Applied Microeconomics Exam Questions
Course Introduction
Applied Microeconomics explores how microeconomic theories and principles are utilized to analyze real-world economic situations and inform decision-making in various sectors. The course covers topics such as consumer behavior, production and cost analysis, market structures, game theory, pricing strategies, and the impact of government policies on markets. Emphasis is placed on applying analytical tools and empirical methods to assess business strategies and policy implications, providing students with practical skills to evaluate and solve economic problems in industries, public policy, and everyday life contexts.
Recommended Textbook
Microeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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Page 2
Chapter 1: What Is Economics
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Sample Questions
Q1) Which of the following newspaper headlines concerns a macroeconomic issue?
A)Why are people buying more SUVs and fewer minivans?
B)How would a tax on e-commerce affect chapters.indigo.ca?
C)How would an unexpected freeze in Oxford, Nova Scotia change the price of blueberries in the Maritimes?
D)Why is Japan's economy stagnant?
E)Why do grain producers purchase less pesticides?
Answer: D
Q2) The expansion of international trade, borrowing and lending, and investment is A)the big tradeoff.
B)industrial revolution.
C)corporate revolution.
D)globalization.
E)antiglobalization.
Answer: D
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Chapter 2: The Economic Problem
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Sample Questions
Q1) Intellectual property ________.
A)includes land and buildings
B)includes stocks and bonds and money in the bank
C)is the intangible product of creative effort
D)is protected by copyrights and patents
E)Both C and D are correct.
Answer: E
Q2) If Harold must decrease production of some other good to increase production of good X, then Harold
A)is producing on his production possibilities frontier.
B)is producing outside his production possibilities frontier.
C)is producing inside his production possibilities frontier.
D)must prefer good X to any other good.
E)has too few capital goods.
Answer: A
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Chapter 3: Demand and Supply
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Sample Questions
Q1) The law of demand applies to food because when the price of food rises, there is
A)a substitution effect that offsets the income effect.
B)an income effect but no substitution effect.
C)both a substitution effect and an income effect.
D)a substitution effect but no income effect.
E)a substitution effect and a complement effect.
Answer: C
Q2) Refer to Table 3.5.1.Suppose a problem develops with car-seat heaters - they malfunction and occasionally cause serious burns.As a result, demand decreases by 100 heaters at each price.Simultaneously, the cost of production rises, and supply decreases by 100 heaters at each price.The new equilibrium price is $________ and the new equilibrium quantity is ________ heaters per month.
A)70; 450
B)70; 350
C)50; 450
D)50; 350
E)60; 300
Answer: E
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Chapter 4: Elasticity
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Sample Questions
Q1) If the price elasticity of demand is zero, then demand is A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.
E)unit elastic.
Q2) A good has an income elasticity of +0.5.An increase in income from $15,000 to $25,000 will lead to a
A)2.5 percent increase in the quantity demanded of the good.
B)5 percent increase in the quantity demanded of the good.
C)5 percent decrease in the quantity demanded of the good.
D)25 percent decrease in the quantity demanded of the good.
E)25 percent increase in the quantity demanded of the good.
Q3) Total revenue from the sale of a good will decrease if A)income increases and the good is a normal good.
B)its price rises and demand is elastic.
C)its price rises and demand is inelastic.
D)income falls and the good is an inferior good.
E)its price falls and demand is elastic.
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Page 6
Chapter 5: Efficiency and Equity
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Sample Questions
Q1) Alvin Roth of Harvard University designed a system that matches donated kidneys to recipients waiting for such donations.This system takes into account the needs of each perspective recipient, their blood type, and the urgency of their case.Based on this information, this allocation method for kidneys is
A)first-come, first-served.
B)force.
C)personal characteristics.
D)a contest.
E)a lottery.
Q2) Refer to Fact 5.3.1.The major problem in achieving an efficient use of the world's water is
A)the lack of rain in some areas of the world.
B)water is vital for life.
C)to get it from the places where it is most abundant to the places in which it has the most valuable uses.
D)markets in water are controlled by governments or private producers.
E)the price of water is too low.
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Chapter 6: Government Actions in Markets
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Sample Questions
Q1) Suppose the cost of breaking the law is imposed on the sellers of an illegal good.This action will have its biggest impact on quantity if the demand for the good is
A)inelastic or the supply is inelastic.
B)elastic or the supply is elastic.
C)elastic or the supply is inelastic.
D)inelastic or the supply is elastic.
E)perfectly inelastic.
Q2) According to the fair rules view of fairness, a fair outcome in the housing market
A)is one that does not block voluntary exchanges of housing.
B)cannot be created in housing industry.
C)is one that allocates scarce housing resources to those who are willing and able to pay.
D)is one that allocates scarce housing resources by lottery.
E)is one that allocates scarce housing resources to the poorest.
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8
Chapter 7: Global Markets in Action
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Sample Questions
Q1) Which of the following is an explanation for the existence of trade restrictions?
A)tariffs generate revenue for the government
B)rent seeking
C)inefficient quotas
D)both A and B
E)both A and C
Q2) Increasing a tariff ________ the domestic quantity consumed of the good and ________ the domestic production of the good.
A)increases; increases
B)increases; decreases
C)decreases; increases D)decreases; decreases E)decreases; does not change
Q3) Tariffs
A)generate revenue for consumers.
B)generate revenue for the government.
C)encourage domestic consumers to buy more imports.
D)encourage domestic producers to produce less.
E)lower prices for consumers.
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Page 9
Chapter 8: Utility and Demand
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Sample Questions
Q1) Marginal utility theory predicts that when a consumer's income decreases, the consumer
A)buys fewer normal goods.
B)buys more normal goods.
C)buys fewer inferior goods.
D)buys less of all goods.
E)buys more of all goods.
Q2) Lucy buys only magazines and CDs.Both are normal goods.Lucy's income decreases, but the prices of magazines and CDs do not change.Marginal utility theory predicts that
A)Lucy buys more magazines and more CDs.
B)Lucy buys fewer magazines and fewer CDs.
C)Lucy's demand curve for magazines shifts leftward.
D)Lucy's demand curve for CDs shifts leftward.
E)B, C, and D are correct.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Consider an initial budget line labelled RS in Figure 9.3.3.If the budget line becomes RT, the income effect is illustrated by the move from point
A)A to B.
B)A to C.
C)A to D.
D)B to C.
E)B to D.
Q2) As a consumer moves rightward along an indifference curve,
A)the relative price of the good measured on the x-axis falls.
B)the relative price of the good measured on the y-axis falls.
C)the income required to buy the combinations of the goods increases.
D)the consumer remains indifferent among the different combinations of goods.
E)the consumer prefers the combinations of goods that are farther rightward along the indifference curve.
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Chapter 10: Organizing Production
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Sample Questions
Q1) Susan invests $1,000 to buy shares of TooNew stock.The company declares bankruptcy, leaving many debts unpaid, including Susan's $1,000 investment.Susan has a personal net worth of $50,000.What will be Susan's final net worth if TooNew has total unpaid debts of $30,000?
A)$19,000
B)$21,000
C)$49,000
D)$51,000
E)$20,000
Q2) Which one of the following is an advantage of a corporation relative to a proprietorship or partnership?
A)Owners have limited liability.
B)Profits are taxed once.
C)difficult to raise money
D)no principal-agent problems
E)simple management structure
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Chapter 11: Output and Costs
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Sample Questions
Q1) Refer to Fact 11.1.1.The decisions made on ________ are short-run decisions because they ________.
A)January 31 and July 18; change the number of stores but not necessarily the number of employees
B)February 25 and June 2; change a variable factor of production but not a fixed factor of production
C)February 25, June 2, and July 18; deal with stores located in the United States
D)June 2 and July 18; are the more recent decisions
E)none of the above
Q2) The short run is a time frame in which
A)the firm is not able to hire more workers.
B)the amount of output produced is fixed.
C)there is a shortage of most factors of production.
D)at least one factor of production is fixed.
E)there is not enough time to make all of the decisions necessary to maximize profit.
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13
Chapter 12: Perfect Competition
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Sample Questions
Q1) When a perfectly competitive market is in long-run equilibrium,
A)at least one firm makes an economic profit.
B)all firms make zero economic profit.
C)firms enter the market if other firms are making an economic profit.
D)firms exit the market if other firms are incurring an economic loss.
E)marginal revenue equals minimum average variable cost.
Q2) Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is
A)$1.00.
B)$4.50.
C)$4.70.
D)$4.80.
E)$4.40.
Q3) Refer to Fact 12.1.1.These gas stations operate in a ________market.
A)competitive
B)noncompetitive
C)monopolistic
D)challenging
E)consumer's
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Chapter 13: Monopoly
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Sample Questions
Q1) Refer to Fact 13.1.1.The firm described in statement ________ is a natural monopoly.The firm described in statement ________ is a legal monopoly.
A)7; 6
B)2; 7
C)6; 7
D)2; 6
E)1; 4
Q2) Canada Post has a monopoly on residential mail delivery.Pfizer Inc.makes LIPITOR, a prescription drug that lowers cholesterol.Rogers Communications is the sole provider of cable television service in some parts of Ontario.The monopolies which profit from price discrimination are
A)Canada Post and Rogers Communications.
B)only Pfizer.
C)only Canada Post.
D)Canada Post, Pfizer, and Rogers Communications.
E)only Rogers Communications.
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Chapter 14: Monopolistic Competition
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Sample Questions
Q1) In the long-run, a firm in monopolistic competition produces at an output level where
A)P > ATC and MR = MC.
B)P > ATC and MR > MC.
C)P = ATC and MR = MC.
D)P = ATC and MR > MC.
E)P > ATC and MC > ATC.
Q2) 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
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16
Chapter 15: Oligopoly
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Sample Questions
Q1) 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.
Q2) 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.
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Chapter 16: Externalities
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Sample Questions
Q1) In recent years, as provincial governments attempt to balance their budgets, they have increased tuition fees considerably.This increase will likely result in
A)more students.
B)fewer students.
C)underprovision of education compared to the efficient level.
D)overprovision of education compared to the efficient level.
E)B and C.
Q2) Three ways governments can encourage production of goods with external benefits are
A)private subsidies, pollution permits, and intellectual property rights.
B)private subsidies, pollution permits, and vouchers.
C)intellectual property rights, pollution permits, and vouchers.
D)taxes, emission charges, and pollution permits.
E)private subsidies, vouchers, and intellectual property rights.
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Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) If voters are rationally ignorant, the quantity of national defence provided by the government will be
A)greater than the efficient quantity.
B)less than the efficient quantity.
C)the least costly quantity.
D)the quantity that maximizes the budget of the Department of National Defence.
E)both A and D are correct.
Q2) The economy's demand curve for a public good is obtained by summing the individual
A)marginal cost curves horizontally.
B)marginal cost curves vertically.
C)marginal benefit curves horizontally.
D)marginal benefit curves vertically.
E)benefit curves diagonally.
Q3) Private goods are
A)nonrival and excludable.
B)nonrival and nonexcludable.
C)always produced in a non-regulated market.
D)rival and excludable.
E)rival and nonexcludable.
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Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) In 2011, the mode income received by 6.0 percent of households in Canada was between
A)$18,500 and $21,999.
B)$15,000 and $19,999.
C)$30,000 and $34,999.
D)$16,000 and $22,500.
E)$18,000 and $24,999.
Q2) Refer to Figure 19.3.4.At an employment level of 30 hours per week, the compensation required for the cost of acquiring human capital is
A)$0.
B)$2 an hour.
C)$4 an hour.
D)$6 an hour.
E)cannot be determined without knowing the demand for labour.
Q3) Refer only to the information in Figure 19.3.1.At any given wage rate,
A)more hours of low-skilled labour will be demanded than high-skilled labour.
B)more hours of high-skilled labour will be demanded than low-skilled labour.
C)more hours of low-skilled labour will be supplied than high-skilled labour.
D)more hours of high-skilled labour will be supplied than low-skilled labour.
E)both B and C are correct.
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