Consider Frank’s decision to go to college. If he goes to college, he will spend $21,000
on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to
college, he will earn $16,000 working in a store and spend $7,200 on room and board.
Frank’s cost of going to college is
a. $33,800.
b. $42,600.
c. $49,800.
d. $57,000.
Figure 66
Refer to Figure 66. If the government imposes a price floor of $10 on this market, then
there will be
a. no surplus.
b. a surplus of 20 units.
c. a surplus of 30 units.
d. a surplus of 10 units.
Table 36
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 36. Which of the following combinations of toothbrushes and
hairbrushes could Portugal produce in 30 minutes?
a. 1 toothbrush and 4 hairbrushes
b. 4 toothbrushes and 2 hairbrushes
c. 5 toothbrushes and 6 hairbrushes
d. 6 toothbrushes and 5 hairbrushes
If a price ceiling is not binding, then
a. the equilibrium price is above the price ceiling.
b. the equilibrium price is below the price ceiling.
c. it has no legal enforcement mechanism.
d. None of the above is correct because all price ceilings must be binding.
Suppose that demand is inelastic within a certain price range. For that price range,
a. an increase in price would increase total revenue because the decrease in quantity
demanded is proportionately less than the increase in price.
b. an increase in price would decrease total revenue because the decrease in quantity
demanded is proportionately greater than the increase in price.
c. a decrease in price would increase total revenue because the increase in quantity
demanded is proportionately smaller than the decrease in price.
d. a decrease in price would not affect total revenue.
As a rationing mechanism, discrimination according to seller bias is
a. efficient and fair.
b. efficient, but potentially unfair.
c. inefficient, but fair.
d. inefficient and potentially unfair.
The language of economics is
a. needlessly arcane.
b. valuable because it provides a new and useful way of learning about the world.
c. easy to learn within a day.
d. unnecessary to learn for a thorough understanding of economics.
Government policies designed to equalize the distribution of economic wellbeing
include
(i)the welfare system
(ii)unemployment insurance
(iii)progressive income tax
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)
Figure 42
Refer to Figure 42. Suppose Phil and Miss Kay are the only consumers in the market.
If the price is $12, then the market quantity demanded is
a. 0 units.
b. 2 units.
c. 4 units.
d. 6 units.
Figure 622
Refer to Figure 622. Suppose the same supply and demand curves apply, and a tax of
the same amount per unit as shown here is imposed. Now, however, the buyers of the
good, rather than the sellers, are required to pay the tax to the government. After the
buyers pay the tax, relative to the case depicted in the figure, the burden on buyers will
be
a. larger, and the burden on sellers will be smaller.
b. smaller, and the burden on sellers will be larger.
c. the same, and the burden on sellers will be the same.
d. The relative burdens in the two cases cannot be determined without further
information.
If buyers and sellers in a certain market are price takers, then individually
a. they have no influence on market price.
b. they have some influence on market price but that influence is limited.
c. buyers will be able to find prices lower than those determined in the market.
d. sellers will find it difficult to sell all they want to sell at the market price.
Figure 88
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 88. The tax causes producer surplus to decrease by the area
a. D+F.
b. D+F+G.
c. D+F+J.
d. D+F+G+H.
Figure 719
Refer to Figure 719. If the government imposes a price ceiling of $55 in this market,
then total surplus will be
a. $187.50.
b. $125.00.
c. $250.00.
d. $266.67.
Total surplus is equal to
a. value to buyers profit to sellers.
b. value to buyers cost to sellers.
c. consumer surplus x producer surplus.
d. (consumer surplus + producer surplus) x equilibrium quantity.
If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax
on buyers of gasoline, then the price paid by buyers will
a. increase, and the price received by sellers will increase.
b. increase, and the price received by sellers will not change.
c. not change, and the price received by sellers will increase.
d. not change, and the price received by sellers will not change.
A positive economic statement such as “Pollution taxes decrease the quantity of
pollution firms generate”
a. would likely be made by an economist acting as a policy adviser.
b. would require values and data to be evaluated.
c. would require data but not values to be evaluated.
d. could not be evaluated by economists acting as scientists.
Betty’s Bakery bakes fresh bread every morning. Any bread not sold by the end of the
day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves
of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of
bread on hand. Which of the following is correct?
a. Betty should only sell the remaining bread for $3.50 per loaf since that is the regular
price.
b. Betty should only sell the remaining bread for $2.00 per loaf or more since that is
what the bread costs to make.
c. Betty should be willing to sell the remaining bread for any price above $0 per loaf
since she will have to throw it away if she does not sell it for something.
d. Betty should just throw the bread away and change the price of her bread starting
tomorrow to make sure she sells all of her bread each day.
A macroeconomist as opposed to a microeconomist would study
a. the effects of rent control on housing in New York City.
b. the effects of foreign competition on the US auto industry.
c. the effects of borrowing by the federal government.
d. the effects of raising the gasoline tax on transit ridership.
A construction company has built 30 houses so far this year at a total cost to the
company of $7.5 million. If the company builds a 31st house, its total cost will increase
to $7.76 million. Which of the following statements is correct?
a. For the first 30 houses, the average cost per house was $250,000.
b. The marginal cost of the 31st house, if it is built, will be $260,000.
c. If the company can experience a marginal benefit of $275,000 by building the 31st
house, then the company should build it.
d. All of the above are correct.
Suppose the price of a bag of tortilla chips decreases from $3.00 to $2.50 and, as a
result, the quantity of tortilla chips demanded increases from 200 bags to 300 bags.
Using the midpoint method, the price elasticity of demand for tortilla chips in the given
price range is
a. 0.33.
b. 0.45.
c. 2.20.
d. 3.00.
A duty of economists at the Department of Labor is to
a. analyze data on workers.
b. schedule federal holidays.
c. enforce the nation’s antitrust laws.
d. All of the above are correct.
The opportunity cost of obtaining more of one good is shown on the production
possibilities frontier as the
a. amount of the other good that must be given up.
b. market price of the additional amount produced.
c. amount of resources that must be devoted to its production.
d. number of dollars that must be spent to produce it.
A tax
a. lowers the price buyers pay and raises the price sellers receive.
b. raises the price buyers pay and lowers the price sellers receive.
c. places a wedge between the price buyers pay and the price sellers receive.
d. Both b) and c) are correct.
How did the influential economist John Maynard Keynes explain his remark that
though economics is an easy subject compared with the higher branches of philosophy
or pure science, it is a subject at which few excel?
a. Most people who study economics are not very bright.
b. Good economists must possess a rare combination of gifts.
c. Economics is quite boring; hence, people tend to lose interest in it before mastering
it.
d. Good thinkers become frustrated with economics because it does not make use of the
scientific method.
The phrase “no such thing as a free lunch” means
a. people must face tradeoffs.
b. rational people think at the margin.
c. people respond to incentives.
d. trade can make everyone better off.
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. Regarding Harry and Darby, whose demand for sandwiches
conforms to the law of demand?
a. only Harry’s
b. only Darby’s
c. both Harry’s and Darby’s
d. neither Harry’s nor Darby’s
Figure 59
Refer to Figure 59. If the price rises from point D to point C, total revenue
a. increases, and demand is price elastic.
b. decreases, and demand is price elastic.
c. increases, and demand is price inelastic.
d. decreases, and demand is price inelastic.
The difference between economists speaking as scientists or policy advisers boil down
to the difference between
a. assumptions and theories.
b. true statements and false statements.
c. specific statements and general statements.
d. positive statements and normative statements.
Figure 716
Refer to Figure 716. Suppose the price of the good is $450. Then, on the first unit of
the good that is sold, producer surplus is
a. $250, and on the second unit of the good that is sold, producer surplus is $100.
b. $250, and on the second unit of the good that is sold, producer surplus is $150.
c. $350, and on the second unit of the good that is sold, producer surplus is $100.
d. $350, and on the second unit of the good that is sold, producer surplus is $150.
Which of the following was not a result of the luxury tax imposed by Congress in
1990?
a. The larger part of the tax burden fell on sellers.
b. A larger part of the tax burden fell on the middle class than on the rich.
c. Even the wealthy demanded fewer luxury goods.
d. The tax was never repealed or even modified.
The slope of a line is equal to
a. rise divided by run.
b. run divided by rise.
c. rise minus run.
d. rise plus run.
The demand for a good or service is determined by
a. those who buy the good or service.
b. the government.
c. those who sell the good or service.
d. both those who buy and those who sell the good or service.
Figure 622
Refer to Figure 622. The amount of the tax per unit is
a. $2.00.
b. $1.50.
c. $3.00.
d. $0.50.
Table 338
Output produced in one growing season
CornSoybeans
Iowa 3045
Nebraska 4080
HTMLENTITY#8203HTMLENTITYRefer to Table 338. Iowa and Nebraska can both
produce corn and soybeans, and can switch between the production of corn and
soybeans at a constant rate. The table illustrates the amount of corn and soybeans each
state can produce in one growing season. From this table, we can conclude that Iowa
should specialize in the production of
a. HTMLENTITY#8203HTMLENTITYboth goods and Nebraska should specialize in
the production of neither good.
b. HTMLENTITY#8203HTMLENTITYneither good and Iowa should specialize in the
production of both goods.
c. HTMLENTITY#8203HTMLENTITYcorn and Nebraska should specialize in the
production of soybeans.
d. HTMLENTITY#8203HTMLENTITYsoybeans and Nebraska should specialize in
the production of corn.
Table 410
The following table shows the number of cases of water each seller is willing to sell at
the prices listed.
Price per caseAlpine SpringsBrook MountainCascade WatersDew Good
$0.000 cases0 cases0 cases0 cases
$3.00100 cases40 cases60 cases100 cases
$6.00200 cases80 cases120 cases200 cases
$9.00300 cases120 cases180 cases300 cases
Refer to Table 410. If the four suppliers listed are the only suppliers in this market and
the market demand schedule is:
PriceQuantity Demanded
$0.001200
$3.00900
$6.00600
$9.00300
the equilibrium price and quantity are
a. $0.00 and 1200 cases
b. $3.00 and 300 cases
c. $6.00 and 600 cases
d. $9.00 and 600 cases