Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. Chile and Colombia would not be able to gain from trade if
Colombia’s opportunity cost of one pound of soybeans changed to
a. 1/2 pound of coffee.
b. 3/4 pound of coffee.
c. 4/3 pounds of coffee.
d. 2 pounds of coffee.
Table 75
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
First OrangeSecond OrangeThird Orange
Allison$2.00$1.50$0.75
Bob$1.50$1.00$0.60
Charisse$0.75$0.25$0
Refer to Table 75. The market quantity of oranges demanded per day is exactly 7 if the
price of an orange, P, satisfies
a. $0.60 < P < $0.75.
b. $0.60 < P < $2.00.
c. $0.25 < P < $0.75.
d. $0.25 < P < $0.60.
If consumers often purchase muffins to eat while they drink their latts at local coffee
shops, what would happen to the equilibrium price and quantity of latts if the price of
muffins falls?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
Table 322
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
ToothbrushHairbrush
Zimbabwe310
Portugal56
Refer to Table 322. Portugal has an absolute advantage in the production of
a. toothbrushes and a comparative advantage in the production of toothbrushes.
b. toothbrushes and a comparative advantage in the production of hairbrushes.
c. hairbrushes and a comparative advantage in the production of toothbrushes.
d. hairbrushes and a comparative advantage in the production of hairbrushes.
Which of the following is not a shortrun effect of rent control on the housing market?
a. reduced rents
b. a large shortage
c. a small increase in quantity demanded
d. a small decrease in quantity supplied
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. The horizontal line at the world price of tricycles represents the
a. demand for tricycles from the rest of the world.
b. supply of tricycles from the rest of the world.
c. level of inefficiency in the domestic market caused by trade.
d. surplus in the domestic tricycle market.
Normative statements are not
a. descriptive.
b. prescriptive.
c. claims about how the world should be.
d. made by economists speaking as policy advisers.
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. The perunit burden of the tax on buyers is
a. $2.
b. $3.
c. $4.
d. $5.
A monopoly is a market with one
a. seller, and that seller is a price taker.
b. seller, and that seller sets the price.
c. buyer, and that buyer is a price taker.
d. buyer, and that buyer sets the price.
Figure 96
The figure illustrates the market for roses in a country.
Refer to Figure 96. The amount of revenue collected by the government from the tariff
is
a. $200.
b. $400.
c. $500.
d. $600.
Figure 922
The following diagram shows the domestic demand and domestic supply in a market. In
addition, assume that the world price in this market is $40 per unit.
Refer to Figure 922. Suppose the government imposes a tariff of $20 per unit. With
trade and a tariff, consumer surplus is
a. $75,000 and producer surplus is $27,000.
b. $63,000 and producer surplus is $12,000.
c. $75,000 and producer surplus is $12,000.
d. $63,000 and producer surplus is $27,000.
Kyle is planning to take a roadtrip. After he makes his plans, he has to make some
unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two
events should Kyle consider in deciding if it is still worthwhile to go on the trip?
a. the unexpected repairs and the increase in the price of gas
b. the unexpected increase for repairs, but not the increase in the price of gas
c. the increase in the price of gas, but not the unexpected repairs
d. neither the unexpected increase in the price of gas nor the unexpected repairs
When supply and demand both increase, equilibrium
a. price will increase.
b. price will decrease.
c. quantity may increase, decrease, or remain unchanged.
d. price may increase, decrease, or remain unchanged.
Table 48
PriceFirm X’s
Quantity
SuppliedFirm Y’s
Quantity
SuppliedFirm Z’s
Quantity
Supplied
$0000
$3246
$64812
$961218
$1281624
$15102030
Refer to Table 48. Suppose Firm X and Firm Y are the only two sellers in the market.
If the market price increases from $12 to $15, quantity supplied will
a. decrease by 6 units.
b. decrease by 12 units.
c. increase by 6 units.
d. increase by 12 units.
Figure 27
Refer to Figure 27. If this economy moved from point P to point N, then
a. it still would not be producing efficiently.
b. there would be no gain in either engines or tvs.
c. it would be producing more engines and more tvs than at point P.
d. It is not possible for this economy to move from point P to point N without additional
resources.
Figure 624
Refer to Figure 624. Suppose sellers, rather than buyers, were required to pay this tax
(in the same amount per unit as shown in the graph). Relative to the tax on buyers, the
tax on sellers would result in
a. buyers bearing the same share of the tax burden.
b. sellers bearing the same share of the tax burden.
c. the same amount of tax revenue for the government.
d. All of the above are correct.
Which of the following might cause the demand curve for an inferior good to shift to
the left?
a. a decrease in income
b. an increase in the price of a substitute
c. an increase in the price of a complement
d. None of the above is correct.
Figure 25
Refer to Figure 25. Inefficient production is represented by which point(s)?
a. A, B
b. C
c. C, D
d. D
Figure 21
Refer to Figure 21. Which arrow represents the flow of spending by households?
a. A
b. B
c. C
d. D
Figure 41
Refer to Figure 41. The movement from point A to point B on the graph is caused by
a(n)
a. increase in price.
b. decrease in price.
c. decrease in the price of a substitute good.
d. increase in income.
Bill is restoring a car and has already spent $4000 on the restoration. He expects to be
able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of
work to make the car worth $6200 to potential buyers. He could also sell the car now,
without completing the additional work, for $3800. What should he do?
a. He should sell the car now for $3800.
b. He should keep the car since it wouldn’t be rational to spend $6400 restoring a car
and then sell it for only $6200.
c. He should complete the additional work and sell the car for $6200.
d. It does not matter if Bill sells the car now or completes the work and then sells it at
the higher price because the outcome will be the same either way.
Figure 54
Refer to Figure 54. The section of the demand curve from A to B represents the
a. elastic section of the demand curve.
b. inelastic section of the demand curve.
c. unit elastic section of the demand curve.
d. perfectly elastic section of the demand curve.
A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A
worker in the United States can earn $85 per day making cotton cloth with a mechanical
loom. What is the likely explanation for the difference in wages?
a. U.S. textile workers belong to a union, whereas Vietnamese textile workers do not
belong to a union.
b. There is little demand for cotton cloth in Vietnam and great demand in the U.S.
c. Labor is more productive making cotton cloth with a mechanical loom than with a
hand loom.
d. Vietnam has a lowwage policy to make its textile industry more competitive in world
markets.
The goal of an economist who formulates new theories is to
a. provide an interesting framework of analysis, whether or not the framework turns out
to be of much use in understanding how the world works.
b. provoke stimulating debate in scientific journals.
c. contribute to an understanding of how the world works.
d. demonstrate that economists, like other scientists, can formulate testable theories.
Figure 811
Refer to Figure 811. Neither a shift of the demand curve nor a shift of the supply curve
is shown on the figure. However, we know that, when the tax is imposed,
a. the demand curve will shift.
b. the supply curve will shift.
c. either the demand curve or the supply curve will shift.
d. None of the above are correct; the tax causes neither the demand curve nor the supply
curve to shift.
A possible outcome of the multilateral approach to free trade is that such an approach
can
a. win political support when a unilateral approach cannot.
b. result in more restricted trade than under a unilateral approach, when international
negotiations fail.
c. result in drastic reductions in tariffs for many countries.
d. All of the above are correct.
Figure 55
Refer to Figure 55. The maximum value of total revenue corresponds to a price of
a. $20.
b. $50.
c. $70.
d. $100.
Figure 413
Refer to Figure 413. If Producer A and Producer B are the only producers in the
market, then the market quantity supplied when the price is $6 is
a. 4 units.
b. 6 units.
c. 12 units.
d. 18 units.
Figure 819
The vertical distance between points A and B represents the original tax.
Refer to Figure 819. If the government changed the perunit tax from $5.00 to $2.50,
then the price paid by buyers would be $7.50, the price received by sellers would be $5,
and the quantity sold in the market would be 1.5 units. Compared to the original tax
rate, this lower tax rate would
a. increase government revenue and increase the deadweight loss from the tax.
b. increase government revenue and decrease the deadweight loss from the tax.
c. decrease government revenue and increase the deadweight loss from the tax.
d. decrease government revenue and decrease the deadweight loss from the tax.
Which of the following will cause no change in producer surplus?
a. the imposition of a nonbinding price ceiling in the market
b. buyers expect the price of a good to be higher next month
c. the price of a substitute increases
d. income increases and buyers consider the good to be inferior
Figure 417
Refer to Figure 417. At a price of
a. $2, there is a surplus of 6 units.
b. $5, there is a surplus of 25 units.
c. $5, there is a shortage of $25.
d. $7, there is a surplus of 4 units.
The Council of Economic Advisers
a. was created in 1776 and consists of three members and a staff of several dozen
economists.
b. was created in 1776 and consists of thirty members and a staff of a dozen economists.
c. was created in 1946 and consists of three members and a staff of several dozen
economists.
d. was created in 1946 and consists of thirty members and a staff of a dozen economists.
Minimumwage laws dictate the
a. average price employers must pay for labor.
b. highest price employers may pay for labor.
c. lowest price employers may pay for labor.
d. the highest and lowest prices employers may pay for labor.
For most students, the earnings they give up to attend college are
a. a minor cost when compared to the costs of tuition, room and board, and the like.
b. the single largest cost of their education.
c. about equal to the costs of room and board at college.
d. not considered true costs by an economist.