Table 65
PriceQuantity
DemandedQuantity
Supplied
$01500
$312045
$69090
$960135
$1230180
$150225
Refer to Table 65. Which of the following price floors would be binding in this
market?
a. $3
b. $6
c. $9
d. None of the above price floors would be binding.
Figure 314
Arturo’s Production Possibilities FrontierDina’s Production Possibilities Frontier
Refer to Figure 314. Arturo should specialize in the production of
a. tacos and Dina should specialize in the production of burritos.
b. burritos and Dina should specialize in the production of tacos.
c. both goods and Dina should specialize in the production of neither good.
d. neither good and Dina should specialize in the production of both goods.
A price floor is
a. a legal minimum on the price at which a good can be sold.
b. often imposed when sellers of a good are successful in their attempts to convince the
government that the market outcome is unfair without a price floor.
c. a source of inefficiency in a market.
d. All of the above are correct.
Figure 612
Refer to Figure 612. When the price ceiling applies in this market and the supply curve
for gasoline shifts from S1 to S2,
a. the market price will increase to P3.
b. a surplus will occur at the new market price of P2.
c. the market price will stay at P1.
d. a shortage will occur at the new market price of P2.
Table 329
Juanita and Shantala run a business that programs and tests cellular phones. Assume
that Juanita and Shantala can switch between programming and testing cellular phones
at a constant rate. The following table applies.
Minutes Needed to Number of Cellular Phones Programmed or Tested in a 40Hour
Week
Program 1 Cellular PhoneTest 1 Cellular PhoneCellular Phones ProgrammedCellular
Phones Tested
Juanita ?21601200
Shantala104240600
Refer to Table 329. Shantala has an absolute advantage in
a. programming cellular phones and a comparative advantage in programming cellular
phones.
b. programming cellular phones and a comparative advantage in testing cellular phones.
c. testing cellular phones and a comparative advantage in programming cellular phones.
d. testing cellular phones and a comparative advantage in testing cellular phones.
If an allocation of resources is efficient, then
a. consumer surplus is maximized.
b. producer surplus is maximized.
c. all potential gains from trade among buyers are sellers are being realized.
d. the allocation achieves equality as well.
Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the
company of $4.80 million. If the company builds a 25th house, its total cost will
increase to $5.05 million. Which of the following statements is correct?
a. For the first 24 houses, the average cost per house was $205,000.
b. The marginal cost of the 25th house, if it is built, will equal $250,000.
c. If the company can sell the 25th house for at least $202,000, then it should build it.
d. All of the above are correct.
A tariff
a. lowers the domestic price of the exported good below the world price.
b. keeps the domestic price of the exported good the same as the world price.
c. raises the domestic price of the imported good above the world price.
d. lowers the domestic price of the imported good below the world price.
The marginal seller is the seller who
a. cannot compete with the other sellers in the market.
b. would leave the market first if the price were any lower.
c. can produce at the lowest cost.
d. has the largest producer surplus.
For a particular good, a 12 percent increase in price causes a 3 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a. There are many substitutes for this good.
b. The good is a necessity.
c. The market for the good is narrowly defined.
d. The relevant time horizon is long.
If the government wants to reduce the burning of fossil fuels, it should impose a tax on
a. buyers of gasoline.
b. sellers of gasoline.
c. either buyers or sellers of gasoline.
d. whichever side of the market is less elastic.
Table 330
Assume that Falda and Varick can switch between producing wheat and producing cloth
at a constant rate.
Quantity Produced in 1 Hour
Bushels of WheatYards of Cloth
Falda812
Varick615
Refer to Table 330. Falda has an absolute advantage in the production of
a. wheat.
b. cloth.
c. both goods.
d. neither good.
If T represents the size of the tax on a good and Q represents the quantity of the good
that is sold, total tax revenue received by government can be expressed as
a. T/Q.
b. T+Q.
c. TxQ.
d. (TxQ)/Q.
Which of the following is a tax on labor?
a. Medicare tax
b. inheritance tax
c. sales tax
d. All of the above are labor taxes.
Scenario 91
The beforetrade domestic price of peaches in the United States is $40 per bushel. The
world price of peaches is $52 per bushel. The U.S. is a pricetaker in the market for
peaches.
Refer to Scenario 91. If trade in peaches is allowed, U.S. producers of peaches
a. will be better off.
b. will be worse off.
c. will be unaffected.
d. will experience a decrease in their collective producer surplus.
Between 1950 and today there was a
a. 20 percent drop in the number of farmers, but farm output increased by more than ten
times.
b. 30 percent drop in the number of farmers, but farm output more than tripled.
c. 40 percent drop in the number of farmers, but farm output more than doubled.
d. 70 percent drop in the number of farmers, but farm output increased by about five
times.
Belarus has a comparative advantage in the production of linen, but Russia has an
absolute advantage in the production of linen. If these two countries decide to trade,
a. Belarus should export linen to Russia.
b. Russia should export linen to Belarus.
c. trading linen would provide no net advantage to either country.
d. Without additional information about opportunity costs, this question cannot be
answered.
Critics of free trade sometimes argue that allowing imports from foreign countries
causes a reduction in the number of domestic jobs. An economist would argue that
a. foreign competition may cause unemployment in importcompeting industries, but the
effect is temporary because other industries, especially exporting industries, will be
expanding.
b. foreign competition may cause unemployment in importcompeting industries, but the
increase in consumer surplus due to free trade is more valuable than the lost jobs.
c. the critics are correct, so countries must protect their industries with tariffs or quotas.
d. foreign competition may cause unemployment in importcompeting industries, but the
increase in the variety of goods consumers can choose from is more valuable than the
lost jobs.
Which of the following should be held constant when calculating an income elasticity
of demand?
a. the price of the good
b. prices of related goods
c. tastes
d. All of the above should be held constant.
Figure 624
Refer to Figure 624. What is the amount of the tax per unit?
a. $8
b. $6
c. $4
d. $2
Eva wants to create a graph containing the prices of concert tickets and the
corresponding quantities of concert tickets demanded by customers. She should use a(n)
a. pie chart.
b. bar graph.
c. timeseries graph
d. coordinate system.
Suppose buyers of fountain drinks are required to send $0.50 to the government for
every fountain drink they buy. Further, suppose this tax causes the effective price
received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following
statements is correct?
a. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at
each quantity.
b. The price paid by buyers is $0.30 per drink more than it was before the tax.
c. Forty percent of the burden of the tax falls on sellers.
d. All of the above are correct.
If the world price of coffee is lower than Colombia’s domestic price of coffee without
trade, then Colombia
a. should import coffee.
b. has a comparative advantage in coffee.
c. should produce just enough coffee to satisfy domestic demand.
d. should produce no coffee domestically.
England can benefit from trade
a. only with nations that can produce goods England cannot produce.
b. only with less developed nations.
c. only with nations outside of Europe.
d. with any nation.
Figure 34
Lisa’s Production Possibilities FrontierBryce’s Production Possibilities Frontier
Refer to Figure 34. If the production possibilities frontiers shown are each for one year
of working, then which of the following combinations of jackets and sweaters could
Lisa and Bryce together produce in a given year?
a. 1 sweater and 22 jackets
b. 2 sweaters and 20 jackets
c. 4 sweaters and 12 jackets
d. 5 sweaters and 7 jackets
A binding price floor
(i)causes a surplus.
(ii)causes a shortage.
(iii)is set at a price above the equilibrium price.
(iv)is set at a price below the equilibrium price.
a. (i) only
b. (iii) only
c. (i) and (iii) only
d. (ii) and (iv) only
Figure 924
The following diagram shows the domestic demand and supply in a market. Assume
that the world price in this market is $20 per unit.
Refer to Figure 924. Suppose the government imposes a tariff of $10 per unit. The
amount of revenue collected by the government from the tariff is
a. $50.
b. $100.
c. $150.
d. $200.
When an economist evaluates a positive statement, he or she is primarily
a. examining evidence.
b. acting as a scientist.
c. concerned with verifying how the world is.
d. All of the above are correct.
Economists sometimes give conflicting advice because
a. graduate students in economics are encouraged to argue with each other.
b. economists have different values and scientific judgment.
c. economists acting as scientists do not like to agree with economists acting as policy
advisers.
d. economics is more of a belief system than a science.
Which of the following events would increase producer surplus?
a. Sellers’ costs stay the same and the price of the good increases.
b. Sellers’ costs increase and the price of the good stays the same.
c. Sellers’ costs increase and the price of the good decreases.
d. All of the above are correct.
When OPEC raised the price of crude oil in the 1970s, it caused the United States’
a. nonbinding price floor on gasoline to become binding.
b. binding price floor on gasoline to become nonbinding.
c. nonbinding price ceiling on gasoline to become binding.
d. binding price ceiling on gasoline to become nonbinding.
If the United States threatens to impose a tariff on Colombian coffee if Colombia does
not remove agricultural subsidies, the United States will be
a. better off regardless of how Colombia responds.
b. better off if Colombia removes the subsidies, and will be no worse off if it doesn’t.
c. worse off if Colombia doesn’t remove the subsidies in response to the threat.
d. worse off regardless of how Colombia responds.