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Figure 89
The vertical distance between points A and C represents a tax in the market.
Refer to Figure 89. The imposition of the tax causes the price paid by buyers to
a. increase from $600 to $800.
b. increase from $300 to $800.
c. decrease from $600 to $300.
d. remain unchanged at $600.
Suppose that someone makes the argument that because empty alcohol containers are
found at many accidents, the containers cause accidents. This would be an example of
a. sound logic.
b. reverse causality.
c. omitted variables.
d. bias.
Table 716
PriceQuantity
DemandedQuantity
Supplied
$12.00036
$10.00330
$ 8.00624
$ 6.00918
$ 4.001212
$ 2.00156
$ 0.00180
Refer to Table 716. Both the demand curve and the supply curve are straight lines. At
equilibrium, total surplus is
a. $44.
b. $56.
c. $72.
d. $96.
Which of the following ideas is the most plausible?
a. Reducing a high tax rate is less likely to increase tax revenue than is reducing a low
tax rate.
b. Reducing a high tax rate is more likely to increase tax revenue than is reducing a low
tax rate.
c. Reducing a high tax rate will have the same effect on tax revenue as reducing a low
tax rate.
d. Reducing a tax rate can never increase tax revenue.
Figure 64
Refer to Figure 64. A governmentimposed price of $6 in this market could be an
example of a
(i)binding price ceiling.
(ii)nonbinding price ceiling.
(iii)binding price floor.
(iv)nonbinding price floor.
a. (i) only
b. (ii) only
c. (i) and (iv) only
d. (ii) and (iii) only
Figure 317
Maxine’s Production Possibilities FrontierDaisy’s Production Possibilities Frontier
Refer to Figure 317. At which of the following prices would both Maxine and Daisy
gain from trade with each other?
a. 4 tarts for 2 pies
b. 8 tarts for 12 pies
c. 12 tarts for 28 pies
d. Maxine and Daisy could not both gain from trade with each other at any price.
Figure 618
The vertical distance between points A and B represents the tax in the market.
Refer to Figure 618. The amount of the tax per unit is
a. $6.
b. $8.
c. $14.
d. $18.
Which of these activities will most likely impose an external cost?
a. An athlete works out at a gym.
b. A secretary smokes a cigarette in a crowded break room.
c. A young mother pushes her baby in a stroller.
d. A construction worker eats a hotdog during his lunch break.
Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. If Chile and Colombia each spends all of its time producing the
good in which it has a comparative advantage and the countries agree to trade 7 pounds
of coffee for 5 pounds of soybeans, then Chile will consume
a. 7 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 5 pounds of soybeans.
b. 7 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 11 pounds of soybeans.
c. 23 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 5 pounds of soybeans.
d. 23 pounds of coffee and 7 pounds of soybeans and Colombia will consume 5 pounds
of coffee and 11 pounds of soybeans.
On a graph, the area below a demand curve and above the price measures
a. producer surplus.
b. consumer surplus.
c. deadweight loss.
d. willingness to pay.
The line that relates the price of a good and the quantity demanded of that good is
called the demand
a. schedule, and it usually slopes upward.
b. schedule, and it usually slopes downward.
c. curve, and it usually slopes upward.
d. curve, and it usually slopes downward.
Figure 318
Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
Refer to Figure 318. Bintu has a comparative advantage in the production of
a. bowls and Juba has a comparative advantage in the production of cups.
b. cups and Juba has a comparative advantage in the production of bowls.
c. both goods and Juba has a comparative advantage in the production of neither good.
d. neither good and Juba has a comparative advantage in the production of both goods.
Table 71
BuyerWillingness To Pay
Calvin$150.00
Sam$135.00
Andrew$120.00
Lori$100.00
Refer to Table 71. If the price of the product is $110, then who would be willing to
purchase the product?
a. Calvin
b. Calvin and Sam
c. Calvin, Sam, and Andrew
d. Calvin, Sam, Andrew, and Lori
Most economists believe that an increase in the quantity of money results in
a. an increase in the demand for goods and services.
b. lower unemployment in the short run.
c. higher inflation in the long run.
d. All of the above are correct.
Maddy purchases 2 pounds of beans and 3 pounds of rice per month when the price of
beans is $2 per pound. She purchases 1 pounds of beans and 4 pounds of rice per month
when the price of beans is $3 per pound. Maddy’s crossprice elasticity of demand for
beans and rice is
a. 0.71, and they are substitutes.
b. 0.71, and they are complements.
c. 1.4, and they are substitutes.
d. 1.4, and they are complements.
Figure 73
Refer to Figure 73. When the price is P1, consumer surplus is
a. A.
b. A+B.
c. A+B+C.
d. A+B+D.
Market failure is the inability of
a. buyers to interact harmoniously with sellers in the market.
b. a market to establish an equilibrium price.
c. buyers to place a value on the good or service.
d. some unregulated markets to allocate resources efficiently.
Figure 81
Refer to Figure 81. Suppose the government imposes a tax of P' P'''. The producer
surplus before the tax is measured by the area
a. I+J+K.
b. I+Y.
c. L+M+Y.
d. M.
Figure 912
Refer to Figure 912. With trade, domestic production and domestic consumption,
respectively, are
a. 1,200 and 800.
b. 1,600 and 800.
c. 800 and 1,200.
d. 800 and 1,600.
Which of the following statements about agriculture in the U.S. is correct?
a. From the 1950s to today, agricultural output has approximately doubled.
b. Because technological improvements increase the supply of a product for which
demand is inelastic, an individual farmer would be better off not adopting the new
technology.
c. Increasing the supply of agricultural products typically benefits consumers but harms
farmers.
d. Technological improvements typically increase both supply and revenue for
individual farmers.
Figure 816
Refer to Figure 816. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.
In comparison to Panel (a), Panel (b) illustrates which of the following statements?
a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than
when demand is relatively elastic.
b. When demand is relatively elastic, the deadweight loss of a tax is larger than when
demand is relatively inelastic.
c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when
supply is relatively elastic.
d. When supply is relatively elastic, the deadweight loss of a tax is larger than when
supply is relatively inelastic.
In a market economy, economic activity is guided by
a. the government.
b. publicinterest groups.
c. central planners.
d. selfinterest and prices.
Table 332
US and French Production Opportunities
Wine (in millions of gallons)Cheese (in millions of lbs.)
US1632
France84
Refer to Table 332 The opportunity costs for the US and France are as follows:
a. In the US 1 million gallons of wine costs 1/2 million pounds of cheese and in France
1 million gallons of wine costs 2 million pounds of cheese.
b. In the US 1 million gallons of wine costs 2 million pounds of cheese and in France 1
million gallons of wine costs 1/2 million pounds of cheese.
c. In the US 1 million pounds of cheese costs 1/2 million gallons of wine and in France
1 million pounds of cheese costs 2 million gallons of wine.
d. In the US 1 million pounds of cheese costs 16 million gallons of wine and in France
1 million pounds of cheese costs 8 million gallons of wine.
Which of the following phrases best captures the notion of efficiency?
a. absolute fairness
b. equal distribution
c. minimum waste
d. equitable outcome
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. The price that sellers receive is
a. P0.
b. P2.
c. P5.
d. P8.
If a tax shifts the demand curve downward (or to the left), we can infer that the tax was
levied on
a. buyers of the good.
b. sellers of the good.
c. both buyers and sellers of the good.
d. We cannot infer anything because the shift described is not consistent with a tax.
Figure 926
The diagram below illustrates the market for baseballs in the U.S.
Refer to figure 926. The figure shows that
a. the U.S. will import baseballs when the market opens to international trade.
b. the U.S. will export baseballs when the market opens to international trade.
c. the U.S. will be a net loser when the market for baseballs opens to international trade.
d. if the U.S. opens its baseball market to international trade, the price will plummet.
Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. Chile’s opportunity cost of one pound of soybeans is
a. 3/4 pound of coffee and Colombia’s opportunity cost of one pound of soybeans is 1/2
pound of coffee.
b. 3/4 pound of coffee and Colombia’s opportunity cost of one pound of soybeans is 2
pounds of coffee.
c. 4/3 pounds of coffee and Colombia’s opportunity cost of one pound of soybeans is
1/2 pound of coffee.
d. 4/3 pounds of coffee and Colombia’s opportunity cost of one pound of soybeans is 2
pounds of coffee.
Table 328
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim
can switch between setting up and testing computers at a constant rate. The following
table applies.
Minutes Needed to Number of Computers Set Up or Tested in a 40Hour Week
Set Up 1 ComputerTest 1 ComputerComputers Set UpComputers Tested
Barb48?5040
Jim30408060
Refer to Table 328. Barb’s opportunity cost of setting up one computer is testing
a. 4/5 computer and Jim’s opportunity cost of setting up one computer is testing 3/4
computer.
b. 4/5 computer and Jim’s opportunity cost of setting up one computer is testing 4/3
computers.
c. 5/4 computers and Jim’s opportunity cost of setting up one computer is testing 3/4
computer.
d. 5/4 computers and Jim’s opportunity cost of setting up one computer is testing 4/3
computers.
An early frost in the vineyards of Napa Valley would cause a(n)
a. increase in the demand for wine, increasing price.
b. increase in the supply of wine, decreasing price.
c. decrease in the demand for wine, decreasing price.
d. decrease in the supply of wine, increasing price.
In a competitive market, each seller has limited control over the price of his product
because
a. other sellers are offering similar products.
b. buyers exert more control over the price than do sellers.
c. these markets are highly regulated by the government.
d. sellers usually agree to set a common price that will allow each seller to earn a
comfortable profit.
