A macroeconomist — as opposed to a microeconomist — might study the effect of
a. changes in the money supply on the inflation rate.
b. an increase in the gas tax on fuel consumption.
c. a technological advance on the natural gas industry.
d. a hurricane on prices in the orange industry.
Table 413
The demand schedule below pertains to sandwiches demanded per week.
PriceHarry’s
Quantity
DemandedDarby’s
Quantity
DemandedJake’s
Quantity
Demanded
$3343
$512x
Refer to Table 413. Suppose x = 1. Then the slope of the market demand curve is
a. 3.
b. 1/3.
c. 1/3.
d. 3.
When a country takes a unilateral approach to free trade, it
a. removes trade restrictions on its own.
b. reduces its trade restrictions while other countries do the same.
c. does not remove trade restrictions no matter what other countries do.
d. is willing to trade with multiple countries at once.
Denmark is an importer of computer chips and adds a $5 per chip tariff to the world
price of $12 per chip. Suppose Denmark removes the tariff. Which of the following
outcomes is not possible?
a. More Danishproduced chips are sold in Denmark.
b. More foreignproduced chips are sold in Denmark.
c. Danish consumers of chips become better off.
d. Total surplus in the Danish chip market increases.
Scenario 81
Erin would be willing to pay as much as $100 per week to have her house cleaned.
Ernesto’s opportunity cost of cleaning Erin’s house is $70 per week.
Refer to Scenario 81. If Erin pays Ernesto $90 to clean her house, Erin’s consumer
surplus is
a. $80.
b. $30.
c. $20.
d. $10.
Communist countries worked under the premise that
a. people, when left on their own without government intervention, will find the best
use of available resources
b. central planners were in the best position to determine the allocation of scarce
resources in the economy.
c. households and firms, guided by an “invisible hand,” could achieve the most efficient
allocation of scarce resources.
d. allowing the market forces of supply and demand to operate with no government
intervention would achieve the most efficient allocation of scarce resources.
An increase in which of the following would shift the supply curve for gasoline to the
right?
a. demand for gasoline
b. price of gasoline
c. number of producers of gasoline
d. price of oil, an input into the production of gasoline
When the price of a good is $5, the quantity demanded is 100 units per month; when the
price is $7, the quantity demanded is 80 units per month. Using the midpoint method,
the price elasticity of demand is about
a. 0.22.
b. 0.67.
c. 1.33.
d. 1.50.
If macaroni and cheese is an inferior good, what would happen to the equilibrium price
and quantity of macaroni and cheese if consumers’ incomes rise?
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.
Figure 715
Refer to Figure 715. When the price rises from P1 to P2, which area represents the
increase in producer surplus to existing producers?
a. A
b. A+B
c. A+B+C
d. G
If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in
quantity supplied, then the price increase is about
a. 0.2%.
b. 0.5%.
c. 2.0%.
d. 4.5%.
Figure 714
Refer to Figure 714. At the equilibrium price, producer surplus is
a. $800.
b. $400.
c. $450.
d. $900.
Table 52
PriceQuantity
$2500
$20030
$15070
$100110
$50150
$0190
Refer to Table 52. Using the midpoint method, if the price falls from $150 to $100, the
absolute value of the price elasticity of demand is
a. 0.4.
b. 0.9.
c. 1.1.
d. 2.
Table 71
BuyerWillingness To Pay
Calvin$150.00
Sam$135.00
Andrew$120.00
Lori$100.00
Refer to Table 71. If the market price is $105,
a. Calvin’s consumer surplus is $45 and total consumer surplus is $85.
b. Sam’s consumer surplus is $30 and total consumer surplus is $90.
c. Andrew’s consumer surplus is $15 and total consumer surplus is $67.50.
d. Lori’s consumer surplus is $2 and total consumer surplus is $100.
Figure 53
Refer to Figure 53. The demand curve representing the demand for a luxury good with
several close substitutes is
a. A.
b. B.
c. C.
d. D.
In the case of perfectly inelastic demand,
a. the change in quantity demanded equals the change in price.
b. the percentage change in quantity demanded equals the percentage change in price.
c. infinitelylarge changes in quantity demanded result from very small changes in the
price.
d. quantity demanded stays the same whenever price changes.
The law of demand states that, other things equal, an increase in
a. price causes quantity demanded to increase.
b. price causes quantity demanded to decrease.
c. quantity demanded causes price to increase.
d. quantity demanded causes price to decrease.
Table 412
A country club usually only allows members to purchase tickets for its celebrity golf
tournament, but the club is considering allowing nonmembers to purchase tickets this
year. The demand and supply schedules are as follows:
PriceQuantity Demanded
by MembersQuantity Demanded
by NonmembersQuantity Supplied
$101000500600
$15800400600
$20600300600
$25400200600
$30200100600
Refer to Table 412. If both members and nonmembers are allowed to purchase tickets
to this year’s celebrity golf tournament and the country club sets the ticket price at $20,
then there will be
a. a shortage of 300 tickets.
b. a surplus of 300 tickets.
c. 300 tickets sold.
d. 600 tickets unsold.
Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of
fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units
of fish per year. There are 30 workers in each country. No trade occurs between the two
countries. Boatland produces and consumes 75 units of wheat and 375 units of fish per
year while Farmland produces and consumes 375 units of wheat and 75 units of fish per
year. If trade were to occur, Boatland would trade 90 units of fish to Farmland in
exchange for 80 units of wheat. If Boatland now completely specializes in fish
production, how many units of fish could it now consume along with the 80 units of
imported wheat?
a. 490 units
b. 500 units
c. 610 units
d. 660 units
Figure 38
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 38. If Chile and Colombia each divides its time equally between
making coffee and making soybeans, then total production is
a. 12 pounds of coffee and 12 pounds of soybeans.
b. 14 pounds of coffee and 9 pounds of soybeans.
c. 16 pounds of coffee and 6 pounds of soybeans.
d. 28 pounds of coffee and 18 pounds of soybeans.
President Truman once said he wanted to find a onearmed economist because when he
asked his economists for advice, they always answered, “On the one hand, … On the
other hand, …” Truman’s observation that economists’ advice is not always
straightforward
a. is rooted in the principle that people face tradeoffs.
b. indicates that economists recognize that there are opportunity costs associated with
policy decisions.
c. confirms that economists are not suited to be presidential advisers.
d. More than one of the above is correct.
One effect of the governmentimposed seat belt law in the U.S. has been
a. a dramatic decrease in the number of pedestrian deaths.
b. safer driving.
c. an increase in the number of accidents.
d. a dramatic decrease in the number of driver deaths.
Table 327
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed to Make 1Quantity Produced in 36 Hours
ParasolPlateParasolPlate
Huang26186
Min24189
Refer to Table 327. Min has an absolute advantage in the production of
a. plates and a comparative advantage in the production of plates.
b. parasols and a comparative advantage in the production of plates.
c. neither good and a comparative advantage in the production of parasols.
d. neither good and a comparative advantage in the production of plates.
If an economy is producing efficiently, then
a. there is no way to produce more of one good without producing less of another good.
b. it is possible to produce more of both goods without increasing the quantities of
inputs that are being used.
c. it is possible to produce more of one good without producing less of another good.
d. it is not possible to produce more of any good at any cost.
Figure 68
Refer to Figure 68. If the government imposes a price floor of $5 on this market, then
there will be
a. no surplus of the good.
b. a surplus of 5 units of the good.
c. a surplus of 10 units of the good.
d. a surplus of 15 units of the good.
Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a
result, smokers who live in Wyoming start purchasing their cigarettes in surrounding
states. Which of the following principles does this best illustrate?
a. People respond to incentives.
b. Rational people think at the margin.
c. Trade can make everyone better off.
d. Markets are usually a good way to organize economic activity.
The “invisible hand” directs economic activity through
a. advertising.
b. prices.
c. central planning.
d. government regulations.
Which of the following statements is correct?
a. Buyers determine supply, and sellers determine demand.
b. Buyers determine demand, and sellers determine supply.
c. Buyers determine both demand and supply.
d. Sellers determine both demand and supply.
Table 511
Supply isDemand is
Scenario Aelasticelastic
Scenario Belasticinelastic
Scenario Cinelasticelastic
Scenario Dinelasticinelastic
Refer to Table 511. Which scenario describes the market for oil in the short run in
comparison to the long run?
a. Scenario A describes both the short run and the long run.
b. Scenario D describes both the short run and the long run.
c. Scenario D describes the short run, whereas scenario A describes the long run.
d. Scenario C describes the short run, whereas scenario B describes the long run.
Table 321
Assume that Jamaica and Norway can switch between producing coolers and producing
radios at a constant rate. The following table shows the number of coolers or number of
radios each country can produce in one day.
Output Produced in One Day
CoolersRadios
Jamaica126
Norway243
Refer to Table 321. Assume that Jamaica and Norway each has 4 days available for
production. Originally, each country divided its time equally between the production of
coolers and radios. Now, each country spends all its time producing the good in which it
has a comparative advantage. As a result, the total output of coolers increased by
a. 12.
b. 24.
c. 36.
d. 48.
Figure 92
The figure illustrates the market for calculators in a country.
Refer to Figure 92. At the world price and with free trade,
a. the domestic quantity of calculators demanded is greater than the domestic quantity
of calculators supplied.
b. the calculator market is in equilibrium.
c. the domestic demand for calculators is perfectly inelastic.
d. both domestic producers of calculators and domestic consumers of calculators are
better off than they were without free trade.
If the supply of a product increases, then we would expect equilibrium price
a. to increase and equilibrium quantity to decrease.
b. to decrease and equilibrium quantity to increase.
c. and equilibrium quantity to both increase.
d. and equilibrium quantity to both decrease.
Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence’s daughter
to play the guitar in exchange for Terrence tiling Dale’s kitchen floor,
a. only Dale is made better off by trade.
b. only Terrence is made better off by trade.
c. both Dale and Terrence are made better off by trade.
d. neither Dale nor Terrence are made better off by trade.
Which of the following statements about market economies is correct?
a. In a market economy, no one is looking out for the economic wellbeing of society as
a whole.
b. Market economies are characterized by decentralized decision making and
selfinterested decision makers.
c. Market economies have proven remarkably successful in promoting overall economic
wellbeing.
d. All of the above are correct.
The president of the United States receives tax policy advice from economists in the
a. Federal Reserve.
b. Department of Justice.
c. Department of the Treasury.
d. Congressional Budget Office.