Table 36
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
ToothbrushHairbrush
Zimbabwe310
Portugal56
Refer to Table 36. Assume that Zimbabwe and Portugal each has 180 machine minutes
available. If each country divides its time equally between the production of
toothbrushes and hairbrushes, then total production is
a. 24 toothbrushes and 12 hairbrushes.
b. 48 toothbrushes and 24 hairbrushes.
c. 96 toothbrushes and 48 hairbrushes.
d. 720 toothbrushes and 1440 hairbrushes.
Figure 325
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 325. Chile 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 918. On the diagram below, Q represents the quantity of peaches and P
represents the price of peaches. The domestic country is Isoland.
Refer to Figure 918. If Isoland allows international trade and if the world price of
peaches is $3, then
a. Isoland has a comparative advantage, relative to other countries, in producing
peaches.
b. Isoland will export peaches.
c. producer surplus with trade exceeds producer surplus without trade.
d. consumer surplus with trade exceeds consumer surplus without trade.
The slope of a fairly flat upwardsloping line will be a
a. small positive number.
b. large positive number.
c. small negative number.
d. large negative number.
A tariff on a product makes
a. domestic sellers better off and domestic buyers worse off.
b. domestic sellers worse off and domestic buyers worse off.
c. domestic sellers better off and domestic buyers better off.
d. domestic sellers worse off and domestic buyers better off.
When a country that imports a particular good imposes a tariff on that good,
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.
One thing economists do to help them understand how the real world works is
a. make assumptions.
b. ignore the past.
c. try to capture every aspect of the real world in the models they construct.
d. All of the above are correct.
You and your college roommate eat three packages of Ramen noodles each week. After
graduation last month, both of you were hired at several times your college income. You
still enjoy Ramen noodles very much and buy even more, but your roommate plans to
buy fewer Ramen noodles in favor of foods she prefers more. When looking at income
elasticity of demand for Ramen noodles, yours would
a. be negative, and your roommate’s would be positive.
b. be positive, and your roommate’s would be negative.
c. be zero, and your roommate’s would approach infinity.
d. approach infinity, and your roommate’s would be zero.
Bill created a new software program he is willing to sell for $200. He sells his first copy
and enjoys a producer surplus of $150. What is the price paid for the software?
a. $50.
b. $150.
c. $200.
d. $350.
Table 331
Labor Hours Needed to Make 1 Pound of:
Amount Produced in 40 hours
Meat PotatoesMeatPotatoes
Farmer8 hours/pound5 hours/pound5 pounds8 pounds
Rancher4 hours/pound10 hours/pound10 pounds4 pounds
Refer to Table 331. Relative to the farmer, the rancher has an absolute advantage in the
production of
a. meat, but not in the production of potatoes.
b. potatoes, but not in the production of meat.
c. both meat and potatoes.
d. neither meat nor potatoes.
Figure 722
Refer to Figure 722. If 110 units of the good are bought and sold, then
a. the marginal cost to sellers is equal to the marginal value to buyers.
b. the marginal value to buyers is greater than the marginal cost to sellers.
c. the marginal cost to buyers is greater than marginal value to sellers.
d. producer surplus is greater than consumer surplus.
Which of the following is not an expression for the sum of all the individual demand
curves for a product?
a. total demand
b. market demand
c. equilibrium demand
d. aggregate demand
Germany could have avoided the high inflation that it experienced in the 1920s by
a. not directing so many of its resources toward preparation for World War II.
b. not increasing taxes so much on the German middle class.
c. not allowing the quantity of money to increase so rapidly.
d. using government policies to stimulate the economy more so than what was done.
Import quotas and tariffs produce some common results. Which of the following is not
one of those common results?
a. Total surplus in the domestic country falls.
b. Producer surplus in the domestic country increases.
c. The domestic country experiences a deadweight loss.
d. Revenue is raised for the domestic government.
When a country allows trade and becomes an exporter of a good, which of the
following is not a consequence?
a. The price paid by domestic consumers of the good increases.
b. The price received by domestic producers of the good increases.
c. The losses of domestic consumers of the good exceed the gains of domestic
producers of the good.
d. The gains of domestic producers of the good exceed the losses of domestic
consumers of the good.
Figure 922
The following diagram shows the domestic demand and domestic supply in a market. In
addition, assume that the world price in this market is $40 per unit.
Refer to Figure 922. Suppose the government imposes a tariff of $20 per unit. The
deadweight loss caused by the tariff is
a. $6,000.
b. $9,000.
c. $12,000.
d. $15,000.
If he devotes all of his available resources to cantaloupe production, a farmer can
produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he
produces, it follows that
a. if he devotes all of his available resources to watermelon production, then he can
produce 80 watermelons.
b. he cannot have a comparative advantage over other farmers in producing
cantaloupes.
c. his opportunity cost of one watermelon is 2/3 of a cantaloupe.
d. his production possibilities frontier is bowedout.
Figure 811
Refer to Figure 811. The price labeled as P3 on the vertical axis represents the price
a. received by sellers before the tax is imposed.
b. received by sellers after the tax is imposed.
c. paid by buyers before the tax is imposed.
d. paid by buyers after the tax is imposed.
Table 333
Chris and Tony’s Production Opportunities
TomatoesPasta Sauce
Chris10 lbs300 jars
Tony14 lbs280 jars
Refer to Table 333 Chris and Tony both produce tomatoes and pasta sauce. The table
shows their possible production per month if both work the same number of 8 hour
days. If Chris and Tony both decide to specialize and produce only the good in which
they have a comparative advantage, then
a. Chris will produce only sauce and Tony will produce only tomatoes.
b. Chris will produce only tomatoes and Tony will produce only sauce.
c. Both Chris and Tony will produce only sauce.
d. Both Chris and Tony will produce only tomatoes.
According to many economists, government restrictions on ticket scalping do all of the
following except
a. inconvenience the public.
b. reduce the audience for cultural and sports events.
c. waste police officers’ time.
d. keep the cost of tickets to all consumers low.
Which of the following is likely to have the most price elastic demand?
a. dental floss
b. milk
c. salt
d. diamond earrings
Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from
drinking the third soda
a. can be thought of as the total benefit Bridget enjoys by drinking three sodas minus
the total benefit she would have enjoyed by drinking just two sodas.
b. determines Bridget’s willingness to pay for the third soda.
c. is likely different from the marginal benefit provided to Bridget by the second soda.
d. All of the above are correct.
Suppose that an increase in the price of melons from $1.30 to $1.80 per pound increases
the quantity of melons that melon farmers produce from 1.2 million pounds to 1.6
million pounds. Using the midpoint method, what is the approximate value of the price
elasticity of supply?
a. 0.67
b. 0.89
c. 1.00
d. 1.13
Figure 510
Refer to Figure 510. If rectangle D is larger than rectangle A, then
a. demand is elastic between prices P1 and P2.
b. a decrease in price from P2 to P1 will cause an increase in total revenue.
c. the magnitude of the percent change in price between P1 and P2 is smaller than the
magnitude of the corresponding percent change in quantity demanded.
d. All of the above are correct.
For two individuals who engage in the same two productive activities, it is impossible
for one of the two individuals to
a. have a comparative advantage in both activities.
b. have an absolute advantage in both activities.
c. be more productive per unit of time in both activities.
d. gain from trade with each other.
When a single person (or small group) has the ability to influence market prices, there
is
a. competition.
b. market power.
c. an externality.
d. a lack of property rights.
The French expression used by freemarket advocates, which literally translates as
“allow them to do,” is
a. laissezfaire.
b. je ne sais pas.
c. si’l vous plait.
d. ttette.
You lose your job and, as a result, you buy fewer iTunes music downloads. This shows
that you consider iTunes music downloads to be a(n)
a. luxury good.
b. inferior good.
c. normal good.
d. complementary good.
Table 331
Labor Hours Needed to Make 1 Pound of:
Amount Produced in 40 hours
Meat PotatoesMeatPotatoes
Farmer8 hours/pound5 hours/pound5 pounds8 pounds
Rancher4 hours/pound10 hours/pound10 pounds4 pounds
Refer to Table 331. For the farmer, the opportunity cost of 1 pound of meat is
a. 0.625 pound of potatoes.
b. 1.6 pounds of potatoes.
c. 5 pounds of potatoes.
d. 8 pounds of potatoes.
If the price elasticity of supply is 0.4, and a price increase led to a 5% increase in
quantity supplied, then the price increase is about
a. 0.25%.
b. 1.2%.
c. 2%.
d. 12.5%.
Tom walks Bethany’s dog once a day for $50 per week. Bethany values this service at
$60 per week, while the opportunity cost of Tom’s time is $30 per week. The
government places a tax of $35 per week on dog walkers. Before the tax, what is the
total surplus?
a. $60
b. $50
c. $30
d. $25
Figure 320
Canada’s Production Possibilities FrontierMexico’s Production Possibilities
Frontier
Refer to Figure 320. Canada would incur an opportunity cost of 6 units of Good X if it
increased its production of Good Y by
a. 3 units.
b. 6 units.
c. 9 units.
d. 12 units.
A tax levied on the buyers of a good shifts the
a. supply curve upward (or to the left).
b. supply curve downward (or to the right).
c. demand curve downward (or to the left).
d. demand curve upward (or to the right).
Which of the following would not result from all countries specializing according to the
principle of comparative advantage?
a. The size of the economic pie would increase.
b. Worldwide production of goods and services would increase.
c. The wellbeing of citizens in each country would be enhanced.
d. Each country’s production possibilities frontier would shift inward.
In which of the following decades was there both high inflation and rapid money supply
growth in the US?
a. the 1970’s and the 1990’s
b. the 1970’s but not the 1990’s
c. the 1990’s but not the 1970’s
d. neither the 1970’s nor the 1990’s