Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to
pay $750 for the clubs but buys them on sale for $575. Cameron’s consumer surplus
from the purchase is
a. $175.
b. $575.
c. $750.
d. $1,325.
Figure 911
Refer to Figure 911. Producer surplus in this market before trade is
a. C.
b. B + C.
c. A + B + D.
d. B + C + D.
Price controls are usually enacted
a. as a means of raising revenue for public purposes.
b. when policymakers believe that the market price of a good or service is unfair to
buyers or sellers.
c. when policymakers tax a good.
d. All of the above are correct.
The law of supply and demand asserts that
a. demand curves and supply curves tend to shift to the right as time goes by.
b. the price of a good will eventually rise in response to an excess demand for that
good.
c. when the supply curve for a good shifts, the demand curve for that good shifts in
response.
d. the equilibrium price of a good will be rising more often than it will be falling.
Suppose that Firms A and B each produce highresolution computer monitors, but Firm
A can do so at a lower cost. Cassie and David each want to purchase a highresolution
computer monitor, but David is willing to pay more than Cassie. Which of the
following market outcomes is efficient?
a. Firm A produces a monitor that Cassie buys. David does not purchase a monitor.
b. Firm A produces a monitor that David buys.
c. Firm B produces a monitor that Cassie buys. David does not purchase a monitor.
d. Firm B produces a monitor that David buys.
Total surplus with a tax is equal to
a. consumer surplus plus producer surplus.
b. consumer surplus minus producer surplus.
c. consumer surplus plus producer surplus minus tax revenue.
d. consumer surplus plus producer surplus plus tax revenue.
Suppose that quantity demand rises by 10% as a result of a 15% decrease in price. The
price elasticity of demand for this good is
a. inelastic and equal to 0.67.
b. elastic and equal to 0.67.
c. inelastic and equal to 1.50.
d. elastic and equal to 1.50.
For an economist, the idea of making assumptions is regarded generally as a
a. bad idea, since doing so leads to the omission of important ideas and variables from
economic models.
b. bad idea, since doing so invariably leads to datacollection problems.
c. good idea, since doing so helps to simplify the complex world and make it easier to
understand.
d. good idea, since economic analysis without assumptions leads to complicated results
that the general public finds hard to understand.
Figure 319
Chile’s Production Possibilities FrontierColombia’s Production Possibilities
Frontier
Refer to Figure 319. Colombia would incur an opportunity cost of 24 pounds of coffee
if it increased its production of soybeans by
a. 12 pounds.
b. 18 pounds.
c. 36 pounds.
d. 48 pounds.
One advantage market economies have over centrallyplanned economies is that market
economies
a. provide an equal distribution of goods and services to households.
b. establish a significant role for government in the allocation of resources.
c. solve the problem of scarcity.
d. are more efficient.
Figure 35
Hosne’s Production Possibilities FrontierMerve’s Production Possibilities Frontier
Refer to Figure 35. If Hosne and Merve both spend all of their time making wallets,
then total production is
a. 7 wallets.
b. 8 wallets.
c. 14 wallets.
d. 28 wallets.
Figure 74
Refer to Figure 74. When the price falls from P1 to P2, which area represents the
increase in consumer surplus to new buyers entering the market?
a. BDF
b. AFG
c. BCGD
d. ABC
A consumer’s willingness to pay directly measures
a. the extent to which advertising and other external forces have influenced the
consumer’s preferences.
b. the cost of a good to the buyer.
c. how much a buyer values a good.
d. consumer surplus.
When a tax is imposed on the sellers of a good, the
a. demand curve shifts downward by less than the amount of the tax.
b. demand curve shifts downward by the amount of the tax.
c. supply curve shifts upward by less than the amount of the tax.
d. supply curve shifts upward by the amount of the tax.
Figure 912
Refer to Figure 912. With trade allowed, this country
a. exports 400 units of the good.
b. exports 800 units of the good.
c. imports 400 units of the good.
d. exports 1,600 units of the good.
Elena loves orange juice. She reads in the newspaper that 20 percent of the Florida
orange crop was destroyed by a late spring frost. Economists predict that the price of
oranges will rise by 50 percent by the end of the year. As a result, Elena’s demand for
orange juice
a. will increase but not until the end of the year.
b. increases today.
c. decreases as she looks for a substitute good.
d. shifts left today.
Table 78
During the last two days, Chad purchased a latte from two different stores. The table
below shows Chad’s willingness to pay on each day and his consumer surplus from
each purchase.
Chad’s Willingness to PayChad’s Consumer Surplus
First Day$5.00$1.25
Second Day$4.00$0.75
Refer to Table 78. The price that Chad paid for a latte on the second day is
a. $0.25 less than the amount he paid on the first day.
b. $1.00 less than the amount he paid on the first day.
c. $1.50 less than the amount he paid on the first day.
d. $0.50 less than the amount he paid on the first day.
Import quotas and tariffs produce similar results. Which of the following is not one of
those results?
a. The domestic price of the good increases.
b. Consumer surplus of domestic consumers increases.
c. Producer surplus of domestic producers increases.
d. A deadweight loss is experienced by the domestic country.
If scientists discover that steamed milk, which is used to make latts, prevents heart
attacks, what would happen to the equilibrium price and quantity of latts?
a. Both the equilibrium price and quantity would increase.
b. Both the equilibrium price and quantity would decrease.
c. The equilibrium price would increase, and the equilibrium quantity would decrease.
d. The equilibrium price would decrease, and the equilibrium quantity would increase.
In a market economy, supply and demand are important because they
a. play a critical role in the allocation of the economy’s scarce resources.
b. determine how much of each good gets produced.
c. can be used to predict the impact on the economy of various events and policies.
d. All of the above are correct.
In 2008, the Los Angeles Times asked members of the American public whether free
international trade has helped or hurt the economy. Of those surveyed,
a. 57 percent said free international trade helped the economy.
b. 26 percent said free international trade helped the economy.
c. 30 percent said free international trade hurt the economy.
d. 16 percent said free international trade hurt the economy.
When Ukraine trades with Italy,
a. both countries are likely made better off.
b. only Italy benefits since Ukraine can produce all goods at a higher level of quality
than Italy.
c. only Ukraine benefits since Italy’s low wages guarantee that Italian firms will be
profitable regardless of trade.
d. neither country will benefit since Ukraine is more efficient than Italy in the
production of all goods.
Which of the following statements is correct?
a. Advocates for druginterdiction policies that reduce the supply of illegal drugs argue
that the demand for illegal drugs may be more responsive in the long run than in the
short run.
b. The demand for illegal drugs is price inelastic.
c. Drug interdiction efforts that reduce the supply of illegal drugs may increase
drugrelated crimes.
d. All of the above are correct.
Within a country, the domestic price of a product will equal the world price if
a. trade restrictions are imposed on the product.
b. the country allows free trade.
c. the country chooses to import, but not export, the product.
d. the country chooses to export, but not import, the product.
Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His
consumer surplus is
a. $650.
b. $150.
c. $250.
d. $400.
Table 37
Assume that the farmer and the rancher can switch between producing meat and
producing potatoes at a constant rate.
Labor Hours Needed to Make 1 Pound ofPounds Produced in 24 Hours
MeatPotatoesMeatPotatoes
Farmer 6 4 4 6
Rancher 3 8 8 3
Refer to Table 37. Which of the following combinations of meat and potatoes could the
rancher not produce in 24 hours?
a. 5 pounds of meat and 1 pounds of potatoes.
b. 2 pounds of meat and 2 pounds of potatoes.
c. 1 pounds of meat and 3 pounds of potatoes.
d. 4 pounds of meat and 1 pound of potatoes.
Central planning refers to
a. markets guiding economic activity. Today many countries that had this system have
abandoned it.
b. markets guiding economic activity. Today many countries that did not have this
system have implemented it.
c. government guiding economic activity. Today many countries that had this system
have abandoned it.
d. government guiding economic activity. Today many countries that did not have this
system have implemented it.
Figure 814
Refer to Figure 814. Which of the following combinations will maximize the
deadweight loss from a tax?
a. supply 1 and demand 1
b. supply 2 and demand 2
c. supply 1 and demand 2
d. supply 2 and demand 1
Figure 712
Refer to Figure 712. If the equilibrium price is $200, what is the producer surplus?
a. $7,500
b. $3,750
c. $10,000
d. $15,000
Table 79
The only four consumers in a market have the following willingness to pay for a good:
BuyerWillingness to Pay
Ashleigh$12
Barb$15
Carolyn$19
Danita$27
Refer to Table 79. If the market price for the good is $20, who will purchase the good?
a. Danita only
b. Carolyn and Danita only
c. Ashleigh, Barb, and Carolyn only
d. All four buyers would purchase the good.
Laws that restrict the smoking of cigarettes in public places are examples of
government intervention that is intended to reduce
a. efficiency.
b. equality.
c. externalities.
d. productivity.
Figure 425
The graph below pertains to the supply of paper to colleges and universities.
Refer to Figure 425. All else equal, a major paper manufacturer filing for bankruptcy
and shutting down as a result of an IRS tax evasion investigation would cause a move
from
a. x to y.
b. y to x.
c. SA to SB.
d. SB to SA.