Suppose buyers of computers and printers regard the two goods as complements. Then
an increase in the price of computers will cause a(n)
a. decrease in the demand for printers and a decrease in the quantity supplied of
printers.
b. decrease in the supply of printers and a decrease in the quantity demanded of
printers.
c. decrease in the equilibrium price of printers and an increase in the equilibrium
quantity of printers.
d. increase in the equilibrium price of printers and a decrease in the equilibrium
quantity of printers.
Suppose Rebecca needs a dog sitter so that she can travel to her sister’s wedding.
Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for
Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of
$185. Suppose the government imposes a tax of $30 on dog sitting. What is the
deadweight loss of the tax?
a. the maximum value that Rebecca would pay for dog sitting
b. the $30 tax
c. the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for
Rebecca
d. the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the
one who would pay the tax
If the labor supply curve is nearly vertical, a tax on labor
a. has a large deadweight loss.
b. raises a small amount of tax revenue.
c. has little impact on the amount of work that workers are willing to do.
d. results in a large tax burden on the firms that hire labor.
Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline
tickets are required to pay the tax to the government. If the tax is reduced from $50 per
ticket to $20 per ticket, then the
a. demand curve will shift upward by $30, and the price paid by buyers will decrease by
less than $30.
b. demand curve will shift upward by $30, and the price paid by buyers will decrease by
$30.
c. supply curve will shift downward by $30, and the effective price received by sellers
will increase by less than $30.
d. supply curve will shift downward by $30, and the effective price received by sellers
will increase by $30.
Which of the following is true?
a. Efficiency refers to the size of the economic pie; equality refers to how the pie is
divided.
b. Government policies usually improve upon both equality and efficiency.
c. As long as the economic pie continually gets larger, no one will have to go hungry.
d. Efficiency and equality can both be achieved if the economic pie is cut into equal
pieces.
A drug interdiction program that successfully reduces the supply of illegal drugs in the
United States likely will
a. raise the price, reduce the quantity, decrease total revenues, and decrease crime.
b. lower the price, increase the quantity, increase total revenues, and increase crime.
c. raise the price, increase the quantity, decrease total revenues, and increase crime.
d. raise the price, reduce the quantity, increase total revenues, and increase crime.
The argument that purchases of minivans cause large families is an example of
a. omitted variables.
b. normative statements.
c. reverse causality.
d. bias.
The supply curve for whiskey is the typical upwardsloping straight line, and the
demand curve for whiskey is the typical downwardsloping straight line. When whiskey
is taxed, the area on the relevant supplyanddemand graph that represents
a. government’s tax revenue is a rectangle.
b. the deadweight loss of the tax is a triangle.
c. the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle.
d. All of the above are correct.
Figure 613
This figure shows the market demand and market supply curves for good X.
Refer to Figure 613. If the government imposes a price ceiling of $6 on this market,
then there will be
a. no shortage.
b. a shortage of 5 units.
c. a shortage of 10 units.
d. a shortage of 20 units.
Kara receives a promotion at work, which increases her income. We would expect
Kara’s demand for
a. each good she purchases to remain unchanged.
b. normal goods to decrease.
c. substitute goods to increase.
d. inferior goods to decrease.
The increase in living standards of American workers over the past century is primarily
due to
a. the success of labor unions.
b. minimumwage laws.
c. improvements in productivity.
d. None of the above are correct.
Table 49
An Increase in SupplyA Decrease in Supply
An Increase in DemandAB
A Decrease in DemandCD
Refer to Table 49. Which combination would produce an increase in equilibrium price
and an indeterminate change in equilibrium quantity?
a. A
b. B
c. C
d. D
Sometimes economists disagree because their scientific judgments differ. Which of the
following instances best reflects this source of disagreement?
a. One economist believes everyone should pay the same percentage of their income in
taxes; another economist believes that wealthier citizens should pay a higher percentage
of their income in taxes.
b. One economist believes that manufacturing firms should face greater regulation to
preserve the environment; another economist believes the government should not
intervene in free markets.
c. One economist believes that equality should be valued over efficiency in policy
decisions; another economist believes that efficiency should be valued over equality in
policy decisions.
d. One economist believes the government should tax a household’s income; another
economist believes the government should tax a household’s consumption.
Which of the following statements is correct?
a. Few economic models incorporate assumptions.
b. Different economic models employ different sets of assumptions.
c. Good economic models attempt to mimic reality as closely as possible.
d. Economic models, to be accepted, must be tested by conducting experiments.
Suppose that 300 bottles of soda are demanded at a particular price. If the price of a
bottle of soda rises from that price by 6 percent, the number of bottles of soda
demanded falls to 275. Using the midpoint approach to calculate the price elasticity of
demand, it follows that the
a. demand for bottles of soda in this price range is perfectly elastic.
b. price increase will increase the total revenue of soda sellers.
c. price elasticity of demand for bottles of soda in this price range is about 0.69.
d. price elasticity of demand for bottles of soda in this price range is about 1.45.
Funsters, Inc., the largest toy company in the country, sells its most popular doll for
$15. It has just learned that its leading competitor, Toysorama, is massproducing an
excellent copy and plans to flood the market with their $5 doll in six weeks. Funsters
should
a. “fight fire with fire” by decreasing supply of its doll for six weeks and then
increasing the supply.
b. increase the supply of its doll now before the other doll hits the market.
c. increase the price of its doll now.
d. discontinue its doll.
Figure 917
Refer to Figure 917. Without trade, total surplus is
a. $600.
b. $1,200.
c. $1,800.
d. $2,250.
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
amount of tax revenue collected by the government is
a. $120.
b. $80.
c. $50.
d. $30.
Suppose the Federal Reserve announces that it will be making a change to a key interest
rate to decrease the money supply. This is likely because the Federal Reserve is
a. worried about inflation.
b. worried about unemployment.
c. hoping to increase the demand for goods and services.
d. worried that the economy is growing too slowly.
Figure 73
Refer to Figure 73. When the price rises from P1 to P2, consumer surplus
a. increases by an amount equal to A.
b. decreases by an amount equal to B+C.
c. increases by an amount equal to B+C.
d. decreases by an amount equal to C.
Suppose your college institutes a new policy requiring you to pay for a permit to park
your car in a campus parking lot.
a. The cost of the parking permit is not part of the opportunity cost of attending college
if you would not have to pay for parking otherwise.
b. The cost of the parking permit is part of the opportunity cost of attending college if
you would not have to pay for parking otherwise.
c. Only half of the cost of the parking permit is part of the opportunity cost of attending
college.
d. The cost of the parking permit is not part of the opportunity cost of attending college
under any circumstances.
The art in scientific thinking whether in chemistry, economics, or biology is
a. the design and implementation of laboratory experiments.
b. knowing when to stop collecting data and when to start analyzing the data.
c. deciding which assumptions to make.
d. being able to mathematically model natural phenomena.
Table 43
PriceBert’s
Quantity
DemandedErnie’s
Quantity
DemandedGrover’s
Quantity
DemandedOscar’s
Quantity
Demanded
$0.00201648
$0.50181266
$1.00141025
$1.5012804
$2.006602
$2.500400
Refer to Table 43. If these are the only four buyers in the market, then the market
quantity demanded at a price of $2 is
a. 0 units.
b. 3.5 units.
c. 12 units.
d. 14 units.
Table 310
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed to Make 1Quantity Produced in 2400 Hours
CarAirplaneCarAirplane
Japan301508016
Korea 501504816
Refer to Table 310. We could use the information in the table to draw a production
possibilities frontier for Japan and a second production possibilities frontier for Korea.
If we were to do this, measuring cars along the horizontal axis, then
a. the slope of Japan’s production possibilities frontier would be 5 and the slope of
Korea’s production possibilities frontier would be 3.
b. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of
Korea’s production possibilities frontier would be 0.33.
c. the slope of Japan’s production possibilities frontier would be 0.2 and the slope of
Korea’s production possibilities frontier would be 0.33.
d. the slope of Japan’s production possibilities frontier would be 5 and the slope of
Korea’s production possibilities frontier would be 3.
A group of buyers and sellers of a particular good or service is called a(n)
a. coalition.
b. economy.
c. market.
d. competition.
Figure 616
Refer to Figure 616. In this market, a minimum wage of $2.75 creates a labor
a. shortage of 2,250 workers.
b. shortage of 4,500 workers.
c. surplus of 2,250 workers.
d. neither a labor shortage nor surplus.
Ken and Traci are two woodworkers who both make tables and chairs. In one month,
Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs.
Given this, we know that the opportunity cost of 1 table is
a. 1/6 chair for Ken and 1/3 chair for Traci.
b. 1/6 chair for Ken and 3 chairs for Traci.
c. 6 chairs for Ken and 1/3 chair for Traci.
d. 6 chairs for Ken and 3 chairs for Traci.
Table 711
The only four producers in a market have the following costs:
SellerCost
Evan$50
Selena$100
Angie$150
Kris$200
Refer to Table 711. If the sellers bid against each other for the right to sell the good to a
consumer, then the good will sell for
a. $50 or slightly more.
b. $100 or slightly less.
c. $150 or slightly less.
d. $200 or slightly more.
A price ceiling is
a. often imposed on markets in which “cutthroat competition” would prevail without a
price ceiling.
b. a legal maximum on the price at which a good can be sold.
c. often imposed when sellers of a good are successful in their attempts to convince the
government that the market outcome is unfair without a price ceiling.
d. All of the above are correct.
In economics, capital refers to
a. the finances necessary for firms to produce their products.
b. buildings and machines used in the production process.
c. the money households use to purchase firms’ output.
d. stocks and bonds.
Which of the following statements is correct?
a. A tax levied on buyers will never be partially paid by sellers.
b. Who actually pays a tax depends on the price elasticities of supply and demand.
c. Government can decide who actually pays a tax.
d. A tax levied on sellers always will be passed on completely to buyers.