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Ken and Traci are two woodworkers who both make tables and chairs. In one month,
Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs..
Given this, we know that
a. Ken has an absolute advantage in chairs.
b. Ken has a comparative advantage in tables.
c. Traci has an absolute advantage in chairs.
d. Traci has a comparative advantage in chairs.
Figure 317
Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities Frontier
Refer to Figure 317. Daisy has an absolute advantage in the production of
a. both goods and a comparative advantage in the production of pies.
b. both goods and a comparative advantage in the production of tarts.
c. neither good and a comparative advantage in the production of pies.
d. neither good and a comparative advantage in the production of tarts.
Table 46
PriceFirm A’s
Quantity
SuppliedFirm B’s
Quantity
SuppliedFirm C’s
Quantity
SuppliedFirm D’s
Quantity
Supplied
$010000
$28345
$466810
$6491215
$8212820
$10015425
Refer to Table 46. If these are the only four sellers in the market, then when the price
increases from $6 to $8, the market quantity supplied
a. increases by 0.5 units.
b. increases by 2 units.
c. decreases by 4 units.
d. increases by 42 units.
Figure 819
The vertical distance between points A and B represents the original tax.
Refer to Figure 819. If the government changed the perunit tax from $5.00 to $7.50,
then the price paid by buyers would be $10.50, the price received by sellers would be
$3, and the quantity sold in the market would be 0.5 units. Compared to the original tax
rate, this higher tax rate would
a. increase government revenue and increase the deadweight loss from the tax.
b. increase government revenue and decrease the deadweight loss from the tax.
c. decrease government revenue and increase the deadweight loss from the tax.
d. decrease government revenue and decrease the deadweight loss from the tax.
Figure 724
Refer to Figure 724. If the government imposes a price ceiling at $12, then producer
surplus is
a. CDI.
b. BDF.
c. BCIF.
d. HGCD.
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 a comparative advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
Figure 218
Relationship between Price and Restaurant Meals
Refer to Figure 218. A movement from point A to point Z is called
a. a shift in demand.
b. a movement along the demand curve.
c. a shift in supply.
d. a movement along the supply curve.
Table 413
The demand schedule below pertains to sandwiches demanded per week.
PriceHarry’s
Quantity
DemandedDarby’s
Quantity
DemandedJake’s
Quantity
Demanded
$3343
$512x
Refer to Table 413. Suppose Harry, Darby, and Jake are the only demanders of
sandwiches. Also suppose the following:
• x = 2.
• The current price of a sandwich is $5.00.
• The market quantity supplied of sandwiches is 10.
• The law of supply applies to the supply of sandwiches.
Then there is a
a. shortage of 5 sandwiches, and the price would be expected to rise from its current
level of $5.00.
b. shortage of 5 sandwiches, and the price would be expected to fall from its current
level of $5.00.
c. surplus of 5 sandwiches, and the price would be expected to rise from its current
level of $5.00.
d. surplus of 5 sandwiches, and the price would be expected to fall from its current level
of $5.00.
The crossprice elasticity of demand can tell us whether goods are
a. normal or inferior.
b. elastic or inelastic.
c. luxuries or necessities.
d. complements or substitutes.
If a seller in a competitive market chooses to charge more than the going price, then
a. the sellers’ profits must increase.
b. the owners of the raw materials used in production would raise the prices for the raw
materials.
c. other sellers would also raise their prices.
d. buyers will make purchases from other sellers.
The price paid by buyers in a market will decrease if the government
a. imposes a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. increases a tax on the good sold in that market.
d. decreases a binding price floor in that market.
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for paper napkins as a result of a “Go Green” advertising campaign
encouraging people to use cloth napkins?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
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 rancher, the opportunity cost of 16 pounds of meat is
a. 4.0 pounds of potatoes.
b. 5.2 pounds of potatoes.
c. 6.4 pounds of potatoes.
d. 9.6 pounds of potatoes.
Cole is refinishing an antique china cabinet and has already spent $180 on the
restoration. He expects to be able to sell the cabinet for $360. Cole discovers that he
needs to do an additional $200 worth of work to make the cabinet worth $360 to
potential buyers. He could also sell the cabinet now, without completing the additional
work, for $100. What should Cole do?
a. He should sell the cabinet now for $100.
b. He should keep the cabinet since it wouldn’t be rational to spend $380 restoring a
cabinet and then sell it for only $360.
c. He should complete the additional work and sell the cabinet for $360.
d. It does not matter which action he takes since the outcome will be the same either
way.
Figure 426
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for wedding cakes resulting from a decrease in the number of pastry chefs?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Table 327
Assume that Huang and Min can switch between producing parasols and producing
porcelain plates at a constant rate.
Labor Hours Needed to Make 1Quantity Produced in 36 Hours
ParasolPlateParasolPlate
Huang26186
Min24189
Refer to Table 327. At which of the following prices would both Huang and Min gain
from trade with each other?
a. 15 parasols for 10 plates
b. 15 parasols for 6 plates
c. 15 parasols for 3 plates
d. Huang and Min could not both gain from trade with each other at any price.
Figure 51
Refer to Figure 51. Between point A and point B, price elasticity of demand is equal to
a. 0.33.
b. 0.67.
c. 1.5
d. 2.67.
If a 20% increase in price for a good results in a 15% decrease in quantity demanded,
the price elasticity of demand is
a. 0.75.
b. 1.25.
c. 1.33.
d. 1.60.
The “unfaircompetition” argument might be cited by an American who believes that
a. almost every country has a comparative advantage, relative to the United States, in
producing almost all goods.
b. young industries should be protected against foreign competition until they become
profitable.
c. the American automobile industry should be protected against Japanese firms that are
able to produce automobiles at relatively low cost.
d. the French government’s subsidies to French farmers justify restrictions on American
imports of French agricultural products.
Two goods are complements when a decrease in the price of one good
a. decreases the quantity demanded of the other good.
b. decreases the demand for the other good.
c. increases the quantity demanded of the other good.
d. increases the demand for the other good.
Figure 926
The diagram below illustrates the market for baseballs in the U.S.
Refer to figure 926. Prior to opening of the U.S. baseball market to international trade,
total surplus is
a. $4800.
b. $2400.
c. $600.
d. $6000.
Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax
would
a. shift the demand curve downward by less than $40.
b. raise the equilibrium price by $40.
c. create a $20 tax burden each for buyers and sellers.
d. discourage market activity.
Which of the following would most likely serve as an example of a monopoly?
a. a bakery in a large city
b. a bank in a large city
c. a local cable television company
d. a small group of corn farmers
Figure 611
Refer to Figure 611. Which of the following statements is not correct?
a. A governmentimposed price of $8 would be a binding price floor if market demand is
Demand A and a binding price ceiling if market demand is Demand B.
b. A governmentimposed price of $10 would be a binding price ceiling if market
demand is either Demand A or Demand B.
c. A governmentimposed price of $4 would be a binding price ceiling if market demand
is either Demand A or Demand B.
d. A governmentimposed price of $10 would be a binding price floor if market demand
is Demand A and a nonbinding price ceiling if market demand is Demand B.
Producer surplus is
a. represented on a graph by the area below the demand curve and above the supply
curve.
b. the amount a seller is paid minus the cost of production.
c. also referred to as excess supply.
d. All of the above are correct.
When the nation of Worldova allows trade and becomes an exporter of silk,
a. residents of Worldova who produce silk become worse off; residents of Worldova
who buy silk become better off; and the economic wellbeing of Worldova rises.
b. residents of Worldova who produce silk become worse off; residents of Worldova
who buy silk become better off; and the economic wellbeing of Worldova falls.
c. residents of Worldova who produce silk become better off; residents of Worldova
who buy silk become worse off; and the economic wellbeing of Worldova rises.
d. residents of Worldova who produce silk become better off; residents of Worldova
who buy silk become worse off; and the economic wellbeing of Worldova falls.
When a buyer’s willingness to pay for a good is equal to the price of the good, the
a. buyer’s consumer surplus for that good is maximized.
b. buyer will buy as much of the good as the buyer’s budget allows.
c. price of the good exceeds the value that the buyer places on the good.
d. buyer is indifferent between buying the good and not buying it.
Total revenue will be at its largest value on a linear demand curve at the
a. top of the curve, where prices are highest.
b. midpoint of the curve.
c. low end of the curve, where quantity demanded is highest.
d. None of the above is correct.
Figure 315
Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier
Refer to Figure 315. Perry has a comparative advantage in the production of
a. novels and Jordan has a comparative advantage in the production of poems.
b. poems and Jordan has a comparative advantage in the production of novels.
c. novels and Jordan has a comparative advantage in the production of neither good.
d. neither good and Jordan has a comparative advantage in the production of novels.
Assume the nation of Teeveeland does not trade with the rest of the world. By
comparing the world price of televisions to the price of televisions in Teeveeland, we
can determine whether
a. consumer surplus exceeds producer surplus in Teeveeland.
b. Teeveeland has an absolute advantage in producing televisions.
c. Teeveeland has a comparative advantage in producing televisions.
d. All of the above are correct.
