Suppose the government has imposed a price ceiling on sliced sandwich bread. Which
of the following events could transform the price ceiling from one that is binding to one
that is not binding?
a. An increase in the price of flour, which is used to make bread.
b. A decrease in the price of lunch meat.
c. A decrease in the price of unsliced bread, which people consider a substitute for
sliced bread.
d. An decrease in the price of peanut butter and jelly.
Figure 821
Refer to Figure 821. Suppose the government places a $3 perunit tax on this good. The
largest deadweight loss from the tax would occur in a market where demand is
represented by
a. Demand 1, and supply is represented by Supply 1.
b. Demand 1, and supply is represented by Supply 2.
c. Demand 2, and supply is represented by Supply 1.
d. Demand 2, and supply is represented by Supply 2.
Goods with many close substitutes tend to have
a. more elastic demands.
b. less elastic demands.
c. price elasticities of demand that are unit elastic.
d. income elasticities of demand that are negative.
Figure 911
Refer to Figure 911. Consumer surplus in this market before trade is
a. A.
b. B + C.
c. A + B + D.
d. C.
Consumer surplus
a. is the amount of a good that a consumer can buy at a price below equilibrium price.
b. is the amount a consumer is willing to pay minus the amount the consumer actually
pays.
c. is the number of consumers who are excluded from a market because of scarcity.
d. measures how much a seller values a good.
Table 711
The only four producers in a market have the following costs:
SellerCost
Evan$50
Selena$100
Angie$150
Kris$200
Refer to Table 711. If the sellers bid against each other for the right to sell the good to a
consumer, then the producer surplus will be
a. $0 or slightly more.
b. $50 or slightly less.
c. $150 or slightly less.
d. $200 or slightly more.
Which of the following changes would not shift the demand curve for a good or
service?
a. a change in income
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
d. a change in the price of a related good or service
Figure 623
Refer to Figure 623. How much tax revenue does this tax produce for the government?
a. $18.
b. $30.
c. $6.
d. $36.
The ycoordinate is the
a. first number of an ordered pair and represents the point’s horizontal location.
b. second number of an ordered pair and represents the point’s horizontal location.
c. first number of an ordered pair and represents the point’s vertical location.
d. second number of an ordered pair and represents the point’s vertical location.
If two goods are complements, their crossprice elasticity will be
a. positive.
b. negative.
c. zero.
d. equal to the difference between the income elasticities of demand for the two goods.
Figure 97. The figure applies to the nation of Wales and the good is cheese.
Refer to Figure 97. Which of the following is a valid equation for the gains from trade?
a. Gains from trade = (1/2)(P1P0)(Q2Q1).
b. Gains from trade = (1/2)(P1P0)(Q2Q0)
c. Gains from trade = (1/2)(P1P0)(Q1 + Q2).
d. Gains from trade = (1/2)(Q1)(P3P1).
Which of the following is not correct?
a. Market power can cause markets to be inefficient.
b. When the decisions of buyers and sellers affect nonparticipants, markets may be
inefficient.
c. The tools of welfare economics cannot help economists when markets are inefficient.
d. Externalities can cause markets to be inefficient.
Which of the following is the most accurate statement?
a. The one argument for restricting trade that almost all economists accept as valid is
the infantindustry argument.
b. Almost all economists insist that it is never appropriate to protect “key” industries,
even when there are legitimate concerns about national security.
c. The idea that one nation might want to threaten another nation with a trade restriction
is associated with the protectionasabargainingchip argument for restricting trade.
d. The protectionasabargainingchip argument for restricting trade is also known as the
infantindustry argument.
If the price elasticity of demand for a good is 0.4, then which of the following events is
consistent with a 2 percent decrease in the quantity of the good demanded?
a. a 0.8 percent increase in the price of the good
b. a 2.4 percent increase in the price of the good
c. a 5 percent increase in the price of the good
d. a 8 percent increase in the price of the good
If macaroni and cheese is an inferior good, then an increase in
a. the price will cause the demand curve for macaroni and cheese to shift to the left.
b. the price will cause the demand curve for macaroni and cheese to shift to the right.
c. a consumer’s income will cause the demand curve for macaroni and cheese to shift to
the left.
d. a consumer’s income will cause the demand curve for macaroni and cheese to shift to
the right.
Policies such as rent control and trade barriers persist
a. because economists are about evenly divided as to the merits of those policies.
b. because almost all economists agree that those policies have no discernible economic
effects.
c. because almost all economists agree that those policies are desirable.
d. despite the fact that almost all economists agree that those policies are undesirable.
Figure 64
Refer to Figure 64. Which of the following statements is not correct?
a. When the price is $10, quantity supplied equals quantity demanded.
b. When the price is $6, there is a surplus of 8 units.
c. When the price is $12, there is a surplus of 4 units.
d. When the price is $16, quantity supplied exceeds quantity demanded by 12 units.
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. Indonesia’s opportunity cost of producing bananas is
a. 2.5 units of rice. This is higher than India’s opportunity cost of producing bananas.
b. 2.5 units of rice. This is lower than India’s opportunity cost of producing bananas.
c. 2/5 units of rice. This is higher than India’s opportunity cost of producing bananas.
d. 2/5 units of rice. This is lower than India’s opportunity cost of producing bananas.
Figure 44
YasmineMercedes
Refer to Figure 44. If Yasmine and Mercedes are the only two consumers in the
market, then the market quantity demanded at a price of $12 is
a. 3 units.
b. 6 units.
c. 9 units.
d. 12 units.
President Gerald Ford referred to inflation as
a. a blight on our nation’s economy.
b. a necessary evil to combat high unemployment.
c. public enemy number one.
d. a fly in the ointment.
There are very few, if any, good substitutes for motor oil. Therefore, the
a. demand for motor oil would tend to be inelastic.
b. demand for motor oil would tend to be elastic.
c. demand for motor oil would tend to respond strongly to changes in prices of other
goods.
d. supply of motor oil would tend to respond strongly to changes in people’s tastes for
large cars relative to their tastes for small cars.
Congress relies on economists at the Congressional Budget Office to
a. enforce the nation’s antitrust laws.
b. set the nation’s monetary policy.
c. provide evidence that incumbent members of Congress are performing well in their
jobs.
d. provide independent evaluations of policy proposals.
When an economy is operating at a point on its production possibilities frontier, then
a. consumers are content with the mix of goods and services that is being produced.
b. there is no way to produce more of one good without producing less of the other.
c. equal amounts of the two goods are being produced.
d. All of the above are correct.
Figure 516
Refer to Figure 516. Using the midpoint method, what is the price elasticity of supply
between $6 and $8?
a. 0.86
b. 1.00
c. 1.17
d. 1.25
In the context of decisionmaking, the word “marginal” is most closely associated with
the word
a. “unimportant.”
b. “slow.”
c. “edge.”
d. “irrational.”
The discovery of a new hybrid wheat would increase the supply of wheat. As a result,
wheat farmers would realize an increase in total revenue if the
a. supply of wheat is elastic.
b. supply of wheat is inelastic.
c. demand for wheat is inelastic.
d. demand for wheat is elastic.
Figure 916. The figure below illustrates a tariff. On the graph, Q represents quantity
and P represents price.
Refer to Figure 916. The deadweight loss created by the tariff is represented by the
area
a. B.
b. D + F.
c. D + E + F.
d. B + D + E + F.
Demand is inelastic if the price elasticity of demand is
a. less than 1.
b. equal to 1.
c. greater than 1.
d. equal to 0.
When consumers face rising gasoline prices, they typically
a. reduce their quantity demanded more in the long run than in the short run.
b. reduce their quantity demanded more in the short run than in the long run.
c. do not reduce their quantity demanded in the short run or the long run.
d. increase their quantity demanded in the short run but reduce their quantity demanded
in the long run.
Figure 917
Refer to Figure 917. The deadweight loss caused by the tariff is
a. $24.
b. $72.
c. $96.
d. $144.
Patterns of trade among nations are primarily determined by
a. cultural considerations.
b. political considerations.
c. comparative advantage.
d. differences in the income elasticity of demand among nations.
The mayor of Workerville proposes a local payroll tax to fund a new water park for the
city. The mayor proposes to collect half the tax from workers and half the tax from
firms. The mayor will be able to successfully divide the burden of the tax equally if the
a. demand for labor is more elastic than the supply of labor.
b. supply of labor is more elastic than the demand for labor.
c. demand for labor and supply of labor are equally elastic.
d. It is not possible for the tax burden to fall equally on firms and workers.
When demand is inelastic, an increase in price will cause
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d. no change in total revenue but a decrease in quantity demanded.