Microeconomics Mid-Term Quizzes
Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is: $1.15. $0.95. $1.85. $1.30.
$1.85.
You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? $50 $10 $40 $0
$10
Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax on each hearing aid is: $160. $200 $120. $60.
$120.
Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized? $10 $40 $20 $30
$20
Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 workingin a store and spend $7,200 on room and board. Frank's cost of going to college is: $49,800 $57,000 $42,600 $33,800
$42,600
Alexis is a lawyer. She bills her clients $100 an hour for her services. She can also mow her lawn in 30 minutes. She can hire someone to mow her lawn who takes an hour. Of the following prices, which is the highest Alexis would pay someone to mow her lawn? $99 $29 $49 Alexis would always mow her own lawn because she can do it faster.
$49
Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be: $8 $11 $3 $5
$5
At Nick's Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result of selling five cakes, Nick experiences a producer surplus in the amount of $17.50. Nick must be selling his cakes for: $9.50 each $6.50 each $7.50 each $10.50 each
$7.50 each
Assume for Brazil that the opportunity cost of each cashew is 100 peanuts. Which of these pairs of points could be on Brazil's production possibilities frontier? (200 cashews, 30,000 peanuts) and (150 cashews, 35,000 peanuts) (300 cashews, 60,000 peanuts) and (200 cashews, 80,000 peanuts) (300 cashews, 60,000 peanut) and (200 cashews, 50,000 peanuts) (200 cashews, 40,000 peanuts) and (150 cashews, 30,000 peanuts)
(200 cashews, 30,000 peanuts) and (150 cashews, 35,000 peanuts)
If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about: 0.75, and supply is elastic. 1.33, and supply is elastic. 1.33, and supply is inelastic. 0.75, and supply is inelastic.
0.75, and supply is elastic.
Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. Political pressure from the fish lobby in Farmland and from the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland. As a result, Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If the political pressure were overcome and trade were to occur, each country would completely specialize in the product in which it has a comparative advantage. If trade were to occur, the combined output of the two countries would increase by: 25 units of wheat and 25 units of fish 75 units of wheat and 75 units of fish 50 units of wheat and 50 units of fish 100 units of wheat and 100 units of fish
100 units of wheat and 100 units of fish
If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is: 0.50. 1.5. 1. 2.
2.
John Maynard Keynes described economics as an easy subject at which very few excel. Which of the following is not one of the reasons Keynes gave for why so few people excel at the study of economics? An economist must be purposeful and disinterested in a simultaneous mood. An economist must also be a mathematician, historian, statesman, and philosopher in some degree. An economist must understand environmental science, regulation, and political science. An economist must understand symbols and speak in words.
An economist must understand environmental science, regulation, and political science.
Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward? As the size of the tax increases, tax revenue and deadweight loss rise initially, but both eventually begin to fall. As the size of the tax increases, tax revenue continually rises and deadweight loss continually falls. As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises. As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss falls initially, but eventually it begins to rise.
As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises.
Some, but not all, government economists are employed within the administrative branch of government. Which of the following government agencies employs economists outside of the administrative branch? Council of Economic Advisers Congressional Budget Office Department of the Treasury Department of Labor
Congressional Budget Office
After a certain nation changed its policy from one that banned international trade in wheat to one that allowed international trade in wheat, the nation began importing wheat. As a result, total surplus in the wheat market increased by $10 million. Which of the following changes could have occurred as well? Consumer surplus in the wheat market increased by $15 million and producer surplus in the wheat market decreased by $5 million. The domestic quantity of wheat supplied increased with the adoption of the new policy. Consumer surplus in the wheat market increased by $7 million and producer surplus in the wheat market increased by $3 million. The price of wheat in that nation increased with the adoption of the new policy.
Consumer surplus in the wheat market increased by $15 million and producer surplus in the wheat market decreased by $5 million.
Which of the following is not possible? Demand is unit elastic, and a decrease in price causes an increase in revenue. Demand is inelastic, and an increase in price causes an increase in revenue. Demand is perfectly inelastic, and an increase in price causes an increase in revenue. Demand is elastic, and a decrease in price causes an increase in revenue.
Demand is unit elastic, and a decrease in price causes an increase in revenue.
Which of the following would not result from all countries specializing according to the principle of comparative advantage? Each country's production possibilities frontier would shift inward. The well-being of citizens in each country would be enhanced. The size of the economic pie would increase. Worldwide production of goods and services would increase.
Each country's production possibilities frontier would shift inward.
The distinction between efficiency and equality can be described as follows: Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.
Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.
Suppose the number of buyers in a market decreases and a technological advancement occurs also. What would we expect to happen in the market? Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. None of the answers listed.
Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
Stephen is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5,800. Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do? It does not matter which action he takes since the outcome will be the same either way. He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800. He should complete the additional work and sell the car for $5,800. He should sell the car now for $3,800.
He should sell the car now for $3,800.
Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible? Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks. Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks. Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks. Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats.
Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.
Suppose that policymakers are considering placing a tax on either of two markets. In Market A, the tax will have a significant effect on the price consumers pay, but it will not affect equilibrium quantity very much. In Market B, the same tax will have only a small effect on the price consumers pay, but it will have a large effect on the equilibrium quantity. Other factors are held constant. In which market will the tax have a larger deadweight loss? The deadweight loss will be the same in both markets. Market A There is not enough information to answer the question. Market B
Market B
Which of the following statements best captures the relationship between microeconomics and macroeconomics? Microeconomists study markets for small products, whereas macroeconomists study markets for large products. Microeconomics and macroeconomics are distinct from one another, yet they are closely related. Microeconomics is oriented toward policy studies, whereas macroeconomics is oriented toward theoretical studies. For the most part, microeconomists are unconcerned with macroeconomics, and macroeconomists are unconcerned with microeconomics.
Microeconomics and macroeconomics are distinct from one another, yet they are closely related.
Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement ? One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption. One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions.
One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption.
One way to characterize the difference between positive statements and normative statements is as follows: Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation.
Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be.
Music compact discs are normal goods. What will happen to the equilibrium price and quantity of music compact discs if musicians accept lower royalties, compact disc players become cheaper, more firms start producing music compact discs, and music lovers experience an increase in income? Price will rise, and the effect on quantity is ambiguous. Quantity will rise, and the effect on price is ambiguous. Price will fall, and the effect on quantity is ambiguous. Quantity will fall, and the effect on price is ambiguous.
Quantity will rise, and the effect on price is ambiguous.
Which of the following is the most likely explanation for the imposition of a price floor on the market for corn? Policymakers have studied the effects of the price floor carefully, and they recognize that the price floor is advantageous for society as a whole. Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into imposing the price floor. Buyers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor. Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.
Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.
Which of the following is not correct? The economy contains many labor markets for different types of workers. The minimum wage is binding for workers with high skills and much experience. The minimum wage is not binding when the equilibrium wage is above the minimum wage. The impact of the minimum wage depends on the skill and experience of the worker.
The minimum wage is binding for workers with high skills and much experience.
Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding? The number of firms selling laptop computers decreases. The number of consumers buying laptop computers decreases. Consumers' income decreases, and laptop computers are a normal good. Improvements in production technology reduce the costs of producing laptop computers.
The number of firms selling laptop computers decreases.
Which of the following events could cause an increase in the supply of ceiling fans? The number of sellers of ceiling fans increases. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes. There is an increase in the price of the motor that powers ceiling fans. All other answers listed here.
The number of sellers of ceiling fans increases.
When constructing a production possibilities frontier, which of the following assumptions is not made? The technology available to firms is given. The quantities of the factors of production that are available are increasing over the relevant time period. The economy produces only two goods or two types of goods. Firms produce goods using factors of production.
The quantities of the factors of production that are available are increasing over the relevant time period.
Suppose an economist advises a city's mayor to begin charging drivers a fee to drive on a busy highway during congested times. The mayor does not implement the policy because it would not be popular with voters. Which of the following statements best describes the scenario? This would never happen. Policymakers always follow the advice of economists. This is an unlikely occurrence. Most of the time, policymakers follow the advice of economists and institute the most efficient policies. This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other reasons. This is a common occurrence. The policymaker usually disregards an economist's advice because they do not believe it is the most efficient policy.
This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other reasons.
Which of the following equations is not valid? Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers Total surplus = Value to sellers - Cost to sellers Consumer surplus = Value to buyers - Amount paid by buyers Producer surplus = Amount received by sellers - Cost to sellers
Total surplus = Value to sellers - Cost to sellers
What happens to the total surplus in a market when the government imposes a tax? Total surplus decreases. Total surplus increases by the amount of the tax. Total surplus is unaffected by the tax. Total surplus increases but by less than the amount of the tax.
Total surplus decreases.
Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that: Traci has an absolute advantage in chairs. Ken has an absolute advantage in chairs. Traci has a comparative advantage in chairs. Ken has a comparative advantage in tables.
Traci has an absolute advantage in chairs.
Which of the following is an example of a normative, as opposed to positive, statement? An increase in the cigarette tax would cause a decrease in the number of smokers. Universal health care would be good for U.S. citizens. A decrease in the minimum wage would decrease unemployment. A law requiring the federal government to balance its budget would increase economic growth.
Universal health care would be good for U.S. citizens.
For a country that is considering the adoption of either a tariff or an import quota on a particular good, an important difference is that: an import quota has no effect on consumer surplus, while a tariff decreases consumer surplus. a tariff raises revenue for that country's government, while an import quota does not. an import quota has no effect on producer surplus, while a tariff decreases producer surplus. a tariff raises total surplus, while an import quota does not.
a tariff raises revenue for that country's government, while an import quota does not.
A demand curve reflects each of the following except the: value each buyer in the market places on the good. highest price buyers are willing to pay for each quantity. willingness to pay of all buyers in the market. ability of buyers to obtain the quantity they desire.
ability of buyers to obtain the quantity they desire.
If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would: not reduce the shortage of organs. be inefficient because markets are not good at allocating scarce resources. benefit rich people but not poor people. be inferior to a plan imposed by a benevolent dictator.
benefit rich people but not poor people.
A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect: the value of a good to society, but not the cost of making it. the cost of making a good to society, but not its value. both the value of a good to society and the cost of making it. neither the value of a good to society nor the cost of making it.
both the value of a good to society and the cost of making it.
Demand is said to be price elastic if: buyers respond substantially to changes in the price of the good. demand shifts substantially when income or the expected future price of the good changes. buyers do not respond much to changes in the price of the good. the price of the good responds substantially to changes in demand.
buyers respond substantially to changes in the price of the good.
Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because: buyers tend to be much less sensitive to a change in price when given more time to react. buyers tend to be much more sensitive to a change in price when given more time to react. buyers will have substantially more real income over a ten-year period. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.
buyers tend to be much more sensitive to a change in price when given more time to react.
If Switzerland chooses to engage in trade, it: should first attempt to produce the good itself. can benefit by trading with any other country. will only benefit if it trades with countries that produce goods Switzerland cannot produce. cannot benefit if it trades with less developed countries.
can benefit by trading with any other country.
Suppose Iceland goes from being an isolated country to being an importer of coats. As a result: it is reasonable to infer that Iceland has a comparative advantage over other countries in coat production. consumer surplus increases for consumers of coats in Iceland. producer surplus increases for producers of coats in Iceland. total surplus remains unchanged in the coat market in Iceland.
consumer surplus increases for consumers of coats in Iceland.
A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax: decreases consumer surplus by $645 per day. decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day. creates a deadweight loss of $15 per day. decreases total surplus from $3,000 to $1,800 per day.
creates a deadweight loss of $15 per day.
If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would: decrease by more than $500. increase by an indeterminate amount. decrease by less than $500. decrease by exactly $500.
decrease by less than $500.
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 incense, exporting steel, and neither importing nor exporting rugs. We can conclude that Aquilonia's new freetrade policy has: increased consumer surplus and producer surplus in the incense market. decreased consumer surplus in the steel market and increased total surplus in the incense market. increased consumer surplus in the steel market and left producer surplus in the rug market unchanged. decreased consumer surplus in both the steel and rug markets
decreased consumer surplus in the steel market and increased total surplus in the incense market.
A $5 tax levied on the buyers of pants will cause the: supply curve for pants to shift up by $5. demand curve for pants to shift up by $5. supply curve for pants to shift down by $5. demand curve for pants to shift down by $5.
demand curve for pants to shift down by $5.
The supply curve for stand up paddle boards: does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the horizontal axis of the graph. shifts when the price of stand up paddle boards changes because the quantity supplied of stand up paddle boards is measured on the horizontal axis of the graph. shifts when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph. does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph.
does not shift when the price of stand up paddle boards changes because the price of stand up paddle boards is measured on the vertical axis of the graph.
When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in: percentage change. units of a related good that is not being taxed. units of the good that is being taxed. dollars.
dollars.
When the government redistributes income from the wealthy to the poor: equality is improved, but efficiency is not. efficiency is improved, but equality is not. neither efficiency nor equality are improved. both efficiency and equality are improved.
equality is improved, but efficiency is not.
If textbooks and study guides are complements, then an increase in the price of textbooks will result in: no difference in the quantity sold of either good. more textbooks being sold. more study guides being sold. fewer study guides being sold.
fewer study guides being sold.
You watch a lot of HGTV during your summer vacation, and you notice that most housing buyers list granite countertops in their "must have" lists when buying a new or existing house. You expect the demand for: substitute products such as marble countertops to be unaffected by buyers' preferences for granite. substitute products such as marble countertops to shift to the right. granite countertops to shift to the right. granite countertops to shift to the left.
granite countertops to shift to the right.
If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina: should refrain altogether from producing apples. should import apples. has a comparative advantage in apples. should produce just enough apples to meet its domestic demand.
has a comparative advantage in apples.
In the markets for factors of production in the circular-flow diagram: households provide firms with labor, land, and capital. households provide firms with savings for investment. firms provide households with goods and services. firms provide households with revenue.
households provide firms with labor, land, and capital.
The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that: other countries have a comparative advantage, relative to Wheatland, in producing fish. Wheatland has a comparative advantage, relative to other countries, in producing corn. if Wheatland were to allow trade, it would import corn. the price of fish in Wheatland exceeds the world price of fish.
if Wheatland were to allow trade, it would import corn.
Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to: increase by 2.5%, and X is an inferior good. increase by 10% and X is an inferior good. decrease by 10% and X is a normal good. decrease by 2.5% and X is a normal good.
increase by 2.5%, and X is an inferior good.
Opponents of free trade often want the United States to prohibit the import of goods made in overseas factories that pay wages below the U.S. minimum wage. Prohibiting such goods is likely to: cause these factories to pay the U.S. minimum wage. increase poverty in poor countries and benefit U.S. firms which compete with these imports. harm U.S. firms which compete with these imports. cause these factories to pay the U.S. minimum wage
increase poverty in poor countries and benefit U.S. firms which compete with these imports.
Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will: increase, and producer surplus in the industry will decrease. decrease, and producer surplus in the industry will decrease. increase, and producer surplus in the industry will increase. decrease, and producer surplus in the industry will increase.
increase, and producer surplus in the industry will increase.
The Surgeon General announces that eating apples promotes healthy teeth. As a result, the equilibrium price of apples: decreases, and producer surplus decreases. increases, and producer surplus decreases. decreases, and producer surplus increases. increases, and producer surplus increases.
increases, and producer surplus increases.
A deadweight loss is a consequence of a tax on a good because the tax: induces buyers to consume less, and sellers to produce less. induces the government to increase its expenditures. imposes a loss on buyers that is greater than the loss to sellers. increases the equilibrium price in the market.
induces buyers to consume less, and sellers to produce less.
When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is: inelastic. unit elastic. perfectly inelastic. elastic.
inelastic
The less freedom young mothers have to work outside the home, the: less elastic the supply of labor will be. more horizontal the labor supply curve will be. more elastic the supply of labor will be. larger is the decrease in employment that will result from a tax on labor.
less elastic the supply of labor will be.
Necessities such as food and clothing tend to have: low price elasticities of demand and high income elasticities of demand. high price elasticities of demand and high income elasticities of demand. low price elasticities of demand and low income elasticities of demand. high price elasticities of demand and low income elasticities of demand.
low price elasticities of demand and low income elasticities of demand.
In the housing market, supply and demand are: more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the long run than in the short run. more elastic in the short run than in the long run, and so rent control leads to a larger shortage of apartments in the short run than in the long run. more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the short run than in the long run.
more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect: most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. a large percentage of smokers to quit smoking in response to the tax. most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government.
most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government.
When OPEC raised the price of crude oil in the 1970s, it caused the United States, binding price floor on gasoline to become nonbinding. nonbinding price floor on gasoline to become binding. binding price ceiling on gasoline to become nonbinding. nonbinding price ceiling on gasoline to become binding.
nonbinding price ceiling on gasoline to become binding.
Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic perspective, this idea would: not make sense as long as Xenophobia had a comparative advantage in some good. not make sense as long as Xenophobia had an absolute advantage in at least half the goods that could be traded. make sense if Xenophobia had no absolute advantages in any good. make sense if Xenophobia had an absolute advantage in all goods.
not make sense as long as Xenophobia had a comparative advantage in some good.
John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that: people face trade-offs. trade can make everyone better off. rational people think at the margin. people respond to incentives.
people face trade-offs
The presence of a price control in a market for a good or service usually is an indication that: the usual forces of supply and demand were not able to establish an equilibrium price in that market. policymakers correctly believed that price controls would generate no inequities of their own once imposed. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. an insufficient quantity of the good or service was being produced in that market to meet the public's need.
policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that: Romania's climate allows for longer growing seasons and therefore Romania can produce large quantities of grain and other crops. Total income is divided among fewer workers in Poland since it has a smaller labor force than Romania. productivity in Poland is higher than in Romania. Polish firms are faced with stricter government regulations than Romanian firms.
productivity in Poland is higher than in Romania.
Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market? protect an industry from foreign competition promote equality enforce property rights promote efficiency
protect an industry from foreign competition
When the nation of Worldova allows trade and becomes an exporter of silk: residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova falls. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova falls. residents of Worldova who produce silk become worse off; residents of Worldova who buy silk become better off; and the economic well-being of Worldova rises. residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.
residents of Worldova who produce silk become better off; residents of Worldova who buy silk become worse off; and the economic well-being of Worldova rises.
A decrease in quantity demanded: results in a movement upward and to the left along a demand curve. shifts the demand curve to the left. results in a movement downward and to the right along a demand curve. shifts the demand curve to the right.
results in a movement upward and to the left along a demand curve.
Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the: demand curve for Matthew's pies will increase. supply curve for Matthew's pies will decrease. demand curve for Matthew's pies will decrease. supply curve for Matthew's pies will increase.
supply curve for Matthew's pies will decrease.
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the: demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. supply curve will shift downward by $20, and the effective price received by sellers will increase by $20. supply curve will shift downward by $20, and the effective price received by sellers will increase by less then $20.
supply curve will shift downward by $20, and the effective price received by sellers will increase by less then $20.
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that: the United States should refrain altogether from producing pork and import all of what it requires from Mexico. the United States should produce more pork than what it requires and export some of it to Mexico. Mexico has nothing to gain from importing United States pork. the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico.
the United States should produce more pork than what it requires and export some of it to Mexico.
Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result: tax revenue necessarily decreases. the demand curve for gasoline necessarily becomes steeper. the supply curve for gasoline necessarily becomes flatter. the deadweight loss of the tax necessarily decreases.
the deadweight loss of the tax necessarily decreases.
Which of the following is not a determinant of demand? the price of a resource that is used to produce the good the price of a complementary good the price of the good next month the price of a substitute good
the price of a resource that is used to produce the good
Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market: the price of tennis balls increases. the price of tennis balls does not change. the price of tennis balls decreases. there is no longer a market for tennis balls.
the price of tennis balls does not change.
A production possibilities frontier is bowed outward when: the rate of tradeoff between the two goods being produced is constant. an economy is self-sufficient instead of interdependent and engaged in trade. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.
the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.
The Laffer curve relates: the tax rate to tax revenue raised by the tax. the tax rate to the deadweight loss of the tax. the price elasticity of supply to the deadweight loss of the tax. government welfare payments to the birth rate.
the tax rate to tax revenue raised by the tax.
When two countries trade with one another, it is most likely because: some people involved in the trade do not understand that one of the two countries will become worse-off because of the trade. the opportunity costs of producing various goods are identical for the two countries. the two countries wish to take advantage of the principle of comparative advantage. the wealthy people in each of the two countries are able to benefit, through trade, by taking advantage of other people who are poor.
the two countries wish to take advantage of the principle of comparative advantage.
If the cross-price elasticity of demand for two goods is 1.25, then: the two goods are substitutes. one of the goods is normal and the other good is inferior. the two goods are luxuries. the demand for one of the goods conforms to the law of demand, but the demand for the other good violates the law of demand.
the two goods are substitutes.
Spain allows trade with the rest of the world. We know that Spain has a comparative advantage in producing olive oil if we know that: consumer surplus in Spain would exceed producer surplus in Spain if trade with other countries were not allowed. Spain imports olive oil. the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed. All other answers are accurate.
the world price of olive oil is higher than the price of olive oil that would prevail in Spain if trade with other countries were not allowed.
In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers? to produce good quality products so that society would benefit from the resources used to conserve on costs, so as to maintain efficiency in the economy to produce those products that society desires most to produce enough to meet the output target, without regard for quality or cost
to produce enough to meet the output target, without regard for quality or cost
Because it is difficult for economists to use experiments to generate data, they generally must: rely upon hypothetical data that were previously concocted by other economists. use whatever data the world gives them. do without data. substitute assumptions for data when data are unavailable.
use whatever data the world gives them.
If the United States threatens to impose a tariff on Honduran blueberries if Honduras does not remove agricultural subsidies, the United States will be: worse off if Honduras doesn't give in to the threat. worse off no matter how Honduras responds. better off no matter how Honduras responds. better off if Honduras gives in, and will be no worse off if it doesn't.
worse off if Honduras doesn't give in to the threat.
