econ test 1

Refer to Figure 6-26. The effective price received by sellers after the tax is imposed is a. $8. b. $16. c. $14. d. $12.

a. $8.

In the economy of Talikastan in 2015, consumption was $1000, GDP was $1950, government purchases were $500, and investment was $700. What were Talikastan's net exports in 2015? a. -$250 b. $250 c. $2200 d. Net exports cannot be calculated from the information given.

a. -$250

A farmer sells five pounds of pecans to a Smith's Fresh Pecans for $10. Smith's Fresh Pecans resells three pounds for $4.50 per pound. The remaining pecans are shelled and canned and sold for a total of $8.00 Taking these transactions into account, how much is added to GDP? a. $22.50 b. $29.50 c. $21.50 d. $31.50

c. $21.50

Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity? a. D1 b. D2 c. D3 d. All of the above are equally elastic.

c. D3

When a tax is placed on the sellers of a product, the a. size of the market decreases. b. effective price received by sellers decreases, and the price paid by buyers increases. c. supply of the product decreases. d. All of the above are correct.

d. All of the above are correct.

Refer to Figure 5-3. Which demand curve is unit elastic? a. A b. B c. D d. None of the above.

d. None of the above.

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.

d. The agreement OPEC members signed allowed each country to produce as much oil as each wanted.

A legal maximum on the price at which a good can be sold is called a price a. floor. b. subsidy. c. support. d. ceiling.

d. ceiling.

If nominal GDP is $10 trillion and real GDP is $12 trillion, then the GDP deflator is a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year. b. 83.33, and this indicates that the price level has increased by 83.33 percent since the base year. c. 120, and this indicates that the price level has increased by 20 percent since the base year. d. 120, and this indicates that the price level has increased by 120 percent since the base year.

a. 83.33, and this indicates that the price level has decreased by 16.67 percent since the base year.

Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of a. both taxes would fall more heavily on the buyers than on the sellers. b. the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers. c. the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers. d. both taxes would fall more heavily on the sellers than on the buyers

a. both taxes would fall more heavily on the buyers than on the sellers.

If demand is price inelastic, then a. buyers do not respond much to a change in price. b. buyers respond substantially to a change in price, but the response is very slow. c. buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. d. the demand curve is very flat.

a. buyers do not respond much to a change in price.

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.

a. is zero, and the demand curve is vertical.

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.

a. magnitude of the response in quantity demanded to a change in price.

Refer to Figure 6-13. If the government imposes a price ceiling of $6 on this market, then there will be a. no shortage. b. a shortage of 5 units. c. a shortage of 10 units. d. a shortage of 20 units.

a. no shortage.

Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.

a. shortage to exist and the market price of roses to increase.

Refer to Table 6-3. Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is a. $2. b. $3. c. $4. d. $5.

b. $3.

Which of the following is the correct formula for the GDP deflator? a. (real GDP/nominal GDP) x 100 b. (nominal GDP/real GDP) x 100 c. [(nominal GDP - real GDP) /real GDP] x 100 d. [(GDP - GDP per person) / GDP per person] x 100

b. (nominal GDP/real GDP) x 100

If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise? 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.

b. Both the equilibrium price and quantity would decrease.

Refer to Figure 4-20. At a price of $20, which of the following statements is not correct? a. The market is in equilibrium. b. Equilibrium price is equal to equilibrium quantity. c. There is no pressure for price to change. d. The quantity of the good that is bought and sold is 600 units.

b. Equilibrium price is equal to equilibrium quantity.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for orange juice of an announcement by the American Dental Association that orange juice erodes tooth enamel? a. Point A to Point B b. Point C to Point B c. Point C to Point D d. Point A to Point D

b. Point C to Point B

What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you? a. Price will fall, and the effect on quantity is ambiguous. b. Price will rise, and the effect on quantity is ambiguous. c. Quantity will fall, and the effect on price is ambiguous. d. Quantity will rise, and the effect on price is ambiguous.

b. Price will rise, and the effect on quantity is ambiguous.

Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament and the country club sets the ticket price at $30, then there will be a. a shortage of 300 tickets. b. a surplus of 300 tickets. c. 600 tickets sold. d. 600 tickets unsold.

b. a surplus of 300 tickets

Consider the market for portable air conditioners in equilibrium. When a heat wave strikes the equilibrium price a. and quantity both decrease. b. and quantity both increase. c. increases, and the equilibrium quantity decreases. d. decreases, and the equilibrium quantity increases.

b. and quantity both increase.

Refer to Table 6-2. A price ceiling set at $5 will a. be binding and will result in a shortage of 50 units. b. be binding and will result in a shortage of 250 units. c. be binding and will result in a shortage of 300 units. d. not be binding.

b. be binding and will result in a shortage of 250 units.

Price ceilings and price floors that are binding a. are desirable because they make markets more efficient and more fair. b. cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price. c. can have the effect of restoring a market to equilibrium. d. are imposed because they can make the poor in the economy better off without causing adverse effects.

b. cause surpluses and shortages to persist because price cannot adjust to the market equilibrium price.

If the government removes a binding price floor from a market, then the price received by sellers will a. decrease, and the quantity sold in the market will decrease. b. decrease, and the quantity sold in the market will increase. c. increase, and the quantity sold in the market will decrease. d. increase, and the quantity sold in the market will increase.

b. decrease, and the quantity sold in the market will increase.

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely a. increased. b. decreased. c. stayed the same. d. may have increased, decreased, or stayed the same.

b. decreased.

A tax on the sellers of coffee mugs a. increases the size of the coffee mug market. b. decreases the size of the coffee mug market. c. has no effect on the size of the coffee mug market. d. may increase, decrease, or have no effect on the size of the coffee mug market.

b. decreases the size of the coffee mug market.

When a tax is imposed on the buyers of a good, the demand curve shifts a. upward by the amount of the tax. b. downward by the amount of the tax. c. upward by less than the amount of the tax. d. downward by less than the amount of the tax.

b. downward by the amount of the tax.

Which of the following is likely to have the most price inelastic demand? a. strawberry-banana milk shakes b. gasoline in the short run c. diamond earrings d. box seats at a major league baseball game

b. gasoline in the short run

President Ronald Reagan once joked that a Trivial Pursuit game designed for economists would a. have no questions but hundreds of answers. b. have 100 questions and 3,000 answers. c. have 1,000 questions but no answers. d. never produce a winner.

b. have 100 questions and 3,000 answers.

Refer to Figure 5-7. For prices below $5, demand is price a. elastic, and raising price will increase total revenue. b. inelastic, and raising price will increase total revenue. c. elastic, and lowering price will increase total revenue. d. inelastic, and lowering price will increase total revenue

b. inelastic, and raising price will increase total revenue.

Total revenue will be at its largest value on a linear demand curve at the a. top of the curve, where prices are highest. b. midpoint of the curve. c. low end of the curve, where quantity demanded is highest. d. None of the above is correct.

b. midpoint of the curve.

A perfectly inelastic demand implies that buyers a. decrease their purchases when the price rises. b. purchase the same amount as before when the price rises or falls. c. increase their purchases only slightly when the price falls. d. respond substantially to an increase in price.

b. purchase the same amount as before when the price rises or falls.

Which government entity computes U.S. GDP every three months? a. the Council of Economic Advisers b. the Department of Commerce c. the Department of Treasury d. the Federal Reserve

b. the Department of Commerce

A U.S. firm produces nail guns in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the nail guns to a U.S. construction company. In which quarter(s) does(do) these transactions raise investment? a. the first and the second b. the first but not the second c. the second but not the first d. neither the first nor the second

b. the first but not the second

Years ago, thousands of country music fans risked their lives by rushing to buy tickets for a Willie Nelson concert at Carnegie Hall. This behavior indicates a. the ticket price was above the equilibrium price. b. the ticket price was below the equilibrium price. c. the ticket price was at the equilibrium price. d. nothing about the equilibrium price.

b. the ticket price was below the equilibrium price.

Which of the following is not correct? a. GNP equals net national product plus losses from depreciation. b. For most countries, including the United States, GDP and GNP are nearly the same. c. GDP and GNP typically move in opposite directions. d. Personal income equals disposable personal income plus personal taxes plus certain nontax payments.

c. GDP and GNP typically move in opposite directions.

Net exports equal a. exports plus imports. b. imports minus exports. c. Y - (C + I + G). d. Y - (C - I - G).

c. Y - (C + I + G).

Minimum-wage laws dictate a. the exact wage that firms must pay workers. b. a maximum wage that firms may pay workers. c. a minimum wage that firms may pay workers. d. both a minimum wage and a maximum wage that firms may pay workers.

c. a minimum wage that firms may pay workers.

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed? a. $3 b. between $3 and $5 c. between $5 and $7 d. $7

c. between $5 and $7

Which of the following is an example of depreciation? a. falling stock prices b. the retirement of several employees c. computers becoming obsolete d. All of the above are examples of depreciation.

c. computers becoming obsolete

If a tax is levied on the sellers of a product, then there will be a(n) a. downward shift of the demand curve. b. upward shift of the demand curve. c. decrease in quantity demanded. d. increase in quantity demanded.

c. decrease in quantity demanded.

Holding all other forces constant, if increasing the price of a good leads to a decrease in total revenue, then the demand for the good must be a. unit elastic. b. inelastic. c. elastic. d. None of the above is correct because a price increase always leads to an decrease in total revenue.

c. elastic.

Which of the following is likely to have the most price inelastic demand? a. tablet computers b. leather boots c. lightbulbs d. optional textbooks

c. lightbulbs

Refer to Figure 4-20. If the price is $10, then there would be a a. shortage of 400 units, and price would rise. b. surplus of 400 units, and price would rise. c. shortage of 600 units, and price would rise. d. surplus of 600 units, and price would rise

c. shortage of 600 units, and price would rise.

Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market, a. the price of tennis balls increases. b. the price of tennis balls decreases. c. the price of tennis balls does not change. d. there is no longer a market for tennis balls.

c. the price of tennis balls does not change.

The Earned Income Tax Credit is an example of a a. minimum-wage law. b. price ceiling. c. wage subsidy. d. rent subsidy.

c. wage subsidy.

Refer to Figure 6-22. The effective price sellers receive after the tax is imposed is a. $2.00. b. $3.50. c. $5.00. d. $3.00.

d. $3.00.

In 2015, GDP per person in the United States was almost a. $38,000. b. $36,000. c. $49,000 d. $56,000

d. $56,000

If a binding price ceiling is imposed on the baby formula market, then a. the quantity of baby formula demanded will increase. b. the quantity of baby formula supplied will decrease. c. a shortage of baby formula will develop. d. All of the above are correct.

d. All of the above are correct.

If a binding price floor is imposed on the video game market, then a. the quantity of video games demanded will decrease. b. the quantity of video games supplied will increase. c. a surplus of video games will develop. d. All of the above are correct.

d. All of the above are correct.

In which of the following situations will total revenue increase? a. Price elasticity of demand is 1.2, and the price of the good decreases. b. Price elasticity of demand is 0.5, and the price of the good increases. c. Price elasticity of demand is 3.0, and the price of the good decreases. d. All of the above are correct.

d. All of the above are correct.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, a. quantity demanded decreases. b. quantity supplied increases. c. there is a surplus. d. All of the above are correct.

d. All of the above are correct.

What would happen to the equilibrium price and quantity of lattés if the cost to produce steamed milk, which is used to make lattés, increased, and scientists discovered that lattés cause heart attacks? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous. d. The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.

d. The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a. The relevant time horizon is short. b. The good is a necessity. c. The market for the good is broadly defined. d. There are many close substitutes for this good.

d. There are many close substitutes for this good.

Congress intended that a. the entire FICA tax be paid by workers. b. the entire FICA tax be paid by firms. c. one-quarter of the FICA tax be paid by workers, and three-quarters be paid by firms. d. half the FICA tax be paid by workers, and half be paid by firms.

d. half the FICA tax be paid by workers, and half be paid by firms.

A minimum wage that is set below a market's equilibrium wage will a. result in an excess demand for labor, that is, unemployment. b. result in an excess demand for labor, that is, a shortage of workers. c. result in an excess supply of labor, that is, unemployment. d. have no impact on employment.

d. have no impact on employment.

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to increase. d. surplus to exist and the market price of roses to decrease.

d. surplus to exist and the market price of roses to decrease.

​Rent controls can cause a. ​a decline in the quality of housing available for rent. b. ​the development of a black market to allocate apartments to renters. c. ​longer search times for renters attempting to locate an apartment. d. ​all of these are possible results of rent controls.

d. ​all of these are possible results of rent controls.