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Figure 822
Refer to Figure 822. Suppose the government changed the perunit tax from $3.00 to
$4.50. Compared to the original tax rate, this higher tax rate would
a. increase tax revenue and increase the deadweight loss from the tax.
b. increase tax revenue and decrease the deadweight loss from the tax.
c. decrease tax revenue and increase the deadweight loss from the tax.
d. decrease tax revenue and decrease the deadweight loss from the tax.
US citizens have better nutrition, better healthcare, and a longer life expectancy than
citizens of Ghana. Which of the following conclusions can be drawn from this
statement?
a. Average income in the US is higher than the average income in Ghana.
b. The US has a higher standard of living than Ghana.
c. Productivity in the US is higher than productivity in Ghana.
d. All of the above are correct.
Under which of the following conditions would the interdiction of illegal drugs result in
a decrease in the quantity of drugs sold and in a decrease in total spending on illegal
drugs by drug users?
a. The interdiction has the effect of shifting the demand curve for illegal drugs to the
right.
b. The price elasticity of demand for illegal drugs is 1.3.
c. The price elasticity of supply for illegal drugs is 0.8.
d. As a result of the interdiction, the price of illegal drugs increases by 20 percent and
the quantity of illegal drugs sold decreases by 16 percent.
Figure 812
Refer to Figure 812. Suppose a $3 perunit tax is placed on this good. The amount of
tax revenue collected by the government is
a. $7.50.
b. $15.00.
c. $22.50.
d. $45.00.
For widgets, the supply curve is the typical upwardsloping straight line, and the demand
curve is the typical downwardsloping straight line. A tax of $15 per unit is imposed on
widgets. The tax reduces the equilibrium quantity in the market by 300 units. The
deadweight loss from the tax is
a. $1,750.
b. $2,250.
c. $3,000.
d. $4,500.
Figure 81
Refer to Figure 81. Suppose the government imposes a tax of P' P'''. The area measured
by J represents
a. consumer surplus after the tax.
b. consumer surplus before the tax.
c. producer surplus after the tax.
d. producer surplus before the tax.
When two variables move in opposite directions, the curve relating them is
a. upward sloping, and we say the variables are positively related.
b. upward sloping, and we say the variables are negatively related.
c. downward sloping, and we say the variables are positively related.
d. downward sloping, and we say the variables are negatively related.
Table 320
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Brad1012
Theresa610
Refer to Table 320. Assume that Brad and Theresa each has 60 minutes available. If
each person spends all his or her time producing the good in which he or she has a
comparative advantage, then total production is
a. 6 bushels of wheat and 6 pounds of beef.
b. 10 bushels of wheat and 5 pounds of beef.
c. 10 bushels of wheat and 6 pounds of beef.
d. 6 bushels of wheat and 5 pounds of beef.
Suppose a market has the demand function Qd=200.5P. Between which of the following
price ranges is demand most inelastic?
a. $0 to $10
b. $10 to $20
c. $20 to $30
d. $30 to $40
Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the
case that
a. Iran is an exporter of lumber.
b. the domestic quantity of lumber supplied exceeds the domestic quantity of lumber
demanded at the world price without the tariff.
c. the world price without the tariff is less than the price of lumber without trade.
d. the world price without the tariff is greater than the price of lumber without trade.
An increase in price causes an increase in total revenue when demand is
a. elastic.
b. inelastic.
c. unit elastic.
d. All of the above are possible.
As price elasticity of supply increases, the supply curve
a. becomes flatter.
b. becomes steeper.
c. becomes downward sloping.
d. shifts to the right.
What would happen to the equilibrium price and quantity of peanut butter if the price of
peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter,
and health officials announced that eating peanut butter was good for you?
a. Price will fall, and the effect on quantity is ambiguous.
b. Price will rise, and the effect on quantity is ambiguous.
c. Quantity will fall, and the effect on price is ambiguous.
d. Quantity will rise, and the effect on price is ambiguous.
Suppose a gardener produces both tomatoes and squash in his garden. If he must give
up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1
bushel of tomatoes is
a. 0.63 bushels of squash.
b. 1.6 bushels of squash.
c. 3 bushels of squash.
d. 5 bushels of squash.
Some firms eventually experience problems with their capacity to produce output as
their output levels increase. For these firms,
a. market power is substantial.
b. supply is perfectly inelastic.
c. supply is more elastic at low levels of output and less elastic at high levels of output.
d. supply is less elastic at low levels of output and more elastic at high levels of output.
For a horizontal demand curve,
a. the slope is undefined, and the price elasticity of demand is equal to 0.
b. the slope is equal to 0, and the price elasticity of demand is undefined.
c. both the slope and price elasticity of demand are undefined.
d. both the slope and price elasticity of demand are equal to 0.
Figure 93. The domestic country is China.
Refer to Figure 93. With no international trade,
a. the equilibrium price is $12 and the equilibrium quantity is 300.
b. the equilibrium price is $16 and the equilibrium quantity is 200.
c. the equilibrium price is $16 and the equilibrium quantity is 300.
d. the equilibrium price is $16 and the equilibrium quantity is 450.
Get Smart University is contemplating an increase in tuition to enhance revenue. If
GSU feels that raising tuition would enhance revenue, it is
a. ignoring the law of demand.
b. assuming that the demand for university education is elastic.
c. assuming that the demand for university education is inelastic.
d. assuming that the supply of university education is elastic.
Figure 29
Panel (a) Panel (b)
Refer to Figure 29, Panel (a). The opportunity cost of moving from point J to point L
is
a. 2 donuts.
b. 2 donuts and 2 cups of coffee.
c. 2 cups of coffee.
d. 6 cups of coffee.
Which of the following events would cause a movement upward and to the left along
the demand curve for olives?
a. The number of people who purchase olives decreases.
b. Consumer income decreases, and olives are a normal good.
c. The price of pickles decreases, and pickles are a substitute for olives.
d. The price of olives rises.
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
tax causes the price received by sellers to
a. decrease by $5.
b. decrease by $3.
c. decrease by $2.
d. increase by $5.
A 10 percent increase in gasoline prices reduces gasoline consumption by about
a. 6 percent after one year and 2.5 percent after five years.
b. 2.5 percent after one year and 6 percent after five years.
c. 10 percent after one year and 20 percent after five years.
d. 0 percent after one year and 1 percent after five years.
Figure 28
Refer to Figure 28. Efficient production is represented by which point(s)?
a. J
b. J, K
c. J, K, L
d. J, K, M
When calculating the cost of college, which of the following should you probably
include?
a. The cost of your meal plan for the cafeteria.
b. The cost of books required for college classes
c. The income you earn at your parttime job.
d. The cost of living in the dormitory.
Figure 710
Refer to Figure 710. Which area represents the increase in producer surplus when the
price rises from P1 to P2?
a. BCG
b. ACH
c. ABGD
d. AHGB
Figure 210
Panel (a) Panel (b)
Refer to Figure 210, Panel (a) and Panel (b). Which of the following is not a result of
the shift of the economy’s production possibilities frontier from Panel (a) to Panel (b)?
a. The tradeoff between the production of tractors and sofas changes.
b. Production of 2 tractors and 10 sofas becomes efficient.
c. Production of 6 tractors and 14 sofas becomes possible.
d. The opportunity cost of a sofa is higher at all levels of sofa production.
Table 45
The table below shows the quantities demanded of cases of Mt. Dew per month by four
families at various prices.
Price of Case of Mr. DewThe Adams FamilyThe Jones FamilyThe Smith
FamilyThe Williams Family
$79151214
$88121010
$97986
$106662
Refer to Table 45. Which of the following could cause all four families to demand
more Mt. Dew at all prices?
a. The price of sugar decreases.
b. All four family incomes increase, and Mt. Dew is a normal good.
c. A major university study reveals that drinking Mt. Dew can cause diabetes.
d. The technology for bottling carbonated beverages improves.
Figure 47
Refer to Figure 47. The shift from Da to Db is called
a. an increase in demand.
b. a decrease in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.
Figure 515
Refer to Figure 515. Along which of these segments of the supply curve is supply least
elastic?
a. GH
b. CD
c. AC
d. AB
Supplyside economics is a term associated with the views of
a. Ronald Reagan and Arthur Laffer.
b. Karl Marx.
c. Bill Clinton and Greg Mankiw.
d. Milton Friedman.
Figure 89
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 89. The imposition of the tax causes the price received by sellers to
a. increase from $600 to $800.
b. decrease from $800 to $300.
c. decrease from $600 to $300.
d. remain unchanged at $600.
