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In the circularflow diagram, which of the following items flows from firms to
households through the markets for the factors of production?
a. goods and services
b. land, labor, and capital
c. dollars spent on goods and services
d. wages, rent, and profit
A decrease in the price of a good will
a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.
Jamaica has a comparative advantage in the production of aluminum, but currently
allows no international trade in aluminum. We can conclude that
a. the domestic price of aluminum in Jamaica is higher than the world price for
aluminum.
b. Jamaica has an absolute advantage in the production of aluminum.
c. Jamaica should import aluminum.
d. the domestic price of aluminum in Jamaica is lower than the world price for
aluminum.
When two variables move in the same direction, the curve relating them is
a. upward sloping, and we say the variables are positively related.
b. upward sloping, and we say the variables are negatively related.
c. downward sloping, and we say the variables are positively related.
d. downward sloping, and we say the variables are negatively related.
The benefit to buyers of participating in a market is measured by
a. consumer surplus.
b. producer surplus.
c. total surplus.
d. deadweight loss.
Table 47
PriceDairy
Barn’s
Gallons
SuppliedDolly’s Dairy’s
Gallons
SuppliedFour Queen’s
Gallons
SuppliedMoo
Roo’s
Gallons
Supplied
$00000
$23421
$46842
$691263
$8121684
$101520105
Refer to Table 47. If these are the only four sellers in the market for ice cream, then
when the price decreases from $10 to $8, the market quantity supplied decreases by
a. 2.5 gallons.
b. 4 gallons.
c. 10 gallons.
d. 50 gallons.
Suppose buyers of coffee and sugar regard the two goods as complements. Then an
increase in the price of coffee will cause a(n)
a. decrease in the demand for sugar and a decrease in the quantity supplied of sugar.
b. decrease in the supply of sugar and a decrease in the quantity demanded of sugar.
c. decrease in the equilibrium price of sugar and an increase in the equilibrium quantity
of sugar.
d. increase in the equilibrium price of sugar and a decrease in the equilibrium quantity
of sugar.
Senator Jackson argues that replacing the federal income tax with a national sales tax
would increase the level of output. Senator Feldman objects that this policy would
benefit the rich at the expense of the poor.
a. Both senators’ arguments are primarily about equality.
b. Both senators’ arguments are primarily about efficiency.
c. Senator Jackson’s argument is primarily about equality, while Senator Feldman’s
argument is primarily about efficiency.
d. Senator Jackson’s argument is primarily about efficiency, while Senator Feldman’s
argument is primarily about equality.
Table 714
SellerCost
LeBron$700
Kobe$600
Kevin$450
Steve$400
Refer to Table 714. You and your best friend want to hire a professional photographer
to take pictures of your two families. The table shows the costs of the four potential
sellers in the local photography market. You and your friend agree to offer $500 for
each session. Who accepts the offer, and what is the total producer surplus in the
market?
a. LeBron and Kobe; $500
b. Kevin and Steve; $500
c. LeBron and Kobe; $300
d. Kevin and Steve; $150
Total surplus is
a. the total cost to sellers of providing the good minus the total value of the good to
buyers.
b. the total value of the good to buyers minus the cost to sellers of providing the good.
c. the difference between consumer surplus and sellers’ cost.
d. always smaller than producer surplus.
Figure 619
Refer to Figure 619. Suppose a tax of $2 per unit is imposed on this market. How
much will sellers receive per unit after the tax is imposed?
a. $3
b. between $3 and $5
c. between $5 and $7
d. $7
Suppose Iceland goes from being an isolated country to being an exporter of coats. As a
result,
a. consumer surplus increases for consumers of coats in Iceland.
b. producer surplus increases for producers of coats in Iceland.
c. total surplus remains unchanged in the coat market in Iceland.
d. it is reasonable to infer that other countries have a comparative advantage over
Iceland in coat production.
Figure 26
Refer to Figure 26. If this economy moves from point F to point G, then which of the
following statements is correct?
a. This economy has moved from a point of inefficient production to a point of efficient
production.
b. This economy has experienced economic growth.
c. This economy has experienced an increase in employment.
d. None of the above is correct.
Figure 94. The domestic country is Nicaragua.
Refer to Figure 94. With trade, Nicaragua
a. imports 150 calculators.
b. imports 250 calculators.
c. exports 100 calculators.
d. exports 250 calculators.
Figure 219
In the following graph the xaxis shows the number of times a commuter rail train stops
at a station per hour and the yaxis shows the number of commuter rail passengers per
hour.
Commuter Rail Passengers by Frequency of Service
Refer to Figure 219. A policymaker observes this graph and concludes that increasing
the frequency of commuter rail service is a certain way to get more commuters to
choose the commuter rail instead of driving their own cars. You warn the policymaker
about making a reverse causality mistake with which of the following statements?
a. Higher gas prices are causing more people to choose the commuter rail over driving.
b. The service frequency was increased in response to an increase in the number of
passengers per hour.
c. There is a positive relationship between frequency of stops and number of
passengers.
d. None of the above is correct.
George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes
for $16 per dozen. His producer surplus per dozen cupcakes is
a. $6.
b. $10.
c. $16.
d. $26.
Table 38
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 24 Hours
CheeseBreadCheeseBread
England23128
Spain3684
Refer to Table 38. Which of the following combinations of cheese and bread could
England not produce in 24 hours?
a. 5 units of cheese and 3 units of bread.
b. 6 units of cheese and 4 units of bread.
c. 8 units of cheese and 3 units of bread.
d. 7 units of cheese and 2 units of bread.
In the ordered pair (20, 30), 20 is the
a. the xcoordinate.
b. the horizontal location of the point.
c. the ycoordinate.
d. Both a and b are correct.
The midpoint method is used to compute elasticity because it
a. automatically computes a positive number instead of a negative number.
b. results in an elasticity that is the same as the slope of the demand curve.
c. gives the same answer regardless of the direction of change.
d. automatically rounds quantities to the nearest whole unit.
A $0.10 tax levied on the sellers of chocolate bars will cause the
a. supply curve for chocolate bars to shift down by $0.10.
b. supply curve for chocolate bars to shift up by $0.10.
c. demand curve for chocolate bars to shift down by $0.10.
d. demand curve for chocolate bars to shift up by $0.10.
If a tax is levied on the sellers of a product, then there will be a(n)
a. downward shift of the supply curve.
b. upward shift of the supply curve.
c. decrease in quantity supplied.
d. increase in quantity supplied.
Suppose that the equilibrium price in the market for widgets is $5. If a law increased the
minimum legal price for widgets to $6,
a. the resulting increase in consumer surplus would be larger than any possible loss of
producer surplus.
b. the resulting increase in consumer surplus would be smaller than any possible loss of
producer surplus.
c. any possible increase in producer surplus would be larger than the loss of consumer
surplus.
d. any possible increase in producer surplus would be smaller than the loss of consumer
surplus.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. What happens to consumer surplus when the tax is imposed in this
market?
a. Consumer surplus falls by $3,600.
b. Consumer surplus falls by $2,700.
c. Consumer surplus falls by $1,800.
d. Consumer surplus falls by $900.
Suppose sellers of perfume are required to send $1.00 to the government for every
bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of
perfume to rise by $0.60 per bottle. Which of the following statements is correct?
a. The effective price received by sellers is $0.40 per bottle less than it was before the
tax.
b. Sixty percent of the burden of the tax falls on sellers.
c. This tax causes the demand curve for perfume to shift downward by $1.00 at each
quantity of perfume.
d. All of the above are correct.
Suppose a tax is imposed on the sellers of fastfood French fries. The burden of the tax
will
a. fall entirely on the buyers of fastfood French fries.
b. fall entirely on the sellers of fastfood French fries.
c. be shared equally by the buyers and sellers of fastfood French fries.
d. be shared by the buyers and sellers of fastfood French fries but not necessarily
equally.
Figure 24
Refer to Figure 24. This economy cannot produce at which point(s)?
a. Q
b. Q, S
c. Q, S, T
d. S
Figure 64
Refer to Figure 64. A governmentimposed price of $12 in this market is an example of
a
a. binding price ceiling that creates a shortage.
b. nonbinding price ceiling that creates a shortage.
c. binding price floor that creates a surplus.
d. nonbinding price floor that creates a surplus.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. With trade, consumer surplus is
a. $3,240.
b. $6,480.
c. $6,760.
d. $13,520.
Price ceilings and price floors that are binding
a. are desirable because they make markets more efficient and more fair.
b. cause surpluses and shortages to persist because price cannot adjust to the market
equilibrium price.
c. can have the effect of restoring a market to equilibrium.
d. are imposed because they can make the poor in the economy better off without
causing adverse effects.
When the nation of Isoland opens up its steel market to international trade, that change
a. creates winners and losers, regardless of whether Isoland ends up exporting or
importing steel.
b. results in a decrease in total surplus, regardless of whether Isoland ends up exporting
or importing steel.
c. creates winners, but no losers, if Isoland ends up exporting steel.
d. creates losers, but no winners, if Isoland ends up importing steel.
Table 72
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.
BuyerWillingness To Pay
David$8.50
Laura$7.00
Megan$5.50
Mallory$4.00
Audrey$3.50
Refer to Table 72. Which of the following is not true?
a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke.
b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and
not buying one.
c. At a price of $4.00, total consumer surplus in the market will be $9.00.
d. All of the above are correct.
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, if Boxland
goes from prohibiting international trade in cardboard to allowing international trade in
cardboard,
a. domestic producers of cardboard become better off and domestic consumers of
cardboard become better off.
b. domestic producers of cardboard become better off and domestic consumers of
cardboard become worse off.
c. domestic producers of cardboard become worse off and domestic consumers of
cardboard become better off.
d. domestic producers of cardboard become worse off and domestic consumers of
cardboard become worse off.
To raise productivity, policymakers could
a. increase spending on education.
b. provide tax credits to firms for capital improvements.
c. fund research and development.
d. All of the above are correct.
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. With free trade, the country
a. exports 20 units of the good.
b. imports 20 units of the good.
c. exports 30 units of the good.
d. imports 30 units of the good.
Suppose a tax is imposed on baseball bats. In which of the following cases will the tax
cause the equilibrium quantity of baseball bats to shrink by the smallest amount?
a. The response of buyers to a change in the price of baseball bats is strong, and the
response of sellers to a change in the price of baseball bats is weak.
b. The response of sellers to a change in the price of baseball bats is strong, and the
response of buyers to a change in the price of baseball bats is weak.
c. The response of buyers and sellers to a change in the price of baseball bats is strong.
d. The response of buyers and sellers to a change in the price of baseball bats is weak.
