Table 25
Corn (in bushels)Wheat (in bushels)
20000
1600700
12001300
8001800
4002200
02500
Refer to Table 25. Table 25 shows one set of production possibilities. Which of the
following combinations of corn and wheat is not currently attainable but would be
attainable if there was an improvement in overall production technology?
a. 1600 bushels of corn and 300 bushels of wheat
b. 1400 bushels of corn and 800 bushels of wheat
c. 1000 bushels of corn and 2000 bushels of wheat
d. 600 bushels of corn and 1800 bushels of wheat
In the circularflow diagram, in the markets for
a. goods and services, households and firms are both sellers.
b. goods and services, households are sellers and firms are buyers.
c. the factors of production, households are sellers and firms are buyers.
d. the factors of production, households and firms are both buyers.
If a country is an exporter of a good, then it must be the case that
a. the world price is less than its domestic price.
b. consumer surplus is higher than a no trade situation.
c. the world price is greater than its domestic price.
d. they used an infantindustry argument to protect its producers.
Figure 422
Refer to Figure 422. At a price of $8, there is a
a. surplus of 4 units.
b. surplus of 8 units.
c. shortage of 4 units.
d. shortage of 8 units.
Figure 35
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 35. If Hosne must work 0.5 hour to make each purse, then her
production possibilities frontier is based on how many hours of work?
a. 2 hours
b. 5 hours
c. 20 hours
d. 50 hours
One economist has argued that rent control is “the best way to destroy a city, other than
bombing.” Why would an economist say this?
a. He fears that low rents will cause lowincome people to move into the city, reducing
the quality of life for other people.
b. He fears that rent control will benefit landlords at the expense of tenants, increasing
inequality in the city.
c. He fears that rent controls will cause a construction boom, which will make the city
crowded and more polluted.
d. He fears that rent control will eliminate the incentive to maintain buildings, leading
to a deterioration of the city.
Figure 55
Refer to Figure 55. Using the midpoint method, between prices of $20 and $30, price
elasticity of demand is about
a. 0.33.
b. 0.4.
c. 1.33.
d. 3.
If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3
music files, then the price received by sellers of MP3 music files would
a. decrease by more than $0.25.
b. decrease by exactly $0.25.
c. decrease by less than $0.25.
d. increase by an indeterminate amount.
Under rent control, tenants can expect
a. lower rent and higher quality housing.
b. lower rent and lower quality housing.
c. higher rent and a shortage of rental housing.
d. higher rent and a surplus of rental housing.
The University of Iowa was voted the #1 “party school” in 2013. The University of
Iowa is located in Iowa City. At the end of August each year, the market demand for
beer in Iowa City
a. decreases.
b. increases.
c. remains constant, but we observe a movement downward and to the right along the
demand curve.
d. remains constant, but we observe a movement upward and to the left along the
demand curve.
A tax accounting firm produces 500 tax returns units when the market price is $150 per
return and produces 700 tax returns when the market price is $170 per tax return. Using
the midpoint method, for this range of prices, the price elasticity of supply is about
a. 2.67.
b. 0.67.
c. 0.4.
d. 0.125.
Figure 712
Refer to Figure 712. If the equilibrium price rises from $200 to $350, what is the
additional producer surplus to initial producers?
a. $15,000
b. $3,750
c. $7,500
d. $30,000
Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her
purchase if her willingness to pay is
a. $15.
b. $90.
c. $105.
d. $75.
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for bulletproof vests of an increase in the price of Kevlar?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Heath’s income elasticity of demand for concerts is 2. All else equal, this means that if
his income increases by 10 percent, he will purchase tickets for
a. 2 percent more concerts.
b. 5 percent more concerts.
c. 10 percent more concerts.
d. 20 percent more concerts.
Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million
bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles.
Which of the following statements is true?
a. The demand for ginger ale is income inelastic, so an increase in the price of ginger
ale will increase the total revenue of ginger ale producers.
b. The demand for ginger ale is income elastic, so an increase in the price of ginger ale
will increase the total revenue of ginger ale producers.
c. The demand for ginger ale is price inelastic, so an increase in the price of ginger ale
will increase the total revenue of ginger ale producers.
d. The demand for ginger ale is price elastic, so an increase in the price of ginger ale
will decrease the total revenue of ginger ale producers.
The particular price that results in quantity supplied being equal to quantity demanded
is the best price because it
a. maximizes costs of the seller.
b. maximizes tax revenue for the government.
c. maximizes the combined welfare of buyers and sellers.
d. minimizes the expenditure of buyers.
A normative economic statement such as “The minimum wage should be abolished”
a. would likely be made by an economist acting as a scientist.
b. would require values and data to be evaluated.
c. would require data but not values to be evaluated.
d. could not be evaluated by economists acting as policy advisers.
Figure 34
Lisa’s Production Possibilities FrontierBryce’s Production Possibilities Frontier
Refer to Figure 34. If Lisa and Bryce each divides his or her time equally between
producing jackets and producing sweaters, then total production is
a. 2 sweaters and 8 jackets.
b. 3 sweaters and 13 jackets.
c. 5 sweaters and 8 jackets.
d. 6 sweaters and 26 jackets.
Figure 320
Canada’s Production Possibilities FrontierMexico’s Production Possibilities
Frontier
Refer to Figure 320. Canada has a comparative advantage in the production of
a. Good X and Mexico has a comparative advantage in the production of Good Y.
b. Good Y and Mexico has a comparative advantage in the production of Good X.
c. both goods and Mexico has a comparative advantage in the production of neither
good.
d. neither good and Mexico has a comparative advantage in the production of both
goods.
Figure 32
Brazil’s Production Possibilities Frontier
Refer to Figure 32. If the production possibilities frontier shown is for 24 hours of
production, then how long does it take Brazil to make one peanut?
a. 1/10 hour
b. 1/3 hour
c. 3 hours
d. 10 hours
The production possibilities frontier illustrates
a. the combinations of output that an economy should produce.
b. the combinations of output that an economy should consume.
c. the combinations of output that an economy can produce.
d. All of the above are correct.
The essence of science is
a. the laboratory experiment.
b. the scientific method.
c. the study of nature, but not the study of society.
d. All of the above are correct.
If consumers view cappuccinos and latts as substitutes, what would happen to the
equilibrium price and quantity of latts if the price of cappuccinos rises?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
HTMLENTITY#8203HTMLENTITYRent controls can cause
a. HTMLENTITY#8203HTMLENTITYa decline in the quality of housing available for
rent.
b. HTMLENTITY#8203HTMLENTITYthe development of a black market to allocate
apartments to renters.
c. HTMLENTITY#8203HTMLENTITYlonger search times for renters attempting to
locate an apartment.
d. HTMLENTITY#8203HTMLENTITYall of these are possible results of rent controls.
Figure 41
Refer to Figure 41. It is apparent from the figure that the
a. good is inferior.
b. demand for the good decreases as income increases.
c. demand for the good conforms to the law of demand.
d. All of the above are correct.
The deadweight loss from a $3 tax will be largest in a market with
a. inelastic supply and elastic demand.
b. inelastic supply and inelastic demand.
c. elastic supply and elastic demand.
d. elastic supply and inelastic demand.
Scenario 92
• For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
where represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
• For Boxland, the equation of the domestic supply curve for cardboard is
,
where represents the domestic quantity of cardboard supplied, in tons, and again
represents the price of a ton of cardboard.
Refer to Scenario 92. Suppose the world price of cardboard is $60. Then, relative to
the notrade situation, international trade in cardboard
a. benefits Boxlandian consumers by $750 and harms Boxlandian producers by $660.
b. harms Boxlandian consumers by $736 and harms Boxlandian producers by $598.
c. harms Boxlandian consumers by $704 and benefits Boxlandian producers by $864.
d. harms Boxlandian consumers by $804 and benefits Boxlandian producers by $984.
Figure 88
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 88. After the tax goes into effect, consumer surplus is the area
a. A.
b. B+C.
c. A+B+C.
d. A+B+D+J+K.
Figure 824. The figure represents the relationship between the size of a tax and the tax
revenue raised by that tax.
Refer to Figure 824. For an economy that is currently at point D on the curve, a
decrease in the tax rate would
a. decrease consumer surplus.
b. decrease producer surplus.
c. increase tax revenue.
d. increase the deadweight loss of the tax.