1) In the market for apples in a certain country, consumer surplus increases and total
surplus increases when that country
a.abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of
apples.
b.abandons a no-trade policy, adopts a free-trade policy, and becomes an exporter of
apples.
c.abandons a free-trade policy, adopts a no-trade policy, and becomes an importer of
apples.
d.abandons a free-trade policy, adopts a no-trade policy, and becomes an exporter of
apples.
2) Suppose that a violent earthquake causes the uninhabited Hawaiian island of
Mokuauia (also called Goat Island) to fall into the Pacific Ocean. No people are killed
or injured, and since the island is undeveloped, no buildings are destroyed. The island
was a source of tourist income for Hawaiian landowners. Which of the following
statements correctly describes the rents earned by the people who own land on the
surrounding islands?
a.As the supply of vacation land decreases, the marginal productivity of the remaining
land will decrease; thus rents will decrease.
b.As the supply of vacation land decreases, the marginal productivity of the remaining
land will increase; thus, rents will decrease.
c.As the supply of vacation land decreases, the marginal productivity of the remaining
land will increase; thus, rents will increase.
d.There would be no change in the rents earned by the other landowners because the
effects of supply and demand would exactly cancel each other out.
3) Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
At which of the following prices would both England and Spain gain from trade with
each other?
a.16 units of bread for 16 units of cheese
b.16 units of bread for 24 units of cheese
c.16 units of bread for 48 units of cheese
d.England and Spain could not both gain from trade with each other at any price.
4) We can say that the allocation of resources is efficient if
a.producer surplus is maximized.
b.consumer surplus is maximized.
c.total surplus is maximized.
d.sellers’ costs are minimized.
5) Which of the following is an example of an externality?
a.Annie purchases a new dress.
b.Antonio’s dog barks loudly during the night, waking his neighbors.
c.Harold sells a book to Cathy, who reads the book and then gives it to James as a gift.
d.Gloria watches a scary movie.
6) Economic mobility in the United States is
a.great, so many of those below the poverty line are there only temporarily.
b.rare, so most of those below the poverty line are there for decades.
c.rare, yet many of those below the poverty line are there only temporarily.
d.unrelated to poverty.
7) The benefits principle of taxation can be used to argue that wealthy citizens should
pay higher taxes than poorer ones on the basis that
a.police services are more frequently used in poor neighborhoods.
b.the wealthy benefit more from services provided by government than the poor.
c.the poor are more active in political processes.
d.the poor receive welfare payments.
8) Figure 8-7
The vertical distance between points A and B represents a tax in the market.
As a result of the tax, consumer surplus decreases by
a.$130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is
$60.
b.$150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss
is $60.
c.$160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is
$80.
d.$240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss
is $80.
9) Suppose Darby values a certain smart phone at $400. Jake values the same smart
phone at $300. The pre-tax price of this smart phone is $250. The government imposes
a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from
the tax is
a. $150.
b. $100.
c.$50.
d.$0.
10) A result of welfare economics is that the equilibrium price of a product is
considered to be the best price because it
a.maximizes both the total revenue for firms and the quantity supplied of the product.
b.maximizes the combined welfare of buyers and sellers.
c.minimizes costs and maximizes output.
d.minimizes the level of welfare payments.
11) Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production
Possibilities Frontier
If
Uzbekistan and Azerbaijan switch from each country dividing its time equally between
the production of bolts and nails to each country spending all of its time producing the
good in which it has a comparative advantage, then total production will increase by
a.5 bolts and 10 nails.
b.15 bolts and 40 nails.
c.20 bolts and 50 nails.
d.30 bolts and 80 nails.
12) Table 14-12
Bill’s Birdhouses
What is Bill‘s economic profit at the profit-maximizing output level?
a. $25
b. $75
c. $115
d. $225
13) Figure 8-10
Suppose the government imposes a tax that reduces the quantity sold in the market after
the tax to Q2. With the tax, the producer surplus is
a.(P5-0) x Q5.
b. 1/2 x (P5-0) x Q5.
c. (P8-0) x Q2.
d. 1/2 x (P8-0) x Q2.
14) Scenario 15-9
Suppose executives at an art museum know that 100 adults are willing to pay $12 for
admission to the museum on a weekday. Suppose the executives also know that 200
students are willing to pay $8 for admission on a weekday. The cost of operating the
museum on a weekday is $2,000.
How much profit will the museum earn if it engages in price discrimination?
a. $800
b. $1,200
c. $1,600
d. $2,800