Canadian Economic Policy
Pre-Test Questions
Course Introduction
Canadian Economic Policy explores the principles, frameworks, and development of economic policies in Canada, examining their impact on national and regional economies. The course analyzes the roles of government institutions, fiscal and monetary policy, trade agreements, regulatory measures, and social welfare programs within the Canadian context. Students assess current policy debates and challenges such as globalization, technological change, resource management, and inclusive growth. Through case studies and empirical analysis, the course fosters an understanding of how economic policy decisions shape economic performance, social equity, and Canada's position in the global economy.
Recommended Textbook
Microeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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Chapter 1: What Is Economics
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Sample Questions
Q1) Given the data in Table 1A.4.2, suppose family income decreases from $400 to $300 per week.Then the graph relating the price of strawberries, measured on the y-axis and the number of boxes of strawberries purchased, measured on the x-axis will
A)become negatively sloped.
B)become positively sloped.
C)shift rightward.
D)shift leftward.
E)no longer exist.
Answer: D
Q2) If the line in Figure 1A.5.2 were to continue down to the x-axis, what would the value of x be when y is zero?
A)0
B)2
C)2/3
D)-2/3
E)-3/2.
Answer: D
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Chapter 2: The Economic Problem
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Sample Questions
Q1) Which of the following quotations illustrates economic growth?
A)"The firm should lower the price it charges for widgets and 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 production next year."
E)"The firm has been able to lower costs due to its extensive experience in building widgets."
Answer: D
Q2) In Figure 2.2.1, when 2,000 bicycles are produced each month,
A)the marginal benefit from another bicycle is greater than the marginal cost of another bicycle.
B)more bicycles must be produced to reach the efficient level of output.
C)fewer bicycles must be produced to reach the efficient level of output.
D)the economy is efficient at this level of production of bicycles.
E)both A and B.
Answer: E
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Chapter 3: Demand and Supply
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Sample Questions
Q1) Refer to Table 3.4.1.A surplus occurs if
A)the price is $2 a unit.
B)the price is $3 a unit.
C)the price is above $4 a unit.
D)the price is $1 a unit.
E)the price is $4 a unit.
Answer: C
Q2) 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
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Chapter 4: Elasticity
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Sample Questions
Q1) Demand will be more elastic the
A)higher the income level.
B)lower the income level.
C)longer the passage of time after a price increase.
D)fewer substitutes are available.
E)smaller the fraction of income spent on the good.
Q2) Suppose the price of a television set rises by 10 percent.Which one of the following would we expect to be the most elastic following such a price change?
A)the momentary supply of television sets
B)the short-run supply of television sets
C)the long-run supply of television sets
D)the momentary demand for television sets
E)the normal demand for television sets
Q3) The supply of coal at Yanzhou Coal Mining is
A)inelastic but not perfectly inelastic.
B)unit elastic.
C)elastic but not perfectly elastic.
D)perfectly inelastic.
E)perfectly elastic.
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Chapter 5: Efficiency and Equity
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Sample Questions
Q1) A contest allocates resources to
A)a winner or a group of winners.
B)an athlete.
C)a gambler.
D)the government.
E)private firms.
Q2) The marginal cost for Morgan's Marvellous Movies is given in the following table:
A)$28
B)$3
C)$7
D)$6
E)$1
Q3) Consumer surplus
A)will definitely be low for inexpensive goods.
B)will definitely be high for inexpensive goods.
C)will definitely be low for expensive goods.
D)will definitely be high for expensive goods.
E)may be low or high for any type of good, expensive or inexpensive, depending on the characteristics of demand.
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Chapter 6: Government Actions in Markets
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Sample Questions
Q1) An effective rent ceiling
A)increases producer surplus.
B)results in a producer surplus of zero.
C)sometimes increases producer surplus and sometimes decreases producer surplus.
D)decreases producer surplus.
E)decreases the supply of housing.
Q2) Refer to Table 6.5.1.If a $2-per-unit cost of breaking the law is imposed on sellers, the price received by sellers (net of the cost of breaking the law)would be
A)$8.
B)$7.
C)$9.
D)$10.
E)$6.
Q3) If enforcement is aimed at sellers of an illegal good, the A)price and quantity bought decrease.
B)price and quantity bought increase.
C)price rises and quantity bought decreases.
D)price falls and quantity bought increases.
E)price change is uncertain and quantity bought decreases.
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Chapter 7: Global Markets in Action
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Sample Questions
Q1) Refer to Figure 7.3.1.With the tariff, Canada imports ________ million shirts per year.
A)24
B)8
C)32
D)16
E)40
Q2) Canada produces both lumber and wine.Canada exports lumber and imports wine.The rest of the world imports Canadian lumber and exports wine to Canada.Canada has a comparative advantage in producing ________.The rest of the world has a comparative advantage in producing ________.
A)lumber; wine
B)wine; lumber
C)wine; wine
D)lumber; lumber
E)a good other than lumber or wine; wine
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Chapter 8: Utility and Demand
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Sample Questions
Q1) The marginal utility per dollar from pizza is greater than the marginal utility per dollar from pop.To maximize utility, a consumer buys
A)less pizza and more pop.
B)equal quantities of pizza and pop.
C)more pizza and less pop.
D)more pizza and more pop.
E)less pizza and less pop.
Q2) As a consumer's income decreases, marginal utility theory predicts that
A)the price of normal goods falls.
B)the demand for normal goods decreases.
C)the demand for all goods decreases.
D)the demand for normal goods increases.
E)total utility increases.
Q3) Marginal utility theory predicts that a rise in the price of a banana results in
A)the demand curve for bananas shifting rightward.
B)the demand curve for bananas shifting leftward.
C)a movement upward along the demand curve for bananas.
D)a movement downward along the demand curve for bananas.
E)the demand curve for bananas shifting rightward and the supply curve for bananas shifting rightward.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Larry consumes only beer (B)and chips (C).The magnitude of the slope of his budget line (with beer measured on the vertical axis)is
A)PC/Y.
B)PC × PB.
C)Y/PC.
D)Y/PB.
E)PC/PB.
Q2) Larry consumes only beer (B)and chips (C).The equation of his budget line (with beer measured on the vertical axis)is
A)QB = Y/PB - (PC/PB)QC.
B)QB = Y - (PC/PB)QC.
C)QB = Y/PC - (PB/PC)QC.
D)QB = Y/PB - (PC/PB)QB.
E)QC = Y/PC - (PB/PC)QB.
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Chapter 10: Organizing Production
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Sample Questions
Q1) Which one of the following is included in the implicit rental rate of capital?
A)economic depreciation
B)the cost of electricity
C)the cost of raw materials
D)the cost of low-skilled labour
E)the cost of heating
Q2) Which one of the following would not likely be a firm with economies of scale?
A)an electrical production plant
B)a steel mill
C)a telephone company
D)a firm that produces handmade cabinetry
E)a multi-store dry-cleaning firm
Q3) When the cost of producing a unit of a good falls as its output rate increases,
A)economies of scale exist.
B)economies of scope exist.
C)transactions costs are zero.
D)market coordination is unnecessary.
E)the firm is a partnership.
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Chapter 11: Output and Costs
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Sample Questions
Q1) Which of the following quotes best illustrates the idea of average product?
A)"If I have 10 workers on my assembly line, I can produce 13 tables a day."
B)"If I add an 11th worker, I can produce 1 extra table a day."
C)"Each worker produces 2 tables a day."
D)"I find if I add an extra shift at night, table production only rises by 80 percent because I need more maintenance time on the assembly line."
E)"If I double workers and double the assembly line, I can make 120 percent more tables."
Q2) Refer to Fact 11.1.2.Avalon's decision to ________ is a short-run decision.Avalon's decision to ________ is a long-run decision.
A)serve 500 customers a day; hire 15 more people
B)move to a larger space; hire 15 more people
C)hire 15 more people; serve 500 customers a day
D)hire 15 more people; move to a larger space
E)pay more for rent; have a larger payroll
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Chapter 12: Perfect Competition
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Sample Questions
Q1) Initially, a perfectly competitive market that has 1,000 firms is in long-run equilibrium.Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good.In the short run, the price ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.
A)remains the same; zero; incur an economic loss
B)remains the same; positive; break even
C)falls; positive; incur an economic loss
D)remains the same; positive; incur an economic loss
E)falls; break even; incur an economic loss
Q2) Consider a perfectly competitive market.In the short run, if demand increases due to a technological advance, the equilibrium price
A)remains constant and the equilibrium quantity increases.
B)remains constant and the equilibrium quantity decreases.
C)rises and the equilibrium quantity increases.
D)falls and the equilibrium quantity decreases.
E)rises and the equilibrium quantity remains the same.
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Chapter 13: Monopoly
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Sample Questions
Q1) When a monopoly practices price discrimination
A)it charges different prices to different consumers and transfers some of the consumer surplus to economic profit.
B)it produces a smaller quantity than when it is a single-price monopoly which decreases consumer surplus.
C)new firms enter the industry, so buyers have more goods from which to choose and consumer surplus increases.
D)consumer surplus increases because the monopoly increases the quantity available for sale.
E)firms exit the industry and consumer surplus decreases.
Q2) In a natural monopoly, the long-run average cost curve
A)is downward sloping in the relevant range of output levels.
B)is horizontal in the relevant range of output levels.
C)is upward sloping in the relevant range of output levels.
D)may be either upward sloping or downward sloping in the relevant range of output levels.
E)lies below the marginal cost curve.
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Chapter 14: Monopolistic Competition
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Sample Questions
Q1) Refer to Figure 14.2.2.To maximize economic profit, this firm in monopolistic competition will charge a price of
A)$15 a unit.
B)$25 a unit.
C)$20 a unit.
D)$32 a unit.
E)$35 a unit.
Q2) Refer to Figure 14.2.3.Assume this firm faces demand curve D .If the firm produced the efficient quantity, it would produce
A)100 units.
B)220 units.
C)200 units.
D)250 units.
E)140 units.
Q3) 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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Chapter 15: Oligopoly
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Sample Questions
Q1) The act of parliament that provides our anti-combine law is
A)the Anti-Combine Act of 1986.
B)the Anti-Combine Act of 1889.
C)the Competition Act of 1986.
D)the Competition Act of 1889.
E)the Competition Act of 1967.
Q2) Which of the following quotes shows cheating on a cartel in the widget industry?
A)"I am producing extra widgets, even though it costs me short-run profit, to stop Wally's Widgets from expanding into my market."
B)"I am producing more widgets than Wally and I agreed to in our talk last week."
C)"If only Wally and I could agree on a higher price, we could make more profit."
D)"I have been spending extra on research and development of my new two-way widget."
E)None of the above
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Chapter 16: Externalities
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Sample Questions
Q1) Governments use subsidies
A)as a means of increasing government spending.
B)when they want to increase taxes.
C)to achieve an efficient outcome in a market with external costs.
D)to achieve an efficient outcome in a market with external benefits.
E)and pollution permits to achieve an efficient outcome in markets with external benefits.
Q2) The Coase theorem applies when transactions costs are
A)low and property rights exist.
B)low and property rights do not exist.
C)high and property rights exist.
D)high and property rights do not exist.
E)low and there are no externalities.
Q3) An externality is
A)the amount by which price exceeds marginal private cost.
B)the amount by which price exceeds marginal social cost.
C)the effect of government regulation on market price and output.
D)someone who consumes a good without paying for it.
E)a cost or benefit that arises from an activity but affects people not part of the original activity.
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Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) Figure 17.3.1 shows the marginal private cost curve, marginal social cost curve, and marginal social benefit curve for cod, a common resource.The equilibrium quantity in an unregulated market is
A)0 kilograms a week.
B)4,000 kilograms a week.
C)3,000 kilograms a week.
D)5,000 kilograms a week.
E)1,000 kilograms a week.
Q2) When a production quota is used to remedy the problem of the commons, then
A)the production quota is set so that use of the resource is where marginal private benefit equals marginal cost.
B)the production quota is set so that use of the resource is where marginal private benefit equals marginal social benefit.
C)the market equilibrium, but not the efficient outcome, is achieved.
D)all users of the resource have an incentive to cheat on the production quota.
E)the production quota is set so that marginal social benefit is maximized.
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Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) 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.
Q2) New technology has allowed oil to be pumped from much deeper offshore oil fields than before.For example, 28 deep ocean rigs operate in the deep waters of the Gulf of Mexico.Deep ocean sources have ________ the world price of oil.Those who benefit from drilling for oil in the Gulf of Mexico are ________.
A)raised; both consumers and suppliers
B)lowered; both consumers and suppliers
C)raised; consumers only
D)lowered; consumers only
E)raised; consumers and the government
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