When two variables have a positive correlation,
a. they tend to move in opposite directions.
b. they tend to move in the same direction.
c. one variable will move while the other remains constant.
d. the variables’ values are never negative.
Figure 628
Refer to Figure 628. Suppose a tax of $6 per unit is imposed on this market. How
much will sellers receive per unit after the tax is imposed?
a. $4
b. between $4 and $7
c. between $7 and $10
d. $10
Positive statements are
a. prescriptive.
b. claims about how the world should be.
c. claims about how the world is.
d. made by economists speaking as policy advisers.
The benefit to buyers of participating in a market is measured by
a. the price elasticity of demand.
b. consumer surplus.
c. the maximum amount that buyers are willing to pay for the good.
d. the equilibrium price.
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is
relatively elastic. When cigarettes are taxed, we would expect
a. most of the burden of the tax to fall on sellers of cigarettes, regardless of whether
buyers or sellers of cigarettes are required to pay the tax to the government.
b. most of the burden of the tax to fall on buyers of cigarettes, regardless of whether
buyers or sellers of cigarettes are required to pay the tax to the government.
c. the distribution of the tax burden between buyers and sellers of cigarettes to depend
on whether buyers or sellers of cigarettes are required to pay the tax to the government.
d. a large percentage of smokers to quit smoking in response to the tax.
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 and that the market demand violates the law of demand. Then, in the table,
the value of x must be
a. less than or equal to 5.
b. greater than or equal to 5.
c. greater than or equal to 7.
d. greater than or equal to 10.
To measure the gains and losses from a tax on a good, economists use the tools of
a. macroeconomics.
b. welfare economics.
c. internationaltrade theory.
d. circularflow analysis.
Figure 725
Refer to Figure 725. At the equilibrium price, total surplus is
a. $288.
b. $576.
c. $1,152.
d. $2,304.
When drawing a demand curve,
a. demand is measured along the vertical axis, and price is measured along the
horizontal axis.
b. quantity demanded is measured along the vertical axis, and price is measured along
the horizontal axis.
c. price is measured along the vertical axis, and demand is measured along the
horizontal axis.
d. price is measured along the vertical axis, and quantity demanded is measured along
the horizontal axis.
Suppose the demand for peaches decreases. What will happen to producer surplus in the
market for peaches?
a. It increases.
b. It decreases.
c. It remains unchanged.
d. It may increase, decrease, or remain unchanged.
Suppose the government increases the size of a tax by 20 percent. The deadweight loss
from that tax
a. increases by 20 percent.
b. increases by more than 20 percent.
c. increases but by less than 20 percent.
d. decreases by 20 percent.
Figure 418
Refer to Figure 418. At the equilibrium price,
a. 200 units would be supplied and demanded.
b. 400 units would be supplied and demanded.
c. 600 units would be supplied and demanded.
d. 600 units would be supplied, but only 200 would be demanded.
Table 333
Chris and Tony’s Production Opportunities
TomatoesPasta Sauce
Chris10 lbs300 jars
Tony14 lbs280 jars
Refer to Table 333 Chris and Tony both produce tomatoes and pasta sauce. The table
shows their possible production per month if both work the same number of 8 hour
days. Given this information, Chris’s opportunity cost of 1 lb. of tomatoes is
a. 2 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 3 jars of sauce.
b. 3 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 2 jars of sauce.
c. 20 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 30 jars of sauce.
d. 30 jars of sauce and Tony’s opportunity cost of 1 lb. of tomatoes is 20 jars of sauce.
The federal government uses the revenue from the FICA (Federal Insurance
Contribution Act) tax to pay for
a. unemployment compensation.
b. the salaries of members of Congress.
c. Social Security and Medicare.
d. housing subsidies for lowincome people.
For teenagers, a 10 percent increase in the price of cigarettes leads to a
a. 1 percent reduction in the quantity demanded of cigarettes.
b. 4 percent reduction in the quantity demanded of cigarettes.
c. 10 percent reduction in the quantity demanded of cigarettes.
d. 12 percent reduction in the quantity demanded of cigarettes.
Table 33
Production Opportunities
Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours
Cheese Wine Cheese Wine
England 1 4 40 10
France 5 2 8 20
Refer to Table 33. Which of the following combinations of cheese and wine could
England not produce in 40 hours?
a. 12 units of cheese and 7 units of wine
b. 16 units of cheese and 6 units of wine
c. 20 units of cheese and 5 units of wine
d. 26 units of cheese and 4 units of wine
If Korea is capable of producing either shoes or soccer balls or some combination of the
two, then
a. Korea should specialize in the product in which it has an absolute advantage.
b. it would be impossible for Korea to have an absolute advantage over another country
in both products.
c. it would be difficult for Korea to benefit from trade with another country if Korea is
efficient in the production of both goods.
d. Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.
Figure 316
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 316. Hosne has a comparative advantage in the production of
a. purses and Merve has a comparative advantage in the production of wallets.
b. wallets and Merve has a comparative advantage in the production of purses.
c. both goods and Merve has a comparative advantage in the production of neither
good.
d. neither good and Merve has a comparative advantage in the production of both
goods.
If a price ceiling is not binding, then
a. there will be a surplus in the market.
b. there will be a shortage in the market.
c. the market will be less efficient than it would be without the price ceiling.
d. there will be no effect on the market price or quantity sold.
When a country allows international trade and becomes an exporter of a good,
a. domestic producers of the good become better off.
b. domestic consumers of the good become worse off.
c. the gains of the winners exceed the losses of the losers.
d. All of the above are correct.
Historical episodes are
a. valuable to economists because they allow economists to see how the science of
economics has evolved.
b. valuable to economists because they allow economists to evaluate economic theories.
c. not of concern to economists because economics is about predicting the future, not
dwelling on the past.
d. not of concern to economists because the exact circumstances of historical episodes
are unlikely to be observed again.
Figure 917
Refer to Figure 917. The amount of revenue collected by the government from the
tariff is
a. $32.
b. $288.
c. $368.
d. $720.
Figure 811
Refer to Figure 811. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then,
when the tax is imposed,
a. consumer surplus decreases by $11.
b. producer surplus decreases by $11.
c. the deadweight loss amounts to $6.
d. All of the above are correct.
Figure 85
Suppose that the government imposes a tax of P3 P1.
Refer to Figure 85. The tax causes a reduction in consumer surplus that is represented
by area
a. A.
b. B+C.
c. C+H.
d. F.
The mainstream view among economists is that
a. society faces a tradeoff between unemployment and inflation, but only in the short
run.
b. society faces a tradeoff between unemployment and inflation, but only in the long
run.
c. society faces a tradeoff between unemployment and inflation, both in the short run
and in the long run.
d. no tradeoff exists between unemployment and inflation, either in the short run or in
the long run.
In the circularflow diagram, firms produce
a. goods and services using factors of production.
b. output using inputs.
c. factors of production using goods and services.
d. Both (a) and (b) are correct.
Pizza is a normal good if the demand
a. for pizza rises when income rises.
b. for pizza rises when the price of pizza falls.
c. curve for pizza slopes upward.
d. curve for pizza shifts to the right when the price of burritos rises, assuming pizza and
burritos are substitutes.
Table 311
Assume that Max and Min can switch between producing mittens and producing hats at
a constant rate.
Labor Hours Needed to Make 1Quantity Produced in 36 Hours
MittensHatsMittensHats
Max26186
Min24189
Refer to Table 311. Which of the following points would be on Min’s production
possibilities frontier, based on a 36hour production period?
a. (3 mittens, 8 hats)
b. (8 mittens, 5 hat)
c. (10 mittens, 4 hats)
d. More than one of the above would be on Min’s production possibilities frontier.
Economists generally support
a. trade restrictions.
b. government management of trade.
c. export subsidies.
d. free international trade.
As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,
the
a. tax revenue increases at first, but it eventually peaks and then decreases.
b. deadweight loss increases at first, but it eventually peaks and then decreases.
c. tax revenue always increases, and the deadweight loss always increases.
d. tax revenue always decreases, and the deadweight loss always increases.
Air pollution from burning fossil fuels causes damages to crops and public health. This
is an example of
a. a market failure caused by an externality.
b. a market failure caused by market power.
c. a market failure caused by equality.
d. There is no market failure in this case.