A production possibilities frontier can shift outward if
a. government increases the amount of money in the economy.
b. there is a technological improvement.
c. resources are shifted from the production of one good to the production of the other
good.
d. the economy abandons inefficient production methods in favor of efficient
production methods.
The quantity sold in a market will increase if the government
a. decreases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. More than one of the above is correct.
Suppose the Federal Reserve announces that it will be making a change to a key interest
rate to increase the money supply. This is likely because
a. the Federal Reserve is worried about inflation.
b. the Federal Reserve is worried about unemployment.
c. the Federal Reserve is hoping to reduce the demand for goods and services.
d. the Federal Reserve is worried that the economy is growing too quickly.
Figure 727
Refer to Figure 727. Buyers who value this good less than the equilibrium price are
represented by which line segment?
a. AC.
b. CK.
c. BC.
d. CH.
Which of the following rates of growth in the money supply is likely to lead to the
highest level of inflation in the economy?
a. 1 percent per year
b. 2 percent per year
c. 3 percent per year
d. 4 percent per year
When a tax is imposed on a good, the
a. supply curve for the good always shifts.
b. demand curve for the good always shifts.
c. amount of the good that buyers are willing to buy at each price always remains
unchanged.
d. equilibrium quantity of the good always decreases.
Figure 822
Refer to Figure 822. Suppose the government changed the perunit tax on this good
from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would
a. increase tax revenue and increase the deadweight loss from the tax.
b. increase tax revenue and decrease the deadweight loss from the tax.
c. decrease tax revenue and increase the deadweight loss from the tax.
d. decrease tax revenue and decrease the deadweight loss from the tax.
Figure 59
Refer to Figure 59. Using the midpoint method, the price elasticity of demand between
point A and point B is
a. 0.33.
b. 0.5.
c. 2.0.
d. 3.0.
Figure 26
Refer to Figure 26. If this economy devotes onehalf of its available resources to the
production of blankets and the other half to the production of pillows, it could produce
a. 120 pillows and 320 blankets.
b. 180 pillows and 180 blankets.
c. 240 pillows and 200 blankets.
d. We would have to know the details of this economy’s technology in order to
determine this.
In competitive markets,
a. firms produce identical products.
b. buyers can influence the market price more easily than sellers.
c. markets are more likely to be in equilibrium.
d. sellers are price setters.
A tax levied on the sellers of blueberries
a. increases sellers’ costs, reduces profits, and shifts the supply curve up.
b. increases sellers’ costs, reduces profits, and shifts the supply curve down.
c. decreases sellers’ costs, increases profits, and shifts the supply curve up.
d. decreases sellers’ costs, increases profits, and shifts the supply curve down.
Table 331
Labor Hours Needed to Make 1 Pound of:
Amount Produced in 40 hours
Meat PotatoesMeatPotatoes
Farmer8 hours/pound5 hours/pound5 pounds8 pounds
Rancher4 hours/pound10 hours/pound10 pounds4 pounds
Refer to Table 331. For the rancher, the opportunity cost of 1 pound of meat is
a. 0.4 pound of potatoes.
b. 2.5 pounds of potatoes.
c. 4 pounds of potatoes.
d. 10 pounds of potatoes.
The price elasticity of supply measures how much
a. the quantity supplied responds to changes in input prices.
b. the quantity supplied responds to changes in the price of the good.
c. the price of the good responds to changes in supply.
d. sellers respond to changes in technology.
Figure 726
Refer to Figure 726. At the equilibrium price, consumer surplus is
a. $600.
b. $900.
c. $1,500.
d. $1,800.
Figure 716
Refer to Figure 716. Sellers will be unwilling to sell more than
a. 1 unit of the good if its price is below $200.
b. 2 units of the good if its price is below $450.
c. 3 units of the good if its price is below $700.
d. All of the above are correct.
ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company
incurs a cost of 70 cents to produce a dozen eggs. Which of the following price
increases would cause both companies to experience an increase in producer surplus?
a. The price of a dozen eggs increases from 40 cents to 55 cents.
b. The price of a dozen eggs increases from 55 cents to 70 cents.
c. The price of a dozen eggs increases from 55 cents to 75 cents.
d. All of these price increases would cause both companies to experience a loss in
producer surplus.
A rightward 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.
Table 337
Output of pottery in one sixhour session
VasesMugs
Sarah 8 32
Charles 10 25
Refer to Table 337. Sarah and Charles are both potters and each can switch between
the production of vases and mugs at a constant rate. The table shows the total number of
vases or decorative mugs that each person can produce in a sixhour session of
producing pottery. Sarah and Charles could benefit from trading with each other if they
traded at a price of
a. 5 vases per mug
b. 0.5 mugs per vase
c. 3 mugs per vase
d. 1.5 vases per mug
Which of the following statements applies to economics, as well as to other sciences
such as physics?
a. Experiments are considered valid only when they are conducted in a laboratory.
b. Good theories do not need to be tested.
c. Realworld observations often lead to theories.
d. Economics, as well as other sciences, is concerned primarily with abstract concepts.
Table 320
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Brad1012
Theresa610
Refer to Table 320. Brad has an absolute advantage in the production of
a. wheat and Theresa has an absolute advantage in the production of beef.
b. beef and Theresa has an absolute advantage in the production of wheat.
c. both goods and Theresa has an absolute advantage in the production of neither good.
d. neither good and Theresa has an absolute advantage in the production of both goods.
Which of the following is an example of a normative as opposed to a positive
statement?
a. The discount rate is the interest rate the Federal Reserve charges banks to borrow
funds.
b. The US income tax rate increases with the amount of income earned.
c. The government should increase the tax on gasoline.
d. The US unemployment rate increased to 10 percent in 2009.
Which of the following is an example of a normative, as opposed to positive,
statement?
a. Gasoline prices ought to be lower than they are now.
b. The federal government should raise taxes on wealthy people.
c. The social security system is a good system and it deserves to be preserved as it is.
d. All of the above are normative statements.
Table 710
The following table represents the costs of five possible sellers.
SellerCost
Abby$1,600
Bobby$1,300
Dianne$1,100
Evaline$900
Carlos$800
Refer to Table 710. If the price is $1,l50, who would be willing to supply the product?
a. Abby and Bobby
b. Abby, Bobby, and Dianne
c. Carlos, Dianne, and Evaline
d. Dianne and Evaline only
Table 75
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
First OrangeSecond OrangeThird Orange
Allison$2.00$1.50$0.75
Bob$1.50$1.00$0.60
Charisse$0.75$0.25$0
Refer to Table 75. Who experiences the largest gain in consumer surplus when the
price of an orange decreases from $1.05 to $0.75?
a. Allison
b. Bob
c. Charisse
d. Allison and Bob experience the same gain in consumer surplus, and Charisse’s gain
is zero.
Figure 722
Refer to Figure 722. At the equilibrium price, consumer surplus is
a. $1,000.
b. $2,000.
c. $3,500.
d. $500.
Figure 85
Suppose that the government imposes a tax of P3 P1.
Refer to Figure 85. After the tax is levied, producer surplus is represented by area
a. A.
b. A+B+C.
c. D+H+F.
d. F.
A nonbinding price ceiling
(i)causes a surplus.
(ii)causes a shortage.
(iii)is set at a price above the equilibrium price.
(iv)is set at a price below the equilibrium price.
a. (i) only
b. (iii) only
c. (i) and (iii) only
d. (ii) and (iv) only
When a country has a comparative advantage in producing a certain good,
a. the country should import that good.
b. the country should produce just enough of that good for its own consumption.
c. the country’s opportunity cost of that good is high relative to other countries’
opportunity costs of that same good.
d. None of the above is correct.
Figure 75
Refer to Figure 75. If the price of the good is $12, then consumer surplus is
a. $9.
b. $11.
c. $13.
d. $16.
Suppose there is a flood in St. Louis, Missouri, that destroys several beer bottling
facilities. Which of the following would not be a direct result of this event?
a. Sellers would not be able to produce and sell as much as before at each relevant
price.
b. The supply would decrease.
c. Buyers would not be willing to buy as much as before at each relevant price.
d. The equilibrium price would rise.