The minimum wage, if it is binding, raises the incomes of
a. no workers.
b. only those workers who cannot find jobs.
c. only those workers whose jobs would pay less than the minimum wage if it didn’t
exist.
d. all workers.
Figure 911
Refer to Figure 911. Consumer surplus in this market after trade is
a. A.
b. C + B.
c. A + B + D.
d. B + C + D.
Figure 822
Refer to Figure 822. Suppose the government initially imposes a $3 perunit tax on this
good. Now suppose the government is deciding whether to lower the tax to $1.50 or
raise it to $4.50. Which of the following statements is correct?
a. Compared to the original tax, the smaller tax will decrease both tax revenue and
deadweight loss.
b. Compared to the original tax, the larger tax will increase both tax revenue and
deadweight loss.
c. Compared to the original tax, the larger tax will decrease tax revenue and increase
deadweight loss.
d. Both a and b are correct.
The higher a country’s tax rates, the more likely that country will be
a. at the top of the Laffer curve.
b. on the positively sloped part of the Laffer curve.
c. on the negatively sloped part of the Laffer curve.
d. experiencing small deadweight losses.
Trade enhances the economic wellbeing of a nation in the sense that
a. both domestic producers and domestic consumers of a good become better off with
trade, regardless of whether the nation imports or exports the good in question.
b. the gains of domestic producers of a good exceed the losses of domestic consumers
of a good, regardless of whether the nation imports or exports the good in question.
c. trade results in an increase in total surplus.
d. trade puts downward pressure on the prices of all goods.
Figure 415
Refer to Figure 415. Which of the following would cause the supply curve to shift
from Supply A to Supply C in the market for sail boats?
a. an increase in the price of sailboats
b. a decrease in the number of firms selling sailboats
c. a decrease in the price of fiberglass and sail cloth
d. a decrease in the price of America’s Cup sailing tshirts
Figure 27
Refer to Figure 27. What is the opportunity cost of moving from point M to point L?
a. zero
b. 15 tvs
c. 20 engines and 15 tvs
d. 20 engines
The federal government is concerned about the negative effects of cigarette smoking in
the United States. Suppose Congress is considering two plans. One plan would limit the
production of cigarettes. The other would require manufacturers to include graphic
photos on cigarette packages of people suffering cancer’s effects. Which of the
following statements is true?
a. Both programs would increase the price of cigarettes.
b. Both programs would reduce the quantity of cigarettes sold.
c. Both programs would decrease revenues for cigarette manufacturers.
d. All of the above are correct.
At the equilibrium price, the quantity of the good that buyers are willing and able to buy
a. is greater than the quantity that sellers are willing and able to sell.
b. exactly equals the quantity that sellers are willing and able to sell.
c. is less than the quantity that sellers are willing and able to sell.
d. Either a) or c) could be correct.
The Surgeon General announces that eating chocolate increases tooth decay. As a result,
the equilibrium price of chocolate
a. increases, and producer surplus increases.
b. increases, and producer surplus decreases.
c. decreases, and producer surplus increases.
d. decreases, and producer surplus decreases.
Table 44
PriceQuantity Demanded
by AdamQuantity Demanded
by BarbQuantity Demanded
by Carl
$1010822
$8121226
$6141630
$4162034
$2182438
$0202842
Refer to Table 44. Suppose the market consists of Adam and Barb only. If the price
rises by $2, the quantity demanded in the market falls by
a. 4 units.
b. 6 units.
c. 8 units.
d. 10 units.
Figure 426
Refer to Figure 426. Which of the following movements would illustrate the effect in
the market for orange juice of an announcement by the American Dental Association
that orange juice erodes tooth enamel?
a. Point A to Point B
b. Point C to Point B
c. Point C to Point D
d. Point A to Point D
Which of the following would be the least likely result of a binding price ceiling
imposed on the market for rental cars?
a. an accumulation of dirt in the interior of rental cars
b. poor engine maintenance in rental cars
c. free gasoline given to people as an incentive to a rent a car
d. slow replacement of old rental cars with newer ones
Suppose consumer income increases. If grass seed is a normal good, the equilibrium
price of grass seed will
a. decrease, and producer surplus in the industry will decrease.
b. increase, and producer surplus in the industry will increase.
c. decrease, and producer surplus in the industry will increase.
d. increase, and producer surplus in the industry will decrease.
Which of the following is not a determinant of demand?
a. the price of a resource that is used to produce the good
b. the price of a complementary good
c. the price of the good next month
d. the price of a substitute good
Table 336
Minutes Needed
to Make 1
TowelUmbrella
Antigua1220
Barbuda1510
Refer to Table 336. If Antigua and Barbuda decide to trade with each other, Antigua
should specialize in the production of
a. towels and Barbuda should specialize in the production of umbrellas.
b. umbrellas and Barbuda should specialize in the production of towels.
c. both goods and Barbuda should specialize in the production of neither good.
d. neither good and Barbuda should specialize in the production of both goods.
For a market for a good or service to exist, there must be a
a. group of buyers and sellers.
b. specific time and place at which the good or service is traded.
c. high degree of organization present.
d. All of the above are correct.
The law of supply states that, other things equal, when the price of a good
a. falls, the supply of the good rises.
b. rises, the quantity supplied of the good rises.
c. rises, the supply of the good falls.
d. falls, the quantity supplied of the good rises.
Ashley eats two bananas during a particular day. The marginal benefit she enjoys from
eating the second banana
a. can be thought of as the total benefit Ashley enjoys by eating two bananas minus the
total benefit she would have enjoyed by eating just the first banana.
b. determines Ashley’s marginal cost of the first and second bananas.
c. does not depend on how many bananas Ashley has already eaten.
d. cannot be determined unless we know how much she paid for the bananas.
Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is
elastic. A tax of $2 per bulb levied on light bulbs will increase the price paid by buyers
of light bulbs by
a. less than $1.
b. $1.
c. between $1 and $2.
d. $2.
The government enforces property rights by
a. requiring property owners to pay property taxes.
b. providing police and courts.
c. forcing people to own property.
d. providing public parks and recreation facilities.
When a country allows trade and becomes an exporter of a good,
a. the gains of the domestic producers of the good exceed the losses of the domestic
consumers of the good.
b. the gains of the domestic consumers of the good exceed the losses of the domestic
producers of the good.
c. the losses of the domestic producers of the good exceed the gains of the domestic
consumers of the good.
d. the losses of the domestic consumers of the good exceed the gains of the domestic
producers of the good.
Economists disagree on whether labor taxes cause small or large deadweight losses.
This disagreement arises primarily because economists hold different views about
a. the size of labor taxes.
b. the importance of labor taxes imposed by the federal government relative to the
importance of labor taxes imposed by the various states.
c. the elasticity of labor supply.
d. the elasticity of labor demand.
Table 413
The demand schedule below pertains to sandwiches demanded per week.
PriceHarry’s
Quantity
DemandedDarby’s
Quantity
DemandedJake’s
Quantity
Demanded
$3343
$512x
Refer to Table 413. Suppose Harry, Darby, and Jake are the only demanders of
sandwiches. Also suppose x = 2. Then
a. the slope of Jake’s demand curve is 1/2, and the slope of the market demand curve is
5/2.
b. the slope of Jake’s demand curve is 1/2, and the slope of the market demand curve is
2/5.
c. the slope of Jake’s demand curve is 2, and the slope of the market demand curve is
5/2.
d. the slope of Jake’s demand curve is 2, and the slope of the market demand curve is
2/5.
Spain allows trade with the rest of the world. We know that Spain has a comparative
advantage in producing olive oil if we know that
a. Spain imports olive oil.
b. the world price of olive oil is higher than the price of olive oil that would prevail in
Spain if trade with other countries were not allowed.
c. consumer surplus in Spain would exceed producer surplus in Spain if trade with other
countries were not allowed.
d. All of the above are correct.
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
tax causes the price paid by buyers to
a. decrease by $5.
b. increase by $5.
c. increase by $3.
d. increase by $2.
Which of the following is an example of an externality?
a. Annie purchases a new dress.
b. Antonio’s dog barks loudly during the night, waking his neighbors.
c. Harold sells a book to Cathy, who reads the book and then gives it to James as a gift.
d. Gloria watches a scary movie.
For which of the following goods is the income elasticity of demand likely highest?
a. tennis lessons
b. allergy medication
c. clothing
d. cell phone contracts
A quota is
a. a tax placed on imports.
b. a limit on the quantity of imports.
c. a tax on exports to other countries.
d. an excess of exports over imports.
Figure 33
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 33. If Arturo and Dina both spend all of their time producing tacos,
then total production is
a. 400 tacos and 0 burritos.
b. 400 tacos and 250 burritos.
c. 800 tacos and 0 burritos.
d. 800 tacos and 500 burritos.
Figure 630
Panel (a)Panel (b)
Panel (c)
Refer to Figure 630. In which market will the majority of the tax burden fall on
buyers?
a. the market shown in panel (a).
b. the market shown in panel (b).
c. the market shown in panel (c).
d. All of the above are correct.
Which of the following is likely to have the most price inelastic demand?
a. white chocolate chip with macadamia nut cookies
b. hardback novels
c. salt
d. box seats at a major league baseball game
The supply curve for a good is a line that relates
a. profit and quantity supplied.
b. quantity supplied and quantity demanded.
c. price and quantity supplied.
d. price and profit.
Figure 815
Refer to Figure 815. Panel (a) and Panel (b) each illustrate a $4 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.