"how"D)"what"E)"who"Answer:D26)When a textile firm decides to produce more silk fabric and less cotton fabric, it is answering the ________question.A)"what"B)"how"C)"when"D)"who"E)"where"Answer:A27)When a farmer decides to harvest tomatoes using machines instead of migrant workers, the farmer is answeringthe________question.A)"who"B)"how"C)"when"D)"where"E)"what"Answer:B28)Complete the following sentence. Capital isA)composed of financial investment and commodities such as gold and silver.B)the knowledge and skill that people obtain from education, on-the-job training, and work experience.C)the tools, instruments, machines, buildings, and other constructions that businesses use to produce goodsand services.D)traded in stock markets and bond markets.E)money in the bank.Answer:C29)When a firm decides to produce computers using robots instead of people, it is answering the ________question.A)"who"B)"how"C)"when"D)"what"E)"where"Answer:B30)To meet increased demand for its good, a firm decides to hire a few high-skilled workers, rather than hire manylow-skilled workers. The firm is answering the ________ question.A)"how"B)"what"C)"who"D)"when"E)"where"Answer:A31)An art museum decides to offer audio tour downloads rather than have tour guides. The museum is answeringthe ________ question.A)"what"B)"when"C)"how"D)"where"E)"who"Answer:C5

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32)To earn income, people sell the services of the factors of production they own. Land earns ________and labourearns ________.A)wages; interestB)rent; minimum wageC)profit; wagesD)profit; interestE)rent; wagesAnswer:E33)The fact that some people can afford to live in beautiful homes while others are homeless is an example of aneconomy facing the ________ question.A)"when"B)"for whom"C)"where"D)"what"E)"how"Answer:B34)The fact that a hockey star earns $10 million a year while a teacher earns $75,000 annually is an example of aneconomy facing the ________ question.A)"what"B)"for whom"C)"how"D)"when"E)"where"Answer:B35)Complete the following sentence. Entrepreneurship isA)the human resource that organizes labour, land and capital.B)traded on the stock market.C)categorized as capital.D)defined asmoney.E)categorized as the factor of production labour.Answer:A36)Sue, who has a law degree, earns $200,000 a year, while Chris, a high-school dropout, earns $15.00 an hour.This is an example of an economy facing the ________ question.A)"how"B)"when"C)"where"D)"what"E)"for whom"Answer:E37)A star athlete can afford a garage full of exotic cars while other people can only afford to take a city bus fortransportation. This is an example of an economy facing the ________ question.A)"what"B)"when"C)"how"D)"where"E)"for whom"Answer:E38)Complete the following sentence. Financial capital isA)not subject to scarcity.B)a service.C)one of the "gifts of nature."D)money, stocks, and bonds.E)a factor of production.Answer:D6

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39)Which factor of production earns the most income?A)entrepreneurshipB)the stock marketC)capitalD)landE)labourAnswer:E40)What choices are best for the entire society?A)self-interest choicesB)choices made by majority ruleC)choices made by well-meaning citizensD)social interest choicesE)choices influenced by lobbyistsAnswer:D41)Self-interest choices areA)never in the social interest.B)those choices which are best for the person making them.C)those choices that are best for all residents of a region.D)choices that are agreed to by majority vote.E)always in the social interest.Answer:B42)The expansion of international trade, borrowing and lending, and investment isA)a corporate revolution.B)the big tradeoff.C)antiglobalization.D)not in the best interests of most countries.E)globalization.Answer:E43)Whichof the following relates factors of production to the sources of income correctly?A)Labour earns rent.B)Land earns interest.C)Capital earns profit.D)Entrepreneurship earns rent.E)Landearns rent.Answer:E44)Whichstatement about incomes earned by factors of production isfalse?A)Natural resourcesearn rent.B)Entrepreneurship earns profit.C)Land earns rent.D)Capital earns profit.E)Labour earns wages.Answer:D7

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45)A tractor is an example of which of the following factors of production?A)landB)entrepreneurshipC)energyD)capitalE)labourAnswer:D46)Which one of the following is an example of capital as a factor of production?A)an automobile factory owned by FordB)natural gasC)money held by Tim HortonsD)a high school teacherE)aBell Canada bondAnswer:A47)Which of the following would an economist classify as capital?A)a deposit of silverB)a computerC)natural resourcesD)entrepreneurshipE)landAnswer:B48)Which one of the following is labour?A)moneyB)a carpenter's hammerC)asinger's voiceD)abread-slicing machineE)ashoe factoryAnswer:C49)Which one of the following would economists classify as land?A)an elementary school in Nova ScotiaB)an automotive plant in British ColumbiaC)an oil rig in the Atlantic OceanD)automobiles parked in a parking lot in ManitobaE)rich agricultural soil in SaskatchewanAnswer:E50)Which one of the following is an example of a factor of production?A)an IBM stock certificateB)acomputer gameC)adonutD)an insurance policyE)the skills of a welderAnswer:E8

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51)Which one of the following is an example of capital?A)acarpenterB)moneyC)a university professorD)abread-slicing machineE)pastureAnswer:D52)The creation of a successful movie can influence the main questions that economics seeks to answer. Choose thestatement that isfalse.A)The movie influences thehowquestion because the movie can create new production techniques, whichcan be used in subsequent films.B)The movie influences thehowquestion because it can use unknown actors or Academy Award winners.C)The movie influences thewhatquestion because it can lead to spinoff goods or a new movie genre, whichcan result in the production of similar films.D)The movie influences thewhenquestion because movie crews work on many different films and must beavailable for the entire production.E)The movie influences thefor whomquestion because the people who earn higher incomes through themovie production buy more goods and services.Answer:D53)Choose the correct statement.A)In Canada today, manufacturing accounts for 50 percent of total production.B)Canada produces more services than goods.C)China's production of services is a greater percentage of its total production than Canada's.D)Canada's production of manufacturing is a greater percentage of its total production than China's.E)In Canada today, agriculture accounts for 30 percent of total production.Answer:B54)In Canada ________ percent of the adult population have completed high school and ________ percent have acollege or university degree.A)55; 25B)25; 95C)100; 55D)95; 25E)95; 55Answer:D55)Which of the following isnota factor of production?A)the water used to cool a nuclear power plantB)the effort of farmers raising cattleC)the land used by a farmer to grow wheatD)the wages paid to workersE)the management skill of a small business ownerAnswer:D56)Which factor of production includes the "gifts of nature"?A)capitalB)entrepreneurshipC)labourD)human capitalE)landAnswer:E9

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57)Which of the following isnota factor of production?A)Wilderness areas that have yet to be developedB)Vans used by a bakery company for deliveriesC)National parksD)Timmy who is developing a production schedule for a new productE)175 shares of Microsoft stockAnswer:E58)An outcome is considered efficient ifA)it is not possible to make someone better off without making anyone else worse off.B)as many people as possible are happy about the outcome.C)there is the smallest difference possible between the highest income earned and the lowest income earned.D)it is the best available choice for an individual.E)everyone makes the same income.Answer:A59)According to Adam SmithA)politicians are well-equipped to regulate corporations and intervene in markets to improve marketoutcomes.B)the self-interest and the social interest never conflict.C)in a market transaction buyers can either get what they want for less than they would be willing to pay orsellers can make a profit, but both buyers and sellers can't gain simultaneously.D)government intervention in markets is not desirable because an invisible hand leads decisions made inpursuit of self-interest to unintentionally promote the social interest.E)when big corporations pursue their self-interest of maximum profit, they will inevitably conflict withsocial interest.Answer:D60)Which one of the following news headlines definitely concerns the social interest?A)The Maple Leafs Win the Stanley CupB)McDonald's Moves into SaladsC)Starbucks Expands in ChinaD)E Coli Test Results Must be Posted on BeachesE)Pumpkin Spice Lattes Available Now!Answer:D61)Which of the following statements is correct?A)Agriculture accounts for 10 percent of total Canadian production.B)Canada produces more agricultural goods than manufactured goods.C)Canada produces more manufactured goods than services.D)Canada produces more services than goods.E)Canada produces more agricultural goods than services.Answer:D62)Opportunity cost isA)themarginal benefit from an activity.B)yourvalue of leisure.C)the money you spend on food, shelter, and clothing.D)thevalue of your favourite activity.E)the highest-valuedalternative that we give up to get something.Answer:E10

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63)During the next hour John can choose one of the following three activities: playing basketball, watchingtelevision, or reading a book. The opportunity cost of reading a bookA)is equal to the marginal benefit from reading the book.B)depends on how much the book cost when it was purchased.C)is the value of playing basketball if John prefers that to watching television.D)depends on how much John enjoys the book.E)is the value of playing basketballandthe value of watching television.Answer:C64)Sally has to decide whether to study for her economics test or her accounting test. If she chooses to study foraccounting, her opportunity cost of studying accounting isA)not comparable to the value of studying economics.B)studying economics.C)equal to the value of studying economics.D)the future lost wages that will occur if she fails her accounting exam.E)less than the value of studying economics.Answer:B65)When the government of Alberta chooses to build more roads, the required resources are no longer available toprovide better healthcare facilities. This situation illustrates the concept ofA)marginal benefit.B)monetary cost.C)human capital.D)entrepreneurship.E)opportunity cost.Answer:E66)The concept of opportunity costA)is used in microeconomics but not macroeconomics.B)suggests that individuals can achieve all they want.C)is used in macroeconomics but not microeconomics.D)is relevant only for developing countries.E)suggests a major increase in public education spending means a reduced expansion in the publichealthcare system.Answer:E67)To make choices, people mustA)be free from government constraint.B)evaluate the values of alternative actions.C)have unlimited resources.D)have unlimited access to information at no cost.E)be risk-takers.Answer:B11

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68)When the government chooses to use resources to build a dam, those resources are no longer available to builda highway. This illustrates the concept ofA)a "how" tradeoff.B)the big tradeoff.C)macroeconomics.D)opportunity cost.E)a market.Answer:D69)Marginal benefit isA)the benefit that arises from a decrease in an activity.B)the cost of a decrease in an activity.C)the cost of an increase in an activity.D)the benefit that arises from an increase in an activity.E)the sum of benefit and cost that arises from an increase in an activity.Answer:D70)"There can be too much of a good thing." This statement suggests thatA)a good may be produced to the point where its marginal benefit is equal to its marginal cost.B)certain goods and services such as education and health care are inherently desirable and should beproduced regardless of costs and benefits.C)a good may be produced to the point where its marginal benefit exceeds its marginal cost.D)choices made in self-interest cannot be applied to many economic decisions.E)a good may be produced to the point where its marginal cost exceeds its marginal benefit.Answer:E71)Which of the following sayings best describes opportunity cost?A)"Love of money is the root of all evil."B)"Make hay while the sun shines."C)"Baseball has been very good to me."D)"Boldly go where no one has gone before."E)"There's no such thing as a free lunch."Answer:E72)If you take an additional class this term, you can graduate earlier. This is an example ofA)total cost.B)opportunity cost.C)the pursuit of social interest.D)marginal benefit.E)social cost.Answer:D73)Marginal benefit is theA)total benefit from an activity.B)opportunity cost of a decrease in an activity.C)additionalbenefit from an increase in an activity.D)additionalbenefit from a decrease in an activity.E)opportunity cost of an increase in an activity.Answer:C12

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74)Complete the following sentence. Marginal cost isA)the opportunity cost of a decrease in an activity.B)the total cost of a decrease in an activity.C)the opportunity cost of an increase in an activity.D)the total cost of an activity.E)equal to marginal benefit.Answer:C75)Monika will choose to eat a seventh pizza slice ifA)the marginal benefit from the seventh slice is greater than its marginal cost.B)the marginal benefit from the seventh slice is less than its marginal cost.C)the total benefit from all seven slices is less than their total cost.D)the total benefit from all seven slices is greater than their total cost.E)shehas enough money to pay for it.Answer:A76)The night before a history test, you decide to go to the movies instead of reviewing your notes. You get 60percent on your test compared with the 75 percent that you normally score. You ________ a tradeoff and theopportunity cost of your evening at the movies was ________.A)did not face; zeroB)faced; the 75 percent that you normally scoreC)faced; the 15 percent fall in your gradeD)did not face; the 15 percent fall in your gradeE)faced; the mark of 60 percent on your testAnswer:C77)A university decides to change its late night bus service between the campus and student housing from afare-based service to a free service. This statement means that the incentive to ride the bus ________ and theopportunity cost of a bus ride ________. The university's decision is a ________ decision.A)remains the same; remains the same; macroeconomicB)changes; increases; microeconomicC)changes; decreases; microeconomicD)changes; decreases; macroeconomicE)remains the same; remains the same; microeconomicAnswer:C13

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Use the information below to answer the following question.Fact 1.3.1Costs Soar for London OlympicsThe regeneration of East London, the site of the 2012 Olympic Games, is set to add extra£1.5 billion to taxpayers' bill.Source:The Times, London, July 6, 200678)Refer to Fact 1.3.1. The cost of regenerating East London ________ an opportunity cost of hosting the 2012Olympic Games ________.A)is; if the property taxes of people living in East London increaseB)is not; because few people attending the 2012 Olympics will spend much time outside Olympic venuesC)is not; because regenerating East London is an unnecessary expenseD)is; if the costs of the East London regeneration is equal to a significant percentage of the total amount spentby London taxpayers to host the 2012 OlympicsE)is; if the regeneration of East London would not occur unless London hosted the 2012 OlympicsAnswer:E79)You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending theweek doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip isA)workingordoing fix-up projects, depending on which you would have done otherwise.B)nothing because you will enjoy the trip to Florida.C)variable depending on the weather you leave behind in Canada.D)working, because you would be giving up income.E)workinganddoing fix-up projects.Answer:A80)Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she ischoosing at the margin when she comparesA)the total revenue from sales of printers to the total cost of producing all the printers.B)the revenue from selling HP's printers as compared to printers from competing companies, such asLexmark.C)the extra revenue from selling a few additional printers to the extra costs of producing the printers.D)the cost of producing HP's printers as compared to printers from competing companies, such as Lexmark.E)the extra revenue from selling a few additional printers to the average cost of producing the additionalprinters.Answer:C81)Which of the following creates an incentive to increase the amount of an activity?A)constant marginal cost and constant marginal benefit from the activityB)a decrease in the marginal cost of the activity and an increase in the marginal benefit from the activityC)an increase in the marginal cost of the activity and an equal increase in the marginal benefit from theactivityD)an increase in the marginal cost of the activity and a decrease in the marginal benefit from the activityE)a decrease in the marginal cost of the activity and an equal decrease in the marginal benefit from theactivityAnswer:B14

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82)You have the choice to go skiing during spring break, staying at the university to study, or spending the weekvisiting your family. If you decide to go skiing, the opportunity cost of the holiday isA)visiting your family because not visiting means that you will feel guilty.B)staying at the university or spending the week visiting your family, depending on what you would havedone otherwise.C)nothing because you enjoy skiing.D)staying at the university to study because you need to improve your grades.E)staying at the university because your parents are paying your tuition.Answer:B83)Chanel has the option of purchasing one of three products: Brand A, Brand B, or Brand C. The price of eachproduct is $10. If Chanel decides to purchase Brand A, the opportunity cost of this decision isA)$20.B)Brand B and Brand C.C)zero if this is a frivolous purchase with no marginal benefit.D)Brand B or Brand C, depending on which she considers to be the highest-valued alternative forgone.E)Brand A.Answer:D84)Statements about "what ought to be" are calledA)economic statements.B)hypotheses.C)normative statements.D)positive statements.E)scientific statements.Answer:C85)Statements about "what is" are calledA)scientific statements.B)normative statements.C)hypotheses.D)economic statements.E)positive statements.Answer:E86)Which of the following statements is normative?A)If income increases, sales of luxury goods fall.B)As e-bookprices fall, people buy more of them.C)Scientists should not make normative statements.D)There is more caffeine in a cup of tea than in a cup of coffee.E)Warts are caused by handling toads.Answer:C87)A positive statement isA)about what ought to be.B)always false.C)an opinion that cannot be verified.D)always true.E)what is currently believed about the way the world operates.Answer:E15

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