Which of the following is not a determinant of the price elasticity of demand for a
good?
a. the time horizon
b. the steepness or flatness of the supply curve for the good
c. the definition of the market for the good
d. the availability of substitutes for the good
A good will have a more inelastic demand, the
a. greater the availability of close substitutes.
b. broader the definition of the market.
c. longer the period of time.
d. more it is regarded as a luxury.
Assume, for Mexico, that the domestic price of beets without international trade is
higher than the world price of beets. This suggests that, in the production of beets,
a. Mexico has a comparative advantage over other countries and Mexico will export
beets.
b. Mexico has a comparative advantage over other countries and Mexico will import
beets.
c. other countries have a comparative advantage over Mexico and Mexico will export
beets.
d. other countries have a comparative advantage over Mexico and Mexico will import
beets.
Figure 31
Panel (a)Panel (b)
Refer to Figure 31. The rate of tradeoff between producing chairs and producing
couches depends on how many chairs and couches are being produced in
a. Panel (a).
b. Panel (b).
c. both Panel (a) and Panel (b).
d. neither Panel (a) nor Panel (b).
Figure 29
Panel (a) Panel (b)
Refer to Figure 29, Panel (a). The movement from point M to point K could be caused
by
a. an advance in production technology.
b. an improvement in efficiency.
c. economic growth.
d. unemployment.
Which of the following is an example of a positive, as opposed to normative,
statement?
a. When the minimum wage is increased, unemployment is a predictable consequence.
b. The income tax rate should be increased to offset the budget deficit.
c. Increasing government spending is the best way to help the economy move out of a
recession.
d. More than one of the above are positive statements.
A tax on the sellers of coffee will increase the price of coffee paid by buyers,
a. increase the effective price of coffee received by sellers, and increase the equilibrium
quantity of coffee.
b. increase the effective price of coffee received by sellers, and decrease the equilibrium
quantity of coffee.
c. decrease the effective price of coffee received by sellers, and increase the equilibrium
quantity of coffee.
d. decrease the effective price of coffee received by sellers, and decrease the
equilibrium quantity of coffee.
Figure 78
Refer to Figure 78. At the equilibrium price, consumer surplus is
a. $1,050.
b. $1,225.
c. $1,575.
d. $2,450.
The price elasticities of supply and demand affect
a. both the size of the deadweight loss from a tax and the tax incidence.
b. the size of the deadweight loss from a tax but not the tax incidence.
c. the tax incidence but not the size of the deadweight loss from a tax.
d. neither the size of the deadweight loss from a tax nor the tax incidence.
A price floor will be binding only if it is set
a. equal to the equilibrium price.
b. above the equilibrium price.
c. below the equilibrium price.
d. either above or below the equilibrium price.
If buyers today become more willing and able than before to purchase larger quantities
of stand up paddle boards (SUPs) at each price of SUPs, then
a. we will observe a movement downward and to the right along the demand curve for
SUPs.
b. we will observe a movement upward and to the left along the demand curve for
SUPs.
c. the demand curve for SUPs will shift to the right.
d. the demand curve for SUPs will shift to the left.
Which of the following is not correct?
a. Taxes levied on sellers and taxes levied on buyers are not equivalent.
b. A tax places a wedge between the price that buyers pay and the price that sellers
receive.
c. The wedge between the buyers’ price and the sellers’ price is the same, regardless of
whether the tax is levied on buyers or sellers.
d. In the new aftertax equilibrium, buyers and sellers share the burden of the tax.
In competitive markets, which of the following is not correct?
a. Firms produce identical products.
b. No individual buyer can influence the market price.
c. Some sellers can set prices.
d. Buyers are price takers.
To improve living standards, policymakers should
a. impose restrictions on foreign competition.
b. formulate policies designed to increase productivity.
c. impose tougher immigration policies.
d. provide tax breaks for the middle class.
Figure 715
Refer to Figure 715. When the price rises from P1 to P2, what area represents the
increase in producer surplus?
a. A
b. A+B
c. A+B+C
d. G
In a particular country in 2000, the average worker needed to work 40 hours to produce
55 units of output. In that same country in 2008, the average worker needed to work 30
hours to produce 45 units of output. In that country, the productivity of the average
worker
a. decreased by about 6 percent between 2000 and 2008.
b. remained unchanged between 2000 and 2008.
c. increased by about 9 percent between 2000 and 2008.
d. increased by about 18 percent between 2000 and 2008.
Figure 628
Refer to Figure 628. Suppose a tax of $4 per unit is imposed on this market. How
much will buyers pay per unit after the tax is imposed?
a. $4
b. between $4 and $7
c. between $7 and $10
d. $10
Figure 87
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 87. The deadweight loss associated with this tax amounts to
a. $80, and this figure represents the amount by which tax revenue to the government
exceeds the combined loss of producer and consumer surpluses.
b. $80, and this figure represents the surplus that is lost because the tax discourages
mutually advantageous trades between buyers and sellers.
c. $60, and this figure represents the amount by which tax revenue to the government
exceeds the combined loss of producer and consumer surpluses.
d. $60, and this figure represents the surplus that is lost because the tax discourages
mutually advantageous trades between buyers and sellers.
Most labor economists believe that the supply of labor is
a. less elastic than the demand, and, therefore, firms bear most of the burden of the
payroll tax.
b. less elastic than the demand, and, therefore, workers bear most of the burden of the
payroll tax.
c. more elastic than the demand, and, therefore, workers bear most of the burden of the
payroll tax.
d. more elastic than the demand, and, therefore, firms bear most of the burden of the
payroll tax.
Which of the following is correct? Price controls
a. always help those they are designed to help.
b. never help those they are designed to help.
c. often hurt those they are designed to help.
d. always hurt those they are designed to help.
Figure 813
Refer to Figure 813. Suppose the government places a $5 perunit tax on this good. The
producer surplus after this tax is
a. $60.
b. $45.
c. $30.
d. $15.
A surplus results when a
a. nonbinding price floor is imposed on a market.
b. nonbinding price floor is removed from a market.
c. binding price floor is imposed on a market.
d. binding price floor is removed from a market.
Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus
is
a. $8,500.
b. $15,500.
c. $24,000.
d. $39,500.
Figure 87
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 87. Which of the following statements summarizes the incidence of the
tax?
a. For each unit of the good that is sold, buyers bear onehalf of the tax burden, and
sellers bear onehalf of the tax burden.
b. For each unit of the good that is sold, buyers bear onethird of the tax burden, and
sellers bear twothirds of the tax burden.
c. For each unit of the good that is sold, buyers bear onefourth of the tax burden, and
sellers bear threefourths of the tax burden.
d. For each unit of the good that is sold, buyers bear threefourths of the tax burden, and
sellers bear onefourth of the tax burden.
Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the
long run. If an increase in the demand for cheese causes the price of cheese to increase
by 15%, then the quantity supplied of cheese will increase by
a. 0.4% in the short run and 4.6% in the long run.
b. 1.7% in the short run and 0.7% in the long run.
c. 9% in the short run and 21% in the long run.
d. 25% in the short run and 10.7% in the long run.
Figure 729
Refer to Figure 729. Which of the following statements is correct?
a. The market is in equilibrium at Q1.
b. At Q2, the cost to sellers exceeds the value to buyers.
c. At Q4, the value to buyers is less than the cost to sellers.
d. At Q3, the market is producing too much output.
When demand is elastic, an increase in price will cause
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d. no change in total revenue but a decrease in quantity demanded.
Suppose an economist develops a theory that higher food prices arise from higher gas
prices. According to the scientific method, which of the following is the economist’s
next step?
a. Collect and analyze data.
b. Go to a laboratory and generate data to test the theory.
c. Publish the theory without testing it.
d. Consult with other economists to see they agree with the theory.
Microeconomics is the study of
a. how money affects the economy.
b. how individual households and firms make decisions.
c. how government affects the economy.
d. how the economy as a whole works.
Figure 714
Refer to Figure 714. If the government imposes a price ceiling of $50 in this market,
then the new producer surplus will be
a. $200.
b. $100.
c. $125.
d. $250.
Government policies can change the costs and benefits that people face. Those policies
have the potential to
a. alter people’s behavior.
b. alter people’s decisions at the margin.
c. produce results that policymakers did not intend.
d. All of the above are correct.
In a December 2007 New York Times column, Paul Krugman noted that
a. it is difficult to find instances of trade between highwage countries in the modern era.
b. it is difficult to find instances of trade between highwage countries and lowwage
countries in the modern era.
c. the United States now imports more oil and other raw materials from other advanced
countries than from the third world.
d. the United States now imports more manufactured goods from the third world than
from other advanced countries.
Figure 55
Refer to Figure 55. Using the midpoint method, between prices of $70 and $80, price
elasticity of demand is
a. 0.33.
b. 0.4.
c. 1.33.
d. 3.