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1) An outcome is considered efficient if A) it is the best available choice for an individual

Economics

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1) An outcome is considered efficient if

A) it is the best available choice for an individual.

B) as many people as possible are happy about the outcome.

C) it is not possible to make someone better off without making anyone else worse off.

D) everyone makes the same income.

E) there is the smallest difference possible between the highest income earned and the

lowest income earned.
2. Suppose that Oscar has three activities in mind for this Saturday night. He can go to the
movies, go to the pub, or go to aconcert. If Oscar chooses to go to the pub then his
opportunity cost is

A) The value of going to the concert since the concert costs more than the movies.

B) The value of going to the movies if the movies provide a higher value than going to

the pub.

C) The value of the concert if the movies have a lower value than the concert to Oscar.

D) The value of the movies if the concert has a higher value than the movies to Oscar.
3. Marginal benefit is

A) the cost of an increase in an activity.

B) the sum of benefit and cost that arises from an increase in an activity.

C) the cost of a decrease in an activity.

D) the benefit that arises from an increase in an activity.

E) the benefit that arises from a decrease in an activity.
4. When asked in an interview what she missed the most because of the time she spent
training for the Olympics, a rower, who lived on her own, answered "a normal social life." She
also revealed that she had given up a job that paid $35,000 per year to train fulltime. She
received a grant of $8,000 per year from Sport Canada, but this failed to cover all her training
expenses. Her food and rent were $5,000 per year and training expenses were $12,000 per
year. Aside from the value of a normal social life, what is the annual opportunity cost,
expressed in dollars, to this rower of "Going for Gold"?

A) $25,000

B) $39,000

C) $34,000

D) $4,000

E) $44,000

5. Saskatchewan had more hospitals than Ontario, despite having one-tenth the population.
The Saskatchewan government closed many of these hospitals in spite of widespread local
protests. Which one of the following arguments is true?
A) Since hospitals have positive benefits, they should never be closed.
B) If Saskatchewan had more hospitals than Ontario, it must have had too many
hospitals.
C) The Saskatchewan government must have thought the marginal benefit from one of
these hospitals exceeded its marginal cost.
D) The Saskatchewan government must have thought the marginal benefit from these
hospitals were less than their marginal cost.
E) The communities where these hospitals existed bore no costs from these decisions,
because they did not pay for any of the hospital operating costs.
FACT #1
Ross and Rachel produce clay pots and garden gnomes. The first table shows Ross’s production
possibilities and the second table shows Rachel’s production possibilities. Each week, Ross
produces 4 clay pots and 32 garden gnomes and Rachel produces 8 clay pots and 4 garden
gnomes.
Ross’s Production Possibilities
pe
pe
8 a
a 8
es  ()
Rachel’s Production Possibilities
Po
Ba
ol

6. Using FACT #1, what is Ross’s opportunity cost of producing 1 clay pot? What is Ross’s
opportunity cost of producing 1 garden gnome?

A) 8 garden gnomes; = clay pots.

B) ~ garden gnomes; 8 clay pots.

C) 2 garden gnomes; = clay pots.

D) = garden gnomes; 2 clay pots.
7. Using FACT #1, what is Rachel’s opportunity cost of producing 1 clay pot? What is Rachel’s
opportunity cost of producing 1 garden gnome?

A) 8 garden gnomes; = clay pots.

B) ~ garden gnomes; 8 clay pots.

C) 2 garden gnomes; = clay pots.

D) > garden gnomes; 2 clay pots.
8. Using FACT #1, who has the comparative advantage in producing garden gnomes? Who has
the comparative advantage in producing clay pots?

A) Ross; Rachel.

B) Ross; Ross.

C) Rachel; Ross.

D) Rachel; Rachel.
9. Using FACT #1, what are the overall net gains from specialization and trade?

A) 16 clay pots and 40 garden gnomes.

B) 4 clay pots and 4 garden gnomes.

C) 8 clay pots and 4 garden gnomes.

D) 8 clay pots and 20 garden gnomes.
10. "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 could 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 could be produced to the point where its marginal benefit exceeds its
marginal cost.
E) a good could be produced to the point where its marginal benefit is equal to its
marginal cost.
11. Caitlyn will choose to eat a seventh pizza slice if
A) 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 greater than their total cost.
D) the total benefit from all seven slices is less than their total cost.
E) she has enough money to pay for it.
12. 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."
13. Assume we are given a demand schedule that is represented by P = 100 - : Q and a supply
schedule where P = 10 + : Q, where P = Price and Q = Quantity.
What is the equilibrium price and quantity?
A) $750; 75 units.
B) $40; 120 units.
C) $500; 100 units.
D) $52.50; 95 units.

14. Suppose that the supply schedule from question #13 changed to P = 20 + - Q. What net
effect does this supply change have on equilibrium price and quantity compared to the original
equilibrium?

A) $60; 80 units.

B) $250; 25 units.

C) $12.50; 20 units.

D) $47.50; 15 units.

E) $20; 40 units.
15. Which of the following quotations best illustrates a tradeoff?

A) "If the firm reorganized its production process, it could produce more widgets and

more gadgets."

B) "The firm should sell more gadgets, even if it means less widget sales."

C) "The more and more gadgets the firm produces, the bigger the fall in widget

production."

D) "If the firm invests more in capital equipment, it can expand sales next year."

E) "The firm has been able to lower costs due to its extensive experience in building

widgets."
16. At 40 cents apiece, Mr. Jones sells 250 candies per week. If he drops his price by 10 cents,
his weekly sales will increase to 300 candies per week. Calculate the elasticity of demand for
candies. Write your answer in answer slot #17 (accurate to 3 decimal places).
17. Your answer to question #16 suggests that demand for candies is

A) Elastic.

B) Inelastic.

C) Unit elastic.

D) Perfectly elastic.

E) Perfectly inelastic.
18. Using the total revenue test, Mr. Jones total revenue in the amount of asa
result of the 10 cent price decrease which confirms that demand for candies is .

A) Lost; $10; elastic.

B) Gained; $10; inelastic.

C) Lost; $100; inelastic.

D) Gained; $100; elastic.

E) Lost; $10; inelastic.

FIGURE #2
n
Ho
o
=
20
S=MC
CS
Potential : : Minimum Wage
10 -Loss-from--+DWL-; :
Search ! :
PS Zi
: : 3 D = MB
0 70 100 130
Labour Hours (thousands)
Given the diagram above which describes a binding minimum wage,

1. Calculate the consumer surplus attained by the hiring firms after the minimum wage is
in place. Write the dollar value of your answer in answer slot #21.

2. Calculate the producer surplus attained by the productive workers after the minimum
wage is in place. Write the dollar value of your answer in answer slot #22.

3. Calculate the Potential Loss from Job Search after the minimum wage is in place. Write
the dollar value of your answer in answer slot #23.

4. Calculate the Deadweight Loss due to the minimum wage. Write the dollar value of your
answer in answer slot #24.

5. Calculate the change in consumer surplus due to the minimum wage if the original
equilibrium occurred at a wage of $10 and quantity of labour of 100,000 hours per
month. Write the dollar value of your answer in answer slot #25.
26. Consider a production possibilities frontier with corn production measured on the vertical
axis and car production measured on the horizontal axis. Unusually good weather for growing
corn shifts
A) the horizontal intercept of the PPF rightward and the vertical intercept of the PPF
upward.
B) the horizontal intercept of the PPF rightward but does not shift the vertical intercept
of the PPF.
C) the vertical intercept of the PPF upward but does not shift the horizontal intercept of
the PPF.
D) neither the horizontal intercept nor the vertical intercept of the PPF.
E) the vertical intercept of the PPF downward and the horizontal intercept of the PPF
leftward.
FIGURE #3
S
| 7f
Price So
5 8
S2 . Nebo
9 Original equilibrium is
2 ,
at point 1.
Di
Do
D2
Tacos
27. Referring to the Figure 3, which represents the market for hard shell tacos, if the price of
enchiladas (a substitute for hard shell tacos in consumption) goes up then what is the new
equilibrium point for hard shell tacos, ceteris paribus? (Notice that your starting point for this
question is Point 1)
A) Point 7 B) Point 3 C) Point 5 D) Point 6 E) Point 8

28. Referring to the Figure 3 representing the market for hard shell tacos. A new scientific
study reveals that hard shell tacos cause extraordinarily bad halitosis (stinky breath...phew!).
Simultaneously, the cost of producing tacos decreases. What is the new equilibrium point for
tacos, ceteris paribus? (Notice that your starting point for this question is Point 1)
A) Point 1 B) Point 4 C) Point 9 D) Point 7 E) Point 2

29. 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
30. If “Dusty Noodles” are an inferior good, then, ceteris paribus, a decrease in income will lead
to

A) a leftward shift of the demand curve for “Dusty Noodles”.

B) a rightward shift of the demand curve for “Dusty Noodles”.

C) a movement up along the demand curve for “Dusty Noodles”.

D) a movement down along the demand curve for “Dusty Noodles”.

E) an initial movement up and then down along the demand curve for “Dusty Noodles”.
31. The substitution effect influences food purchases because when the price of a certain food
rises, other things remaining the same, . Consumers .

A) the relative price of all food rises; purchase less of the food that has experienced the

price increase and more of all other foods

B) its relative price does not change because most likely the prices of all other foods will

also rise; continue to purchase all foods, but in smaller quantities

C) its relative price rises; purchase more of a different food that is less expensive

D) the relative price of all food rises; continue to purchase all foods, but in smaller

quantities

E) its relative price rises; purchase less of all foods

36. Suppose a fall from $110 to $90 in the price of playing golf on a public golf course results in
an increase in the quantity of golf balls demanded (at the current price of golf balls) from 9,950
units to 10,050 units. The cross elasticity of demand of playing golf with respect to the price of
golf balls is

A) -0.05.

B) -0.1.

C) 0.01.

D) 0.08.

E) 0.05.
37. The market for strawberries is perfectly competitive. Joe and Haley are consuming the
same amount of strawberries, but Joe's demand is much more elastic than Haley's. Which
statement is true?

A) Joe's consumer surplus exceeds Haley's.

B) Haley's consumer surplus equals Joe's.

C) Haley's consumer surplus exceeds Joe's.

D) In comparing consumer surpluses, no statement can be made.

E) Any comparison of consumer surplus depends on the price of strawberries.
38. Marginal cost

A) is always less than price.

B) can be negative.

C) is the minimum price a producer must receive to induce him to offer one more unit of

a good or service for sale.

D) is the maximum price a producer must receive to induce him to offer one more unit

of a good or service for sale.

E) decreases as more of a good or service is produced.
39. Which of the following can lead to an inefficient outcome?
|. Price regulations
ll. Increasing marginal cost
Ill. Monopoly

A) | only

B) Il only

C) | and Ill

D) Ill only

E) |, Il, and III
Use the figure below to answer the following questions.
Price (dollars per unit)
A
B D $s
Cc
H .
E
G D
0 $0 100 150 200 250
Quantity [units)
Figure 4
40. Refer to Figure 4. If the level of output is 150 units, the producer surplus is area
A) BCF.
B) ACG.
C) DCE.
D) ACH.
E) HCG.
41. Refer to Figure 4. If the level of output is 100 units, the deadweight loss is area
A) BCF.
B) ACG.
C) DCE.
D) ACH.
E) HCG.
42. Suppose the demand for CDs is elastic, but not perfectly elastic, and the supply is inelastic,
but not perfectly inelastic. A tax on CDs is paid
A) equally by buyers and sellers.
B) mostly by sellers.
C) mostly by buyers.
D) by neither buyers nor sellers.
E) totally by sellers.

Use the figure below to answer the following questions.
Price (dollars per hour)
S + fox
7.00 5
6.60}
5.60),
5.00 :
| D
(
0 1 2 3 4 5 6 7 8
Quantity (thousands of frisbees)
Figure 5
43. Refer to Figure S showing the market for frisbees before and after a tax is imposed. The tax
on each frisbee is
A) $0.40.
B) $0.60.
C) $1.00.
D) $5.60.
E) $6.60.
44. Refer to Figure S showing the market for frisbees before and after a tax is imposed. On
each frisbee, the sellers' share of the tax is
A) $0.40.
B) $0.60.
C) $1.00.
D) $5.60.
E) $6.60.

45. Refer to Figure S showing the market for frisbees before and after a tax is imposed. On
each frisbee, the buyers’ share of the tax is
A) $0.40.
B) $0.60.
C) $1.00.
D) $5.60.
E) $6.60.
46. Refer to Figure S showing the market for frisbees before and after a tax is imposed.
Government revenue from the tax is
A) $4,000.
B) $5,000.
C) $22,400.
D) $26,400.
E) $30,000.
Use the figure below to answer the following questions.
Price (dollars) Price (dollars)
S
Ss
2.00 2.00
D | D
0 Quantity 0 Quantity
(a) (b)
Price (dollars) Price (dollars)
S S
: a :
D
D
0 Quantity 0 Quantity
(c) (d)
Figure 6

47. Refer to Figure 6. Suppose a tax of $1 is imposed. In which market would the seller pay the
highest portion of the tax?

A) (a)

B) (b)

C) (c)

D) (d)

E) all markets equally
48. Refer to Figure 6. Suppose a tax of $1 is imposed. In which market would tax revenue be
the highest?

A) (a)

B) (b)

C) (c)

D) (d)

E) all markets equally
49. When an effective production quota is applied in the market for wheat, the quantity
produced and the price . The marginal social benefit marginal
social cost.

A) increases; rises; exceeds

B) decreases; falls; is less than

C) decreases; rises; exceeds

D) increases; falls; is less than

E) decreases; rises; is less than
50. How much time did you spend on this assignment? Everyone that completes this question
will get the point for this question. Please report truthfully ©

A) less than 1 hour

B) between 1 hour and 2 hours

C) between 2 hours and 3 hours

D) more than 3 hours