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Suppose the crossprice elasticity of demand between hot dogs and mustard is 2.00. This
implies that a 20 percent increase in the price of hot dogs will cause the quantity of
mustard purchased to
a. fall by 200 percent.
b. fall by 40 percent.
c. rise by 200 percent.
d. rise by 40 percent.
Figure 912
Refer to Figure 912. Producer surplus before trade is
a. $14,400.
b. $16,800.
c. $21,600.
d. $24,800.
Table 42
PriceAbby’s
Quantity
DemandedBrandi’s
Quantity
DemandedCarrie’s
Quantity
DemandedDeeDee’s
Quantity
Demanded
$122134
$104445
$86756
$68847
$410938
$2121029
Refer to Table 42. Suppose Abby, Brandi, Carrie, and DeeDee are the only four buyers
in the market. When the price decreases from $6 to $4, the market quantity demanded
a. increases by 0.75 units.
b. increases by 3 units.
c. increases by 4 units.
d. decreases by 27 units.
Based on the available evidence, which of the following groups benefits most from
mandatory seat belt laws?
a. automakers
b. pedestrians
c. drivers
d. owners of collisionrepair shops
Figure 96
The figure illustrates the market for roses in a country.
Refer to Figure 96. Without trade, the equilibrium price of roses is
a. $4 and the equilibrium quantity is 300.
b. $3 and the equilibrium quantity is 200.
c. $3 and the equilibrium quantity is 400.
d. $2 and the equilibrium quantity is 500.
Home is a country that produces two goods, pears and cellular phones. Last year, Home
produced 450 bushels of pears and 1050 cellular phones. This year it produced 450
bushels of pears and 2000 cellular phones. Given no other information, which of the
following events could explain this change?
a. Home experienced increased unemployment.
b. Home experienced a decline in pearproducing technology.
c. Home experienced an improvement in cellular phonemaking technology.
d. Home experienced a reduction in resources.
You wear either shorts or sweatpants every day. You notice that sweatpants have gone
on sale, so your demand for
a. sweatpants will increase.
b. sweatpants will decrease.
c. shorts will increase.
d. shorts will decrease.
Suppose the average income of a citizen of Poland is higher than the average income of
a citizen of Romania. You might conclude that
a. Polish firms are faced with stricter government regulations than Romanian firms.
b. total income is divided among fewer workers in Poland since it has a smaller labor
force than Romania.
c. Romania's climate allows for longer growing seasons and therefore Romania can
produce large quantities of grain and other crops.
d. productivity in Poland is higher than in Romania.
Figure 512
Refer to Figure 512. Using the midpoint method, the price elasticity of demand
between point X and point Y is
a. 0.4.
b. 1.
c. 2.
d. 2.5.
OPEC has coordinated a reduction in supply that was
a. effective in insulating the members from the decrease in demand in the late 2000s.
b. more profitable in the long run than in the short run.
c. profitable in both the short run and the long run.
d. more profitable in the short run than in the long run.
When a country takes a multilateral approach to free trade, it
a. removes trade restrictions on its own.
b. reduces its trade restrictions while other countries do the same.
c. does not remove trade restrictions no matter what other countries do.
d. is willing to trade with multiple countries at once.
Holding all other factors constant and using the midpoint method, if a candy
manufacturer increases production by 20 percent when the market price of candy
increases from $0.50 to $0.60, then supply is
a. inelastic, since the price elasticity of supply is equal to .91.
b. inelastic, since the price elasticity of supply is equal to 1.1.
c. elastic, since the price elasticity of supply is equal to 0.91.
d. elastic, since the price elasticity of supply is equal to 1.1.
Which of the following is an example of a positive, as opposed to normative,
statement?
a. The federal government should decrease coverage of unemployment benefits to
stimulate the economy out of the recession.
b. Congress should agree on lower government spending for the next fiscal year.
c. The Federal Reserve Bank should increase interest rates in response to the
higherthanexpected inflation in the economy.
d. The unemployment rate last year was lower than any other year in the last century.
For a good that is a necessity, demand
a. tends to be inelastic.
b. tends to be elastic.
c. has unit elasticity.
d. cannot be represented by a demand curve in the usual way.
Figure 216
Refer to Figure 216. Inefficient production is represented by which point(s)?
a. A, C
b. B, C
c. B, E
d. D
Figure 710
Refer to Figure 710. When the price rises from P1 to P2, which area represents the
increase in producer surplus to existing producers?
a. BCG
b. ACH
c. DGH
d. ABGD
The price elasticity of demand for a good measures the willingness of
a. consumers to buy less of the good as price rises.
b. consumers to avoid monopolistic markets in favor of competitive markets.
c. firms to produce more of a good as price rises.
d. firms to respond to the tastes of consumers.
Figure 318
Bintu’s Production Possibilities FrontierJuba’s Production Possibilities Frontier
Refer to Figure 318. If Bintu and Juba switch from each person dividing her time
equally between the production of cups and bowls to each person spending all of her
time producing the good in which she has a comparative advantage, then total
production will increase by
a. 1 bowl and 1 cup.
b. 2 bowls and 4 cups.
c. 3 bowls and 5 cups.
d. 4 bowls and 8 cups.
Figure 727
Refer to Figure 727. Buyers who value this good more than the equilibrium price are
represented by which line segment?
a. AC.
b. CK.
c. BC.
d. CH.
Figure 28
Refer to Figure 28. Which point on the graph best represents the fact that, because
resources are scarce, not every conceivable outcome is feasible?
a. point J
b. point K
c. point L
d. point M
Assume that for good X the supply curve for a good is a typical, upwardsloping straight
line, and the demand curve is a typical downwardsloping straight line. If the good is
taxed, and the tax is doubled, the
a. base of the triangle that represents the deadweight loss doubles.
b. height of the triangle that represents the deadweight loss doubles.
c. deadweight loss of the tax quadruples.
d. All of the above are correct.
In an economy in which decisions are guided by prices and individual selfinterest, there
is
a. the potential to achieve efficiency in production.
b. a strong need for government intervention in the market.
c. less efficiency than would be observed in a centrallyplanned economy.
d. more need for a strong legal system to control individual greed than would be needed
in a centrallyplanned economy.
Figure 69
Refer to Figure 69. At which price would a price ceiling be binding?
a. $8
b. $5
c. $6
d. $7
Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If
the federal government increases the minimum wage by $1.00 per hour, then it is likely
that the
a. demand for bicycle assembly workers will increase.
b. supply of bicycles will shift to the right.
c. supply of bicycles will shift to the left.
d. firm must increase output to maintain profit levels.
According to the circularflow diagram, if Denny is the owner of a landscaping business
and he just received $50 for mowing Mrs. Pendleton’s lawn,
a. the $50 represents a cost of production for Denny’s firm.
b. the $50 represents wages, rent, and profit to Denny’s firm.
c. Denny acts as a firm who interacted in the markets for factors of production with
Mrs. Pendleton.
d. Denny acts as a firm who interacted in the markets for goods and services with Mrs.
Pendleton.
A tax imposed on the buyers of a good will raise the
a. price paid by buyers and lower the equilibrium quantity.
b. price paid by buyers and raise the equilibrium quantity.
c. effective price received by sellers and lower the equilibrium quantity.
d. effective price received by sellers and raise the equilibrium quantity.
In conducting their research, economists often substitute historical events and historical
episodes for
a. theories and observations.
b. laboratory experiments.
c. models.
d. assumptions.
Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of
wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of
wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and
consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and
consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated
between the two countries, and Freedonia sends 30 units of corn to Sylvania in
exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of
a. 30 units of corn and 30 units of wheat.
b. 40 units of corn and 30 units of wheat.
c. 40 units of corn and 20 units of wheat.
d. 10 units of corn and 40 units of wheat.
A rationale for government involvement in a market economy is
a. markets sometimes fail to produce a fair distribution of economic wellbeing.
b. markets sometimes fail to produce an efficient allocation of resources.
c. property rights have to be enforced.
d. All of the above are correct.
During the last few decades in the United States, health officials have argued that eating
too much beef might be harmful to human health. As a result, there has been a
significant decrease in the amount of beef produced. Which of the following best
explains the decrease in production?
a. Beef producers, concerned about the health of their customers, decided to produce
relatively less beef.
b. Government officials, concerned about consumer health, ordered beef producers to
produce relatively less beef.
c. Individual consumers, concerned about their own health, decreased their demand for
beef, which lowered the equilibrium price of beef, making it less attractive to produce.
d. Antibeef protesters have made it difficult for both buyers and sellers of beef to meet
in the marketplace.
Figure 69
Refer to Figure 69. A price floor set at
a. $4 will be binding and will result in a shortage of 8 units.
b. $4 will be binding and will result in a shortage of 16 units.
c. $7 will be binding and will result in a surplus of 4 units.
d. $7 will be binding and will result in a surplus of 8 units.
Demand is said to have unit elasticity if the price elasticity of demand is
a. less than 1.
b. greater than 1.
c. equal to 1.
d. equal to 0.
