Comparative Economic Systems
Chapter Exam Questions
Course Introduction
Comparative Economic Systems explores the theoretical foundations and practical workings of different economic systems across the world, including capitalism, socialism, and mixed economies. The course examines how societies organize production, distribution, and consumption of goods and services, analyzing the strengths and weaknesses of various systems in terms of efficiency, equity, and adaptability. Students will study historical and contemporary case studies to understand how different systems address economic challenges, the role of government intervention, and the impact of ideological, cultural, and political factors on economic performance and development.
Recommended Textbook Economics Canada in the Global Environment 9th Edition by Robin Bade
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Page 2
Chapter 1: What Is Economics
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Q1) At all points along a straight line, slope is
A)positive.
B)negative.
C)constant.
D)zero.
E)infinity.
Answer: C
Q2) 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.
Answer: D
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Chapter 2: The Economic Problem
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Sample Questions
Q1) To describe preferences, economists use the concept of A)opportunity cost.
B)scarcity.
C)marginal benefit.
D)marginal cost.
E)price.
Answer: C
Q2) The quantity of shoes produced is measured along the x-axis of a bowed-outward production possibilities frontier and the quantity of shirts produced is measured along the y-axis. As you move down towards the right along the production possibilities frontier, the marginal cost of
A)a pair of shoes decreases.
B)a pair of shoes increases.
C)a shirt remains constant.
D)a shirt increases or decreases but we don't know for sure.
E)a pair of shoes and a shirt is equal at the midpoint between the x-axis and the y-axis.
Answer: B
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Chapter 3: Demand and Supply
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Sample Questions
Q1) The demand curve for knobs is P = 75 - 6QD and the supply curve for knobs is P = 35 + 2QS. What is the equilibrium price of a knob?
A)$5
B)$10
C)$40
D)$45
E)$75
Answer: D
Q2) Refer to Figure 3.5.2, which represents the market for tacos. A new scientific study reveals that tacos cause bad breath. Simultaneously, the cost of producing tacos increases. What is the new equilibrium, ceteris paribus?
A)2
B)3
C)9
D)4
E)7
Answer: A
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Page 5
Chapter 4: Elasticity
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Q1) Business people speak about cross elasticity of demand without using the actual term. Which one of the following statements reflects cross elasticity of demand?
A)"A price cut won't help me. It won't increase sales, and I'll just get less money for each unit."
B)"I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on the lower price."
C)"My customers are real bargain hunters. Since I set my prices just a few cents below my competitors, customers have flocked to the store and sales are booming."
D)"With the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices."
E)"Since the price of gasoline fell at the neighbouring station, my milk sales have been booming."
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Chapter 5: Efficiency and Equity
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Sample Questions
Q1) At the Stratford Festival Theatre no reservations are accepted on the day of the performance; at matinees, reservations are accepted; at opening night performances reservations are essential. On the day of the performance, Stratford Festival Theatre allocates seats by ________; at matinees, it allocates seats by ________; at opening night performances, it allocates seats by ________.
A)first-come, first served; a command system; a combination of first-come, first-served and a command system
B)force; first-come, first-served; a command system
C)personal characteristics; personal characteristics; personal characteristics
D)a lottery; first-come, first-served; personal characteristics
E)first-come, first served; first-come, first-served; first-come, first-served
Q2) The demand curve for a good is the same as the
A)marginal cost curve of that good.
B)marginal benefit curve for that good.
C)consumer surplus curve of that good.
D)production possibilities frontier (PPF).
E)producer surplus from that good.
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Page 7
Chapter 6: Governments Actions in Markets
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Sample Questions
Q1) Refer to Fact 6.5.1. If a penalty is imposed on either the buyer or the seller, and the penalty is the same, then the marginal benefit
A)is higher when the penalty is imposes on the seller.
B)cannot be measured regardless of who pays the penalty.
C)is the same regardless of who pays the penalty.
D)is higher when the penalty is imposed on the buyer.
E)is zero.
Q2) A $10 per-unit tax on MP players raises the equilibrium price paid by consumers by $5. The quantity sold before the tax was 5,000 per year. The revenue from the tax is A)zero.
B)positive but less than $50,000 per year.
C)$50,000 per year.
D)more than $50,000 per year.
E)greater the more elastic is demand.
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8
Chapter 7: Global Markets in Action
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Q1) Who benefits from imports?
A)domestic consumers
B)domestic producers
C)foreign consumers
D)domestic workers in the industry
E)everyone benefits
Q2) 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.
Q3) In Figure 7.2.2, international trade ________ producer surplus in Canada by ________.
A)decreases; $2.88 billion
B)decreases; $1.92 billion
C)increases; $4.8 billion
D)increases; $3.6 billion
E)decreases; $4.8 billion
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Page 9
Chapter 8: Utility and Demand
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Q1) In consumer equilibrium, a consumer equates the
A)total utility from each good.
B)marginal utility from each good.
C)total utility per dollar on each good.
D)marginal utility per dollar on each good.
E)total income spent on each good with total utility from each good.
Q2) Utility is similar to temperature because
A)both are positive.
B)both are negative.
C)both have units of measurement that are arbitrary.
D)both are observable.
E)both are measured in the same scale.
Q3) Beverly is currently in consumer equilibrium. An increase in her income
A)increases her total utility.
B)decreases her total utility.
C)increases her marginal utility from all goods.
D)decreases her marginal utility from all goods.
E)increases her consumption of all goods.
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10
Chapter 9: Possibilities, Preferences, and Choices
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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) Which of the following is not relevant when calculating the budget line?
A)the price of good X
B)income
C)the price of good Y
D)preferences
E)the relative price of good X in terms of good Y
Q3) What is a distinguishing characteristic of goods that are perfect complements?
A)straight-line indifference curves
B)upward-sloping demand curves
C)L-shaped indifference curves
D)upward-sloping indifference curves
E)curved indifference curves, bowed away from the origin
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Page 11
Chapter 10: Organizing Production
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Sample Questions
Q1) Refer to Table 10.2.1, which shows three methods for making photon torpedoes. Which method is technologically efficient?
A)1 only
B)2 only
C)3 only
D)all of the methods
E)1 and 3 only
Q2) Which of the following industries in Canada has the highest four-firm concentration ratio?
A)audio and video equipment
B)clothing
C)bakery items
D)fabrics
E)tobacco products
Q3) A firm with a single owner who has unlimited liability is
A)a corporation.
B)a sole proprietorship.
C)a limited partnership.
D)an unlimited partnership.
E)a cooperative.
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Chapter 11: Output and Costs
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Q1) Which of the following are correct? According to the law of diminishing returns,
(1)marginal product eventually rises.
(2)marginal product eventually falls.
(3)marginal cost eventually rises.
(4)marginal cost eventually falls.
A)(1)and (3)
B)(1)and (4)
C)(2)and (3)
D)(2)and (4)
E)(4)
Q2) Refer to Table 11.2.3. The maximum value of marginal product occurs where output equals ________, while the maximum value of average product occurs where output equals ________.
A)5; 6
B)6; 5
C)7; 14
D)9; 14
E)14; 11
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Chapter 12: Perfect Competition
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Q1) If firms in a perfectly competitive market are making an economic profit, new firms will enter. This entry shifts the market
A)demand curve leftward, and the market price falls.
B)demand curve rightward, and the market price rises.
C)supply curve leftward, and the market price rises.
D)supply curve rightward, and the market price falls.
E)supply curve rightward and the market demand curve leftward.
Q2) In the price range above minimum average variable cost, a perfectly competitive firm's supply curve is
A)horizontal at the market price.
B)vertical at zero output.
C)the same as its marginal cost curve.
D)the same as its average variable cost curve.
E)the same as its total variable cost curve.
Q3) An example of a perfectly competitive industry is the
A)airline industry.
B)beer industry.
C)running shoe industry.
D)fast food industry.
E)wheat industry.
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Chapter 13: Monopoly
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Q1) A monopoly
A)faces a perfectly elastic demand.
B)ignores the demand curve because it is the only seller.
C)can raise the price it charges only if it decreases the quantity that it sells.
D)can raise the price it charges only if it increases the quantity that it sells.
E)faces a perfectly inelastic demand.
Q2) A single-price monopolist
A)maximizes economic profit by producing the quantity at which marginal revenue equals marginal cost.
B)maximizes economic profit by producing the quantity at which marginal revenue equals average total cost.
C)can increase the price and the quantity sold simultaneously.
D)is not restricted by the law of demand.
E)can sell as much as it wants at a given price because it is the only seller.
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15
Chapter 14: Monopolistic Competition
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Q1) Refer to Figure 14.2.3. Assume this firm faces demand curve D .To maximize economic profit, this firm in monopolistic competition will charge a price of ________ and produce an output of ________ units.
A)$100; 200
B)$90; 220
C)$80; 200
D)$70; 100
E)$55; 140
Q2) Markup
A)does not exist in monopoly.
B)does not exist in monopolistic competition.
C)exists in perfect competition.
D)is the difference between price and average total cost.
E)exists in both monopoly and monopolistic competition.
Q3) Advertising costs of a monopolistically competitive firm are
A)greater than a monopoly and the same as a perfectly competitive firm.
B)greater than a perfectly competitive firm.
C)less than a perfectly competitive firm.
D)the same as a monopoly.
E)less than a monopoly.
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Chapter 15: Oligopoly
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Sample Questions
Q1) Limit pricing is the practice of
A)limiting the amount that can be purchased to drive up prices.
B)threatening to go to the limit in a price war if someone enters your market.
C)charging a monopoly price, but producing a quantity greater than the quantity at which MC = MR.
D)setting the price at the highest level that inflicts a loss on the entrant.
E)charging a price higher than the monopoly price, but producing a quantity greater than the quantity at which MC = MR.
Q2) Refer to Fact 15.4.1. This conspiracy to raise prices violates the anti-combine law because
A)Apple is merging with the five publishers.
B)Apple is telling the publishers the price at which they must sell e-books.
C)Apple is refusing to deal with Amazon.
D)it substantially lessens competition in the e-book market.
E)it is creating a monopoly.
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Chapter 16: Externalities
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Q1) If positive externalities exist and production is left to the private market, then at the quantity produced,
A) MSC = MSB.
B) MSC < MSB.
C) MSC > MSB.
D) MSB = marginal external benefit.
E) MSB = 1/MSC.
Q2) When an additional unit of output is produced, the extra cost to society is the A)average total cost.
B)marginal social cost.
C)marginal private cost.
D)marginal external cost.
E)marginal damage.
Q3) A market economy tends to ________ goods with negative externalities and ________ goods with positive externalities.
A)overproduce; overproduce
B)overproduce; underproduce
C)underproduce; overproduce
D)underproduce; underproduce
E)produce; consume
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Chapter 17: Public Goods and Common Resources
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Q1) Sharing downloaded music
A)has a free-rider problem that cannot be eliminated because once music is downloaded, it is nonexcludable.
B)has a free-rider problem that can be eliminated by charging people to download music.
C)is a private good.
D)does not have a free-rider problem.
E)is a common resource.
Q2) Private provision of public goods
A)fails because the private firm will always go broke.
B)succeeds because public provision is often more costly.
C)succeeds if consumers expect to obtain a benefit from the consumption of the public good.
D)fails because of the free-rider problem.
E)fails because private firms generally charge higher prices than public firms, and therefore lose customers.
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19
Chapter 18: Markets for Factors of Production
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Q1) If the wage rate increases, the income effect gives a household the incentive to A)raise its reservation wage.
B)increase leisure and decrease work.
C)increase work and decrease leisure.
D)increase both work and leisure.
E)decrease both work and leisure.
Q2) Refer to Fact 18.3.1. Labour unions are scarce in New York's low-income neighbourhoods because there are
A)a great number of low-skilled workers, which makes it more difficult for a union to organize and influence them.
B)too few employers, which makes forming a labour union an inefficient use of time.
C)many immigrants, who do not support unions.
D)many workers who are satisfied to earn minimum wage, which they can do without help from a labour union.
E)so many unemployed people who are thankful for a job regardless of the working conditions.
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Chapter 19: Economic Inequality
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Q1) Refer to Fact 19.4.1. Changes in employment insurance ________ the income gap between the richest and the poorest Canadians.
A)decreased
B)increased
C)had no effect on
D)sometimes increased but mostly decreased
E)eliminated
Q2) Other things remaining the same, if education costs rise substantially, we would expect to see
A)a decrease in the value of marginal product of high-skilled workers.
B)a decrease in the demand for high-skilled workers.
C)an increase in the supply of high-skilled workers.
D)an increase in the number of high-skilled workers employed.
E)an increase in the wages received by high-skilled workers.
Q3) From an examination of data on income and wealth, it can be concluded that
A)wealth distribution is more equal than income distribution.
B)income distribution is more equal than wealth distribution.
C)wealth distribution is equal to income distribution.
D)income and wealth are the same.
E)income and wealth are unrelated.
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Chapter 20: Measuring Gdp and Economic Growth
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Sample Questions
Q1) The purchase of a new home is categorized as
A)consumption expenditure.
B)consumption expenditure and investment.
C)investment only if the home owners take out a mortgage.
D)investment.
E)consumption expenditure only if the home owners do not take out a mortgage.
Q2) The largest component of GDP using the expenditure approach is
A)investment.
B)consumption expenditure.
C)exports.
D)government expenditure.
E)imports.
Q3) Which of the following statements by politicians is talking about the business cycle?
A)"Canadian unemployment is falling due to the upturn in the economy."
B)"Crime rates increase every spring as the school year ends."
C)"An average of 220,000 new jobs are created each year in Canada."
D)"More capital investment will create more jobs."
E)"Business always rises just before Christmas."
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Chapter 21: Monitoring Jobs and Inflation
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Q1) The CPIC
A)does not overcome the source of bias in the CPI.
B)overcomes the sources of bias in the CPI by eliminating measures of the goods and services with the most volatile prices.
C)overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities.
D)overcomes the sources of bias in the CPI by giving extra weight to the measures of the goods and services with the most volatile prices.
E)overcomes the sources of bias in the CPI by always using discount store prices.
Q2) If the CPI was 180 at the end of 2013, and 216 at the end of 2014, the inflation rate in 2014 was
A)216 percent.
B)36 percent.
C)16.67 percent.
D)20 percent.
E)18 percent.
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Chapter 22: Economic Growth
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Q1) Between 1960 and 2010, growth rates in real GDP per person in Hong Kong, Korea, Singapore, Taiwan, and China ________ the growth rate of real GDP per person in Canada. China's real GDP per person in 2010 is approximately equal to real GDP per person in Hong Kong in ________.
A)exceeded; 1998
B)were less than; 1988
C)were less than; 1976
D)exceeded; 1976
E)were approximately equal to; 1968
Q2) Consider Fact 22.2.1. China's was the world's largest economy until 1890 because A)people in all countries had approximately the same subsistence level of income.
B)the Industrial Revolution gave the greatest growth to the countries with the largest populations.
C)it was the country with the largest land mass.
D)it was a large exporter of goods and services.
E)it had a diverse climate.
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Chapter 23: Finance, Saving, and Investment
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Q1) 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
Q2) In January 2014, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the machines fell by 10 percent. During 2014, Tim spent $200,000 on new machines. During 2014, Tim's net investment was A)$1 million.
B)$300,000.
C)$200,000.
D)$100,000.
E)$1.1 million.
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Chapter 24: Money, the Price Level, and Inflation
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Q1) Money market equilibrium occurs
A)when interest rates are constant.
B)when the level of real GDP is constant.
C)when the quantity of real money supplied equals the quantity of real money demanded.
D)only under a fixed exchange rate.
E)when bond prices are constant.
Q2) A bank can create money by
A)selling some of its securities.
B)increasing its reserves.
C)lending its excess reserves.
D)printing more cheques.
E)converting reserves into securities.
Q3) If the prices of goods and services are stated in terms of kilograms of salt, then salt is
A)a unit of account.
B)a standard of deferred payment.
C)a store of value.
D)quasi-money.
E)a medium of exchange.
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Chapter 25: The Exchange Rate and the Balance of Payments
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Q1) Canada's balance of payments accounts are the
A)current account, capital and financial account, and net interest account.
B)capital and financial account, official settlements account, and merchandise trade account.
C)current account, capital and financial account, and official settlements account.
D)official settlements account, current account, and net interest account.
E)capital and financial account, current account, and merchandise trade account.
Q2) The exchange rate is the
A)volume of currency exchanged between importers and exporters.
B)price at which one currency exchanges for another currency.
C)rate of currency appreciation or depreciation.
D)percentage change in the volume of currency exchanges.
E)average rate at which foreign currencies are exchanged.
Q3) Refer to Fact 25.4.1. What is the net exports?
A)-2 billion turkeys
B)-1 billion turkeys
C)3 billion turkeys
D)-3 billion turkeys
E)1 billion turkeys
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Chapter 26: Aggregate Supply and Aggregate Demand
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Q1) Foreign exchange dealers expect the Canadian dollar next year to appreciate against all currencies. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?
A)The quantity of Canadian real GDP demanded increases.
B)The quantity of Canadian real GDP demanded decreases.
C)Canadian aggregate demand increases.
D)Canadian aggregate demand decreases.
E)There is no change to either the quantity of real GDP demanded or to aggregate demand.
Q2) Beginning at a long-run equilibrium, an increase in aggregate demand
A)increases the price level and in the long run increases real GDP.
B)increases the price level and in the long run decreases real GDP.
C)decreases the price level and in the long run increases real GDP.
D)decreases the price level and in the long run decreases real GDP.
E)increases the price level, but in the long run there is no change in real GDP.
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Chapter 27: Expenditure Multipliers
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Q1) As Canada experiences increasing wealth and increasing expected future income, A)there is a movement down along the consumption function.
B)the consumption function shifts steadily upward and autonomous consumption increases.
C)the consumption function shifts steadily upward with no change in autonomous consumption.
D)the consumption function shifts steadily upward and autonomous consumption decreases.
E)there is a movement down along the saving function.
Q2) The marginal propensity to import is equal to
A)disposable income minus consumption expenditure minus saving divided by real GDP.
B)the change in imports divided by the change in real GDP that brought it about, other things remaining the same.
C)the change in net imports divided by the change in disposable income, other things remaining the same.
D)imports minus exports.
E)1 - MPS - MPC.
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Chapter 28: The Business Cycle, Inflation, and Deflation
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Q1) Refer to Figure 28.4.1. The figure illustrates an economy's Phillips curves. If the current inflation rate is 4 percent, what is the current unemployment rate?
A)9 percent
B)6 percent
C)4 percent
D)3 percent
E)cannot be determined without more information
Q2) Refer to Figure 28.2.6. Starting at point A, the initial effect of a demand-pull inflation is a move to point ________. As a demand-pull inflation spiral proceeds, it follows the path ________.
A)E; I
B)C; E, H, I
C)C; B, H, G, I
D)B; E, G, I
E)C; F, H, I
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Chapter 29: Fiscal Policy
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Q1) If the economy is in a recession and the federal government is running a deficit, then an expansion would
A)automatically balance the budget.
B)automatically increase the deficit.
C)automatically decrease the deficit.
D)leave the deficit unchanged.
E)increase the deficit only if the interest rate rises.
Q2) Refer to Figure 29.3.1, which shows the outlays and revenues for the government of Pianoland. If real GDP equals $550 billion, the budget is A)in balance.
B)a surplus of $60 billion.
C)a surplus of $40 billion.
D)a deficit of $60 billion.
E)a deficit of $40 billion.
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Chapter 30: Monetary Policy
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Sample Questions
Q1) If the Bank of Canada fears inflation it will undertake an open market ________ of securities, the overnight loans rate will ________ and the long-term real interest rate will ________.
A)sale; rise; fall
B)sale; rise; rise
C)purchase; rise; fall
D)purchase; fall; rise
E)sale; fall; fall
Q2) Which statement below best expresses the relationship between the 3-month Treasury bill rate and the overnight loans rate? The rates are
A)not similar because banks can not readily substitute between them.
B)similar because they are both required to remain with the Bank of Canada's operating band.
C)similar because banks can readily substitute between them.
D)not similar because the treasury bill rate is established through the financial markets whereas the overnight loans rate is set by the Bank of Canada.
E)not similar because the treasury bill rate is set by the Government of Canada whereas the overnight loans rate is set by the Bank of Canada.
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Chapter 31: Macro Only: International Trade Policy
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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) A country opens up to trade. In an import industry,
A)domestic producers lose and domestic consumers gain.
B)domestic consumers lose and domestic producers gain.
C)the government loses and domestic consumers gain.
D)domestic producers lose and the government gains.
E)none of the above
Q3) Refer to Figure 31.3.1. With the tariff, Canada imports ________ million shirts per year.
A)24
B)8 C)32 D)16
E)40
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