Economists typically measure efficiency using
a. the price paid by buyers.
b. the quantity supplied by sellers.
c. total surplus.
d. profits to firms.
The opportunity cost of an item is
a. the number of hours needed to earn money to buy the item.
b. what you give up to get that item.
c. usually less than the dollar value of the item.
d. the dollar value of the item.
A movement downward and to the left along a supply curve is called a(n)
a. increase in supply.
b. decrease in supply.
c. decrease in quantity supplied.
d. increase in quantity supplied.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. Without a tax, total surplus in this market is
a. $3,000.
b. $4,800.
c. $6,000.
d. $7,200.
If a tax is levied on the buyers of a product, then the demand curve will
a. not shift.
b. shift down.
c. shift up.
d. become flatter.
Figure 811
Refer to Figure 811. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then,
when the tax is imposed,
a. consumer surplus decreases by $13.
b. producer surplus decreases by $13.
c. the deadweight loss amounts to $6.
d. the amount of the good that is sold remains unchanged.
Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses
is $30 per dozen. We would expect a
a. shortage to exist and the market price of roses to increase.
b. shortage to exist and the market price of roses to decrease.
c. surplus to exist and the market price of roses to increase.
d. surplus to exist and the market price of roses to decrease.
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
perunit burden of the tax on buyers is
a. $1.
b. $2.
c. $3.
d. $5.
Table 714
SellerCost
LeBron$700
Kobe$600
Kevin$450
Steve$400
Refer to Table 714. You and your best friend want to hire a professional photographer
to take pictures of your two families. The table shows the costs of the four potential
sellers in the local photography market. You and your friend take bids from the sellers.
Who offers the two winning bids, and what do they offer to charge for the photography
sessions?
a. LeBron and Kobe; more than $450 but less than $600
b. Kevin and Steve; more than $450 but less than $600
c. LeBron and Kobe; more than $700
d. Kevin and Steve; less than $400
Consider Noah’s decision to go to college. If he goes to college, he will spend $80,000
on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to
college, he will earn $22,000 working in a store and he will spend $13,000 on room and
board. Noah’s cost of going to college is
a. $99,000.
b. $103,000.
c. $108,000.
d. $121,000.
Table 331
Labor Hours Needed to Make 1 Pound of:
Amount Produced in 40 hours
Meat PotatoesMeatPotatoes
Farmer8 hours/pound5 hours/pound5 pounds8 pounds
Rancher4 hours/pound10 hours/pound10 pounds4 pounds
Refer to Table 331. For the farmer, the opportunity cost of 15 pounds of meat is
a. 12 pounds of potatoes.
b. 16 pounds of potatoes.
c. 20 pounds of potatoes.
d. 24 pounds of potatoes.
Economists generally believe that rent control is
a. an efficient and fair way to help the poor.
b. inefficient but the best available means of solving a serious social problem.
c. a highly inefficient way to help the poor raise their standard of living.
d. an efficient way to allocate housing, but not a good way to help the poor.
If marijuana were legalized, it is likely that there would be an increase in the demand
for marijuana. If demand for marijuana is inelastic and the supply of marijuana is
perfectly elastic, this will result in
a. higher prices and higher total revenue from marijuana sales.
b. higher prices but lower total revenue from marijuana sales.
c. the same price and higher total revenue from marijuana sales.
d. the same price but lower total revenue from marijuana sales.
Figure 722
Refer to Figure 722. If the price decreases from $80 to $70 due to a shift in the supply
curve, consumer surplus increases by
a. $250.
b. $750.
c. $1000.
d. $500.
Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax
will be to
a. shift the supply curve up by exactly $4 and the price paid by buyers will remain
unchanged.
b. shift the supply curve up by exactly $4 and the price paid by buyers will rise by less
than $4.
c. shift the supply curve up by exactly $4 and the price received by sellers will rise by
exactly $4.
d. shift the demand curve down by exactly $4 and the price paid by buyers will fall by
exactly $4.
The presence of a price control in a market for a good or service usually is an indication
that
a. an insufficient quantity of the good or service was being produced in that market to
meet the public’s need.
b. the usual forces of supply and demand were not able to establish an equilibrium price
in that market.
c. policymakers believed that the price that prevailed in that market in the absence of
price controls was unfair to buyers or sellers.
d. policymakers correctly believed that price controls would generate no inequities of
their own once imposed.
In any economic system, scarce resources have to be allocated among competing uses.
Market economies harness the forces of
a. government to allocate scarce resources.
b. supply and demand to allocate scarce resources.
c. credit cards to allocate scarce resources.
d. nature to allocate scarce resources.
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 an increase in equilibrium
quantity and an indeterminate change in equilibrium price?
a. A
b. B
c. C
d. D
The fact that different countries experience different standards of living is largely
explained by differences in those countries’
a. populations.
b. productivity levels.
c. locations.
d. None of the above is correct. Economists are puzzled by differences in standards of
living around the world.
Figure 64
Refer to Figure 64. A governmentimposed price of $16 in this market could be an
example of a
(i)binding price ceiling.
(ii)nonbinding price ceiling.
(iii)binding price floor.
(iv)nonbinding price floor.
a. (i) only
b. (ii) only
c. (i) and (iv) only
d. (ii) and (iii) only
Table 330
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
Quantity Produced in 1 Hour
Bushels of WheatYards of Cloth
Falda812
Varick615
Refer to Table 330. Varick has an absolute advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
Table 76
For each of three potential buyers of apples, the table displays the willingness to pay for
the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three
buyers of apples, and only three apples can be supplied per day.
First AppleSecond AppleThird Apple
Xavier$1.75$1.55$1.15
Yadier$1.50$1.25$0.75
Zavi$1.30$1.10$0.70
Refer to Table 76. If the market price of an apple is $1.40, then the market quantity of
apples demanded per day is
a. 1.
b. 2.
c. 3.
d. 4.
Figure 919. On the diagram below, Q represents the quantity of textiles and P
represents the price of textiles.
Refer to Figure 919. With free trade, consumer surplus in the textile market amounts to
a. $210.
b. $320.
c. $405.
d. $910.
Slow growth in US incomes during the 1970s and 1980s was primarily due to
a. slow productivity growth in the US.
b. increased competition from Japan.
c. increased competition from European countries.
d. a rapid decrease in the quantity of money in the economy.
Mary and Martha both can make cookies and cakes of the same quality, though Mary
can make more of both cookies and cakes per hour than Martha. With the bakesale
quickly approaching, they want to make as many cookies and cakes as possible. In
which of the following situations will the most cookies and cakes be made?
a. Mary makes as many cookies and cakes as she can, while Martha does nothing.
b. Martha makes as many cookies and cakes as she can, while Mary does nothing.
c. Mary and Martha both specialize in what they are better at making.
d. There is not enough information.
Suppose Japan exports televisions to the United States and imports sugar from
Argentina. This situation suggests
a. Japan has a comparative advantage relative to the United States in producing
televisions, and Argentina has a comparative advantage relative to Japan in producing
sugar.
b. Japan has a comparative advantage relative to the United States in producing sugar,
and Argentina has a comparative advantage relative to Japan in producing televisions.
c. Japan has an absolute advantage relative to the United States in producing
televisions, and Argentina has an absolute advantage relative to Japan in producing
sugar.
d. Japan has an absolute advantage relative to Argentina in producing sugar, and the
United States has an absolute advantage relative to Japan in producing televisions.
Figure 715
Refer to Figure 715. When the price falls from P2 to P1, producer surplus
a. decreases by an amount equal to C.
b. decreases by an amount equal to A+B.
c. decreases by an amount equal to A+C.
d. increases by an amount equal to A+B.
Zelzar has decided to end its policy of not trading with the rest of the world. When it
ends its trade restrictions, it discovers that it is importing incense, exporting steel, and
neither importing nor exporting rugs. Which groups in Zelzar are better off as a result of
the new freetrade policy?
a. producers of incense and consumers of steel
b. consumers of all three goods
c. consumers of incense and producers of rugs
d. producers of steel and consumers of incense
Figure 67
Refer to Figure 67. Suppose a price floor of $8 is imposed on this market. As a result,
a. buyers’ total expenditure on the good decreases by $20.
b. the supply curve shifts to the left; quantity sold is now 30 units and the price is $8.
c. the quantity of the good demanded decreases by 10 units.
d. the price of the good continues to serve as the rationing mechanism.
When a tax on a good is enacted,
a. buyers and sellers share the burden of the tax regardless of whether the tax is levied
on buyers or on sellers.
b. buyers always bear the full burden of the tax.
c. sellers always bear the full burden of the tax.
d. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full
burden of the tax if the tax is levied on them.
The term “market failure”
a. means the same thing as “market power.”
b. refers to the dissolution of a market when firms decide to quit producing a certain
product.
c. refers to the failure of a market to produce an efficient allocation of resources.
d. refers to government’s failure to enforce the property rights of households or firms
that participate in a certain market.
What will happen in the gasoline market now if buyers expect higher gasoline prices in
the near future?
a. The demand for gasoline will increase.
b. The demand for gasoline will decrease.
c. The demand for gasoline will be unaffected.
d. The supply of gasoline will increase.
Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. Chile would incur an opportunity cost of 36 pounds of coffee if it
increased its production of soybeans by
a. 12 pounds.
b. 27 pounds.
c. 30 pounds.
d. 48 pounds.
Figure 519
Refer to Figure 519. Which of the following statements is not correct?
a. Supply curve A is perfectly inelastic.
b. Supply curve B is perfectly elastic.
c. Supply curve C is unit elastic.
d. Supply curve D is more elastic than supply curve C.