The selfinterest of the participants in an economy is guided into promoting general
economic selfinterest by
a. the invisible hand.
b. market power.
c. government intervention.
d. oikonomos.
The unique point at which the supply and demand curves intersect is called
a. market harmony.
b. coincidence.
c. equivalence.
d. equilibrium.
Between the two ordered pairs (3, 6) and (7, 18), the slope is
a. 1/3
b. 1/3.
c. 3.
d. 3.
A tax on sellers will shift the
a. demand curve upward by the amount of the tax.
b. demand curve downward by the amount of the tax.
c. supply curve upward by the amount of the tax.
d. supply curve downward by the amount of the tax.
Table 318
The following table contains some production possibilities for an economy for a given
month.
ApplesOranges
120450
180?
240150
Refer to Table 318. If the production possibilities frontier is a straight line, then “?”
must be
a. 150.
b. 225.
c. 300.
d. 375.
Which of the following is a tax on labor?
a. Medicare tax
b. Social Security tax
c. federal income tax
d. All of the above are labor taxes.
Suppose the incomes of buyers in a market for a particular normal good decrease and
there is also a reduction in input prices. What would we expect to occur in this market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium price would increase, but the impact on equilibrium quantity would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
A movement along the supply curve might be caused by a change in
a. production technology.
b. input prices.
c. expectations about future prices.
d. the price of the good or service that is being supplied.
Scenario 54
Milk has an inelastic demand, and beef has an elastic demand. Suppose that a
mysterious increase in bovine infertility decreases both the population of dairy cows
and the population of beef cattle by 50 percent.
Refer to Scenario 54. Total consumer spending on milk will
a. increase, and total consumer spending on beef will increase.
b. increase, and total consumer spending on beef will decrease.
c. decrease, and total consumer spending on beef will increase.
d. decrease, and total consumer spending on beef will decrease.
Taxes cause deadweight losses because they
a. lead to losses in surplus for consumers and for producers that, when taken together,
exceed tax revenue collected by the government.
b. distort incentives to both buyers and sellers.
c. prevent buyers and sellers from realizing some of the gains from trade.
d. All of the above are correct.
When policymakers set prices by legal decree, they
a. are usually following the advice of mainstream economists.
b. improve the organization of economic activity.
c. obscure the signals that normally guide the allocation of society’s resources.
d. are demonstrating a willingness to sacrifice fairness for the sake of a gain in
efficiency.
On a certain supply curve, one point is (quantity supplied = 200, price = $2.00) and
another point is (quantity supplied = 250, price = $2.50). Using the midpoint method,
the price elasticity of supply is about
a. 0.2.
b. 0.5.
c. 1.0.
d. 2.5.
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for golf balls of an increase in green fees?
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 338
Output produced in one growing season
CornSoybeans
Iowa 3045
Nebraska 4080
HTMLENTITY#8203HTMLENTITYRefer 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 Nebraska has a
a. HTMLENTITY#8203HTMLENTITYcomparative advantage in the production of
soybeans and Iowa has a comparative advantage in the production of corn.
b. HTMLENTITY#8203HTMLENTITYcomparative advantage in the production of
corn and Iowa has a comparative advantage in the production of soybeans.
c. HTMLENTITY#8203HTMLENTITYcomparative advantage in both goods and Iowa
has a comparative advantage in neither good.
d. HTMLENTITY#8203HTMLENTITYcomparative advantage in neither good and
Iowa has a comparative advantage in both goods.
If a tax is levied on the buyers of a product, then the supply curve will
a. not shift.
b. shift up.
c. shift down.
d. become flatter.
Suppose an increase in the price of rubber coincides with an advance in the technology
of tire production. As a result of these two events, the demand for tires
a. decreases, and the supply of tires increases.
b. is unaffected, and the supply of tires decreases.
c. is unaffected, and the supply of tires increases.
d. None of the above is necessarily correct.
Table 335
Labor Hours Needed
to Produce
1 Dozen Eggs1 Pound Ham
Denmark108
Finland64
Refer to Table 335. Which good(s) does Denmark have an absolute advantage
producing?
a. both eggs and ham.
b. eggs but not ham.
c. ham but not eggs.
d. neither ham nor eggs.
Denise values a stainless steel dishwasher for her new house at $500, but she succeeds
in buying one for $350. Denise’s consumer surplus is
a. $150.
b. $350.
c. $500.
d. $850.
In the markets for goods and services in the circularflow diagram,
a. households and firms are both buyers.
b. households and firms are both sellers.
c. households are buyers and firms are sellers.
d. households are sellers and firms are buyers.
Economists speaking like scientists make
a. normative statements.
b. prescriptive statements.
c. claims about how the world is.
d. claims about how the world should be.
Table 49
An Increase in SupplyA Decrease in Supply
An Increase in DemandAB
A Decrease in DemandCD
Refer to Table 49. Which combination would produce a decrease in equilibrium price
and an indeterminate change in equilibrium quantity?
a. A
b. B
c. C
d. D
People are willing to pay more for a diamond than for a bottle of water because
a. the marginal cost of producing an extra diamond far exceeds the marginal cost of
producing an extra bottle of water.
b. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra
bottle of water.
c. producers of diamonds have a much greater ability to manipulate diamond prices
than producers of water have to manipulate water prices.
d. water prices are held artificially low by governments, since water is necessary for
life.
Using the midpoint method, the price elasticity of demand for a good is computed to be
approximately 2. Which of the following events is consistent with a 0.1 percent increase
in the price of the good?
a. The quantity of the good demanded decreases from 250 to 150.
b. The quantity of the good demanded decreases from 200 to 100.
c. The quantity of the good demanded decreases by 0.05 percent.
d. The quantity of the good demanded decreases by 0.2 percent.
You watch a lot of HGTV during your summer vacation, and you notice that most
housing buyers list granite countertops in their “must have” lists when buying a new or
existing house. You expect the demand for
a. granite countertops to shift to the left.
b. granite countertops to shift to the right.
c. substitute products such as marble countertops to shift to the right.
d. substitute products such as marble countertops to be unaffected by buyers’
preferences for granite.
Figure 27
Refer to Figure 27. This economy has the ability to produce at which point(s)?
a. N, O, P
b. L, M
c. L, M, N, O, P
d. L, M, Q
An example of a perfectly competitive market would be the market for
a. electricity.
b. soybeans.
c. coffee shops.
d. restaurants.
When a tax is imposed on the buyers of a good, the demand curve shifts
a. downward by the amount of the tax.
b. upward by the amount of the tax.
c. downward by less than the amount of the tax.
d. upward by more than the amount of the tax.
Total surplus in a market will increase when the government
a. imposes a tax on that market.
b. imposes a binding price floor on that market.
c. removes a binding price ceiling from that market.
d. None of the above is correct.
Which of the following is not a determinant of the demand for a particular good?
a. the prices of related goods
b. income
c. tastes
d. the prices of the inputs used to produce the good
The law of demand states that, other things equal, when the price of a good
a. falls, the demand for the good rises.
b. rises, the quantity demanded of the good rises.
c. rises, the demand for the good falls.
d. falls, the quantity demanded of the good rises.
Figure 616
Refer to Figure 616. In this market, a minimum wage of $7.25 is
a. binding and creates a labor shortage.
b. binding and creates unemployment.
c. nonbinding and creates a labor shortage.
d. nonbinding and creates neither a labor shortage nor unemployment.
Figure 71
Refer to Figure 71. If the price of the good is $150, then consumer surplus amounts to
a. $150.
b. $200.
c. $250.
d. $300.