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Final

practice exam econ 1b03


Department
Economics
Course Code
ECON 1B03
Professor
Hannah Holmes
Study Guide
Final

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PRACTICE EXAM DECEMBER 2007
120 QUESTIONS
ANSWER KEY AT THE END OF EXAMINATION.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
Use the table below to answer the following question(s).
Table 33.3
Country
Units of Labour per
Unit of Food Output
Units of Labour per
Unit of Cloth Output
Home 2 6
Foreign 6 8
1) Refer to Table 33.3. In order for the home country to gain from trade, which product must it import from the
foreign country?
1)
_________
A) Food.
B) Cloth.
C) Neither product.
D) Either product.
E) Both products.
Use the figure below to answer the following question(s).
Figure 33.1
Two countries, Partyland and Cowabunga, produce only beer and pizza and have the production possibilities
frontiers shown below.
2) Refer to Figure 33.1. The opportunity cost of 1 unit of beer in Partyland is ________, and the opportunity cost
of 1 unit of beer in Cowabunga is ________.
2)
_________
A) 1 pizza; 1 pizza
B) dependent on where on the PPF we measure it; dependent on where on the PPF we measure it
C) 3 pizzas; 1 pizza
D) 100 pizzas; 25 pizzas
E) 1 pizza; 1/3 pizza

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3) Refer to Figure 33.1. If trade occurs between Partyland and Cowabunga,
3)
_________
A) Partyland will supply pizzas, and Cowabunga will supply beers.
B) Cowabunga will supply both pizzas and beers, because they have a comparative advantage in both.
C) Partyland will supply both pizzas and beers, because they have a comparative advantage in both.
D) there will be a lot of drunk turtles.
E) Partyland will supply beers, and Cowabunga will supply pizzas.
4) Complete the following sentence. A tariff is a
4)
_________
A) tax on an imported good or service.
B) restriction on the quantity of imported goods.
C) subsidy on an imported good.
D) tax on an exported good or service.
E) subsidy on an exported good.
5) One goal of the General Agreement on Tariffs and Trade is to
5)
_________
A) raise Canada's share of world trade.
B) maximize the tariff revenue earned by governments.
C) maximize the profit to producers by imposing quotas on manufactured goods.
D) encourage bilateral trade agreements between countries.
E) reduce tariff barriers to trade.
6) If Canada imposes a tariff on imported shoes, an increase in the domestic demand for shoes will result in
6)
_________
A) a rise in the domestic price and no change in the quantity imported.
B) no change in the domestic price or in the quantity imported.
C) a rise in the domestic price and an uncertain change in the quantity imported.
D) no change in the domestic price, but an increase in the quantity imported.
E) a rise in the domestic price and in the quantity imported.
7) The key difference between a tariff and a quota is that
7)
_________
A) the consumer gets hurt with tariffs, but not with quotas.
B) quotas are illegal internationally.
C) the government gets the added revenue with quotas, but the industry receives the added revenue with tariffs.
D) the government gets the added revenue with tariffs, but the industry receives the added revenue with quotas.
E) the consumer gets hurt with quotas, but not with tariffs.
8) If Canada imposes a tariff on imported shoes, a decrease in the domestic demand for shoes will result in
8)
_________
A) no change in the domestic prices or in the quantity imported.
B) a fall in the domestic prices and in the quantity imported.
C) no change in the domestic prices, but an increase in the quantity imported.
D) a fall in the domestic prices and an uncertain change in the quantity imported.
E) a fall in the domestic prices and no change in the quantity imported.
9) Canada has import quota of 1 million pairs of shoes per year, and is currently importing this amount. An
increase in the domestic demand for shoes will result in
9)
_________
A) no change in the domestic price or in the quantity imported.
B) a rise in the domestic price and an uncertain change in the quantity imported, depending on whether the increase
in demand is greater than one million pairs or not.
C) a rise in the domestic price and in the quantity imported.
D) no change in the domestic price, but an increase in the quantity imported.
E) a rise in the domestic price and no change in the quantity imported.

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10) Some opponents of free trade argue that when we buy shoes from Brazil or shirts from Taiwan, Canadian
workers lose their jobs. A good counter to this argument is that
10)
_________
A) no Canadian worker has actually lost a job because of free trade.
B) most jobs lost because of free trade pay salaries below the poverty line.
C) imported goods create more handling and distributing jobs than they cost.
D) the jobs lost are concentrated in restricted geographic areas.
E) free trade creates export jobs, many of which pay more than the jobs lost.
11) When consumption is nonrivalrous and nonexclusive, the product is a
11)
_________
A) regulated good.
B) public good.
C) private good.
D) service.
E) publicly provided good.
12) Public goods are those goods for which
12)
_________
A) production is carried out by the government.
B) the people who do not pay cannot be excluded from the consumption.
C) the people who do not pay can be excluded from the consumption.
D) consumers generally must pay a high price.
E) consumers generally must pay a low price.
13) Complete the following sentence. Free riding
13)
_________
A) is possible if the consumption of the good or service is characterized by nonexcludability.
B) is possible if the consumption of the good or service is characterized by excludability.
C) is possible if the consumption of the good or service is characterized by nonrivalry.
D) is due to the government providing the good at no cost.
E) is due to consumers paying excessively high prices for goods and services provided by the government.
14) An example of a public good is
14)
_________
A) a Ford truck.
B) national defence.
C) a loaf of bread.
D) a television.
E) a home computer.
15) Public goods are provided by government since
15)
_________
A) people value national defence very highly.
B) governments are more efficient than private firms at producing public goods.
C) private firms do not take into account the impact of external costs.
D) free-rider problems result in an underproduction by private markets.
E) private firms will make positive economic profits.
16) Private provision of public goods
16)
_________
A) succeeds because public provision is often more costly.
B) succeeds if consumers expect to obtain marginal benefits from the consumption of the public good.
C) fails because private firms generally charge higher prices than public firms, and therefore lose customers.
D) fails because the private firm will always go broke.
E) fails because of the free-rider problem.
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