Figure 95
The figure illustrates the market for tricycles in a country.
Refer to Figure 95. Without trade, consumer surplus amounts to
a. $810.
b. $1,620.
c. $3,240.
d. $6,480.
Table 75
For each of three potential buyers of oranges, the table displays the willingness to pay
for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only
three buyers of oranges, and only three oranges can be supplied per day.
First OrangeSecond OrangeThird Orange
Allison$2.00$1.50$0.75
Bob$1.50$1.00$0.60
Charisse$0.75$0.25$0
Refer to Table 75. If the market price of an orange is $0.90, then the market quantity of
oranges demanded per day is
a. 5.
b. 2.
c. 3.
d. 4.
Figure 65
Refer to Figure 65. Suppose the market is initially in equilibrium. Then the
government imposes a price control, as represented by the solid horizontal line on the
graph. If the price control is a price floor, then the price control
a. causes the quantity demanded to decrease by 50 units, relative to the initial
equilibrium.
b. causes the quantity supplied to increase by 40 units, relative to the initial equilibrium.
c. means that some firms will not be able to sell all that they want
d. All of the above are correct.
Welfare economics is the study of
a. the wellbeing of less fortunate people.
b. welfare programs in the United States.
c. how the allocation of resources affects economic wellbeing.
d. the effect of income redistribution on work effort.
If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in
quantity supplied, then the price increase is about
a. 0.24%.
b. 4.2%.
c. 6%.
d. 6.2%.
Suppose the U.S. and Japan can both produce airplanes and televisions and the U.S. has
a comparative advantage in the production of airplanes while Japan has a comparative
advantage in the production of televisions. Also suppose the U.S. has an absolute
advantage in the production of both airplanes and televisions. The U.S. should
a. not trade airplanes or televisions with Japan.
b. import airplanes from Japan and export televisions to Japan.
c. export airplanes to Japan and import televisions from Japan.
d. export both airplanes and televisions to Japan.
Suppose an economy produces two goods, food and machines. This economy always
operates on its production possibilities frontier. Last year, it produced 1000 units of
food and 47 machines. This year, it is producing 1050 units of food and 52 machines.
Which of the following events could not explain the increase in output?
a. a reduction in unemployment
b. an increase in available labor
c. an improvement in technology
d. Any of these events could explain the increase in output.
Figure 427
Panel (a)Panel (b)
Panel (c)Panel (d)
Refer to Figure 427. Which of the four panels represents the market for pizza delivery
in a college town as we go from summer to the beginning of the fall semester?
a. Panel (a)
b. Panel (b)
c. Panel (c)
d. Panel (d)
Figure 618
The vertical distance between points A and B represents the tax in the market.
Refer to Figure 618. The price that buyers pay after the tax is imposed is
a. $8.
b. $10.
c. $16.
d. $24.
Allen tutors in his spare time for extra income. Buyers of his service are willing to pay
$40 per hour for as many hours Allen is willing to tutor. On a particular day, he is
willing to tutor the first hour for $10, the second hour for $18, the third hour for $28,
and the fourth hour for $40. Assume Allen is rational in deciding how many hours to
tutor. His producer surplus is
a. $40.
b. $64.
c. $12.
d. $56.
Demand is said to be unit elastic if quantity demanded
a. changes by the same percent as the price.
b. changes by a larger percent than the price.
c. changes by a smaller percent than the price.
d. does not respond to a change in price.
Suppose after graduating from college you get a job working at a bank earning $30,000
per year. After two years of working at the bank earning the same salary, you have an
opportunity to enroll in a oneyear graduate program that would require you to quit your
job at the bank. Which of the following should not be included in a calculation of your
opportunity cost?
a. the cost of tuition and books to attend the graduate program
b. the $30,000 salary that you could have earned if you retained your job at the bank
c. the $45,000 salary that you will be able to earn after having completed your graduate
program
d. the value of insurance coverage and other employee benefits you would have
received if you retained your job at the bank
Table 77
BuyerWillingness to Pay
Michael$500
Earvin$400
Larry$350
Charles$300
Refer to Table 77. You are selling extra tickets to the Midwest Regional Sweet 16
game in the men’s NCAA basketball tournament. The table shows the willingness to
pay of the four potential buyers in the market for a ticket to the game. Which of the
following graphs represents the market demand curve?
a.
b.
c.
d.
When demand is perfectly inelastic, the price elasticity of demand
a. is zero, and the demand curve is vertical.
b. is zero, and the demand curve is horizontal.
c. approaches infinity, and the demand curve is vertical.
d. approaches infinity, and the demand curve is horizontal.
In the short run, which of the following is not correct?
a. Increasing the money supply increases the demand for goods and services.
b. Increasing the money supply encourages firms to hire more workers.
c. Lowering the money supply leads to a higher level of unemployment.
d. Policies that encourage higher employment will also induce a lower rate of inflation.
Figure 921
The following diagram shows the domestic demand and domestic supply for a market.
In addition, assume that the world price in this market is $40 per unit.
Refer to Figure 921. With free trade allowed, this country
a. exports 200 units of the good.
b. exports 400 units of the good.
c. imports 400 units of the good.
d. exports 800 units of the good.
Figure 322
Alice and Betty’s Production Possibilities in one 8hour day.
Alice’s Production Possibilities FrontierBetty’s Production Possibilities Frontier
Refer to Figure 322. Which of the following statements is correct regarding absolute
advantage?
a. Alice has an absolute advantage in the production of both lemonade and pizzas.
b. Betty has an absolute advantage in the production of both lemonade and pizzas.
c. Alice has an absolute advantage in the production of pizzas while Betty has an
absolute advantage in the production of lemonade.
d. Alice has an absolute advantage in the production of lemonade while Betty has an
absolute advantage in the production of pizzas.
Table 338
Assume that England and Spain can switch between producing cheese and producing
bread at a constant rate.
Labor Hours Needed to Make 1 Unit ofNumber of Units Produced in 40 Hours
CheeseBread CheeseBread
England14 4010
Spain48 105
Refer to Table 338. England should export
a. cheese and import bread.
b. bread and import cheese.
c. both goods and import neither good.
d. neither good and import both goods.
Figure 421
Refer to Figure 421. At a price of $4, there is a
a. surplus of 1 unit.
b. surplus of 3 units.
c. shortage of 1 unit.
d. shortage of 3 units.
When society gets the most it can from its scarce resources, then the outcome is called
a. equitable.
b. efficient.
c. normal.
d. efficacious.
For economists, substitutes for laboratory experiments often come in the form of
a. natural experiments offered by history.
b. untested theories.
c. “rules of thumb” and other such conveniences.
d. reliance upon the wisdom of elders in the economics profession.
Table 57
The following table shows a portion of the demand schedule for a particular good at
various levels of income.
PriceQuantity Demanded
(Income = $5,000)Quantity Demanded
(Income = $7,500)Quantity Demanded
(Income = $10,000)
$24234
$20468
$166912
$1281216
$8101520
$4121824
Refer to Table 57. Using the midpoint method, when income equals $5,000, what is the
price elasticity of demand between $8 and $12?
a. 0.56
b. 0.75
c. 1.33
d. 1.80
Which of the following expressions is valid for the price elasticity of demand?
a. Price elasticity of demand = .
b. Price elasticity of demand = .
c. Price elasticity of demand = .
d. Price elasticity of demand = .
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
the price is $4 but only 6 units are bought and sold, consumer surplus will be
a. $21.
b. $28.
c. $36.
d. $42.
On a downwardsloping linear demand curve, total revenue reaches its maximum value
at the
a. midpoint of the demand curve.
b. lower end of the demand curve.
c. upper end of the demand curve.
d. It is impossible to tell without knowing prices and quantities demanded.
Producer surplus is the area
a. under the supply curve.
b. between the supply and demand curves.
c. below the price and above the supply curve.
d. under the demand curve and above the price.
Suppose that Amanda receives a pay increase. We would expect
a. to observe Amanda moving down and to the right along her given demand curve.
b. Amanda’s demand for inferior goods to decrease.
c. Amanda’s demand for each of two goods that are complements to increase.
d. Amanda’s demand for normal goods to decrease.
Figure 34
Lisa’s Production Possibilities FrontierBryce’s Production Possibilities Frontier
Refer to Figure 34. If the production possibilities frontier shown for Lisa is for 4
months of work, then how long does it take Lisa to produce one jacket?
a. 1/4 month
b. 1/2 month
c. 2 months
d. 4 months
While in college, Marty and Laura each buy 15 bus tickets per month. After they
graduate and have fulltime jobs, Marty buys 0 bus tickets per month and Laura buys 28
bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty’s
a. is negative, and Laura’s is positive.
b. is positive, and Laura’s is negative.
c. is zero, and Laura’s is positive.
d. is zero, and Laura’s is negative.
Consider two individuals — Marquis and Serena — each of whom would like to wear
sweaters and eat tasty food. The gains from trade between Marquis and Serena are most
obvious in which of the following cases?
a. Marquis is very good at knitting sweaters and at cooking tasty food, but Serena’s
skills in both of these activities are very poor.
b. Marquis and Serena both are very good at cooking tasty food, but neither has the
necessary skills to knit a sweater.
c. Marquis’s cooking and knitting skills are very poor, and Serena’s cooking and
knitting skills are also very poor.
d. Marquis’s skills are such that he can produce only sweaters, and Serena’s skills are
such that she can produce only tasty food.
Table 337
Assume that Aruba and Iceland can switch between producing coolers and producing
radios at a constant rate.
Labor Hours
Needed to Make 1
CoolerRadio
Aruba25
Iceland14
Refer to Table 337. Iceland should export
a. coolers and import radios.
b. radios and import coolers.
c. both goods and import neither good.
d. neither good and import both goods.
Figure 811
Refer to Figure 811. The tax revenue that the government collects equals
a. .
b. .
c. .
d. .