The law of supply states that, other things equal, an increase in
a. price causes quantity supplied to increase.
b. price causes quantity supplied to decrease.
c. quantity supplied causes price to increase.
d. quantity supplied causes price to decrease.
Total surplus is represented by the area
a. under the demand curve and above the price.
b. above the supply curve and up to the price.
c. under the supply curve and up to the price.
d. between the demand and supply curves up to the point of equilibrium.
When the price of a good or service changes,
a. the supply curve shifts in the opposite direction.
b. the demand curve shifts in the opposite direction.
c. the demand curve shifts in the same direction.
d. there is a movement along a given demand curve.
Which of the following transactions takes place in the markets for the factors of
production in the circularflow diagram?
a. Dylan receives a salary for his work as a financial analyst for an investment firm.
b. Kristin buys two business suits to wear to her job as a Chief Information Officer.
c. Jim receives clean water in his home in exchange for paying his water bill.
d. Caroline owns a nail salon and receives payments from her clients for her services.
Figure 811
Refer to Figure 811. The length of the line segment connecting points A and B
represents
a. the difference between the price paid by buyers after the tax is imposed and the price
received by sellers after the tax is imposed.
b. the size of the tax.
c. the “tax wedge.”
d. All of the above are correct.
Figure 55
Refer to Figure 55. Using the midpoint method, demand is unit elastic between prices
of
a. $20 and $40.
b. $40 and $50.
c. $40 and $60.
d. $50 and $70.
In 2012, the U.S. minimum wage according to federal law was
a. $4.25 per hour.
b. $5.15 per hour.
c. $5.75 per hour.
d. $7.25 per hour.
Figure 923
The following diagram shows the domestic demand and domestic supply for a market.
Assume that the world price in this market is $120 per unit.
Refer to Figure 923. With free trade, the domestic price and domestic quantity supplied
are
a. $90 and 10.
b. $90 and 18.
c. $120 and 5.
d. $120 and 18.
. Table 74
The numbers in Table 71 reveal the maximum willingness to pay for a ticket to a
Chicago Cubs vs. St. Louis Cardinal’s baseball game at Wrigley Field.
BuyerWillingness to Pay
Jennifer$10
Bryce$15
Dan$20
David$25
Ken$50
Lisa$60
Refer to Table 74. If you have a ticket that you sell to the group in an auction, who will
buy the ticket?
a. Dan
b. David
c. Ken
d. Lisa
Figure 427
Panel (a)Panel (b)
Panel (c)Panel (d)
Refer to Figure 427. Which of the four panels illustrates a decrease in quantity
demanded?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
The price of a good that prevails in a world market is called the
a. absolute price.
b. relative price.
c. comparative price.
d. world price.
When the price of a good is $5, the quantity demanded is 120 units per month; when the
price is $7, the quantity demanded is 100 units per month. Using the midpoint method,
the price elasticity of demand is about
a. 0.55.
b. 1.83.
c. 2.
d. 10.
When a payroll tax is enacted, the wage received by workers
a. falls, and the wage paid by firms rises.
b. falls, and the wage paid by firms falls.
c. rises, and the wage paid by firms falls.
d. rises, and the wage paid by firms rises.
If the government were to intervene in a market economy and fix the price of visiting a
health care provider below the market price, then we would expect, relative to the
market outcome,
a. an increase in the number of visits people want to make and an increase in the
number of visits health care providers want to provide.
b. an increase in the number of visits people want to make and a decrease in the number
of visits health care providers want to provide.
c. a decrease in the number of visits people want to make and an increase in the number
of visits health care providers want to provide.
d. a decrease in the number of visits people want to make and a decrease in the number
of visits health care providers want to provide.
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for chocolate chip cookies of an improved highspeed mixer that allows
bakers to produce cookies in less time?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
When a tax is placed on the buyers of a product, the
a. size of the market decreases.
b. effective price received by sellers decreases, and the price paid by buyers increases.
c. demand for the product decreases.
d. All of the above are correct.
Table 322
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
ToothbrushHairbrush
Zimbabwe310
Portugal56
Refer to Table 322. Zimbabwe and Portugal would not be able to gain from trade if
Zimbabwe’s opportunity cost of one toothbrush changed to
a. 0 hairbrushes.
b. 5/6 hairbrushes.
c. 6/5 hairbrushes.
d. Zimbabwe and Portugal can always gain from trade regardless of their opportunity
costs.
Figure 39
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 39. If the production possibilities frontiers shown are each for two days
of production, then which of the following combinations of bolts and nails could
Uzbekistan and Azerbaijan together not make in a given 2day production period?
a. 9 bolts and 122 nails
b. 21 bolts and 98 nails
c. 36 bolts and 56 nails
d. 47 bolts and 18 nails
Welfare economics is the study of
a. taxes and subsidies.
b. how technology is best put to use in the production of goods and services.
c. government welfare programs for needy people.
d. how the allocation of resources affects economic wellbeing.
If a 10% decrease in price for a good results in a 20% increase in quantity demanded,
the price elasticity of demand is
a. 0.50.
b. 1.
c. 1.5.
d. 2.
The difference between slope and elasticity is that slope
a. is a ratio of two changes, and elasticity is a ratio of two percentage changes.
b. is a ratio of two percentage changes, and elasticity is a ratio of two changes.
c. measures changes in quantity demanded more accurately than elasticity.
d. None of the above is correct; there is no difference between slope and elasticity.
Which of the following is not an example of a graph of a single variable?
a. a pie chart
b. a bar graph
c. a timeseries graph
d. a scatterplot
In a market, to find the total amount supplied at a particular price, we must
a. sum the quantities that individual firms are willing and able to supply at that price.
b. calculate the average of the quantities that individual firms are willing and able to
supply at that price.
c. sum the costs that individual firms incur to supply the product at that price.
d. account for all determinants of demand.
Figure 85
Suppose that the government imposes a tax of P3 P1.
Refer to Figure 85. After the tax is levied, consumer surplus is represented by area
a. A.
b. A+B+C.
c. D+H+F.
d. F.
In the market for widgets, the supply curve is the typical upwardsloping straight line,
and the demand curve is the typical downwardsloping straight line. The equilibrium
quantity in the market for widgets is 250 per month when there is no tax. Then a tax of
$6 per widget is imposed. As a result, the government is able to raise $750 per month in
tax revenue. We can conclude that the aftertax quantity of widgets is
a. 75 per month.
b. 100 per month.
c. 125 per month.
d. 150 per month.
Beef is a normal good. You observe that both the equilibrium price and quantity of beef
have fallen over time. Which of the following explanations would be most consistent
with this observation?
a. Consumers have experienced an increase in income, and beefproduction technology
has improved.
b. The price of chicken has risen, and the price of steak sauce has fallen.
c. New medical evidence has been released that indicates a negative correlation
between a person’s beef consumption and life expectancy.
d. The demand curve for beef must be positively sloped.
Figure 321
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 321. Suppose Azerbaijan is willing to trade 3 nails to Uzbekistan for
every bolt that Uzbekistan makes and sends to Azerbaijan. Which of the following
combinations of bolts and nails could Azerbaijan then consume, assuming Uzbekistan
specializes in making bolts and Azerbaijan specializes in making nails?
a. 8 bolts and 56 nails
b. 14 bolts and 44 nails
c. 18 bolts and 32 nails
d. 20 bolts and 26 nails
Figure 55
Refer to Figure 55. At a price of $50 per unit, sellers’ total revenue equals
a. $500.
b. $750.
c. $1000.
d. $1250.
In the long run, the quantity supplied of most goods
a. will increase in almost all cases, regardless of what happens to price.
b. cannot respond at all to a change in price.
c. can respond to a change in price, but the change is almost always inconsequential.
d. can respond substantially to a change in price.
Figure 918. On the diagram below, Q represents the quantity of peaches and P
represents the price of peaches. The domestic country is Isoland.
Refer to Figure 918. If Isoland allows international trade and the world price of
peaches is $5, then
a. producer surplus will be smaller than it would be if Isoland banned trade.
b. consumer surplus will be smaller than it would be if Isoland banned trade.
c. the domestic quantity of peaches demanded will exceed the domestic quantity of
peaches supplied.
d. Isoland will be an importer of peaches.
A tariff is a tax placed on
a. an exported good and it lowers the domestic price of the good below the world price.
b. an exported good and it ensures that the domestic price of the good stays the same as
the world price.
c. an imported good and it lowers the domestic price of the good below the world price.
d. an imported good and it raises the domestic price of the good above the world price.