Contemporary Microeconomic Issues
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Course Introduction
This course examines current topics and challenges in microeconomics, focusing on real-world applications and policy debates that shape individual and firm decision-making. Students will analyze contemporary issues such as market structures, income inequality, digital economies, environmental regulation, and the impact of globalization on local markets. The course emphasizes critical evaluation of economic models, interpretation of empirical data, and the use of microeconomic principles to understand and propose solutions to pressing economic problems in today's dynamic environment.
Recommended Textbook
Principles of Microeconomics 7th Canadian Edition by McKenzie Mankiw
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Page 2
Chapter 1: Ten Principles of Economics
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Sample Questions
Q1) Robert spends an hour studying instead of going hiking.What is the opportunity cost to him of studying
A)the improvement in his grades from studying for the hour
B)the difference between the improvement in his grades from studying minus the enjoyment of hiking
C)the enjoyment and exercise he would have received had he gone hiking
D)nothing, because Russell chose to study rather than to go hiking the value of studying must have been greater than the value of hiking
Answer: C
Q2) A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $2.00. Because this shop does not sell day-old donuts the next day, what should the manager do if she still has ten dozen left at 2:30 p.m.?
A)lower the price of the remaining donuts even if the price falls below $2.00
B)lower the price of the remaining donuts as long as it's more than $2.00
C)lower the price on all donuts so they will all be sold earlier in the day
D)donate them to the local Food Bank and produce ten fewer dozen tomorrow
Answer: A
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Page 3
Chapter 2: Thinking Like an Economist
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Sample Questions
Q1) On a production possibilities frontier,when is production efficient
A)if the production point is on the frontier
B)if the production point is outside the frontier
C)if the production point is on or inside the frontier
D)if the production point is inside the frontier
Answer: A
Q2) What is the opportunity cost of obtaining more of one good,as it relates to the production possibilities frontier
A)the amount of the other good that must be given up
B)the market price of the additional amount produced
C)the amount of resources that must be devoted to its production
D)the number of dollars that must be spent to produce it
Answer: A
Q3) Refer to Figure 2-10.What is the movement from point B to point C
A)a shift of the curve
B)a change in price
C)a movement along the curve
D)a change in costs to the firm
Answer: A
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Chapter 3: Interdependence and the Gains From Trade
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Sample Questions
Q1) Refer to Figure 3-4.For Jerry,what is the opportunity cost of one bottle of beer
A)1/3 bottle of wine
B)1/2 bottle of wine
C)1 bottle of wine
D)3 bottles of wine
Answer: A
Q2) Refer to Table 3-3.What does each of the two producers have a comparative or absolute advantage in
A)Kevin has a comparative advantage in sweaters, and Amy has an absolute advantage in neither good.
B)Kevin has a comparative advantage in blankets, and Amy has an absolute advantage in sweaters.
C)Kevin has a comparative advantage in sweaters, and Amy has an absolute advantage in blankets.
D)Kevin has a comparative advantage in blankets, and Amy has an absolute advantage in both goods.
Answer: D
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Chapter 4: The Market Forces of Supply and Demand
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Sample Questions
Q1) If the supply of a product decreases,what would we expect
A)equilibrium price to increase and equilibrium quantity to decrease
B)equilibrium price to decrease and equilibrium quantity to increase
C)equilibrium price and equilibrium quantity to both increase
D)equilibrium price and equilibrium quantity to both decrease
Q2) Refer to the Figure 4-4.If the price is $25,what would happen
A)There would be a surplus of 300 and the price would fall.
B)There would be a surplus of 200 and the price would fall.
C)There would be a shortage of 200 and the price would rise.
D)There would be a shortage of 300 and the price would rise.
Q3) Refer to the Figure 4-5.Which of the four graphs shown illustrates a decrease in quantity demanded
A)graph A
B)graph B
C)graph C
D)graph D
Q4) Anyone willing to pay the market price for a resource may have it.
A)True
B)False
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Chapter 5: Elasticity and Its Application
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Sample Questions
Q1) When the price of bubble gum is $0.55,the quantity demanded is 400 packs per day.When the price falls to $0.45,the quantity demanded increases to 600.Given this information,and using the midpoint method,what do you know about the demand for bubble gum
A)It is inelastic.
B)It is elastic.
C)It is unit elastic.
D)It is perfectly inelastic.
Q2) When will a good have a more inelastic demand
A)when the availability of close substitutes is less
B)when the definition of the market is narrower
C)when the period of time is longer
D)when the good is considered a luxury
Q3) What type of demand does a person who has high cholesterol,and must exercise for an hour every day,have for exercise equipment
A)elastic
B)unit elastic
C)inelastic
D)perfectly elastic
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Chapter 6: Supply, demand, and Government Policies
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Sample Questions
Q1) Refer to Figure 6-12.What is the per-unit burden of the tax on the sellers
A)P minus P
B)P minus P
C)P minus P
D)Q minus Q
Q2) What methods are available to raise revenue by levels of governments
A)All governments, federal, provincial, and local, rely on taxes to raise revenue for public purposes.
B)Federal and provincial governments use taxes to raise revenue, but local governments use borrowing.
C)Federal and local governments use taxes to raise revenue, but provincial governments use borrowing.
D)Provincial and local governments use taxes to raise revenue, but the federal government uses borrowing.
Q3) What results from a tax placed on the sellers of blueberries
A)It increases costs, lowers profit, and shifts supply to the left (upward).
B)It increases costs, lowers profit, and shifts supply to the right (downward).
C)It reduces costs, raises profit, and shifts supply to the left (upward).
D)It reduces costs, lowers profit, and shifts supply to the right (downward).
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Page 8
Chapter 7: Consumers, producers, and the Efficiency of Markets
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Sample Questions
Q1) Cameron visits a sporting goods store to buy a new set of golf clubs.He is willing to pay $1200 for the clubs,but buys them on sale for $900.What is Cameron's consumer surplus from the purchase
A)$175
B)$300
C)$575
D)$900
Q2) Which quantity does producer surplus NOT measure
A)the amount sellers receive above the minimum they would accept
B)the benefit to sellers of participating in a market
C)the amount sellers are paid less the amount they were willing to accept D)the total value of a good to sellers
Q3) Refer to Figure 7-1.At the price of P ,what is consumer surplus
A)A
B)A + B
C)A + B + C
D)A + B + D
Q4) Producer surplus is the amount a seller is paid minus the cost of production.
A)True B)False
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Chapter 8: Application: the Costs of Taxation
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Sample Questions
Q1) Refer to Figure 8-3.What is the price sellers receive after the tax
A)$8
B)$10
C)$16
D)$24
Q2) Given the supply of land is fixed,who would pay a tax on land
A)the landowners
B)the renters or users of the land
C)partly landowners and partly land users
D)workers
Q3) When a tax is placed on the buyer of a product,what is the result
A)buyers pay less and sellers receive more
B)buyers pay less and sellers receive less
C)buyers pay more and sellers receive more
D)buyers pay more and sellers receive less
Q4) What is total surplus without a tax equal to
A)consumer surplus plus producer surplus
B)consumer surplus minus producer surplus
C)consumer surplus minus tax revenue, plus producer surplus
D)consumer surplus plus producer surplus, plus tax revenue
10
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Chapter 9: Application: International Trade
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Sample Questions
Q1) How is an import quota similar to,and different than,an equivalent tariff
Q2) Since World War II,what reduction in the average tariff has GATT achieved among member countries
A)from about 20 percent to about 10 percent
B)from about 40 percent to about 5 percent
C)from about 40 percent to about 20 percent
D)from about 80 percent to about 20 percent
Q3) Which industry was a major part of the Canadian economy a century ago,but not now
A)agriculture
B)textile and clothing
C)coal mining
D)automobile
Q4) Refer to Figure 9-10.What would be producer surplus after trade
A)$900
B)$1100
C)$1800
D)$3600
Q5) Define the two approaches a nation can take to achieve free trade.Does one approach have an advantage over the other
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Chapter 10: Externalities
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Sample Questions
Q1) According to the Coase theorem,under which conditions can private parties solve the problem of externalities
A)if the cost of bargaining is small
B)if the initial distribution of rights favours the person being adversely affected by the externality
C)if the number of parties involved is sufficiently large
D)if the number of parties involved is sufficiently small
Q2) If the government wanted to ensure that the market reaches the social optimum in the presence of a technology spillover,what should it do
A)It should impose a corrective tax on any firm producing a technology spillover.
B)It should offer tax credits to consumers who are adversely affected by the new technology.
C)It should subsidize producers by an amount equal to the value of the technology spillover.
D)It should provide research grants to those firms not currently engaging in research to increase competition in the industry.
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Chapter 11: Public Goods and Common Resources
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Sample Questions
Q1) When does the Tragedy of the Commons result
A)when a good is rival in consumption and not excludable
B)when a good is excludable and not rival in consumption
C)when a good is both rival in consumption and excludable
D)when a good is neither rival in consumption nor excludable
Q2) Apparently,human life does have an implicit dollar value,due to the observable fact that people take voluntary risks every day.
A)True
B)False
Q3) What results when a good is not excludable
A)The good will be produced as a private good but not as a public good.
B)The good will not be produced since no one values it.
C)The free-rider problem prevents the private market from supplying the good.
D)Everyone can have all they want and the good will have a price of zero.
Q4) A free rider is someone who receives the benefit of a good but avoids paying for it.
A)True
B)False
Q5) Can we use cost and benefit analysis to evaluate human life and how
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Chapter 12: The Design of the Tax System
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Sample Questions
Q1) What kind of taxes are deadweight losses from taxation associated with A)taxes that distort the incentives that people face
B)taxes that target expenditures on survivor's benefits for Old Age Security
C)taxes that have no efficiency losses
D)lump-sum taxes
Q2) In order to construct a more complete picture of the economic burden of government across income classes,what do economists usually do
A)include both tax payments and transfer payments received
B)focus only on the tax payments of wealthy taxpayers
C)limit their analysis to taxes based on the ability-to-pay principle
D)focus their analysis on issues of tax efficiency
Q3) What is the second largest component of provincial spending,after health care
A)education
B)social services
C)transportation and communication
D)police and protection
Q4) Vertical equity is not consistent with a regressive tax structure.
A)True
B)False
Q5) Evaluate the statement: Tax loopholes increase the efficiency of tax systems.
Page 14
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Chapter 13: The Costs of Production
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Sample Questions
Q1) Let L represent the number of workers hired by a firm and let Q represent that firm's quantity of output.Assume two points on the firm's production function are (L = 12,Q = 122) and (L = 13,Q = 132).What is the marginal product of the 13th worker
A)8 units of output
B)10 units of output
C)122 units of output
D)130 units of output
Q2) How are explicit costs calculated
A)They require an outlay of money by the firm.
B)They include all of the firm's opportunity costs.
C)They include income that is forgone by the firm's owners.
D)They include interest earned from abandoned investment opportunities.
Q3) Refer to Scenario 13-5.What was the firm's economic profit for the year
A)-$35,000
B)-$5000
C)$5000
D)$10,000
Q4) What effect, if any, does diminishing marginal product have on the shape of the marginal-cost curve?
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Chapter 14: Firms in Competitive Markets
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Sample Questions
Q1) Why is a competitive firm's marginal-cost curve regarded as its supply curve
A)The position of the marginal-cost curve determines the price for which the firm should sell its product.
B)Among the various cost curves, the marginal-cost curve is the only one that slopes upward.
C)The marginal cost curve determines the quantity of output the firm is willing to supply at any price.
D)The firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.
Q2) Market demand is given as Q<sub>D </sub>= 200 - P.Market supply is given as Q<sub>S </sub>= 4P + 100.Each identical firm has MC = 4Q and ATC = 2Q.What quantity of output will a typical firm produce
A)5
B)10
C)15
D)20
Q3) Explain how a firm in a competitive market identifies the profit-maximizing level of production.When should the firm raise production,and when should the firm lower production?
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Page 16
Chapter 15: Monopoly
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Sample Questions
Q1) Refer to Figure 15-1.In view of what is known about the relationship between average total cost and marginal cost,what do we know about the marginal-cost curve for this firm
A)It must lie entirely above the average-total-cost curve.
B)It must lie entirely below the average-total-cost curve.
C)It must be upward sloping.
D)It must be downward sloping.
Q2) Why do additional firms often NOT try to compete with a natural monopoly
A)They fear retaliation in the form of pricing wars from the natural monopolist.
B)They are unsure of the size of the market in general.
C)They know they cannot achieve the same low costs that the monopolist enjoys.
D)They see that the natural monopoly doesn't make a huge profit.
Q3) A monopolist faces market demand given by P = 60 - Q.For this market,MR = 90 - 2Q and MC = Q.What quantity of output will the monopolist produce in order to maximize profits
A)20
Q4) Explain the benefits and costs of competition law.
Page 17
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Chapter 16: Monopolistic Competition
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Sample Questions
Q1) On a vacation to Cancun,Mexico,you find yourself eating every meal at the local Burger King rather than having a hamburger from one of the street vendors.Your travelling companion claims that you are irrational,since you very rarely eat Burger King hamburgers when you are home and Burger King hamburgers cost more than those prepared and sold by Cancun's street vendors.How would an economist most likely explain your behaviour
A)Your behaviour is rational, but your friend's behaviour is clearly irrational.
B)Your behaviour is clearly irrational.
C)The Burger King brand name guarantees consistent quality.
D)The advertising by Burger King in Cancun is more persuasive than the advertising by Burger King in your home town.
Q2) Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to which factor
A)a change in the technology that the firm utilizes
B)new firms entering the market causing a shift of its demand curve
C)new firms entering the market causing a shift of its supply curve
D)increased product differentiation
Q3) What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?
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Page 18
Chapter 17: Oligopoly
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Sample Questions
Q1) What is a special kind of imperfectly competitive market that has only two firms called
A)a monopsony
B)an incidental monopoly
C)a doublet
D)a duopoly
Q2) Refer to Table 17-4.When this game reaches a Nash equilibrium,what will the value of trade flow benefits be
A)Canada $50 and Germany $290
B)Canada $70 and Germany $80
C)Canada $150 and Germany $30
D)Canada $120 and Germany $280
Q3) What do dominant strategies in a two-person game often lead to
A)a less-preferred outcome for both players
B)the best possible outcome for both players
C)one person gaining advantage at the expense of the other person
D)the worst possible outcomes for both players
Q4) Describe the output and price effects that influence the profit-maximizing decision faced by a firm in an oligopoly market.How does this differ from output and price effects in a monopoly market?
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Chapter 18: The Markets for the Factors of Production
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Sample Questions
Q1) Which markets do the basic tools of supply and demand apply to
A)markets for goods and services and markets for labour services
B)markets for goods and services but not markets for labour services
C)markets for labour services but not markets for factors of production
D)markets for factors of production but not markets for goods and services
Q2) What directly measures a worker's contribution to a firm's revenue
A)the worker's marginal product
B)the worker's value of marginal product
C)the worker's marginal product multiplied by his/her wage
D)the worker's value of marginal product multiplied by his/her wage
Q3) Refer to Scenario 18-1.If Madison is a competitor in both the fresh Pacific salmon market and in the market for crewmembers,what is she called in the salmon market and the crew market
A)a price taker in the salmon market, and a wage setter in the crew market
B)a price taker in the crew market, and a price setter in the salmon market
C)a price taker in both markets
D)a price setter in both markets
Q4) Oil field workers' wages are directly tied to the world price of oil.
A)True
B)False
Page 20
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Chapter 19: Earnings and Discrimination
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Sample Questions
Q1) What is the most important source of human capital
A)education
B)effort
C)chance
D)physical strength
Q2) According to a study based on Statistics Canada,approximately what percentage of the male wage was paid to women in 2010
A)78
B)83
C)87
D)94
Q3) When differences in human capital among workers lead to discrimination,it is typically a result of social or political processes rather than economic processes.
A)True
B)False
Q4) Discrimination is an emotionally charged issue that is impossible to study objectively.
A)True
B)False
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Chapter 20: Income Inequality and Poverty
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Sample Questions
Q1) What is the rule for redistribution proposed by John Rawls in his book A Theory of Justice called
A)the "veil of ignorance" criterion
B)the optimizing agent rule
C)the maximin criterion
D)the egalitarian principle
Q2) What is one reason for movement up the income ladder
A)good luck
B)minimum-wage law
C)welfare transfer
D)inflation
Q3) In the parable of the leaky bucket,a fundamental problem with government redistribution programs is identified.As long as the government only has "leaky buckets" at its disposal,what can we conclude
A)Affirmative action programs are doomed to failure.
B)The government should not try to reach complete equality in income.
C)Full egalitarian policies will always dominate competing policy options.
D)Equality of economic opportunity is an unattainable goal.
Q4) What is the ongoing debate regarding the current EI system in Canada?
Q5) What is the R-factor? How did the R-factor change from 1976 to 2011 in Canada?
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Chapter 21: The Theory of Consumer Choice
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Q1) Refer to Figure 21-4.Which statement best describes a consumer who moves from point A to point D
A)The consumer has a stronger preference for popcorn.
B)The consumer is indifferent between point A and point D.
C)The consumer is definitely worse off.
D)The consumer is likely to place a higher relative value on juice at point A than at point D.
Q2) In what direction will a decrease in income cause a shift in the budget constraint A)outward
B)toward the good most consumed
C)toward the good least consumed D)inward
Q3) The substitution effect (in the work-leisure model) induces a person to work less in response to higher wages,which tends to make the labour supply curve slope upward. A)True
B)False
Q4) What would happen to an individual's labour supply schedule if leisure were an inferior good?
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Chapter 22: Frontiers of Microeconomics
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Sample Questions
Q1) What does the Condorcet paradox show
A)preferential voting based on majority rule are inefficient in all cases.
B)problems in counting votes can negate legitimate democratic outcomes.
C)the order in which items are voted on can affect the result.
D)transitive preferences are inconsistent with rationality.
Q2) A seller of a used car knows more than the buyer about the car's condition.What is this an example of
A)a hidden action; specifically, it is an example of a hidden characteristic
B)a hidden characteristic; specifically, it is an example of a hidden action
C)an information asymmetry; specifically, it is an example of a hidden action
D)an information asymmetry; specifically, it is an example of a hidden characteristic
Q3) In his 1951 book Social Choice and Individual Values,what does Kenneth Arrow use the term "unanimity" to mean
A)A beats B only if everyone prefers A to B.
B)If everyone prefers A to B, then A beats B.
C)He uses it to mean the same thing as transitivity.
D)Everyone who is eligible to vote must vote; otherwise, the outcome is invalid.
Q4) What are the systematic mistakes humans are always making that prevent us from making rational decisions
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