Suppose there is a decrease in the price of corn. If corn is an input into the production
of ethanol, we would expect the supply curve for ethanol to
a. shift rightward.
b. shift leftward.
c. become flatter.
d. remain unchanged.
Figure 916. The figure below illustrates a tariff. On the graph, Q represents quantity
and P represents price.
Refer to Figure 916. Government revenue raised by the tariff is represented by the area
a. E.
b. B + E.
c. D + E + F.
d. B + D + E + F.
Which of the following would shift the demand curve for gasoline to the right?
a. a decrease in the price of gasoline
b. an increase in consumer income, assuming gasoline is a normal good
c. an increase in the price of cars, a complement for gasoline
d. a decrease in the expected future price of gasoline
Unemployment would cause an economy to
a. produce inside its production possibilities frontier.
b. produce on its production possibilities frontier.
c. produce outside its production possibilities frontier.
d. experience an inward shift of its production possibilities frontier.
Consider the market for new DVDs. If DVD players became cheaper, buyers expected
DVD prices to fall next year, used DVDs became more expensive, and DVD production
technology improved, then the equilibrium price of a new DVD would
a. rise.
b. fall.
c. stay the same.
d. could rise, fall, or remain unchanged.
Consider a good to which a perunit tax applies. The size of the deadweight that results
from the tax is smaller, the
a. less elastic is the demand for the good.
b. less elastic is the supply of the good.
c. smaller is the amount of the tax.
d. All of the above are correct.
Figure 418
Refer to Figure 418. At a price of $20, there would be a(n)
a. shortage. The law of supply and demand predicts that the price will fall from $20 to a
lower price.
b. surplus. The law of supply and demand predicts that the price will rise from $20 to a
higher price.
c. excess demand. The law of supply and demand predicts that the price will rise from
$20 to a higher price.
d. excess supply. The law of supply and demand predicts that the price will fall from
$20 to a lower price.
Figure 84
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 84. The tax results in a loss of producer surplus that amounts to
a. $75.50.
b. $90.00.
c. $112.50.
d. $127.50.
Figure 926
The diagram below illustrates the market for baseballs in the U.S.
Refer to figure 926. Consumer surplus in the U.S. prior to the opening of the baseball
market to international trade is the area
a. HTMLENTITY#8203HTMLENTITYA
b. HTMLENTITY#8203HTMLENTITYA + B + C
c. HTMLENTITY#8203HTMLENTITYA + B + E
d. HTMLENTITY#8203HTMLENTITYC + F
Which of the following is not correct?
a. Some states in the U.S. mandate minimum wages above the federal level.
b. Most European nations have minimumwage laws.
c. The U.S. minimum wage is significantly higher than the minimum wages in France
and the United Kingdom.
d. The U.S. Congress first instituted a minimum wage with the Fair Labor Standards
Act.
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. The perunit burden of the tax on sellers is
a. $2.
b. $3.
c. $4.
d. $5.
Consider a good to which a perunit tax applies. The size of the deadweight that results
from the tax is smaller, the
a. larger is the price elasticity of demand.
b. smaller is the price elasticity of supply.
c. larger is the amount of the tax.
d. All of the above are correct.
Figure 43
Consumer 1Consumer 2
Refer to Figure 43. If these are the only two consumers in the market, then the market
quantity demanded at a price of $6 is
a. 12 units.
b. 14 units.
c. 19 units.
d. 21 units.
Trade
a. allows specialization, which increases costs.
b. allows specialization, which reduces costs.
c. reduces specialization, which increases costs.
d. reduces specialization, which reduces costs.
Suppose that the country of Xenophobia chose to isolate itself from the rest of the
world. Its ruler proclaimed that Xenophobia should become selfsufficient, so it would
not engage in foreign trade. From an economic perspective, this idea would
a. make sense if Xenophobia had an absolute advantage in all goods.
b. make sense if Xenophobia had no absolute advantages in any good.
c. not make sense as long as Xenophobia had a comparative advantage in some good.
d. not make sense as long as Xenophobia had an absolute advantage in at least half the
goods that could be traded.
You have responsibility for economic policy in the country of Freedonia. Recently, the
neighboring country of Sylvania has cut off all exports of oranges to Freedonia. George,
who is one of your advisors, says that the best way to avoid a shortage of oranges is to
take no action at all. Charles, another one of your advisors, argues that without a
binding price floor, a shortage will certainly develop. Otto, a third advisor, suggests that
you should impose a binding price ceiling in order to avoid a shortage of oranges.
Which of your three advisors is most likely to have studied economics?
a. George
b. Charles
c. Otto
d. Apparently, all three advisors have studied economics, but their views on positive
economics are different.
Welfare economics explains which of the following in the market for televisions?
a. The government sets the price of televisions; firms respond to the price by producing
a specific level of output.
b. The government sets the quantity of televisions; firms respond to the quantity by
charging a specific price.
c. The market equilibrium price for televisions maximizes the total welfare of television
buyers and sellers.
d. The market equilibrium price for televisions maximizes consumer welfare and
minimizes producer profit.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. Without trade, total surplus amounts to
a. $810.
b. $1,620.
c. $3,240.
d. $6,480.
Suppose Jim and Tom can both produce baseball bats. If Jim’s opportunity cost of
producing baseball bats is lower than Tom’s opportunity cost of producing baseball
bats, then
a. Tom must have an absolute advantage in the production of baseball bats.
b. Jim must have an absolute advantage in the production of baseball bats.
c. Tom has a comparative advantage in the production of baseball bats.
d. Jim has a comparative advantage in the production of baseball bats.
Which of the following is a correct statement about production possibilities frontiers?
a. An economy can produce only on the production possibilities frontier.
b. An economy can produce at any point inside or outside a production possibilities
frontier.
c. An economy can produce at any point on or inside the production possibilities
frontier, but not outside the frontier.
d. An economy can produce at any point inside the production possibilities frontier, but
not on or outside the frontier.
Figure 721
Refer to Figure 721. When the price is P1, area C represents
a. total benefit.
b. producer surplus.
c. consumer surplus.
d. None of the above is correct.
Holding the nonprice determinants of demand constant, a change in price would
a. result in either a decrease in demand or an increase in demand.
b. result in a movement along a stationary demand curve.
c. result in a shift of supply.
d. have no effect on the quantity demanded.
Table 38
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed to Make 1 Unit ofNumber of Units Produced in 24 Hours
CheeseBreadCheeseBread
England23128
Spain3684
Refer to Table 38. Assume that England and Spain each has 24 labor hours available. If
each country divides its time equally between the production of cheese and bread, then
total production is
a. 10 units of cheese and 6 units of bread.
b. 25 units of cheese and 7.5 units of bread.
c. 20 units of cheese and 12 units of bread.
d. 12 units of cheese and 8 units of bread.
A survey which sought the opinion of professional economists on fourteen propositions
about economic policy found that
a. the respondents were almost equally divided on the propositions.
b. the respondents favored the propositions by a slight margin.
c. the respondents disagreed with the propositions by a slight margin.
d. there was overwhelming endorsement of the propositions among the respondents.
When each person specializes in producing the good in which he or she has a
comparative advantage, total production in the economy
a. falls.
b. stays the same.
c. rises.
d. may fall, rise, or stay the same.
Figure 724
Refer to Figure 724. At equilibrium, producer surplus is
a. $36.
b. $72.
c. $54.
d. $18.
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. Assume that England and France each has 40 labor hours available.
If each country divides its time equally between the production of cheese and wine,
then total production is
a. 8 units of cheese and 10 units of wine
b. 24 units of cheese and 15 units of wine
c. 40 units of cheese and 20 units of wine
d. 48 units of cheese and 30 units of wine
Figure 74
Refer to Figure 74. Which area represents consumer surplus at a price of P2?
a. BDF
b. AFG
c. ABDG
d. ABC
When a country that exported a particular good abandons a freetrade policy and adopts
a notrade policy,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
A tax placed on buyers of tuxedoes shifts the
a. demand curve for tuxedoes downward, decreasing the price received by sellers of
tuxedoes and causing the quantity of tuxedoes to increase.
b. demand curve for tuxedoes downward, decreasing the price received by sellers of
tuxedoes and causing the quantity of tuxedoes to decrease.
c. supply curve for tuxedoes upward, decreasing the effective price paid by buyers of
tuxedoes and causing the quantity of tuxedoes to increase.
d. supply curve for tuxedoes upward, increasing the effective price paid by buyers of
tuxedoes and causing the quantity of tuxedoes to decrease.
Figure 54
Refer to Figure 54. Assume the section of the demand curve from A to B corresponds
to prices between $6 and $12. Then, when the price increases from $8 to $10,
a. the percent decrease in the quantity demanded exceeds the percent increase in the
price.
b. the percent increase in the price exceeds the percent decrease in the quantity
demanded.
c. sellers’ total revenue increases as a result.
d. it is possible that the quantity demanded fell from 550 to 500 as a result.
The quantity demanded of a good is the amount that buyers are
a. willing to purchase.
b. willing and able to purchase.
c. willing, able, and need to purchase.
d. able to purchase.
In recent years, which countries have taken a unilateral approach to the removal of
trade restrictions?
a. China and North Korea
b. Chile and South Korea
c. Russia and Japan
d. the United States and Mexico
Normative statements are
a. prescriptive, whereas positive statements are descriptive.
b. descriptive, whereas positive statements are prescriptive.
c. backwardlooking, whereas positive statements are forwardlooking.
d. forwardlooking, whereas positive statements are backwardlooking.