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If Freedonia changes its laws to allow international trade in software and the world
price is lower than its domestic price, then it must be the case that
a. both consumer surplus and producer surplus increase.
b. consumer surplus increases and producer surplus decreases.
c. consumer surplus decreases and producer surplus increases.
d. both consumer surplus and producer surplus decrease.
If, at the current price, there is a shortage of a good, then
a. sellers are producing more than buyers wish to buy.
b. the market must be in equilibrium.
c. the price is below the equilibrium price.
d. quantity demanded equals quantity supplied.
Which of the following is not a commonlyadvanced argument for trade restrictions?
a. the jobs argument
b. the nationalsecurity argument
c. the infantindustry argument
d. the efficiency argument
The business cycle is measured by the
a. production of goods and services.
b. number of people employed.
c. the interest rate.
d. Both a and b are correct.
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. The imposition of the tax causes the price paid by buyers to
a. decrease by $2.
b. increase by $3.
c. decrease by $4.
d. increase by $5.
Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we
know that the
a. demand is more inelastic than the supply.
b. supply is more inelastic than the demand.
c. government has required that buyers remit the tax payments.
d. government has required that sellers remit the tax payments.
The terms equality and efficiency are similar in that they both refer to benefits to
society. However they are different in that
a. equality refers to uniform distribution of those benefits and efficiency refers to
maximizing benefits from scarce resources.
b. equality refers to maximizing benefits from scarce resources and efficiency refers to
uniform distribution of those benefits.
c. equality refers to everyone facing identical tradeoffs and efficiency refers to the
opportunity cost of the benefits.
d. equality refers to the opportunity cost of the benefits and efficiency refers to
everyone facing identical tradeoffs.
Figure 620
Refer to Figure 620. Suppose a tax of $5 per unit is imposed on this market. How
much will buyers pay per unit after the tax is imposed?
a. $5
b. between $5 and $10
c. between $10 and $14
d. $14
Two individuals engage in the same two productive activities. In which of the following
circumstances would neither individual have a comparative advantage in either
activity?
a. One individual’s production possibilities frontier is steeper than the other individual’s
production possibilities frontier.
b. One individual is faster at both activities than the other individual.
c. One individual’s opportunity costs are the same as the other individual’s opportunity
costs.
d. None of the above is correct; one of the two individuals always will have a
comparative advantage in at least one of the two activities.
In principle, we can
a. ignore positive statements when choosing among various public policy alternatives.
b. ignore normative statements when choosing among various public policy
alternatives.
c. confirm or refute positive statements by examining evidence.
d. confirm or refute normative statements by examining evidence.
Table 320
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Brad1012
Theresa610
Refer to Table 320. What is Brad’s opportunity cost of producing one pound of beef?
a. 5/6 bushel of wheat
b. 6/5 bushels of wheat
c. 3/5 bushels of wheat
d. 5/3 bushels of wheat
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
consumer surplus after this tax is
a. $80.
b. $40.
c. $30.
d. $10.
Rentcontrol laws dictate
a. the exact rent that landlords must charge tenants.
b. a maximum rent that landlords may charge tenants.
c. a minimum rent that landlords may charge tenants.
d. both a minimum rent and a maximum rent that landlords may charge tenants.
Table 71
BuyerWillingness To Pay
Calvin$150.00
Sam$135.00
Andrew$120.00
Lori$100.00
Refer to Table 71. If the price of the product is $90, then who would be willing to
purchase the product?
a. Calvin
b. Calvin and Sam
c. Calvin, Sam, and Andrew
d. Calvin, Sam, Andrew, and Lori
Lead is an important input in the production of crystal. If the price of lead decreases,
then we would expect the supply of
a. crystal to be unaffected.
b. crystal to decrease.
c. crystal to increase.
d. lead to increase.
Figure 45
Refer to Figure 45. Which of the following would cause the demand curve to shift
from Demand A to Demand B in the market for oranges in the United States?
a. a freeze in Florida
b. a technological advance that allows oranges to ripen faster
c. a decrease in the price of apples
d. an announcement by the FDA that oranges prevent heart disease
Suppose Iceland goes from being an isolated country to being an importer of coats. As a
result,
a. consumer surplus increases for consumers of coats in Iceland.
b. producer surplus increases for producers of coats in Iceland.
c. total surplus remains unchanged in the coat market in Iceland.
d. it is reasonable to infer that Iceland has a comparative advantage over other countries
in coat production.
If a tax is levied on the buyers of dog food, then
a. buyers will bear the entire burden of the tax.
b. sellers will bear the entire burden of the tax.
c. buyers and sellers will share the burden of the tax.
d. the government will bear the entire burden of the tax.
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. The loss of consumer surplus for those buyers of the good who
continue to buy it after the tax is imposed is
a. $0.
b. $1.50.
c. $3.
d. $4.50.
Figure 811
Refer to Figure 811. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the
deadweight loss of the tax is
a. $6.
b. $8.
c. $9.
d. $12.
Some time ago, the nation of Republica opened up its paper market to international
trade. Which of the following results of this policy change is consistent with the notion
that Republica has a comparative advantage over other countries in producing paper?
a. The price of paper in Republica decreased as a result of the policy change.
b. Republica began exporting paper as a result of the policy change.
c. The domestic demand curve for paper shifted to the right as a result of the policy
change.
d. The domestic quantity of paper demanded increased as a result of the policy change.
If the price of milk rises, when is the price elasticity of demand likely to be the lowest?
a. immediately after the price increase
b. one month after the price increase
c. three months after the price increase
d. one year after the price increase
