Public Policy and Microeconomics
Midterm Exam
Course Introduction
This course explores the intersection of public policy and microeconomic theory, examining how governments use economic tools to address social issues and influence individual and firm behavior. Students will analyze the impacts of policies such as taxes, subsidies, regulation, and welfare programs on resource allocation, market efficiency, and equity. The course covers foundational microeconomic concepts supply and demand, consumer and producer behavior, and market failures while applying them to real-world policy challenges. Through case studies and policy analysis, students gain insights into evaluating the effectiveness and unintended consequences of public policies.
Recommended Textbook
Microeconomics 1st Canadian Edition by R.
Glenn Hubbard
Available Study Resources on Quizplus
17 Chapters
2441 Verified Questions
2441 Flashcards
Source URL: https://quizplus.com/study-set/1385
Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/27590
Sample Questions
Q1) ________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.
A)Competition
B)Voluntary exchange
C)Equity
D)A centrally planned economy
Answer: A
Q2) Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?
A)Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others.
B)Failure to do this could lead to an inequitable allocation of goods and services produced.
C)Failure to do this could lead to drastic shortages of good and services.
D)Failure to do this could reduces efficiency and leads to an inequitable allocation of output.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/27591
Sample Questions
Q1) Which of the following is a flow in the circular flow model?
A)the flow of goods and services from households to firms
B)the flow of profit and the flow of revenue
C)the flow of income earned by firms and the flow of expenditures earned by households
D)the flow of revenue received by firms and the flow of payments to resource owners
Answer: D
Q2) Refer to Figure 2.8.One segment of the circular flow diagram in the figure shows the flow of wages and salaries from market K to economic agents M.What is market K and who are economic agents M?
A)K = factor markets; M = households
B)K = product markets; M = households
C)K = factor markets; M = firms
D)K = product markets; M = firms
Answer: A
Q3) The basis for trade is comparative advantage, not absolute advantage.
A)True
B)False
Answer: True
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
159 Verified Questions
159 Flashcards
Source URL: https://quizplus.com/quiz/27592
Sample Questions
Q1) Elvira decreased her consumption of bananas when the price of peanut butter increased.For Elvira, peanut butter and bananas are
A)substitutes in consumption.
B)both inferior goods.
C)complements in consumption.
D)both luxury goods.
Answer: C
Q2) If Canada bans the importation of beluga caviar (the most prized of caviars)from the Caspian Sea, what happens in the market for caviar in Canada?
A)The supply curve shifted to the left.
B)The supply curve shifted to the right.
C)The demand curve shifted to the right.
D)The demand curve shifted to the left.
Answer: A
Q3) From a supply perspective, what impact would an increase in the price of motorcycles have on the market for motorcycles?
Answer: An increase in the price of motorcycles would generate an increase in the quantity of motorcycles supplied in the market.
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
Available Study Resources on Quizplus for this Chatper
127 Verified Questions
127 Flashcards
Source URL: https://quizplus.com/quiz/27593
Sample Questions
Q1) Using a supply and demand graph, illustrate the effect of the addition of a $10.00 unit tax on digital cameras, where the entire tax burden falls on the seller.Assume the equilibrium price before the tax is $125 and the equilibrium quantity is 50,000.What happens to the price and quantity after the tax is implemented?
Q2) One result of a tax is an increase in economic efficiency.
A)True
B)False
Q3) Refer to Figure 4.2.What area represents the increase in producer surplus when the market price rises from P to P ?
A) B + D
B)A + C + E
C)C + E
D)A + B
Q4) Payroll deductions imposed on ________ is used to fund Employment Insurance.
A)employers only
B)workers only
C)employers and workers
D)the unemployed
To view all questions and flashcards with answers, click on the resource link above. Page 6
Q5) What is "tax incidence"? What determines tax incidence in a competitive market?
Chapter 5: Externalities, Environmental Policy, and Public Goods
Available Study Resources on Quizplus for this Chatper
141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/27594
Sample Questions
Q1) A quasi-public good differs from a public good in that unlike a public good, it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.
A)True
B)False
Q2) Refer to Figure 5.5.Let's suppose the government imposes a tax of $50 per ton of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?
A)It rises by $50.
B)It rises by more than $50.
C)It rises by less than $50.
D)It remains the same because the tax is imposed on producers who create the externality.
Q3) The Fairmount Banff Springs Hotel has a spectacular view of the Rocky Mountains.Suppose a commercial logger has purchased the logging rights to the area and is planning to clear-cut the forest in a way that will have a negative impact on the resort.Can the two parties arrive at a Coasian solution and if so what is it?
Q4) State the Coase theorem.
Q5) How does a negative externality in production reduce economic efficiency?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Elasticity: the Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/27595
Sample Questions
Q1) An increase in the demand for green tea raises the price of apples from $16 a pound to $20 a pound.As a result, quantity supplied increases by 30 percent.Using the midpoint formula, calculate the value of the price elasticity of supply?
A)1.35
B)1.875
C)2.22
D)7.5
Q2) Rank these three items in terms of the elasticity of the demand for them at any given price, from most elastic to least elastic: alcoholic beverages, beer and Molson Canadian.
A)alcoholic beverages, beer, Molson Canadian
B)Molson Canadian, beer, alcoholic beverages
C)beer, Molson Canadian, alcoholic beverages
D)beer, alcoholic beverages, Molson Canadian
Q3) The price elasticity of an upward-sloping supply curve is always
A)positive.
B)negative.
C)greater than one.
D)impossible to determine.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Comparative Advantage and the Gains From International Trade
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/27596
Sample Questions
Q1) The intention of the "Buy American" provision in the 2009 stimulus bill was to
A)increase jobs in the United States.
B)prevent foreign firms from dumping product in the United States.
C)insure that products used to build roads and bridges meet U.S. quality and safety standards.
D)save the government money by restricting the sale of more expensive foreign-made products.
Q2) Refer to Figure 7.1.Suppose the government allows imports of leather footwear into Canada.The market price falls to $18.What are the values of consumer surplus and domestic producer surplus?
A)Consumer surplus = $270; producer surplus = $40.
B)Consumer surplus = $320; producer surplus = $40.
C)Consumer surplus = $320; producer surplus = $360.
D)Consumer surplus = $305; producer surplus = $320.
Q3) Early international trade in Canada involved
A)exporting consumer goods and importing raw materials.
B)greater costs than in any other country.
C)importing consumer goods and exporting furs and agricultural products.
D)importing raw materials and exporting intermediate goods.
Q4) Distinguish between a voluntary export restraint and a quota.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Consumer Choice and Behavioral Economics
Available Study Resources on Quizplus for this Chatper
154 Verified Questions
154 Flashcards
Source URL: https://quizplus.com/quiz/27597
Sample Questions
Q1) When the price of summer tank tops falls and you buy more of them because they are relatively less expensive, this is called
A)the substitution effect.
B)the income effect.
C)the deadweight loss effect.
D)the elasticity effect.
Q2) If total utility increases at a decreasing rate as a consumer consumes more coffee, then marginal utility must
A)remains constant.
B)increase also.
C)decrease.
D)be negative.
Q3) A consumer's utility-maximizing combination of goods is given by the bundle that corresponds to the point on
A)the indifference curve that intersects the horizontal axis.
B)the indifference curve that intersects the vertical axis.
C)an indifference curve that is tangent to the budget constraint.
D)the budget constraint where it intersects one of the axes.
Q4) What is marginal utility and what is the law of diminishing marginal utility?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Technology, Production, and Costs
Available Study Resources on Quizplus for this Chatper
169 Verified Questions
169 Flashcards
Source URL: https://quizplus.com/quiz/27598
Sample Questions
Q1) Refer to Figure 9.4.The vertical difference between curves F and G measures
A)average fixed costs.
B)marginal costs.
C)fixed costs.
D)sunk costs.
Q2) The law of diminishing marginal returns
A)explains why the average total cost and marginal cost curves are U-shaped in the short run.
B)explains why the average total cost, average fixed cost and the marginal cost curves are U-shaped in the short run.
C)causes average total costs to rise at a decreasing rate as output increases.
D)causes the difference between average total cost and average variable cost to get smaller as output increases.
Q3) What is the difference between total cost and variable cost in the long run?
Q4) A characteristic of the long run is
A)there are fixed inputs.
B)all inputs can be varied.
C)plant capacity cannot be increased or decreased.
D)there are both fixed and variable inputs.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/27599
Sample Questions
Q1) Refer to Figure 10.7.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium,
A)there will be fewer firms in the industry and total industry output decreases.
B)there will be more firms in the industry and total industry output increases.
C)there will be fewer firms in the industry but total industry output increases.
D)there will be more firms in the industry and total industry output remains constant.
Q2) A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?
A)The price remains constant at $48.
B)The price falls below $48.
C)The price rises above $48.
D) There is insufficient information to answer the question.
Q3) Why are individual buyers and sellers in perfect competition called price takers?
Q4) Maximizing average profit is equivalent to maximizing total profit.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Monopolistic Competition
Available Study Resources on Quizplus for this Chatper
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/27600
Sample Questions
Q1) Refer to Table 11.1.The Table shows
A)an elastic segment of the demand curve.
B)an inelastic segment of the demand curve.
C)a demand curve with an elastic segment of the demand curve from $7.50 to $6.50 followed by an inelastic segment.
D)a demand curve with an inelastic segment of the demand curve from $7.50 to $6.50 followed by an elastic segment.
Q2) If the demand curve for a firm is downward-sloping, its marginal revenue curve
A)will lie above the demand curve.
B)will lie below the demand curve.
C)is the same as the demand curve.
D)is horizontal.
Q3) In the long run, if price is less than average cost,
A)there is an incentive for firms to exit the market.
B)there is profit incentive for firms to enter the market.
C)the market must be in long-run equilibrium.
D)there is no incentive for the number of firms in the market to change.
Q4) What are the most important differences between perfectly competitive markets and monopolistically competitive markets?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Oligopoly: Firms in Less Competitive Markets
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/27601
Sample Questions
Q1) Refer to Table 12.1.What is the Nash equilibrium in this game?
A)There is no Nash equilibrium.
B)Godrickporter increases its advertising budget, but Star Connections does not.
C)Star Connections increases its advertising budget, but Godrickporter does not.
D)Both Godrickporter and Star Connections increase their advertising budgets.
Q2) What is a second-price auction?
A)An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the second highest amount bid.
B)An auction in which the bidder who submitted the second highest bid is awarded the object being sold.
C)An auction in which the bidder who submitted the highest bid is awarded the object being sold and pays a price equal to the average of the highest and second highest amount bid.
D)An auction in which the bidder who submitted the second highest bid is awarded the object being sold and pays a price equal to the average of the highest and second highest amount bid.
Q3) What is an oligopoly? Give two examples of oligopolistic industries in Canada.
Q4) List the competitive forces in the five competitive forces model.
Q5) Explain why OPEC is caught in a prisoner's dilemma?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Monopoly and Antitrust Policy
Available Study Resources on Quizplus for this Chatper
146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/27602
Sample Questions
Q1) Refer to Figure 13.1.If the firm's average total cost curve is ATC , the firm will
A)suffer a loss.
B)break even.
C)make a profit.
D)face competition.
Q2) A monopolist's profit maximizing price and output correspond to the point on a graph
A)where average total cost is minimized.
B)where total costs are the smallest relative to price.
C)where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.
D)where price is as high as possible.
Q3) Which one of the following about a monopoly is false?
A)A monopoly could make profits in the long run.
B)A monopoly could break even in the long run.
C)A monopoly must have some kind of government privilege or government imposed barrier to maintain its monopoly.
D)A monopoly status could be temporary.
Q4) Provide two examples of a government barrier to entry?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: The Markets for Labour and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/27603
Sample Questions
Q1) Consider the market for blackjack dealers in Niagra, Ontario.In each of the following cases, explain what happens to the equilibrium wage rate and the quantity of blackjack dealers hired.
a.Three new large resort casinos open in Niagra.
b.Fewer students are attending classes to learn to become blackjack dealers.
c.Traditionally, blackjack dealing is a field that attracts foreign workers.However, changes in immigration laws have made it more difficult for foreign workers to come to Niagra to obtain jobs.The demand for blackjack dealers, however, does not change.
d.Advances in technology have increased the popularity of electronic blackjack machines and decreased the popularity of live table games which require the use of a dealer.
Q2) Refer to Figure 14.3.Which of the following is true if the wage rate increases from W to W ?
A)The income effect is larger than the substitution effect.
B)The substitution effect is larger than the income effect.
C)The income effect and the substitution effect are equal.
D)The supply curve is unit-elastic.
Q3) What is personnel economics?
Q4) What is the marginal productivity theory of income distribution?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Public Choice, Taxes, and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/27604
Sample Questions
Q1) A situation where a Member of Parliament votes to approve a bill in exchange for favorable votes from other members on other bills is called
A)rent seeking.
B)logrolling.
C)regulatory capture.
D)special interest legislation.
Q2) As the value of the Gini coefficient approaches zero,
A)income distribution becomes less unequal.
B)income distribution becomes more unequal.
C)the percentage of the population under the poverty line increases.
D)the percentage of the population under the poverty line decreases.
Q3) "Sin taxes," such as taxes on alcoholic beverages, are intended to
A)increase the amount of the products supplied.
B)generate money to subsidize production of the products taxed.
C)reduce the quantity demanded.
D)generate funds to aid in the medical care of those harmed by the product.
Q4) If the government is most interested in minimizing excess burden of an excise tax, should it impose the tax on goods that are elastic or on goods that are inelastic?
Q5) Describe the main factors economists believe cause inequality of income.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Pricing Strategy
Available Study Resources on Quizplus for this Chatper
132 Verified Questions
132 Flashcards
Source URL: https://quizplus.com/quiz/27605
Sample Questions
Q1) Which of the following is a necessary condition for successful price discrimination?
A)The seller must possess market power.
B)The buyer must possess market power.
C)Transaction costs must be zero.
D)Buyers must have identical inelastic demands.
Q2) In January of 2014, Rogers cable was offering new customers cable TV, internet access, and a PVR, for $19.95 a month.Renting just a PVR from Roger's would cost existing customers $25.07 a month.What can you conclude about the price elasticity of demand for Rogers cable TV, internet access, and PVR rental?
A)Existing subscribers likely have more elastic demand than potential new subscribers.
B)Existing subscribers are likely to have less elastic demand than potential new subscribers.
C)Existing subscribers are likely to view cable TV and internet as substitutions and thus not be interested in this bundle.
D)New subscribers are the only ones likely to view TV and internet as complements.
Q3) What is odd pricing? Why do some merchants use odd pricing?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Firms, the Stock Market, and Corporate Governance
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/27606
Sample Questions
Q1) During 2007, many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.
Q2) What happens in the secondary market?
A)secondary inputs like electricity are sold
B)a corporate financial manager will raise funds for expansion of the firm
C)newly issued claims are sold by the borrowing firm to the initial buyer
D)previously issued claims are sold from one investor to another
Q3) What takes place in the indirect finance market?
A)Part ownership of corporations is sold in the form of stocks.
B)Corporate and government bonds are sold to savers.
C)Deposits of savers are accepted and loans made to borrowers.
D)Government purchases of buildings and equipment are sold to the highest bidder.
Q4) Corporate governance involves the way in which
A)the government nationalizes corporations.
B)the government licenses corporations.
C)a corporation is subject to government regulations.
D)a corporation is structured.
Q5) What is the difference between retained earnings and dividends?
Q6) How can a partnership raise funds needed for firm expansion?
To view all questions and flashcards with answers, click on the resource link above. Page 19