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The imposition of a binding price floor on a market
a. causes quantity demanded to be greater than quantity supplied.
b. causes quantity demanded to be less than quantity supplied.
c. causes quantity demanded to be equal to quantity supplied.
d. causes a decrease in demand.
If the government removes a binding price ceiling from a market, then the price paid by
buyers will
a. increase, and the quantity sold in the market will increase.
b. increase, and the quantity sold in the market will decrease.
c. decrease, and the quantity sold in the market will increase.
d. decrease, and the quantity sold in the market will decrease.
Figure 58
Refer to Figure 58. An increase in price from $10 to $15 would
a. increase total revenue by $1,000.
b. decrease total revenue by $1,000.
c. increase total revenue by $500.
d. decrease total revenue by $500.
Scenario 92
• For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
• For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 92. Suppose the world price of cardboard is $60. Then, relative to
the notrade situation, international trade in cardboard produces which of the following
results for Boxland?
a. It decreases consumer surplus, increases producer surplus, and decreases total
surplus.
b. It decreases consumer surplus, increases producer surplus, and increases total
surplus.
c. It decreases consumer surplus, decreases producer surplus, and decreases total
surplus.
d. It increases consumer surplus, increases producer surplus, and increases total surplus.
Table 49
An Increase in SupplyA Decrease in Supply
An Increase in DemandAB
A Decrease in DemandCD
Refer to Table 49. Which combination would produce a decrease in equilibrium
quantity and an indeterminate change in equilibrium price?
a. A
b. B
c. C
d. D
Figure 37
Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
Refer to Figure 37. If the production possibilities frontiers shown are each for 4 hours
of work, then which of the following combinations of bowls and cups could Bintu and
Juba together make in a given 4hour production period?
a. 1 bowl and 14 cups
b. 2 bowls and 11 cups
c. 3 bowls and 10 cups
d. 5 bowls and 5 cups
Which of the following is likely to have the most price inelastic demand?
a. yoga mats
b. prescription medicine
c. protein powder
d. gym memberships
When a tax is levied on buyers of tea,
a. buyers of tea and sellers of tea both are made worse off.
b. buyers of tea are made worse off, and the wellbeing of sellers is unaffected.
c. buyers of tea are made worse off, and sellers of tea are made better off.
d. the wellbeing of both buyers of tea and sellers of tea is unaffected.
Figure 420
Refer to Figure 420. At a price of $15,
a. quantity demanded exceeds quantity supplied.
b. there is a shortage.
c. there is an excess demand.
d. All of the above are correct.
For which pairs of goods is the crossprice elasticity most likely to be positive?
a. canoes and kayaks
b. pizza and college textbooks
c. Halloween candy and rain coats
d. cats and cat food
Figure 722
Refer to Figure 722. If 40 units of the good are bought and sold, then
a. the marginal cost to sellers is equal to the marginal value to buyers.
b. the marginal value to buyers is greater than the marginal cost to sellers.
c. the marginal cost to sellers is greater than the marginal value to buyers.
d. producer surplus would be greater than consumer surplus.
Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5
empty rooms for tonight. If the marginal cost of operating one room for one night is
$40, the hotel manager should rent one of the empty rooms only if a customer is willing
to pay
a. more than $40, as the average benefit will exceed the marginal cost.
b. more than $40, as the marginal benefit will exceed the marginal cost.
c. more than $80, as the average benefit will exceed the marginal cost.
d. more than $80, as the marginal benefit will exceed the marginal cost.
For which of the following goods is the income elasticity of demand likely lowest?
a. water
b. sapphire pendant necklaces
c. filet mignon steaks
d. fresh fruit
A macroeconomist is interested in
a. explaining how changes in sellers’ behavior affect prices of a particular good.
b. explaining price changes in a particular market.
c. explaining why the unemployment rate is higher.
d. All of the above are correct.
Productivity is defined as the
a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.
Figure 716
Refer to Figure 716. If the price of the good is $300, then producer surplus amounts to
a. $100.
b. $200.
c. $300.
d. $400.
A binding price ceiling
(i)causes a surplus.
(ii)causes a shortage.
(iii)is set at a price above the equilibrium price.
(iv)is set at a price below the equilibrium price.
a. (ii) only
b. (iv) only
c. (i) and (iii) only
d. (ii) and (iv) only
Which of the following could be the price elasticity of demand for a good for which a
decrease in price would increase revenue?
a. 0
b. 0.4
c. 1
d. 4
Rational people make decisions at the margin by
a. following marginal traditions.
b. behaving in a random fashion.
c. thinking in blackandwhite terms.
d. comparing marginal costs and marginal benefits.
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. We could use the information in the table to draw a production
possibilities frontier for England and a second production possibilities frontier for
Spain. If we were to do this, measuring cheese along the horizontal axis, then
a. the slope of England’s production possibilities frontier would be 0.67 and the slope of
Spain’s production possibilities frontier would be 0.5.
b. the slope of England’s production possibilities frontier would be 1.5 and the slope of
Spain’s production possibilities frontier would be 2.
c. the slope of England’s production possibilities frontier would be .75 and the slope of
Spain’s production possibilities frontier would be 1.
d. the slope of England’s production possibilities frontier would be 2 and the slope of
Spain’s production possibilities frontier would be .5.
Figure 823. The figure represents the relationship between the size of a tax and the tax
revenue raised by that tax.
Refer to Figure 823. If the economy is at point B on the curve, then an increase in the
tax rate will
a. increase the deadweight loss of the tax and increase tax revenue.
b. increase the deadweight loss of the tax and decrease tax revenue.
c. decrease the deadweight loss of the tax and increase tax revenue.
d. decrease the deadweight loss of the tax and decrease tax revenue.
If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must
have been
a. $48.
b. $32.
c. $8.
d. $40.
Coal is considered to be a nonrenewable energy source. Which of the following
statements is correct?
a. Coal is an unlimited resource.
b. Coal is a scarce resource.
c. Coal is a nonscarce resource.
d. Coal is not a resource.
A person who takes a prescription drug to control high cholesterol most likely has a
demand for that drug that is
a. inelastic.
b. unit elastic.
c. elastic.
d. highly responsive to changes in income.
Which of the following is not a function of prices in a market system?
a. Prices have the crucial job of balancing supply and demand.
b. Prices send signals to buyers and sellers to help them make rational economic
decisions.
c. Prices coordinate economic activity.
d. Prices ensure an equal distribution of goods and services among consumers.
If a good is normal, then an increase in income will result in a(n)
a. increase in the demand for the good.
b. decrease in the demand for the good.
c. movement down and to the right along the demand curve for the good.
d. movement up and to the left along the demand curve for the good.
Countries that restrict foreign trade are likely to
a. forgo the additional surplus that trade allows, but will probably enjoy economies of
scale.
b. forgo the additional surplus that trade allows, but will be compensated by a higher
rate of technological change.
c. forgo the additional surplus that trade allows, but will have a lower rate of
unemployment.
d. have more firms with domestic market power.
When a country is on the downwardsloping side of the Laffer curves, a cut in the tax
rate will
a. decrease tax revenue and decrease the deadweight loss.
b. decrease tax revenue and increase the deadweight loss.
c. increase tax revenue and decrease the deadweight loss.
d. increase tax revenue and increase the deadweight loss.
Figure 913
Refer to Figure 913. The price and domestic quantity demanded after trade are
a. $8 and 300.
b. $8 and 900.
c. $14 and 900.
d. $14 and 600.
Taxes on labor have the effect of encouraging
a. workers to work more hours.
b. the elderly to postpone retirement.
c. second earners within a family to take a job.
d. unscrupulous people to take part in the underground economy.
