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Figure 91
The figure illustrates the market for coffee in Guatemala.
Refer to Figure 91. With trade, total surplus in the Guatemalan coffee market amounts
to
a. 1,250.
b. 1,468.
c. 1,870.
d. 1,980.
Which of the following statements is valid when the market supply curve is vertical?
a. Market quantity supplied does not change when the price changes.
b. Supply is perfectly elastic.
c. An increase in market demand will increase the equilibrium quantity.
d. An increase in market demand will not increase the equilibrium price.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. When the government imposes the tax in this market, tax revenue
is
a. $600.
b. $900.
c. $1,500.
d. $3,000.
Many economists believe that restrictions against ticket scalping result in each of the
following except
a. a smaller audience for cultural and sporting events.
b. shorter lines at cultural and sporting events.
c. less tax revenue for the state.
d. an increase in ticket prices.
When a shortage exists in a market, sellers
a. raise price, which increases quantity demanded and decreases quantity supplied until
the shortage is eliminated.
b. raise price, which decreases quantity demanded and increases quantity supplied until
the shortage is eliminated.
c. lower price, which increases quantity demanded and decreases quantity supplied until
the shortage is eliminated.
d. lower price, which decreases quantity demanded and increases quantity supplied until
the shortage is eliminated.
The circularflow diagram
a. is an economic model.
b. incorporates two types of decision makers: households and firms.
c. represents the flows of inputs, outputs, and dollars.
d. All of the above are correct.
Figure 25
Refer to Figure 25. Efficient production is represented by which point(s)?
a. A, B
b. A, B, D
c. A, B, C
d. C
If the crossprice elasticity of demand for two goods is 4.5, then
a. the two goods are substitutes.
b. the two goods are complements.
c. one of the goods is normal while the other good is inferior.
d. one of the goods is a luxury while the other good is a necessity.
An advance in farm technology that results in an increased market supply is
a. good for farmers because it raises prices for their products but bad for consumers
because it raises prices consumers pay for food.
b. bad for farmers because total revenue will fall but good for consumers because prices
for food will fall.
c. good for farmers because it raises prices for their products and also good for
consumers because more output is available for consumption.
d. bad for farmers because total revenue will fall and bad for consumers because
farmers will raise the price of food to increase their total revenue.
Table 334
Assume that Indonesia and India can switch between producing rice and bananas at a
constant rate.
Labor Hours Needed to Make 1 Unit ofNumber of Units Produced in 40 Hours
RiceBananasRiceBananas
Indonesia25208
India421020
Refer to Table 334. For which good(s) does Indonesia have a comparative advantage
a. rice and bananas.
b. rice but not bananas.
c. bananas but not rice.
d. nether rice nor bananas.
Figure 68
Refer to Figure 68. If the government imposes a price ceiling of $2 on this market,
then there will be
a. no shortage of the good.
b. a shortage of 10 units of the good.
c. a shortage of 20 units of the good.
d. a shortage of 30 units of the good.
Table 61
PriceQuantity
DemandedQuantity
Supplied
$2024000
$302000200
$401600400
$501200600
$60800800
$704001000
$8001200
Refer to Table 61. Suppose the government imposes a price floor of $70 on this
market. What will be the size of the surplus in this market?
a. 0 units
b. 400 units
c. 600 units
d. 1000 units
Table 34
Assume that Andrea and Paul can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Bushel of WheatPound of Beef
Andrea3015
Paul155
Refer to Table 34. Assume that Andrea and Paul each has 480 minutes available. If
each person divides his time equally between the production of wheat and beef, then
total production is
a. 24 bushels of wheat and 64 pounds of beef.
b. 21 bushels of wheat and 33 pounds of beef.
c. 16 bushels of wheat and 48 pounds of beef.
d. 5 bushels of wheat and 24 pounds of beef.
When a surplus exists in a market, sellers
a. raise price, which increases quantity demanded and decreases quantity supplied, until
the surplus is eliminated.
b. raise price, which decreases quantity demanded and increases quantity supplied, until
the surplus is eliminated.
c. lower price, which increases quantity demanded and decreases quantity supplied,
until the surplus is eliminated.
d. lower price, which decreases quantity demanded and increases quantity supplied,
until the surplus is eliminated.
After a country goes from disallowing trade in coffee with other countries to allowing
trade in coffee with other countries,
a. the domestic price of coffee will be greater than the world price of coffee.
b. the domestic price of coffee will be lower than the world price of coffee.
c. the domestic price of coffee will equal the world price of coffee.
d. The world price of coffee does not matter; the domestic price of coffee prevails.
Figure 413
Refer to Figure 413. If Producer A and Producer B are the only producers in the
market, then the market quantity supplied when the price is $2 is
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.
Figure 83
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 83. The amount of deadweight loss associated with the tax is equal to
a. P3ACP1.
b. ABC.
c. P2ADP3.
d. P1DCP2.
Figure 49
Panel (a)Panel (b)
Refer to Figure 49. The graphs show the demand for cigarettes. In Panel (b), the
arrows are consistent with which of the following events?
a. an increase in the price of cigarettes
b. placing a tax on cigarettes
c. the prohibition of cigarette advertisements on television
d. decreasing the price of marijuana, given that tobacco and marijuana are complements
When quantity demanded decreases at every possible price, the demand curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the demand curve to a new point on the
same curve.
d. not shifted; rather, the demand curve has become flatter.
The simple circularflow diagram is a model that includes only some key players in the
real economy. Which of the following key players are omitted from the simple
circularflow model?
a. households
b. firms
c. government
d. markets for factors of production
Figure 631
HTMLENTITY#8203HTMLENTIT
Y
Refer to Figure 631. Suppose that a price ceiling is imposed in this market at a price of
$30. The effect of this price ceiling would be HTMLENTITY#8203HTMLENTITY
a. nonbinding and cause a shortage of 50 units.
b. HTMLENTITY#8203HTMLENTITYbinding and cause a shortage of 50 units.
c. HTMLENTITY#8203HTMLENTITYbinding and cause a shortage of 20 units.
d. nonbinding and have no effect on the market.
The slope of a line that passes through the points (5, 8) and (12, 12) is
a. 7/4.
b. 4/7.
c. 4/7.
d. 7/4.
In which of the following situations will total revenue increase?
a. Price elasticity of demand is 1.2, and the price of the good decreases.
b. Price elasticity of demand is 0.5, and the price of the good increases.
c. Price elasticity of demand is 3.0, and the price of the good decreases.
d. All of the above are correct.
To say that government intervenes in the economy to promote efficiency is to say that
government is attempting to
a. create a more fair distribution of income.
b. change the way in which the economic pie is divided.
c. enlarge the economic pie.
d. All of the above are correct.
For which of the following goods is the price elasticity of demand most inelastic?
a. pizza
b. large pizza
c. large pepperoni pizza
d. Domino’s large pepperoni pizza
When the price of a good is higher than the equilibrium price,
a. a shortage will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase.
d. quantity demanded exceeds quantity supplied.
Table 335
Labor Hours Needed
to Produce
1 Dozen Eggs1 Pound Ham
Denmark108
Finland64
Refer to Table 335. Finland’s opportunity cost of producing 1 unit of ham is
a. 3/2 dozen eggs. This is higher than Denmark’s opportunity cost.
b. 3/2 dozen eggs. This is lower than Denmark’s opportunity cost.
c. 2/3 dozen eggs. This is higher than Denmark’s opportunity cost.
d. 2/3 dozen eggs. This is lower than Denmark’s opportunity cost.
Figure 723
Refer to Figure 723. The equilibrium price is
a. P1.
b. P2.
c. P3.
d. P4.
Suppose chocolatedipped strawberries are currently selling for $30 per dozen, but the
equilibrium price of chocolatedipped strawberries is $20 per dozen. We would expect a
a. shortage to exist and the market price of chocolatedipped strawberries to increase.
b. shortage to exist and the market price of chocolatedipped strawberries to decrease.
c. surplus to exist and the market price of chocolatedipped strawberries to increase.
d. surplus to exist and the market price of chocolatedipped strawberries to decrease.
Figure 626
Refer to Figure 626. The amount of the tax per unit is
a. $4.
b. $8.
c. $14.
d. $10.
For which of the following individuals would the opportunity cost of going to college
be highest?
a. a promising young mathematician who will command a high salary once she earns
her college degree
b. a student with average grades who has never held a job
c. a famous, highlypaid actor who wants to take time away from show business to finish
college and earn a degree
d. a student who is the best player on his college basketball team, but who lacks the
skills necessary to play professional basketball
Table 62
PriceQuantity
DemandedQuantity
Supplied
$03750
$530050
$10225100
$15150150
$2075200
$250250
Refer to Table 62. A price floor set at $20 results in
a. 75 units sold.
b. 125 units sold.
c. 200 units sold.
d. 275 units sold.
