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Figure 611
Refer to Figure 611. If the government imposes a price floor at $10, it would be
a. binding if market demand is Demand A or Demand B.
b. nonbinding if market demand is Demand A or Demand B.
c. binding if market demand is Demand A and nonbinding if market demand is Demand
B.
d. nonbinding if market demand is Demand A and binding if market demand is Demand
B.
After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring
Break destination this year. However, Spring Break is still months away, and you may
reverse this decision. Which of the following events would prompt you to reverse this
decision?
a. The marginal benefit of going to Cancun increases.
b. The marginal cost of going to Cancun decreases.
c. The marginal benefit of going to Ft. Lauderdale decreases.
d. The marginal cost of going to Ft. Lauderdale decreases.
When a tax is levied on a good,
a. government revenues exceed the loss in total welfare.
b. there is a decrease in the quantity of the good bought and sold in the market.
c. the price that sellers receive exceeds the price that buyers pay.
d. All of the above are correct.
Production possibilities frontiers are usually bowed outward. This is because
a. the more resources a society uses to produce one good, the fewer resources it has
available to produce another good.
b. the opportunity cost of producing a good decreases as more and more of that good is
produced.
c. of the effects of technological change.
d. resources are specialized; that is, some are better at producing particular goods rather
than other goods.
Figure 715
Refer to Figure 715. When the price is P2, producer surplus is
a. A.
b. A+C.
c. A+B+C.
d. D+G.
The combination of President Obama’s strategies and the Federal Reserve’s reaction to
the deep economic downturn in the US in 2008 and 2009
a. was intended to reduce unemployment.
b. may lead to excessive inflation over time.
c. resulted in higher taxes and an increased supply of money.
d. Both a and b are correct.
Which of the following is not correct? In a 2006 survey of Ph.D. economists,
a. 47 percent favored eliminating the minimum wage.
b. 14 percent would maintain the minimum wage at its current level.
c. 38 percent would increase the minimum wage.
d. 10 percent would decrease the minimum wage.
When a tax is placed on the sellers of cell phones, the size of the cell phone market
a. and the effective price received by sellers both increase.
b. increases, but the effective price received by sellers decreases.
c. decreases, but the effective price received by sellers increases.
d. and the effective price received by sellers both decrease.
Who once said that taxes are the price we pay for a civilized society?
a. Milton Friedman
b. Theodore Roosevelt
c. Arthur Laffer
d. Oliver Wendell Holmes, Jr.
Figure 21
Refer to Figure 21. Which arrow represents the flow of goods and services?
a. A
b. B
c. C
d. D
You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider
eating a third. As a rational consumer you should make your choice by comparing
a. the benefits from eating all three bowls of ice cream to how much three bowls of ice
cream costs.
b. the benefits from eating all three bowls of ice cream to how much one more bowl of
ice cream costs.
c. the benefits from eating one more bowl of ice cream to how much three bowls of ice
cream costs.
d. the benefits from eating one more bowl of ice cream to how much one more bowl of
ice cream costs.
If muffins and bagels are substitutes, a higher price for bagels would result in a(n)
a. increase in the demand for bagels.
b. decrease in the demand for bagels.
c. increase in the demand for muffins.
d. decrease in the demand for muffins.
After a certain nation changed its policy from one that banned international trade in
wheat to one that allowed international trade in wheat, the nation began importing
wheat. As a result, total surplus in the wheat market increased by $10 million. Which of
the following changes could have occurred as well?
a. The price of wheat in that nation increased with the adoption of the new policy.
b. The domestic quantity of wheat supplied increased with the adoption of the new
policy.
c. Consumer surplus in the wheat market increased by $7 million and producer surplus
in the wheat market increased by $3 million.
d. Consumer surplus in the wheat market increased by $15 million and producer surplus
in the wheat market decreased by $5 million.
Figure 317
Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities Frontier
Refer to Figure 317. Maxine has an absolute advantage in the production of
a. both goods and a comparative advantage in the production of pies.
b. both goods and a comparative advantage in the production of tarts.
c. neither good and a comparative advantage in the production of pies.
d. neither good and a comparative advantage in the production of tarts.
After OPEC raised the price of crude oil in the 1970's, which of the following was the
most important reason that there were shortages of gasoline?
a. HTMLENTITY#8203HTMLENTITYAmericans drove large, gasguzzling vehicles.
b. HTMLENTITY#8203HTMLENTITYThe increase in the price of crude oil by
OPEC.
c. HTMLENTITY#8203HTMLENTITYThe effects of a price ceiling on gasoline prices
imposed by the US government.
d. HTMLENTITY#8203HTMLENTITYIncreased commuting times resulting from
traffic congestion.
Figure 85
Suppose that the government imposes a tax of P3 P1.
Refer to Figure 85. The price that sellers effectively receive after the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
Which of the following might cause the supply curve for an inferior good to shift to the
right?
a. an increase in input prices
b. a decrease in consumer income
c. an improvement in production technology that makes production of the good more
profitable
d. a decrease in the number of sellers in the market
Figure 221
Refer to Figure 221. Your friend John created the graph above to illustrate that
snowstorms are caused by more snowblowers being sold. You inform him that his
interpretation is incorrect due to
a. omitted variable bias.
b. reverse causality.
c. slope mismatch.
d. shifting versus moving along a curve.
Figure 621
Refer to Figure 621. The price that buyers pay after the tax is imposed is
a. $8.00.
b. $9.00.
c. $10.50.
d. $12.00.
Which of the following events could shift the demand curve for gasoline to the left?
a. The income of gasoline buyers rises, and gasoline is a normal good.
b. The income of gasoline buyers falls, and gasoline is an inferior good.
c. Public service announcements run on television encourage people to walk or ride
bicycles instead of driving cars.
d. The price of gasoline rises.
Figure 32
Brazil’s Production Possibilities Frontier
Refer to Figure 32. If the production possibilities frontier shown is for two months of
production, then which of the following combinations of peanuts and cashews could
Brazil produce in two months?
a. 7 peanuts and 35 cashews
b. 5 peanuts and 100 cashews
c. 2 peanuts and 190 cashews
d. 3 peanuts and 150 cashews
Table 714
SellerCost
LeBron$700
Kobe$600
Kevin$450
Steve$400
Refer to Table 714. You want to hire a professional photographer to take pictures of
your family. The table shows the costs of the four potential sellers in the local
photography market. You take bids from the sellers. Who offers the winning bid, and
what does he offer to charge for the photography session?
a. Steve; more than $400 but less than $450
b. Steve; $399
c. LeBron; more than $700
d. LeBron; more than $600 but less than $700
Which of the following demonstrates the law of supply?
a. When the price of leather belts rose, leather belt sellers increase their quantity
supplied of leather belts.
b. When car production technology improved, car producers increased their supply of
cars.
c. When sweater producers expected sweater prices to rise in the near future, they
decreased their current supply of sweaters.
d. When ketchup prices rose, ketchup sellers decreased their quantity supplied of
ketchup.
Figure 81
Refer to Figure 81. Suppose the government imposes a tax of P' P'''. The area measured
by L+M+Y represents
a. consumer surplus after the tax.
b. consumer surplus before the tax.
c. producer surplus after the tax.
d. producer surplus before the tax.
Figure 67
Refer to Figure 67. For a price floor to be binding in this market, it would have to be
set at
a. any price below $7.
b. any price below $3.
c. any price below $9.
d. any price above $7.
Figure 81
Refer to Figure 81. Suppose the government imposes a tax of P' P'''. The consumer
surplus after the tax is measured by the area
a. J+K+I.
b. J.
c. M.
d. L+M+Y.
Jeff decides that he would pay as much as $2,000 for a new laptop computer. He buys
the computer and realizes a consumer surplus of $300. How much did Jeff pay for his
computer?
a. $300.
b. $1,700.
c. $2,000.
d. $2,300.
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 price received by sellers to
a. decrease by $2.
b. increase by $3.
c. decrease by $4.
d. increase by $5.
A very hot summer in Atlanta will cause
a. the demand curve for lemonade to shift to the left.
b. the demand for air conditioners to decrease.
c. the demand for jackets to decrease.
d. a movement downward and to the right along the demand curve for tank tops.
What happens to consumer surplus in the iPod market if iPods are normal goods and
buyers of iPods experience an increase in income?
a. Consumer surplus decreases.
b. Consumer surplus remains unchanged.
c. Consumer surplus increases.
d. Consumer surplus may increase, decrease, or remain unchanged.
Figure 75
Refer to Figure 75. If the price of the good is $6, then consumer surplus is
a. $16.
b. $24.
c. $30.
d. $36.
Assume for Guatemala that the domestic price of coffee without international trade is
higher than the world price of coffee. This suggests that
a. Guatemala has a comparative advantage over other countries in the production of
coffee, and Guatemala will export coffee.
b. Guatemala has a comparative advantage over other countries in the production of
coffee, and Guatemala will import coffee.
c. other countries have a comparative advantage over Guatemala in the production of
coffee, and Guatemala will export coffee.
d. other countries have a comparative advantage over Guatemala in the production of
coffee, and Guatemala will import coffee.
Figure 21
Refer to Figure 21. Harvey receives his first paycheck for working as an ice cream
vendor. To which of the arrows does this transaction directly contribute?
a. B only
b. A and B
c. C only
d. C and D
Which of the following events must cause equilibrium price to fall?
a. demand increases and supply decreases
b. demand and supply both decrease
c. demand decreases and supply increases
d. demand and supply both increase
Figure 97. The figure applies to the nation of Wales and the good is cheese.
Refer to Figure 97. With trade, Wales
a. imports Q2Q1 units of cheese.
b. exports Q2Q1 units of cheese.
c. imports Q2Q0 units of cheese.
d. exports Q2Q0 units of cheese.
