Consumer surplus equals the
a. value to buyers minus the amount paid by buyers.
b. value to buyers minus the cost to sellers.
c. amount received by sellers minus the cost to sellers.
d. amount received by sellers minus the amount paid by buyers.
If the government removes a binding price floor from a market, then the price received
by sellers will
a. decrease, and the quantity sold in the market will decrease.
b. decrease, and the quantity sold in the market will increase.
c. increase, and the quantity sold in the market will decrease.
d. increase, and the quantity sold in the market will increase.
Suppose you make jewelry. If the price of gold falls, then we would expect you to
a. be willing and able to produce less jewelry than before at each possible price.
b. be willing and able to produce more jewelry than before at each possible price.
c. face a greater demand for your jewelry.
d. face a weaker demand for your jewelry.
Economists say that a market where goods are not consumed by those valuing the
goods most highly is
a. laissezfaire..
b. unequal.
c. inefficient.
d. rational.
In response to the deep economic downturn in the US in 2008 and 2009, the US
a. reduced taxes.
b. increased government spending.
c. increased the supply of money.
d. All of the above are correct.
The price of sugar that prevails in international markets is called the
a. export price of sugar.
b. import price of sugar.
c. comparativeadvantage price of sugar.
d. world price of sugar.
Figure 919. On the diagram below, Q represents the quantity of textiles and P
represents the price of textiles.
Refer to Figure 919. With free trade, the country for which the figure is drawn will
a. export 30 units of textiles.
b. export 50 units of textiles.
c. import 30 units of textiles.
d. import 50 units of textiles.
Buyers of a product will bear the larger part of the tax burden, and sellers will bear a
smaller part of the tax burden, when the
a. tax is placed on the sellers of the product.
b. tax is placed on the buyers of the product.
c. supply of the product is more elastic than the demand for the product.
d. demand for the product is more elastic than the supply of the product.
When the government redistributes income from the wealthy to the poor,
a. efficiency is improved, but equality is not.
b. equality is improved, but efficiency is not.
c. both efficiency and equality are improved.
d. neither efficiency nor equality are improved.
Figure 724
Refer to Figure 724. If the government imposes a price floor at $18, then consumer
surplus is
a. ABF.
b. AGH.
c. HGCD.
d. HGBF.
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 Spain is
a. 1/2 unit of cheese.
b. 1/2 hour of labor.
c. 2 units of cheese.
d. 8 hours of labor.
Table 327
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed to Make 1Quantity Produced in 36 Hours
ParasolPlateParasolPlate
Huang26186
Min24189
Refer to Table 327. The opportunity cost of 1 parasol for Min is
a. 1/3 plate.
b. 1/2 plate.
c. 2 plates.
d. 3 plates.
Congressman Dearmark justified spending $3 million on a new entertainment complex
in his district because it will create 450 new jobs for his residents. As a student of
economics, you know that
a. this is a case of the “broken window fallacy.”
b. this is a great use of taxpayer dollars.
c. this policy diverts money from spending somewhere else in the economy.
d. Both a and c are correct.
Table 59
Supply Curve ASupply Curve BSupply Curve C
Price $1.00 $2.00 $1.00 $3.00$2.00 $5.00
Quantity Supplied 500 600 600 900 400 700
Refer to Table 59. Which of the three supply curves represents the most elastic supply?
a. supply curve A
b. supply curve B
c. supply curve C
d. There is no difference in the elasticity of the three supply curves.
The principle of comparative advantage does not provide answers to certain questions.
One of those questions is
a. Do specialization and trade benefit more than one party to a trade?
b. Is it absolute advantage or comparative advantage that really matters?
c. How are the gains from trade shared among the parties to a trade?
d. Is it possible for specialization and trade to increase total output of traded goods?
The price elasticity of supply measures how responsive
a. equilibrium price is to equilibrium quantity.
b. sellers are to a change in buyers’ income.
c. sellers are to a change in price.
d. consumers are to the number of substitutes.
A marginal change is a
a. change that involves little, if anything, that is important.
b. large, significant adjustment.
c. change for the worse, and so it is usually a shortterm change.
d. small, incremental adjustment.
In constructing models, economists
a. leave out equations, since equations and models tend to contradict one another.
b. ignore the long run, since models are useful only for shortrun analysis.
c. sometimes make assumptions that are contrary to features of the real world.
d. try to include every feature of the economy.
Figure 925
The following diagram shows the domestic demand and supply in a market. Assume
that the world price in this market is $10 per unit.
Refer to Figure 925. Suppose the government imposes a tariff of $5 per unit. The
deadweight loss caused by the tariff is
a. $25.
b. $50.
c. $75.
d. $100.
Figure 96
The figure illustrates the market for roses in a country.
Refer to Figure 96. With trade and without a tariff,
a. the domestic price is equal to the world price.
b. roses are sold at $4 in this market.
c. there is a shortage of 400 roses in this market.
d. this country imports 200 roses.
Suppose the income elasticity of demand is 0.5 for good X. This implies that a 5%
decrease in income will cause the quantity demanded of good X to
a. increase by 2.5%, and X is an inferior good.
b. decrease by 2.5% and X is a normal good.
c. increase by 10% and X is an inferior good.
d. decrease by 10% and X is a normal good.
Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice
cream cones rises from that price by 4 percent, the number of ice cream cones
demanded falls to 46. Using the midpoint approach to calculate the price elasticity of
demand, it follows that the
a. demand for ice cream cones in this price range is elastic.
b. demand for ice cream cones in this price range is inelastic.
c. demand for ice cream cones in this price range is unit elastic.
d. price elasticity of demand for ice cream cones in this price range is 0.
A decrease in supply will cause the smallest increase in price when
a. both supply and demand are inelastic.
b. demand is elastic and supply is inelastic.
c. both supply and demand are elastic.
d. demand is inelastic and supply is elastic.
Goods produced abroad and sold domestically are called
a. exports.
b. imports.
c. exchange rates.
d. opportunity costs.
Figure 925
The following diagram shows the domestic demand and supply in a market. Assume
that the world price in this market is $10 per unit.
Refer to Figure 925. With free trade and a $5 per unit tariff, the country
a. exports 20 units of the good.
b. imports 20 units of the good.
c. exports 40 units of the good.
d. imports 40 units of the good.
One of the basic principles of economics is that markets are usually a good way to
organize economic activity. This principle is explained by the study of
a. factor markets.
b. energy markets.
c. welfare economics.
d. labor economics.
When a production possibilities frontier is bowed outward, the opportunity cost of
producing an additional unit of a good
a. increases as more of the good is produced.
b. decreases as more of the good is produced.
c. does not change as more of the good is produced.
d. may increase, decrease, or not change as more of the good is produced.
Figure 93. The domestic country is China.
Refer to Figure 93. If China were to abandon a notrade policy in favor of a freetrade
policy,
a. Chinese producers of pencil sharpeners would become worse off.
b. Chinese consumers of pencil sharpeners would become better off.
c. total surplus in the Chinese economy would increase.
d. All of the above are correct.
Suppose the American Medical Association announces that men who shave their heads
are less likely to die of heart failure. We could expect the current demand for
a. hair gel to increase.
b. razors to increase.
c. combs to increase.
d. shampoo to increase.
A binding minimum wage tends to
a. cause a labor surplus.
b. cause unemployment.
c. have the greatest impact in the market for teenage labor.
d. All of the above are correct.
Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake
and eat corn. In which of the following cases is it impossible for both Olivia and
Andrew to benefit from trade?
a. Olivia cannot grow corn and Andrew cannot bake cakes.
b. Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at
growing corn.
c. Olivia is better than Andrew at baking cakes and at growing corn.
d. Both Olivia and Andrew can benefit from trade in all of the above cases.
Figure 84
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 84. The amount of tax revenue received by the government is equal to
a. $245.
b. $350.
c. $490.
d. $700.
Table 328
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
Minutes Needed to Number of Computers Set Up or Tested in a 40Hour Week
Set Up 1 ComputerTest 1 ComputerComputers Set UpComputers Tested
Barb48?5040
Jim30408060
Refer to Table 328. Barb has an absolute advantage in
a. both setting up and testing computers and a comparative advantage in setting up
computers.
b. both setting up and testing computers and a comparative advantage in testing
computers.
c. neither setting up nor testing computers and a comparative advantage in setting up
computers.
d. neither setting up nor testing computers and a comparative advantage in testing
computers.
Justin builds fences for a living. Justin’s outofpocket expenses (for wood, paint, etc.)
plus the value that he places on his own time amount to his
a. producer surplus.
b. producer deficit.
c. cost of building fences.
d. profit.
In the early 1980s, U.S. economic policy was directed toward reducing inflation. What
would you have expected to observe during this short period of time?
a. Inflation fell and unemployment fell.
b. Inflation and unemployment were both unaffected.
c. Inflation fell and unemployment increased.
d. Inflation fell and unemployment was unchanged.