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Suppose researchers at the University of Wisconsin discover a new vitamin that
increases the milk production of dairy cows. If the demand for milk is relatively
inelastic, the discovery will
a. raise both price and total revenues.
b. lower both price and total revenues.
c. raise price and lower total revenues.
d. lower price and raise total revenues.
Ashley bakes bread that she sells at the local farmer’s market. If she purchases a new
convection oven that reduces the costs of baking bread, the
a. supply curve for Ashley’s bread will increase.
b. supply curve for Ashley’s bread will decrease.
c. demand curve for Ashley’s bread will increase.
d. demand curve for Ashley’s bread will decrease.
Figure 99
Refer to Figure 99. Total surplus in this market after trade is
a. A + B.
b. A + B + C.
c. A + B + C + D.
d. B + C + D.
In the 1990s, inflation in the United States was
a. very close to zero.
b. about 3 percent per year.
c. about 6 percent per year.
d. commonly referred to as “public enemy number one.”
Figure 32
Brazil’s Production Possibilities Frontier
Refer to Figure 32. If the production possibilities frontier shown is for 24 hours of
production, then how long does it take Brazil to make one cashew?
a. 1/10 hour
b. 1/3 hour
c. 3 hours
d. 10 hours
Suppose Spencer and Kate are the only two demanders of lemonade. Each month,
Spencer buys six glasses of lemonade when the price is $1.00 per glass, and he buys
four glasses when the price is $1.50 per glass. Each month, Kate buys four glasses of
lemonade when the price is $1.00 per glass, and she buys two glasses when the price is
$1.50 per glass. Which of the following points is on the market demand curve?
PointPriceQuantity
A$1.004
B$1.0010
C$1.502
D$1.506
a. B only
b. B and D only
c. A and C only
d. D only
When we move upward and to the left along a linear, downwardsloping demand curve,
price elasticity of demand
a. first becomes smaller, then larger.
b. always becomes larger.
c. always becomes smaller.
d. first becomes larger, then smaller.
If the crossprice elasticity of demand for two goods is 1.25, then
a. the two goods are luxuries.
b. the two goods are substitutes.
c. one of the goods is normal and the other good is inferior.
d. the demand for one of the goods conforms to the law of demand, but the demand for
the other good violates the law of demand.
Table 321
Assume that Jamaica and Norway can switch between producing coolers and producing
radios at a constant rate. The following table shows the number of coolers or number of
radios each country can produce in one day.
Output Produced in One Day
CoolersRadios
Jamaica126
Norway243
Refer to Table 321. Jamaica has a comparative advantage in the production of
a. coolers and Norway has a comparative advantage in the production of radios.
b. radios and Norway has a comparative advantage in the production of coolers.
c. both goods and Norway has a comparative advantage in the production of neither
good.
d. neither good and Norway has a comparative advantage in the production of both
goods.
Suppose that corn farmers want to increase their total revenue. Knowing that the
demand for corn is inelastic, corn farmers should
a. plant more corn so that they would be able to sell more each year.
b. increase spending on fertilizer in an attempt to produce more corn on the acres they
farm.
c. reduce the number of acres on which they plant corn.
d. contribute to a fund that promotes technological advances in corn production.
In the United States, incomes historically have grown about 2 percent per year. At this
rate, average income doubles every
a. 15 years.
b. 25 years.
c. 35 years.
d. 45 years.
Figure 418
Refer to Figure 418. Equilibrium price and quantity are, respectively,
a. $15 and 200 units.
b. $25 and 600 units.
c. $25 and 400 units.
d. $35 and 200 units.
Figure 86
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 86. Total surplus with the tax in place is
a. $1,500.
b. $3,600.
c. $4,500.
d. $6,000.
A tax imposed on the sellers 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.
Figure 418
Refer to Figure 418. At a price of $35, there would be
a. a shortage, and the price would tend to rise from $35 to a higher price.
b. a surplus, and the price would tend to rise from $35 to a higher price.
c. excess demand, and the price would tend to fall from $35 to a lower price.
d. excess supply, and the price would tend to fall from $35 to a lower price.
Figure 625
Refer to Figure 625. How much tax revenue does this tax generate for the government?
a. $150
b. $180
c. $250
d. $300
Figure 26
Refer to Figure 26. The opportunity cost of this economy moving from point I to point
H is
a. 120 pillows.
b. 120 blankets.
c. 120 blankets and 120 pillows.
d. 200 blankets.
Figure 28
Refer to Figure 28. Inefficient production is represented by which point(s)?
a. K, M
b. L
c. L, M
d. M
If a binding price floor is imposed on the video game market, then
a. the quantity of video games demanded will decrease.
b. the quantity of video games supplied will increase.
c. a surplus of video games will develop.
d. All of the above are correct.
Figure 54
Refer to Figure 54. Suppose the point labeled B is the “halfway point” on the demand
curve and it corresponds to a price of $5.00. Then, between prices of $4.99 and $5.01,
the price elasticity of demand is
a. less than 1 but greater than zero.
b. equal to 1.
c. greater than 1.
d. equal to zero.
Which is the most accurate statement about trade?
a. Trade can make every nation better off.
b. Trade makes some nations better off and others worse off.
c. Trading for a good can make a nation better off only if the nation cannot produce that
good itself.
d. Trade helps rich nations and hurts poor nations.
When a tax is placed on the buyers of cell phones, the size of the cell phone market
a. and the effective price received by sellers both decrease.
b. decreases, but the effective price received by sellers increases.
c. increases, but the effective price received by sellers decreases.
d. and the effective price received by sellers both increase.
Figure 213
Refer to Figure 213. Which of the following statements is true about point G for this
economy?
a. Point G is currently unattainable.
b. Point G is efficient.
c. At point G, more cakes are produced than cookies.
d. There is unemployment at point G.
The opportunity cost of an item is
a. the number of hours that one must work in order to buy one unit of the item.
b. what you give up to get that item.
c. always less than the dollar value of the item.
d. always greater than the cost of producing the item.
Hot dogs and hot dog buns are complements. An increase in the price of flour used to
make hot dogs buns will
a. increase consumer surplus in the market for hot dog buns and decrease producer
surplus in the market for hot dogs.
b. increase consumer surplus in the market for hot dogs and increase producer surplus
in the market for hot dog buns.
c. decrease consumer surplus in the market for hot dog buns and increase producer
surplus in the market for hot dogs.
d. decrease consumer surplus in the market for hot dog buns and decrease producer
surplus in the market for hot dogs.
A likely example of complementary goods for most people would be
a. canoes and paddles.
b. snow mobiles and sofas.
c. coffee and tea.
d. tennis balls and basketballs.
Which of the following should be held constant when calculating an income elasticity
of demand?
a. the quantity of the good demanded
b. the price of the good
c. income
d. All of the above should be held constant.
Figure 718
Refer to Figure 718. If total surplus is $240 and consumer surplus is
a. $100, then the price of the good is $130.
b. $130, then the price of the good is $120.
c. $160, then the price of the good is $100.
d. $120, then the price of the good is $90.
In a particular country in 2008, the average worker had to work 40 hours to produce
100 units of output. In that same country in 2018, the average worker needed to work
35 hours to produce 94.5 units of output. In that country, the productivity of the average
worker
a. increased by 2 percent between 2008 and 2018.
b. increased by 8 percent between 2008 and 2018.
c. remained unchanged between 2008 and 2018.
d. decreased by 2 percent between 2008 and 2018.
Which of the following statements about trade is false?
a. Trade increases competition.
b. With trade, one country wins and one country loses.
c. Bulgaria can benefit, potentially, from trade with any other country.
d. Trade allows people to buy a greater variety of goods and services at lower cost.
Figure 910. The figure applies to Mexico and the good is rifles.
Refer to Figure 910. With trade, the equilibrium price of rifles and the equilibrium
quantity of rifles demanded in Mexico are
a. P1 and Q1.
b. P1 and Q2.
c. P2 and Q2.
d. P0 and Q0.
Figure 922
The following diagram shows the domestic demand and domestic supply in a market. In
addition, assume that the world price in this market is $40 per unit.
Refer to Figure 922. With free trade, the country imports
a. 300 units of the good.
b. 600 units of the good.
c. 900 units of the good.
d. 1,200 units of the good.
Figure 422
Refer to Figure 422. What is the equilibrium quantity in this market?
a. 4 units
b. 8 units
c. 12 units
d. 16 units
Figure 213
Refer to Figure 213. Which of the following combinations of points are both efficient
and attainable for this economy?
a. G, H
b. F, I, L
c. F, G, H, I, L
d. J, K
