Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. The tax results in a deadweight loss that amounts to
a. $600.
b. $900.
c. $1,500.
d. $1,800.
Figure 314
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 314. At which of the following prices would both Arturo and Dina gain
from trade with each other?
a. 12 burritos for 21 tacos
b. 12 burritos for 27 tacos
c. 12 burritos for 36 tacos
d. Arturo and Dina could not both gain from trade with each other at any price.
Table 46
PriceFirm A’s
Quantity
SuppliedFirm B’s
Quantity
SuppliedFirm C’s
Quantity
SuppliedFirm D’s
Quantity
Supplied
$010000
$28345
$466810
$6491215
$8212820
$10015425
Refer to Table 46. If these are the only four sellers in the market, then the market
quantity supplied at a price of $4 is
a. 4 units.
b. 7.5 units.
c. 10 units.
d. 30 units.
A tax on a good
a. gives buyers an incentive to buy less of the good than they otherwise would buy.
b. gives sellers an incentive to produce more of the good than they otherwise would
produce.
c. creates a benefit to the government, the size of which exceeds the loss in surplus to
buyers and sellers.
d. All of the above are correct.
Figure 93. The domestic country is China.
Refer to Figure 93. Relative to a notrade situation, which of the following comes with
trade?
a. Consumer surplus increases by $1,800 and producer surplus increases by $1,600.
b. Consumer surplus decreases by $1,000 and producer surplus increases by $1,500.
c. Consumer surplus decreases by $1,000 and producer surplus increases by $1,750.
d. Total surplus increases by $400.
Figure 35
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 35. If the production possibilities frontier shown for Merve is for 8
hours of work, then how long does it take Merve to make one purse?
a. 1/2 hour
b. 2 hours
c. 4 hours
d. 8 hours
We can say that the allocation of resources is efficient if
a. producer surplus is maximized.
b. consumer surplus is maximized.
c. total surplus is maximized.
d. sellers’ costs are minimized.
Which of the following is likely to have the most price inelastic demand?
a. latts
b. filet mignon
c. Grey Goose vodka
d. milk
Figure 51
Refer to Figure 51. Between point A and point B, the slope is equal to
a. 1/4, and the price elasticity of demand is equal to 2/3.
b. 1/4, and the price elasticity of demand is equal to 3/2.
c. 3/2, and the price elasticity of demand is equal to 1/4.
d. 2/3, and the price elasticity of demand is equal to 3/2.
Figure 321
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 321. Suppose Azerbaijan is willing to trade 3 nails to Uzbekistan for
every bolt that Uzbekistan makes and sends to Azerbaijan. Which of the following
combinations of bolts and nails could Uzbekistan then consume, assuming Uzbekistan
specializes in making bolts and Azerbaijan specializes in making nails?
a. 7 bolts and 70 nails
b. 12 bolts and 56 nails
c. 17 bolts and 40 nails
d. 25 bolts and 15 nails
Table 31
Assume that John and Jane can switch between producing bread and wine at a constant
rate.
Labor Hours Needed
to Make
Bottle of WineLoaf of Bread
Jane21.5
John31
Refer to Table 31. Assume that John and Jane each work 24 hours. What happens to
total production if instead of each person spending 12 hours producing each good, Jane
spends 21 hours producing wine and 3 hours producing bread and John spends 3 hours
producing wine and 21 hours producing bread?
a. The total production of bread and wine each rise.
b. The total production of bread rises and the total production of wine falls.
c. The total production of bread falls and the total production of wine rises.
d. The total production of bread and wine each fall.
Suppose the federal government doubles the gasoline tax. The deadweight loss
associated with the tax
a. also doubles.
b. triples.
c. quadruples.
d. rises by a factor of 8.
Suppose an economy only produces two goods, robots and ice cream. Last month, the
economy produced 10 robots and 200 gallons of ice cream. This month, the same
economy produced 15 robots and 240 gallons of ice cream. Which of the following
statements could explain this change?
a. This month, the economy reduced the unemployment of its resources.
b. This month, the economy experienced an improvement in technology.
c. This month, the economy experienced an increase in resources
d. All of the above are correct.
Suppose that 50 hot dogs are demanded at a particular price. If the price of hot dogs
rises from that price by 5 percent, the number of hot dogs demanded falls to 48. Using
the midpoint approach to calculate the price elasticity of demand, it follows that the
a. demand for hot dogs in this price range is unit elastic.
b. price increase will decrease the total revenue of hot dog sellers.
c. price elasticity of demand for hot dogs in this price range is about 1.22.
d. price elasticity of demand for hot dogs in this price range is about 0.82.
Figure 419
Refer to Figure 419. If price in this market is currently $14, then there would be a(n)
a. surplus of 20 units. The law of supply and demand predicts that the price will rise
from $14 to a higher price.
b. excess supply of 20 units. The law of supply and demand predicts that the price will
fall from $14 to a lower price.
c. surplus of 40 units. The law of supply and demand predicts that the price will rise
from $14 to a higher price.
d. excess supply of 40 units. The law of supply and demand predicts that the price will
fall from $14 to a lower price.
Recent forest fires in the western states are expected to cause the price of lumber to rise
in the next six months. As a result, we can expect the supply of lumber to
a. fall in six months but not now.
b. increase in six months when the price goes up.
c. fall now.
d. increase now to meet as much demand as possible.
Table 62
PriceQuantity
DemandedQuantity
Supplied
$03750
$530050
$10225100
$15150150
$2075200
$250250
Refer to Table 62. A price ceiling set at $5 results in
a. 50 units sold.
b. 250 units sold.
c. 300 units sold.
d. 350 units sold.
In the market for widgets, the supply curve is the typical upwardsloping straight line,
and the demand curve is the typical downwardsloping straight line. The equilibrium
quantity in the market for widgets is 200 per month when there is no tax. Then a tax of
$5 per widget is imposed. The price paid by buyers increases by $2 and the aftertax
price received by sellers falls by $3. The government is able to raise $750 per month in
revenue from the tax. The deadweight loss from the tax is
a. $250.
b. $125.
c. $75.
d. $50.
In the ordered pair (5, 3), 3 is the
a. horizontal location of the point.
b. the slope.
c. the xcoordinate.
d. the ycoordinate.
Table 324
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 40 Hours
CheeseBreadCheeseBread
England 144010
Spain 48105
Refer to Table 324. Assume that England and Spain each has 40 labor hours available.
Originally, each country divided its time equally between the production of cheese and
bread. Now, each country spends all its time producing the good in which it has a
comparative advantage. As a result, the total output of cheese increased by
a. 15.
b. 20.
c. 25.
d. 40.
Which of the following is not correct?
a. Economists use some familiar words in specialized ways.
b. Economics has its own language and its own way of thinking, but few other fields of
study do.
c. Supply, demand, elasticity, comparative advantage, consumer surplus, and
deadweight loss are all terms that are part of the economist’s language.
d. The value of the economist’s language lies in its ability to provide you with a new
and useful way of thinking about the world in which you live.
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 size of the tax is
a. P0P2.
b. P2P8.
c. P2P5.
d. P5P8.
Figure 26
Refer to Figure 26. A movement from point H to point K could be caused by
a. unemployment.
b. a decrease in society’s preference for pillows.
c. fewer resources available for production of pillows.
d. All of the above are correct.
If a tax is imposed on a market with inelastic supply and elastic demand, then
a. buyers will bear most of the burden of the tax.
b. sellers will bear most of the burden of the tax.
c. the burden of the tax will be shared equally between buyers and sellers.
d. it is impossible to determine how the burden of the tax will be shared.
Figure 61
Panel (a)Panel (b)
Refer to Figure 61. A binding price ceiling is shown in
a. panel (a) only.
b. panel (b) only.
c. both panel (a) and panel (b).
d. neither panel (a) nor panel (b).
Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result,
residents of Wisconsin who do not like breathing secondhand smoke begin driving
across the border to Illinois to eat at restaurants there. Which of the following principles
does this best illustrate?
a. People respond to incentives
b. Rational people think at the margin
c. Trade can make everyone better off
d. Markets are usually a good way to organize economic activity
A tax on the buyers of cereal will increase the price of cereal paid by buyers,
a. decrease the effective price of cereal received by sellers, and decrease the equilibrium
quantity of cereal.
b. decrease the effective price of cereal received by sellers, and increase the equilibrium
quantity of cereal.
c. increase the effective price of cereal received by sellers, and decrease the equilibrium
quantity of cereal.
d. increase the effective price of cereal received by sellers, and increase the equilibrium
quantity of cereal.
In building economic models, economists often omit
a. assumptions.
b. theories.
c. details.
d. equations.
Which of the following is a determinant of the market supply curve but not a
determinant of an individual seller’s supply?
a. production technology
b. expectations
c. input prices
d. the number of sellers
Market power refers to the
a. power of a single person or small group to influence market prices.
b. ability of a person or small group to successfully market new products.
c. power of the government to regulate a market.
d. importance of a certain market in relation to the overall economy.
When a country abandons a notrade policy, adopts a freetrade policy, and becomes an
importer of a particular 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.
Figure 27
Refer to Figure 27. Efficient production is represented by which point(s)?
a. L, M
b. L, M, N, P, Q
c. N, O, P
d. Q
Figure 27
Refer to Figure 27. Unemployment could cause this economy to produce at which
point(s)?
a. L, M
b. N, O, P, Q
c. N, O, P
d. Q
