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. Suppose Jamaica decides to increase its production of radios by 12.
What is the opportunity cost of this decision?
a. 3 coolers
b. 6 coolers
c. 12 coolers
d. 24 coolers
Figure 216
Refer to Figure 216. Efficient production is represented by which point(s)?
a. B, D, E
b. D
c. C, B
d. A, C
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. The imposition of the tax causes the quantity sold to
a. increase by 1 unit.
b. decrease by 1 unit.
c. increase by 2 units.
d. decrease by 2 units.
Figure 77
Refer to Figure 77. What happens to the consumer surplus if the price rises from $100
to $150?
a. The new consumer surplus is half of the original consumer surplus.
b. The new consumer surplus is 25 percent of the original consumer surplus.
c. The new consumer surplus is double the original consumer surplus.
d. The new consumer surplus is triple the original consumer surplus.
Figure 88
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 88. The government collects tax revenue that is the area
a. L.
b. B+D.
c. C+F.
d. F+G+L.
Figure 514
Refer to Figure 514. Over which range is the supply curve in this figure the most
elastic?
a. $16 to $40
b. $40 to $100
c. $100 to $220
d. $220 to $430
Figure 37
Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
Refer to Figure 37. If Bintu must work 2 hours to make each cup, then her production
possibilities frontier is based on how many hours of work?
a. 2 hours
b. 4 hours
c. 8 hours
d. 16 hours
If the world price of coffee is higher than Colombia’s domestic price of coffee without
trade, then Colombia
a. should import coffee.
b. has a comparative advantage in coffee and should export coffee.
c. should produce just enough coffee to satisfy domestic demand.
d. should produce no coffee domestically.
Figure 917
Refer to Figure 917. When the country moves from free trade to trade and a tariff,
consumer surplus
a. decreases by $576 and producer surplus does not change.
b. decreases by $576 and producer surplus increases by $192.
c. decreases by $792 and producer surplus does not change.
d. decreases by $792 and producer surplus increases by $192.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. Bearing in mind that this country is “small,” what would happen if
there were a decrease in the price of tricycle helmets within this country, given that
tricycles and tricycle helmets are complements?
a. The quantity of tricycles that this country imports would increase.
b. The quantity of tricycles that this country imports would decrease, but the country
would still be an importer of tricycles.
c. This country would switch from being an importer of tricycles to an exporter of
tricycles.
d. The domestic price without trade would move closer to the world price.
Figure 33
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 33. If the production possibilities frontier shown for Arturo is for 100
hours of production, then how long does it take Arturo to make one burrito?
a. 1/4 hour
b. 1/3 hour
c. 3 hours
d. 4 hours
Figure 423
Refer to Figure 423. In this market for sunscreen, there is a decrease in the price of
zinc oxide, an input into sunscreen, and more producers enter the market. The
equilibrium price
a. increases and the equilibrium quantity decreases.
b. decreases and the equilibrium quantity increases.
c. is ambiguous and the equilibrium quantity increases.
d. decreases and the equilibrium quantity is ambiguous.
On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and
another point is (quantity supplied = 250, price = $4.50). Using the midpoint method,
the price elasticity of supply is about
a. 0.22.
b. 0.53.
c. 1.00.
d. 1.89.
Scenario 82
Roland mows Karla’s lawn for $25. Roland’s opportunity cost of mowing Karla’s lawn
is $20, and Karla’s willingness to pay Roland to mow her lawn is $28.
Refer to Scenario 82. Assume Roland is required to pay a tax of $10 each time he
mows a lawn. Which of the following results is most likely?
a. Karla now will decide to mow her own lawn, and Roland will decide it is no longer
in his interest to mow Karla’s lawn.
b. Karla still is willing to pay Roland to mow her lawn, but Roland will decline her
offer.
c. Roland still is willing to mow Karla’s lawn, but Karla will decide to mow her own
lawn.
d. Roland and Karla still can engage in a mutuallyagreeable trade.
Economic models are built with
a. recommendations concerning public policies.
b. facts about the legal system.
c. assumptions.
d. statistical forecasts.
Figure 926
The diagram below illustrates the market for baseballs in the U.S.
Refer to figure 926. After the opening of the U.S. baseball market to international
trade, it’s possible to conclude that
a. HTMLENTITY#8203HTMLENTITYboth U.S. buyers and U.S. sellers are worse
off.
b. HTMLENTITY#8203HTMLENTITYboth U.S. buyers and U.S. sellers are better off.
c. HTMLENTITY#8203HTMLENTITYU.S. buyers are better off but U.S. sellers are
worse off.
d. HTMLENTITY#8203HTMLENTITYU.S. buyers are worse off but U.S. sellers are
better off.
Holding all other forces constant, if increasing the price of a good leads to an increase
in total revenue, then the demand for the good must be
a. unit elastic.
b. inelastic.
c. elastic.
d. None of the above is correct because a price increase always leads to an increase in
total revenue.
When a relevant variable that is not named on either axis changes,
a. there will be a movement along the curve.
b. the curve will rotate clockwise.
c. the curve will be unaffected since only the variables on the axis affect the curve.
d. the curve will shift.
Figure 316
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 316. Merve should specialize in the production of
a. purses.
b. wallets.
c. both goods.
d. neither good.
One of the 20th century’s worst episodes of inflation occurred in
a. the United States in the 1960s.
b. Italy in the 1950s.
c. Russia in the 1930s.
d. Germany in the 1920s.
Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing
to pay for the book?
a. $6.
b. $2.
c. $8.
d. $4.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. With trade, this country
a. exports 160 tricycles.
b. exports 320 tricycles.
c. imports 160 tricycles.
d. imports 320 tricycles.
Table 72
This table refers to five possible buyers’ willingness to pay for a case of Vanilla Coke.
BuyerWillingness To Pay
David$8.50
Laura$7.00
Megan$5.50
Mallory$4.00
Audrey$3.50
Refer to Table 72. If the market price is $3.80,
a. David’s consumer surplus is $4.70 and total consumer surplus for the five individuals
is $9.50.
b. Megan’s consumer surplus is $1.70 and total consumer surplus for the five
individuals is $9.80.
c. David, Laura, and Megan will be the only buyers of Vanilla Coke.
d. the demand curve for Vanilla Coke, taking the five individuals into account, is
horizontal.
A circularflow model and production possibilities frontier are similar in that
a. neither allows economic analysis to occur.
b. neither can be represented visually on a graph.
c. both make use of assumptions.
d. both make use of complex equations to arrive at solutions.
Dallas buys strawberries, and he would be willing to pay more than he now pays.
Suppose that Dallas has a change in his tastes such that he values strawberries more
than before. If the market price is the same as before, then
a. Dallas’s consumer surplus would be unaffected.
b. Dallas’s consumer surplus would increase.
c. Dallas’s consumer surplus would decrease.
d. Dallas would be wise to buy fewer strawberries than before.
Which of these statements does not apply to market economies?
a. Prices prevent decentralized decision making from degenerating into chaos.
b. Prices coordinate the actions of millions of people with varying abilities and desires.
c. Prices ensure that anyone who wants a product can get it.
d. Prices ensure that what needs to get done does in fact get done.
Figure 62
Refer to Figure 62. The price ceiling
a. is binding.
b. causes a shortage.
c. causes the quantity demanded to exceed the quantity supplied.
d. All of the above are correct.
Table 74
The numbers in Table 71 reveal the maximum willingness to pay for a ticket to a
Chicago Cubs vs. St. Louis Cardinal’s baseball game at Wrigley Field.
BuyerWillingness to Pay
Jennifer$10
Bryce$15
Dan$20
David$25
Ken$50
Lisa$60
Refer to Table 74. If you have a ticket that you sell to the group in an auction, what
will be the selling price?
a. slightly more than $20.
b. slightly more than $25.
c. slightly more than $50.
d. slightly more than $60.
As rationing mechanisms, prices
a. and long lines are efficient.
b. are efficient, but long lines are inefficient.
c. are inefficient, but long lines are efficient.
d. and long lines are inefficient.
Which of the following tradeoffs does the production possibilities frontier illustrate?
a. If an economy wants to increase efficiency in production, then it must sacrifice
equality in consumption.
b. Once an economy has reached the efficient points on its production possibilities
frontier, the only way of getting more of one good is to get less of the other.
c. For an economy to consume more of one good, it must stop consuming the other
good entirely.
d. For an economy to produce and consume goods, it must sacrifice environmental
quality.
In the circularflow diagram,
a. factors of production flow from government to firms.
b. goods and services flow from households to firms.
c. income paid to the factors of production flows from firms to households.
d. spending on goods and services flows from firms to households.
For a particular good, an 8 percent increase in price causes a 4 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a. There are many close substitutes for this good.
b. The good is a luxury.
c. The market for the good is broadly defined.
d. The relevant time horizon is long.
Just like models constructed in other areas of science, economic models
a. incorporate assumptions that contradict reality.
b. incorporate all details of the real world.
c. complicate reality.
d. avoid the use of diagrams and equations.
Suppose the number of buyers in a market decreases and a technological advancement
occurs also. What would we expect to happen in the market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. None of the above is correct.
If the world price of apples is higher than Argentina’s domestic price of apples without
trade, then Argentina
a. should import apples.
b. has a comparative advantage in apples.
c. should produce just enough apples to meet its domestic demand.
d. should refrain altogether from producing apples.