Which of the following is a decision that economists study?
a. how much people work
b. what people buy
c. how much money people save
d. All of the above are correct.
The two basic reasons why economists often appear to give conflicting advice to
policymakers are differences in
a. opinions and education.
b. opinions and values.
c. scientific judgments and education.
d. scientific judgments and values.
In response to a shortage caused by the imposition of a binding price ceiling on a
market,
a. price will no longer be the mechanism that rations scarce resources.
b. long lines of buyers may develop.
c. sellers could ration the good or service according to their own personal biases.
d. All of the above are correct.
The deadweight loss from a tax
a. does not vary in amount when the price elasticity of demand changes.
b. does not vary in amount when the amount of the tax per unit changes.
c. is larger, the larger is the amount of the tax per unit.
d. is smaller, the larger is the amount of the tax per unit.
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. Brad has a comparative advantage in the production of
a. wheat and Theresa has a comparative advantage in the production of beef.
b. beef and Theresa has a comparative advantage in the production of wheat.
c. both goods and Theresa has a comparative advantage in the production of neither
good.
d. neither good and Theresa has a comparative advantage in the production of both
goods.
Figure 517
Refer to Figure 517. If, holding the supply curve fixed, there were an increase in
demand that caused the equilibrium price to increase from $6 to $7, then sellers’ total
revenue would
a. increase.
b. decrease.
c. remain unchanged.
d. The effect on total revenue cannot be determined from the given information.
Figure 631
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Y
Refer to Figure 631. Suppose that a price ceiling is imposed in this market at a price of
$30 and market demand for the good subsequently increases. This would
a. HTMLENTITY#8203HTMLENTITYdecrease the size of the surplus.
b. HTMLENTITY#8203HTMLENTITYdecrease the size of the shortage.
c. HTMLENTITY#8203HTMLENTITYincrease the size of the surplus.
d. HTMLENTITY#8203HTMLENTITYincrease the size of the shortage.
Figure 83
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 83. The equilibrium price before the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
Which of the following statements is not correct about a market in equilibrium?
a. The price determines which buyers and which sellers participate in the market.
b. Those buyers who value the good more than the price choose to buy the good.
c. Those sellers whose costs are less than the price choose to produce and sell the good.
d. Consumer surplus will be equal to producer surplus.
Refer to Figure 67. For a price ceiling to be binding in this market, it would have to be
set at
a. any price below $7.
b. any price above $3.
c. any price below $9.
d. any price above $7.
Which of the following statements best characterizes a basic difference between market
economies and centrally planned economies?
a. Society relies more upon prices to allocate resources when the economy is
centrallyplanned than when it is marketbased.
b. The selfinterest of households is reflected more fully in the outcome of a
centrallyplanned economy than in the outcome of a market economy.
c. Government plays a larger role in the economic affairs of a market economy than in
the economic affairs of a centrally planned economy.
d. None of the above are correct.
Table 25
Corn (in bushels)Wheat (in bushels)
20000
1600700
12001300
8001800
4002200
02500
Refer to Table 25. Table 25 shows one set of production possibilities. What is the
opportunity cost of an increase in the production of wheat from 700 bushels to 1300
bushels?
a. 800 bushels of corn
b. 600 bushels of corn
c. 400 bushels of corn
d. 400 bushels of wheat
Suppose the market demand curve for a good passes through the point (quantity
demanded = 100, price = $25). If there are five buyers in the market, then
a. the marginal buyer’s willingness to pay for the 100th unit of the good is $25.
b. the sum of the five buyers’ willingness to pay for the 100th unit of the good is $25.
c. the average of the five buyers’ willingness to pay for the 100th unit of the good is $25.
d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.
A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does
not sell dayold bagels, so all unsold bagels are thrown away at 7 p.m. each day. The
cost of making and selling a dozen bagels is $1.00; there are no costs associated with
throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a
particular day, which of the following alternatives is most attractive?
a. Lower the price of the remaining bagels, even if the price falls below $1.00 per
dozen.
b. Lower the price of the remaining bagels, but under no circumstances should the price
fall below $1.00 per dozen.
c. Throw the bagels away and produce 8 fewer dozen bagels tomorrow.
d. Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the
day.
An increase in quantity supplied
a. results in a movement downward and to the left along a fixed supply curve.
b. results in a movement upward and to the right along a fixed supply curve.
c. shifts the supply curve to the left.
d. shifts the supply curve to the right.
Total surplus in a market is equal to
a. value to buyers amount paid by buyers.
b. amount received by sellers costs of sellers.
c. value to buyers costs of sellers.
d. amount received by sellers amount paid by buyers.
Scenario 51
Suppose that when the average college student’s income is $10,000 per year, the annual
quantity demanded of Patty’s Pizza is 50 and the annual quantity demanded of Sue’s
Subs is 80. Suppose that when the price of Patty’s Pizza increases from $8 to $10 per
pie, the quantity demanded of Sue’s Subs increases from 80 to 100. Suppose also that
when the average student’s income increases to $12,000 per year, the annual quantity
demanded of Patty’s Pizza increases from 50 to 60.
Refer to Scenario 51. Using the midpoint method, what is the income elasticity of
demand for pizza and what does the value indicate about the demand for pizza?
a. The income elasticity is 0.18 so pizza is a normal good.
b. The income elasticity is 1 so pizza is an inferior good.
c. The income elasticity is 1 so pizza is unitary elastic.
d. The income elasticity is 1 so pizza is a normal good.
Hilda’s Hair Hysteria earned $3,750 in total revenue last month when it sold 125
haircuts. This month it earned $3,600 in total revenue when it sold 90 haircuts. The
price elasticity of demand for Hilda’s Hair Hysteria is
a. 0.33.
b. 0.88.
c. 1.14.
d. 7.98.
Figure 85
Suppose that the government imposes a tax of P3 P1.
Refer to Figure 85. The total surplus with the tax is represented by area
a. C+H.
b. A+B+C.
c. D+H+F.
d. A+B+D+F.
Figure 54
Refer to Figure 54. If the price decreases in the region of the demand curve between
points A and B, we can expect total revenue to
a. increase.
b. stay the same.
c. decrease.
d. first decrease, then increase until total revenue is maximized.
If a 15% increase in price for a good results in a 20% decrease in quantity demanded,
the price elasticity of demand is
a. 0.75.
b. 1.25.
c. 1.33.
d. 1.60.
If Miguel expects to earn a higher income next month, he may choose to
a. save more now and spend less of his current income on goods and services.
b. save less now and spend more of his current income on goods and services.
c. decrease his current demand for goods and services.
d. move along his current demand curves for goods and services.
In a competitive market free of government regulation,
a. price adjusts until quantity demanded is greater than quantity supplied.
b. price adjusts until quantity demanded is less than quantity supplied.
c. price adjusts until quantity demanded equals quantity supplied.
d. supply adjusts to meet demand at every price.
Table 324
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed to Make 1 Unit ofNumber of Units Produced in 40 Hours
CheeseBreadCheeseBread
England 144010
Spain 48105
Refer to Table 324. Without trade, England produced and consumed 32 units of cheese
and 2 units of bread and Spain produced and consumed 6 units of cheese and 2 units of
bread. Then, each country agreed to specialize in the production of the good in which it
has a comparative advantage and trade 7 units of cheese for 2.5 units of bread. As a
result, England gained
a. 0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit
of bread.
b. 1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit
of bread.
c. 7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5
units of bread.
d. 33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5
units of bread.
Which of the following is correct?
a. A horizontal line has an infinite slope, and a vertical line has a zero slope.
b. A horizontal line has a slope of 1, and a vertical line has a slope of 1.
c. A horizontal line has a zero slope, and a vertical line has an infinite slope.
d. A horizontal line has a slope of 1, and a vertical line has a slope of 1.
In which of the following cases should the United States produce more noodles than it
wants for its own use and trade some of those noodles to Italy in exchange for wine?
a. Americans know less than Italians know about cooking noodles.
b. The United States has an absolute advantage over Italy in producing noodles.
c. Italy has a comparative advantage over the United States in producing wine.
d. The opportunity cost of producing a gallon of wine is the same for Italy as it is for the
United States.
The adage, “There is no such thing as a free lunch,” is used to illustrate the principle
that
a. goods are scarce.
b. people face tradeoffs.
c. income must be earned.
d. households face many decisions.
A tariff on a product
a. is a direct quantitative restriction on the amount of a good that can be imported.
b. increases the domestic quantity supplied.
c. increases domestic consumer surplus.
d. All of the above are correct.
The two words economists use most often are
a. inflation and trade.
b. supply and demand.
c. competition and prices.
d. markets and equilibrium.
Which of the following would likely be studied by a microeconomist rather than a
macroeconomist?
a. the effect of foreign direct investment on economic growth
b. the effect of a sales tax on the cigarette industry
c. the effect of an investment tax credit on the economy’s capital stock
d. the effect of a war on government spending
