Figure 716
Refer to Figure 716. If the price of the good is $600, then producer surplus amounts to
a. $650.
b. $800.
c. $900.
d. $1,000.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. What happens to producer surplus when the tax is imposed in this
market?
a. Producer surplus falls by $600.
b. Producer surplus falls by $900.
c. Producer surplus falls by $1,800.
d. Producer surplus falls by $2,100.
Efficiency is illustrated by
a. both the production possibilities frontier and the circularflow diagram.
b. neither the production possibilities frontier nor the circularflow diagram.
c. the production possibilities frontier only.
d. the circularflow diagram only.
Taxes cause deadweight losses because taxes
a. reduce the sum of producer and consumer surpluses by more than the amount of tax
revenue.
b. prevent buyers and sellers from realizing some of the gains from trade.
c. cause marginal buyers and marginal sellers to leave the market, causing the quantity
sold to fall.
d. All of the above are correct.
Figure 221
Refer to Figure 221. Which of the following could be an omitted variable in the graph?
a. the price of snowblowers
b. a change in consumers’ incomes
c. a change in the seasons
d. All of the above are correct.
Figure 321
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 321. Azerbaijan has an absolute advantage in the production of
a. bolts and a comparative advantage in the production of bolts.
b. bolts and a comparative advantage in the production of nails.
c. nails and a comparative advantage in the production of bolts.
d. nails and a comparative advantage in the production of nails.
Which of the following would not shift the demand curve for mp3 players?
a. a decrease in the price of mp3 players
b. a fad that makes mp3 players more popular among 1225 year olds
c. an increase in the price of digital music downloads, a complement for mp3 players
d. a decrease in the price of satellite radio, a substitute for mp3 players
Suppose that when the price of good X falls from $10 to $8, the quantity demanded of
good Y rises from 20 units to 25 units. Using the midpoint method, the crossprice
elasticity of demand is
a. 1.0, and X and Y are complements.
b. 1.0, and X and Y are substitutes.
c. 1.0, and X and Y are complements.
d. 1.0, and X and Y are substitutes.
For the general population, a 10 percent increase in the price of cigarettes leads to a
a. 1 percent reduction in the quantity demanded of cigarettes.
b. 4 percent reduction in the quantity demanded of cigarettes.
c. 10 percent reduction in the quantity demanded of cigarettes.
d. 12 percent reduction in the quantity demanded of cigarettes.
Figure 87
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 87. Which of the following statements is correct?
a. Total surplus before the tax is imposed is $500.
b. After the tax is imposed, consumer surplus is 45 percent of its pretax value.
c. After the tax is imposed, producer surplus is 45 percent of its pretax value.
d. All of the above are correct.
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
perunit burden of the tax on sellers is
a. $1.
b. $2.
c. $3.
d. $5.
Figure 412
Firm AFirm B
Refer to Figure 412. If these are the only two sellers in the market, then the market
quantity supplied at a price of $4 is
a. 6 units.
b. 7 units.
c. 8 units.
d. 14 units.
Figure 317
Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities Frontier
Refer to Figure 317. Suppose Daisy decides to increase her production of pies by 6.
What is the opportunity cost of this decision?
a. 8/3 tarts
b. 4.5 tarts
c. 8 tarts
d. 10 tarts
Making rational decisions “at the margin” means that people
a. make those decisions that do not impose a marginal cost.
b. evaluate how easily a decision can be reversed if problems arise.
c. compare the marginal costs and marginal benefits of each decision.
d. always calculate the dollar costs for each decision.
Which of the following events would cause a movement downward and to the left along
the supply curve for mangos?
a. The number of sellers of mangos decreases.
b. There is an advance in technology that reduces the cost of producing mangos.
c. The price of mangos falls.
d. The price of fertilizer increases, and fertilizer is an input in the production of mangos.
The circularflow diagram is an example of
a. a laboratory experiment.
b. an economic model.
c. a mathematical model.
d. All of the above are correct.
Figure 315
Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier
Refer to Figure 315. Perry should specialize in the production of
a. novels.
b. poems.
c. both goods.
d. neither good.
Sir Isaac Newton’s development of the theory of gravity after observing an apple fall
from a tree is an example of
a. a controlled experiment that lead to the formulation of a scientific theory.
b. being in the right place at the right time.
c. an idea whose time had come.
d. the interplay between observation and theory in science.
Figure 44
YasmineMercedes
Refer to Figure 44. Suppose Yasmine and Mercedes are the only two consumers in the
market. When the market price falls from $12 to $6, the quantity demanded increases
by
a. 6 units.
b. 9 units.
c. 12 units.
d. 15 units.
The xcoordinate is the
a. first number of an ordered pair and represents the point’s horizontal location.
b. second number of an ordered pair and represents the point’s horizontal location.
c. first number of an ordered pair and represents the point’s vertical location.
d. second number of an ordered pair and represents the point’s vertical location.
Economics is the study of how society manages its
a. limited wants and unlimited resources.
b. unlimited wants and unlimited resources.
c. limited wants and limited resources.
d. unlimited wants and limited resources.
Which of the following statements best represents the principle represented by the
adage, “There is no such thing as a free lunch”?
a. Michelle can attend the concert only if she takes her sister with her.
b. Michael is hungry and homeless.
c. Andrea must repair the tire on her bike before she can ride it to class.
d. Dani must decide between going to Florida or Brazil for spring break.
For a particular good, a 5 percent increase in price causes a 15 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a. There are many substitutes for this good.
b. The good is a necessity.
c. The market for the good is broadly defined.
d. The relevant time horizon is short.
If two goods are substitutes, their crossprice elasticity will be
a. positive.
b. negative.
c. zero.
d. equal to the difference between the income elasticities of demand for the two goods.
Figure 520
Refer to Figure 520. Which supply curve represents perfectly inelastic supply?
a. S1
b. S2
c. S3
d. None of the supply curves is perfectly inelastic.
Figure 622
Refer to Figure 622. Buyers pay how much of the tax per unit?
a. $0.50.
b. $1.50.
c. $3.00.
d. $5.00.
The production of methamphetamine (meth) is a social problem in the Midwest. Iowa is
considering two potential programs: Operation Methbust would increase the number of
sheriffs’ deputies to search out and destroy methamphetamine labs. Operation Say No
to Meth would increase the training required of public school teachers so that they
could better educate students about the health risks of using meth. Assuming that each
program were successful, which of the following statements is correct?
a. Both Operation Methbust and Say No would reduce the equilibrium quantity and
increase the equilibrium price of meth.
b. Both Operation Methbust and Say No would increase the equilibrium quantity and
reduce the equilibrium price of meth.
c. Both Operation Methbust and Say No would reduce the equilibrium quantity of meth;
Operation Methbust would increase the equilibrium price, whereas Say No would
reduce the equilibrium price of meth.
d. Both Operation Methbust and Say No would reduce the equilibrium price of meth;
Operation Methbust would reduce the equilibrium quantity, whereas Say No would
increase the equilibrium quantity of meth.
If sellers do not adjust their quantity supplied at all in response to a change in price, the
price elasticity of supply is
a. zero, and the supply curve is horizontal.
b. zero, and the supply curve is vertical.
c. infinity, and the supply curve is horizontal.
d. infinity, and the supply curve is vertical.
Jerome says that he will spend exactly $25 each month on new apps for his mobile
device, regardless of the price of apps. Jerome’s demand for apps is
a. perfectly elastic.
b. unit elastic.
c. perfectly inelastic.
d. somewhat inelastic, but not perfectly inelastic.
If a market is allowed to adjust freely to its equilibrium price and quantity, then an
increase in demand will
a. increase producer surplus.
b. reduce producer surplus.
c. not affect producer surplus.
d. Any of the above are possible.
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. Without trade, the farmer produced and consumed 2 pounds of
pork and 4 pounds of tomatoes and the rancher produced and consumed 4 pounds of
pork and 2 pounds of tomatoes. Then, each person agreed to specialize in the
production of the good in which he has a comparative advantage and trade 4 pounds of
pork for 6 pounds of tomatoes. As a result,
a. the farmer gained 3 hours worth of production and the rancher gained 4 hours worth
of production.
b. the farmer gained 4 hours worth of production and the rancher gained 6 hours worth
of production.
c. the farmer gained 6 hours worth of production and the rancher gained 8 hours worth
of production.
d. the farmer gained 8 hours worth of production and the rancher gained 10 hours worth
of production.
Figure 422
Refer to Figure 422. At a price of $24, there is a
a. surplus of 4 units.
b. surplus of 8 units.
c. shortage of 4 units.
d. shortage of 8 units.
A leftward shift of a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.
When a tax is levied on a good, the buyers and sellers of the good share the burden,
a. provided the tax is levied on the sellers.
b. provided the tax is levied on the buyers.
c. provided a portion of the tax is levied on the buyers, with the remaining portion
levied on the sellers.
d. regardless of how the tax is levied.
