Economics

Microeconomics

Parkin/Bade, Economics: Canada in the Global Environment, 8e 5) If marginal product of a restaurant employee is 10 customers per hour, and the price of a meal is $15, the restaurant employee's value of marginal product is A) $15. B) $7.5. C) $12.5. D) $10. E) $150. Answer: E Diff: 2 Type: MC Topic: The Demand for a Factor of Production 6) Suppose a gift shop in Corner Brook Newfoundland hires workers to personalize ornaments for Christmas. The store sells the personalized ornaments for $6 each. The value of marginal product of this store's fourth worker is $60. The marginal product of the fourth worker is A) 6 ornaments. B) 10 ornaments. C) 60 ornaments. D) 360 ornaments. E) 90 ornaments. Answer: B Diff: 2 Type: MC Topic: The Demand for a Factor of Production 7) If the marginal product of a baker is 10 loaves of bread, and the price of a loaf of bread is $2, the baker's value of marginal product is A) $2.00. B) $20.00. C) $0.20. D) $5.00. E) $12.00. Answer: B Diff: 2 Type: MC Topic: The Demand for a Factor of Production 8) The Brown's Egg store in Lethbridge Alberta hires workers to paint eggs. The price of an egg is $2.50. The value of marginal product of this store's fifth worker is $25. The marginal product of the fifth worker is A) 62.5 eggs. B) 25 eggs. C) 2 eggs. D) 10 eggs. E) 0.1 eggs. Answer: D Diff: 2 Type: MC Topic: The Demand for a Factor of Production Copyright © 2013 Pearson Canada Inc. 725 Parkin/Bade, Economics: Canada in the Global Environment, 8e Use the table below to answer the following questions. Table 18.2.1 Labour Output (workers) (units) 0 0 1 5 2 11 3 18 4 26 5 32 6 37 7 41 8 44 9 46 10 47 9) Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $5 a unit, what is the value of marginal product of the 6th worker? A) $20 B) $0 C) $25 D) $40 E) $185 Answer: C Diff: 2 Type: MC Topic: The Demand for a Factor of Production 10) Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $4 a unit, what is the profit-maximizing number of workers if the wage rate is $12? A) zero B) 10 C) 4 D) 8 E) 6 Answer: D Diff: 2 Type: MC Topic: The Demand for a Factor of Production Copyright © 2013 Pearson Canada Inc. 726 Parkin/Bade, Economics: Canada in the Global Environment, 8e 11) Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $5 a unit, what is the profit-maximizing number of workers if the wage rate is $30? A) 1 B) 3 C) 5 D) 6 E) 7 Answer: C Diff: 2 Type: MC Topic: The Demand for a Factor of Production 12) Refer to Table 18.2.1. If the firm can sell all the output it wants for the price of $10 a unit, what is the profit-maximizing number of workers if the wage rate is $30? A) 1 B) 5 C) 6 D) 8 E) 9 Answer: D Diff: 2 Type: MC Topic: The Demand for a Factor of Production 13) If the price of the firm's output decreases, the value of marginal product curve A) remains unchanged. B) becomes more elastic. C) becomes more inelastic. D) shifts to the left. E) shifts to the right. Answer: D Diff: 1 Type: MC Topic: The Demand for a Factor of Production 14) Mr. Shaw has a small factory in Estevan Saskatchewan. He will continue hiring labour as long as the value of marginal product of labour ________ the wage rate. A) is greater than B) is less than C) is less than or equal to D) determines E) maximizes Answer: A Diff: 2 Type: MC Topic: The Demand for a Factor of Production Copyright © 2013 Pearson Canada Inc. 727

ECON | 1000 and 1010 | Economics | lecture notes | Parkin/Bade  Economics: Canada

Parkin/Bade, Economics: Canada in the Global Environment, 8e 7) Which of the following statements regarding human capital is INCORRECT ? A) Human capital is the accumulated skill and knowledge of human beings. B) Education is the only vehicle for the creation of human capital because training simply reinforces what has already been learned. C) The accumulation of human capital is the source of both increased labour productivity and technological advance. D) Writing and mathematics, the most basic of human skills, are crucial elements in economic progress. E) All of the above statements are correct. Answer: B Type: MC Topic: Why Labour Productivity Grows Skill: Conceptual AACSB: Reflective Thinking 8) Which of the following is not a source of economic growth? A) increasing stock market prices B) better educated workers C) growing physical capital D) appropriate incentive system E) advances in technology Answer: A Type: MC Topic: Why Labour Productivity Grows Source: Study Guide 9) The Industrial Revolution in England was largely the result of A) growth in human capital. B) population growth. C) technological innovations that were financed mainly by government spending. D) technological innovations encouraged by the patent system. E) the elimination of the patent system. Answer: D Type: MC 10) Factors that influence labour productivity include ________. A) the inflation rate, the real wage rate, and the exchange rate B) the labour demand curve C) physical capital, the real wage rate, and technology D) the demand for labour, the real wage rate, and technology E) physical capital, human capital, and technology Answer: E Type: MC Copyright © 2013 Pearson Canada Inc. 893 Parkin/Bade, Economics: Canada in the Global Environment, 8e 11) Labour productivity rises when A) technological progress is stagnant. B) firms invest more in hiring workers than in replacing worn-out capital. C) the amount of capital per worker decreases. D) the real wage rate falls. E) the amount of capital per worker increases. Answer: E Type: MC 12) In developing nations, microloans ________. A) have enabled small businesses with limited access to credit to purchase capital and expand, allowing greater economic growth B) have increased the indebtedness of impoverished people, slowing economic growth C) are primarily used to finance consumption expenditure, leading to economic growth D) are far too small to have any discernible effect E) discourage saving and investment Answer: A Type: MC 22.5 Growth Theories, Evidence, and Policies 1) Which one of the following quotations could be attributed to a supporter of the classical growth theory? A) "Growth will last as long as technology keeps advancing." B) "Prosperity will last as long as technology keeps advancing." C) "Growth will last only until the increase in population brings productivity down to the subsistence level." D) "Prosperity will last as long as there is knowledge accumulation." E) "Growth will last as long as knowledge accumulation continues." Answer: C Diff: 2 Type: MC Topic: Growth Theories and Policies 2) The new growth theory holds that growth can persist indefinitely based on the major assumption that A) discoveries result from regulations. B) knowledge capital does not experience diminishing returns. C) knowledge is a public capital good. D) discoveries bring profit. E) knowledge destroys profit. Answer: B Diff: 2 Type: MC Topic: Growth Theories and Policies Copyright © 2013 Pearson Canada Inc. 894

ECON | 1000 and 1010 | Economics | study guides | Parkin/Bade  Economics: Canada

Parkin/Bade, Economics: Canada in the Global Environment, 8e 22) In which market would you find mortgage-backed securities? A) stock market B) bond market C) housing market D) capital market E) loan market Answer: B Type: MC Topic: Financial Institutions and Financial Markets Skill: Recognition Source: Study Guide AACSB: Reflective Thinking 23) Elena owns a Canada Savings Bond with a a price of $5,000, which pays $500 per year. The price of the bond rises in the bond market to $7,500. What is the new interest rate on the bond? A) 5% B) 6.67% C) 10% D) 20% E) 500% Answer: B Type: MC Topic: Financial Institutions and Financial Markets Skill: Recognition Source: Study Guide AACSB: Reflective Thinking 24) Suppose that a bond promises to pay its holder $100 a year forever. If the price of the bond increases from $1,000 to $1,250, then the interest rate on the bond ________. A) rises from 8 percent a year to 10 percent a year B) falls from 10 percent a year to 6 percent a year C) falls from 10 percent a year to 8 percent a year D) rises because the bond becomes a better investment E) does not change because the purchaser buys the bond knowing that interest rates will be adjusted Answer: C Type: MC Copyright © 2013 Pearson Canada Inc. 908 Parkin/Bade, Economics: Canada in the Global Environment, 8e 25) Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond ________. A) falls from $2,500 to $2,000 B) falls from $25,000 to $20,000 C) rises from $2,000 to $2,500 D) rises from $20,000 to $25,000 E) does not change. Bond prices are constant. Answer: A Type: MC 26) The key Canadian financial institutions include all of the following except ________. A) commercial banks B) trust and loan companies C) credit unions and caisses populaires D) pension funds E) ATMs Answer: E Type: MC 27) Choose the statement that is incorrect about trust and loan companies. A) Trust and loan companies hold more than 70 percent of the total assets of the Canadian financial services sector. B) The largest trust and loan companies are owned by banks. C) Trust and loan companies accept deposits and make personal loans and mortgage loans. D) Trust and loan companies administer estates. E) Trust and loan companies administer trusts and pension plans. Answer: A Type: MC 28) Choose the statement that is incorrect . A) A financial institution can be solvent but illiquid. B) A firm is illiquid if it has made long-term loans with borrowed funds and is faced with a sudden demand to repay more of what is has borrowed than its available cash. C) Insolvency and illiquidity were at the core of a global financial meltdown in 2007-2008. D) A financial institution's net worth is the market value of what it has lent minus the market value of what it has borrowed. E) All of the above are true. Answer: E Type: MC Copyright © 2013 Pearson Canada Inc. 909

Parkin/Bade, Economics: Canada in the Global Environment, 8e 15) Dole Co. operates in a monopolistically competitive market. Which of the following characterizes Dole Co.'s market? A) Dole Co. supplies a small portion of the market's output. B) Dole Co.'s product is slightly different from its competitors. C) Dole Co. faced no barrier to entry when it decided to enter its market. D) Dole Co. is unable to collude with other firms in the market. E) All of the above describe Dole Co.'s market. Answer: E Type: MC Topic: What Is Monopolistic Competition? Skill: Recognition AACSB: Reflective Thinking 16) Which of the following goods is best described as being sold in a monopolistically competitive market? A) batteries B) wheat C) fast food D) postage stamps E) the local newspaper Answer: C Type: MC Topic: What Is Monopolistic Competition? Skill: Conceptual AACSB: Reflective Thinking 17) Within a monopolistically competitive industry, A) firms can freely enter and exit, and economic profit is zero in the long run. B) firms can freely enter and exit, and economic profit is greater than zero in the long run. C) there are some barriers to entry and exit, and economic profit is zero in the long run. D) there are some barriers to entry and exit, and economic profit is greater than zero in the long run. E) firms can freely enter and exit, and economic profit is zero in the short run. Answer: A Type: MC Topic: What Is Monopolistic Competition? Skill: Recognition AACSB: Reflective Thinking Copyright © 2013 Pearson Canada Inc. 590 Parkin/Bade, Economics: Canada in the Global Environment, 8e 18) When comparing perfect competition and monopolistic competition, we find that A) firms in monopolistic competition produce identical products just as do firms in perfect competition. B) firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. C) advertising plays a large role in monopolistic competition, unlike in perfect competition. D) firms in monopolistic competition are price takers just as is the case for firms in perfect competition. E) firms in monopolistic competition each have a large market share. Answer: C Type: MC Topic: What Is Monopolistic Competition? Skill: Conceptual AACSB: Reflective Thinking 19) Which of the following best explains why firms in monopolistic competition face a downward- sloping demand curve while perfectly competitive firms do not? A) Monopolistically competitive industries have only a few firms. B) Monopolistically competitive firms face barriers to entry. C) Only industries with free entry and exit have firms that face horizontal demand curves. D) Firms in monopolistic competition are price takers. E) Firms in monopolistic competition sell a differentiated good. Answer: E Type: MC 20) Product differentiation exists within an industry when A) there are no substitutes for the product. B) the firm can sell all it wants at the given price. C) the market is a monopoly. D) the market is perfectly competitive. E) there are close but not perfect substitutes for the product. Answer: E Type: MC 21) Firefox, Internet Explorer, and Google Chrome browsers are an example of A) goods produced in perfectly competitive markets. B) goods produced by monopolies. C) product differentiation. D) goods that are identical. E) product similarity. Answer: C Type: MC Copyright © 2013 Pearson Canada Inc. 591

Parkin/Bade, Economics: Canada in the Global Environment, 8e 17) An oligopoly is a market structure in which there A) are a few buyers but many sellers. B) are no barriers to entry. C) are many independent sellers. D) are a few goods sold by many sellers. E) is a temptation to collude. Answer: E Type: MC 18) The distinguishing features of oligopoly are ________ and ________ in the industry. A) no barriers to entry; a small number of firms B) barriers to entry; a large number of firms C) no barriers to entry; a large number of firms D) barriers to entry; one firm E) barriers to entry; a small number of firms Answer: E Type: MC 19) Oligopoly is similar to A) perfect competition because both market types produce identical goods. B) perfect competition because both firms in both market types make zero economic profit in the long run. C) monopoly because both market types have barriers to entry. D) monopoly because both market types have a single firm. E) monopolistic competition because firms in both markets face a perfectly elastic demand. Answer: C Type: MC 20) In an oligopoly market, the Herfindahl-Hirschman Index is usually A) below 1,800. B) zero. C) above 1,800. D) equal to 10,000. E) between 100 and 1,000. Answer: C Type: MC Copyright © 2013 Pearson Canada Inc. 627 Parkin/Bade, Economics: Canada in the Global Environment, 8e 15.2 Oligopoly Games 1) All games share four common features. They are A) costs, prices, profit, and strategies. B) revenues, elasticity, profit, and payoffs. C) rules, strategies, profit, and outcome. D) patents, copyrights, barriers to entry, and rules. E) rules, strategies, payoffs, and outcome. Answer: E Diff: 2 Type: MC Topic: Oligopoly Games 2) Prisoners' dilemma describes a case where A) collusion of the participants leads to the best solution from their point of view. B) rivalry among a large number of rivals leads to lower overall profit. C) one prisoner has no chance to be acquitted since there is no other prisoner to support his testimony. D) a prisoner has no incentive to confess to his crime, and stands a greater chance of not going to prison. E) rivalry of the participants leads to the worst solution from their point of view. Answer: E Diff: 2 Type: MC Topic: Oligopoly Games Copyright © 2013 Pearson Canada Inc. 628 Parkin/Bade, Economics: Canada in the Global Environment, 8e Use the table below to answer the following questions. Table 15.2.1 3) Refer to Table 15.2.1. This table includes the sentences that Bob and Joe will receive if convicted. They have been apprehended by the police under the suspicion of committing armed robbery. The two are immediately separated and questioned about the case. Which one of the following observations is correct? A) Bob would be smart to confess no matter what Joe does. B) Joe would be smart not to confess no matter what Bob does. C) Both Bob and Joe would be better off not confessing if they both do not confess. D) Both Bob and Joe would be better off "coming clean" and confessing to their crime. E) Both Bob and Joe have a dominant strategy of not confessing. Answer: C Diff: 2 Type: MC Topic: Oligopoly Games 4) Refer to Table 15.2.1. This table includes the sentences that Bob and Joe will receive if convicted. They have been apprehended by the police under the suspicion of committing armed robbery. The two are immediately separated and questioned about the case. Which one of the following observations is correct? A) If Joe confesses, Bob would be better off not confessing. B) If Bob confesses, Joe would be better off confessing. C) The outcome of the game, assuming Joe and Bob cannot collude, is they will both go free. D) If Joe does not confess, Bob would be better off confessing. E) The outcome of the game, assuming Joe and Bob cannot collude, is they will both confess. Answer: B Diff: 2 Type: MC Topic: Oligopoly Games Copyright © 2013 Pearson Canada Inc. 629

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