Figure 422
Refer to Figure 422. At a price of $20, there is a
a. surplus of 4 units.
b. surplus of 8 units.
c. shortage of 4 units.
d. shortage of 8 units.
Figure 922
The following diagram shows the domestic demand and domestic supply in a market. In
addition, assume that the world price in this market is $40 per unit.
Refer to Figure 922. Suppose the government imposes a tariff of $20 per unit. The
amount of revenue collected by the government from the tariff is
a. $6,000.
b. $9,000.
c. $12,000.
d. $15,000.
Figure 216
Refer to Figure 216. The opportunity cost of obtaining 30 additional gadgets by
moving from point B to point A is
a. 0 widgets.
b. 10 widgets.
c. 20 widgets.
d. 30 widgets.
Table 32
Assume that England and Holland can switch between producing milk and oats at a
constant rate.
Number of Units
Produced in an Hour
MilkOats
England104
Holland86
Refer to Table 32. We could use the information in the table to draw a production
possibilities frontier for England and a second production possibilities frontier for
Holland. If we were to do this, measuring milk along the horizontal axis, then
a. the slope of England’s production possibilities frontier would be 10/4 and the slope of
Holland’s production possibilities frontier would be 4/3.
b. the slope of England’s production possibilities frontier would be 4/10 and the slope
of Holland’s production possibilities frontier would be 3/4.
c. the slope of England’s production possibilities frontier would be 10/4 and the slope of
Holland’s production possibilities frontier would be 4/3.
d. the slope of England’s production possibilities frontier would be 4/10 and the slope
of Holland’s production possibilities frontier would be 3/4.
At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At
a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the
midpoint method, the price elasticity of supply is about
a. 2.0.
b. 1.23.
c. 1.00.
d. 0.81.
In the early 1970s, OPEC’s goal was to
a. decrease the worldwide price of oil so that the quantity demanded increased, thus
raising total revenues for OPEC members.
b. increase the worldwide price of oil by reducing the quantity of oil supplied.
c. increase the worldwide price of oil by increasing the quantity of oil supplied, thus
raising total revenues for OPEC members.
d. decrease the worldwide price of oil so that quantity demanded increased.
Minimum wage laws
a. may encourage some teenagers to drop out and take jobs.
b. create labor shortages.
c. have the greatest impact in the market for skilled labor.
d. All of the above are correct.
If suppliers expect the price of their product to fall in the future, then they will
a. decrease supply now.
b. increase supply now.
c. decrease supply in the future but not now.
d. increase supply in the future but not now.
Table 51
GoodPrice Elasticity of Demand
A1.9
B0.8
Refer to Table 51. Which of the following is consistent with the elasticities given in
Table 51?
a. A is a luxury and B is a necessity.
b. A is a good after an increase in income and B is that same good after a decrease in
income.
c. A has fewer substitutes than B.
d. A is a good immediately after a price increase and B is that same good 3 years after
the price increase.
When a nation first begins to trade with other countries and the nation becomes an
exporter of soybeans,
a. this is an indication that the world price of soybeans exceeds the nation’s domestic
price of soybeans in the absence of trade.
b. this is an indication that the nation has a comparative advantage in producing
soybeans.
c. the nation’s consumers of soybeans become worse off and the nation’s producers of
soybeans become better off.
d. All of the above are correct.
A rational decisionmaker
a. ignores marginal changes and focuses instead on “the big picture.”
b. ignores the likely effects of government policies when he or she makes choices.
c. takes an action only if the marginal benefit of that action exceeds the marginal cost of
that action.
d. takes an action only if the combined benefits of that action and previous actions
exceed the combined costs of that action and previous actions.
The price received by sellers in a market will decrease if the government
a. imposes a binding price floor in that market.
b. decreases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. increases a binding price floor in that market.
Table 326
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed to Make 1Quantity Produced in 2400 Hours
CarAirplaneCarsAirplanes
Japan301508016
Korea501504816
Refer to Table 326. Japan and Korea would not be able to gain from trade if Korea’s
opportunity cost of one car changed to
a. 1/5 airplane.
b. 1/3 airplane.
c. 3 airplanes.
d. 5 airplanes.
Which of the following is not correct about most economic models?
a. They are composed of equations and diagrams.
b. They contribute very little to economists’ understanding of the real world.
c. They omit many features of the realworld economy.
d. In constructing models, economists make assumptions.
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, total surplus is
a. $800.
b. $1,200.
c. $1,600.
d. $2,000.
Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and
a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10
workers. For many years, the two countries traded, each completely specializing
according to their respective comparative advantages. Now war has broken out between
them and all trade has stopped. Without trade, Caninia produces and consumes 10
blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5
meals per day. The war has caused the combined daily output of the two countries to
decline by
a. 15 blankets and 35 meals.
b. 25 blankets and 40 meals.
c. 35 blankets and 45 meals.
d. 50 blankets and 80 meals.
In a market economy, supply and demand are important because they
a. are direct policy tools used by government agencies to regulate the economy.
b. illustrate when an market is in equilibrium, but they are not helpful when a market is
out of equilibrium.
c. can be used to predict the impact on the economy of various events and policies.
d. All of the above are correct.
Assume for the United States that the opportunity cost of each airplane is 50 cars.
Which of these pairs of points could be on the United States’ production possibilities
frontier?
a. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars)
b. (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)
c. (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)
d. (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)
When two variables have a negative correlation,
a. when the xvariable decreases, the yvariable decreases.
b. when the xvariable decreases, the yvariable increases.
c. when the xvariable increases, the yvariable increases.
d. More than one of the above is correct.
The consumption of water by local residents that may include pesticide runoff from
local farmers’ fields is an example of
a. market equilibrium.
b. market power.
c. externalities.
d. laissezfaire.
Figure 517
Refer to Figure 517. Using the midpoint method, what is the price elasticity of supply
between point A and point B?
a. 0.4
b. 0.6
c. 1.67
d. 2.16
When economists are trying to help improve the world, they are
a. in the realm of positive economics rather than normative economics.
b. in the realm of macroeconomics rather than microeconomics.
c. scientists.
d. policy advisers.
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. Huang has an absolute advantage in the production of
a. parasols and a comparative advantage in the production of parasols.
b. parasols and a comparative advantage in the production of plates.
c. neither good and a comparative advantage in the production of parasols.
d. neither good and a comparative advantage in the production of plates.
Figure 619
Refer to Figure 619. Suppose a tax of $2 per unit is imposed on this market. Which of
the following is correct?
a. Onefourth of the burden of the tax will fall on buyers, and threefourths of the burden
of the tax will fall on sellers.
b. Onethird of the burden of the tax will fall on buyers, and twothirds of the burden of
the tax will fall on sellers.
c. Onehalf of the burden of the tax will fall on buyers, and onehalf of the burden of the
tax will fall on sellers.
d. Twothirds of the burden of the tax will fall on buyers, and onethird of the burden of
the tax will fall on sellers.
When a country allows trade and becomes an exporter of a good,
a. consumer surplus and producer surplus both increase.
b. consumer surplus and producer surplus both decrease.
c. consumer surplus increases and producer surplus decreases.
d. consumer surplus decreases and producer surplus increases.
Suppose the cost of flying a 200seat plane for an airline is $100,000 and there are 10
empty seats on a flight. The airline should sell a ticket to a standby passenger only if the
passenger is willing to pay
a. more than $200.
b. more than $300.
c. more than $500.
d. This cannot be determined from the information given.
Figure 71
Refer to Figure 71. The value of the good to consumers minus the cost of the good to
consumers amounts to $325 if the price of the good is
a. $200.
b. $150.
c. $125.
d. $100.
Suppose Jamaica has an absolute advantage over other countries in producing sugar, but
other countries have a comparative advantage over Jamaica in producing sugar. If trade
in sugar is allowed, Jamaica
a. will import sugar.
b. will export sugar.
c. will either import sugar or export sugar, but it is not clear from the given information.
d. would have nothing to gain either from exporting or importing sugar.
The deadweight loss from a tax of $x per unit will be smallest in a market
a. in which demand is elastic and supply is inelastic.
b. in which demand is inelastic and supply is elastic.
c. in which demand is inelastic and supply is inelastic.
d. None of the above are correct; we need to know the value of x in order to determine
the answer.
Figure 33
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 33. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of tacos and burritos could
Arturo and Dina together produce in a given day?
a. 400 tacos and 350 burritos
b. 500 tacos and 250 burritos
c. 600 tacos and 150 burritos
d. 700 tacos and 100 burritos
Figure 424
The diagram below pertains to the demand for turkey in the United States.
Refer to Figure 424. All else equal, the premature deaths of thousands of turkeys
would cause a move from
a. DA to DB.
b. DB to DA.
c. x to y.
d. y to x.
Suppose that a worker in Radioland can produce either 4 radios or 1 television per year,
and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each
nation has 100 workers. Also suppose that each country completely specializes in
producing the good in which it has a comparative advantage. If Radioland trades 100
radios to Teeveeland in exchange for 100 televisions each year, then each country’s
maximum consumption of new radios and televisions per year will be
a. 100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in
Teeveeland.
b. 300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in
Teeveeland.
c. 200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in
Teeveeland.
d. 300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in
Teeveeland.