Figure 87
The vertical distance between points A and B represents a tax in the market.
Refer to Figure 87. Suppose a 20th unit of the good were sold by a seller to a buyer.
Which of the following statements is correct?
a. For the 20th unit, the difference between the buyer’s value and the seller’s cost is less
than the tax per unit.
b. For the 20th unit, the difference between the buyer’s value and the seller’s cost is
greater than the tax per unit.
c. For the 20th unit, the difference between the buyer’s value and the seller’s cost is
equal to the tax per unit.
d. It makes sense for the buyer to buy and for the seller to sell the 20th unit, with or
without the tax in place.
Figure 711
Refer to Figure 711. If the supply curve is S and the demand curve shifts from D to D’,
what is the increase in producer surplus to existing producers?
a. $625
b. $2,500
c. $3,125
d. $5,625
Figure 88
Suppose the government imposes a $10 per unit tax on a good.
Refer to Figure 88. The deadweight loss of the tax is the area
a. B+D.
b. C+F.
c. A+C+F+J.
d. B+C+D+F.
Which of the following was not a reason OPEC failed to keep the price of oil high?
a. Over the long run, producers of oil outside of OPEC responded to higher prices by
increasing oil exploration and by building new extraction capacity.
b. Consumers responded to higher prices with greater conservation.
c. Consumers replaced old inefficient cars with newer efficient ones.
d. The agreement OPEC members signed allowed each country to produce as much oil
as each wanted.
Suppose the world price of a television is $300. Before Paraguay allowed trade in
televisions, the price of a television there was $350. Once Paraguay began allowing
trade in televisions with other countries, Paraguay began
a. importing televisions and the price of a television in Paraguay decreased to $300.
b. importing televisions and the price of a television in Paraguay remained at $350.
c. exporting televisions and the price of a television in Paraguay decreased to $300.
d. exporting televisions and the price of a television in Paraguay remained at $350.
Figure 59
Refer to Figure 59. Using the midpoint method, the price elasticity of demand between
point C and point D is about
a. 0.29.
b. 0.54.
c. 1.86.
d. 2.0.
The benefit to sellers of participating in a market is measured by the
a. amount of taxes collected on sales of the good.
b. producer surplus.
c. amount sellers receive for their product.
d. sellers’ willingness to sell.
Which of the following is not a question that macroeconomists address?
a. Why is average income high in some countries while it is low in others?
b. Why does the price of oil rise when war erupts in the Middle East?
c. Why do production and employment expand in some years and contract in others?
d. Why do prices rise rapidly in some periods of time while they are more stable in
other periods?
Figure 717
Refer to Figure 717. If the demand curve is D and the supply curve shifts left from S to
S’, what is the change in producer surplus when comparing the new equilibrium with
the original equilibrium?
a. Producer surplus increases by $225.
b. Producer surplus increases by $675.
c. Producer surplus decreases by $225.
d. Producer surplus decreases by $675.
The income of a typical worker in a country is most closely linked to which of the
following?
a. population
b. productivity
c. market power
d. government policies
The nation of Aquilonia has decided to end its policy of not trading with the rest of the
world. When it ends its trade restrictions, it discovers that it is importing rice, exporting
steel, and neither importing nor exporting TVs. We can conclude that producer surplus
in Aquilonia is now
a. higher in the steel market, lower in the rice market, and unchanged in the TV market.
b. higher in the rice and steel markets, and unchanged in the TV market.
c. lower in the rice and TV markets, and higher in the steel market.
d. lower in the rice and steel markets, and the same in the TV market.
Table 23
Production Possibilities for Footville
ShoesSocks
8000
600400
400700
200900
01000
Refer to Table 23. Which of the following statements is correct?
a. The opportunity cost of an additional 200 shoes is constant at 200 socks.
b. The opportunity cost of an additional 200 shoes is constant at 300 socks.
c. Footville’s production possibilities frontier is a straight, downwardsloping line.
d. The opportunity cost of an additional 200 shoes increases as more socks are
produced.
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, at a price of $8, what is the income
elasticity of demand when income rises from $7,500 to $10,000?
a. 0.00
b. 0.41
c. 1.00
d. 2.45
The minimum wage, if it is binding, lowers the incomes of
a. no workers.
b. only those workers who become unemployed.
c. only those workers who have jobs.
d. all workers.
Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15
each. Lauren’s willingness to pay was $35, Leslie’s willingness to pay was $25, and
Lydia’s willingness to pay was $30. Total consumer surplus for these three would be
a. $15.
b. $30.
c. $45.
d. $90.
Figure 810
Refer to Figure 810. Suppose the government imposes a tax that reduces the quantity
sold in the market after the tax to Q2. With the tax, the total surplus is
a. [1/2 x (P0P5) x Q5] + [1/2 x (P50) x Q5].
b. [1/2 x (P0P2) x Q2] +[(P2P8) x Q2] + [1/2 x (P80) x Q2].
c. (P2P8) x Q2.
d. 1/2 x (P2P8) x (Q5Q2).
When a binding price ceiling is imposed on a market to benefit buyers,
a. no buyers actually benefit.
b. some buyers benefit, but no buyers are harmed.
c. some buyers benefit, and some buyers are harmed.
d. all buyers benefit.
Figure 321
Uzbekistan’s Production Possibilities FrontierAzerbaijan’s Production Possibilities
Frontier
Refer to Figure 321. Suppose Uzbekistan decides to increase its production of bolts by
10. What is the opportunity cost of this decision?
a. 1/2 nail
b. 2 nails
c. 5 nails
d. 20 nails
The nation of Farmland forbids international trade. In Farmland, you can exchange 1
pound of beef for 2 pounds of pepper. In other countries, you can exchange 1 pound of
beef for 4 pounds of pepper. These facts indicate that
a. Farmland has a comparative advantage, relative to other countries, in producing beef.
b. other countries have an absolute advantage, relative to Farmland, in producing beef.
c. the price of beef in Farmland exceeds the world price of beef.
d. if Farmland were to allow trade, it would export pepper.
Figure 513
Refer to Figure 513. Between point A and point B on the graph, demand is
a. perfectly elastic.
b. inelastic.
c. unit elastic.
d. elastic, but not perfectly elastic.
Figure 424
The diagram below pertains to the demand for turkey in the United States.
Refer to Figure 424. All else equal, sellers expecting the price of turkey to rise in the
future would cause a current move from
a. DA to DB.
b. DB to DA.
c. x to y.
d. y to x.
Figure 622
Refer to Figure 622. The effective price sellers receive after the tax is imposed is
a. $2.00.
b. $3.50.
c. $5.00.
d. $3.00.
The world price of a ton of steel is $650. Before Russia allowed trade in steel, the price
of a ton of steel there was $1,000. Once Russia allowed trade in steel with other
countries, Russia began
a. exporting steel and the price per ton in Russia decreased to $650.
b. exporting steel and the price per ton in Russia remained at $1,000.
c. importing steel and the price per ton in Russia decreased to $650.
d. importing steel and the price per ton in Russia remained at $1,000.
A survey of professional economists revealed that more than threefourths of them
agreed with a number of statements, including which of the following?
a. Tariffs and import quotas usually reduce general economic welfare.
b. A large federal budget deficit has an adverse effect on the economy.
c. Minimum wage increases unemployment among young and unskilled workers.
d. All of the above are correct.
Which of the following concepts cannot be illustrated by the production possibilities
frontier?
a. efficiency
b. opportunity cost
c. equality
d. tradeoffs
The two basic approaches that a country can take as a means to achieve free trade are
the
a. unilateral approach and the multilateral approach.
b. shortrun approach and the longrun approach.
c. continental approach and the global approach.
d. industry approach and the security approach.
Who gets scarce resources in a market economy?
a. the government
b. whoever the government decides gets them
c. whoever wants them
d. whoever is willing and able to pay the price
Figure 92
The figure illustrates the market for calculators in a country.
Refer to Figure 92. With free trade, producer surplus is
a. $845.
b. $1,620.
c. $1,690.
d. $3,240.
For a particular good, an 8 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 necessity.
c. The market for the good is broadly defined.
d. The relevant time horizon is long.
The slope of a steep upwardsloping line will be a
a. small positive number.
b. large positive number.
c. small negative number.
d. large negative number.
Table 36
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Machine Minutes
Needed to Make 1
ToothbrushHairbrush
Zimbabwe310
Portugal56
Refer to Table 36. Which of the following combinations of toothbrushes and
hairbrushes could Zimbabwe not produce in 120 minutes?
a. 5 toothbrushes and 11 hairbrushes
b. 10 toothbrushes and 9 hairbrushes
c. 20 toothbrushes and 6 hairbrushes
d. 30 toothbrushes and 3 hairbrushes
If the government levies a $5 tax per MP3 player on buyers of MP3 players, then the
price paid by buyers of MP3 players would likely
a. increase by more than $5.
b. increase by exactly $5.
c. increase by less than $5.
d. decrease.
Which of the following causes a shortage of a good?
a. a binding price floor
b. a binding price ceiling
c. a tax on the good
d. None of the above is correct.
Consider two individuals — Howard and Mai — each of whom would like to wear
sweaters and eat tasty food. The gains from trade between Howard and Mai are least
obvious in which of the following cases?
a. Howard is very good at knitting sweaters and at cooking tasty food, but Mai’s skills
in both of these activities are very poor.
b. Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good
at knitting sweaters, but she knows nothing about cooking tasty food.
c. Howard’s skills in knitting sweaters are fairly good, but his skills in cooking tasty
food are fairly bad; Mai’s skills in knitting sweaters are fairly bad, but her skills in
cooking tasty food are fairly good.
d. Howard’s skills are such that he can produce only sweaters, and Mai’s skills are such
that she can produce only tasty food.
Figure 623
Refer to Figure 623. The price paid by buyers after the tax is imposed is
a. $3.
b. $4.
c. $5.
d. $6.