The maximum price a consumer is willing to pay for a good is the
A) consumer surplus.
B) value of the good.
C) opportunity cost of producing the good.
D) minimum supply-price.
E) marginal cost of the good.
The marginal social benefit curve for a public good is derived by
A) adding the marginal benefits of all individuals at each quantity.
B) adding the quantities demanded by all individuals at each price.
C) surveying consumers and asking how much they use a certain good or service.
D) adding the total benefits for all consumers for a given quantity of the good.
E) finding the maximum amount someone is willing to pay for one more unit of the
good.
Today, the price of peanuts increases. Peanut butter producers and peanut butter
consumers expect that the price of peanut butter will rise in the future. In the current
market for peanut butter, the equilibrium price rises and the equilibrium quantity
increases. It must be the case that
A) the supply of peanut buttered decreased by more than the demand for peanut butter
increased.
B) the supply of peanut butter decreased by more than the demand for peanut butter
decreased.
C) the demand for peanut butter increased by more than the supply of peanut butter
decreased.
D) the demand for peanut butter increased by more than the supply of peanut butter
increased.
E) peanut butter producers and peanut butter consumers have incorrect expectations.
Economic depreciation is
A) the same as depreciation calculated by an accountant.
B) equal to economic profit minus normal profit.
C) the change in the market value of capital over a given period.
D) the deterioration of the physical appearance of a capital.
E) paid in cash.
The budget of a government department is likely to be efficient if
A) voters are well informed.
B) there is rational voter ignorance combined with special interest lobbying.
C) the political equilibrium can be described in terms of public choice theory.
D) bureaucrats are rationally ignorant.
E) there are negative externalities.
Cigarette Taxes, Black Markets, and Crime: Lessons from New York’s 50-Year
Losing Battle
New York City has the highest cigarette taxes in the country. During the four months
following the recent tax hike, sales of taxed cigarettes in the city fell by more than 50
percent as consumers turned to the city’s bustling black market. The thriving illegal
market for cigarettes has diverted billions of dollars from legitimate businesses and
governments to criminals.
The emergence of a black market ________ the elasticity of demand in the legal market
for cigarettes.
An increase in the tax rate can result in a decrease in the tax revenue when the elasticity
of demand is ________.
A) decreases; elastic
B) decreases; inelastic
C) increases; elastic
D) increases; inelastic
E) increases; unit elastic
Canada exports athletic coaching services and imports computer tech support. The price
of athletic coaching services in Canada is ________ with international trade than
without international trade. As a result of trade in athletic coaching services, the
Canadian producer surplus from athletic coaching services ________.
A) higher; does not change
B) lower; increases
C) lower; decreases
D) higher; increases
E) higher; decreases
Consumer surplus is
A) positive in the case of a monopolist practising perfect price discrimination.
B) equal to price minus marginal cost.
C) less in the case of a single-price monopoly than in the case of a perfectly competitive
industry.
D) zero for a single-price monopolist.
E) greater in a single-price monopoly than in a perfectly competitive industry.
Refer to Table 20.4.1. In this table, at 2014 prices, the value of production from 2013 to
2014 has increased by
A) 56 percent.
B) 91.7 percent.
C) 10.8 percent.
D) 54.5 percent.
E) 77.3 percent.
The main idea of fairness is based on which of the following rules?
a. The state must enforce laws that establish and protect private property.
b. Goods and services that produce externalities must be owned by the state,
monopolies must be eliminated, and common resources must follow the rules of the
competitive market.
c. The state must enforce tax laws so that after taxes are paid and benefits are received,
the gap between rich and poor is as small as possible.
d. Private property may be transferred from one person to another only by voluntary
exchange.
A) Rules a and d
B) Rules b and d
C) Rules b and c
D) Rules a and c
E) The main idea of fairness is not based on any of these rules.
Toronto has a large number of retail stores that sell clothes. Each store has its own
characteristics which differ from the other stores. The clothing business in Toronto is an
example of
A) a duopoly.
B) an oligopoly.
C) a perfectly competitive market.
D) a monopoly.
E) a monopolistically competitive market.
When government saving is negative,
A) the real interest rate rises.
B) the real interest rate falls.
C) investment increases.
D) the real interest rate falls if crowding-out occurs.
E) the supply of loanable funds increases.
The present value of a future sum of money is the amount that, if invested today, will
grow
A) as large as that future sum, given the interest rate.
B) as large as that future sum.
C) as large as that future sum, less taxes payable.
D) as large as that future sum, if the rate of interest is zero.
E) at a constant rate forever.
In Table 21.2.1, which person is a discouraged searcher?
A) A
B) B
C) C
D) D
E) none of them
If the real interest rate is below the equilibrium real interest rate,
A) lenders will be unable to find borrowers willing to borrow all of the available funds
and the supply of loanable funds curve shifts leftward.
B) borrowers will be unable to borrow all of the funds they want to borrow and the
demand for loanable funds curve shifts rightward.
C) a shortage of of loanable funds exists, and the real interest rate rises.
D) borrowers will be unable to borrow all of the funds they want to borrow and the
demand for loanable funds curve shifts leftward.
E) lenders will be unable to find borrowers willing to borrow all of the available funds
and the supply of loanable funds curve shifts rightward.
A vertical supply curve
A) is impossible except in the long run.
B) implies an elasticity of supply equal to zero.
C) implies an elasticity of supply equal to infinity.
D) indicates that suppliers are unwilling to produce the good.
E) indicates a shortage of the good.
Suppose real GDP increases by $1 billion and, as a result, consumption increases by
$500 million. This change in consumption is
A) unplanned.
B) induced.
C) autonomous.
D) too little.
E) planned.
The following events occur one at a time:
I. The price of crude oil rises.
II. The price of a car rises.
III. All speed limits on highways are abolished.
IV. Robots cut car production costs.
The quantity of gasoline supplied
A) increases when all speed limits on highways are abolished.
B) increases when the price of crude oil rises.
C) decreases when robots cut car production costs.
D) increases when the price of a car rises.
E) decreases when the price of crude oil rises.
In Figure 7.2.2, international trade ________ consumer surplus in Canada by ________.
A) decreases; $2.88 billion
B) decreases; $1.92 billion
C) increases; $2.88 billion
D) increases; $4.8 billion
E) increases; $1.92 billion
If the prices of goods and services are stated in terms of kilograms of salt, then salt is
A) a unit of account.
B) a standard of deferred payment.
C) a store of value.
D) quasi-money.
E) a medium of exchange.
Suppose that the following situation exists in the foreign exchange market. 1 Canadian
dollar buys 5.77 South African rand. If the price of a bottle of South African wine is 32
rand, what is the price in Canadian dollars if purchase power parity exists?
A) $184.64
B) $32.00
C) $5.55
D) $18.46
E) $18.02
________ specifies the maximum amount of a good that may be imported in a given
period of time.
A) An import restriction
B) A legislative restriction
C) A trade restriction
D) An import quota
E) An import subsidy
Refer to Figure 5.3.1. If the quantity produced is 200,
A) a deadweight loss exists.
B) the sum of consumer surplus and producer surplus is maximized.
C) production is efficient.
D) the sum of consumer surplus and producer surplus is zero.
E) deadweight loss is minimized.
Which of the following is not a prediction of marginal utility theory?
A) Other things remaining the same, the higher the price of a good, the smaller the
quantity demanded.
B) Other things remaining the same, the lower the price of a good, the greater the
quantity demanded.
C) Other things remaining the same, the lower the price of a good, the smaller is the
consumption of substitutes for that good.
D) The law of demand.
E) Diminishing marginal utility.
Use the figure below to answer the following questions.
Figure 26.3.3
Refer to Figure 26.3.3. Which one of the graphs illustrates a below full-employment
equilibrium?
A) (a) only
B) (b) only
C) (c) only
D) (d) only
E) both (c) and (d)
The demand curve for a good is the same as the
A) marginal cost curve of that good.
B) marginal benefit curve for that good.
C) consumer surplus curve of that good.
D) production possibilities frontier (PPF).
E) producer surplus from that good.
A welfare trap occurs when the marginal tax rate is
A) negative.
B) zero.
C) 100% or more.
D) positive.
E) less than the average tax rate.
Refer to Figure 3.5.2, which represents the market for cow manure. If the price of milk,
a complement in production of manure, rises, what is the new manure equilibrium,
ceteris paribus?
A) 8
B) 3
C) 9
D) 5
E) 6
According to the quantity theory of money, in the long run
A) V/M is constant.
B) Y/M is constant.
C) Y/P is constant.
D) M/P is constant.
E) M/V is constant.
Refer to Figure 16.3.3. The figure shows the marginal private benefit and marginal
social cost of a university education. If society’s external benefit from university
graduates is $10,000 each, then
A) a subsidy of $10,000 per student paid to the universities achieves efficiency.
B) a tax of $10,000 per student imposed on the universities achieves efficiency.
C) 10 million students per year is the efficient number students.
D) a subsidy of $20,000 per student paid to the universities achieves efficiency.
E) a tax of $5,000 per student paid by taxpayers achieves efficiency.
If the efficient scale of production only allows three firms to supply a market, the
market is a
A) three-firm monopoly.
B) cost-based oligopoly.
C) natural oligopoly.
D) monopolistic competition.
E) competitive monopoly.
The infant industry argument is based on the idea of
A) global comparative advantage.
B) global absolute advantage.
C) tariff maximization.
D) learning-by-doing.
E) tariff minimization.
An average cost pricing rule sets ________ equal to average total cost. An average cost
pricing rule is not an efficient way of regulating monopoly because at the quantity
produced, ________.
A) price; marginal benefit exceeds marginal cost
B) the return on capital; marginal benefit exceeds marginal cost
C) marginal cost; marginal cost exceeds marginal benefit
D) price equal to marginal revenue, which in long-run equilibrium is; marginal cost
exceeds marginal benefit
E) marginal cost; marginal benefit exceeds marginal cost
Use the figure below to answer the following questions.
Figure 6.1.2
Refer to Figure 6.1.2. If a rigorously enforced price ceiling is set at $10, then
A) 100 units will be sold at a price of $20 each.
B) 100 units will be sold at a price of $15 each.
C) 150 units will be sold at a price of $15 each.
D) 200 units will be sold at a price of $10 each.
E) 100 units will be sold at a price of $10 each.
The commodity substitution bias is that
A) consumers substitute high-quality goods for low-quality goods.
B) government spending is a good substitute for investment expenditures.
C) national saving and foreign borrowing are interchangeable.
D) consumers decrease the quantity they buy of goods whose relative prices rise and
increase the quantity of goods whose relative price falls.
E) consumers substitute more expensive goods for less expensive goods when
technology advances.