Figure: The Market for Yachts
(Figure: The Market for Yachts) Look at the figure The Market for Yachts. A price
_____ of _____ will bring the about the same price and output in the market for yachts
as would an excise tax of $60,000.
A) ceiling; $80,000
B) ceiling; $100,000
C) floor; $100,000
D) floor; $160,000
When a country exchanges goods with another country, in the short run:
A) producers in the exporting industry may be better off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry are better off.
Figure: Slope
(Figure: Slope) Look at the figure Slope. In the
graph, the slope of the line between points A and B is:
A) +8.
B) “8.
C) “2.
D) +2.
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Cindy sells one more pumpkin and Diane sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A) increase; $16
B) increase; $14
C) decrease; $4
D) decrease; $2
Most economic models:
A) assume that people behave irrationally.
B) assume that people behave rationally.
C) assume that people are reluctant to learn from their mistakes.
D) are useless because they use too many simplifying assumptions.
Which of the following offices of the U.S. government is a major employer of
economists?
A) International Monetary Fund
B) United Nations
C) World Bank
D) Bureau of Labor Statistics
The best example of a public good is:
A) a court of law.
B) clothing.
C) food.
D) a state university.
(Table: Spring Water) The table Spring Water shows the demand and cost data for a
firm in a monopolistically competitive industry producing drinking water from
underground springs. The profit-maximizing price is:
A) $16.
B) $3.
C) $5.
D) $10.
In the long run, all costs are:
A) fixed.
B) constant.
C) variable.
D) marginal.
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. The opportunity cost of producing 1 radio in
Malaysia is:
A) 0.5 tire.
B) 1 tire.
C) 2 tires.
D) 6 tires.
The best example of a good that is excludable in consumption is:
A) a park.
B) an ocean.
C) a bicycle.
D) national defense.
Alex’s boss notices that with each course Alex takes, he becomes a more knowledgeable
and efficient worker. This is an example of:
A) human capital development.
B) derived demand.
C) value of marginal product.
D) income effects.
A dominant strategy equilibrium occurs when:
A) a player has no choice.
B) all players make the same choice regardless of the action of the other players.
C) each player makes the best choice given the choice of the other player.
D) no player is able to dictate the actions of any other player.
If the minimum wage is a binding price floor:
A) those who want to work will outnumber the jobs available.
B) the equilibrium wage will increase.
C) there will be a job for everyone who is willing to work.
D) business owners will hire more workers.
Figure: Producer Surplus
(Figure: Producer Surplus) Look at the figure Producer Surplus. When the price falls
from $45 to $35, producer surplus _____ for a total producer surplus of _____.
A) increases by $10; $140
B) decreases by $40; $60
C) increases by $35; $180
D) decreases by $10; $140
If the price is less than the average variable cost at the quantity of output where MR =
MC, in the short run a perfectly competitive firm will:
A) produce at a loss.
B) produce at a profit.
C) shut down production.
D) produce more than the profit-maximizing quantity.
In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one
hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies
that:
A) Japan has a comparative advantage in the production of automobiles.
B) the United States has an absolute advantage in the production of steel.
C) Japan has a comparative advantage in the production of both goods.
D) the United States has a comparative advantage in the production of automobiles.
Figure: Correcting for Market Failure
(Figure: Correcting for Market Failure) There is an external cost in the market
illustrated in the figure Correcting for Market Failure. When the government intervenes
to correct for the external cost, the output will _____ from _____ to _____.
A) fall; W; R
B) increase; W; R
C) fall; R; W
D) fall; W; 0
Airlines that engage in price discrimination charge higher prices to business travelers
because their _____ is more _____ than that of other travelers.
A) demand; elastic
B) demand; inelastic
C) supply; elastic
D) supply; inelastic
If the demand curve is downward-sloping and supply is perfectly elastic, then the
burden of an excise tax is:
A) borne entirely by consumers.
B) borne entirely by producers.
C) shared by consumers and producers, with the burden falling mainly on consumers.
D) shared by consumers and producers, with the burden falling mainly on producers.
Use the following to answer questions 16-17:
Figure: Good X and Good Y
(Figure: Good X and Good Y) Look at the figure
Good X and Good Y. If we move from point C to point B in the figure, the x-variable
has ______ units and the y-variable has ______ units.
A) decreased by 2; increased by 15
B) increased by 2; decreased by 15
C) decreased by 15; increased by 2
D) increased by 15; decreased by 2
Figure: Consumer Surplus II
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II. If the price of
the good decreases from $2 to $1, consumer surplus will increase by:
A) $5.
B) $10.
C) $25.
D) $35.
Which of the following goods BEST fits the characteristics of a private good?
A) a professor giving a lecture in a large classroom
B) an ice-cream cone
C) fire protection
D) disease prevention
The optimal consumption rule for all goods requires:
A) the marginal utility of all goods consumed divided by the price to be equal to the
budget constraint.
B) the marginal utility of all goods consumed to exceed the total utility of all goods.
C) the marginal utility of all goods consumed divided by the respective price to be
equal.
D) the prices of all goods to be equal.
Suppose an emissions tax is imposed on all dairy farms in Wisconsin. This tax would:
A) encourage the dairy farmers to lower prices.
B) increase the level of emissions.
C) reduce the supply of milk in Wisconsin.
D) increase the supply of milk in Wisconsin.
The owners of the gas stations in a town are trying to set up a cartel that will raise the
price of gasoline. Which of the following will INCREASE the chances that the cartel
will fail because of cheating by the owners?
A) All of the gas stations face the same costs.
B) There are only a few gas stations.
C) The gas stations are producing as much as they can.
D) The gas stations vary in terms of the services that they provide.
(Table: Production Possibilities for Machinery and Petroleum) Look at the table
Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico
of producing 10 units of machinery is _____ units of petroleum.
A) 30
B) 90
C) 180
D) 270
In a single day, George can bake 10 cakes and Greta can bake 5 cakes. We know that
_____ has a(n) _____ advantage in baking cakes.
A) George; comparative
B) George; absolute
C) Greta; comparative
D) Greta; absolute