In a certain economy, toys and greeting cards are produced, and the economy currently
operates on its production possibilities frontier. Which of the following events would
allow the economy to produce more toys and more greeting cards, relative to the
quantities of those goods that are being produced now?
a. The economy experiences economic growth.
b. There is a technological advance in the toy industry, but the greeting card industry
experiences no such advance.
c. There is a technological advance in the greeting card industry, but the toy industry
experiences no such advance.
d. All of the above are correct.
In the simple circularflow diagram,
a. households own the factors of production.
b. households buy all the goods and services that firms produce.
c. land, labor, and capital flow from households to firms.
d. All of the above are correct.
In 1776, the American Revolution was sparked by anger over
a. the extravagant lifestyle of British royalty.
b. the crimes of British soldiers stationed in the American colonies.
c. British taxes imposed on the American colonies.
d. the failure of the British to protect American colonists from attack by hostile Native
Americans.
Once the supply curve for a product or service is drawn, it
a. remains stable over time.
b. can shift either rightward or leftward.
c. is possible to move along the curve, but the curve will not shift.
d. tends to become steeper over time.
If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of
apples will decrease the quantity demanded of apples by
a. 1.92%, and apples sellers’ total revenue will increase as a result.
b. 1.92%, and apples sellers’ total revenue will decrease as a result.
c. 3%, and apples sellers’ total revenue will increase as a result.
d. 3%, and apples sellers’ total revenue will decrease as a result.
Figure 214
Consider the production possibilities curve for a country that can produce sweaters,
apples (in bushels), or a combination of the two
Refer to Figure 214. The opportunity cost of moving from point U to point R is
a. 60 bushels of apples.
b. 80 bushels of apples.
c. 80 sweaters.
d. 160 sweaters.
A demand curve reflects each of the following except the
a. willingness to pay of all buyers in the market.
b. value each buyer in the market places on the good.
c. highest price buyers are willing to pay for each quantity.
d. ability of buyers to obtain the quantity they desire.
Figure 89
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 89. The loss of consumer surplus as a result of the tax is
a. $2,000.
b. $4,000.
c. $6,000.
d. $8,000.
Figure 45
Refer to Figure 45. Which of the following would cause the demand curve to shift
from Demand A to Demand B in the market for golf balls in the United States?
a. a decrease in the price of golf balls
b. an increase in the price of green fees
c. an expectation by buyers that their incomes will increase in the very near future
d. a change in consumer tastes away from golf and toward tennis
You receive a paycheck from your employer, and your pay stub indicates that $400 was
deducted to pay the FICA (Social Security/Medicare) tax. Which of the following
statements is correct?
a. This type of tax is an example of a payback tax.
b. Your employer is required by law to pay $400 to match the $400 deducted from your
check.
c. The $400 that you paid is the true burden of the tax that falls on you, the employee.
d. All of the above are correct.
Suppose televisions are a normal good and buyers of televisions experience a decrease
in income. As a result, consumer surplus in the television market
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.
If the price elasticity of demand for a good is 5, then a 10 percent increase in price
results in a
a. 0.5 percent decrease in the quantity demanded.
b. 2 percent decrease in the quantity demanded.
c. 5 percent decrease in the quantity demanded.
d. 50 percent decrease in the quantity demanded.
Table 324
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed to Make 1 Unit ofNumber of Units Produced in 40 Hours
CheeseBreadCheeseBread
England 144010
Spain 48105
Refer to Table 324. The opportunity cost of 1 unit of bread for England is
a. 1/4 unit of cheese.
b. 1/4 hour of labor.
c. 4 units of cheese.
d. 4 hours of labor.
A relatively steep demand curve indicates that
a. quantity demanded will adjust only slightly to a price change.
b. quantity demanded will adjust significantly to a price change.
c. quantity demanded will not adjust to a price change.
d. the change in quantity demanded will exactly equal a change in price.
Figure 76
Refer to Figure 76. If the government imposes a price floor of $110 in this market,
then consumer surplus will decrease by
a. $200.
b. $400.
c. $600.
d. $800.
Market power refers to the
a. side effects that may occur in a market.
b. government regulations imposed on the sellers in a market.
c. ability of market participants to influence price.
d. forces of supply and demand in determining equilibrium price.
Table 313
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Minutes Needed toNumber of Cellular Phones Programmed or Tested in a 40Hour
Week
Program 1 Cellular PhoneTest 1 Cellular PhoneCellular Phones ProgrammedCellular
Phones Tested
Juanita ? 2 160 1200
Shantala 10 4 240 600
Refer to Table 313. The number of minutes needed by Juanita to program a cellular
phone is
a. 4.
b. 5.
c. 7.5.
d. 15.
If a price floor is a binding constraint on a market, then
a. the equilibrium price must be above the price floor.
b. the quantity demanded must exceed the quantity supplied.
c. sellers cannot sell all they want to sell at the price floor.
d. buyers cannot buy all they want to buy at the price floor.
Table 337
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Labor Hours
Needed to Make 1
CoolerRadio
Aruba25
Iceland14
Refer to Table 337. Aruba should export
a. coolers and import radios.
b. radios and import coolers.
c. both goods and import neither good.
d. neither good and import both goods.
Table 57
The following table shows a portion of the demand schedule for a particular good at
various levels of income.
PriceQuantity Demanded
(Income = $5,000)Quantity Demanded
(Income = $7,500)Quantity Demanded
(Income = $10,000)
$24234
$20468
$166912
$1281216
$8101520
$4121824
Refer to Table 57. Using the midpoint method, at a price of $12, what is the income
elasticity of demand when income rises from $5,000 to $10,000?
a. 0.00
b. 0.41
c. 1.00
d. 2.45
Figure 67
Refer to Figure 67. Which of the following price controls would cause a surplus of 20
units of the good?
a. a price ceiling set at $6
b. a price ceiling set at $5
c. a price floor set at $9
d. a price floor set at $8
In the broadest sense, economics is the study of
a. production methods.
b. how society manages its scarce resources.
c. how households decide who performs which tasks.
d. the interaction of business and government.
Figure 414
Refer to Figure 414. Which of the following best describes the movement from E1 to
E2?
a. a decrease in supply
b. an increase in supply
c. a movement along the supply curve
d. a decrease in demand
About what percent of total world trade is accounted for by countries that belong to the
World Trade Organization?
a. 54 percent
b. 72 percent
c. 89 percent
d. 97 percent
A tax placed on a good
a. causes the effective price to sellers to increase.
b. affects the welfare of buyers of the good but not the welfare of sellers.
c. causes the equilibrium quantity of the good to decrease.
d. creates a burden that is usually borne entirely by the sellers of the good.
When a country that imports a particular good imposes an import quota on that good,
a. producer surplus increases and total surplus increases in the market for that good.
b. producer surplus increases and total surplus decreases in the market for that good.
c. producer surplus decreases and total surplus increases in the market for that good.
d. producer surplus decreases and total surplus decreases in the market for that good.
Figure 216
Refer to Figure 216. The graph shown is known as a
a. timeseries graph.
b. bar graph.
c. scatterplot.
d. pie chart.
The forces that make market economies work are
a. work and leisure.
b. politics and religion.
c. supply and demand.
d. taxes and government spending.
If the labor supply curve is very elastic, a tax on labor
a. has a large deadweight loss.
b. raises enough tax revenue to offset the loss in welfare.
c. has a relatively small impact on the number of hours that workers choose to work.
d. results in a large tax burden on the firms that hire labor.
A society allocates its scarce resources to various uses. These scarce resources include
a. land.
b. people.
c. machines.
d. All of the above are correct.
Figure 64
Refer to Figure 64. A governmentimposed price floor of $12 in this market results in
a. a surplus of 2 units.
b. a surplus of 4 units.
c. 12 units sold.
d. 10 units sold.
If a consumer places a value of $20 on a particular good and if the price of the good is
$25, then the
a. consumer has consumer surplus of $5 if he buys the good.
b. consumer does not purchase the good.
c. price of the good will rise due to market forces.
d. market is out of equilibrium.
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 $1,000,
a. Bobby is an eager supplier.
b. Dianne is an eager supplier.
c. Evaline’s producer surplus is $100.
d. All of the above are correct.