Figure 310
Alice and Betty’s Production Possibilities in one 8hour day.
Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier
Refer to Figure 310. If point A represents Alice’s production and point B represents
Betty’s production,
a. Alice produces 200 pitchers of lemonade and 100 pizzas while Betty produces 180
pitchers of lemonade and 180 pizzas.
b. Alice produces 180 pitchers of lemonade and 180 pizzas while Betty produces 200
pitchers of lemonade and 100 pizzas.
c. Alice produces 100 pitchers of lemonade and 200 pizzas while Betty produces 180
pitchers of lemonade and 180 pizzas.
d. Only Alice can benefit from specialization and trade.
Table 77
BuyerWillingness to Pay
Michael$500
Earvin$400
Larry$350
Charles$300
Refer to Table 77. You have an extra ticket to the Midwest Regional Sweet 16 game in
the men’s NCAA basketball tournament. The table shows the willingness to pay of the
four potential buyers in the market for a ticket to the game. You hold an auction to sell
the ticket. Michael bids $410 for the ticket, and you sell him the ticket. What is his
consumer surplus?
a. $410
b. $90
c. $10
d. $0
Suppose the government has imposed a price floor on the market for soybeans. Which
of the following events could transform the price floor from one that is not binding into
one that is binding?
a. Farmers use improved, draughtresistant seeds, which lowers the cost of growing
soybeans.
b. The number of farmers selling soybeans decreases.
c. Consumers’ income increases, and soybeans are a normal good.
d. The number of consumers buying soybeans increases.
Figure 74
Refer to Figure 74. Which area represents the increase in consumer surplus when the
price falls from P1 to P2?
a. BDF
b. AFG
c. ABC
d. ABDG
Figure 427
Panel (a)Panel (b)
Panel (c)Panel (d)
Refer to Figure 427. Panel (c) shows which of the following?
a. an increase in demand and an increase in quantity supplied
b. an increase in demand and an increase in supply
c. an increase in quantity demanded and an increase in quantity supplied
d. an increase in quantity demanded and an increase in supply
Table 33
Production Opportunities
Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours
Cheese Wine Cheese Wine
England 1 4 40 10
France 5 2 8 20
Refer to Table 33. We could use the information in the table to draw a production
possibilities frontier for England and a second production possibilities frontier for
France. If we were to do this, measuring cheese along the horizontal axis, then
a. the slope of England’s production possibilities frontier would be 4 and the slope of
France’s production possibilities frontier would be 0.4.
b. the slope of England’s production possibilities frontier would be 0.25 and the slope
of France’s production possibilities frontier would be 2.5.
c. the slope of England’s production possibilities frontier would be 0.25 and the slope of
France’s production possibilities frontier would be 2.5.
d. the slope of England’s production possibilities frontier would be 4 and the slope of
France’s production possibilities frontier would be 0.4.
Figure 915
Refer to Figure 915. Consumer surplus with the tariff is
a. A.
b. A + B.
c. A + C + G.
d. A + B + C + D +E + F.
An outcome that can result from either a price ceiling or a price floor is
a. an enhancement of efficiency.
b. undesirable rationing mechanisms.
c. a surplus.
d. a shortage.
Figure 96
The figure illustrates the market for roses in a country.
Refer to Figure 96. When the tariff is imposed, domestic consumers
a. lose by $200.
b. lose by $450.
c. gain by $200.
d. gain by $450.
Refer to Figure 69. A price ceiling set at
a. $4 will be binding and will result in a shortage of 8 units.
b. $4 will be binding and will result in a shortage of 16 units.
c. $7 will be binding and will result in a surplus of 4 units.
d. $7 will be binding and will result in a surplus of 8 units.
Table 55
PriceTotal
Revenue
$5$70
$6$78
$7$84
$8$88
$9$90
$10$90
Refer to Table 55. As price rises from $7 to $8, the price elasticity of demand using the
midpoint method is approximately
a. 0.09.
b. 0.58.
c. 0.65.
d. 1.53.
In the market for apples in a certain country, consumer surplus increases and total
surplus increases when that country
a. abandons a notrade policy, adopts a freetrade policy, and becomes an importer of
apples.
b. abandons a notrade policy, adopts a freetrade policy, and becomes an exporter of
apples.
c. abandons a freetrade policy, adopts a notrade policy, and becomes an importer of
apples.
d. abandons a freetrade policy, adopts a notrade policy, and becomes an exporter of
apples.
If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the
price elasticity of demand is
a. 0.02.
b. 0.33.
c. 3.
d. 4.
Figure 912
Refer to Figure 912. Equilibrium price and equilibrium quantity without trade are
a. $54 and 800.
b. $54 and 1,600.
c. $42 and 800.
d. $42 and 1,200.
Figure 914. On the diagram below, Q represents the quantity of crude oil and P
represents the price of crude oil.
Refer to Figure 914. The country for which the figure is drawn
a. has a comparative advantage relative to other countries in the production of crude oil
and it will export crude oil.
b. has a comparative advantage relative to other countries in the production of crude oil
and it will import crude oil.
c. has a comparative disadvantage relative to other countries in the production of crude
oil and it will export crude oil.
d. has a comparative disadvantage relative to other countries in the production of crude
oil and it will import crude oil.
Which of the following would cause price to increase?
a. an increase in supply
b. a decrease in demand
c. a surplus of the good
d. a shortage of the good
Table 41
PriceQuantity Demanded
by MichelleQuantity Demanded
by LauraQuantity Demanded
by Hillary
$55411
$46613
$37815
$281017
$191219
$0101421
Refer to Table 41. If the market consists of Michelle and Laura only and the price falls
by $1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
The price received by sellers in a market will increase if the government
a. decreases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. increases a tax on the good sold in that market.
d. imposes a binding price ceiling in that market.
Table 77
BuyerWillingness to Pay
Michael$500
Earvin$400
Larry$350
Charles$300
Refer to Table 77. You have two essentially identical extra tickets to the Midwest
Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows
the willingness to pay of the four potential buyers in the market for a ticket to the game.
You hold an auction to sell the two tickets. Who makes the winning bids, and what do
they offer to pay for the tickets?
a. Michael and Earvin; more than $350 but less than or equal to $400
b. Michael and Earvin; more than $400 but less than or equal to $500
c. Earvin and Larry; more than $300 but less than or equal to $350
d. Larry and Charles; less than $300
Figure 83
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 83. The loss in consumer surplus caused by the tax is measured by the
area
a. P1P3AC.
b. P3ABP2.
c. P1P3ABC.
d. ABC.
A competitive market is one in which there
a. is only one seller, but there are many buyers.
b. are many sellers, and each seller has the ability to set the price of his product.
c. are many sellers, and they compete with one another in such a way that some sellers
are always being forced out of the market.
d. are so many buyers and so many sellers that each has a negligible impact on the price
of the product.
An important factor in the decline of the U.S. textile industry over the past 100 or so
years is
a. foreign competitors that can produce quality textile goods at low cost.
b. lower prices of goods that are substitutes for clothing.
c. a decrease in Americans’ demand for clothing, due to increased incomes and the fact
that clothing is an inferior good.
d. the fact that the minimum wage in the U.S. has failed to keep pace with the cost of
living.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. When the tax is imposed in this market, the price buyers effectively
pay is
a. $4.
b. $6.
c. $10.
d. $16.
Economists speaking like scientists make
a. positive statements.
b. prescriptive statements.
c. claims about how the world should be.
d. More than one of the above is correct.
Which of the following is correct?
a. Consumer surplus refers to a situation in which there are more buyers than sellers in a
market.
b. Producer surplus refers to a situation in which there are more sellers than buyers in a
market.
c. Total surplus is measured as the area below the demand curve and above the supply
curve, up to the equilibrium quantity.
d. All of the above are correct.
Figure 728
Refer to Figure 728. At the quantity Q2, the marginal value to buyers
a. and the marginal cost to sellers are both P2.
b. is P2, and the marginal cost to sellers is P3.
c. and the marginal cost to sellers are both P3.
d. is P3, and the marginal cost to sellers is P2.
Figure 313
Peru’s Production Possibilities Frontier
Refer to Figure 313. Suppose Peru decides to increase its production of emeralds by 2.
What is the opportunity cost of this decision?
a. 30 rubies
b. 40 rubies
c. 60 rubies
d. 120 rubies
A leftward shift of a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.
Laissezfaire is a French expression which literally means
a. to make do.
b. to get involved.
c. whatever works.
d. allow them to do.
Almost all economists agree that tariffs and import quotas
a. reduces general economic welfare.
b. increases general economic welfare.
c. have no effect on general economic welfare.
d. stimulate a less than fully employed economy.