1) Table 3-8
Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate.
Labor Hours Needed to Make 1 Quantity Produced in 36 Hours
Parasol Plate Parasol Plate
Huang 2 6 18 6
Min 2 4 18 9
Refer to Table 3-8. The opportunity cost of 1 parasol for Huang is
a. 1/3 plate.
b. 1/2 plate.
c. 3 plates.
d. 6 plates.
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2) Graphs such as bar graphs and pie charts are limited in that they
a. can only show variables that are positively related.
b. can only show variables that have a negative correlation.
c. provide information on only one variable.
d. provide information on no more than two variables.
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3) The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in the price. If the owner is only interested in increasing revenue, she should
a. lower the price of the cinnamon rolls.
b. leave the price of the cinnamon rolls unchanged.
c. raise the price of the cinnamon rolls.
d. reduce costs.
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4)
Refer to Figure 6-7. Which of the following price controls would cause a shortage of 20 units of the good?
a. a price ceiling set at $4
b. a price ceiling set at $5
c. a price floor set at $7
d. a price floor set at $8
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5)
Refer to Figure 6-20. The price paid by buyers after the tax is imposed is
a. $24.
b. $21.
c. $18.
d. $16.
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6) When describing the opportunity cost of two producers, economists use the term
a. natural advantage.
b. trading advantage.
c. comparative advantage.
d. absolute advantage.
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7) Table 4-9
The demand schedule below pertains to sandwiches demanded per week.
Price Harrys Quantity Demanded Darbys Quantity Demanded Jakes Quantity Demanded
$3 3 4 3
$5 1 2 x
Refer to Table 4-9. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following:
x = 2.
The current price of a sandwich is $5.00.
The market quantity supplied of sandwiches is 10.
The law of supply applies to the supply of sandwiches.
Then there is a
a. shortage of 5 sandwiches, and the price would be expected to rise from its current level of $5.00.
b. shortage of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.
c. surplus of 5 sandwiches, and the price would be expected to rise from its current level of $5.00.
d. surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.
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8) A tax imposed on the buyers of a good will raise the
a. price paid by buyers and lower the equilibrium quantity.
b. price paid by buyers and raise the equilibrium quantity.
c. effective price received by sellers and lower the equilibrium quantity.
d. effective price received by sellers and raise the equilibrium quantity.
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9) In the markets for the factors of production in the circular-flow diagram,
a. households are sellers and firms are buyers.
b. households are buyers and firms are sellers.
c. households and firms are both buyers.
d. households and firms are both sellers.
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10) The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by
a. unstable economic conditions in Eastern Europe.
b. increased competition from abroad.
c. a decline in the rate of increase in U.S. productivity.
d. a strong U.S. dollar abroad, hurting U.S. exports.
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11) On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about
a. 0.22.
b. 0.53.
c. 1.00.
d. 1.89.
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12) In considering how to allocate its scarce resources among its various members, a household considers
a. each members abilities.
b. each members efforts.
c. each members desires.
d. all of the above
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13) The imposition of a binding price floor on a market causes quantity demanded to be
a. greater than quantity supplied.
b. less than quantity supplied.
c. equal to quantity supplied.
d. Both a) and b) are possible.
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14) A tax on the buyers of personal computer external hard drives encourages
a. sellers to supply a smaller quantity at every price.
b. buyers to demand a smaller quantity at every price.
c. buyers to demand a larger quantity at every price.
d. Both a) and b) are correct.
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15) A survey of professional economists revealed that more than three-fourths of them agreed with fourteen economic propositions. Which of the following is not one of those propositions?
a. A ceiling on rents reduces the quantity and quality of housing available.
b. Fiscal policy has a significant stimulative impact on a less than fully employed economy.
c. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged.
d. The United States should implement universal health care for its citizens.
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16) Refer to Scenario 5-3. The change in equilibrium price will be
a. greater in the milk market than in the beef market.
b. greater in the beef market than in the milk market.
c. the same in the milk and beef markets.
d. Any of the above could be correct.
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17) When a tax is placed on the buyers of a product, buyers pay
a. more and sellers receive more than they did before the tax.
b. more and sellers receive less than they did before the tax.
c. less and sellers receive more than they did before the tax.
d. less and sellers receive less than they did before the tax.
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18) In the circular-flow diagram, in the markets for
a. goods and services, households and firms are both sellers.
b. goods and services, households are buyers and firms are sellers.
c. the factors of production, households are buyers and firms are sellers.
d. the factors of production, households and firms are both buyers.
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19) Table 4-7
Price Quantity Demanded Quantity Supplied
$10 10 60
$8 20 45
$6 30 30
$4 40 15
$2 50 0
Refer to Table 4-7. The equilibrium price and quantity, respectively, are
a. $2 and 50 units.
b. $6 and 30 units.
c. $6 and 60 units.
d. $12 and 30 units.
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20) Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay
a. more than $40, as the average benefit will exceed the marginal cost.
b. more than $40, as the marginal benefit will exceed the marginal cost.
c. more than $80, as the average benefit will exceed the marginal cost.
d. more than $80, as the marginal benefit will exceed the marginal cost.
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21) Which of the following causes a shortage of a good?
a. a binding price floor
b. a binding price ceiling
c. a tax on the good
d. None of the above is correct.
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22) The nation’s antitrust laws are enforced by economists at the Department of
a. Labor.
b. Health and Human Services.
c. Justice.
d. Treasury.
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23) Table 3-11
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.
Quantity Produced in 1 Hour
Bushels of Wheat Yards of Cloth
Falda 8 12
Varick 6 15
Refer to Table 3-11. Varick has a comparative advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
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24) For a good that is a necessity, demand
a. tends to be inelastic.
b. tends to be elastic.
c. has unit elasticity.
d. cannot be represented by a demand curve in the usual way.
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25) Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.
Hours Needed To Make 1 Amount Produced in 40 Hours
mixer toaster mixers toasters
Maya 8 5 5 8
Miguel 20 10 2 4
Refer to Table 3-6. We could use the information in the table to draw a production possibilities frontier for Maya and a second production possibilities frontier for Miguel. If we were to do this, measuring toasters along the horizontal axis, then
a. the slope of Mayas production possibilities frontier would be -1.6 and the slope of Miguels production possibilities frontier would be -2.
b. the slope of Mayas production possibilities frontier would be -0.625 and the slope of Miguels production possibilities frontier would be -0.5.
c. the slope of Mayas production possibilities frontier would be 625 and the slope of Miguels production possibilities frontier would be 0.5.
d. the slope of Mayas production possibilities frontier would be 6 and the slope of Miguels production possibilities frontier would be 2.
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26) A leftward shift of a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.
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27) Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
Labor Hours Needed to Make 1
Cooler Radio
Aruba 2 5
Iceland 1 4
Refer to Table 3-2. Assume that Aruba and Iceland each has 80 labor hours available. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by
a. 20.
b. 40.
c. 60.
d. 80.
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28) Suppose price is measured along the vertical axis on a graph. When price changes, there will be a
a. rotation of the curve.
b. shift of the curve.
c. movement along the curve.
d. change in the slope of the curve.
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29) If the demand for donuts is elastic, then a decrease in the price of donuts will
a. increase total revenue of donut sellers.
b. decrease total revenue of donut sellers.
c. not change total revenue of donut sellers.
d. There is not enough information to answer this question.
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30) The production possibilities frontier is a graph that shows the various combinations of output that an economy
a. should produce.
b. wants to produce.
c. can produce.
d. demands.
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31) To promote good economic outcomes, policymakers should strive to enact policies that
a. enhance productivity.
b. enhance individuals’ market power.
c. result in a rapidly-growing quantity of money.
d. All of the above are correct.
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32) Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
Labor Hours Needed to Make 1
Cooler Radio
Aruba 2 5
Iceland 1 4
Refer to Table 3-2. At which of the following prices would both Aruba and Iceland gain from trade with each other?
a. 2 radios for 4 coolers
b. 2 radio for 6 coolers
c. 2 radio for 10 coolers
d. Aruba and Iceland could not both gain from trade with each other at any price.
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33) Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses teenage employment by about
a. 1 to 3 percent.
b. 5 to 7 percent.
c. 10 percent.
d. None of the above is correct because studies show no decrease in teenage employment.
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34) The line that relates the price of a good and the quantity demanded of that good is called the demand
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.
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35) The circular-flow diagram is a
a. visual model of the economy.
b. visual model of the relationships among money, prices, and businesses.
c. model that shows the effects of government on the economy.
d. mathematical model of how the economy works.
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36) Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is
a. ignoring the law of demand.
b. assuming that the demand for university education is elastic.
c. assuming that the demand for university education is inelastic.
d. assuming that the supply of university education is elastic.
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37) A binding price ceiling causes a shortage in the market.
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38) Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.
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39) The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.
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40) The primary effect of rent control in the short run is to reduce rents.
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41) In the long run the primary effect of increasing the quantity of money is higher prices.
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42) To be binding, a price ceiling must be set above the equilibrium price.
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43) Positive statements can be evaluated using data alone, but normative statements cannot.
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44) A binding price floor causes quantity supplied to be less than quantity demanded.
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45) A decrease in the price of blueberries will decrease both the equilibrium price and quantity in the market for blueberry muffins.
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