1) Over a long period of time, perhaps many years, changes in real GDP come primarily from

A) upward shifts of the AS curve.

B) upward shifts of the AE curve.

C) rightward shifts of the AD curve.

D) continuous increases in potential GDP.

E) leftward shifts of the AD curve.

2) Between the years 1960 and 2011, the Canadian economy experienced growth in real GDP at an average annual rate of ________%.

A) 0.7

B) 1.2

C) 1.9

D) 3.3

E) 6.3

3) In the long run, changes in average material living standards are best shown by

A) growth in real GDP.

B) population growth.

C) growth in real per capita GDP.

D) improvements in fiscal policy.

E) improvements in monetary policy.

4) The compounding of economic growth rates means that

A) a large increase in investment today has little effect on national income over the long run.

B) small changes in sustained growth rates can have a significant impact on national income over several decades.

C) consumers should not save, given the low real returns that compounding produces.

D) a 10% annual rate of return will double an investment in less than 6 years.

E) a 2% annual growth rate of GDP will double national income in 27 years.

5) If per capita GDP in a richer country grows at a faster annual rate than in a poorer country,

A) the gap between their standards of living will widen over time.

B) the gap between their standards of living will close over time.

C) the gap between their standards of living will close over time as long as the rate of population growth is higher in the poorer country.

D) whether the gap in living standards widens or closes over time depends on the absolute size of the relative growth rates.

E) the difference in their living standards will not change over time.

6) If GDP in a richer country grows at the same annual rate as in a poorer country, the

A) gap between their standards of living will widen over time.

B) gap between their standards of living will close over time.

C) gap between their standards of living will close over time as long as the rate of population growth is lower in the poorer country.

D) gap between their standards of living will close over time as long as the rate of population growth is lower in the richer country.

E) difference in their living standards will not change over time.

7) A common measure of a country's level of productivity is

A) the average efficiency of capital.

B) the capital-output ratio.

C) output per capita.

D) output per unit of labour input.

E) per capita GDP.

8) A common measure of a country's rate of economic growth is

A) the marginal efficiency of capital.

B) the capital-output ratio.

C) the level of output per capita.

D) the change in output per capita.

E) the level of real gross domestic product.

9) Over the long term, by far the most potent force for raising average material living standards is

A) economic growth.

B) reducing inefficiencies.

C) redistributing income.

D) increasing the money supply.

E) appropriate fiscal policies.

10) If real income grows at approximately 2% per year, the number of years it will take for real income to double is approximately

A) 5.

B) 12.

C) 24.

D) 36.

E) 72.

1) Over a long period of time, perhaps many years, changes in real GDP come primarily from

A) upward shifts of the AS curve.

B) upward shifts of the AE curve.

C) rightward shifts of the AD curve.

D) continuous increases in potential GDP.

E) leftward shifts of the AD curve.

2) Between the years 1960 and 2011, the Canadian economy experienced growth in real GDP at an average annual rate of ________%.

A) 0.7

B) 1.2

C) 1.9

D) 3.3

E) 6.3

3) In the long run, changes in average material living standards are best shown by

A) growth in real GDP.

B) population growth.

C) growth in real per capita GDP.

D) improvements in fiscal policy.

E) improvements in monetary policy.

4) The compounding of economic growth rates means that

A) a large increase in investment today has little effect on national income over the long run.

B) small changes in sustained growth rates can have a significant impact on national income over several decades.

C) consumers should not save, given the low real returns that compounding produces.

D) a 10% annual rate of return will double an investment in less than 6 years.

E) a 2% annual growth rate of GDP will double national income in 27 years.

5) If per capita GDP in a richer country grows at a faster annual rate than in a poorer country,

A) the gap between their standards of living will widen over time.

B) the gap between their standards of living will close over time.

C) the gap between their standards of living will close over time as long as the rate of population growth is higher in the poorer country.

D) whether the gap in living standards widens or closes over time depends on the absolute size of the relative growth rates.

E) the difference in their living standards will not change over time.

6) If GDP in a richer country grows at the same annual rate as in a poorer country, the

A) gap between their standards of living will widen over time.

B) gap between their standards of living will close over time.

C) gap between their standards of living will close over time as long as the rate of population growth is lower in the poorer country.

D) gap between their standards of living will close over time as long as the rate of population growth is lower in the richer country.

E) difference in their living standards will not change over time.

7) A common measure of a country's level of productivity is

A) the average efficiency of capital.

B) the capital-output ratio.

C) output per capita.

D) output per unit of labour input.

E) per capita GDP.

8) A common measure of a country's rate of economic growth is

A) the marginal efficiency of capital.

B) the capital-output ratio.

C) the level of output per capita.

D) the change in output per capita.

E) the level of real gross domestic product.

9) Over the long term, by far the most potent force for raising average material living standards is

A) economic growth.

B) reducing inefficiencies.

C) redistributing income.

D) increasing the money supply.

E) appropriate fiscal policies.

10) If real income grows at approximately 2% per year, the number of years it will take for real income to double is approximately

A) 5.

B) 12.

C) 24.

D) 36.

E) 72.

31) Which of the following is an example of a two-part tariff?

A) price discrimination based on the buyers' willingness to pay

B) charging a hookup fee plus a monthly charge equal to marginal cost

C) higher sales tax on specific products

D) different prices based on the cost of production and quantity bought

E) A regulated firm uses marginal cost pricing for some customers and average cost pricing for other customers.

32) One way a company can cover its costs and, at the same time, obey a marginal cost pricing rule is by

A) choosing output levels according to the profit-maximizing rule.

B) using price discrimination.

C) increasing production.

D) decreasing production.

E) decreasing its marginal cost but not changing its average total cost.

33) If a regulatory agency sets the price equal to marginal cost for a natural monopoly, the

A) government might have to provide a subsidy to the firm to keep it in business.

B) price is the same as the unregulated monopoly price.

C) firm makes an economic profit, though not the maximum economic profit.

D) firm makes the maximum economic profit.

E) firm makes zero economic profit.

34) What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

A) The regulated firm ends up earning an economic profit.

B) Consumers pay too much for the product of the monopoly.

C) This policy is a two-part tariff, which creates inefficiency.

D) The taxes required to gain the revenue used as the subsidy result in a deadweight loss that subtracts from gains in efficiency which result from use of the marginal cost pricing rule.

E) The regulated firm goes out of business if it is subsidized.

35) With a natural monopoly,

A) no regulation is necessary because it is a natural monopoly.

B) regulation takes the form of forcing competition from new firms.

C) regulation takes the form of forcing the company out of business.

D) regulation can take the form of average cost pricing to allow coverage of costs.

E) regulation takes the form of breaking the company into several competing firms.

36) When a firm is regulated so it uses an average cost pricing rule, the price

A) exceeds average total cost.

B) equals marginal cost.

C) is less than marginal cost.

D) equals average total cost.

E) equals marginal revenue.

37) For a natural monopoly to cover its total cost, its price must equal its

A) average total cost.

B) marginal cost.

C) demand.

D) total fixed cost.

E) marginal revenue.

38) When used with a natural monopoly, an average cost pricing rule results in

A) the efficient level of output.

B) economic losses for the firm.

C) the need for government to subsidize the natural monopoly.

D) zero economic profit for the firm.

E) the firm making an economic profit.

39) With an average cost pricing rule, the quantity produced by the natural monopoly is ________ the quantity produced with a marginal cost pricing rule.

A) greater than

B) less than

C) equal to

D) greater than in the long run and less than in the short run than

E) not comparable to

40) A natural monopoly's output is less if it is regulated with

A) a marginal cost pricing rule than if it is unregulated.

B) an average cost pricing rule than if it is unregulated.

C) an average cost pricing rule than if it is regulated with a marginal cost pricing rule.

D) a marginal cost pricing rule than if it is regulated with an average cost pricing rule.

E) More information about the firm's demand is needed to determine how its output depends on what regulation it faces.

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