When a tax is levied on the sellers of a good, the
a. supply curve shifts upward by the amount of the tax.
b. quantity demanded decreases for all conceivable prices of the good.
c. quantity supplied increases for all conceivable prices of the good.
d. None of the above is correct.
Table 73
The only four consumers in a market have the following willingness to pay for a good:
BuyerWillingness to Pay
Carlos$15
Quilana$25
Wilbur$35
Mingla$45
Refer to Table 73. Who experiences the largest loss of consumer surplus when the
price of the good increases from $20 to $22?
a. Quilana
b. Wilbur
c. Mingla
d. All three buyers experience the same loss of consumer surplus.
Table 62
PriceQuantity
DemandedQuantity
Supplied
$03750
$530050
$10225100
$15150150
$2075200
$250250
Refer to Table 62. A price ceiling set at $5 will
a. be binding and will result in a shortage of 50 units.
b. be binding and will result in a shortage of 250 units.
c. be binding and will result in a shortage of 300 units.
d. not be binding.
The market for soybeans in Canada consists solely of domestic buyers of soybeans and
domestic sellers of soybeans if
a. consumer surplus equals producer surplus in the Canadian soybean market.
b. total surplus exceeds consumer surplus in the Canadian soybean market.
c. Canada permits international trade in soybeans.
d. Canada forbids international trade in soybeans.
The country of Gerance produces two goods, cars and wine. Last year, it produced
1,000 cars and 15,000 cases of wine. This year, it produced 1,300 cars and 20,000 cases
of wine. Given no other information, which of the following events could not explain
this change?
a. Gerance experienced a reduction in unemployment.
b. Gerance experienced an improvement in carmaking technology.
c. Gerance acquired more resources.
d. Any of these events could explain the change.
How does total revenue change as one moves downward and to the right along a linear
demand curve?
a. It always increases.
b. It always decreases.
c. It first increases, then decreases.
d. It is unaffected by a movement along the demand curve.
Figure 92
The figure illustrates the market for calculators in a country.
Refer to Figure 92. As a result of trade, total surplus increases by
a. $50.
b. $100.
c. $250.
d. $500.
Which of the following is the most likely explanation for the imposition of a price
ceiling on the market for milk?
a. Policymakers have studied the effects of the price ceiling carefully, and they
recognize that the price ceiling is advantageous for society as a whole.
b. Buyers of milk, recognizing that the price ceiling is good for them, have pressured
policymakers into imposing the price ceiling.
c. Sellers of milk, recognizing that the price ceiling is good for them, have pressured
policymakers into imposing the price ceiling.
d. Buyers and sellers of milk have agreed that the price ceiling is good for both of them
and have therefore pressured policymakers into imposing the price ceiling.
Which of the following characteristics is required for a perfectly competitive market?
a. The goods offered for sale are exactly the same.
b. There are so many buyers and sellers that no single buyer or seller has any influence
over the market price.
c. It is difficult for new sellers to enter the market.
d. Both a and b are correct.
Figure 920
The figure illustrates the market for rice in Vietnam.
Refer to Figure 920. From the figure it is apparent that
a. Vietnam will experience a shortage of rice if trade is not allowed.
b. Vietnam will experience a surplus of rice if trade is not allowed.
c. Vietnam has a comparative advantage in producing rice, relative to the rest of the
world.
d. foreign countries have a comparative advantage in producing rice, relative to
Vietnam.
Figure 315
Perry’s Production Possibilities FrontierJordan’s Production Possibilities Frontier
Refer to Figure 315. The opportunity cost of 1 novel for Jordan is
a. 1/3 poem.
b. 3 poems.
c. 4 poems.
d. 12 poems.
Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup.
On a certain day, they sell 40 cups. Their producer surplus for that day amounts to
$19.20. Kristi & Rebecca sold each cup for
a. 31 cents.
b. 38 cents.
c. 45 cents.
d. 55 cents.
Figure 96
The figure illustrates the market for roses in a country.
Refer to Figure 96. The amount of deadweight loss caused by the tariff equals
a. $100.
b. $200.
c. $400.
d. $500.
Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. If Chile and Colombia switch from each country dividing its time
equally between the production of coffee and soybeans to each country spending all of
its time producing the good in which it has a comparative advantage, then total
production of soybeans will increase by
a. 3 pounds.
b. 6 pounds.
c. 9 pounds.
d. 12 pounds.
Figure 913
Refer to Figure 913. Consumer surplus after trade is
a. $3,600.
b. $5,400.
c. $7,200.
d. $8,100.
You go to the movieplex where movies ordinarily cost $9. You are intending to see a
movie for which you have a $3 off coupon good for only that movie at that time.
However, when you get there you see a friend who asks if you would rather see a new
release. Both movies start and end at the same time. If you decide to see the new release
with your friend, what is your opportunity cost?
a. the amount you value the first movie + $3
b. the amount you value the first movie + $9
c. $3
d. $9
Figure 921
The following diagram shows the domestic demand and domestic supply for a market.
In addition, assume that the world price in this market is $40 per unit.
Refer to Figure 921. Producer surplus with free trade is
a. $14,000.
b. $18,000.
c. $24,000.
d. $32,000.
Figure 427
Panel (a)Panel (b)
Panel (c)Panel (d)
Refer to Figure 427. Which of the four panels illustrates an increase in quantity
supplied?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
Table 71
BuyerWillingness To Pay
Calvin$150.00
Sam$135.00
Andrew$120.00
Lori$100.00
Refer to Table 71. If price of the product is $135, then the total consumer surplus is
a. $50.
b. $35.
c. $15.
d. $150.
Government policies resulting in reduced efficiency include
(i)the welfare system
(ii)unemployment insurance
(iii)progressive income tax
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)
Figure 823. The figure represents the relationship between the size of a tax and the tax
revenue raised by that tax.
Refer to Figure 823. If the economy is at point B on the curve, then a small decrease in
the tax rate will
a. increase the deadweight loss of the tax and increase tax revenue.
b. increase the deadweight loss of the tax and decrease tax revenue.
c. decrease the deadweight loss of the tax and increase tax revenue.
d. decrease the deadweight loss of the tax and decrease tax revenue.
Figure 87
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 87. Which of the following statements is correct?
a. Total surplus before the tax is imposed is $180.
b. After the tax is imposed, consumer surplus is 25 percent of its pretax value.
c. After the tax is imposed, producer surplus is 36 percent of its pretax value.
d. All of the above are correct.
Figure 98. On the diagram below, Q represents the quantity of cars and P represents the
price of cars.
Refer to Figure 98. When the country for which the figure is drawn allows
international trade in cars,
a. consumer surplus increases by the area B.
b. producer surplus decreases by the area B + D.
c. total surplus increases by the area D.
d. All of the above are correct.
Denmark is an importer of computer chips, taking the world price of $12 per chip as
given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes
is possible?
a. More Danishproduced chips are sold in Denmark.
b. More foreignproduced chips are sold in Denmark.
c. Danish consumers of chips become better off.
d. Total surplus in the Danish chip market increases.
Figure 46
Refer to Figure 46. Suppose that the federal government is concerned about obesity in
the United States. Congress is considering two plans. One would require “junk food”
producers to include warning labels on all junk food. The other would impose a tax on
all products considered to be junk food. We could illustrate the tax as producing a
movement from
a. Point A to Point B in Panel 1.
b. Point B to Point A in Panel 1.
c. Point A to Point C in Panel 2.
d. Point C to Point A in Panel 2.
The principle that “people face tradeoffs” applies to
a. individuals.
b. families.
c. societies.
d. All of the above are correct.
Figure 210
Panel (a) Panel (b)
Refer to Figure 210, 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 sofa production technology.
c. an improvement in tractor production technology.
d. an improvement in both sofa and tractor production technology.
When a supply curve is relatively flat, the
a. sellers are not at all responsive to a change in price.
b. equilibrium price changes substantially when the demand for the good changes.
c. supply is relatively elastic.
d. supply is relatively inelastic.
Figure 92
The figure illustrates the market for calculators in a country.
Refer to Figure 92. This country
a. has a comparative advantage in calculators.
b. should export calculators.
c. is a price taker in the world economy.
d. All of the above are correct.
A survey of professional economists revealed that more than threefourths of them
agreed with fourteen economic propositions. Which of the following is not one of those
propositions?
a. A ceiling on rents reduces the quantity and quality of housing available.
b. Fiscal policy has a significant stimulative impact on a less than fully employed
economy.
c. The gap between Social Security funds and expenditures will become unsustainably
large within the next fifty years if current policies remain unchanged.
d. The United States should implement universal health care for its citizens.
Figure 810
Refer to Figure 810. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. With the tax, the producer surplus is
a. (P50) x Q5.
b. 1/2 x (P50) x Q5.
c. (P80) x Q2.
d. 1/2 x (P80) x Q2.
