Figure 53
Refer to Figure 53. Jenna says she would buy 10 gallons of gas per week regardless of
the price. If this is true, then Jenna’s demand for gas is represented by demand curve
a. A.
b. B.
c. C.
d. D.
Figure 318
Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
Refer to Figure 318. The opportunity cost of 1 cup for Juba is
a. 1/6 bowl.
b. 2/3 bowl.
c. 3/2 bowls.
d. 6 bowls.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. If this country allows free trade in tricycles,
a. consumers will gain more than producers will lose.
b. producers will gain more than consumers will lose.
c. producers and consumers will both gain equally.
d. producers and consumers will both lose equally.
By definition, exports are
a. limits placed on the quantity of goods brought into a country.
b. goods in which a country has an absolute advantage.
c. people who work in foreign countries.
d. goods produced domestically and sold abroad.
The welfare of sellers is measured by
a. consumer surplus.
b. producer surplus.
c. total surplus.
d. price.
Which of the following statements is not correct?
a. An invisible hand leads buyers and sellers to an equilibrium that maximizes total
surplus.
b. Market power can cause markets to be inefficient.
c. Externalities can cause markets to be inefficient.
d. The invisible hand can remedy all types of market failures.
What would happen to the equilibrium price and quantity of latts if coffee shops began
using a machine that reduced the amount of labor necessary to produce steamed milk,
which is used to make latts, and scientists discovered that coffee prevents heart attacks?
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 effect on equilibrium quantity would
be ambiguous.
d. The equilibrium quantity would increase, and the effect on equilibrium price would
be ambiguous.
In a market economy,
a. supply determines demand and demand, in turn, determines prices.
b. demand determines supply and supply, in turn, determines prices.
c. the allocation of scarce resources determines prices and prices, in turn, determine
supply and demand.
d. supply and demand determine prices and prices, in turn, allocate the economy’s
scarce resources.
The study of how the allocation of resources affects economic wellbeing is called
a. consumer economics.
b. macroeconomics.
c. willingnesstopay economics.
d. welfare economics.
Figure 421
Refer to Figure 421. At a price of $16, there is a
a. surplus of 1 unit.
b. surplus of 3 units.
c. shortage of 1 unit.
d. shortage of 3 units.
Figure 913
Refer to Figure 913. With trade, producer surplus is
a. $900.
b. $1,100.
c. $1,500.
d. $2,000.
Adam Smith’s book The Wealth of Nations was published in
a. 1692.
b. 1776.
c. 1816.
d. 1936.
Figure 611
Refer to Figure 611. If the government imposes a price ceiling at $6, it would be
a. binding if market demand is Demand A or Demand B.
b. nonbinding if market demand is Demand A or Demand B.
c. binding if market demand is Demand A and nonbinding if market demand is Demand
B.
d. nonbinding if market demand is Demand A and binding if market demand is Demand
B.
A rational decisionmaker takes an action if and only if
a. the marginal benefit of the action exceeds the marginal cost of the action.
b. the marginal cost of the action exceeds the marginal benefit of the action.
c. the marginal cost of the action is zero.
d. the opportunity cost of the action is zero.
An improvement in production technology will
a. increase a firm’s costs and increase its supply.
b. increase a firm’s costs and decrease its supply.
c. decrease a firm’s costs and increase its supply.
d. decrease a firm’s costs and decrease its supply.
Figure 47
Refer to Figure 47. If the demand curve for Good X shifts from Da to Db, then
a. firms would be willing to supply less of Good X than before at each possible price.
b. people are willing to buy more of Good X than before at each possible price.
c. people’s incomes must have decreased.
d. the price of Good X has decreased.
When OPEC raised the price of crude oil in the 1970s, it caused the
a. supply of gasoline to decrease.
b. quantity of gasoline demanded to decrease.
c. equilibrium price of gasoline to increase.
d. All of the above are correct.
A model that shows how dollars flow through markets among households and firms is
called the
a. production possibilities frontier.
b. circularflow diagram.
c. demand and supply diagram.
d. comparative advantage model.
Table 323
Assume that the farmer and the rancher can switch between producing pork and
producing tomatoes at a constant rate.
Labor Hours Needed to Make 1 Pound of Pounds Produced in 24 Hours
PorkTomatoesPorkTomatoes
Farmer6348
Rancher4466
Refer to Table 323. The farmer should specialize in the production of
a. pork and the rancher should specialize in the production of tomatoes.
b. tomatoes and the rancher should specialize in the production of pork.
c. both goods and the rancher should specialize in the production of neither good.
d. neither good and the rancher should specialize in the production of both goods.
A likely example of substitute goods for most people would be
a. tables and chairs.
b. bicycles and helmets.
c. apple juice and orange juice.
d. coffee and sugar.
If Shawn can produce donuts at a lower opportunity cost than Sue, then
a. Shawn has a comparative advantage in the production of donuts.
b. Sue has a comparative advantage in the production of donuts.
c. Shawn should not produce donuts.
d. Shawn is capable of producing more donuts than Sue in a given amount of time.
Causes of market failure include
a. externalities and market power.
b. market power and incorrect forecasts of consumer demand.
c. externalities and foreign competition.
d. incorrect forecasts of consumer demand and foreign competition.
Generally, a firm is more willing and able to increase quantity supplied in response to a
price change when
a. the relevant time period is short rather than long.
b. the relevant time period is long rather than short.
c. supply is inelastic.
d. the firm is experiencing capacity problems.
A $2.00 tax levied on the sellers of birdhouses will shift the supply curve
a. upward by exactly $2.00.
b. upward by less than $2.00.
c. downward by exactly $2.00.
d. downward by less than $2.00.
When quantity demanded increases at every possible price, the demand curve has
a. shifted to the left.
b. shifted to the right.
c. not shifted; rather, we have moved along the demand curve to a new point on the
same curve.
d. not shifted; rather, the demand curve has become steeper.
Table 322
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 322. Assume that Zimbabwe and Portugal each has 60 machine minutes
available. Originally, each country divided its time equally between the production of
toothbrushes and hairbrushes. Now, each country spends all its time producing the good
in which it has a comparative advantage. As a result, the total output increased by
a. 4 toothbrushes and 2 hairbrushes.
b. 10 toothbrushes and 5 hairbrushes.
c. 16 toothbrushes and 8 hairbrushes.
d. 20 toothbrushes and 10 hairbrushes.
The North American Free Trade Agreement
a. is an example of the unilateral approach to free trade.
b. eliminated tariffs on imports to North America from the rest of the world.
c. reduced trade restrictions among Canada, Mexico and the United States.
d. All of the above are correct.
Highschool athletes who skip college to become professional athletes
a. obviously do not understand the value of a college education.
b. usually do so because they cannot get into college.
c. understand that the opportunity cost of attending college is very high.
d. are not making a rational decision since the marginal benefits of college outweigh the
marginal costs of college for highschool athletes.
When small changes in price lead to infinite changes in quantity demanded, demand is
perfectly
a. elastic, and the demand curve will be horizontal.
b. inelastic, and the demand curve will be horizontal.
c. elastic, and the demand curve will be vertical.
d. inelastic, and the demand curve will be vertical.
In the former Soviet Union, producers were paid for meeting output targets, not for
selling products. Under those circumstances, what were the economic incentives for
producers?
a. to produce good quality products so that society would benefit from the resources
used
b. to conserve on costs, so as to maintain efficiency in the economy
c. to produce enough to meet the output target, without regard for quality or cost
d. to produce those products that society desires most
Large or persistent inflation is almost always caused by
a. excessive government spending.
b. excessive growth in the quantity of money.
c. foreign competition.
d. higherthannormal levels of productivity.
What would happen to the equilibrium price and quantity of coffee if the wages of
coffeebean pickers fell and the price of tea fell?
a. Price would fall, and the effect on quantity would be ambiguous.
b. Price would rise, and the effect on quantity would be ambiguous.
c. Quantity would fall, and the effect on price would be ambiguous.
d. Quantity would rise, and the effect on price would be ambiguous.