A key determinant of the price elasticity of supply is the
a. time horizon.
b. income of consumers.
c. price elasticity of demand.
d. importance of the good in a consumer’s budget.
Suppose the income of buyers in a market for an inferior good decreases and a
technological advancement occurs also. What would we expect to happen in the
market?
a. Equilibrium price would decrease, but the impact on equilibrium quantity would be
ambiguous.
b. Equilibrium quantity would increase, but the impact on equilibrium price would be
ambiguous.
c. Equilibrium quantity would decrease, but the impact on equilibrium price would be
ambiguous.
d. None of the above is correct.
Which of the following events would cause the price of oranges to fall?
a. There is a shortage of oranges.
b. The FDA announces that bananas cause strokes, and oranges and bananas are
substitutes.
c. The price of land throughout Florida decreases, and Florida produces a significant
proportion of the nation’s oranges.
d. All of the above are correct.
Which of the following is correct?
a. Workers determine the supply of labor, and firms determine the demand for labor.
b. Workers determine the demand for labor, and firms determine the supply of labor.
c. The labor market is a single market for all different types of workers.
d. The price of the product produced by labor adjusts to balance the supply of labor and
the demand for labor.
Any point on a country’s production possibilities frontier represents a combination of
two goods that an economy
a. will never be able to produce.
b. can produce using all available resources and technology.
c. can produce using some portion, but not all, of its resources and technology.
d. may be able to produce in the future with more resources and/or superior technology.
Which of the following events would cause both the equilibrium price and equilibrium
quantity of number two grade potatoes to increase if number two grade potatoes are an
inferior good?
a. an increase in consumer income
b. a decrease in consumer income
c. greater government restrictions on agricultural chemicals
d. fewer government restrictions on agricultural chemicals
Figure 62
Refer to Figure 62. The price ceiling
a. causes a shortage of 40 units.
b. is not binding, because it is set above the equilibrium price.
c. causes a shortage of 45 units.
d. causes a shortage of 85 units.
Figure 924
The following diagram shows the domestic demand and supply in a market. Assume
that the world price in this market is $20 per unit.
Refer to Figure 924. Suppose the government imposes a tariff of $10 per unit. The
deadweight loss caused by the tariff is
a. $25.
b. $50.
c. $75.
d. $100.
Table 64
The following table contains the demand schedule and supply schedule for a market for
a particular good. Suppose sellers of the good successfully lobby Congress to impose a
price floor $3 above the equilibrium price in this market.
PriceQuantity
DemandedQuantity
Supplied
$0150
$1133
$2116
$399
$4712
$5515
$6318
Refer to Table 64. How many units of the good are sold after the imposition of the
price floor?
a. 3
b. 9
c. 15
d. 18
A production possibilities frontier is bowed outward when
a. the more resources the economy uses to produce one good, the fewer resources it has
available to produce the other good.
b. an economy is selfsufficient instead of interdependent and engaged in trade.
c. the rate of tradeoff between the two goods being produced is constant.
d. the rate of tradeoff between the two goods being produced depends on how much of
each good is being produced.
Druginterdiction policies that reduce the supply of illegal drugs
a. are likely to be more effective in the short run than in the long run.
b. are proven to reduce illegal drug use faster than drugeducation programs designed to
reduce demand.
c. may increase drugrelated crimes.
d. All of the above are correct.
A demand curve displaying the relationship between the price of cars and the quantity
demanded of cars should have a slope that is
a. less than 0.
b. between zero and 1.
c. between one and infinity.
d. undefined.
If Switzerland chooses to engage in trade, it
a. will only benefit if it trades with countries that produce goods Switzerland cannot
produce.
b. cannot benefit if it trades with less developed countries.
c. should first attempt to produce the good itself.
d. can benefit by trading with any other country.
Figure 216
Refer to Figure 216. Taking cause and effect into account, which of the following
interpretations would be most reasonable regarding the relationship between coffee and
hours without sleep?
a. The less coffee a person drinks per day, the more time he can go without sleep.
b. There is no relationship between how much coffee per day a person drinks and how
long he can go without sleep.
c. The more coffee a person drinks per day, the more time he can go without sleep.
d. The more coffee a person drinks per day, the less time he can go without sleep.
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. The loss of producer surplus for those sellers of the good who
continue to sell it after the tax is imposed is
a. $0.
b. $1.
c. $2.
d. $3.
Consumer surplus is a good measure of economic welfare if policymakers want to
a. maximize total benefit.
b. minimize deadweight loss.
c. respect the preferences of sellers.
d. respect the preferences of buyers.
In a particular country in 1999, the average worker had to work 20 hours to produce 55
units of output. In that same country in 2009, the average worker needed to work 28
hours to produce 77 units of output. In that country, the productivity of the average
worker
a. increased by 2 percent between 1999 and 2009.
b. increased by 5 percent between 1999 and 2009.
c. remained unchanged between 1999 and 2009.
d. decreased by 3 percent between 1999 and 2009.
Suppose good X has a negative income elasticity of demand. This implies that good X
is
a. a normal good.
b. a necessity.
c. an inferior good.
d. a luxury.
Table 335
Labor Hours Needed
to Produce
1 Dozen Eggs1 Pound Ham
Denmark108
Finland64
Refer to Table 335. Denmark’s opportunity cost of producing 1dozen eggs is
a. 5/4 pounds of ham. This is higher than Finland’s opportunity cost of producing
1dozen eggs.
b. 5/4 pounds of ham. This is lower than Finland’s opportunity cost of producing 1
dozen eggs.
c. 4/5 pounds of ham. This is higher than Finland’s opportunity cost of producing 1
dozen eggs.
d. 4/5 pounds of ham. This is lower than Finland’s opportunity cost of producing 1
dozen eggs.
If a binding price ceiling is imposed on the baby formula market, then
a. the quantity of baby formula demanded will increase.
b. the quantity of baby formula supplied will decrease.
c. a shortage of baby formula will develop.
d. All of the above are correct.
Figure 912
Refer to Figure 912. Consumer surplus after trade is
a. $6,400.
b. $9,600.
c. $12,800.
d. $14,400.
If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on
sellers of cigars, then the price paid by buyers will
a. not change, and the price received by sellers will not change.
b. not change, and the price received by sellers will decrease.
c. decrease, and the price received by sellers will not change.
d. decrease, and the price received by sellers will decrease.
Market economies are distinguished from other types of economies largely on the basis
of
a. the political affiliations of government officials.
b. the process by which government officials are elected or appointed.
c. the ways in which scarce resources are allocated.
d. the number of retail outlets available to consumers.
Figure 321
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 321. Azerbaijan’s opportunity cost of one bolt is
a. 1/4 nail and Uzbekistan’s opportunity cost of one bolt is 1/2 nail.
b. 1/4 nail and Uzbekistan’s opportunity cost of one bolt is 2 nails.
c. 4 nails and Uzbekistan’s opportunity cost of one bolt is 1/2 nail.
d. 4 nails and Uzbekistan’s opportunity cost of one bolt is 2 nails.
Figure 515
Refer to Figure 515. Using the midpoint method, what is the price elasticity of supply
between points A and B?
a. 2.33
b. 1.0
c. 0.43
d. 0.1
Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for
the last tomato you bought this week, you paid a price exactly equal to your willingness
to pay. Then
a. you should buy more tomatoes before the end of the week.
b. you already have bought too many tomatoes this week.
c. your consumer surplus on the last tomato you bought is zero.
d. your consumer surplus on all of the tomatoes you have bought this week is zero.
Using the midpoint method, the price elasticity of demand for a good is computed to be
approximately 0.75. Which of the following events is consistent with a 10 percent
decrease in the quantity of the good demanded?
a. a 7.5 increase in the price of the good
b. a 13.33 percent increase in the price of the good
c. an increase in the price of the good from $7.50 to $10
d. an increase in the price of the good from $10 to $17.50
Figure 66
Refer to Figure 66. In which of the following cases would sellers have to develop a
rationing mechanism?
a. a price ceiling set at $8
b. a price ceiling set at $6
c. a price floor set at $8
d. a price floor set at $6
If a 40% change in price results in a 25% change in quantity supplied, then the price
elasticity of supply is about
a. 0.63, and supply is elastic.
b. 0.63, and supply is inelastic.
c. 1.60, and supply is elastic.
d. 1.60, and supply is inelastic.
Table 65
PriceQuantity
DemandedQuantity
Supplied
$01500
$312045
$69090
$960135
$1230180
$150225
Refer to Table 65. Which of the following price ceilings would be binding in this
market?
a. $3
b. $6
c. $9
d. None of the above price ceilings would be binding.
Figure 315
Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier
Refer to Figure 315. Perry has an absolute advantage in the production of
a. novels and Jordan has an absolute advantage in the production of poems.
b. poems and Jordan has an absolute advantage in the production of novels.
c. novels and Jordan has an absolute advantage in the production of neither good.
d. neither good and Jordan has an absolute advantage in the production of novels.