The English word that comes from the Greek word for “one who manages a household”
is
a. market.
b. consumer.
c. producer.
d. economy.
Table 78
During the last two days, Chad purchased a latte from two different stores. The table
below shows Chad’s willingness to pay on each day and his consumer surplus from
each purchase.
Chad’s Willingness to PayChad’s Consumer Surplus
First Day$5.00$1.25
Second Day$4.00$0.75
Refer to Table 78. The price that Chad paid for a latte on the first day is
a. $3.75.
b. $6.25.
c. $5.00.
d. $5.50.
In a market, the marginal buyer is the buyer
a. whose willingness to pay is higher than that of all other buyers and potential buyers.
b. whose willingness to pay is lower than that of all other buyers and potential buyers.
c. who is willing to buy exactly one unit of the good.
d. who would be the first to leave the market if the price were any higher.
Barb’s aunt gave her $100 for her birthday with the condition that Barb buy herself
something. In deciding how to spend the money, Barb narrows her options down to four
choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally
she decides on Option B. The opportunity cost of this decision is
a. the value to Barb of the option she would have chosen had Option B not been
available.
b. the value to Barb of Options A, C and D combined.
c. the average of the values to Barb of Options A, C, and D.
d. $100.
Which of the following statements is correct?
a. Economists almost always find it easy to conduct experiments in order to test their
theories.
b. Economics is not a true science because economists are not usually allowed to
conduct experiments to test their theories.
c. Economics is a social science rather than a true science because it cannot employ the
scientific method.
d. Economists are usually not able to conduct experiments, so they must rely on natural
experiments offered by history.
Figure 512
Refer to Figure 512. Sellers’ total revenue would increase if the price
a. increased from $6 to $9.
b. increased from $33 to $36.
c. decreased from $15 to $12.
d. All of the above are correct.
For a particular good, a 5 percent increase in price causes a 2 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a. There are many close substitutes for this good.
b. The good is a luxury.
c. The market for the good is broadly defined.
d. The relevant time horizon is long.
Suppose the equilibrium price of a physical examination (“physical”) by a doctor is
$200, and the government imposes a price ceiling of $150 per physical. As a result of
the price ceiling,
a. the quantity of physicals demanded increases.
b. there is shortage of physicals.
c. the quantity of physicals supplied decreases.
d. All of the above are correct.
The Economic Report of the President
a. discusses recent developments in the economy and presents analysis of current policy
issues.
b. is written by the Council of Economic Advisers.
c. is the responsibility of the economists at the Office of Management and Budget.
d. Both a and b are correct.
When the price of chai tea latts is $5, Maxine buys 20 per month. When the price is $4,
she buys 30 per month. Maxine’s demand for chai tea latts is
a. elastic, and her demand curve would be relatively flat.
b. elastic, and her demand curve would be relatively steep.
c. inelastic, and her demand curve would be relatively flat.
d. inelastic, and her demand curve would be relatively steep.
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for convertible automobiles of an increase in the price of steel?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
For any country, if the world price of copper is higher than the domestic price of copper
without trade, that country should
a. export copper, since that country has a comparative advantage in copper.
b. import copper, since that country has a comparative advantage in copper.
c. neither export nor import copper, since that country cannot gain from trade.
d. neither export nor import copper, since that country already produces copper at a low
cost compared to other countries.
Suppose the government wants to encourage Americans to exercise more, so it imposes
a binding price ceiling on the market for inhome treadmills. As a result,
a. the demand for treadmills will increase.
b. the supply of treadmills will decrease.
c. a shortage of treadmills will develop.
d. All of the above are correct.
Which of the following statements is correct?
a. The demand for medicine is more elastic than the demand for sailboats.
b. The demand for iPads is more elastic than the demand for tablets in general.
c. The demand for cell phones is more elastic over a short period of time than over a
long period of time.
d. All of the above are correct.
Which of the following statements is correct?
a. The demand for natural gas is more elastic over a short period of time than over a
long period of time.
b. The demand for smoke alarms is more elastic than the demand for Persian rugs.
c. The demand for bourbon whiskey is more elastic than the demand for alcoholic
beverages in general.
d. All of the above are correct.
Which of the following statements is not valid when supply is perfectly elastic?
a. The elasticity of supply approaches infinity.
b. The supply curve is horizontal.
c. Very small changes in price lead to very large changes in quantity supplied.
d. The time period under consideration is more likely a short period rather than a long
period.
Figure 66
Refer to Figure 66. Which of the following statements is correct?
a. A price ceiling set at $12 would be binding, but a price ceiling set at $8 would not be
binding.
b. A price floor set at $8 would be binding, but a price ceiling set at $8 would not be
binding.
c. A price ceiling set at $9 would result in a surplus.
d. A price floor set at $11 would result in a surplus.
Table 73
The only four consumers in a market have the following willingness to pay for a good:
BuyerWillingness to Pay
Carlos$15
Quilana$25
Wilbur$35
Mingla$45
Refer to Table 73. If there is only one unit of the good and if the buyers bid against
each other for the right to purchase it, then the good will sell for
a. $15 or slightly less.
b. $25 or slightly more.
c. $35 or slightly more.
d. $45 or slightly less.
Figure 427
Panel (a)Panel (b)
Panel (c)Panel (d)
Refer to Figure 427. Panel (a) 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 312
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
Minutes Needed toNumber of Computers Set Up or Tested in a 40Hour Week
Set Up 1 Computer Test 1 Computer Computers Set UpComputers Tested
Barb48?5040
Jim30408060
Refer to Table 312. Which of the following points would not be on Barb’s production
possibilities frontier, based on a 40hour week?
a. (0 computers set up, 40 computers tested)
b. (8 computers set up, 32 computers tested)
c. (25 computers set up, 20 computers tested)
d. (30 computers set up, 16 computers tested)
A model can be accurately described as a
a. theoretical abstraction with very little value.
b. device that is useful only to the people who created it.
c. realistic and carefully constructed theory.
d. simplification of reality.
Figure 33
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 33. If the production possibilities frontiers shown are each for one day
of production, then which of the following combinations of tacos and burritos could
Arturo and Dina together not produce in a given day?
a. 200 tacos and 400 burritos
b. 300 tacos and 350 burritos
c. 400 tacos and 300 burritos
d. 600 tacos and 250 burritos
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 opportunity cost of 1 pound of pork for the farmer is
a. 1/2 pound of tomatoes.
b. 1/2 hour of labor.
c. 2 pounds of tomatoes.
d. 2 hours of labor.
Scenario 91
The beforetrade domestic price of peaches in the United States is $40 per bushel. The
world price of peaches is $52 per bushel. The U.S. is a pricetaker in the market for
peaches.
Refer to Scenario 91. If trade in peaches is allowed, the price of peaches in the United
States
a. will increase, and this will cause consumer surplus to decrease.
b. will decrease, and this will cause consumer surplus to increase.
c. will be unaffected, and consumer surplus will be unaffected as well.
d. could increase or decrease or be unaffected; this cannot be determined.
The principle of comparative advantage asserts that
a. not all countries can benefit from trade with other countries.
b. the world price of a good will prevail in all countries, regardless of whether those
countries allow international trade in that good.
c. countries can become better off by exporting goods, but they cannot become better
off by importing goods.
d. countries can become better off by specializing in what they do best.
Figure 323
The graph below represents the various combinations of ham and cheese (in pounds)
that the nation of Bonovia could produce in a given month.
Refer to Figure 323. In the nation of Cropitia, the opportunity cost of a pound of ham
is 0.3 pounds of cheese. Bonovia and Cropitia both can gain from trading with one
another if one pound of ham trades for
a. 0.40 pounds of cheese.
b. 0.55 pounds of cheese.
c. 0.75 pounds of cheese.
d. All of the above are correct.
Suppose that when the price of a 16 oz. togo cup of gourmet coffee is $4.25, students
purchase 750 cups per day. If the price decreases to $3.75 per cup, which of the
following is the most likely outcome?
a. Students would purchase fewer than 750 cups per day.
b. Student would continue to purchase 750 cups per day.
c. Students would purchase more than 750 cups per day.
d. We do not have enough information to answer this question.
The idea that only the government can organize economic activity in a way that
promotes economic wellbeing for a country as a whole
a. is a basic principle regarding individual decisionmaking.
b. amounts to a denial of one of the basic principles regarding interactions among
people.
c. supports the idea that the “invisible hand” should guide economic activity.
d. was promoted by the economist Adam Smith in a wellknown 1776 book.
Figure 87
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 87. As a result of the tax, buyers effectively pay
a. $32 for each unit of the good, and sellers effectively receive $24 for each unit of the
good.
b. $32 for each unit of the good, and sellers effectively receive $16 for each unit of the
good.
c. $24 for each unit of the good, and sellers effectively receive $16 for each unit of the
good.
d. $28 for each unit of the good, and sellers effectively receive $20 for each unit of the
good.
Which of the following is not an example of scarcity?
a. Only some people can afford to buy a BMW automobile.
b. Every individual in society cannot attain the highest standard of living to which he or
she might aspire.
c. Miranda has more oranges in her orchard than she will ever use.
d. Each member of a household cannot get everything he or she wants.