Water pollution from pulp and paper mills harms plants, animals, and humans. This is
an example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. There is no market failure in this case.
Figure 316
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 316. At which of the following prices would both Hosne and Merve
gain from trade with each other?
a. 5 wallets for 1.25 purses
b. 5 wallets for 2.5 purses
c. 5 wallets for 3.75 purses
d. Hosne and Merve could not both gain from trade with each other at any price.
Suppose a country begins to allow international trade in steel. Which of the following
outcomes will be observed regardless of whether the country finds itself importing steel
or exporting steel?
a. The sum of consumer surplus and producer surplus for domestic traders of steel
increases.
b. The quantity of steel demanded by domestic consumers increases.
c. Domestic producers of steel receive a higher price for steel.
d. The losses of the losers exceed the gains of the winners.
For a good that is taxed, the area on the relevant supplyanddemand graph that
represents government’s tax revenue is a
a. triangle.
b. rectangle.
c. trapezoid.
d. None of the above is correct; government’s tax revenue is the area between the
supply and demand curves, above the horizontal axis, and below the effective price to
buyers.
Suppose Ireland exports beer to China and imports pineapples from the United States.
This situation suggests that
a. Ireland has a comparative advantage relative to the United States in producing
pineapples, and China has a comparative advantage relative to Ireland in producing
beer.
b. Ireland has a comparative advantage relative to China in producing beer, and the
United States has a comparative advantage relative to Ireland in producing pineapples.
c. Ireland has an absolute advantage relative to the United States in producing
pineapples, and China has an absolute advantage relative to Ireland in producing beer.
d. Ireland has an absolute advantage relative to China in producing beer, and the United
States has an absolute advantage relative to Ireland in producing pineapples.
Suppose Country A has a high average wage level and a high level of output per person,
while Country B has a low average wage level and a low level of output per person.
Which country can benefit from trade?
a. Only Country A can benefit.
b. Only Country B can benefit.
c. Both Country A and Country B can benefit.
d. Neither Country A nor Country B can benefit.
Figure 29
Panel (a) Panel (b)
Refer to Figure 29, Panel (a). To gain 2 donuts by moving from point L to point M,
society must sacrifice
a. efficiency.
b. employment.
c. 4 cups of coffee.
d. More than one of the above is correct.
Which of the following is not an example of a natural experiment an economist might
use to evaluate a theory?
a. Transit ridership increased in Atlanta following an increase in gas prices.
b. Federal tax revenue increased following a decrease in the tax rate.
c. Students in a principles of microeconomics course are asked to play a game with
classmates to determine what decisions they make under certain circumstances.
d. Following the imposition of austerity measures, the growth rate of the economy in
Greece slowed.
Figure 320
Canada’s Production Possibilities FrontierMexico’s Production Possibilities
Frontier
Refer to Figure 320. Canada has an absolute advantage in the production of
a. Good X and Mexico has an absolute advantage in the production of Good Y.
b. Good Y and Mexico has an absolute advantage in the production of Good X.
c. both goods and Mexico has an absolute advantage in the production of neither good.
d. neither good and Mexico has an absolute advantage in the production of both goods.
A seller is willing to sell a product only if the seller receives a price that is at least as
great as the
a. seller’s producer surplus.
b. seller’s cost of production.
c. seller’s profit.
d. average willingness to pay of buyers of the product.
Since World War II, GATT has been responsible for reducing the average tariff among
member countries from about
a. 40 percent to about 5 percent.
b. 40 percent to about 20 percent.
c. 80 percent to about 20 percent.
d. 20 percent to about 10 percent.
Figure 54
Refer to Figure 54. The section of the demand curve from B to C represents the
a. elastic section of the demand curve.
b. inelastic section of the demand curve.
c. unit elastic section of the demand curve.
d. perfectly elastic section of the demand curve.
When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When
it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the
price elasticity of demand for bracelets is
a. 1.14.
b. 1.
c. 0.25.
d. 0.13.
In analyzing the gains and losses from international trade, to say that Moldova is a
small country is to say that
a. Moldova can only import goods; it cannot export goods.
b. Moldova’s choice of which goods to export and which goods to import is not based
on the principle of comparative advantage.
c. only the domestic price of a good is relevant for Moldova; the world price of a good
is irrelevant.
d. Moldova is a price taker.
Figure 58
Refer to Figure 58. When the price is $15, total revenue is
a. $1,500.
b. $2,500.
c. $3,500.
d. $4,500.
Adam Smith asserted that a person should never attempt to make at home
a. what it will cost him more to make than to buy.
b. any good in which that person does not have an absolute advantage.
c. any luxury good.
d. any necessity.
Table 75
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
First OrangeSecond OrangeThird Orange
Allison$2.00$1.50$0.75
Bob$1.50$1.00$0.60
Charisse$0.75$0.25$0
Refer to Table 75. If the market price of an orange is $0.65, then consumer surplus
amounts to
a. $3.90.
b. $6.75.
c. $3.60.
d. $7.50.
You receive a paycheck from your employer, and your pay stub indicates that $300 was
deducted to pay the FICA (Social Security/Medicare) tax. Which of the following
statements is correct?
a. The $300 that you paid is not necessarily the true burden of the tax that falls on you,
the employee.
b. Your employer is required by law to pay $300 to match the $300 deducted from your
check.
c. This type of tax is an example of a payroll tax.
d. All of the above are correct.
Figure 98. On the diagram below, Q represents the quantity of cars and P represents the
price of cars.
Refer to Figure 98. In the country for which the figure is drawn, total surplus with
international trade in cars
a. is represented by the area A + B + C.
b. is represented by the area A + B + D.
c. is smaller than producer surplus without international trade in cars.
d. is larger than total surplus without international trade in cars.
A table that shows the relationship between the price of a good and the quantity
demanded of that good is called a
a. pricequantity schedule.
b. buyer schedule.
c. demand schedule.
d. demand curve.
Which of the following is correct?
a. Studies of the effects of the minimum wage typically find that a 10 percent increase
in the minimum wage raises the average wage of teenagers by 10 percent.
b. The drop in teenage employment caused by a 10 percent increase in the minimum
wage is not significant.
c. The minimum wage is more often binding for teenagers than for other members of
the labor force.
d. All firms consistently enforce minimumwage laws.
Figure 812
Refer to Figure 812. Suppose a $3 perunit tax is placed on this good. The tax causes
the price received by sellers to
a. decrease by $3.
b. increase by $2.
c. decrease by $1.
d. increase by $6.
Figure 315
Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier
Refer to Figure 315. The opportunity cost of 1 poem for Jordan is
a. 1/2 novel.
b. 1/3 novel.
c. 3 novels.
d. 4 novels.
Table 339
Assume that Japan and Korea can switch between producing cars and producing
airplanes at a constant rate.
Hours Needed to Make 1Quantity Produced in 2400 Hours
CarsAirplanesCarsAirplanes
Japan301508016
Korea501504816
Refer to Table 339. Japan should specialize in the production of
a. cars and import airplanes.
b. airplanes and import cars.
c. both goods and import neither good.
d. neither good and import both goods.
Another way to think of the marginal seller is the seller who
a. will accept the lowest price of any seller in the market.
b. requires the highest price of any potential seller in the market.
c. would leave the market first if the price were any lower.
d. would leave the market last if the price falls.
Figure 610
Refer to Figure 610. A price ceiling set at
a. $6 will be binding and will result in a shortage of 10 units.
b. $6 will be binding and will result in a shortage of 6 units.
c. $16 will be binding and will result in a shortage of 10 units.
d. $16 will be binding and will result in a shortage of 4 units.
If Jane attends graduate school, it will take her two years, during which time she will
earn no income. She will pay a total of $100,000 for tuition, $20,000 for room and
board, and $2,000 for books. If she spends the two years working rather than attending
college, she will pay a total of $18,000 for room and board, pay no intuition, and buy no
books. Based on this information, Jane’s economic cost of attending graduate school
would be $175,000 if, over the two years, she could earn a total of
a. $53,000 instead of attending graduate school.
b. $55,000 instead of attending graduate school.
c. $71,000 instead of attending graduate school.
d. $73,000 instead of attending graduate school.
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, sellers effectively pay
what amount of the $10 tax?
a. $0
b. $4
c. $6
d. $10
Under rent control, landlords cease to be responsive to tenants’ concerns about the
quality of the housing because
a. with rent control, the government guarantees landlords a minimum level of profit.
b. they become resigned to the fact that many of their apartments are going to be vacant
at any given time.
c. with shortages and waiting lists, they have no incentive to maintain and improve their
property.
d. with rent control, it becomes the government’s responsibility to maintain rental
housing.
Suppose that when income rises, the demand curve for doctor’s visits shifts to the right.
In this case, we know doctor’s visits are
a. inferior goods.
b. normal goods.
c. perfectly competitive goods.
d. durable goods.
Trade raises the economic wellbeing of a nation in the sense that
a. the gains of the winners exceed the losses of the losers.
b. everyone in an economy gains from trade.
c. since countries can choose what products to trade, they will pick those products that
are most beneficial to society.
d. the nation joins the international community when it begins to engage in trade.
If labor in Mexico is less productive than labor in the United States in all areas of
production,
a. then neither nation can benefit from trade.
b. then Mexico can benefit from trade but the United States cannot.
c. then the United States will have a comparative advantage relative to Mexico in the
production of all goods.
d. then both Mexico and the United States still can benefit from trade.
For a number of years country A had inflation of 3% but for the last five years has had
inflation of 6%. Country B had inflation of 4% for many years, but very recently
inflation unexpectedly rose to 9%. Other things the same, in which of the countries
would the higher inflation rate be more likely to reduce unemployment?
a. both country A and country B
b. neither country A nor country B
c. country A but not country B
d. country B but not country A
Table 323
Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
Labor Hours Needed to Make 1 Pound of Pounds Produced in 24 Hours
PorkTomatoesPorkTomatoes
Farmer6348
Rancher4466
Refer to Table 323. The farmer has a comparative advantage in the production of
a. pork.
b. tomatoes.
c. both goods.
d. neither good.
Which of the following statements is an example of a positive, as opposed to normative,
statement?
a. Americans deserve a cleaner environment.
b. Reducing emissions reduces days missed from school due to asthma.
c. All Americans are entitled to quality health care.
d. Economic policies should focus on improving equality.