Intermediate Microeconomics
Practice Questions
Course Introduction
Intermediate Microeconomics delves into the core concepts and analytical tools essential for understanding the behavior of individuals, firms, and markets. The course explores consumer choice, production and costs, market structures, and the mechanisms of price determination under various competitive scenarios. Students learn to apply mathematical and graphical models to real-world economic issues, analyze the effects of government intervention, and evaluate market outcomes in terms of efficiency and welfare. Through problem-solving and case studies, the course builds a solid foundation for advanced economic analysis and policy evaluation.
Recommended Textbook Microeconomics 2nd Canadian Edition by Glenn Hubbard
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15 Chapters
4098 Verified Questions
4098 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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148 Flashcards
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Sample Questions
Q1) List the five main factors of production.
Answer: The five main factors of production are labour, capital, human capital, natural resources, and entrepreneurial ability.
Q2) Which of the following is an example of an activity undertaken by an entrepreneur?
A)designing your landscaping for your new home
B)holding a position as the president of a small university
C)running for Prime Minister of Canada
D)starting your own pet sitting business
Answer: D
Q3) What is meant by the statement that "optimal decisions are made at the margin"?
Answer: In economics, the word "marginal" means "extra" or "additional." Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost, so optimal decisions are made at the point where the extra benefit received from an activity is equal to the extra cost associated with that activity.
Q4) What is a centrally planned economy?
Answer: A centrally planned economy is an economy in which the government decides how economic resources will be allocated.
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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314 Verified Questions
314 Flashcards
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Sample Questions
Q1) In a production possibilities frontier model, a point ________ the frontier is productively inefficient.
A)along
B)inside
C)outside
D)at either intercept of Answer: B
Q2) Which of the following are separate flows (shown in different parts of the model)in the circular flow model?
A)the flow of goods and the flow of services
B)the flow of costs and the flow of revenue
C)the flow of income earned from the sale of resources and the flow of expenditures on goods and services
D)the flow of income received by households and the flow of tax revenues paid by households
Answer: C
Q3) List the four broad categories of factors of production.
Answer: labour, capital, natural resources, and entrepreneurship
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Chapter 3: Where Prices Come From: The Interaction of
Supply and Demand
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Sample Questions
Q1) By drawing a demand curve with price on the vertical axis and quantity on the horizontal axis, economists assume that the most important determinant of the demand for a good is
A)consumer income.
B)consumer tastes and preferences.
C)the price of the good.
D)the quality of the good.
Answer: C
Q2) If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
A)True
B)False
Answer: True
Q3) The law of demand implies, holding everything else constant, that as the price of yogurt
A)increases, the demand for yogurt will increase.
B)increases, the quantity of yogurt demanded will decrease.
C)decreases, the quantity of yogurt demanded will decrease.
D)decreases, the demand for yogurt will increase.
Answer: B
Page 5
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Chapter 4: GDP: Measuring Total Production and Income
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277 Flashcards
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Sample Questions
Q1) Refer to Table 4.20.What is real GDP in 2017, using 2017 as the base year?
A)$28,885
B)$11,790
C)$11,200
D)$10,275
E)$8,750
Q2) Which of the following would not be included in the expenditure category called investment expenditures?
A)spending on new houses
B)a purchase of shares of preferred stock
C)a purchase of a copy machine by Purolator Courier's head office
D)the cars held in inventory on a local Ford dealer's lot
E)the purchase of a new airplane by Air Canada
Q3) The purchase by a foreign government of an airplane produced in Canada is included in Canadian
A)consumption expenditures.
B)investment expenditures.
C)government purchases.
D)net exports.
E)consumer spending.
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Chapter 5: Unemployment and Inflation
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300 Flashcards
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Sample Questions
Q1) An increase in cyclical unemployment will result in
A)an increase in the natural rate of unemployment.
B)an increase in the unemployment rate.
C)an increase in structural unemployment.
D)a decrease in frictional unemployment.
E)an increase in the employment population ratio.
Q2) The formula for calculating the CPI is
A)(expenditures in the current year/expenditures in the base year)× 100.
B)(expenditures in the current year × expenditures in the base year)/100.
C)(expenditures in the base year/expenditures in the current year).
D)(expenditures in the base year × 100)/(expenditures in the current year).
E)(expenditures in the current year)/(average of base year and current year expenditure)× 100.
Q3) Discuss the likely impact of each of the following on the unemployment rate.
a.The length of time workers are eligible to receive Employment Insurance payments is cut in half.
b.The government passes a law making labour unions illegal.
c.The minimum wage is raised by 50 percent.
d.The government funds an Internet site where companies can post job openings at no charge.
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Chapter 6: Economic Growth, The Financial System, and Business Cycles
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Sample Questions
Q1) Countries with high rates of economic growth tend to have
A)a labour force that is more productive.
B)a lower life expectancy at birth.
C)low rates of technological advancement.
D)a declining incidence of business cycle fluctuations.
E)higher levels of corruption.
Q2) The only way the standard of living of the average person in a country can increase is if ________ increases faster than ________.
A)production; population
B)population; GDP per capita
C)population; production
D)population; income
E)debt; GDP per capita
Q3) Refer to Figure 6.1.Which of the following is consistent with the graph depicted above?
A)An expected recession decreases the profitability of new investment.
B)Technological change increases the profitability of new investment.
C)The government runs a budget surplus.
D)Households become spendthrifts and begin to save less.
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E)Government making more effort to balance the budget.
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Chapter 7: Long-Run Economic Growth: Sources and Policies
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Sample Questions
Q1) Between 1960 and 2011, which of these leading industrial countries of the world had the highest average annual growth rate in GDP per capita?
A)Taiwan
B)Switzerland
C)Japan
D)Canada
E)Greece
Q2) Entrepreneurship in Mexico is
A)still risky due to government corruption and organized crime.
B)the sole responsibility of the Mexican government.
C)a relatively new phenomenon.
D)the main reason Mexico does not enjoy the same standard of living as the United States and Canada.
E)much safer than in Canada.
Q3) Would you expect to see higher or lower growth rates for countries that start out with a relatively low level of real GDP per capita? Explain using the concept of "catch-up" and support your answer with a graph.
Q4) Explain the meaning of the word "convergence" in the context of economic growth and standards of living.
Page 9
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Chapter 8: Aggregate Expenditure and Output in the Short Run
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Sample Questions
Q1) The formula for the multiplier is (1 - MPC).
A)True
B)False
Q2) The Conference Board of Canada's Consumer Confidence Index measures
A)consumers' expectations about the future.
B)the confidence the public has in the federal government.
C)the confidence consumers have in banks.
D)the confidence Canadians have in their relationships.
E)the confidence Canadians have in the safety of the products they consume.
Q3) The decline in consumer spending during the 2008-2009 recession was due in part to a decrease in disposable income.The decline in consumption resulting from the decline in disposable income caused a(n)________ the consumption function curve.
A)movement up along B)movement down along C)downward shift of D)upward shift of
Q4) If the marginal propensity to save is 0.35, the multiplier is 2.86.
A)True
B)False
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Chapter 9: Aggregate Demand and Aggregate Supply Analysis
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Sample Questions
Q1) Which of the following is one reason for the decline in aggregate demand that led to the recession of 2008-2009?
A)falling oil prices
B)increases in housing prices
C)the U.S.financial crisis
D)a decline in government spending
E)a shrinking Canadian labour force
Q2) An increase in the price level causes a movement down the aggregate demand curve.
A)True
B)False
Q3) One factor which brought on the recession of 2008-2009 was the collapse of the U.S.housing bubble.
A)True
B)False
Q4) The long-run aggregate supply curve is vertical.
A)True
B)False
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Q5) Explain why the long-run aggregate supply curve is vertical.
Q6) What are sticky prices and how can contracts make them "sticky"?
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Chapter 10: Money, Banks, and the Bank of Canada
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285 Verified Questions
285 Flashcards
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Sample Questions
Q1) Your chequing account balance is included in your bank's assets.
A)True
B)False
Q2) When a financial asset is first sold, the sale takes place in the ________ market, and subsequent sales take place in the ________ market.
A)stock; bond
B)primary; secondary
C)investment; commercial
D)secure; risk
Q3) Which of the following is not a function of the Bank of Canada?
A)acting as a lender of last resort
B)acting as a banker's bank
C)performing cheque clearing services
D)insuring deposits in the banking system
E)taking actions to control the money supply
Q4) If banks receive a greater amount of currency and do not hold all of this new currency as reserves, the money supply expands.
A)True
B)False
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Chapter 11: Monetary Policy
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Sample Questions
Q1) Using the money demand and money supply model, an open market sale of government of Canada securities by the Bank of Canada would cause the equilibrium interest rate to A)increase.
B)decrease.
C)not change.
D)increase, then decrease.
Q2) Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP is less than potential GDP, then the overnight interest target rate ________ the sum of the current inflation rate plus the equilibrium real overnight interest rate. A)will be greater than B)will be less than C)will be the same as D)may be greater than or less than
Q3) Maintaining a strong dollar in international currency markets is not one of the four monetary policy goals of the Bank of Canada listed in the textbook. A)True B)False
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14
Chapter 12: Fiscal Policy
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Sample Questions
Q1) Suppose real GDP is $1.7 trillion, potential real GDP is $1.8 trillion, and the federal government plans to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level, the federal government would need to increase government purchases by
A)$100 billion.
B)less than $100 billion.
C)more than $100 billion.
D)None of the above is correct.The federal government must decrease government purchases in this case.
Q2) Which of the following would be most likely to induce the federal government to conduct expansionary fiscal policy?
A)a significant decrease in investment spending
B)a significant decrease in oil prices
C)a significant increase in consumption spending
D)a significant increase in net exports
E)a significant decrease tax revenue
Q3) How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?
Q4) What is the difference between federal purchases and federal expenditures?
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Chapter 13: Inflation, Unemployment, and Bank of Canada Policy
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265 Flashcards
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Sample Questions
Q1) In the short run, the Bank of Canada can affect which of the following?
A)the inflation rate
B)the unemployment rate
C)the growth rate of real GDP in the economy
D)the nominal interest rate
E)all of the above
Q2) If actual inflation is greater than expected inflation, what is the relationship between the actual real wage and the expected real wage?
A)The actual real wage will be lower than the expected real wage.
B)The actual real wage will be higher than the expected real wage.
C)The actual real wage will be equal to the expected real wage.
D)The relationship between the actual real wage and the expected real wage cannot be predicted.
Q3) Growth in aggregate demand will
A)cause deflation.
B)increase unemployment.
C)move the economy to a higher point on the short-run Phillips curve.
D)cause the short-run Phillips curve to shift to the left.
E)cause the short-run Phillips curve to become flatter.
Q4) What does it mean to say that workers and firms have rational expectations?
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Chapter 14: Macroeconomics in an Open Economy
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Sample Questions
Q1) Suppose the government cuts taxes.We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets.
A)rise; appreciate
B)rise; depreciate
C)fall; depreciate D)fall; appreciate
Q2) When exchange rates are ________, we say that the country's exchange rate is fixed.
A)determined in the market
B)set by a country's central bank
C)determined by supply and demand
D)relatively stable
E)set by a countries taxation authority
Q3) Ceteris paribus, a decrease in the government's budget deficit will increase domestic investment and net foreign investment.
A)True
B)False
Q4) Use the saving and investment equation to explain why Canada experienced large current account deficits in the late 1990s.
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Chapter 15: The International Financial System
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Sample Questions
Q1) Which of the following did not help Thailand maintain its peg against the dollar in the 1990s?
A)borrowing dollars from the International Monetary Fund in exchange for baht
B)buying baht on the foreign exchange market to support higher demand for the baht
C)increasing domestic interest rates to attract more foreign investors
D)foreigners selling off of new investments in Thailand
Q2) If the GDP deflator in Canada is 114, and the GDP deflator in Ukraine is 142, which of the following exchange rates would the theory of purchasing power parity predict in the long run? (The Ukrainian currency is the hryvnia.)
A)0.25 hryvnias per dollar
B)0.80 hryvnias per dollar
C)1.25 hryvnias per dollar
D)2.80 hryvnias per dollar
E)28 hryvnias per dollar
Q3) Among countries that purchased Canadian stocks and bonds in 2011, China was the biggest customer, accounting for over 50 percent of all purchases.
A)True
B)False
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