1) Figure 7-16
Sellers will be unwilling to sell more than
a.1 unit of the good if its price is below $200.
b.2 units of the good if its price is below $450.
c.3 units of the good if its price is below $700.
d.All of the above are correct.
2) Supply is said to be inelastic if the quantity supplied responds substantially to
changes in the price and elastic if the quantity supplied responds only slightly to price.
a.True
b.False
3) Dave consumes two normal goods, X and Y, and is currently at an optimum. If the
price of good X falls, we can predict with certainty that
a.Dave will consume more of both goods because his real income has risen.
b.the substitution effect will be positive for good X and negative for good Y.
c.Dave may consume more or less of good X, but he will consume less of good Y.
d.the substitution effect will offset the income effect for good X.
4) Last year, Max bought 6 pairs of athletic shoes when his income was $35,000. This
year, his income is $42,000, and he purchased 8 pairs of athletic shoes. Holding other
factors constant, it follows that Max
a.considers athletic shoes to be necessities.
b.considers athletic shoes to be inferior goods.
c.considers athletic shoes to be normal goods.
d.has a low for athletic shoes.
5) In the circular-flow diagram, in the markets for
a.goods and services, households and firms are both sellers.
b.goods and services, households are buyers and firms are sellers.
c.the factors of production, households are buyers and firms are sellers.
d.the factors of production, households and firms are both buyers.
6) Trade enhances the economic well-being of a nation in the sense that
a.both domestic producers and domestic consumers of a good become better off with
trade, regardless of whether the nation imports or exports the good in question.
b.the gains of domestic producers of a good exceed the losses of domestic consumers of
a good, regardless of whether the nation imports or exports the good in question.
c.trade results in an increase in total surplus.
d.trade puts downward pressure on the prices of all goods.
7) An implication of the median voter theorem is that Republicans and Democrats will
try to align their views with those of the median voter.
a.True
b.False
8) For whom is the good a normal good?
a.Bert only
b.Grover only
c.Bert, Ernie, Grover, and Oscar
d.This cannot be determined from the table.
9) As long as two people have different opportunity costs, each can gain from trade with
the other, since trade allows each person to obtain a good at a price lower than his or her
opportunity cost.
a.True
b.False
10) Kate is a personal trainer whose client William pays $80 per hour-long session.
William values this service at $100 per hour, while the opportunity cost of Kate’s time is
$75 per hour. The government places a tax of $10 per hour on personal trainers. After
the tax, what is likely to happen in the market for personal training?
a.Kate and William will agree to a new price somewhere between $85 and $100.
b.Kate and William will agree to a new price somewhere between $70 and $110.
c.Kate will no longer offer personal training services to William because she must
charge more than $100 in order to cover her opportunity costs and pay the tax.
d.The price will remain at $80, and Kate will pay the $10 tax.
11) Figure 9-10. The figure applies to Mexico and the good is rifles.
The area bounded by the points (Q0, P0), (Q2, P1), and (Q1, P1) represents
a.Mexico’s gains from trade.
b.the amount by which Mexico’s gain in producer surplus exceeds its loss in consumer
surplus due to trade.
c.Mexico’s loss in total surplus due to trade.
d.All of the above are correct.
12) If there is an improvement in the technology used to produce a good, then the
supply curve for that good will shift to the left.
a.True
b.False
13) Table 17-10
The table shows the demand schedule for a particular product.
Refer to Table 17-10. Suppose the market for this product is served by two firms who
have formed a cartel and are colluding to set the price and quantity in this market. If the
marginal cost to produce this product is constant at $40 per unit, then what price will
the cartel set in this market?
a. $40
b. $50
c. $60
d. $70