Policymaking in a representative democracy
a. is straightforward and does not involve any disagreement.
b. benefits from the input of economists, even if their advice is not always followed.
c. is conducted without the input of economists.
d. is always based exclusively on the results of economic analysis.
Figure 612
Refer to Figure 612. Which of the following statements best relates the figure to the
events that occurred in the United States in the 1970s?
a. Buyers of gasoline paid a price of P1 before 1973; they paid a price of P2 after OPEC
increased the price of crude oil in 1973, and there was a shortage of gasoline at that
price.
b. Buyers of gasoline paid a price of P1 before 1973; they paid a price of P3 after OPEC
increased the price of crude oil in 1973, and there was a shortage of gasoline at that
price.
c. Buyers of gasoline paid a price of P2 before 1973; they paid a price of P3 after OPEC
increased the price of crude oil in 1973, with no shortage of gasoline at that price.
d. The price ceiling was binding before 1973; the price ceiling was no longer binding
after OPEC increased the price of crude oil in 1973.
When a binding price ceiling is imposed on a market,
a. price no longer serves as a rationing device.
b. the quantity supplied at the price ceiling exceeds the quantity that would have been
supplied without the price ceiling.
c. all buyers benefit.
d. All of the above are correct.
In less than two years in the early 1920s, the cost of a German newspaper rose from
0.30 marks to 70,000,000 marks. This is a spectacular example of
a. market power caused by a change in the country’s standard of living.
b. market power caused by a single firm controlling the newspaper production.
c. inflation caused by increased productivity in the economy.
d. inflation caused by an increase in the quantity of money in the economy.
HTMLENTITY#8203HTMLENTITY Table 338
Output produced in one growing season
CornSoybeans
Iowa 3045
Nebraska 4080
Refer to Table 338. Iowa and Nebraska can both produce corn and soybeans, and can
switch between the production of corn and soybeans at a constant rate. The table
illustrates the amount of corn or soybeans each state can produce in one growing
season. From the table we know that Iowa has a
a. HTMLENTITY#8203HTMLENTITYcomparative advantage in the production of
soybeans and Nebraska has a comparative advantage in the production of corn.
b. HTMLENTITY#8203HTMLENTITYcomparative advantage in the production of
corn and Nebraska has a comparative advantage in the production of soybeans.
c. HTMLENTITY#8203HTMLENTITYcomparative advantage in both goods and
Nebraska has a comparative advantage in neither good.
d. HTMLENTITY#8203HTMLENTITYcomparative advantage in neither good and
Nebraska has a comparative advantage in both goods.
Which of the following statements about models is correct?
a. The more details a model includes, the better the model.
b. Models assume away irrelevant details.
c. Models cannot be used to explain how the economy functions.
d. Models cannot be used to make predictions.
Figure 210
Panel (a) Panel (b)
Refer to Figure 210, Panel (a). Production is
a. possible at points V, W, Y, and Z, but efficient only at points V, W, and Z.
b. possible at points V, W, Y, and Z, but efficient only at point Y.
c. possible at points U, V, W, and Z, but efficient only at points V, W, and Z.
d. possible at points U, V, W, and Z, but efficient only at point U.
Soup is an inferior good if the demand
a. for soup falls when the price of a substitute for soup rises.
b. for soup rises when the price of soup falls.
c. curve for soup slopes upward.
d. for soup falls when income rises.
Elasticity is
a. a measure of how much buyers and sellers respond to changes in market conditions.
b. the study of how the allocation of resources affects economic wellbeing.
c. the maximum amount that a buyer will pay for a good.
d. the value of everything a seller must give up to produce a good.
Total surplus in a market is equal to
a. consumer surplus + producer surplus.
b. value to buyers amount paid by buyers.
c. amount received by sellers costs of sellers.
d. producer surplus consumer surplus.
Figure 96
The figure illustrates the market for roses in a country.
Refer to Figure 96. Before the tariff is imposed, this country
a. imports 200 roses.
b. imports 400 roses.
c. exports 200 roses.
d. exports 400 roses.
Albert Einstein once made the following observation about science:
a. “The whole of science is nothing more than the refinement of everyday thinking.”
b. “The whole of science is nothing more than an interesting intellectual exercise.”
c. “In order to understand science, one must rely solely on abstraction.”
d. “In order to understand science, one must transcend everyday thinking.”
When society requires that firms reduce pollution, there is
a. a tradeoff because of reduced incomes to the firms’ owners and workers.
b. a tradeoff only if some firms are forced to close.
c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the
requirements.
d. no tradeoff, since everyone benefits from reduced pollution.
Figure 78
Refer to Figure 78. If the government imposes a price floor of $100 in this market,
then consumer surplus will decrease by
a. $150.
b. $325.
c. $650.
d. $675.
Given the market for illegal drugs, when the government is successful in reducing the
flow of drugs into the United States,
a. supply decreases, demand is unaffected, and price increases.
b. demand decreases, supply is unaffected, and price decreases.
c. demand and supply both decrease, leaving price essentially unchanged.
d. supply decreases, demand increases, and price increases substantially.
Figure 321
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 321. Azerbaijan’s opportunity cost of one nail is
a. 1/4 bolt and Uzbekistan’s opportunity cost of one nail is 1/2 bolt.
b. 1/4 bolt and Uzbekistan’s opportunity cost of one nail is 2 bolts.
c. 4 bolts and Uzbekistan’s opportunity cost of one nail is 1/2 bolt.
d. 4 bolts and Uzbekistan’s opportunity cost of one nail is 2 bolts.
Figure 83
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 83. The price that sellers effectively receive after the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
Producer surplus directly measures
a. the wellbeing of society as a whole.
b. the wellbeing of buyers and sellers.
c. the wellbeing of sellers.
d. sellers’ willingness to sell.
Figure 23
Refer to Figure 23. Which shape refers to the markets for goods and services?
a. oval A
b. oval B
c. rectangle 1
d. rectangle 2
Figure 72
Refer to Figure 72. If the price of the good is $80, then consumer surplus amounts to
a. $110.
b. $135.
c. $160.
d. $185.
Which of the following firms is likely to have the greatest market power?
a. an electric company
b. a farmer
c. a grocery store
d. a local electronics retailer
Figure 65
Refer to Figure 65. If government imposes a price floor at $9, then the price floor
causes
a. quantity demanded to decrease by 40 units.
b. quantity supplied to increase by 20 units.
c. a surplus of 60 units.
d. All of the above are correct.
Figure 417
Refer to Figure 417. At a price of
a. $8, there is a surplus of 6 units.
b. $5, there is neither a shortage nor a surplus.
c. $2, there is a shortage of 6 units.
d. All of the above are correct.
Economists speaking like policy advisers make
a. positive statements.
b. descriptive statements.
c. claims about how the world is.
d. claims about how the world should be.
The opportunity cost of going to college is
a. the total spent on food, clothing, books, transportation, tuition, lodging, and other
expenses.
b. the value of the best opportunity a student gives up to attend college.
c. zero for students who are fortunate enough to have all of their college expenses paid
by someone else.
d. zero, since a college education will allow a student to earn a larger income after
graduation.
Tim decides to spend four hours playing video games rather than attending his classes.
His opportunity cost of playing games is
a. the value of the knowledge he would have received had he attended his classes.
b. the $50 he could have earned if he had worked at his job for those four hours.
c. the value of his time playing video games minus the value of attending classes.
d. nothing, since he valued playing video games more than attending classes.
Table 22
The following table contains some production possibilities for an economy for a given
year:
Tennis RacketsTennis Balls
1008000
2006500
300?
Refer to Table 22. If the production possibilities frontier is bowed outward, then “?”
could be
a. 6000.
b. 5500.
c. 5000.
d. 4500.
If the government allowed a free market in organs for transplant there would be
a. a decrease in the shortage of organs for transplant.
b. a decrease in producer surplus.
c. an decrease in consumer surplus
d. an increase in the waiting period for transplant organs.
Irregular fluctuations in economic activity are known as the
a. business cycle.
b. broken window fallacy.
c. tradeoff between inflation and unemployment.
d. ten principles of economics.
Suppose the government places a perunit tax on a good. The smaller the price
elasticities of demand and supply for the good, the
a. smaller the deadweight loss from the tax.
b. greater the deadweight loss from the tax.
c. less efficient is the tax.
d. more equitable is the distribution of the tax burden between buyers and sellers.
Table 511
Supply isDemand is
Scenario Aelasticelastic
Scenario Belasticinelastic
Scenario Cinelasticelastic
Scenario Dinelasticinelastic
Refer to Table 511. Which scenario describes the market for oil in the short run?
a. A
b. B
c. C
d. D
When a nation first begins to trade with other countries and the nation becomes an
importer of corn,
a. this is an indication that the world price of corn exceeds the nation’s domestic price
of corn in the absence of trade.
b. this is an indication that the nation has a comparative advantage in producing corn.
c. the nation’s consumers of corn become better off and the nation’s producers of corn
become worse off.
d. All of the above are correct.
Figure 719
Refer to Figure 719. If the government imposes a price floor of $55 in this market,
then total surplus will be
a. $137.50.
b. $125.00.
c. $187.50.
d. $275.00.
As we move downward and to the right along a linear, downwardsloping demand curve,
a. both slope and elasticity remain constant.
b. slope changes but elasticity remains constant.
c. both slope and elasticity change.
d. slope remains constant but elasticity changes.