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CHAPTER 1—UNDERSTANDING EVOLVING ECONOMIC SYSTEMS AND

COMPETITION
MULTIPLE CHOICE
1. Which is an example of factors of production?

a. corporate social responsibility
b. business ethics
c. entrepreneurship
d. the economic climate
ANS: A PTS: 1 REF: 1-12 OBJ: 1
BLM: U
2. Which of the following is the study of how a society uses scarce resources to produce and distribute
goods and services?
a. finance
b. acculturation
c. economics
d. marketing
ANS: C PTS: 1 REF: 1-16 OBJ: 2
BLM: U
3. Which of the following is the study of the economy as a whole, looking at aggregate data for large
groups of people, companies, or products?
a. economics aggregation
b. national economics
c. microeconomics
d. macroeconomics
ANS: D PTS: 1 REF: 1-16 OBJ: 2
BLM: U
4. A manager in the life insurance industry examining the national level of personal income, the
unemployment rate, interest rates, inflation, and death statistics would be looking at which of her
company’s environments?
a. fiscal economic
b. macroeconomic
c. national economic
d. competitive
Copyright © 2011 by Nelson Education Ltd. 1

ANS: B PTS: 1 REF: 1-16 OBJ: 2
BLM: A
5. What is the definition of macroeconomics?

a. changes in resource availability in the marketplace
b. the economy as a whole by looking at aggregate data
c. the activities of individual companies and products
d. the supply and demand of individual households
BLM: U
6. What is the definition of microeconomics?

a. monetary policy as it pertains to specific industries
b. fiscal and monetary policy on a national level
c. the interactions of aggregated national and international economic data
d. individual companies, markets, or households
BLM: U
7. The GMC manager who evaluates truck models made by his competition, consumer demand for
different sizes of trucks, labour and material costs to build trucks, and current prices of all trucks
would be taking which of the following perspectives?
a. microeconomics
b. individual economics
c. aggregated economics
d. macroeconomics
BLM: A
8. The agricultural sector in Guatemala accounts for about one-quarter of the nation’s GDP, two-thirds of
its exports, and half of its labour force. This type of information would be revealed through which
perspective?
a. regional monetary policy
b. aggregated economic
c. area economics
d. microeconomics
BLM: A
9. An individual who is thinking of buying a Wendy’s franchise in London, Ontario, and is examining
the employment statistics, area income levels, and local competition would be interested in which of
the following fields?
a. regional monetary policy
b. aggregated economic
c. area economics
d. microeconomics
BLM: A
2 Copyright © 2011 by Nelson Education Ltd.

10. The relationship of the inputs and outputs of households, businesses, and governments can be
graphically explained through the use of which figure?
a. diamond
b. box
c. circle
d. square
BLM: U

11. To examine how the sectors of the economy interact, you should think in terms of which of the
following figures?
a. diamond shape
b. linear graph
c. economic hierarchy
d. circular flow
BLM: U
12. Which of the following is the most basic measure of economic growth?
a. consumer price index
b. producer price index
c. gross domestic product
d. total of all goods and services produced
BLM: U
13. If you were told the output of goods and services produced in Luxembourg had increased by 6 percent
in 2010, you would correctly refer to this increase as which type of growth?
a. an example of recessionary growth
b. growth standardization
c. economic growth
d. nationalized growth
BLM: A
14. If the GDP of a country in 2010 was $48 billion, what does this $48 billion represent?
a. the total value of all final goods and services produced during 2010
b. the actual growth of discretionary profit in 2010
c. the estimated growth of discretionary profit in the country for 2010
d. how much money the households in the country spent in 2010
BLM: A
15. Imagine that you were reading an international marketing text in which you learned that the GDP for
one of the former members of the Soviet Union was $1.56 billion. A few pages later in the same text,
the book states that that nation’s real GDP was $800,000. From reading this information, what could
you conclude?
a. The second GDP measurement reflected only the value of the products produced in the
nation and did not include the value of services.
b. The various methods used to calculate GDP do not produce the same results.
c. GDP is an approximation of the actual total value.
d. This former member of the Soviet Union had a high rate of inflation.
BLM: A

16. Assume the GDP in Argentina increased by 28 percent in 2010. The economists would adjust the
current market prices to take into account inflated values. This adjusted GDP is called which type of
the nation’s GDP?
a. real
b. frictional
c. interpreted
d. cyclical
BLM: A
17. Which type of GDP takes inflation into account and uses adjusted market prices?
a. real
b. frictional
c. adjusted
d. cyclical
BLM: U
18. What are patterns of expansion and contraction in aggregate economic activity, as measured by GDP?
a. business standards
b. cyclical adjustments
c. economic yields
d. business cycles
BLM: U
19. What does a decline in real GDP that lasts for two consecutive quarters represent?
a. economic downsizing
b. recession
c. depression
d. resource divestment
BLM: U
20. As soon as Kazakhstan, a former member of the Soviet Union, had experienced two consecutive
quarterly declines in its gross national product, Kazakhstan was in which economic situation?
a. regression
b. recession
c. adjustment period
d. depression
BLM: A
21. What is the name of the business cycle that follows a recession?
a. upsizing
b. prosperity
c. inflation
d. recovery
BLM: U

22. If the national unemployment rate goes up, which of the following might be a contributing factor?
a. Some people took a job transfer to another province.
b. Some people took a job right out of high school.
c. Some people are preparing for later employment by attending school.
d. Some people started a new job and their old position is vacant.
BLM: A
23. If, in 2010, 7.5 percent of a country’s total work force was not working, but was actively seeking
employment, this 7.5 percent represents which national figure?
a. recessionary unemployment
b. unemployment rate
c. inflationary unemployment
d. position on the international unemployment scale
BLM: A
24. The unemployment rate is the percentage of the total work force that is not working but is engaged in
which of the following activities?
a. drawing unemployment cheques
b. preparing physically and mentally to begin work
c. actively looking for work
d. laid off, terminated, or downsized due to some economic activity outside of their control
BLM: A
25. Which of the following is a form of unemployment?

a. unseasonal unemployment
b. fractional unemployment
c. cyclical unemployment
d. fiscal unemployment
BLM: U
26. Josh Loachim quit his job in advertising in Toronto and has moved to Calgary, where he is actively
seeking employment. This is an example of which type of unemployment?
a. frictional
b. fiscal
c. structural
d. cyclical
BLM: A

27. Laron Kelly recently quit his job as a car salesperson and is now trying to find a job with another car
dealership. This is an example of which type of unemployment?
a. structural
b. frictional
c. recessionary
d. fiscal
BLM: A
28. For the past 10 years, Kris Boja has been a welder for a local manufacturer. This morning her boss
informed her that a robot would replace her. Boja’s unemployment is an example of which type of
unemployment?
a. cyclical
b. mechanical
c. structural
d. frictional
BLM: A
29. Suppose that 50 percent of the labour force in a country is involved in the agricultural sector, but the
economic growth in the nation comes from industry and tourism. What type of unemployment would
such a mismatch of ability and job requirements cause?
a. mechanical
b. frictional
c. structural
d. cyclical
BLM: A
30. Structural unemployment is unemployment that results from which of the following circumstances?
a. the restructuring of an organization
b. the change in business cycles
c. a mismatch between the available jobs and the skills of available workers
d. people moving to new geographical areas
BLM: A
31. The labourers displaced due to assembly-line automation may not have the skills needed to operate the
computerized machines that replaced them. This is an example of which type of unemployment?
a. cyclical
b. operational
c. frictional
d. structural
BLM: A

32. If the tourism industry in a Canadian province had 43 percent unemployment due to an economic
downturn that gripped the country, the workers in the tourism industry would be experiencing which
of the following type of unemployment?
a. seasonal
b. cyclical
c. structural
d. frictional
BLM: A
33. When the economy is in a recession, many companies must lay off workers, causing which type of
unemployment?
a. cultural
b. cyclical
c. frictional
d. structural
BLM: A
34. Each January, Lopez is laid off as soon as Christmas is over. She will be hired back sometime during
the summer. In terms of unemployment, Lopez is a good example of which type of unemployment?
a. frictional
b. structural
c. seasonal
d. fiscal
BLM: A
35. On PEI, jobs are plentiful during the summer months, but difficult to find in September once the
tourists leave and many restaurants and inns close. People who work in the island’s restaurants
annually become unemployed in which way?
a. structurally
b. geographically
c. frictionally
d. seasonally
BLM: A
36. Gracie Burlesford works for a peach grower in Southern Ontario. In July, Burlesford was laid off
because of a drought. What type of unemployment is this?
a. frictional
b. structural
c. geographical
d. seasonal
BLM: A

37. What is a general upward movement of prices in the economy known as?
a. purchase power acceleration
b. deflation
c. inflation
d. upsizing
BLM: U
38. Which of the following represent two types of inflation?

a. demand-pull and cost-push
b. cost-pull and supply-push
c. demand-pull and supply-push
d. recessionary and recovery
BLM: U
39. Which type of inflation is occurring when the demand for goods and services is greater than the
supply?
a. demand-push
b. cost-push
c. demand-pull
d. supply-side
BLM: A
40. Which type of inflation is triggered by increases in production that which push up the costs of final
goods and services?
a. supply-side
b. demand-push
c. cost-push
d. demand-side
BLM: A
41. What does it mean if the annual inflation rate in a country was 8.1 percent?
a. The people experienced demand-push inflation.
b. The people saw a decline in gross domestic profit (GDP).
c. The people saw their purchasing power increase from what it was in the previous year.
d. The people saw their purchasing power decrease from what it was in the previous year.
BLM: A
42. If one of the reasons for the growing inflation rate is due to increases in production costs of goods and
services that occurred as a result of a decline in a suitable labour force, this would be an example of
which type of inflation?
a. cost-push
b. supply-side
c. cost-pull
d. demand-push

BLM: A
43. If a nation experienced an inflation rate of about 12 percent and then, five years later, had an inflation
rate of about 5 percent, which of the following statements best describes what was happening to
purchasing power during the period?
a. The purchasing power of businesses did not see a change throughout the period, but
consumers did.
b. The average consumer’s purchasing power was lower at the beginning of period than at
the end.
c. The country was experiencing a recession, prices were universally high throughout the
period, and purchasing power declined for everyone.
d. The average consumer’s purchasing power was higher at the beginning of the period than
at the end.
BLM: A
44. The price of a decorated three-tiered wedding cake from a local supermarket deli recently increased
from $105 to $119. The supermarket manager said it was due entirely to increases in sugar and labour
costs. The $14 increase is an example of which of the following?
a. deflation
b. poor resource utility
c. price gouging
d. inflation
BLM: A
45. Last year, a mother in a small African nation could buy a pound of flour for the Canadian equivalent of
$1.30. Six months ago, an identical pound of flour costs $3.40. Today she would need $5.60 to buy
that pound of flour. This example of the general upward movement of prices is called which of the
following?
a. discretionary pricing
b. supply-side pricing
c. deflation
d. inflation
BLM: A
46. The price of a basket of groceries rises from $30 to $40 but your salary remains the same. This is an
example of a decline in which of the following for you, personally?
a. standard of living
b. purchasing power
c. cost of living index
d. GDP index
BLM: A

47. Which is an index of the prices of a shopping basket of goods and services as published monthly by
Statistics Canada?
a. producer price index (PPI)
b. consumer price index (CPI)
c. inflation rate
d. wholesale cost index (WCI)
BLM: U
48. The consumer price index (CPI) is partially composed of which of the following?
a. cars bought by a delivery company
b. food bought by a restaurant in order to prepare menu items
c. iron ore used by the steel industry
d. trips to amusement parks
BLM: U
49. Which of the following measures prices paid by producers and wholesalers for commodities, including
raw materials and finished products?
a. wholesale cost index
b. producer price index
c. GDP index
d. raw material price index
BLM: U
50. To bring inflation under control, which combination of unemployment and growth may be necessary?
a. high unemployment, high growth
b. high unemployment, low growth
c. low growth, high unemployment
d. low unemployment, moderate growth
BLM: A
51. Which of the following refers to the Bank of Canada’s programs for controlling the amount of money
in circulation?
a. microeconomics
b. macroeconomics
c. monetary policy
d. fiscal policy
BLM: U

52. Which of the following organizations sells government securities, raises interest rates, and prints
money?
a. Canadian Revenue Agency
b. Department of Finance
c. chartered banks
d. Bank of Canada
ANS: D PTS: 1 REF: 1-22 | 1-23 OBJ: 5
BLM: U
53. The implementation of a contractionary policy by the Bank of Canada would result in which of the
following?
a. lower unemployment
b. increased economic growth
c. lower interest rates
d. lower inflation
BLM: A
54. Which of the following is the Bank of Canada implementing when it tightens the money supply by
selling government securities or raising interest rates?
a. fiscal reduction strategy
b. contractionary policy
c. retrenchment strategy
d. shrinkage policy
BLM: U
55. The Bank of Canada increases the growth of the money supply when it implements which of the
following?
a. fiscal reengineering
b. retrenchment strategy
c. expansionary policy
d. policy of fiscal augmentation
BLM: U
56. The implementation of an expansionary policy by the Bank of Canada would result in which of the
following?
a. higher unemployment
b. lower inflation
c. lower interest rates
d. decreased economic growth
BLM: A

57. When the government raises taxes on consumers and businesses, it is dealing with which type of
policy?
a. inflationary
b. monetary
c. fiscal
d. recessionary
BLM: U
58. What is fiscal policy concerned with?

a. taxation and spending
b. credit and banking
c. investments and insurance
d. credit and spending
BLM: U
59. When the government decides to cut military spending, which type of policy is it implementing?
a. monetary
b. microeconomic
c. fiscal
d. operational
BLM: A
60. Which of the following occurs if a country’s total expenditures are higher than the revenues received
from the taxes it gathers?
a. federal budget deficit
b. national surplus
c. annual expenditure surplus
d. national priority deficit
BLM: A
61. If a government spends $2.7 billion on government programs, and receives revenues of $2.3 billion,
what does the country have?
a. a low GDP
b. a budget deficit
c. a high CPI
d. an expansionary policy
BLM: A

62. Which of the following situations occurs when government spending replaces spending by the private
sector?
a. public-sector inflation
b. demarketing
c. deficit spending
d. crowding out
BLM: A
63. When Parks Canada spends money on promoting the use of national parks as perfect sites for a
summer vacation, then motels, campgrounds, and other tourist attractions in the private sector may
become less attractive to consumers. If, as a result of the promotion, consumers spent more money on
trips to the national parks and less money in the private sector for their vacations, what would have
occurred?
a. deficit spending
b. demarketing
c. crowding out
d. public-sector inflation
BLM: A
64. How is the national debt described?

a. as the cumulative total owed to Canada. by foreign countries
b. as the amount of money owed each year by the taxpayers
c. as the cumulative total of the government’s annual budget deficits
d. as the total amount owed by corporations
BLM: U
65. The purchase of savings bonds by individuals allows the government to do what?
a. eliminate crowding out
b. balance supply and demand
c. access funds that might otherwise have gone to the private sector
d. concentrate on microeconomics strategy
BLM: U
66. Which concept represents the quantity of a good or service that people are willing to buy at various
prices?
a. demand
b. market potential
c. supply
d. market share
BLM: U

67. Which of the following terms refers to the quantity of a product or service that businesses will make
available at various prices?
a. demand
b. market potential
c. supply
d. capacity
BLM: U
68. Which direction represents the slope of the demand curve?

a. horizontal
b. upward and to the right
c. downward and to the left
d. downward and to the right
ANS: D PTS: 1 REF: 1-25 | 1-26 OBJ: 6
BLM: U
69. Which of the following directions describe the slope of the supply curve?
a. downward and to the left
b. upward and to the right
c. horizontal
d. downward and to the right
ANS: B PTS: 1 REF: 1-25 | 1-26 OBJ: 6
BLM: U
70. Which of the following statements about demand and supply curves is most accurate?
a. The supply curve will shift to the left if taxes are decreased.
b. The demand curve will shift to the left if buyers’ incomes increase.
c. The demand curve will shift to the right if the number of buyers decreases.
d. The supply curve will shift to the left if the number of suppliers increases.
ANS: A PTS: 1 REF: 1-25 | 1-26 OBJ: 6
BLM: A
71. Which of the following statements about the interaction of demand and supply is most accurate?
a. At prices below equilibrium, demand exceeds supply.
b. Government intervention is usually needed to achieve market equilibrium.
c. At prices above equilibrium, suppliers produce less than consumers are willing to buy.
d. A surplus of product pushes prices upward.
BLM: A

72. When demand and supply meet, the price of the product or service is established. What is this point
called?
a. equilibrium
b. interaction
c. price intersection
d. monetary value
BLM: U
73. Market equilibrium is described as which of the following?

a. the point at which a nation reaches full employment
b. the time period used to determine the Consumer Price Index (CPI)
c. the point at which quantity supplied equals quantity demanded
d. the moment when profit is created
BLM: U
74. Which one characteristic most clearly defines a market structure?

a. the number of suppliers in a market
b. the market share
c. the type of product sold
d. how the company is organized
BLM: U
75. In perfect competition, which of the following conditions exist?

a. only one producer
b. no relationship between supply and demand
c. a large number of buyers and few sellers
d. a large number of sellers producing nearly identical products
BLM: U
76. For most agricultural products, farmers produce homogeneous products, sell them to a common
market, and generally cannot affect prices greatly. This is an example of which kind of market
structure?
a. a pure monopoly
b. imperfect competition
c. perfect competition
d. monopolistic competition
BLM: A

77. Which of the following terms refers to a market in which there are a large number of firms that
differentiate their products?
a. an oligopoly
b. oligopolistic competition
ANS: D PTS: 1 REF: 1-29 | 1-30 OBJ: 7
BLM: U
78. In a large metropolitan market, it is relatively easy to set up a law office. The ease of entry explains
why you will find hundreds of lawyers listed in the Toronto phone book. Each lawyer is a close
substitute for another but with slight differences. Which of the following market structures best
describes the one in which lawyers operate?
a. monopolistic competition
b. pure competition
c. oligopoly
d. perfect monopoly
ANS: A PTS: 1 REF: 1-29 | 1-30 OBJ: 7
BLM: A
79. Think about all the restaurants that are located near your campus. You have probably noted some new
ones appearing, and others closing because of lack of business. What type of competition exists in the
restaurant business?
b. oligopolistic competition
c. an oligopoly
d. perfect competition
ANS: A PTS: 1 REF: 1-29 | 1-30 OBJ: 7
BLM: A
80. An industry in which a few firms produce most or all of the output of a product and in which large
amounts of capital are needed known as which of the following?
a. perfect competition
b. an oligopoly
c. monopolistic competition
d. imperfect competition
BLM: A
81. In the middle of the mountains in ,northern BC, there are five service stations competing for all the
business that exists in this isolated location. When one service station lowers its price on gas, all must
follow suit. These service stations are operating in which type of market structure?
a. oligopoly
b. monopoly
ANS: A PTS: 1 REF: 1-30 | 1-31 OBJ: 7
BLM: A

82. There is a large capital requirement needed to set up a tire manufacturing operation. What type of
market structure do tire manufacturers operate in?
a. perfect competition
b. oligopoly
c. imperfect competition
ANS: B PTS: 1 REF: 1-30 | 1-31 OBJ: 7
BLM: A
83. Which of the following statements describes an oligopoly?

a. In an oligopoly, three or four firms usually dominate the marketplace.
b. In an oligopoly, there are many firms selling identical products.
c. Market entry into an oligopoly is easy.
d. Capital requirements are minimal for entering an oligopolistic market.
ANS: A PTS: 1 REF: 1-30 | 1-31 OBJ: 7
BLM: U
84. In which type of market structure can few sellers exert substantial control over prices?
b. oligopoly
c. perfect monopoly
d. pure monopoly
ANS: B PTS: 1 REF: 1-30 | 1-31 OBJ: 7
BLM: U
85. When a single firm accounts for 100 percent of industry sales, it is an example of which type of market
structure?
a. a pure monopoly
b. an oligopoly
c. monopolistic competition
BLM: A
86. Southern Ontario farmers have found it difficult to go into olive farming because olives imported from
Europe are priced so much cheaper. Canadian farmers have to meet various climate challenges to grow
olives and thus have higher expenses. Consumers prefer to buy the lower-priced imported olives rather
than locally grown olives. The problems that make it unprofitable for an Ontario farmer to profitably
become an olive farmer would be considered which of the following?
a. a purchasing power equalizer
b. a market contractionary tool
c. an oligopolistic tool
d. a barrier to entry
BLM: A

87. If NBPower supplies all of the electricity to New Brunswick, NBPower is an example of which of the
following?
a. an oligopolistic monopoly
b. utilitarianism
c. an oligopoly
d. a pure monopoly
BLM: A
88. For a time, only Xerox could produce dry-paper copiers because Xerox held all the patents on the
process. Until the patent expires, Xerox could be said to operate in which type of market structure?
a. imperfect competitive
b. purely competitive
c. monopolistic
d. noncompetitive oligopoly
BLM: A
89. A retailer of computer games can focus on relationship management by engaging in which of the
following practices?
a. selling products that are cheaper but not always reliable
b. pricing to take advantage of customers’ passions
c. using advertising that helps customers make impulse buying decisions
d. giving customers more than they expected such as a reward once they have purchased 10
games
BLM: A
90. When Mary Robb purchased a dozen cupcakes for her son’s birthday party, she was pleasant surprised
to find the box contained 13 cupcakes instead of the 12 she had paid for. The bakery used this
technique to accomplish which of the following?
a. to make sure the customer would not be concerned about product quality
b. to respond to competitive industries in the global marketplace
c. to cement its customer-supplier relationship with Robin Hood flour
d. to build, maintain, and enhance relationships with its customers
BLM: A
91. Which of the following strategies involves building, maintaining, and enhancing interactions with
customers and other parties so as to develop long-term satisfaction through mutually beneficial
partnerships?
a. customer maximization
b. relationship management
c. a developing strategic alliance
d. profit maximization
BLM: U

92. Every time Tom buys a litre of milk he gets a stamp, which he sticks on a card he carries in his wallet.
When he has 10 stamps, he gets a free litre of milk. This sort of program to encourage repeat business
exemplifies which of the following?
a. a developing strategic alliance
b. customer maximization
c. relationship management
d. profit maximization
BLM: A
93. Which of the following statements about strategic alliances is most accurate?
a. Strategic alliances are not associated with any form of relationship management.
b. Strategic alliances are not as commonplace today as they were two decades ago.
c. A company that is interested in maintaining, but not improving, its product and service
quality is most likely to enter a strategic alliance.
d. A strategic alliance is sometimes called a strategic partnership.
BLM: A
94. Mexico requires all foreign firms operating there to have a local business partner. This is an example
of which of the following?
a. economic partnership
b. economic merger
c. transactional partnership
d. strategic alliance
BLM: A
95. A strategic alliance is sometimes called which of the following?

a. strategic partnership
b. transactional partnership
c. economic partnership
d. economic merger
BLM: U
TRUE/FALSE
1. The factors of production are the goods produced by a manufacturing facility.
ANS: F PTS: 1 REF: 1-12 OBJ: 1

BLM: U
2. A market economy is also known as capitalism.
ANS: T PTS: 1 REF: 1-13 OBJ: 1

BLM: U

3. When an analyst is evaluating the construction industry in terms of interest rates, employment cycles,
and the rate of new home building nationwide, he is looking at microeconomics.

BLM: A
4. An analyst at Merrill Lynch who is evaluating Home Depot as an investment for her clients is taking a
microeconomics approach.

BLM: A
5. Canada, Great Britain, and Sweden are market economies.

BLM: A
6. It takes four consecutive quarters of decline in the GDP for economists to consider the economy to be
in a recession.

BLM: A
7. Full employment means all those who want to work are employed.

BLM: U
8. Because Jonathon Li has recently quit his job at GMC and is currently seeking work in the computer
business, he would be described as structurally unemployed.

BLM: A
9. Leo Yoder lost his job as a result of a recession and would be described as experiencing cyclical
unemployment.

BLM: A
10. Because Allyson Levi works in a vegetable processing plant and is out of work about six months a
year due to the periodic harvest times, she can be described as seasonally unemployed.

BLM: A
11. An increase in the price of crude oil could trigger cost-push inflation.

BLM: A

12. Monetary policy deals with tax revenues and expenditures at the national level.

BLM: U
13. The Bank of Canada can print money and raise taxes.

BLM: U
14. When Parliament passes a law to raise individual tax rates, it is creating fiscal policy.

BLM: A
15. The national debt is the accumulation of deficits that have occurred in the past as a result of
expenditures exceeding tax revenues.

BLM: U
16. The higher the price of a good or service, the greater the quantity demanded.

BLM: U
17. The higher the price of a good or service, the greater the amount a producer is willing to supply.

BLM: U
18. At the equilibrium point, quantity demanded equals quantity supplied.

BLM: U
19. A farmer’s market where 60 farmers come weekly to sell the produce they grow in their gardens is an
example of monopolistic competition.

BLM: A
20. It is difficult to enter a monopolistic competition market structure.

BLM: A
21. There are more firms in a monopolistic competition than in an oligopoly.

BLM: U

22. No true examples of a pure monopoly exist today.

BLM: U
23. Relationship management would benefit a company that provides janitorial cleaning services for
businesses.

BLM: A
24. A strategic alliance is a cooperative agreement between a firm and its banker.

BLM: A
25. China is a planned economy with very few entrepreneurs.

BLM: A
COMPLETION
1. ____________________ are the resources used to produce goods and services.
ANS: Factors of production
PTS: 1 REF: 1-12 OBJ: 1 BLM: U
2. ____________________ is the study of the economy as a whole, looking at data for large groups of
persons, companies, or products.
ANS: Macroeconomics
3. A ____________________ is defined as a decline in GDP that lasts for six months.
ANS: recession
4. The ____________________ is the total monetary value of all goods and services produced within a
nation annually.
ANS:
gross domestic product
GDP

5. When you graduate from university or college and start looking for a job, you will experience
____________________ unemployment.
ANS: frictional
6. Logan Martin works at a bookstore. Each year the prices of necessities such as groceries and
transportation continue to rise, but Martin’s salary stays the same. Martin’s ____________________ is
being eroded by her stagnant salary and increasing prices.
ANS: purchasing power
PTS: 1 REF: 1-20 | 1-21 OBJ: 4 BLM: A
7. ____________________ is the general upward movement of prices from year to year.
ANS: Inflation
PTS: 1 REF: 1-20 | 1-21 OBJ: 4 BLM: U
8. ____________________ policy refers to a government’s program for controlling the amount of money
in circulation.
ANS: Monetary
9. The ____________________ is the central banking system in Canada that controls our monetary
policy.
ANS: Bank of Canada
PTS: 1 REF: 1-22 | 1-23 OBJ: 5 BLM: U
10. ____________________ policy refers to a government’s program of taxation and spending.
ANS: Fiscal
11. The ____________________ curve slopes downward and to the right.
ANS: demand
PTS: 1 REF: 1-25 | 1-26 OBJ: 6 BLM: U
12. The point at which quantity demanded equals quantity supplied is called the point of
____________________.
ANS: equilibrium

13. ____________________ is at the other end of the continuum from a pure competition market
structure.
ANS: Pure monopoly
14. In a ____________________ market structure, many firms are in the market, the firms in the market
sell similar but not identical products, and the market is relatively easy to enter.
ANS: monopolistic competition
15. A ____________________ is a cooperative agreement between business firms.
ANS:
strategic alliance
strategic partnership
SHORT ANSWER
1. What are the factors of production and why are they important?
ANS:
Factors of production include labour, capital, entrepreneurship, knowledge and natural resources. They
are important because they are the basic building blocks of business.
2. What is the difference between a market economy and a command economy with respect to business
ownership?
ANS:
In a market economy, businesses are privately owned and in a command economy the government
owns all or most enterprises.
PTS: 1 REF: 1-13 | 1-14 OBJ: 2 BLM: A
3. What is the name of the business cycle that follows a recessionary one?
ANS:
recovery

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CHAPTER 1—UNDERSTANDING EVOLVING ECONOMIC SYSTEMS AND

1. Which is an example of factors of production?

Copyright © 2011 by Nelson Education Ltd. 1

5. What is the definition of macroeconomics?

6. What is the definition of microeconomics?

2 Copyright © 2011 by Nelson Education Ltd.

Copyright © 2011 by Nelson Education Ltd. 3

4 Copyright © 2011 by Nelson Education Ltd.

Copyright © 2011 by Nelson Education Ltd. 5

25. Which of the following is a form of unemployment?

6 Copyright © 2011 by Nelson Education Ltd.

Copyright © 2011 by Nelson Education Ltd. 7

8 Copyright © 2011 by Nelson Education Ltd.

38. Which of the following represent two types of inflation?

Copyright © 2011 by Nelson Education Ltd. 9

10 Copyright © 2011 by Nelson Education Ltd.

Copyright © 2011 by Nelson Education Ltd. 11

12 Copyright © 2011 by Nelson Education Ltd.

58. What is fiscal policy concerned with?

Copyright © 2011 by Nelson Education Ltd. 13

64. How is the national debt described?

14 Copyright © 2011 by Nelson Education Ltd.

68. Which direction represents the slope of the demand curve?

Copyright © 2011 by Nelson Education Ltd. 15

73. Market equilibrium is described as which of the following?

74. Which one characteristic most clearly defines a market structure?

75. In perfect competition, which of the following conditions exist?

16 Copyright © 2011 by Nelson Education Ltd.

Copyright © 2011 by Nelson Education Ltd. 17

83. Which of the following statements describes an oligopoly?

18 Copyright © 2011 by Nelson Education Ltd.

Copyright © 2011 by Nelson Education Ltd. 19

95. A strategic alliance is sometimes called which of the following?

1. The factors of production are the goods produced by a manufacturing facility.

ANS: F PTS: 1 REF: 1-12 OBJ: 1

2. A market economy is also known as capitalism.

ANS: T PTS: 1 REF: 1-13 OBJ: 1

20 Copyright © 2011 by Nelson Education Ltd.

ANS: F PTS: 1 REF: 1-13 OBJ: 1

ANS: T PTS: 1 REF: 1-13 OBJ: 1

5. Canada, Great Britain, and Sweden are market economies.

ANS: F PTS: 1 REF: 1-15 OBJ: 1

ANS: F PTS: 1 REF: 1-18 OBJ: 3

ANS: T PTS: 1 REF: 1-20 OBJ: 3

ANS: F PTS: 1 REF: 1-20 OBJ: 3

ANS: T PTS: 1 REF: 1-20 OBJ: 3

ANS: T PTS: 1 REF: 1-20 OBJ: 3

ANS: T PTS: 1 REF: 1-21 OBJ: 4