Table 320
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Brad1012
Theresa610
Refer to Table 320. What is Brad’s opportunity cost of producing one bushel of wheat?
a. 5/6 pound of beef
b. 6/5 pounds of beef
c. 3/5 pounds of beef
d. 5/3 pounds of beef
The rules established under GATT are enforced by the
a. governments of the nations that are involved in GATT.
b. North American Free Trade Association.
c. World Trade Organization.
d. European Union.
In the circularflow diagram,
a. firms own the factors of production.
b. the factors of production are labor, land, and capital.
c. the factors of production are also called “output.”
d. All of the above are correct.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. When the tax is imposed in this market, the price sellers effectively
receive is
a. $4.
b. $6.
c. $10.
d. $16.
Figure 513
Refer to Figure 513. Between point A and point B, price elasticity of demand using the
midpoint method is equal to
a. 0.71.
b. 0.85.
c. 1.18.
d. 1.40.
Figure 29
Panel (a) Panel (b)
Refer to Figure 29, Panel (a). Production is
a. possible at points J, K, L, and M, but efficient only at points J, L, and M.
b. possible at points J, K, L, and M, but efficient only at point K.
c. possible at points J, L, M, and N, but efficient only at points J, L, and M.
d. possible at points J, L, M, and N, but efficient only at point N.
According to the circularflow diagram, if Suzy is a worker who delivers flowers for
Happy Day Flower Company, she participates
a. in the markets for factors of production exchanging labor for income.
b. in the markets for factors of production exchanging flowers for revenue.
c. in the markets for goods and services exchanging flowers for wages, rent, and profit.
d. in the markets for goods and services exchanging labor for income.
Figure 724
Refer to Figure 724. At equilibrium, total surplus is measured by the area
a. ABD.
b. ABF.
c. FBD.
d. HGCI.
When all market participants are price takers who have no influence over prices, the
markets have
a. only a few buyers and sellers.
b. numerous sellers but only a few buyers.
c. numerous buyers but only a few sellers.
d. numerous buyers and sellers.
Suppose the equilibrium price of a tube of toothpaste is $2, and the government
imposes a price floor of $3 per tube. As a result of the price floor,
a. quantity demanded decreases.
b. quantity supplied increases.
c. there is a surplus.
d. All of the above are correct.
Figure 24
Refer to Figure 24. Unemployment could cause this economy to produce at which
point(s)?
a. Q, S
b. Q, S, T
c. R, U
d. T
As a result of a successful attempt by government to cut the economic pie into more
equal slices,
a. the pie gets larger, and there will be more pie overall.
b. the pie gets smaller, and there will be less pie overall.
c. it increases the reward for working hard, resulting in people producing more goods
and services.
d. those who earn more income pay less in taxes.
While in college, John and Bethany each buy five packages of macncheese per week.
After they graduate and have fulltime jobs, John buys six packages per week, but
Bethany buys only two packages per week. When looking at income elasticity of
demand for macncheese, John’s
a. is negative, and Bethany’s is positive.
b. is positive, and Bethany’s is negative.
c. is zero, and Bethany’s approaches infinity.
d. approaches infinity, and Bethany’s is zero.
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline
tickets are required to pay the tax to the government. If the tax is reduced from $50 per
ticket to $30 per ticket, then the
a. demand curve will shift upward by $20, and the effective price received by sellers
will increase by $20.
b. demand curve will shift upward by $20, and the effective price received by sellers
will increase by less than $20.
c. supply curve will shift downward by $20, and the price paid by buyers will decrease
by $20.
d. supply curve will shift downward by $20, and the price paid by buyers will decrease
by less than $20.
Scenario 92
• For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
• For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 92. Suppose the world price of cardboard is $45. Then, relative to
the notrade situation, international trade in cardboard produces which of the following
results for Boxland?
a. It increases consumer surplus, decreases producer surplus, and increases total surplus.
b. It increases consumer surplus, increases producer surplus, and increases total surplus.
c. It increases consumer surplus, decreases producer surplus, and decreases total
surplus.
d. It decreases consumer surplus, increases producer surplus, and increases total
surplus.
Figure 314
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 314. Arturo and Dina would not be able to gain from trade if Dina’s
opportunity cost of one taco changed to
a. 1/2 burrito.
b. 3/4 burrito.
c. 4/3 burritos.
d. 2 burritos.
A price floor is binding when it is set
a. above the equilibrium price, causing a shortage.
b. above the equilibrium price, causing a surplus.
c. below the equilibrium price, causing a shortage.
d. below the equilibrium price, causing a surplus.
Figure 212
Refer to Figure 212. The shift of the production possibilities frontier from A to B can
best be described as
a. a downturn in the economy.
b. economic growth.
c. an enhancement of equality.
d. an improvement in the allocation of resources.
Figure 58
Refer to Figure 58. An increase in price from $15 to $20 would
a. increase total revenue by $500
b. decrease total revenue by $500.
c. increase total revenue by $1,000.
d. decrease total revenue by $1,000.
Which of the following would increase in response to a decrease in the price of ironing
boards?
a. the quantity of irons demanded at each possible price of irons
b. the equilibrium quantity of irons
c. the equilibrium price of irons
d. All of the above are correct.
The market for ice cream is a
a. monopolistic market.
b. highly competitive market.
c. highly organized market.
d. Both b and c are correct.
Chad is willing to pay $5.00 to get his first cup of morning latt; he is willing to pay
$4.50 for a second cup. He buys his first cup from a vendor selling latt for $3.75 per
cup. He returns to that vendor later in the morning to find that the vendor has increased
her price to $3.90 per cup. Chad buys a second cup. Which of the following statements
is correct?
a. Chad’s willingness to pay for his second cup of latt was smaller than his willingness
to pay for his first cup of latt.
b. Chad’s consumer surplus on his second cup of latt was larger than his consumer
surplus on his first cup of latt.
c. Chad is irrational in that he is willing to pay a different price for his second cup of
latt than what he is willing to pay for his first cup of latt.
d. Chad places a higher value on his second cup of latt than on his first cup of latt.
The marginal benefit Susie gets from purchasing a third pair of gloves is
a. the same as the total benefit she gets from purchasing three pairs of gloves.
b. more than the marginal cost of purchasing the third pair of gloves.
c. the total benefit she gets from purchasing three pairs of gloves minus the total benefit
she gets from purchasing two pairs of gloves.
d. the total benefit she gets from purchasing four pairs of gloves minus the total benefit
she gets from purchasing three pairs of gloves.
When a tax is levied on sellers of tea,
a. the wellbeing of both sellers and buyers of tea is unaffected.
b. sellers of tea are made worse off, and the wellbeing of buyers is unaffected.
c. sellers of tea are made worse off, and buyers of tea are made better off.
d. both sellers and buyers of tea are made worse off.
If the crossprice elasticity of two goods is positive, then the two goods are
a. substitutes.
b. complements.
c. normal goods.
d. inferior goods.
A $5 tax levied on the buyers of pants will cause the
a. supply curve for pants to shift down by $5.
b. supply curve for pants to shift up by $5.
c. demand curve for pants to shift down by $5.
d. demand curve for pants to shift up by $5.
The “invisible hand” works to promote general wellbeing in the economy primarily
through
a. government intervention.
b. the political process.
c. people’s pursuit of selfinterest.
d. altruism.
According to Adam Smith, the success of decentralized market economies is primarily
due to
a. the basic benevolence of society.
b. society’s legal system.
c. individuals’ pursuit of selfinterest.
d. partnerships that are forged between business and government.
If a market is allowed to move freely to its equilibrium price and quantity, then an
increase in supply will
a. increase consumer surplus.
b. reduce consumer surplus.
c. not affect consumer surplus.
d. Any of the above are possible.
When a tax is imposed on a good for which the demand is relatively elastic and the
supply is relatively inelastic,
a. buyers of the good will bear most of the burden of the tax.
b. sellers of the good will bear most of the burden of the tax.
c. buyers and sellers will each bear 50 percent of the burden of the tax.
d. the effective price paid by buyers will decrease as a result of the tax.
Scenario 53
Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is
elastic. Both goods are considered to be normal goods by a majority of consumers.
Suppose that a large income tax increase decreases the demand for both goods by 10%.
Refer to Scenario 53. The price elasticity of supply for bread could be
a. 1.
b. 0.
c. 0.5.
d. 1.5.
With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a
good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the
deadweight loss from the new tax will be
a. $200.
b. $250.
c. $475.
d. $625.
Which of the following is an example of a capital input?
a. a computer
b. a share of stock
c. an hour of a worker’s time
d. $50,000
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the
price falls to $0.80, the quantity demanded increases to 600. Given this information and
using the midpoint method, we know that the demand for candy bars is
a. inelastic.
b. elastic.
c. unit elastic.
d. perfectly inelastic.
Which of the following is likely to have the most price inelastic demand?
a. white chocolate chip with macadamia nut cookies
b. Mrs. Field’s chocolate chip cookies
c. milk chocolate chip cookies
d. cookies