ECON 1023 Multiple Choice Questions

1.Consider the market for single malt whisky – a normal good. You
observe there has been a general increase in the incomes of Canadians.
Additionally, you find the price of barely, a main ingredient in single malt
whisky, has decreased. The result of these effects leads to a:

A)

An increase in
quantity transacted and an ambiguous change in prices.

B)

A decrease in quantity
transacted and an ambiguous change in prices.

C)

An increase in quantity transacted and an increase in prices.

D)

An increase in quantity transacted and a decrease in prices.

2.Now consider the market for skis and ski boots. You notice that
price of ski boots has fallen as of recent. As a result, what do you predict
will happen in the market for skis?

A)

An increase in quantity transacted and a decrease in prices.

B)

A decrease in quantity transacted and an increase in prices.

C)

An increase in quantity
transacted and an increase in prices.

D)

A decrease in quantity transacted and a decrease in prices.

3.To better compete with the skiing world, snowboard manufacturers
reduce their prices. What effect will this have on the market for skis?

A)

An increase in quantity
transacted and a decrease in prices.

B)

A decrease in quantity transacted and an increase in prices.

C)

An increase in quantity transacted and an increase in prices.

D)

A decrease in quantity transacted and a decrease in prices.

4.During the summer months, the demand for gasoline intensifies as
more people are taking vacations (i.e. driving more). At the same time,
requirements for cleaner emissions force retailers to purchase a more
expensive gasoline. Given these two occurrences, what is the predicted result
in the market for gasoline?

A)

An increase in quantity transacted
and an increase in prices.

B)

An ambiguous change in quantity
transacted and an ambiguous change in prices.

C)

An ambiguous change in quantity transacted and an increase in prices.

D)

An increase in quantity transacted
and a decrease in prices.

5.Fearing that current low gas prices will increase the popularity of
gas guzzling vehicles, the federal government decides to tax the sale of all
vehicles not meeting a certain L/100Km rating. Given this tax, what do you
expect will happen to the market for such gas guzzling vehicles.

A)

An increase in quantity transacted
and a decrease in prices.

B)

A decrease in quantity transacted and an increase in prices.

C)

An increase in quantity transacted
and an increase in prices.

D)

A decrease in quantity transacted
and a decrease in prices.

6.Which of the following would result in higher demand for Tim
Horton’s coffee?

A)

A new fad doughnut diet.

B)

An increase in the price of
doughnuts, a complement to coffee.

C)

A law restricting youths from
coffee shops until they are 21.

D)

A decrease in consumers’ income.

7.Suppose the National Assembly, the governing body in Quebec,
imposes a price ceiling of $10 per month for chequing account charges. If the
average market-clearing price for monthly chequing account charges is $5,
then:

A)

The price ceiling will keep prices
artificially low.

B)

The price ceiling will increase the
quality of the good.

C)

The price ceiling will not be binding in this instance.

D)

None of the above will occur.

8.Suppose Ontario schools offered cash bonuses to students who scored
high on the province’s standardized exams. The cash bonuses are an example of
which of the following basic economic principles?

A)

Resources are scarce.

B)

The real cost of something is what
you must give up to get it.

C)

There are gains from trade.

D)

People usually take advantage of opportunities to make themselves
better off.

9.In the circular-flow model, the interaction between households and
firms implies that:

A)

We need money to buy things.

B)

Households and firms interact in
the market for goods and services, but firms are the only participants in the
factor markets.

C)

Firms supply goods and services to households which, in turn, supply
factors of production to firms.

D)

The focus is on the “real” flows of
goods, services, and factors of production, but the flows of money between
households and firms are ignored for simplicity.

10.Ukrainian wheat farmers are very upset about the subsidies the
Canadian government pays to Canadian wheat farmers. One reason for this could
be that:

A)

Subsidized wheat from Canada leads
to global cotton surpluses and lower prices for Ukrainian farmers.

B)

Subsidized wheat from Canada raises the world price of wheat.

C)

Subsidized wheat from Canada has
led to a global shortage of wheat.

D)

Subsidized wheat from Canada has
led to an increase in the demand for Ukrainian wheat.

11.Suppose you make $15 per hour working as an extra for Toronto Film
Extras. Today you need to take 2 hours off to see your divorce lawyer, but
your contract specifies that you still get paid for this time. The lawyer
charges $100 for the consultation. The opportunity cost in dollar terms for
your trip to the lawyer would be:

A)

$30.

B)

$115.

C)

$100.

D)

$130.