Table 77
BuyerWillingness to Pay
Michael$500
Earvin$400
Larry$350
Charles$300
Refer to Table 77. You have two essentially identical extra tickets to the Midwest
Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows
the willingness to pay of the four potential buyers in the market for a ticket to the game.
You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360
for a ticket, and you sell them the two tickets. What is the total consumer surplus in the
market?
a. $720
b. $180
c. $140
d. $40
Figure 213
Refer to Figure 213. Which points are not currently attainable but could become
achievable for this economy if there is an improvement in technology?
a. I, L
b. G, H
c. J, K
d. F, G
Figure 613
This figure shows the market demand and market supply curves for good X.
Refer to Figure 613. If the government imposes a price ceiling of $4 on this market,
then there will be
a. no shortage.
b. a shortage of 5 units.
c. a shortage of 10 units.
d. a shortage of 20 units.
Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to
pay $155 per tuning. One particular week, Tom is willing to tune the first piano for
$120, the second piano for $125, the third piano for $140, and the fourth piano for
$160. Assume Tom is rational in deciding how many pianos to tune. His producer
surplus is
a. $95.
b. $80.
c. $75.
d. $60.
For which pairs of goods is the crossprice elasticity most likely to be negative?
a. peanut butter and jelly
b. automobile tires and coffee
c. pens and pencils
d. paperback novels and electronic books for ereaders
Table 47
PriceDairy
Barn’s
Gallons
SuppliedDolly’s Dairy’s
Gallons
SuppliedFour Queen’s
Gallons
SuppliedMoo
Roo’s
Gallons
Supplied
$00000
$23421
$46842
$691263
$8121684
$101520105
Refer to Table 47. If these are the only four sellers in the market for ice cream, then
when the price increases from $4 to $6, the market quantity supplied
a. decreases by 10 gallons.
b. decreases by 20 gallons.
c. increases by 10 gallons.
d. increases by 20 gallons.
The word “economy” comes from the Greek word oikonomos, which means
a. “environment.”
b. “production.”
c. “one who manages a household.”
d. “one who makes decisions.”
Table 51
GoodPrice Elasticity of Demand
A1.9
B0.8
Refer to Table 51. Which of the following is consistent with the elasticities given in
Table 51?
a. A is pens and B is pencils.
b. A is a Snickers bar and B is a Milky Way bar.
c. A is an airline ticket from Chicago to New York demanded by a vacationer and B is
an airline ticket from Chicago to New York demanded by a business traveler.
d. A is a bottle of water demanded by a tourist in a desert and B is a bottle of water
demanded by a tourist in a rain forest.
In competitive markets,
a. firms produce identical products.
b. no individual buyer can influence the market price.
c. no individual seller can influence the market price.
d. All of the above are correct.
Figure 54
Refer to Figure 54. Assume, for the good in question, two specific points on the
demand curve are (Q = 1,000, P = $40) and (Q = 1,500, P = $30). Then which of the
following scenarios is possible?
a. Both of these points lie on the section of the demand curve from B to C.
b. The vertical intercept of the demand curve is the point (Q = 0, P = $60).
c. The horizontal intercept of the demand curve is the point (Q = 1,800, P = $0).
d. Any of these scenarios is possible.
Figure 89
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 89. The total surplus with the tax is
a. $2,000.
b. $3,000.
c. $15,000.
d. $20,000.
Table 41
PriceQuantity Demanded
by MichelleQuantity Demanded
by LauraQuantity Demanded
by Hillary
$55411
$46613
$37815
$281017
$191219
$0101421
Refer to Table 41. If the market consists of Michelle and Hillary only and the price
falls by $1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
Figure 617
This figure shows the market demand and market supply curves for good Y
Refer to Figure 617. A governmentimposed price of $12 in this market is an example
of a
a. binding price ceiling that creates a shortage.
b. nonbinding price ceiling that creates a shortage.
c. binding price floor that creates a surplus.
d. nonbinding price floor that creates a surplus.
Holding all other forces constant, when the price of gasoline rises, the number of
gallons of gasoline demanded would fall substantially over a tenyear period because
a. buyers tend to be much less sensitive to a change in price when given more time to
react.
b. buyers tend to be much more sensitive to a change in price when given more time to
react.
c. buyers will have substantially more real income over a tenyear period.
d. the quantity supplied of gasoline increases very little in response to an increase in the
price of gasoline.
Figure 218
Relationship between Price and Restaurant Meals
Refer to Figure 218. A movement from point A to point B 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.
Figure 315
Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier
Refer to Figure 315. Suppose Perry is willing to trade 4 poems to Jordan for each
novel that Jordan writes and sends to Perry. Which of the following combinations of
novels and poems could Jordan then consume, assuming Jordan specializes in novel
production and Perry specializes in poem production?
a. 1 novel and 14 poems
b. 2 novels and 8 poems
c. 3 novels and 6 poems
d. 4 novels and 2 poems
Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax
is increased to $0.25 per unit, the deadweight loss from the new tax would be
a. $200.
b. $250.
c. $475.
d. $625.
Table 336
Minutes Needed
to Make 1
TowelUmbrella
Antigua1220
Barbuda1510
Refer to Table 336. Antigua has an absolute advantage in the production of
a. towels and Barbuda has an absolute advantage in the production of umbrellas.
b. umbrellas and Barbuda has an absolute advantage in the production of towels.
c. both goods and Barbuda has an absolute advantage in the production of neither good.
d. neither good and Barbuda has an absolute advantage in the production of both goods.
When a country allows trade and becomes an importer of a good,
a. domestic producers become better off, and domestic consumers become worse off.
b. domestic producers become worse off, and domestic consumers become better off.
c. domestic consumers become better off, but the effect on the wellbeing of domestic
producers is ambiguous.
d. domestic producers become worse off, but the effect on the wellbeing of domestic
consumers is ambiguous.
Figure 614
Refer to Figure 614. If the horizontal line on the graph represents a price ceiling, then
the price ceiling is
a. binding and creates a shortage of 20 units of the good.
b. binding and creates a shortage of 40 units of the good.
c. not binding but creates a shortage of 40 units of the good.
d. not binding, and there will be no surplus or shortage of the good.
Figure 816
Refer to Figure 816. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.
In comparison to Panel (b), Panel (a) illustrates which of the following statements?
a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than
when demand is relatively elastic.
b. When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when
supply is relatively elastic.
d. When supply is relatively elastic, the deadweight loss of a tax is larger than when
supply is relatively inelastic.
A competitive market is a market in which
a. an auctioneer helps set prices and arrange sales.
b. there are only a few sellers.
c. the forces of supply and demand do not apply.
d. no individual buyer or seller has any significant impact on the market price.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. Without a tax, consumer surplus in this market is
a. $1,500.
b. $2,400.
c. $3,000.
d. $3,600.
According to Arthur Laffer, the graph that represents the amount of tax revenue
(measured on the vertical axis) as a function of the size of the tax (measured on the
horizontal axis) looks like
a. a U.
b. an upsidedown U.
c. a horizontal straight line.
d. an upwardsloping line or curve.
The two words most often used by economists are
a. prices and quantities.
b. resources and allocation.
c. supply and demand.
d. efficiency and equity.
Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to
make the money she needs. Your mother is paying for all of the ingredients. She
currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50
faster. If you know that the demand for lemonade is elastic, what is your advice to her?
a. Leave the price at 25 cents and be patient.
b. Raise the price to increase total revenue.
c. Lower the price to increase total revenue.
d. There isn’t enough information given to answer this question.
The beforetrade price of fish in Germany is $8.00 per pound. The world price of fish is
$6.00 per pound. Germany is a pricetaker in the fish market. If Germany allows trade in
fish, then Germany will become an
a. importer of fish and the price of fish in Germany will be $6.00.
b. importer of fish and the price of fish in Germany will be $8.00.
c. exporter of fish and the price of fish in Germany will be $6.00.
d. exporter of fish and the price of fish in Germany will be $8.00.
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.
Figure 723
Refer to Figure 723. The efficient pricequantity combination is
a. P1 and Q1.
b. P2 and Q2.
c. P3 and Q1.
d. P4 and 0.
Table 61
PriceQuantity
DemandedQuantity
Supplied
$2024000
$302000200
$401600400
$501200600
$60800800
$704001000
$8001200
Refer to Table 61. Suppose the government imposes a price floor of $30 on this
market. What will be the size of the surplus in this market?
a. 0 units
b. 200 units
c. 1800 units
d. 2000 units