Figure 427
Panel (a)Panel (b)
Panel (c)Panel (d)
Refer to Figure 427. Panel (d) shows which of the following?
a. a decrease in demand and a decrease in quantity supplied
b. a decrease in demand and a decrease in supply
c. a decrease in quantity demanded and a decrease in quantity supplied
d. a decrease in quantity demanded and a decrease in supply
Which of the following statements is correct?
a. Buyers always want to pay less and sellers always want to be paid more.
b. Buyers always want to pay less and sellers always want to be paid less.
c. Buyers always want to pay more and sellers always want to be paid more.
d. Buyers always want to pay more and sellers always want to be paid less.
Figure 93. The domestic country is China.
Refer to Figure 93. The increase in total surplus in China when trade is allowed is
a. $400.
b. $500.
c. $600.
d. $750.
Figure 217
Refer to Figure 217. The movement from point B to point C could have been caused
by
a. inflation.
b. a change in income.
c. a change in the price of grapes.
d. a change in the cost of producing grapes.
When a tax is placed on the buyers of a product, a result is that buyers effectively pay
a. less than before the tax, and sellers effectively receive less than before the tax.
b. less than before the tax, and sellers effectively receive more than before the tax.
c. more than before the tax, and sellers effectively receive less than before the tax.
d. more than before the tax, and sellers effectively receive more than before the tax.
Table 335
Labor Hours Needed
to Produce
1 Dozen Eggs1 Pound Ham
Denmark108
Finland64
Refer to Table 335. At which of the following prices, if any, could both Denmark and
Finland gain from trade?
a. 2/3 pounds of ham per dozen eggs.
b. 1 pound of ham per dozen eggs.
c. 1.4 pounds of ham per dozen eggs.
d. None of the above are correct.
The decisions of firms and households are guided by prices and selfinterest in a
a. command economy.
b. centrallyplanned economy.
c. market economy.
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. England has a comparative advantage in the production of
a. cheese and Spain has a comparative advantage in the production of bread.
b. bread and Spain has a comparative advantage in the production of cheese.
c. both goods and Spain has a comparative advantage in the production of neither good.
d. neither good and Spain has a comparative advantage in the production of both goods.
An increase in supply is represented by a
a. movement downward and to the left along a supply curve.
b. movement upward and to the right along a supply curve.
c. rightward shift of a supply curve.
d. leftward shift of a supply curve.
The price received by sellers in a market will decrease if the government
a. increases a binding price floor in that market.
b. increases a binding price ceiling in that market.
c. decreases a tax on the good sold in that market.
d. None of the above is correct.
Table 57
The following table shows a portion of the demand schedule for a particular good at
various levels of income.
PriceQuantity Demanded
(Income = $5,000)Quantity Demanded
(Income = $7,500)Quantity Demanded
(Income = $10,000)
$24234
$20468
$166912
$1281216
$8101520
$4121824
Refer to Table 57. Using the midpoint method, at a price of $16, what is the income
elasticity of demand when income rises from $5,000 to $10,000?
a. 0.00
b. 0.50
c. 1.00
d. 1.50
Table 71
BuyerWillingness To Pay
Calvin$150.00
Sam$135.00
Andrew$120.00
Lori$100.00
Refer to Table 71. If the price of the product is $122, then the total consumer surplus is
a. $28.
b. $41.
c. $43.
d. $405.
Skip’s Sealcoating Service increased its total monthly revenue from $12,000 to $13,500
when it raised the price of driveway repairs from $600 to $750. The price elasticity of
demand for Skip’s Sealcoating Service is
a. 0.11.
b. 0.47.
c. 1.12.
d. 2.11.
Figure 82
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 82. Total surplus without the tax is
a. $10, and total surplus with the tax is $2.50.
b. $10, and total surplus with the tax is $7.50.
c. $20, and total surplus with the tax is $2.50.
d. $20, and total surplus with the tax is $7.50.
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. Regarding Harry and Darby, for whom are sandwiches a normal
good?
a. only for Harry
b. only for Darby
c. for both Harry and Darby
d. This cannot be determined from the given information.
Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A
government policy aimed at reducing smoking changed the price of a pack of cigarettes
from $2 to $6. According to the midpoint method, the government policy should have
reduced smoking by
a. 30%.
b. 40%.
c. 80%.
d. 250%.
On a bowed production possibilities frontier, as you move down along the curve
a. more of one good must be given up to receive one unit of the other good.
b. the available production technology does not change.
c. the opportunity cost increases.
d. All of the above are correct.
Figure 25
Refer to Figure 25. The opportunity cost of this economy moving from point A to point
B is
a. 20 dryers.
b. 20 washers.
c. 20 dryers and 20 washers.
d. 60 dryers.
Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he
wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the
first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can.
Assume Abraham is rational in deciding how many cans to buy. His consumer surplus
is
a. $0.50.
b. $0.60.
c. $0.70.
d. $1.00.
Figure 99
Refer to Figure 99. Producer surplus in this market before trade is
a. A.
b. A + B.
c. B + C + D.
d. C.
Figure 216
Refer to Figure 216. The opportunity cost of obtaining approximately 20 additional
gadgets by moving from point B to point C is
a. 0 widgets.
b. 10 widgets.
c. 20 widgets.
d. none of the above; the economy cannot move from point B to point C.
Which of the following statements is true for markets in which the demand curve slopes
downward and the supply curve slopes upward?
a. As the size of the tax increases, tax revenue continually rises and deadweight loss
continually falls.
b. As the size of the tax increases, tax revenue and deadweight loss rise initially, but
both eventually begin to fall.
c. As the size of the tax increases, tax revenue rises initially, but it eventually begins to
fall; deadweight loss continually rises.
d. As the size of the tax increases, tax revenue rises initially, but it eventually begins to
fall; deadweight loss falls initially, but eventually it begins to rise.
Figure 28
Refer to Figure 28. Point K represents an outcome in which
a. production is inefficient.
b. some of the economy’s resources are unemployed.
c. the economy is using all of its resources to produce hammers.
d. the economy is using all of its nails to produce hammers.
Which of the following transactions does not take place in the markets for factors of
production in the circularflow diagram?
a. a landowner leases land to a farmer
b. a farmer hires a teenager to help with harvest
c. a construction company rents trucks for its business
d. a woman buys corn for dinner
If a good is inferior, then an increase in income will result in a(n)
a. increase in the demand for the good.
b. decrease in the demand for the good.
c. movement down and to the right along the demand curve for the good.
d. movement up and to the left along the demand curve for the good.
Figure 29
Panel (a) Panel (b)
Refer to Figure 29, Panel (a) and Panel (b). Which of the following is not a result of
the shift of the economy’s production possibilities frontier from Panel (a) to Panel (b)?
a. the tradeoff between the production of donuts and coffee changes
b. the opportunity cost of a cup of coffee is higher at all levels of coffee production
c. production of 4 donuts and 2 cups of coffee becomes possible
d. production of 1 donut and 4 cups of coffee becomes efficient
Table 320
Assume that Brad and Theresa can switch between producing wheat and producing beef
at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Brad1012
Theresa610
Refer to Table 320. What is Theresa’s opportunity cost of producing one pound of
beef?
a. 5/6 bushel of wheat
b. 6/5 bushel of wheat
c. 3/5 bushel of wheat
d. 5/3 bushels of wheat
Figure 48
Refer to Figure 48. Suppose the figure shows the market demand for laptop computers.
Suppose the price of wireless printers, a complementary good, decreases. Which of the
following changes would occur?
a. a movement along D2 from point A to point B
b. a movement along D2 from point B to point A
c. a shift from D1 to D2
d. a shift from D2 to D1
Suppose the price of apples decreases from $1.00 to $0.80 each and, as a result, the
quantity of apples demanded increases from 800 to 1,000. Using the midpoint method,
the price elasticity of demand for apples in the given price range is
a. 0.22.
b. 0.5.
c. 1.0.
d. 4.5.
If a 15% change in price results in a 20% change in quantity supplied, then the price
elasticity of supply is about
a. 1.33, and supply is elastic.
b. 1.33, and supply is inelastic.
c. 0.75, and supply is elastic.
d. 0.75, and supply is inelastic.
Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in
the long run. If an increase in the demand for soccer balls causes the price of soccer
balls to increase by 20%, then the quantity supplied of soccer balls will increase by
about
a. 0.67% in the short run and 0.17% in the long run.
b. 3% in the short run and 1.2% in the long run.
c. 6% in the short run and 24% in the long run.
d. 66.7% in the short run and 16.7% in the long run.
If the price a consumer pays for a product is equal to a consumer’s willingness to pay,
then the consumer surplus relevant to that purchase is
a. zero.
b. negative, and the consumer would not purchase the product.
c. positive, and the consumer would purchase the product.
d. There is not enough information given to answer this question.
When the demand for a good increases and the supply of the good remains unchanged,
consumer surplus
a. decreases.
b. is unchanged.
c. increases.
d. may increase, decrease, or remain unchanged.