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Figure 629
Suppose the government imposes a $2 on this market.
Refer to Figure 629. Suppose D1 represents the demand curve for paperback novels,
D2 represents the demand curve for gasoline, and S1 represents the supply curve for
paperback novels and gasoline. After the imposition of the $2 on paperback novels and
on gasoline, the
a. buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback
novels.
b. sellers of gasoline bear a higher burden of the $2 tax than sellers of paperback
novels.
c. buyers of gasoline bear an equal burden of the $2 tax as buyers of paperback novels.
d. Both a) and b) are correct.
Figure 69
Refer to Figure 69. At which price would a price floor be nonbinding?
a. $8
b. $7
c. $6
d. $9
Figure 613
This figure shows the market demand and market supply curves for good X.
Refer to Figure 613. Which of the following statements is correct?
a. A price ceiling set at $6 would be binding, but a price ceiling set at $4 would not be
binding.
b. A price floor set at $4 would be binding, but a price ceiling set at $4 would not be
binding.
c. A price ceiling set at $3.50 would result in a surplus.
d. A price floor set at $6.50 would result in a surplus.
HTMLENTITY#8203HTMLENTITYConsider the US market for chocolate, a market
in which the government has imposed a price ceiling. Which of the following events
could convert the price ceiling from a nonbinding to a binding price ceiling?
a. HTMLENTITY#8203HTMLENTITYa government study that shows that consuming
chocolate increases the incidence of cancer.
b. HTMLENTITY#8203HTMLENTITYa large increase in the size of the cocoa bean
crop; cocoa beans are used to produce chocolate.
c. HTMLENTITY#8203HTMLENTITYSouth American cocoa bean producers refuse
to ship to chocolate producers in the US.
d. HTMLENTITY#8203HTMLENTITYa sharp drop in consumer income; chocolate is
a normal good.
Table 52
PriceQuantity
$2500
$20030
$15070
$100110
$50150
$0190
Refer to Table 52. Using the midpoint method, if the price falls from $200 to $150, the
absolute value of the price elasticity of demand is
a. 5.3.
b. 2.8.
c. 0.8.
d. 0.36.
Suppose a market has the demand function Qd=200.5P. At which of the following prices
will total revenue be maximized?
a. $10
b. $20
c. $30
d. $40
You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at
Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on
the same night, and his concert is your nextbest alternative activity. Tickets to see Willie
Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and
hear Willie Nelson perform. Assume there are no other costs of seeing either event.
Based on this information, at a minimum, how much would you have to value seeing
the Cubs play the White Sox to accept the ticket and go to the game?
a. $0
b. $10
c. $40
d. $50
Which of the following events must result in a lower price in the market for Snickers?
a. Demand for Snickers increases, and supply of Snickers decreases.
b. Demand for Snickers and supply of Snickers both decrease.
c. Demand for Snickers decreases, and supply of Snickers increases.
d. Demand for Snickers and supply of Snickers both increase
Figure 519
Refer to Figure 519. Which of the following statements is correct?
a. Supply curve A is perfectly elastic.
b. Supply curve B is perfectly inelastic.
c. Supply curve C is more inelastic than supply curve D.
d. Supply curve D is unit elastic.
The price elasticity of demand measures the
a. magnitude of the response in quantity demanded to a change in price.
b. direction of the shift in the demand curve in response to a market event.
c. size of the shortage created by the increase in demand.
d. responsiveness of quantity demanded to a change in income.
An economic theory about international trade that is based on the assumption that there
are only two countries trading two goods
a. is useless, since the real world has many countries trading many goods.
b. can be useful only in situations involving two countries and two goods.
c. can be useful in the classroom, but is useless in the real world.
d. can be useful in helping economists understand the complex world of international
trade involving many countries and many goods.
When the government prevents prices from adjusting naturally to supply and demand,
a. it equates the amount buyers want to buy with the amount sellers want to sell.
b. it adversely affects the allocation of resources.
c. it improves equality and efficiency.
d. it improves efficiency but reduces equality.
Figure 84
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 84. The price that sellers effectively receive after the tax is imposed is
a. $12.
b. between $8 and $12.
c. between $5 and $8.
d. $5.
If Shawn can produce more donuts in one day than Sue can produce in one day, then
a. Shawn has a comparative advantage in the production of donuts.
b. Sue has a comparative advantage in the production of donuts.
c. Shawn has an absolute advantage in the production of donuts.
d. Sue has an absolute advantage in the production of donuts.
Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. If this country allows free trade in tricycles,
a. consumers will gain and producers will lose.
b. consumers will lose and producers will gain.
c. both consumers and producers will gain.
d. both consumers and producers will lose.
A common argument in favor of restricting trade
a. concerns the strategy of bargaining.
b. is that efforts should be made to get new industries started.
c. emphasizes the belief that all countries should play by the same rules.
d. All of the above are correct.
Producer surplus equals the
a. value to buyers minus the amount paid by buyers.
b. value to buyers minus the cost to sellers.
c. amount received by sellers minus the cost to sellers.
d. amount received by sellers minus the amount paid by buyers.
Studies of the effects of the minimum wage typically find that a 10 percent increase in
the minimum wage depresses teenage employment by about
a. 1 to 3 percent.
b. 5 to 7 percent.
c. 10 percent.
d. None of the above is correct because studies show no decrease in teenage
employment.
The marginal benefit Kyra gets from eating a second sandwich is
a. the total benefit Kyra gets from eating two sandwiches minus the total benefit she
gets from eating one sandwich.
b. the same as the total benefit she gets from eating two sandwiches.
c. less than the marginal cost of eating the second sandwich since she chose to eat the
second sandwich.
d. the total benefit Kyra gets from eating three sandwiches minus the total benefit she
gets from eating two sandwiches.
Figure 910. The figure applies to Mexico and the good is rifles.
Refer to Figure 910. Mexico’s gains from trade are represented by the area that is
bounded by the points
a. (0, P0), (Q0, P0), (Q2, P1), and (0, P1).
b. (0, P1), (0, P2), (Q0, P0), and (Q1, P1).
c. (Q0, P0), (Q2, P1), and (Q1, P1).
d. (0, P0), (0, P2), and (Q0, P0).
In the early 19th century, the Russian government sent doctors to southern Russian
villages to provide assistance during a cholera epidemic. The villagers noticed that
wherever doctors appeared, people died. Therefore, many doctors were chased away
from villages, and some were even killed. This reaction to the correlation between
doctors and deaths is most likely a problem of
a. omitted variables.
b. reverse causality.
c. government propaganda.
d. medical incompetence.
If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the deadweight
loss from the tax
a. remains constant.
b. increases by a factor of 4.
c. increases by a factor of 9.
d. increases by a factor of 16.
When the government implements programs such as progressive income tax rates,
which of the following is likely to occur?
a. equality is increased and efficiency is increased.
b. equality is increased and efficiency is decreased.
c. equality is decreased and efficiency is increased.
d. equality is decreased and efficiency is decreased.
Table 716
PriceQuantity
DemandedQuantity
Supplied
$12.00036
$10.00330
$ 8.00624
$ 6.00918
$ 4.001212
$ 2.00156
$ 0.00180
Refer to Table 716. Both the demand curve and the supply curve are straight lines. If 6
units are bought and sold, then total surplus is
a. $18 lower than it would be if the equilibrium number of units were bought and sold.
b. $22 lower than it would be if the equilibrium number of units were bought and sold.
c. $26 lower than it would be if the equilibrium number of units were bought and sold.
d. $6 higher than it would be if the equilibrium number of units were bought and sold.
Table 712
The numbers reveal the opportunity costs of providing 10 piano lessons of equal
quality.
SellerCost
Marcia$200
Jan$250
Cindy$350
Greg$400
Peter$700
Bobby$800
Refer to Table 712. You wish to purchase 10 piano lessons, so you take bids from each
of the sellers. You will not accept a bid below a seller’s cost because you are concerned
that the seller will not provide all 10 lessons. What bid will you accept?
a. $351
b. $251
c. $249
d. $199
Figure 819
The vertical distance between points A and B represents the original tax.
Refer to Figure 819. The original tax can be represented by the vertical distance AB.
Suppose the government is deciding whether to lower the tax to CD or raise it to FG.
Which of the following statements is not correct?
a. Compared to the original tax, the larger tax will increase tax revenue.
b. Compared to the original tax, the smaller tax will decrease deadweight loss.
c. Compared to the original tax, the smaller tax will decrease tax revenue.
d. Compared to the original tax, the larger tax will increase deadweight loss.
A decrease in supply will cause the largest increase in price when
a. both supply and demand are inelastic.
b. both supply and demand are elastic.
c. demand is elastic and supply is inelastic.
d. demand is inelastic and supply is elastic.
For a particular good, a 2 percent increase in price causes a 12 percent decrease in
quantity demanded. Which of the following statements is most likely applicable to this
good?
a. There are no close substitutes for this good.
b. The good is a luxury.
c. The market for the good is broadly defined.
d. The relevant time horizon is short.
Which of the following events would unambiguously cause an increase in the
equilibrium price of cotton shirts?
a. an increase in the price of wool shirts and a decrease in the price of raw cotton
b. a decrease in the price of wool shirts and a decrease in the price of raw cotton
c. an increase in the price of wool shirts and an increase in the price of raw cotton
d. a decrease in the price of wool shirts and an increase in the price of raw cotton
Suppose price is measured along the vertical axis on a graph. When price changes, there
will be a
a. rotation of the curve.
b. shift of the curve.
c. movement along the curve.
d. change in the slope of the curve.
The beforetrade price of fish in Denmark is $10.00 per pound. The world price of fish is
$6.00 per pound. Denmark is a pricetaker in the fish market. If Denmark begins to
allow trade in fish, its consumers of fish will become
a. better off, its producers of fish will become better off, and on balance the citizens of
Denmark will become better off.
b. worse off, its producers of fish will become better off, and on balance the citizens of
Denmark will become worse off.
c. worse off, its producers of fish will become better off, and on balance the citizens of
Denmark will become worse off.
d. better off, its producers of fish will become worse off, and on balance the citizens of
Denmark will become better off.
Suppose that a decrease in the price of good X results in fewer units of good Y being
demanded. This implies that X and Y are
a. complementary goods.
b. normal goods.
c. inferior goods.
d. substitute goods.
