Applied Economics
Question Bank
Course Introduction
Applied Economics focuses on the practical application of economic theories and principles to real-world situations and policy-making. Students explore how economic concepts are used to analyze and address issues in various sectors such as health, education, labor markets, and public finance. The course emphasizes quantitative and qualitative methods to interpret data, evaluate economic models, and assess the potential impacts of economic policies and business strategies. Through case studies and problem-solving exercises, students develop the skills needed to provide informed recommendations for economic decision-making in both private and public spheres.
Recommended Textbook
Economics Canada in the Global Environment 9th Edition by Robin Bade
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31 Chapters
4049 Verified Questions
4049 Flashcards
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Page 2
Chapter 1: What Is Economics
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212 Verified Questions
212 Flashcards
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Sample Questions
Q1) Which curve or curves in Figure 1A.2.4 shows a positive relationship between unemployment and inflation?
A)A
B)A and B
C)B, C, and D
D)A and C
E)none of the curves.
Answer: E
Q2) Which of the following is a normative statement?
A)Next year's inflation rate will be under 4 percent.
B)Consumers will buy more gasoline over the December holiday period than they bought during the summer holiday period even if the price of gas is 10 cents a litre higher than it was during the summer.
C)Government cuts in welfare spending impose an unfair hardship on the poor.
D)A wheat shortage or surplus is always the result of federal government policies.
E)Hurricane Irene caused more damage in the United States than Hurricane Katrina. Answer: C
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Chapter 2: The Economic Problem
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159 Flashcards
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Sample Questions
Q1) Refer to Table 2.1.2. In moving from combination B to combination C, the opportunity cost of producing one additional unit of guns is
A)2 kilograms of butter.
B)1/2 kilogram of butter.
C)6 kilograms of butter.
D)1/6 kilogram of butter.
E)3 kilograms of butter.
Answer: E
Q2) The main functions of markets include
A)promoting the social interest, but not the self-interest.
B)selling goods, but not factors of production.
C)enabling buyers and sellers to get information about each other.
D)establishing a physical location for business transactions.
E)promoting the self-interest, but not the social interest.
Answer: C
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4
Chapter 3: Demand and Supply
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Sample Questions
Q1) The price at which sellers are not willing to supply a good is $70 a unit. As the quantity supplied of the good increases by one unit, the minimum price at which someone is willing to sell that unit increased by $5. What is the equation of this supply curve?
A)P = 70 - 5QS
B)QS = 70 - 5P
C)P = 5 + 70QS
D)QS = 5 + 70P
E)P = 70 + 5QS
Answer: E
Q2) How many sides does a market have?
A)one side - buyers
B)one side - sellers
C)two sides - buyers and sellers
D)three sides - buyers, sellers, and the government
E)two sides - domestic and foreign
Answer: C
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Page 5
Chapter 4: Elasticity
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Sample Questions
Q1) The concept used by economists to indicate the responsiveness of the quantity demanded of a good to a change in its price is the
A)cross elasticity of demand.
B)income elasticity of demand.
C)substitute elasticity of demand.
D)price elasticity of demand.
E)elasticity of supply.
Q2) Demand will be more inelastic the
A)higher the income level.
B)lower the income level.
C)longer the passage of time after a price increase.
D)fewer good substitutes that are available.
E)larger the fraction of income spent on the good.
Q3) When the price elasticity of demand is ________, demand for the good is elastic.
A)equal to infinity
B)greater than 1
C)equal to 1
D)between 1 and zero
E)equal to zero
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Page 6
Chapter 5: Efficiency and Equity
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Sample Questions
Q1) What is the producer surplus for the market from the production of the 100th unit of a good?
A)the marginal cost of producing the 100th unit
B)the marginal benefit from the 100th unit
C)the opportunity cost of producing the 100th unit
D)the marginal social benefit from the 100th unit minus the marginal cost of producing the 100th unit
E)the price paid for the 100th unit minus the marginal social cost of producing the 100th unit
Q2) Sam's demand curve for pizza
A)lies below his marginal benefit curve from pizza.
B)lies above his marginal benefit curve from pizza.
C)is the same as his marginal benefit curve from pizza.
D)is the same as his marginal cost curve of pizza.
E)lies below his marginal cost curve of pizza.
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Chapter 6: Governments Actions in Markets
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Sample Questions
Q1) Refer to Figure 6.3.2. The buyers' share of the tax is A)zero.
B)$0.50.
C)$1.00.
D)$1.50.
E)$2.00.
Q2) 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.
Q3) A lottery allocates housing to those
A)who are poor.
B)who share similar views to the owner of the housing.
C)who are rich.
D)whose names are on waiting lists.
E)who are lucky.
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Page 8
Chapter 7: Global Markets in Action
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Sample Questions
Q1) In Figure 7.2.1, international trade ________ total surplus in Canada by ________.
A)increases; $128 million
B)decreases; $192 million
C)increases; $320 million
D)decreases; $256 million
E)decreases; $128 million
Q2) Offshore outsourcing occurs when a firm in Canada
A)moves its corporate headquarters to another country.
B)buys finished goods, components, or services from other firms in other countries.
C)buys finished goods, components, or services from other firms in Canada.
D)hires Canadian labour and produces in Canada.
E)hires foreign workers who work in Canada.
Q3) Goods and services that we buy from other countries are our A)balance of payments.
B)exports.
C)imports.
D)terms of trade.
E)comparative goods and services.
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9
Chapter 8: Utility and Demand
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Sample Questions
Q1) According to the principle of diminishing marginal utility, as consumption of a good increases, total utility
A)decreases and then eventually increases.
B)decreases at an increasing rate.
C)decreases at a decreasing rate.
D)increases at an increasing rate.
E)increases at a decreasing rate.
Q2) Behavioural economics
A)studies the activity of the human brain when a person makes an economic decision.
B)studies psychology by using the economist's toolbox.
C)studies the ways in which limits on the human brain's ability to compute and implement rational decisions influences economic behaviour.
D)was used extensively in the development of marginal utility theory.
E)all of the above
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10
Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Sam buys gasoline and coffee each week. To draw his budget line for gasoline and coffee, Sam needs to know
A)how much income he has to spend on gasoline and coffee, the price of a litre of gasoline, and the price of a cup of coffee.
B)only the price of a litre of gasoline and the price of a cup of coffee.
C)only how much coffee he wants to drink and how much gasoline he needs.
D)only how much income he has to spend on coffee and gasoline.
E)what he needs more-gasoline or coffee.
Q2) What is a distinguishing characteristic of an inferior good?
A)a negative price effect
B)a positive income effect
C)a positive substitution effect
D)a negative income effect
E)an upward-sloping demand curve
Q3) Real income in terms of a good is defined as
A)income divided by the quantity consumed of a good.
B)the income of a producer of that good.
C)the price of one good divided by the price of another good.
D)dollar income.
E)income divided by the price of a good.
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Chapter 10: Organizing Production
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Sample Questions
Q1) A group of business people are having coffee. Which of the following quotations describes economies of scale?
A)"The new production process we've installed uses less capital and labour than the old one."
B)"The new assembly line has higher capital costs, but the fall in workers' hours has lowered overall costs."
C)"The costs of per-unit production have fallen dramatically as we have increased the length of the production runs."
D)"Despite the higher costs of negotiating the contracts, hiring the cleaning firm is much cheaper than using our own staff."
E)"The computer servicing people we have hired work very well as an integrated problem-solving group."
Q2) Economic profit equals total revenue minus
A)the cost of resources bought in the market.
B)the implicit rental rate.
C)the opportunity cost of production.
D)the cost of resources supplied by the owner.
E)the cost of resources owned by the firm.
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12
Chapter 11: Output and Costs
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Sample Questions
Q1) Marginal cost is equal to
A)total cost divided by output.
B)the increase in total cost divided by the increase in output.
C)the increase in total cost divided by the increase in labour input, given the amount of capital.
D)total variable cost minus total fixed cost.
E)the increase in total cost divided by the increase in variable cost.
Q2) Refer to Table 11.2.1 which gives Tania's total product schedule. The marginal product when the number of workers increases from 1 to 2 is
A)3 teapots.
B)12 teapots.
C)7 teapots.
D)9 teapots.
E)6 teapots.
Q3) The average product of labour equals
A)the slope of the total product curve.
B)the slope of the marginal product curve.
C)the increase in total product divided by the increase in labour employed.
D)total product divided by the quantity of labour employed.
E)the difference between the total product and the marginal product of labour.
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Chapter 12: Perfect Competition
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Sample Questions
Q1) Perfect competition occurs in a market where there are many firms, each selling
A)an identical product.
B)a similar product.
C)a unique product.
D)a capital-intensive product.
E)a competitive product.
Q2) Technological change
A)brings only temporary gains to producers.
B)brings only temporary gains to consumers.
C)brings permanent gains to producers.
D)decreases the number of firms in an industry.
E)decreases the number of consumers in a market.
Q3) Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm. The average fixed cost of producing the 4th balloon is A)$4.30.
B)$4.80.
C)$4.70.
D)$4.50.
E)$1.00.
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Page 14
Chapter 13: Monopoly
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118 Flashcards
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Sample Questions
Q1) A single-price monopolist's demand curve
A)is its marginal revenue curve.
B)shows that demand for the good is perfectly elastic.
C)is the same as the market demand curve.
D)shows that demand for the good is perfectly inelastic.
E)is horizontal.
Q2) To increase sales from 7 units to 8 units, a single-price monopolist must drop the price from $7 per unit to $6 per unit. What is marginal revenue in this range?
A)$48
B)$6
C)$1
D)-$1
E)$7
Q3) Which of the following markets will have the largest deadweight loss?
A)a single-price monopoly
B)a perfectly competitive market
C)a perfectly price discriminating monopoly
D)both B and C
E)both A and C
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Page 15
Chapter 14: Monopolistic Competition
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122 Flashcards
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Sample Questions
Q1) Refer to Fact 14.3.3. If the nearby firms' advertising decreases the demand for Roots' jackets and makes the demand more elastic, the price of a Roots' jacket ________. If Roots' advertising increases the demand for Roots' jackets and makes the demand less elastic, the price of a Roots' jacket ________.
A)falls; rises
B)rises; rises C)rises; falls
D)falls; falls
E)does not change; does not change
Q2) Under monopolistic competition, long-run economic profit is zero because of A)product differentiation.
B)no barriers to entry.
C)excess capacity.
D)economic inefficiency.
E)the downward-sloping demand curve facing each firm.
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16
Chapter 15: Oligopoly
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106 Flashcards
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Sample Questions
Q1) Once a cartel determines the profit-maximizing price,
A)all members of the cartel have a strong incentive to abide by the agreed-upon price.
B)each member will face the temptation to cheat on the cartel price to increase its sales and profit.
C)changes in the output of any member firms will have no impact on the market price.
D)entry into the industry of rival firms will have no impact on the profit of the cartel.
E)entry into the industry of rival firms will raise cartel profit as long as the new firms join the cartel.
Q2) Limit pricing refers to
A)the highest price a monopolist can set.
B)the highest price that just inflicts a loss on a potential entrant.
C)a strategy used by entering firms in contestable markets.
D)the lowest price a duopoly can set.
E)the price set in a perfectly competitive market.
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Chapter 16: Externalities
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Sample Questions
Q1) If negative externalities exist, then in a market with no property rights,
A) MSC = MSB.
B) MSC < MSB.
C) MSC > MSB.
D) MSC = marginal external cost.
E) MC > MSC.
Q2) Refer to Figure 16.2.3. In this market there is a marginal external
A)cost of $14 a tonne.
B)cost of $12 a tonne.
C)cost of $2 a tonne.
D)benefit of $2 a tonne.
E)benefit of $12 a tonne.
Q3) A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.
A)marginal external cost
B)marginal social benefit
C)marginal private benefit
D)marginal social cost
E)marginal external benefit
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18
Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) Which of the following quotations describes a nonexcludable and nonrival good?
A)"Mom, Ashley is looking at me."
B)"Mom, Morgan won't let me watch the Backyardigans because she is watching Dora the Explorer."
C)"Mom, Harrison won't let me in his room."
D)"Mom, Taylor told me on the phone that he is also watching the Backyardigans on TV at his house, but I'm not allowed to go over there."
E)"Mom said everyone in this house gets to enjoy the flowers in the garden."
Q2) The absence of incentives to prevent the overuse of a common resource that arises when its users have no incentive to conserve it and use it sustainably is referred to as A)unsustainable production.
B)sustainable production.
C)the tragedy of the commons.
D)rational ignorance.
E)irrational production.
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19
Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) Refer to Figure 18.3.1. This figure shows the value of marginal product of labour curve, the labour supply curve, and the marginal cost of labour curve. If this labour market is competitive, the quantity of labour employed is
A)zero hours.
B)50 hours.
C)75 hours.
D)100 hours.
E)greater than 100 hours.
Q2) Refer to Fact 18.4.1. The Hotelling Principle ________ apply to Canada's water because the Hotelling Principle ________.
A)does; applies to renewable resources and water is a renewable resource
B)does; only applies when the interest rate is falling
C)does not; applies to nonrenewable resources but water is a renewable resource
D)does not; only applies when the interest rate is rising
E)does; applies when interest rates are relatively low
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Chapter 19: Economic Inequality
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Sample Questions
Q1) Refer to Table 19.4.2. The table shows three tax payment schemes. Which tax payment plan has no effect on inequality?
A)Plan B
B)Plan C
C)Plan A
D)Plan A and Plan C
E)Plan B and Plan C
Q2) Refer to Figure 19.3.5. This figure shows the labour supply curves and the value of marginal product curves for high-skilled and low-skilled workers. If there is an increase in the supply of high-skilled workers and the supply of high-skilled workers is now equal to the supply of low-skilled workers, then
A)wages paid to high-skilled workers would fall to $4 an hour.
B)wages paid to high-skilled workers would fall to $5 an hour.
C)wages paid to high-skilled workers would fall to $6 an hour.
D)there would be no change in the wages of high-skilled workers, because high-skilled workers always earn more than low-skilled workers.
E)there would be no change in the wages of high-skilled workers, because their value of marginal product is unchanged.
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Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) The largest component of GDP using the expenditure approach is A)investment.
B)consumption expenditure.
C)exports.
D)government expenditure.
E)imports.
Q2) An art collector recently sold a piece of pottery for $300. He had purchased it for $200 two years earlier. How will the most recent sale affect GDP?
A)GDP will increase by $100.
B)GDP is unaffected.
C)GDP will increase by $300.
D)GDP will increase by $200.
E)GDP 2 years ago must be adjusted downwards by $200, and current GDP will rise by $300.
Q3) In the circular flow model,
A)households are sellers of factor services in goods markets.
B)households are buyers of goods and services in the factor markets.
C)firms are sellers of the factors in factor markets.
D)firms are sellers of goods and services in goods markets.
E)firms are buyers of goods and services in final markets.
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Chapter 21: Monitoring Jobs and Inflation
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Sample Questions
Q1) In a country with a working-age population of 30 million, 18 million are employed, 2 million are unemployed, and 2 million of the employed are working part-time, half of whom wish to work full-time. The labour force is
A)30 million.
B)18 million.
C)20 million.
D)22 million.
E)16 million.
Q2) In China, suppose that the price level was 100 in 2007, 110 in 2008, 120 in 2009, and 130 in 2011. Over this time period,
A)zero inflation occurred.
B)the inflation rate increased.
C)the inflation rate was positive.
D)the inflation rate decreased.
E)Both C and D are correct.
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Chapter 22: Economic Growth
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Sample Questions
Q1) Real GDP per person in the country of Flip is $10,000, and the growth rate is 10 percent a year. Real GDP per person in the country of Flap is $20,000 and the growth rate is 5 percent a year. When will real GDP per person be greater in Flip than in Flap?
A)in 2 years
B)in 15 years
C)never
D)in 10 years
E)in 7 years
Q2) 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
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Page 24
Chapter 23: Finance, Saving, and Investment
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Sample Questions
Q1) At the beginning of the year, Tom's Tubes had capital of 5 tube-inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's gross investment for the year is
A)1 machine.
B)2 machines.
C)3 machines.
D)6 machines.
E)8 machines.
Q2) Refer to Table 23.3.3. The table shows the demand for loanable funds schedule and the private supply of loanable funds schedule when the government's budget is balanced. If the Ricardo-Barro effect occurs, and if the government budget deficit is $2.0 trillion, the real interest rate is ________ percent a year and the quantity of investment is ________ trillion.
A)5.0; $5.0
B)9.0; $7.0
C)3.0; $7.5
D)5.0; $7.0
E)7.0; $6.0
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Chapter 24: Money, the Price Level, and Inflation
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Sample Questions
Q1) Money's function as a store of value can best be described as
A)an agreed measure for stating the prices of goods and services.
B)a guarantee of a double coincidence of wants.
C)an efficient means of writing contracts over a long time period.
D)something that can be held and exchanged later for goods and services.
E)a generally acceptable exchange system.
Q2) Which of the following best fits the definition of money?
A)gold
B)any commodity or token that is generally acceptable as a means of payment
C)an obligation between the parties to a transaction
D)any unit of account
E)any medium of exchange
Q3) Refer to Figure 24.5.2. Which one of the following best describes the response to an increase in real GDP?
A)Movement from A to F
B)Movement from A to C
C)Movement from E to A
D)Movement from B to A
E)Movement from A to E
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Page 26
Chapter 25: The Exchange Rate and the Balance of Payments
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Sample Questions
Q1) The law of supply of foreign exchange tells us that, other things remaining the same,
A)the lower the exchange rate, the greater is the quantity of Canadian dollars supplied.
B)the higher the exchange rate, the greater is the quantity of Canadian dollars supplied.
C)the higher the exchange rate, the greater is the supply of Canadian dollars
D)the lower the exchange rate, the greater is the supply of Canadian dollars.
E)the lower the exchange rate, the smaller is the supply of Canadian dollars.
Q2) The exchange rate equals
A)the real exchange rate divided by the foreign price level.
B)the real exchange rate multiplied by the foreign price level, divided by the domestic price level.
C)the real exchange rate multiplied by the domestic price level, divided by the foreign price level.
D)the real exchange rate when the inflation rate is less than 2 percent a year.
E)the real exchange rate when the government budget is balanced.
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Chapter 26: Aggregate Supply and Aggregate Demand
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Sample Questions
Q1) Full-employment equilibrium occurs when
A)aggregate demand equals short-run aggregate supply.
B)all who are willing and able to work, are working.
C)real GDP equals potential GDP.
D)real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 100.
E)all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 100.
Q2) Which of the following news quotes best describes a new classical view of a recession?
A)"Rapid computerization is creating obsolete workers and higher unemployment."
B)"The unexpectedly tight fiscal policy is raising spending and lowering unemployment."
C)"The anti-inflationary policy of the Bank of Canada is increasing spending."
D)"The cuts in government spending have helped lower consumer spending and created unemployment."
E)"Businesses are very worried about future sales and have lowered their purchases of capital equipment."
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Chapter 27: Expenditure Multipliers
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Sample Questions
Q1) Refer to Figure 27.2.1. When real GDP is equal to Yb, then aggregate planned expenditure is
A)less than real GDP, and real GDP decreases.
B)less than real GDP, and real GDP increases.
C)greater than real GDP, and real GDP increases.
D)greater than real GDP, and real GDP decreases.
E)equal to real GDP, and real GDP neither increases nor decreases.
Q2) In a recent study, the University of Underfunded argued that it created four times as many jobs as people that it hired directly. This argument illustrates the idea
A)of the marginal propensity to consume.
B)of the multiplier.
C)of government spending.
D)of the tax multiplier.
E)that universities are wasting taxpayers' dollars.
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Chapter 28: The Business Cycle, Inflation, and Deflation
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Sample Questions
Q1) Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. What is the natural unemployment rate?
A)9 percent
B)6 percent
C)4 percent
D)7 percent
E)cannot be determined without more information
Q2) Demand-pull inflation can start
A)aggregate demand increases.
B)aggregate supply decreases.
C)input costs rise.
D)people incorrectly forecasting inflation.
E)unemployment that is above the natural rate.
Q3) A movement down along the short-run Phillips curve results from an unanticipated
A)decrease in aggregate demand.
B)increase in aggregate demand.
C)decrease in short-run aggregate supply.
D)increase in short-run aggregate supply.
E)increase in the natural unemployment rate.
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Chapter 29: Fiscal Policy
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Sample Questions
Q1) Consider all the effects on fiscal policy. A cut in the tax on capital income
A)shifts the AD curve rightward.
B)shifts the SAS curve rightward.
C)shifts the LAS curve rightward.
D)all of the above
E)only B and C
Q2) Choose the statement that is incorrect.
A)The federal government debt was 5 percent of GDP in 1970.
B)The debt-to-GDP ratio increased slightly during the 2008-2009 recession.
C)The debt-to-GDP ratio increased from 1974 through 1997, and then began to decrease.
D)The government debt increases when the government has a budget deficit.
E)As a percentage of real GDP, the federal government debt was greater in 2014 than in 1970.
Q3) Fiscal policy is
A)the use of the federal budget to achieve macroeconomic objectives.
B)any policy by the Bank of Canada.
C)budgeting policy by aggregate households.
D)any attempt by the federal government or Bank of Canada to control inflation.
E)effective only when the federal government has a budget surplus.
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Chapter 30: Monetary Policy
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Sample Questions
Q1) When the Bank of Canada lowers the overnight loans rate, there is a ________ shift of the ________ curve.
A)rightward; AD
B)leftward; AD
C)rightward; SAS
D)leftward; SAS
E)rightward; LAS
Q2) Refer to Fact 30.1.1. In the inflation control agreement, the Government of Canada and the Bank of Canada agree to all of the following except that
A)the target will continue to be defined in terms of the 12-month rate of change in the total CPI.
B)the inflation target will continue to be 2 percent.
C)the agreement will run until December 31, 2016.
D)if the CPI becomes too volatile, in the future the target will be defined in terms of the 12-month rate of change in the core CPI.
E)the inflation-control range is 1 percent to 3 percent a year.
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Chapter 31: Macro Only: International Trade Policy
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Q1) If a country imposes a tariff on an imported good, the tariff ________ the price in the importing country and ________ the quantity of imports.
A)raises; increases B)raises; does not change C)lowers; does not change D)lowers; increases E)raises; decreases
Q2) Which of the following are valid reasons advanced by almost all economists? Protection
A)saves jobs.
B)prevents rich countries from exploiting developing countries.
C)is a good way for governments in developed nations to raise revenue.
D)penalizes lax environmental standards.
E)Economists would not support any of the above reasons.
Q3) Rent seeking is one reason why countries choose to A)export and import the same goods.
B)work for freer trade.
C)follow the theory of comparative advantage.
D)hire foreign labour.
E)restrict trade.
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