Table 710
The following table represents the costs of five possible sellers.
SellerCost
Abby$1,600
Bobby$1,300
Dianne$1,100
Evaline$900
Carlos$800
Refer to Table 710. If the market price is $1,000, the producer surplus in the market is
a. $1000.
b. $300.
c. $1,700.
d. $700.
A country that currently does not trade with other countries could benefit by
a. restricting imports and promoting exports.
b. promoting imports and restricting exports.
c. restricting both imports and exports.
d. not restricting trade.
While pollution regulations yield the benefit of a cleaner environment and the improved
health that comes with it, the regulations come at the cost of reducing the incomes of
the regulated firms’ owners, workers, and customers. This statement illustrates the
principle that
a. trade can make everyone better off.
b. rational people think at the margin.
c. people face tradeoffs.
d. people respond to incentives.
Table 336
Minutes Needed
to Make 1
TowelUmbrella
Antigua1220
Barbuda1510
Refer to Table 336. What is Antigua’s opportunity cost of one umbrella?
a. 3/5 towels
b. 2/3 towels
c. 3/2 towels
d. 5/3 towels
When a supply curve is relatively flat,
a. sellers are not very responsive to changes in price.
b. supply is relatively inelastic.
c. supply is relatively elastic.
d. Both a and b are correct.
A nonbinding price floor
(i)causes a surplus.
(ii)causes a shortage.
(iii)is set at a price above the equilibrium price.
(iv)is set at a price below the equilibrium price.
a. (iii) only
b. (iv) only
c. (i) and (iii) only
d. (ii) and (iv) only
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for fences of a decrease in the price of wood?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
A tax on a good
a. raises the price that buyers effectively pay and raises the price that sellers effectively
receive.
b. raises the price that buyers effectively pay and lowers the price that sellers effectively
receive.
c. lowers the price that buyers effectively pay and raises the price that sellers effectively
receive.
d. lowers the price that buyers effectively pay and lowers the price that sellers
effectively receive.
An assumption an economist might make while studying international trade is
a. there are only two countries.
b. countries only produce two goods.
c. technology does not change.
d. All of the above are possible assumptions.
Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline
causes the quantity of gasoline demanded to
a. decrease and the quantity of gasoline supplied to decrease.
b. decrease and the quantity of gasoline supplied to increase.
c. increase and the quantity of gasoline supplied to decrease.
d. increase and the quantity of gasoline supplied to increase.
In which of the following circumstances would a buyer be indifferent about buying a
good?
a. The amount of consumer surplus the buyer would experience as a result of buying the
good is zero.
b. The price of the good is equal to the buyer’s willingness to pay for the good.
c. The price of the good is equal to the value the buyer places on the good.
d. All of the above are correct.
Table 324
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed to Make 1 Unit ofNumber of Units Produced in 40 Hours
CheeseBreadCheeseBread
England 144010
Spain 48105
Refer to Table 324. If England and Spain each spends all its time producing the good
in which it has a comparative advantage and the countries agree to trade 2 units of
bread for 6 units of cheese, then England will consume
a. 34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and
3 units of bread.
b. 34 units of cheese and 2 units of bread and Spain will consume 16 units of cheese
and 3 units of bread.
c. 34 units of cheese and 12 units of bread and Spain will consume 6 units of cheese and
3 units of bread.
d. 34 units of cheese and 12 units of bread and Spain will consume 16 units of cheese
and 3 units of bread.
When studying the effects of public policy changes, economists
a. always refrain from making assumptions.
b. sometimes make different assumptions about the short run and the long run.
c. consider only the direct effects of those policy changes and not the indirect effects.
d. consider only the shortrun effects of those policy changes and not the longrun effects.
Table 313
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Minutes Needed toNumber of Cellular Phones Programmed or Tested in a 40Hour
Week
Program 1 Cellular PhoneTest 1 Cellular PhoneCellular Phones ProgrammedCellular
Phones Tested
Juanita ? 2 160 1200
Shantala 10 4 240 600
Refer to Table 313. Which of the following points would be on Juanita’s production
possibilities frontier, based on a 40hour week?
a. (120 cellular phones programmed, 295 cellular phones tested)
b. (130 cellular phones programmed, 225 cellular phones tested)
c. (140 cellular phones programmed, 155 cellular phones tested)
d. Both (a) and (b) would be on Juanita’s production possibilities frontier.
Figure 81
Refer to Figure 81. Suppose the government imposes a tax of P’ P”’. The consumer
surplus before the tax is measured by the area
a. M.
b. L+M+Y.
c. J.
d. J+K+I.
When a country that imported a particular good abandons a freetrade policy and adopts
a notrade policy,
a. consumer surplus increases and total surplus increases in the market for that good.
b. consumer surplus increases and total surplus decreases in the market for that good.
c. consumer surplus decreases and total surplus increases in the market for that good.
d. consumer surplus decreases and total surplus decreases in the market for that good.
Which of the following is not a characteristic of a perfectly competitive market?
a. Sellers set the price of the product.
b. There are many sellers.
c. Buyers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.
Table 55
PriceTotal
Revenue
$5$70
$6$78
$7$84
$8$88
$9$90
$10$90
Refer to Table 55. As price rises from $5 to $6, the price elasticity of demand using the
midpoint method is approximately
a. 0.07.
b. 0.18.
c. 0.41.
d. 2.45.
Suppose the nation of Canada forbids international trade. In Canada, you can obtain a
hockey stick by trading 5 baseball bats. In other countries, you can obtain a hockey
stick by trading 8 baseball bats. These facts indicate that
a. if Canada were to allow trade, it would export hockey sticks.
b. Canada has an absolute advantage, relative to other countries, in producing hockey
sticks.
c. Canada has a comparative advantage, relative to other countries, in producing
baseball bats.
d. All of the above are correct.
Figure 81
Refer to Figure 81. Suppose the government imposes a tax of P’ P”’. The area measured
by I+J+K+L+M+Y represents
a. total surplus before the tax.
b. total surplus after the tax.
c. consumer surplus before the tax.
d. deadweight loss from the tax.
Which of the following statistics is usually regarded as the best single measure of a
society’s economic wellbeing?
a. the unemployment rate
b. the inflation rate
c. gross domestic product
d. the trade deficit
Figure 411
Refer to Figure 411. The movement from point A to point B on the graph is caused by
a. a decrease in the price of the good.
b. an increase in the price of the good.
c. an advance in production technology.
d. a decrease in input prices.
HTMLENTITY#8203HTMLENTITYA production possibilities frontier (PPF) is
characterized by increasing opportunity costs when
a. HTMLENTITY#8203HTMLENTITYthe PPF is a straight line
b. HTMLENTITY#8203HTMLENTITYthe PPF is bowed inward
c. HTMLENTITY#8203HTMLENTITYthe PPF is bowed outward
d. HTMLENTITY#8203HTMLENTITYincreasing opportunity costs do not occur with
PPF’s
Figure 29
Panel (a) Panel (b)
Refer to Figure 29, Panel (a) and Panel (b). A shift of the economy’s production
possibilities frontier from Panel (a) to Panel (b) could be caused by
a. unemployment.
b. an improvement in donut production technology.
c. an improvement in coffee production technology.
d. an improvement in both donut and coffee production technology.
Economists generally agree that the most important tax in the U.S. economy is the
a. investment tax.
b. sales tax.
c. property tax.
d. labor tax.
Figure 515
Refer to Figure 515. Using the midpoint method, what is the price elasticity of supply
between points D and G?
a. 1.89
b. 1.26
c. 0.53
d. 0.34
Moving downward and to the right along a linear demand curve, we know that total
revenue
a. first increases, then decreases.
b. first decreases, then increases.
c. always increases.
d. always decreases.
Figure 325
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 325. Colombia should specialize in the production of
a. coffee and import soybeans.
b. soybeans and import coffee.
c. both goods and import neither good.
d. neither good and import both goods.
Figure 316
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 316. Hosne’s opportunity cost of one wallet is
a. 4/5 purse and Merve’s opportunity cost of one wallet is 2/3 purse.
b. 4/5 purse and Merve’s opportunity cost of one wallet is 3/2 purses.
c. 5/4 purses and Merve’s opportunity cost of one wallet is 2/3 purse.
d. 5/4 purses and Merve’s opportunity cost of one wallet is 3/2 purses.
Figure 64
Refer to Figure 64. A governmentimposed price of $6 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.
The inner loop of the circularflow diagram represents the flows of inputs and outputs.
Which of the following does not appear on the inner loop?
a. wages
b. land
c. capital
d. goods and services sold
If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied
would
a. increase by 4%.
b. increase by 6.25%.
c. decrease by 4%.
d. decrease by 6.25%.
Table 77
BuyerWillingness to Pay
Michael$500
Earvin$400
Larry$350
Charles$300
Refer to Table 77. You have an extra ticket 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 ticket. Who makes the winning bid, and what does he offer to pay for the ticket?
a. Michael; $501
b. Michael; more than $400 but less than or equal to $500
c. Earvin; $400
d. Earvin; more than $350 but less than or equal to $400
An increase in the price of a good will
a. increase demand.
b. decrease demand.
c. increase quantity demanded.
d. decrease quantity demanded.