A movement downward and to the right along a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.
Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks.
Which of the following is not possible?
a. Jim has an absolute advantage in the production of baseball bats and in the
production of hockey sticks.
b. Jim has an absolute advantage in the production of baseball bats and a comparative
advantage in the production of hockey sticks.
c. Jim has an absolute advantage in the production of hockey sticks and a comparative
advantage in the production of baseball bats.
d. Jim has a comparative advantage in the production of baseball bats and in the
production of hockey sticks.
Figure 916. The figure below illustrates a tariff. On the graph, Q represents quantity
and P represents price.
Refer to Figure 916. The tariff
a. decreases producer surplus by the area C, decreases consumer surplus by the area C +
D + E, and decreases total surplus by the area D + F.
b. increases producer surplus by the area C, decreases consumer surplus by the area C +
D + E + F, and decreases total surplus by the area D + F.
c. creates government revenue represented by the area B + E and decreases total surplus
by the area D + E + F.
d. increases producer surplus by the area C + G and creates government revenue
represented by the area D + E + F.
Consider Larry’s decision to go to college. If he goes to college, he will spend a total of
$120,000 on tuition, $30,000 on room and board, and $3,500 on books over four years.
If he does not go to college, he will earn $30,000 annually working in a store and spend
$7,000 on room and board each year. Larry’s cost of going to college is
a. $123,500.
b. $153,500.
c. $190,500
d. $245,500
Figure 911
Refer to Figure 911. Producer surplus plus consumer surplus in this market after trade
is
a. A + B.
b. A + B + C.
c. B + C + D.
d. A + B + C + D.
Table 41
PriceQuantity Demanded
by MichelleQuantity Demanded
by LauraQuantity Demanded
by Hillary
$55411
$46613
$37815
$281017
$191219
$0101421
Refer to Table 41. If the market consists of Michelle, Laura, and Hillary and the price
falls by $1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of
bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,
a. Henry experiences an increase in consumer surplus, but Janine does not.
b. Janine experiences an increase in consumer surplus, but Henry does not.
c. both Janine and Henry experience an increase in consumer surplus.
d. neither Janine nor Henry experiences an increase in consumer surplus.
Suppose Brazil has an absolute advantage over other countries in producing almonds,
but other countries have a comparative advantage over Brazil in producing almonds. If
trade in almonds is allowed, Brazil
a. will import almonds.
b. will export almonds.
c. will either import almonds or export almonds, but it is not clear from the given
information.
d. would have nothing to gain either from exporting or importing almonds.
Good X and good Y are substitutes. If the price of good Y increases, then the
a. demand for good X will decrease.
b. quantity demanded of good X will decrease.
c. demand for good X will increase.
d. quantity demanded of good X will increase.
Figure 73
Refer to Figure 73. Area C represents the
a. decrease in consumer surplus that results from a downwardsloping demand curve.
b. consumer surplus to new consumers who enter the market when the price falls from
P2 to P1.
c. increase in producer surplus when quantity sold increases from Q2 to Q1.
d. decrease in consumer surplus to each consumer in the market when the price
increases from P1 to P2.
Figure 720
Refer to Figure 720. Total surplus can be measured as the area
a. JNK.
b. JNML.
c. JRL.
d. JNL.
Figure 725
Refer to Figure 725. Suppose the government imposes a price ceiling of $16 in this
market. If the buyers with the highest willingness to pay purchase the good, then total
surplus will be
a. $256.
b. $768.
c. $1,024.
d. $1,280.
Table 75
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
First OrangeSecond OrangeThird Orange
Allison$2.00$1.50$0.75
Bob$1.50$1.00$0.60
Charisse$0.75$0.25$0
Refer to Table 75. If the market price of an orange increases from $0.80 to $1.05, then
consumer surplus
a. increases by $0.75.
b. decreases by $0.95.
c. decreases by $0.75.
d. decreases by $1.00.
Which of the following is not an important question for economic policy raised by the
experience of the textile industry?
a. How does international trade affect consumer wellbeing?
b. Who gains and who loses from free trade among countries?
c. How do the gains from trade compare to the losses?
d. Which argument for restricting free trade is politically feasible?
Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. Chile has a comparative advantage in the production of
a. coffee and Colombia has a comparative advantage in the production of soybeans.
b. soybeans and Colombia has a comparative advantage in the production of coffee.
c. both goods and Colombia has a comparative advantage in the production of neither
good.
d. neither good and Colombia has a comparative advantage in the production of both
goods.
Figure 417
Refer to Figure 417. At a price of
a. $2, there is a shortage of 6 units.
b. $5, there is a surplus of 25 units.
c. $5, there is a shortage of $25.
d. $7, there is a shortage of 4 units.
When an economist is asked a question like “why is unemployment higher for teenagers
than for older workers?” the economist
a. is asked to explain the cause of an economic event.
b. is asked to recommend a policy to improve economic outcomes.
c. is asked as a policy adviser.
d. does not have enough information to respond.
Figure 916. The figure below illustrates a tariff. On the graph, Q represents quantity
and P represents price.
Refer to Figure 916. The tariff
a. decreases producer surplus by the area C and decreases consumer surplus by the area
C + D + E + F.
b. decreases producer surplus by the area C + D and decreases consumer surplus by the
area D + E + F.
c. increases producer surplus by the area C and decreases consumer surplus by the area
C + D + E + F.
d. increases producer surplus by the area B + C and decrease consumer surplus by the
area D + E + F.
If a decrease in income increases the demand for a good, then the good is a(n)
a. substitute good.
b. complementary good.
c. normal good.
d. inferior good.
Suppose that the market for large, 64ounce soft drinks in the town of Pudgyville is
characterized by a typical, downwardsloping, linear demand curve and a typical,
upwardsloping, linear supply curve. The market is initially in equilibrium with 1,000
soft drinks sold per day. The newlyelected Mayor of Pudgyville wants to tax 64ounce
soft drinks. She is considering either a $0.10 tax or a $0.30 tax. Her chief economic
advisor estimates that the number of soft drinks sold after a $0.10 tax will be 900 and
after a $0.30 tax will be 500. Which tax is better?
a. The $0.10 tax is better because it raises more revenue and creates a lower deadweight
loss than the $0.30 tax.
b. The $0.30 tax is better because it raises more revenue and creates a lower deadweight
loss than the $0.10 tax.
c. It is not clear which tax is better because although the $0.30 tax raises more tax
revenues, it creates a larger deadweight loss than the $0.10 tax.
d. It is not clear which tax is better because although the $0.10 tax raises more tax
revenues, it creates a larger deadweight loss than the $0.30 tax.
Trade between the United States and Guatemala
a. benefits both the United States and Guatemala.
b. is a losing proposition for the United States because Guatemalan labor is less
expensive than U.S. labor.
c. is a losing proposition for Guatemala because capital is much more abundant in the
U.S. than in Guatemala.
d. is a losing proposition for Guatemala because U.S. workers are more productive than
Guatemalan workers.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. When the tax is placed on this good, the quantity sold
a. is 600, and buyers effectively pay $10.
b. is 300, and buyers effectively pay $10.
c. is 600, and buyers effectively pay $16.
d. is 300, and buyers effectively pay $16.
If sellers expect higher basket prices in the near future, the current
a. supply of baskets will increase.
b. supply of baskets will decrease.
c. supply of baskets will be unaffected.
d. demand for baskets will decrease.
Figure 53
Refer to Figure 53. Which demand curve is perfectly inelastic?
a. A
b. B
c. C
d. D
Table 413
The demand schedule below pertains to sandwiches demanded per week.
PriceHarry’s
Quantity
DemandedDarby’s
Quantity
DemandedJake’s
Quantity
Demanded
$3343
$512x
Refer to Table 413. Suppose x = 1. Then it must be true that
a. Harry and Jake have the same income, which is lower than Darby’s income.
b. if sandwiches and potato chips are complements for Harry, then those two goods are
also complements for Jake.
c. Harry’s demand curve is identical to Jake’s demand curve.
d. All of the above are correct.
Which of the following statements helps to explain why government drug interdiction
increases drugrelated crime?
a. The direct impact is on buyers, not sellers.
b. Successful drug interdiction policies reduce the demand for illegal drugs.
c. Drug addicts will have an even greater need for quick cash to support their habits.
d. In the short run, both equilibrium quantities and prices will fall in the markets for
illegal drugs.
Which of the following is not correct?
a. The producer who requires a smaller quantity of inputs to produce a good is said to
have an absolute advantage in producing that good.
b. The producer who gives up less of other goods to produce Good X has the smaller
opportunity cost of producing Good X.
c. The producer who has the smaller opportunity cost of producing a good is said to
have a comparative advantage in producing that good.
d. The gains from specialization and trade are based not on comparative advantage but
on absolute advantage.
For which of the following types of goods would the income elasticity of demand be
positive and relatively large?
a. all inferior goods
b. all normal goods
c. goods for which there are many complements
d. luxuries
Suppose the cost of flying a 100seat plane for an airline is $50,000 and there are 10
empty seats on a flight. The average cost per seat is
a. $50.
b. $500.
c. $50,000.
d. This cannot be determined from the information given.
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 5 televisions per year. Each
nation has 100 workers, and each country specializes according to the principle of
comparative advantage. If Radioland trades 100 televisions to Teeveeland in exchange
for 100 radios each year, then each country’s maximum consumption of new radios and
televisions per year will be
a. higher than it would be in the absence of trade because of the gains from trade.
b. the same as it would be in the absence of trade.
c. less than it would be in the absence of trade because neither country is specializing in
the product in which it has a comparative advantage.
d. less than it would be in the absence of trade because Teeveeland has an absolute
advantage in both goods and so it cannot benefit by trading with Radioland.