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Figure 89
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 89. The amount of amount of deadweight loss as a result of the tax is
a. $4,000.
b. $5,000.
c. $6,000.
d. $10,000.
When a tax is levied on the buyers of a good, the
a. supply curve shifts upward by the amount of the tax.
b. quantity supplied increases for all conceivable prices of the good.
c. buyers of the good will send tax payments to the government.
d. demand curve shifts to the right by the horizontal distance of the tax.
Figure 715
Refer to Figure 715. Suppose producer surplus is larger than C but smaller than
A+B+C. The price of the good must be
a. lower than P1.
b. P1.
c. between P1 and P2.
d. higher than P2.
Almost all economists agree that rent control
a. has no effect on the rental income of landlords.
b. allows the market for housing to work more efficiently.
c. adversely affects the availability and quality of housing.
d. is a very inexpensive way to help the most needy members of society.
Figure 622
Refer to Figure 622. The equilibrium price in the market before the tax is imposed is
a. $3.50.
b. $5.00.
c. $2.00.
d. $1.50.
One way to characterize the difference between positive statements and normative
statements is as follows:
a. Positive statements tend to reflect optimism about the economy and its future,
whereas normative statements tend to reflect pessimism about the economy and its
future.
b. Positive statements offer descriptions of the way things are, whereas normative
statements offer opinions on how things ought to be.
c. Positive statements involve advice on policy matters, whereas normative statements
are supported by scientific theory and observation.
d. Economists outside of government tend to make normative statements, whereas
governmentemployed economists tend to make positive statements.
Table 710
The following table represents the costs of five possible sellers.
SellerCost
Abby$1,600
Bobby$1,300
Dianne$1,100
Evaline$900
Carlos$800
Refer to Table 710. Who is a marginal seller when the price is $1,100?
a. Dianne
b. Bobby and Abby
c. Carlos, Dianne, and Evaline
d. Carlos, Dianne, Evaline, and Bobby
Table 323
Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
Labor Hours Needed to Make 1 Pound of Pounds Produced in 24 Hours
PorkTomatoesPorkTomatoes
Farmer6348
Rancher4466
Refer to Table 323. Assume that the farmer and the rancher each has 24 labor hours
available. If each person spends all his time producing the good in which he has a
comparative advantage, then total production is
a. 4 pounds of pork and 6 pounds of tomatoes.
b. 6 pounds of pork and 8 pounds of tomatoes.
c. 4 pounds of pork and 8 pounds of tomatoes.
d. 6 pounds of pork and 6 pounds of tomatoes.
Figure 320
Canada’s Production Possibilities FrontierMexico’s Production Possibilities
Frontier
Refer to Figure 320. Mexico would incur an opportunity cost of 8 units of Good X if it
increased its production of Good Y by
a. 2 units.
b. 4 units.
c. 6 units.
d. 8 units.
If the quantity supplied responds only slightly to changes in price, then
a. supply is said to be elastic.
b. supply is said to be inelastic.
c. an increase in price will not shift the supply curve very much.
d. even a large decrease in demand will change the equilibrium price only slightly.
Figure 625
Refer to Figure 625. The burden of the tax on sellers is
a. $1 per unit.
b. $1.50 per unit.
c. $2 per unit.
d. $3 per unit.
Last year, Joan bought 50 pounds of hamburger when her household’s income was
$40,000. This year, her household income was only $30,000 and Joan bought 60 pounds
of hamburger. All else constant, Joan's income elasticity of demand for hamburger is
a. positive, so Joan considers hamburger to be an inferior good.
b. positive, so Joan considers hamburger to be a normal good and a necessity.
c. negative, so Joan considers hamburger to be an inferior good.
d. negative, so Joan considers hamburger to be a normal good but not a necessity.
At present, the United States uses a system of quotas to limit the amount of sugar
imported into the country. Which of the following statements is most likely true?
a. The quotas are probably the result of lobbying from U.S. consumers of sugar. The
quotas increase consumer surplus for the United States, reduce producer surplus for the
United States, and harm foreign sugar producers.
b. The quotas are probably the result of lobbying from U.S. producers of sugar. The
quotas increase producer surplus for the United States, reduce consumer surplus for the
United States, and harm foreign sugar producers.
c. The quotas are probably the result of lobbying from foreign producers of sugar. The
quotas reduce producer surplus for the United States, increase consumer surplus for the
United States, and benefit foreign sugar producers.
d. U.S. lawmakers did not need to be lobbied to impose the quotas because total surplus
for the United States is higher with the quotas than without them.
If the government passes a law requiring buyers of college textbooks to send $5 to the
government for every textbook they buy, then
a. the demand curve for textbooks shifts downward by $5.
b. buyers of textbooks pay $5 more per textbook than they were paying before the tax.
c. sellers of textbooks are unaffected by the tax.
d. All of the above are correct.
Which of the following is not a reason people choose to depend on others for goods and
services?
a. to improve their lives
b. to allow them to enjoy a greater variety of goods and services
c. to consume more of each good without working any more hours
d. to allow people to produce outside their production possibilities frontiers
If a tax shifts the supply curve upward (or to the left), we can infer that the tax was
levied on
a. buyers of the good.
b. sellers of the good.
c. both buyers and sellers of the good.
d. We cannot infer anything because the shift described is not consistent with a tax.
If demand is price inelastic, then when price rises, total revenue
a. will fall.
b. will rise.
c. will remain unchanged.
d. may rise, fall, or remain unchanged. More information is need to determine the
change in total revenue with certainty.
Figure 912
Refer to Figure 912. With trade, the domestic price and domestic quantity demanded
are
a. $54 and 800.
b. $54 and 1,600.
c. $42 and 800.
d. $42 and 1,200.
Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75
and, as a result, the quantity of bags demanded increases from 600 to 800. Using the
midpoint method, the price elasticity of demand for frozen chicken nuggets in the given
price range is
a. 0.35.
b. 0.43.
c. 2.33.
d. 2.89.
Suppose the government imposes a 20cent tax on the sellers of artificiallysweetened
beverages. The tax would shift
a. demand, raising both the equilibrium price and quantity in the market for
artificiallysweetened beverages.
b. demand, lowering the equilibrium price and raising the equilibrium quantity in the
market for artificiallysweetened beverages.
c. supply, raising the equilibrium price and lowering the equilibrium quantity in the
market for artificiallysweetened beverages.
d. supply, lowering the equilibrium price and raising the equilibrium quantity in the
market for artificiallysweetened beverages.
Table 62
PriceQuantity
DemandedQuantity
Supplied
$03750
$530050
$10225100
$15150150
$2075200
$250250
Refer to Table 62. A price floor set at $5 will
a. be binding and will result in a surplus of 50 units.
b. be binding and will result in a surplus of 250 units.
c. be binding and will result in a surplus of 300 units.
d. not be binding.
By definition, imports are
a. people who work in foreign countries.
b. goods in which a country has an absolute advantage.
c. limits placed on the quantity of goods leaving a country.
d. goods produced abroad and sold domestically.
Suppose that when the price of good X increases from $800 to $850, the quantity
demanded of good Y increases from 65 to 70. Using the midpoint method, the cross
price elasticity of demand is about
a. 1.2, and X and Y are complements.
b. 0.1, and X and Y are complements.
c. 0.1, and X and Y are substitutes.
d. 1.2, and X and Y are substitutes.
For a good that is a luxury, demand
a. tends to be inelastic.
b. tends to be elastic.
c. has unit elasticity.
d. cannot be represented by a demand curve in the usual way.
Figure 210
Panel (a) Panel (b)
Refer to Figure 210, Panel (a). To gain 2 tractors by moving from point W to point V,
society must sacrifice
a. 12 sofas.
b. employment.
c. efficiency.
d. More than one of the above is correct.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. The increase in total surplus resulting from trade is
a. $640, since consumer surplus increases by $1,760 and producer surplus falls by
$1,120.
b. $1,280, since consumer surplus increases by $3,520 and producer surplus falls by
$2,240.
c. $2,240, since consumer surplus increases by $3,240 and producer surplus falls by
$1,000.
d. $2,560, since consumer surplus increases by $7,040 and producer surplus falls by
$4,480.
Figure 915
Refer to Figure 915. As a result of the tariff, there is a deadweight loss that amounts to
a. B.
b. E.
c. D + F.
d. B + D + E + F.
Efficiency in a market is achieved when
a. a social planner intervenes and sets the quantity of output after evaluating buyers'
willingness to pay and sellers' costs.
b. the sum of producer surplus and consumer surplus is maximized.
c. all firms are producing the good at the same low cost per unit.
d. no buyer is willing to pay more than the equilibrium price for any unit of the good.
Figure 625
Refer to Figure 625. The equilibrium price in the market before the tax is imposed is
a. $1.
b. $2.
c. $5.
d. $6.
The Social Security tax is a tax on
a. capital.
b. labor.
c. land.
d. savings.
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. The opportunity cost of 1 unit of cheese for England is
a. 1/4 unit of bread.
b. 1 hour of labor.
c. 4 units of bread.
d. 4 hours of labor.
Under rent control, bribery is a mechanism to
a. bring the total price of an apartment (including the bribe) closer to the equilibrium
price.
b. allocate housing to the poorest individuals in the market.
c. force the total price of an apartment (including the bribe) to be less than the market
price.
d. allocate housing to the most deserving tenants.
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 Alpine Springs and Dew Good are the only two suppliers in this
market, by how much does the market quantity supplied change with each $3 increase
in price?
a. 200 cases
b. 100 cases
c. 100 cases
d. 200 cases
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. Which of the
following statements is correct?
a. The opportunity cost of a bushel of corn does not depend on how many bushels of
wheat are being produced.
b. The opportunity cost of a bushel of corn increases as more corn is produced.
c. The opportunity cost of a bushel of corn decreases as more corn is produced.
d. The opportunity cost of a bushel of wheat decreases as more wheat is produced.
