1) Willingness to pay
a.measures the value that a buyer places on a good.
b.is the amount a seller actually receives for a good minus the minimum amount the
seller is willing to accept.
c.is the maximum amount a buyer is willing to pay minus the minimum amount a seller
is willing to accept.
d.is the amount a buyer is willing to pay for a good minus the amount the buyer actually
pays for it.
2) When quantity demanded increases at every possible price, the demand curve has
a.shifted to the left.
b.shifted to the right.
c.not shifted; rather, we have moved along the demand curve to a new point on the
same curve.
d.not shifted; rather, the demand curve has become steeper.
3) Total surplus is equal to
a.value to buyers – profit to sellers.
b.value to buyers – cost to sellers.
c.consumer surplus x producer surplus.
d.(consumer surplus + producer surplus) x equilibrium quantity.
4) Which of the following statements is correct?
a.Few economic models incorporate assumptions.
b.Different economic models employ different sets of assumptions.
c.Good economic models attempt to mimic reality as closely as possible.
d.Economic models, to be accepted, must be tested by conducting experiments.
5) If unskilled labor is relatively plentiful and cheap in many foreign countries, then as
the United States expands its trade with these foreign countries, the domestic demand
for
a.both skilled and unskilled labor will rise proportionately.
b.skilled labor will fall and the demand for unskilled labor will rise.
c.skilled labor will rise and the demand for unskilled labor will fall.
d.both skilled and unskilled labor will be unaffected, assuming no barriers to free trade.
6) Suppose Abby, Brandi, Carrie, and DeeDee are the only four buyers in the market.
When the price decreases from $6 to $4, the market quantity demanded
a.increases by 0.75 units.
b.increases by 3 units.
c.increases by 4 units.
d.decreases by 27 units.
7) A consumer has preferences over two goods, X and Y. Suppose we graph this
consumer’s preferences (which satisfy the usual properties of indifference curves) and
budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis.
At the consumer’s current consumption bundle, the consumer is spending all available
income, and the marginal rate of substitution is greater than the slope of the budget
constraint. We can conclude that the consumer
a.is currently maximizing satisfaction subject to the budget constraint.
b.could increase satisfaction by consuming more X and less Y.
c.could increase satisfaction by consuming less X and more Y.
d.could purchase more X and more Y and increase total satisfaction.
8) Elephant populations in some African countries have started to rise because
a.environmentalists have developed effective educational campaigns.
b.the value of ivory has decreased.
c.some elephants have been made a private good, and people are allowed to kill
elephants on their own property.
d.regulations are being enforced more forcefully.
9) Assume, for Vietnam, that the domestic price of textiles without international trade is
lower than the world price of textiles. This suggests that, in the production of textiles,
a.Vietnam has a comparative advantage over other countries and Vietnam will import
textiles.
b.Vietnam has a comparative advantage over other countries and Vietnam will export
textiles.
c.other countries have a comparative advantage over Vietnam and Vietnam will import
textiles.
d.other countries have a comparative advantage over Vietnam and Vietnam will export
textiles.
10) A construction company has built 30 houses so far this year at a total cost to the
company of $7.5 million. If the company builds a 31sthouse, its total cost will increase
to $7.76 million. Which of the following statements is correct?
a.For the first 30 houses, the average cost per house was $250,000.
b.The marginal cost of the 31sthouse, if it is built, will be $260,000.
c.If the company can experience a marginal benefit of $275,000 by building the
31sthouse, then the company should build it.
d.All of the above are correct.
11) In the short-run, a firm‘s supply curve is equal to the
a.marginal cost curve above its average variable cost curve.
b.marginal cost curve above its average total cost curve.
c.average variable cost curve above its marginal cost curve.
d.average total cost curve above its marginal cost curve.
12) If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax
rate is 25 percent.
a.True
b.False
13)
If this economy devotes all of its resources to the production of dryers, then it will
produce
a.0 dryers and 100 washers.
b.60 dryers and 50 washers.
c.80 dryers and 0 washers.
d.80 dryers and 50 washers.
14) Suppose you are in charge of setting prices at a local ice cream shop. The business
needs to increase its total revenue, and your job is on the line. You evaluate the data and
determine that the for ice cream at your shop is 1.8. You should
a.increase the price of ice cream.
b.decrease the price of ice cream.
c.decrease the cost of operating the ice cream shop.
d.increase the price of bottled water also sold at the ice cream shop because its is 1.2.
15) Scenario 13-3
Kachina is a senior majoring in graphic design at Awesome University (AU). While she
has been attending college, Kachina started a computer consulting business to help
senior citizens learn how to use their iPads. Kachina charges $25 per hour for her
consulting services. She also works 5 hours a week for the Economics Department to
maintain that department’s Web page. The Economics Department pays Kachina $20
per hour.
Which of the following statements is correct?
a.Kachina should increase the number of hours she works for the Economics
Department to make her income comparable to her consulting business income.
b.Kachina cannot be maximizing her well-being if she continues to work for the
Economics Department.
c.If Kachina chooses one hour at the beach with her friends rather than spend one more
hour with a consulting client, the forgone income of $25 is considered a cost of the
choice to go to the beach.
d.Both b) and c) are correct
16) Sometimes workers earn higher wages through chance.
a.True
b.False