This is a sample "test yourself" exam. It is not to be turned in, but will be useful for Office Hour help if you get
answers wrong. The answers key is on the last page. It covers Chapters 7, 8, 9, 10 and 11. Some of the questions are very
easy and some are harder than will be on the final exam. Some of the questions may turn up on the final. You will LEARN
A LOT MORE if you try to answer the questions BEFORE looking at the answer key.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The fundamental force that drives international trade is 1) _______
A) comparative advantage.
B) unemployment of factors of production.
C) absolute advantage.
D) cheap labor in countries like China and India.
E) a countries' desire to increase their trade surplus.
2) Compared to the situation before international trade, after Canada exports a good, production in 2) _______
Canada ________ and consumption in Canada ________.
A) decreases; increases
B) decreases; decreases
C) increases; does not change
D) increases; decreases
E) increases; increases
3) Consider a country that sells some of its goods as exports. Who does NOT benefit? 3) _______
[PROF: Reflect on why the answer suggested by Chapter 7 may be WRONG]
A) domestic producers
B) foreign consumers
C) domestic consumers
D) workers in the industry
E) everyone benefits
Refer to the figure below to answer the following questions.
The figure shows the market for shirts in Canada, where D is the domestic demand curve and S is the domestic supply
curve. The world price is $20 per shirt.
4) In Figure 7.2.1, with international trade Canadians buy ________ million shirts per year. 4) _______
A) 24 B) 16 C) 32 D) 48 E) 56
Refer to the figure below to answer the following question. Figure 7.2.4
5) Refer to Figure 7.2.4. The graph shows the demand for shoes in Brazil, D B the supply of shoes 5) _______
produced in Brazil, S B and the market equilibrium in Brazil when it does not trade
internationally. If the world price of a pair of shoes is $20 and Brazil opens up and trades
internationally, producer surplus in Brazil ________ and consumer surplus in Brazil ________.
A) decreases by area C; increases by area C + D
B) increases by area C + D; decreases by area C
C) increases by area C; decreases by area C and a deadweight loss equal to area D arises
D) increases by area D; decreases by area D
E) decreases by area C + D; increases by area C
6) A tax that is imposed by the importing country when an imported good crosses its international 6) _______
boundary is called
A) a voluntary export restraint.
B) an import quota.
D) a sales tax.
E) a tariff.
7) If Canada imposes a tariff of $1 per imported shirt, the tariff 7) _______
A) benefits Canadian shirt producers.
B) raises the price of a shirt paid by Canadian consumers.
C) creates a deadweight loss.
D) decreases imports of shirts into Canada.
E) all of the above.
8) Diminishing marginal utility means that 8) _______
A) Ralph will enjoy his second hamburger less than the first one.
B) the utility from eating two hamburgers will be more than twice the utility from eating the
C) the utility from one hamburger is greater than the utility from two hamburgers.
D) the price of two hamburgers is less than twice the price of one.
E) hamburgers seem smaller as you eat more of them.
Use the table below to answer the following questions.
Table 8.1.1 9) Refer to Table 8.1.1. The value of C is 9) _______
A) 13. B) 50. C) 0. D) 3. E) 17.
10) Sarah can consume either pizzas or hamburgers. The price of a hamburger is $1 and the p10) ______
a pizza is $5. Let MU be the marginal utility of hamburgers and MU be the marginal utility of
pizzas. In consumer equilibrium, what must the ratih MU pMU equal?
A) 1/1. B) 1/6. C) 5/1. D) 1/5. E) 4.
11) Let MUA and MU Btand for the marginal utility of goods A and B, respectivelA.and PB 11) ______
stand for the price of goods A and B, respectively. Which statement must hold for consumer
A) MU /MU = P /P .
A B B A
B) MU A = MU Bnd P A = PB.
C) MU A A = MU B B
D) MU AMU = B /PA. B
E) MU = MU .
12) Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum tota12) ______
utility from the meal for your entire budget of $12. The price of a hot dog is $2 and the price of a
Coke is $2. Which one of the following can you conclude?
A) You are purchasing three hot dogs and three Cokes.
B) The marginal utilities from hot dogs and Cokes must be equal.
C) The marginal utilities from hot dogs and Cokes divided by the quantity of each good must
D) The total utilities from hot dogs and Cokes must be equal.
E) The total utility from hot dogs is maximized.
13) John and Sally have identical preferences except Sally's utility units are exactly 10 t13) ______of
John's. Both have the same income and face the same prices. Choose the best response.
A) John receives 1/10 the satisfaction that Sally receives.
B) Both will consume the same amount of all goods.
C) John consumes 10 times the amount that Sally consumes.
D) John and Sally will have equal total utility.
E) John and Sally will have equal marginal utility.
Use the table below to answer the following questions.
Windsurfing equipment rents for $10 per hour, snorkeling equipment for $5 per hour. 14) Consider Devon's total utility from snorkeling and windsurfing in Table 8.2.1. Suppose Devon's 14) ______
total income is $35. If the price of windsurfing rises to $20 per hour, how long does Devon
choose to windsurf and to snorkel?
A) 4 hours of windsurfing and 3 hours of snorkeling
B) 1 hour of windsurfing and 3 hours of snorkeling
C) 2 hour of windsurfing and 7 hours of snorkeling
D) 3 hours of windsurfing and 5 hours of snorkeling
E) 5 hours of windsurfing and 1 hour of snorkeling
15) The paradox of value as it applies to diamonds and water can be explained by 15) ______
A) distinguishing between total utility and marginal utility.
B) water having a high level of marginal utility relative to diamonds.
C) water having a low price relative to diamonds.
D) the fact that utility can't be measured.
E) distinguishing between utility and price.
16) A behavioral economist will explain Tom's donation to charity by saying that Tom is displaying 16) ______
A) the neuro effect.
B) bounded self-interest.
C) bounded will-power.
D) bounded rationality.
E) the endowment effect.
17) Lucky buys hats for $20 but Lucky will not sell one of her hats for less than $35. Lucky is 17) ______
A) exhibiting bounded self-interest.
B) a behavioural economist.
C) making decisions using her prefrontal cortex.
D) displaying the endowment effect.
E) showing unbounded will-power.
18) David has an income of $30 to buy movie tickets and bus tickets. The price of a movie ticket is $6 18) ______
and the price of a bus ticket is $2. What is David's real income?
D) 5 movie tickets or 15 bus tickets
E) 15 movie tickets or 5 bus tickets
19) The price of a cup of coffee is $2.00. The price of a cup of tea is $1.20. The relative price of a cup19) ______
of tea with respect to a cup of coffee is
A) 0.6 cups of coffee.
B) 1.25 cups of coffee.
C) 1.0 cup of coffee.
D) 0.75 cups of coffee.
E) 1.67 cups of coffee. 20) Martha consumes cake and muffins. Suppose Martha's income doubles and the prices of cake 20) ______
and muffins also double. Martha's budget line
A) remains unchanged.
B) shifts rightward but the slope does not change.
C) shifts rightward and becomes flatter.
D) shifts rightward and becomes steeper.
E) shifts leftward but the slope does not change.
21) Sara's income is $12 a week. The price of popcorn is $3 a bag, and the price of a smoothie is $3. 21) ______
The opportunity cost of a smoothie is ________.
A) 1.00 smoothie
B) 1.0 bag of popcorn
C) 4 bags of popcorn
22) The marginal rate of substitution 22) ______
A) is the rate at which a person gives up the good measured on the y-axis to get an additional
unit of the good measured on the x-axis while remaining on the same indifference curve.
B) is equal to the slope of the budget line.
C) is the amount of good Y substituted for good X as a consumer moves along his budget line.
D) increases as a consumer consumes more of the good measured on the x-axis.
E) is greater than the magnitude of the slope of the budget line.
Use the figure below to answer the following questions.
23) Which one of the graphs in Figure 9.2.1 shows perfect substitutes? 23) ______
A) (a) B) (b) C) (c) D) (d) E) (c) and (d)
24) Good X is measured on the horizontal axis and good Y is measured on the vertical axis. The 24) ______
marginal rate of substitution is
A) the relative price of good Y in terms of good X.
B) the rate at which a consumer will give up good Y to obtain an additional unit of good X
while remaining indifferent.
C) equal to the magnitude of the slope of the budget line.
D) the rate at which a consumer will give up good X to obtain an additional unit of good Y
while remaining indifferent.
E) the relative price of good X in terms of good Y.
Use the figure below to answer the following questions. Figure 9.3.3
25) Consider an initial budget line labelled RT in Figure 9.3.3. What would rotate the budget line to 25) ______
A) a rise in the price of good X
B) a de