Practice Test #2, Chapters 5-9Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. The price elasticity of demand measures how responsive a. buyers are to a change in income. b. sellers are to a change in price. c. buyers are to a change in price. d. sellers are to a change in buyers' incomes. ____ 2. Demand is said to be elastic if a. the price of the good responds substantially to changes in demand. b. demand shifts substantially when the price of the good changes. c. buyers do not respond much to changes in the price of the good. d. the quantity demanded responds substantially to changes in the price of the good. ____ 3. When quantity demanded responds substantially to changes in price, demand is said to be a. elastic. b. inelastic. c. unit elastic. d. perfectly elastic. ____ 4. The elasticity of demand for luxuries tends to be a. greater than 1. b. less than 1. c. equal to 1. d. equal to 0. ____ 5. The midpoint method is used to compute elasticity because it a. automatically computes a positive number instead of a negative number. b. uses the same equation that is used to compute slope. c. gives the same answer regardless of the direction of change. d. automatically rounds quantities to the nearest whole unit. ____ 6. Demand is unit elastic if elasticity is a. less than 1. b. greater than 1.

c. equal to 1. d. equal to 0. Figure 5-1

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7. Refer to Figure 5-1. The section of the demand curve labeled C represents the a. elastic section of the demand curve. b. perfectly elastic section of the demand curve. c. unit elastic section of the demand curve. d. inelastic section of the demand curve. Figure 5-2

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8. Refer to Figure 5-2. The elasticity of demand from point A to point B, using the midpoint method would be a. 1. b. 1.5. c. 2. d. 2.5.

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9. Refer to Figure 5-2. The elasticity of demand from point B to point C, using the midpoint method would be a. 0.5. b. 0.75. c. 1.0. d. 1.3.

____ 10. When the price of kittens was $25 each, the pet shop sold 20 per month. When they raised the price to $35 each, they sold 14 per month. The elasticity of demand for kittens would be a. 1.66. b. 1.06. c. 0.94. d. 0.60. ____ 11. When the local used bookstore prices economics books at $15.00 each, they generally sell 70 per month. If they lower the price to $7.00 each they sell 90. Given this, we know that the elasticity of demand for economics books is a. 2.91, so this store should lower price to raise total revenue. b. 2.91, so this store should raise price to raise total revenue. c. 0.34, so this store should lower price to raise total revenue. d. 0.34, so this store should raise price to raise total revenue. ____ 12. The flatter the demand curve through a given point, the a. greater the price elasticity of demand. b. smaller the price elasticity of demand. c. closer the price elasticity of demand will be to the slope of the curve. d. more equal the price elasticity of demand will be to the slope of the curve. ____ 13. The smaller the price elasticity of demand the a. closer the price elasticity of demand will be to the slope of the curve. b. flatter the demand curve will be through a given point. c. steeper the demand curve will be through a given point. d. more equal the price elasticity of demand will be to the slope of the curve. ____ 14. A perfectly inelastic demand curve will be a. negatively sloped, because buyers decrease their purchases when the price rises.

b. vertical, because buyers purchase the same amount whether the price rises or falls. c. positively sloped, because buyers respond by increasing their purchases when price rises. d. horizontal, because buyers increase their purchases by huge amounts with slight changes in price. ____ 15. In any market, total revenue is price a. divided by the price elasticity of demand. b. multiplied by quantity. c. plus quantity. d. multiplied by quantity minus the costs of production. ____ 16. When demand is inelastic, a decrease in price will cause a. an increase in total revenue. b. a decrease in total revenue. c. no change in total revenue. d. There is insufficient information to answer this question. Figure 5-6

____ 17. Refer to Figure 5-6. If price increases from $10 to $15, total revenue will a. increase by $20, so demand must be inelastic. b. increase by $5, so demand must be inelastic. c. decrease by $20, so demand must be elastic. d. decrease by $10, so demand must be elastic. Figure 5-7

____ 18. Refer to Figure 5-7. Total revenue at P2 would be represented by area(s) a. B + D. b. A + B. c. C + D. d. D. ____ 19. For a horizontal demand curve, slope a. is undefined and elasticity equals 0. b. equals 0 and elasticity is undefined. c. and elasticity are both undefined. d. and elasticity are both equal to 0. ____ 20. Along a linear demand curve, slope a. and elasticity are both constant. b. changes but elasticity is constant. c. and elasticity both change. d. is constant but elasticity changes. ____ 21. Moving down a linear demand curve we know that elasticity gets a. smaller, then larger. b. larger. c. smaller. d. larger, then smaller. ____ 22. Moving up a linear demand curve, we know that total revenue

a. increases, then decreases. b. decreases, then increases. c. increases. d. decreases. ____ 23. Which pair of products lists the more elastic product first? a. corn oil and motor oil b. eggs and butter c. erasers and Snickers candy bars d. car tires and diet Coke ____ 24. Whether a good is a luxury or necessity depends on a. the price of the good. b. the preferences of the buyer. c. the intrinsic properties of the good. d. how scarce the good is. ____ 25. Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. She currently is charging 25 cents per cup, but wants to adjust her price to earn the money faster. If you know that the demand for lemonade is elastic, what is your advice to her? a. Leave the price the same and be patient. b. Raise the price to increase total revenue. c. Lower the price to increase total revenue. d. There isn't enough information given to answer this question. ____ 26. The Winston/Calfee study conducted to determine how to increase revenue from the Greenway toll road found that commuters would only be willing to pay a $2 toll if they a. could save 20 minutes in commute time. b. earned at least $30 an hour. c. commuted at least 40 miles to work. d. had a low tolerance for public transportation. ____ 27. Which of the following would you expect to have the highest income elasticity of demand? a. water b. diamonds c. hamburgers

d. housing ____ 28. If an increase in income results in a decrease in the quantity demanded of a good, then the good is a. an inferior good. b. a necessity. c. a normal good. d. a luxury. ____ 29. Assume that a 4 percent increase in income results in a 6 percent decrease in the quantity demanded of a good. The income elasticity of demand for the good is a. negative and therefore the good is an inferior good. b. negative and therefore the good is a normal good. c. positive and therefore the good is an inferior good. d. positive and therefore the good is a normal good. Table 5-1 Income $30,000 $40,000 Quantity of Good X Purchased 2 5 Quantity of Good Y Purchased 20 10

____ 30. Refer to Table 5-1. Using the midpoint method, what is the income elasticity of good Y? a. -3.33 b. -2.33 c. 1.33 d. 2.33 ____ 31. Refer to Table 5-1. Good X is a. very price elastic. b. an inferior good. c. underpriced. d. a normal good. ____ 32. Cross-price elasticity of demand measures how the a. quantity demanded of a good changes as price changes. b. quantity demanded of a good changes as income changes. c. quantity demanded of one good changes as the price of another good changes. d. price of a good is affected when income changes.

____ 33. If you want to know how an increase in the price of ice cream at the next door Ice Cream Shoppe affects the demand for frozen yogurt in your shop you would compute the a. price elasticity of demand. b. income elasticity of demand. c. cross-price elasticity of demand. d. price elasticity of supply. ____ 34. Suppose the price elasticity of demand for basketballs is 1.20. A 15 percent increase in price will result in a. an 18 percent decrease in the quantity of basketballs demanded. b. a 15 percent decrease in the quantity of basketballs demanded. c. an 8 percent reduction in the number of basketballs demanded. d. a 12.5 percent reduction in the number of basketballs demanded. ____ 35. Get Smart University is contemplating increasing tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, they are a. necessarily ignoring the law of demand. b. assuming that the demand for university education is elastic. c. assuming that the demand for university education is inelastic. d. assuming that the supply of university education is elastic. ____ 36. The price elasticity of supply measures how responsive a. sellers are to a change in price. b. buyers are to a change in income. c. buyers are to a change in price. d. sellers are to a change in buyers' income. ____ 37. The main determinant of the price elasticity of supply is a. time. b. the definition of the market. c. the number of close substitutes. d. luxuries vs. necessities. ____ 38. In the long run, the quantity supplied of most goods a. cannot respond at all to a change in price. b. cannot respond much to a change in price.

d. will naturally increase regardless of what happens to price. ____ 39. If the elasticity of supply of a product is greater than 1, then supply is a. inelastic. b. elastic. c. unit elastic. d. not very sensitive to change in price. ____ 40. A linear supply curve has a a. constant slope and changing elasticity of supply. b. changing slope and a constant elasticity of supply. c. both a constant slope and a constant elasticity of supply. d. both a changing slope and a changing elasticity of supply. ____ 41. If the quantity supplied is the same regardless of price, then the supply curve would be a. elastic. b. perfectly elastic. c. perfectly inelastic. d. inelastic. Figure 5-10

____ 42. Refer to Figure 5-10. Which of the following would be most elastic? a. from A to B b. from C to D

c. from E to F d. from D to F ____ 43. Refer to Figure 5-10. What is the elasticity of supply between points D and E? a. 1.89 b. 1.26 c. 0.53 d. 0.34 Table 5-2 Price Quantity Supplied Supply Curve A $1.00 $2.00 500 600 Supply Curve B $1.00 $3.00 600 900 Supply Curve C $2.00 $5.00 400 700

____ 44. Refer to Table 5-2. Which of the following would represent a more inelastic supply curve? a. supply curve A b. supply curve B c. supply curve C d. There is no difference in the elasticity of the 3 supply curves. ____ 45. Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to a. increase the total revenue of wheat farmers. b. decrease the total revenue of wheat farmers. c. weaken the demand for wheat. d. weaken the supply of wheat. ____ 46. Knowing that the demand for wheat is inelastic, if all farmers voluntarily plowed under 10 percent of their wheat crop, then a. consumers of wheat would buy more wheat. b. wheat farmers would suffer a reduction in their revenue. c. wheat farmers would increase their revenue. d. the demand for wheat would decrease. ____ 47. Which of the following is NOT a reason why government drug interdiction increases drug-related crime? a. The demand for such drugs tends to be very inelastic. b. Addicts would have a greater need for quick cash.

c. Government drug programs are more lenient now with drug offenders than in the 1980s. d. The total amount of money needed to buy the same amount of drugs needed increases. Suppose there is a baseball park with 10,000 seats and a demand for seats in the park as follow: Table 5-3 Price per Ticket$20 $16 $12 $ 8 $ 6 $ 4 $ 2

Quantity Demanded2,000 4,000 6,000 8,000 10,000 12,000 14,000

____ 48. Refer to Table 5-3. The supply of seats a. is perfectly elastic. b. is perfectly inelastic. c. increases as price increases. d. decreases as price increases. Figure 5-11

____ 49. Refer to Figure 5-11. When a new, more productive strawberry was developed which caused supply to increase, strawberry farmers were a. helped, since although price fell, total revenue increased, due to an inelastic demand curve.

b. hurt, since both price and total revenue fell due to an elastic demand curve. c. hurt, since both price and total revenue fell due to an inelastic demand curve. d. helped, since although price fell, total revenue increased, due to an elastic demand curve. ____ 50. There are fewer farmers in the United States today than 200 years ago because of a. more educational opportunities and increases in farm technology. b. increased government regulations in farming and increased farm technology. c. an elastic food demand and more attractive urban alternatives to farming. d. increases in farm technology and an inelastic food demand. ____ 51. Which of the following best describes the change in farm population from 1950 to 2000? a. a drop from 10 million to fewer than 3 million people. b. a drop from 20 million to fewer than 5 million people. c. an increase from 10 million to almost 12 million people. d. a drop from 30 million to just over 6 million people. ____ 52. Suppose that you are in charge of pricing at a local sandwich shop. The business needs to increase revenue and your job is on the line. If the demand for sandwiches is elastic you a. should increase the price of sandwiches. b. should decrease the price of sandwiches. c. should not change the price of sandwiches. d. could not determine what to do with price until you determine whether supply is elastic or inelastic. Figure 5-12

____ 53. Refer to Figure 5-12. Which supply curve is perfectly inelastic?

a. S1 b. S2 c. S3 d. It is impossible to tell without more information. ____ 54. Suppose a producer is able to separate customers into two groups, one having a price inelastic demand and the other having a price elastic demand. If the producer's objective is to increase total revenue, she should a. increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand. b. decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand. c. charge the same price to both groups of customers. d. increase the price for both groups of customers. ____ 55. Harry's Barber Shop increased its total monthly revenue from $1500 to $1800 when it raised the price of a haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is a. 0.318. b. 0.700. c. 1.125. d. 0.416. ____ 56. Barb's Bakery made $200 last month selling 100 loaves of bread. This month it made $300 selling 60 loaves of bread. The price elasticity of demand for Barb's bread is a. 0.583. b. 1.25. c. 0.266. d. 1.11. ____ 57. You are in charge of the local city-owned golf course. You need to increase the revenue generated by the golf course in order to meet expenses. The mayor advises you to increase the price of a round of golf. The city manager recommends reducing the price of a round of golf. You realize that a. the mayor thinks demand is elastic and the city manager thinks demand is inelastic. b. both the mayor and the city manager think that demand is elastic. c. both the mayor and the city manager think that demand is inelastic. d. the mayor thinks demand is inelastic and the city manager thinks demand is elastic. ____ 58. Policymakers choose to enact price controls in a market because

a. they believe the market's outcome to be unfair. b. enacting price controls will directly increase tax revenues. c. they are required by law to improve market conditions. d. they believe that the market system is inefficient and their actions will improve efficiency. ____ 59. A price ceiling a. is a legal maximum on the price at which a good can be sold. b. is a legal minimum on the price at which a good can be sold. c. occurs when the price in the market is temporarily above equilibrium. d. will usually result in a market surplus. ____ 60. If a price ceiling is not binding, a. the equilibrium price is above the ceiling. b. the equilibrium price is below the ceiling. c. it has no legal enforcement mechanism. d. people must voluntarily agree to abide by it. ____ 61. A price ceiling that is not binding will a. cause a surplus in the market. b. cause a shortage in the market. c. cause the market to be less efficient. d. have no effect on the market price. Figure 6-2

____ 62. Refer to Figure 6-2. A binding price floor would exist at a. a price of $10.00.

b. a price of $8.00. c. any price above $10.00. d. any price below $10.00. ____ 63. With a binding price floor the market price will a. be lower than the price floor. b. be higher than the price floor. c. equal the price floor. d. It is impossible to compare the market price with the price floor. ____ 64. A binding price floor in a market sets price a. above equilibrium price and causes a shortage. b. above equilibrium price and causes a surplus. c. below equilibrium price and causes a surplus. d. below equilibrium price and causes a shortage. Figure 6-3

____ 65. Refer to Figure 6-3. Which of the panels represents a binding price floor? a. panel (a) b. panel (b) c. panel (a) and panel (b) d. neither panel (a) nor panel (b) ____ 66. Refer to Figure 6-3. In panel (b), at the actual price there will be a. a shortage of wheat. b. equilibrium in the market.

c. a surplus of wheat. d. an excess demand for wheat. Figure 6-4

____ 67. Refer to Figure 6-4. A binding price ceiling would exist at a price of a. $8.00. b. $6.00. c. $5.00. d. It could exist at any price above $6.00. Figure 6-5

____ 68. Refer to Figure 6-5. If the government imposes a binding price floor of $5.00 in this market, the result would be a a. surplus of 15. b. surplus of 35.

c. surplus of 20. d. shortage of 20. ____ 69. Rationing by long lines is a. inefficient, because it wastes buyers' time. b. efficient, because those who are willing to wait the longest get the goods. c. the only way scarce goods can be rationed. d. only necessary if price ceilings are not binding. Figure 6-6

____ 70. Refer to Figure 6-6. With a price ceiling present in this market, when the supply curve for gasoline shifts from S1 to S2 a. the price will increase to P3. b. a surplus will occur at the new market price of P2. c. the market price will stay at P1 due to the price ceiling. d. a shortage will occur at the price ceiling of P2. ____ 71. Water shortages can be most efficiently eliminated even in times of drought if a. the market is allowed to adjust freely. b. water can be moved from where it is plentiful to where it is needed most. c. government intervention occurs to regulate water usage. d. the price is low enough for everyone to have all the water they want. ____ 72. California's drought-emergency water bank a. caused a severe water shortage in 1991. b. causes water to be fixed in supply.

c. allows farmers to lease water during dry spells. d. caused the price of water during the last drought to fall. ____ 73. Over time, housing shortages caused by rent control a. increase, because the demand and supply curves for housing are more elastic in the long run. b. increase, because the demand and supply curves for housing are more inelastic in the long run. c. decrease, because the demand and supply curves for housing are more inelastic in the long run. d. change very little since price is not allowed to adjust. Figure 6-7

____ 74. Refer to Figure 6-7. Which panel(s) best represent(s) a binding rent control in the long run? a. panel (a) b. panel (b) c. neither panel d. both panels ____ 75. Under rent control, bribery is a mechanism to a. bring the total price of an apartment (including the bribe) closer to the equilibrium price. b. allocate housing to the poorest individuals in the market. c. force the total price of an apartment (including the bribe) to be less than the market price. d. allocate housing to the most deserving tenants. ____ 76. Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because a. with shortages and waiting lists, they have no incentive to maintain and improve their

property. b. they know they can never please their tenants. c. the law no longer requires them to maintain their buildings. d. it becomes the government's responsibility. ____ 77. Which of the following is NOT a result of government imposed rent controls? a. fewer new apartments offered for rent b. less maintenance provided by landlords c. bribery d. higher quality housing ____ 78. Which of the following statements about rent control in New York City is accurate? a. Rent control has proven successful in providing low-cost housing for poor people. b. Rent control has produced an increase in available rental units. c. Many well-to-do people live in rent-controlled apartments. d. All of the above are accurate statements. ____ 79. In the United States, when minimum wage laws are established, employers must a. pay the going (equilibrium) wage in the market. b. pay a wage equal to or higher than the minimum wage. c. hire a minimum number of employees which is set by the government. d. hire only those workers who will work for the established minimum wage. ____ 80. The typical study on the effect of the minimum wage on teenage employment finds that a 10 percent increase in the minimum wage a. depresses teenage employment by 1 to 3 percent. b. depresses teenage employment by 10 to 13 percent. c. has no effect on teenage employment. d. raises wages of teenagers by 10 percent. ____ 81. Which of the following is the most correct statement about price controls? a. Price controls always help those they are designed to help. b. Price controls never help those they are designed to help. c. Price controls often hurt those they are designed to help. d. Price controls always hurt those they are designed to help. ____ 82. One disadvantage of government subsidies over price controls is that subsidies

a. cause disequilibrium in the market in which they are imposed. b. raise taxes. c. cause lower prices to suppliers. d. cause unemployment. ____ 83. The earned income tax credit is an example of a. supply and demand. b. a policy designed to increase efficiency. c. a wage subsidy. d. a price control. ____ 84. The term tax incidence refers to the a. Boston Tea Party. b. "flat tax" movement. c. division of the tax burden between buyers and sellers. d. division of the tax burden between sales taxes and income taxes. ____ 85. If a tax is imposed on the buyer of a product the demand curve would shift a. downward by the amount of the tax. b. upward by the amount of the tax. c. downward by less than the amount of the tax. d. upward by more than the amount of the tax. ____ 86. A tax placed on kite buyers will shift a. supply upward, causing equilibrium price to rise and equilibrium quantity to fall. b. demand upward, causing both equilibrium price and quantity to rise. c. supply downward, causing equilibrium price to fall and equilibrium quantity to rise. d. demand downward, causing both equilibrium price and quantity to fall. Figure 6-8

____ 87. Refer to Figure 6-8. The equilibrium price in the market before the tax is imposed is a. $8.00. b. $6.00. c. $5.00. d. $3.00. Figure 6-9

____ 88. Refer to Figure 6-9. The amount of the tax imposed in this market is a. $10.00. b. $6.00. c. $4.00. d. $2.00. ____ 89. Refer to Figure 6-9. The amount of the tax that sellers would pay would be

a. $10.00. b. $6.00. c. $4.00. d. $2.00. ____ 90. A tax on the buyers of tea will cause the price the buyer pays a. and the price the seller receives to rise. b. and the price the seller receives to fall. c. to rise and the price the seller receives to fall. d. to fall and the price the seller receives to rise. ____ 91. The initial impact of a tax on the sellers of a product a. is on the supply of the product. b. is on the demand for the product. c. is on both the supply of the product and the demand for the product. d. Taxes impact both demand and supply. Figure 6-10

____ 92. Refer to Figure 6-10. The amount of the tax that buyers would pay would be a. $1.00. b. $1.50. c. $2.50. d. $3.00. ____ 93. What is true about the burden of a tax imposed on candles? a. Buyers bear the entire burden of the tax.

b. Sellers bear the entire burden of the tax. c. Buyers and sellers share the burden of the tax. d. The government bears the entire burden of the tax. ____ 94. The tax incidence is equivalent a. if the tax is levied on only the seller. b. if the tax is levied only on the buyer. c. if the tax is levied on both the buyer and the seller. d. regardless of whether the tax is levied on buyers or sellers. ____ 95. FICA is an example of a. a payroll tax. b. a sales tax. c. a farm subsidy. d. fire insurance. ____ 96. Congress intended that a. the entire FICA tax be paid by workers. b. the entire FICA tax be paid by firms. c. the entire FICA tax be paid by consumers. d. half the FICA tax be paid by workers, and half be paid by firms. ____ 97. A key result of a payroll tax is that it a. becomes a tax on poor people. b. becomes a tax on corporations. c. places a wedge between the wage that firms pay and the wage that workers receive. d. does not affect equilibrium in labor markets. Figure 6-11

____ 98. Refer to Figure 6-11. In which market will the majority of a tax be paid by the buyer? a. market (a) b. market (b) c. market (c) d. All of the above are correct. ____ 99. Refer to Figure 6-11. In which market will the majority of a tax be paid by the seller? a. market (a) b. market (b) c. market (c) d. All of the above are correct. Figure 6-13

____ 100. Refer to Figure 6-13. The price that will be paid after the tax is a. $24. b. $16. c. $10. d. $8. ____ 101. Refer to Figure 6-13. The price sellers receive after the tax is a. $24. b. $14. c. $10. d. $8. ____ 102. Refer to Figure 6-13. The amount of the tax imposed is a. $16. b. $14. c. $8. d. $6. ____ 103. If a tax is imposed on a market with inelastic demand and elastic supply, a. buyers will bear most of the burden of the tax. b. sellers will bear most of the burden of the tax. c. the burden of the tax will be shared equally between buyers and sellers. d. it is impossible to determine how the burden of the tax will be shared. ____ 104. Buyers of a product will pay the majority of a tax placed on a product when a. supply is more elastic than demand.

b. the demand in more elastic than supply. c. the tax is placed on the seller of the product. d. the tax is placed on the buyer of the product. ____ 105. The burden of a tax placed on a product a. depends on the supply and demand of that product. b. depends on how lawmakers decide the burden should be placed. c. usually falls more heavily on the buyer. d. usually falls more heavily on the seller. ____ 106. Suppose that a tax is placed on DVDs. If the seller ends up paying the majority of the tax we know that the a. demand curve is more inelastic than the supply curve. b. supply curve is more inelastic than the demand curve. c. government has placed the tax on the seller. d. government has placed the tax on the buyer. ____ 107. Which of the following was NOT a result of the luxury tax imposed by Congress in 1990? a. The burden of the tax fell on suppliers. b. The burden of the tax fell more on the middle class than on the rich. c. The demand for many luxury goods fell. d. Government revenue from the tax increased substantially. ____ 108. The burden of a luxury tax falls a. more on the rich than on the middle class. b. more on the poor than on the middle class. c. more on the middle class than on the rich. d. equally on the rich, the middle class, and the poor. ____ 109. Which of the following is the LEAST likely to result from the imposition of a price ceiling in the market for rental cars? a. free gasoline given to people as an incentive to a rent car b. poor engine maintenance in rental cars c. an accumulation of dirt in the interior of rental cars d. slow replacement of old rental cars with new ones ____ 110. Which of the following is the most likely explanation for the imposition of a price floor in the market for corn?

a. Policy makers have studied the effects of the price floor carefully and recognize that the price floor is advantageous for society as a whole. b. Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into enacting the price floor. c. Buyers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. d. Sellers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor. ____ 111. Suppose that the demand for picture frames is price elastic and the supply of picture frames is price inelastic. A tax of $1 per frame levied on buyers of picture frames will increase the equilibrium price paid by buyers of picture frames by a. $1. b. more than $0.50 but less than $1.00. c. less than $0.50. d. It is impossible to say without more information. ____ 112. Suppose that the demand for picture frames is price inelastic and the supply of picture frames is price elastic. A tax of $1 per frame levied on buyers of picture frames will increase the equilibrium price paid by buyers of picture frames by a. $1. b. more than $0.50 but less than $1.00. c. less than $0.50. d. It is impossible to say without more information. ____ 113. Suppose that the demand for macaroni is price inelastic and the supply of macaroni is price elastic, and that the demand for cigarettes is price inelastic and the supply of cigarettes is price elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the a. sellers of both goods would pay most of the tax. b. buyers of both goods would pay most of the tax. c. sellers of cigarettes and the buyers of macaroni would pay most of the tax. d. We could not be sure who would actually pay most of the tax. ____ 114. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. c. the effect of income redistribution on work effort. d. how the allocation of resources affects economic well-being.

____ 115. Normative analysis refers to what a. is. b. should be. c. maximizes efficiency. d. is politically correct. ____ 116. Suppose that Larry, Moe and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called a. a resistance price. b. willingness to pay. c. consumer surplus. d. producer surplus. ____ 117. 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. $25. c. $35. d. $45. Table 7-1 BUYER MIKE SANDY JONATHAN HALEY

WILLINGNESS TO PAY $50.00 $30.00 $20.00 $10.00

____ 118. Refer to Table 7-1. If the table represents the willingness to pay of 4 buyers and the price of the product is $15, then who would be willing to purchase the product? a. Mike b. Mike and Sandy c. Mike, Sandy, and Jonathan d. Mike, Sandy, Jonathan, and Haley ____ 119. Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer? a. $700

b. $2,300 c. $3,000 d. $3,700 ____ 120. 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. ____ 121. Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in the market for lemons? a. It increases. b. It decreases. c. It is not affected by this change in market forces. d. It increases very briefly then decreases. This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Table 7-2 BUYER DAVID LAURA MEGAN MALLORY AUDREY WILLINGNESS TO PAY $8.50 $7.00 $5.50 $4.00 $3.50

____ 122. Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be a. $3.00. b. $4.50. c. $15.50. d. $21.00. ____ 123. Refer to Table 7-2. Which of the following is NOT true? a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke. b. The table shows the willingness to pay of the marginal buyer.

c. When the price is $3.50, each person would receive consumer surplus. d. At a price of $4.00, total consumer surplus in the market will be $9.00. ____ 124. Consumer surplus in a market is the a. area below the demand curve and above the price. b. distance from the demand curve to the horizontal axis. c. distance from the demand curve to the vertical axis. d. area below the demand curve and above the horizontal axis. ____ 125. If the cost of producing sofas decreases, consumer surplus will a. increase, then decrease. b. decrease. c. remain constant. d. increase. ____ 126. If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets? a. It increases. b. It decreases. c. It will not change consumer surplus, but it will change producer surplus. d. It will increase, then decrease. ____ 127. The height of a demand curve measures a. the value buyers place on a good. b. a buyer's willingness to pay. c. the price buyers must pay for the good. d. Both a and b are correct. e. All of the above are correct. Figure 7-1

____ 128. Refer to Figure 7-1. When the price is P1, consumer surplus is a. A. b. A + B. c. A + B + C. d. A + B + D. Figure 7-2

____ 129. Refer to Figure 7-2. Which area represents consumer surplus at a price of P2? a. ABD b. ACF c. BCDE d. DEF e. BCFD

Figure 7-3

____ 130. Refer to Figure 7-3. Which area represents producer surplus at a price of P2? a. BCE b. ACF c. ABED d. DEF e. AFEB ____ 131. Refer to Figure 7-3. Which area represents the increase in producer surplus when the price rises from P1 to P2? a. BCE b. ACF c. ABED d. DEF e. AFEB Figure 7-4

____ 132. Refer to Figure 7-4. What area represents total surplus in the market when the price is P1? a. A + B b. B + C c. C + D d. A + B + C + D ____ 133. Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will a. decrease, and producer surplus in the industry will decrease. b. increase, and producer surplus in the industry will increase. c. decrease, and producer surplus in the industry will increase. d. increase, and producer surplus in the industry will decrease. ____ 134. The marginal seller is the seller who a. cannot compete with the other sellers in the market. b. would leave the market first if the price were any lower. c. can produce at the lowest cost. d. has the greatest producer surplus. Figure 7-5

____ 135. Refer to Figure 7-5. When the price is P2, producer surplus is a. A. b. A + C. c. A + B + C. d. D + E. ____ 136. Refer to Figure 7-5. When the price falls from P2 to P1, producer surplus a. decreases by an amount equal to A. b. decreases by an amount equal to A + C. c. decreases by an amount equal to A + B. d. increases by an amount equal to A + B. ____ 137. Refer to Figure 7-5. When the price falls from P2 to P1, which of the following would NOT be true? a. The sellers who still sell the good are worse off because they now receive less. b. Some sellers leave the market because they are not willing to sell the good at the lower price. c. The total cost of what is now sold by sellers is actually higher. d. Producer surplus would fall by area A + B. ____ 138. Producer surplus measures the a. well-being of society as a whole. b. well-being of sellers. c. well-being of buyers and sellers. d. loss to sellers. ____ 139. Producer surplus measures

a. the well-being of sellers. b. production costs. c. the well-being of buyers and sellers. d. unsold inventories. ____ 140. Rich sells investment advice for $100 per hour. His cost is $20 per hour. Rich's producer surplus is a. $20. b. $80. c. $100. d. $120. Market Supply and Demand for Pepperoni Pizza Table 7-4 PRICE$12.00 $10.00 $ 8.00 $ 6.00 $ 4.00 $ 2.00

QUANTITY DEMANDED0 4 8 12 16 20 10 8 6 4

QUANTITY SUPPLIED12

2

____ 141. Refer to Table 7-4. At the equilibrium price, consumer surplus would be a. $4. b. $8. c. $12. d. $16. ____ 142. Total surplus in a market is a. the total costs to sellers of providing the goods less the total value to buyers of the goods. b. the total value to buyers of the goods less the costs to sellers of providing those goods. c. less than consumer surplus plus producer surplus. d. greater than consumer surplus plus producer surplus. ____ 143. In a market, total surplus is a. equal to producer surplus plus consumer surplus. b. equal to the total costs to sellers less the total value to buyers.

c. equal to consumers' willingness to pay plus producer costs. d. greater than consumer surplus plus producer surplus. Figure 7-6

____ 144. Refer to Figure 7-6. Buyers who value this good more than price are represented by segment a. AC. b. CE. c. BC. d. CD. ____ 145. Refer to Figure 7-6. If price were higher than Pe, a. total surplus would fall. b. consumer surplus would increase. c. total surplus would rise, since producer surplus would increase. d. consumer surplus would be greater than producer surplus. ____ 146. Total surplus in a market equals a. Value to buyers - Amount paid by buyers. b. Amount received by sellers - Costs of sellers. c. Value to buyers - Costs of sellers. d. Amount received by sellers - Amount paid by buyers. Figure 7-7

____ 147. Refer to Figure 7-7. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus to producers already in the market would be equal to a. $90. b. $210. c. $360. d. $480. ____ 148. Refer to Figure 7-7. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in total producer surplus would be equal to a. $210. b. $360. c. $480. d. $570. Figure 7-8

____ 149. Refer to Figure 7-8. The equilibrium (market-clearing) price is

a. P1. b. P2. c. P3. d. P4. Figure 7-9

____ 150. Refer to Figure 7-9. For the quantity Q3, the value to buyers a. and the cost to sellers are both P2. b. is P1 and the cost to sellers is P3. c. and the cost to sellers are both P3. d. is P3 and the cost to sellers is P2. ____ 151. Inefficiency exists in an economy when a good is a. being produced with less than all available resources. b. not distributed fairly among buyers. c. not being produced by the lowest-cost producers. d. being consumed by buyers who value it most highly. ____ 152. If the government allowed a free market for transplant organs (such as kidneys) to exist a. the shortage of organs would be eliminated. b. those with the greatest need would be first to receive an organ. c. organs would be distributed more fairly. d. only the very rich in a society would receive a transplant.

____ 153. The "invisible hand" is a. used to describe the welfare system in the United States. b. a concept used by Adam Smith to describe the virtues of free markets. c. a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy. d. a term used by some economists to describe what the role of government should be in an economy-present but invisible. ____ 154. According to many economists, government restrictions of ticket scalping do all of the following EXCEPT a. inconvenience the public. b. reduce the audience for cultural and sports events. c. waste the police's time. d. keep the cost of tickets to consumers low. ____ 155. Market power refers to the a. side effects that may occur in a market. b. government regulations imposed on the sellers in a market. c. ability to influence price. d. forces of supply and demand in determining equilibrium price. ____ 156. Externalities are a. side effects passed on to a party other than the buyers and sellers in the market. b. external forces that help establish equilibrium price. c. external forces that cause the price of a good to be higher than it otherwise would be. d. side effects of government intervention in markets. ____ 157. When markets fail, public policy a. can do nothing to improve the situation. b. can potentially remedy the problem and increase economic efficiency. c. can always remedy the problem and increase economic efficiency. d. can, in theory, remedy the problem, but in practice, has proven to be ineffective. ____ 158. Suppose that the equilibrium price in the market for widgets is $5. If a law reduced the maximum legal price for widgets to $4, a. consumer surplus would necessarily increase even if the lower price resulted in a shortage of widgets. b. consumer surplus would necessarily decrease because the lower price would create a

shortage of widgets. c. consumer surplus might increase or decrease. d. consumer surplus would be unaffected. ____ 159. At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes a. consumer surplus, but not producer surplus. b. producer surplus, but not consumer surplus. c. both consumer and producer surplus. d. neither consumer nor producer surplus. ____ 160. Orange juice and apple juice are substitutes. Bad weather that sharply reduced the orange harvest would a. increase consumer surplus in the market for orange juice but decrease producer surplus in the market for apple juice. b. increase consumer surplus in the market for orange juice and increase producer surplus in the market for apple juice. c. decrease consumer surplus in the market for orange juice but increase producer surplus in the market for apple juice. d. decrease consumer surplus in the market for orange juice and decrease producer surplus in the market for apple juice. ____ 161. During Ronald Reagan's eight years in office a. income tax rates rose. b. income tax rates fell. c. he said, "Read my lips: no new taxes." d. the tax rate of high-income taxpayers rose, while the tax rates of low income taxpayers fell. ____ 162. When a tax is levied on a good a. only the quantity of the good sold will change. b. only the price of the good sold will change. c. both price and quantity of the good sold will change. d. neither price nor quantity of the good sold will change. ____ 163. A tax placed on a product causes the price the buyer pays a. and the price the seller receives to be higher. b. and the price the seller receives to be lower. c. to be lower and the price the seller receives to be higher.

d. to be higher and the price the seller receives to be lower. ____ 164. A tax levied on the supplier of a product shifts the a. supply curve upward (or to the left). b. supply curve downward (or to the right). c. demand curve upward (or to the right). d. demand curve downward (or to the left). Figure 8-1

____ 165. Refer to Figure 8-1. If the market is in equilibrium, consumer surplus is represented by area a. A. b. B. c. C. d. D. ____ 166. Refer to Figure 8-1. When the market is in equilibrium, producer surplus is represented by area a. A. b. B. c. C. d. D. ____ 167. When a tax is levied on the sellers of a good, the supply curve a. shifts left (up) by less than the tax. b. shifts left (up) by more than the tax. c. shifts left (up) by an amount equal to the tax.

d. does not shift when a tax is levied on sellers. ____ 168. A tax placed on a good a. causes the price of the good to fall. b. affects buyers of the good, but not sellers. c. causes the size of the market for the good to shrink. d. is usually borne entirely by the seller of the good. ____ 169. Total tax revenue received by government can be expressed as a. T/Q. b. T + Q. c. T(Q). d. T - Q. ____ 170. The loss in total surplus resulting from a tax is called a. a deficit. b. economic loss. c. deadweight loss. d. inefficiency. Figure 8-2

____ 171. Refer to Figure 8-2. The price that will be paid after the tax is a. P1. b. P2. c. P3.

d. impossible to determine. ____ 172. Refer to Figure 8-2. The per unit burden of the tax on buyers is a. P3 - P1. b. P3 - P2. c. P2 - P1. d. Q2 - Q1. ____ 173. Refer to Figure 8-2. The per unit burden of the tax on the sellers is a. P3 - P1. b. P3 - P2. c. P2 - P1. d. Q2 - Q1. ____ 174. The amount of tax revenue received by the government is equal to the area a. P3 A C P1. b. A B C. c. P2 D A P3. d. P1 C D P2. Figure 8-3

____ 175. Refer to Figure 8-3. The per unit burden of the tax on buyers is a. $16. b. $14.

c. $8. d. $6. ____ 176. The amount of deadweight loss as a result of the tax would be equal to a. $210. b. $420. c. $560. d. $980. Figure 8-4

____ 177. Refer to Figure 8-4. Consumer surplus before the tax was levied is represented by area a. A. b. A + B + C. c. D + E + F. d. F. ____ 178. Refer to Figure 8-4. The total surplus (consumer, producer, and government) with the tax is represented by area a. A + B + C. b. D + E + F. c. A + B + D + F. d. C + E. Figure 8-5

____ 179. Refer to Figure 8-5. Without a tax, the equilibrium price and quantity would be a. $16 and 300. b. $10 and 600. c. $10 and 300. d. $6 and 300. ____ 180. Refer to Figure 8-5. Without a tax, total surplus in this market would be a. $2400. b. $3000. c. $3600. d. $6000. ____ 181. Refer to Figure 8-5. If a tax is imposed in this market, the price buyers would now pay for the good would be a. $2. b. $6. c. $10. d. $16. ____ 182. Refer to Figure 8-5. If a tax is imposed in this market, the price sellers would receive for their product would be a. $2. b. $6. c. $10. d. $16.

____ 183. Refer to Figure 8-5. If the government imposes a tax in this market, tax revenue will be a. $600. b. $900. c. $1500. d. $3000. Figure 8-6

____ 184. Refer to Figure 8-6. The equilibrium market price before the tax is imposed is a. $16. b. $12. c. $8. d. $4. ____ 185. Refer to Figure 8-6. After the tax is levied, producer surplus would be a. $150. b. $125. c. $75. d. $45. ____ 186. Refer to Figure 8-6. The amount of deadweight loss in this market resulting from the levying of the tax is a. $20. b. $30. c. $40. d. $50.

a. they transfer purchasing power to the government which always wastes money. b. they prevent buyers and sellers from realizing some of the gains from trade. c. marginal buyers and sellers leave the market causing the quantity sold to fall. d. Both b and c are correct. Scenario 8-2 Sheila offers to do Stephanie's housework for $20 per week. Stephanie's opportunity cost of doing housework is $30 per week, and Sheila's opportunity cost of doing housework is $10 per week. ____ 188. Refer to Scenario 8-2. What will be Sheila's gain in producer surplus as a result of the proposed transaction? a. Sheila will gain $30 per week. b. Sheila will gain $20 per week. c. Sheila will gain $10 per week. d. Sheila will gain no producer surplus. ____ 189. Oliver Wendell Holmes once said taxes a. are the price we pay for a civilized society. b. are a fact of life. c. cannot be escaped unless you are in jail. d. can only be avoided by the rich. ____ 190. The size of the tax and the deadweight loss of a tax are a. positively related. b. negatively related. c. independent of each other. d. equal to each other. ____ 191. If the supply of a good is relatively elastic, changing the price causes a. a relatively small change in the amounts that buyers are willing to buy. b. a relatively small change in the amounts sellers are willing to sell. c. a relatively large change in the amounts sellers are willing to sell. d. no change in the amounts sellers are willing to sell. ____ 192. Assume that the demand for diamonds is more elastic than the demand for gasoline. The tax levied on diamonds will cause the loss of consumer surplus to be a. zero. b. relatively large.

c. relatively small. d. either small or large (depending on the elasticity of supply). ____ 193. Assume that the supply of gasoline is relatively inelastic and the supply of wheat is relatively elastic. A tax levied on wheat will cause the loss of producer surplus to be a. relatively large. b. relatively small. c. zero. d. either small or large, depending on the elasticity of demand. ____ 194. Since the amount of land is fixed, the total supply of land is a. relatively elastic. b. perfectly elastic. c. perfectly inelastic. d. relatively inelastic. ____ 195. If the supply of land is fixed, a tax on land would be paid a. entirely by the landowners. b. entirely by the renters or users of the land. c. partly by landowners and partly by land users. d. only by workers. ____ 196. According to the famous economist Milton Friedman, the "least bad" tax is a tax on a. income received from profits and interest. b. the value of unimproved land. c. labor income. d. the value of land including the improvements to the land. ____ 197. If the size of a tax is tripled, then the deadweight loss from the tax would a. double. b. triple. c. increase a factor of six. d. increase by a factor of nine. ____ 198. One side-effect of the tax cuts made during Ronald Reagan's terms as president was a. increased tax revenues.

b. small budget surpluses. c. large budget deficits. d. decreased government spending. ____ 199. The Laffer curve indicates each of the following EXCEPT income tax collections will be a. very low if income tax rates are very low. b. very low if income tax rates are very high. c. at a maximum if income tax rates are at some intermediate level between very low and very high. d. very high if income tax rates are very high. ____ 200. The "underground" economy refers to a. mining and excavation. b. illegal activities (such as prostitution and illegal drugs). c. barter and other activities conducted "under the table" to avoid being taxed. d. All of the above are correct. e. Both b and c are correct. ____ 201. Suppose that the equilibrium quantity in the market for widgets has been 200 per month. Then a tax of $5 per widget is imposed on widgets. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is a. $250. b. $125. c. $75. d. $50. ____ 202. As more people become self-employed and so can determine how many hours they work per week, we would expect that the deadweight loss from the Social Security Tax would a. increase and the revenue generated from it would rise. b. decrease and the revenue generated from it would rise. c. increase and the revenue generated from it would fall. d. decrease and the revenue generated from it would fall. ____ 203. Nobel Prize-winning economist Milton Friedman said that, "In my opinion, the least bad tax is the property tax on the unimproved value of land." Why? a. Land owners can afford the tax better than other people.

b. A tax on unimproved land would be sufficient to fund government, so all other taxes could be abolished. c. Such a tax could generate more government revenue than any tax on labor or capital. d. A tax on unimproved land would have no deadweight loss. ____ 204. Which of the following statements is true for most markets? a. As the tax rate increases, tax revenue continually rises and deadweight loss continually falls. b. As the tax rate rises, tax revenue rises for a while, but eventually begins to fall; deadweight loss rises but also begins to fall as tax revenue falls. c. As the tax rate rises, tax revenue rises for a while, but eventually begins to fall; deadweight loss continually rises. d. As the tax rate rises, tax revenue rises for a while, but eventually begins to fall; deadweight loss falls for a while, but begins to rise as tax revenue falls. ____ 205. When Ford and General Motors import automobile parts from Mexico at prices below those they must pay in the United States, a. workers who assemble Ford and General Motors vehicles become worse off. b. United States consumers, taken as a group, become worse off. c. Mexican consumers, taken as a group, become worse off. d. American companies that manufacture automobile parts become worse off. ____ 206. An industry that was a major part of the U.S. economy a century ago but is not now is the a. agriculture industry. b. textile and clothing industry. c. coal mining industry. d. automobile industry. ____ 207. If a country allows trade and the domestic price of a good is lower than the world price, a. the country will become an exporter of the good. b. the country will become an importer of the good. c. the country will neither export nor import the good. d. additional information about demand is needed to determine whether the country will export or import the good. ____ 208. If the world price of a product is higher than a country's domestic price we know that country a. should import that product.

b. should no longer produce that product. c. has a comparative advantage in that product. d. could benefit by imposing a tariff on that product. ____ 209. Which of the following is NOT a benefit of trade? a. an increased variety of goods b. lower costs through economies of scale c. increased competition d. an ability to control domestic and world prices ____ 210. When a country allows trade and becomes an importer of a good, a. both domestic producers and domestic consumers are better off. b. domestic producers are better off, and domestic consumers are worse off. c. domestic producers are worse off, and domestic consumers are better off. d. both domestic producers and domestic consumers are worse off. ____ 211. When a country allows trade and becomes an exporter of a good, a. everyone in the country benefits. b. everyone in the country loses. c. the gains of the winners exceed the losses of the losers. d. the losses of the losers exceed the gains of the winners. ____ 212. When a country allows trade and becomes an exporter of a good, which of the following would NOT be true? a. The price paid by domestic consumers of the good increases. b. The price received by domestic producers of the good increases. c. The losses of domestic consumers exceed the gains of domestic producers. d. The gains of domestic producers exceed the losses of domestic consumers. ____ 213. When a country allows trade and becomes an importer of a good, which of the following would NOT be true? a. The gains of domestic consumers exceed the losses of domestic producers. b. The losses of domestic producers exceed the gains of domestic consumers. c. The price paid by domestic consumers of the good decreases. d. The price received by domestic producers of the good decreases. ____ 214. When a country allows free trade, a. the domestic price will be greater than the world price.

b. the domestic price will be lower than the world price. c. the domestic price will equal the world price. d. it does not matter what the world price is; the domestic price is the prevailing price. ____ 215. To correctly analyze the welfare effects of free trade on an economy, economists must assume that the country a. has a comparative advantage in the product. b. is the only producer of the product. c. is a price taker. d. has an absolute advantage in the product. Figure 9-1

____ 216. Refer to Figure 9-1. Without trade, consumer surplus would be a. $210. b. $245. c. $455. d. $490. Figure 9-2

____ 217. Refer to Figure 9-2. China will a. import 100 pencil sharpeners. b. import 250 pencil sharpeners. c. export 100 pencil sharpeners. d. export 250 pencil sharpeners. ____ 218. Refer to Figure 9-2. The increase in total surplus in China because of trade is a. $500. b. $800. c. $1100. d. $1600. Figure 9-3

____ 219. Refer to Figure 9-3. The change in total surplus in Jamaica because of trade is

a. $625. b. $865. c. $1,375. d. $1,500. Scenario 9-1 The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $600 per ton. The U.S. is a price-taker in the tomatoes market. ____ 220. Refer to Scenario 9-1. If trade in tomatoes is allowed, U.S. producers of tomatoes a. will be better off. b. will be worse off. c. will be unaffected. d. could be helped or hurt. ____ 221. Refer to Scenario 9-1. If trade in tomatoes is allowed, total well-being in the United States a. will increase. b. will decrease. c. will be unaffected. d. could increase or decrease. Figure 9-4

____ 222. Refer to Figure 9-4. This country would a. import 30 wagons. b. export 20 wagons.

c. import 50 wagons. d. export 50 wagons. ____ 223. Refer to Figure 9-4. Without trade, consumer surplus would be a. $210.50. b. $245.50. c. $367.50. d. $607.50. ____ 224. Refer to Figure 9-4. With free trade, producer surplus would be a. $80. b. $150. c. $210. d. $245. ____ 225. Refer to Figure 9-4. With free trade, total surplus would be a. $245. b. $367.50. c. $607.50. d. $687.50. ____ 226. Refer to Figure 9-4. If this country allows free trade in wagons, consumers will a. lose by $75. b. lose by $240. c. gain by $240. d. gain by $75. ____ 227. Refer to Figure 9-4. If this country allows free trade in wagons a. consumers will gain more than producers will lose. b. producers will gain more than consumers will lose. c. producers and consumers will both gain equally. d. producers and consumers will both lose equally. Figure 9-7

____ 228. Refer to Figure 9-7. The quantity of cheese exported from Wales is a. Q0 - Q1. b. Q2 - Q1. c. Q2 - Q0. d. Q0. Figure 9-8

____ 229. Refer to Figure 9-8. Total surplus in this market after trade is a. A + B. b. A + B + C. c. A + B + C + D. d. B + C + D.

Figure 9-10

____ 230. Refer to Figure 9-10. Consumer surplus in this market after trade would be a. A. b. C + B. c. A + B + D. d. B + C + D. Figure 9-11

____ 231. Refer to Figure 9-11. Equilibrium price and quantity before trade would be a. $18 and 400. b. $18 and 800. c. $14 and 400. d. $14 and 600.

Figure 9-12

____ 232. Refer to Figure 9-12. Domestic production and domestic consumption respectively after trade would be a. 600 and 600. b. 600 and 300. c. 300 and 900. d. 600 and 900. ____ 233. Refer to Figure 9-12. Consumer surplus before trade would be a. $1600. b. $2400. c. $3200. d. $3600. ____ 234. Refer to Figure 9-12. How many units of this product would be imported after trade? a. 200 b. 400 c. 600 d. 800 ____ 235. A tariff a. lowers the price of the exported good below the world price. b. keeps the price of the exported good the same as the world price. c. raises the price of the imported good above the world price. d. lowers the price of the imported good below the world price. ____ 236. When a country moves from a free trade position and imposes a tariff on imports, this causes

a. a decrease in total surplus in the market. b. a decrease in producer surplus in the market. c. an increase in consumer surplus in the market. d. a decrease in revenue to the government. ____ 237. Turkey is an importer of goose down pillows. The world price of these pillows is $50. Turkey imposes a $7 tariff on pillows. Turkey is a price-taker in the pillow market. As a result of the tariff Turkish consumers of pillows will a. gain and Turkish producers of pillows will lose. b. lose and Turkish producers of pillows will gain. c. gain and Turkish producers of pillows will gain. d. lose and Turkish producers of pillows will lose. Figure 9-13

____ 238. Refer to Figure 9-13. Producer surplus with free trade would be a. G. b. C + G. c. A + C + G. d. A + B + C + G. ____ 239. Refer to Figure 9-13. Producer surplus after the tariff would be a. G. b. C + G. c. A + C + G. d. A + B + C + G.

____ 240. When a quota is imposed on a market the a. supply curve (above the world price) shifts to the right by the amount of the quota. b. supply curve (above the world price) shifts to the left by the amount of the quota. c. demand curve (above the world price) shifts to the right by the amount of the quota. d. demand curve (above the world price) shifts to the left by the amount of the quota. ____ 241. A tariff and an import quota will both a. increase the quantity of imports and raise domestic price. b. increase the quantity of imports and lower domestic price. c. reduce the quantity of imports and raise domestic price. d. reduce the quantity of imports and lower domestic price. Figure 9-15

____ 242. Refer to Figure 9-15. The equilibrium price and quantity after the quota would be a. P1 and Q1. b. P1 and Q4. c. P2 and Q2. d. P2 and Q3. ____ 243. Refer to Figure 9-15. After the quota, deadweight loss would be equal to a. E. b. B. c. D + F. d. B + D + E + F.

____ 244. Refer to Figure 9-15. Area E represents a. a part of consumer surplus. b. a part of producer surplus. c. a surplus for import license holders. d. government revenue. ____ 245. Import quotas and tariffs have each of the following in common EXCEPT a. total surplus falls. b. deadweight losses occur. c. producer surplus increases. d. revenue to government is raised. ____ 246. Which of the following is NOT an argument for restricting trade? a. the jobs argument b. the national security argument c. the infant industry argument d. the efficiency argument ____ 247. Which of the following is the most accurate statement? a. Protection is necessary in order for young industries to grow up and be successful. b. Protection is not necessary for an industry to grow. c. Protection is necessary because if young industries are not protected, they may suffer losses. d. Protection may not always be necessary for infant industries, but it has proven to be useful in most cases. ____ 248. If the United States threatens to impose a tariff on German cars if Germany does not remove agricultural subsidies, the United States will be a. better off no matter how Germany responds. b. better off if Germany gives in, and will be no worse off if it doesn't. c. worse off if Germany doesn't give in to the threat. d. worse off no matter how Germany responds. ____ 249. When a country takes a multilateral approach to free trade it a. removes trade restrictions on its own. b. reduces its trade restrictions while other countries do the same. c. does not remove trade restrictions no matter what other countries do.

d. is willing to trade with multiple countries at once. ____ 250. 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 consumer surplus in Aquilonia is now higher for a. steel, lower for incense, and the same for rugs. b. incense and steel, but not rugs. c. incense and rugs, but not steel. d. incense, lower for steel, and the same for rugs.

Practice Test #2, Chapters 5-9 Answer SectionMULTIPLE CHOICE 1. ANS: C buyers are to a change in price. DIF: 1 REF: SECTION: 5.1 OBJ: TYPE: M 2. ANS: D the quantity demanded responds substantially to changes in the price of the good. DIF: 1 3. ANS: A elastic. DIF: 1 4. ANS: A greater than 1. REF: SECTION: 5.1 OBJ: TYPE: M

REF: SECTION: 5.1

OBJ: TYPE: M

DIF: 2 REF: SECTION: 5.1 5. ANS: C gives the same answer regardless of the direction of change. DIF: 2 6. ANS: C equal to 1. REF: SECTION: 5.1

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 1 REF: SECTION: 5.1 7. ANS: D inelastic section of the demand curve. DIF: 2 8. ANS: D 2.5. DIF: 2 9. ANS: B 0.75. DIF: 2 10. ANS: B 1.06. REF: SECTION: 5.1

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 5.1

OBJ: TYPE: M

REF: SECTION: 5.1

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DIF: 3 REF: SECTION: 5.1 11. ANS: D 0.34, so this store should raise price to raise total revenue. DIF: 3 REF: SECTION: 5.1

OBJ: TYPE: M

OBJ: TYPE: M

12. ANS: A greater the price elasticity of demand. DIF: 3 REF: SECTION: 5.1 13. ANS: C steeper the demand curve will be through a given point. OBJ: TYPE: M

DIF: 3 REF: SECTION: 5.1 OBJ: TYPE: M 14. ANS: B vertical, because buyers purchase the same amount whether the price rises or falls. DIF: 3 REF: SECTION: 5.1 15. ANS: B multiplied by quantity. DIF: 2 REF: SECTION: 5.1 16. ANS: B a decrease in total revenue. DIF: 2 REF: SECTION: 5.1 17. ANS: A increase by $20, so demand must be inelastic. DIF: 3 18. ANS: B A + B. REF: SECTION: 5.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 5.1 19. ANS: B equals 0 and elasticity is undefined. DIF: 3 REF: SECTION: 5.1 20. ANS: D is constant but elasticity changes. DIF: 3 21. ANS: C smaller. REF: SECTION: 5.1

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 5.1 22. ANS: A increases, then decreases. DIF: 3 REF: SECTION: 5.1 23. ANS: A corn oil and motor oil DIF: 2 REF: SECTION: 5.1 24. ANS: B the preferences of the buyer.

OBJ: TYPE: M

OBJ: TYPE: M

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DIF: 2 REF: SECTION: 5.1 25. ANS: C Lower the price to increase total revenue. DIF: 2 REF: SECTION: 5.1 26. ANS: B earned at least $30 an hour. DIF: 1 27. ANS: B diamonds DIF: 1 28. ANS: A an inferior good. REF: SECTION: 5.1

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 5.1

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DIF: 1 REF: SECTION: 5.1 29. ANS: A negative and therefore the good is an inferior good. DIF: 2 30. ANS: B -2.33 DIF: 3 31. ANS: D a normal good. REF: SECTION: 5.1

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 5.1

OBJ: TYPE: M

DIF: 1 REF: SECTION: 5.1 OBJ: TYPE: M 32. ANS: C quantity demanded of one good changes as the price of another good changes. DIF: 1 REF: SECTION: 5.1 33. ANS: C cross-price elasticity of demand. DIF: 2 REF: SECTION: 5.1 34. ANS: A an 18 percent decrease in the quantity of basketballs demanded. DIF: 3 REF: SECTION: 5.1 35. ANS: C assuming that the demand for university education is inelastic. DIF: 3 REF: SECTION: 5.1 36. ANS: A sellers are to a change in price. DIF: 1 REF: SECTION: 5.2 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

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OBJ: TYPE: M

37. ANS: A time. DIF: 2 REF: SECTION: 5.2 38. ANS: C can respond substantially to a change in price. DIF: 2 39. ANS: B elastic. REF: SECTION: 5.2 OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 5.2 40. ANS: A constant slope and changing elasticity of supply. DIF: 3 41. ANS: C perfectly inelastic. DIF: 1 42. ANS: A from A to B DIF: 2 43. ANS: C 0.53 DIF: 3 44. ANS: A supply curve A. REF: SECTION: 5.2

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 5.2

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REF: SECTION: 5.2

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REF: SECTION: 5.2

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DIF: 3 REF: SECTION: 5.2 45. ANS: B decrease the total revenue of wheat farmers. DIF: 2 REF: SECTION: 5.3 46. ANS: C wheat farmers would increase their revenue.

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 5.3 OBJ: TYPE: M 47. ANS: C Government drug programs are more lenient now with drug offenders than in the 1980s. DIF: 2 REF: SECTION: 5.3 48. ANS: B is perfectly inelastic. DIF: 2 49. ANS: C REF: SECTION: 5.3 OBJ: TYPE: M

OBJ: TYPE: M

hurt, since both price and total revenue fell due to an inelastic demand curve. DIF: 3 REF: SECTION: 5.3 50. ANS: D increases in farm technology and an inelastic food demand. DIF: 2 REF: SECTION: 5.3 51. ANS: A a drop from 10 million to fewer than 3 million people. DIF: 2 REF: SECTION: 5.3 52. ANS: B should decrease the price of sandwiches. DIF: 2 53. ANS: A S1 REF: SECTION: 5.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 1 REF: SECTION: 5.2 OBJ: TYPE: M 54. ANS: B decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand. DIF: 3 55. ANS: B 0.700. DIF: 3 56. ANS: A 0.583. REF: SECTION: 5.1 OBJ: TYPE: M

REF: SECTION: 5.1

OBJ: TYPE: M

DIF: 3 REF: SECTION: 5.1 OBJ: TYPE: M 57. ANS: D the mayor thinks demand is inelastic and the city manager thinks demand is elastic. DIF: 2 REF: SECTION: 5.1 58. ANS: A they believe the market's outcome to be unfair. DIF: 2 REF: SECTION: 6.1 59. ANS: A is a legal maximum on the price at which a good can be sold. DIF: 1 REF: SECTION: 6.1 60. ANS: B the equilibrium price is below the ceiling. DIF: 2 61. ANS: D REF: SECTION: 6.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

have no effect on the market price. DIF: 2 REF: SECTION: 6.1 62. ANS: C any price above $10.00. DIF: 3 REF: SECTION: 6.1 63. ANS: A be lower than the price floor. DIF: 2 REF: SECTION: 6.1 64. ANS: B above equilibrium price and causes a surplus. DIF: 3 65. ANS: B panel (b) DIF: 2 66. ANS: C a surplus of wheat. DIF: 2 67. ANS: C $5.00. DIF: 2 68. ANS: B surplus of 35. REF: SECTION: 6.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 6.1

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REF: SECTION: 6.1

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REF: SECTION: 6.1

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DIF: 2 REF: SECTION: 6.1 69. ANS: A inefficient, because it wastes buyers' time. DIF: 1 REF: SECTION: 6.1 70. ANS: D a shortage will occur at the price ceiling of P2. DIF: 3 REF: SECTION: 6.1 71. ANS: A the market is allowed to adjust freely. DIF: 2 REF: SECTION: 6.1 72. ANS: C allows farmers to lease water during dry spells.

OBJ: TYPE: M

OBJ: TYPE: M

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DIF: 2 REF: SECTION: 6.1 OBJ: TYPE: M 73. ANS: A increase, because the demand and supply curves for housing are more elastic in the long run.

DIF: 2 74. ANS: B panel (b)

REF: SECTION: 6.1

OBJ: TYPE: M

DIF: 2 REF: SECTION: 6.1 OBJ: TYPE: M 75. ANS: A bring the total price of an apartment (including the bribe) closer to the equilibrium price. DIF: 2 REF: SECTION: 6.1 OBJ: TYPE: M 76. ANS: A with shortages and waiting lists, they have no incentive to maintain and improve their property. DIF: 2 REF: SECTION: 6.1 77. ANS: D higher quality housing DIF: 2 REF: SECTION: 6.1 78. ANS: C Many well-to-do people live in rent-controlled apartments. DIF: 2 REF: SECTION: 6.1 79. ANS: B pay a wage equal to or higher than the minimum wage. DIF: 2 REF: SECTION: 6.1 80. ANS: A depresses teenage employment by 1 to 3 percent. DIF: 1 REF: SECTION: 6.1 81. ANS: C Price controls often hurt those they are designed to help. DIF: 2 82. ANS: B raise taxes. DIF: 2 83. ANS: C a wage subsidy. REF: SECTION: 6.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 6.1

OBJ: TYPE: M

DIF: 2 REF: SECTION: 6.1 84. ANS: C division of the tax burden between buyers and sellers. DIF: 1 REF: SECTION: 6.2 85. ANS: A downward by the amount of the tax. DIF: 2 REF: SECTION: 6.2

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

86. ANS: D demand downward, causing both equilibrium price and quantity to fall. DIF: 3 87. ANS: B $6.00. DIF: 1 88. ANS: A $10.00. DIF: 3 89. ANS: B $6.00. REF: SECTION: 6.2 OBJ: TYPE: M

REF: SECTION: 6.2

OBJ: TYPE: M

REF: SECTION: 6.2

OBJ: TYPE: M

DIF: 3 REF: SECTION: 6.2 90. ANS: C to rise and the price the seller receives to fall. DIF: 3 REF: SECTION: 6.2 91. ANS: A is on the supply of the product. DIF: 2 92. ANS: A $1.00. REF: SECTION: 6.2

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 3 REF: SECTION: 6.2 93. ANS: C Buyers and sellers share the burden of the tax. DIF: 2 REF: SECTION: 6.2 94. ANS: D regardless of whether the tax is levied on buyers or sellers. DIF: 2 95. ANS: A a payroll tax. REF: SECTION: 6.2

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 1 REF: SECTION: 6.2 96. ANS: D half the FICA tax be paid by workers, and half be paid by firms.

OBJ: TYPE: M

DIF: 2 REF: SECTION: 6.2 OBJ: TYPE: M 97. ANS: C places a wedge between the wage that firms pay and the wage that workers receive. DIF: 2 98. ANS: B market (b) REF: SECTION: 6.2 OBJ: TYPE: M

DIF: 2 99. ANS: A market (a) DIF: 2 100. ANS: A $24. DIF: 3 101. ANS: C $10. DIF: 2 102. ANS: B $14

REF: SECTION: 6.2

OBJ: TYPE: M

REF: SECTION: 6.2

OBJ: TYPE: M

REF: SECTION: 6.2

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REF: SECTION: 6.2

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DIF: 3 REF: SECTION: 6.2 103. ANS: A buyers will bear most of the burden of the tax. DIF: 3 REF: SECTION: 6.2 104. ANS: A supply is more elastic than demand. DIF: 2 REF: SECTION: 6.2 105. ANS: A depends on the supply and demand of that product. DIF: 2 REF: SECTION: 6.2 106. ANS: B supply curve is more inelastic than the demand curve. DIF: 2 REF: SECTION: 6.2 107. ANS: D Government revenue from the tax increased substantially. DIF: 2 REF: SECTION: 6.2 108. ANS: C more on the middle class than on the rich. DIF: 2 REF: SECTION: 6.2 109. ANS: A free gasoline given to people as an incentive to a rent car

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

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DIF: 2 REF: SECTION: 6.1 OBJ: TYPE: M 110. ANS: D Sellers of corn, recognizing that the price floor is good for them, have pressured policy makers into enacting the price floor.

DIF: 2 111. ANS: C less than $0.50.

REF: SECTION: 6.1

OBJ: TYPE: M

DIF: 2 REF: SECTION: 6.2 112. ANS: B more than $0.50 but less than $1.00. DIF: 2 REF: SECTION: 6.2 113. ANS: B buyers of both goods would pay most of the tax. DIF: 2 REF: SECTION: 6.2 114. ANS: D how the allocation of resources affects economic well-being. DIF: 1 115. ANS: B should be. DIF: 1 116. ANS: B willingness to pay. DIF: 1 117. ANS: D $45. OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.1

OBJ: TYPE: M

DIF: 2 REF: SECTION: 7.1 118. ANS: C Mike, Sandy, and Jonathan DIF: 2 119. ANS: B $2,300 DIF: 2 120. ANS: A $175. DIF: 1 121. ANS: B It decreases. DIF: 3 122. ANS: B $4.50. DIF: 2 REF: SECTION: 7.1

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.1

OBJ: TYPE: M

REF: SECTION: 7.1

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REF: SECTION: 7.1

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REF: SECTION: 7.1

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123. ANS: C When the price is $3.50, each person would receive consumer surplus. DIF: 2 REF: SECTION: 7.1 124. ANS: A area below the demand curve and above the price. DIF: 2 125. ANS: D increase. DIF: 3 126. ANS: B It decreases. REF: SECTION: 7.1 OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.1

OBJ: TYPE: M

DIF: 3 REF: SECTION: 7.1 127. ANS: D Both a and b are correct. 128. ANS: C A + B + C. DIF: 2 129. ANS: B ACF DIF: 2 130. ANS: B ACF DIF: 2 131. ANS: E AFEB DIF: 2 132. ANS: B B+C REF: SECTION: 7.1

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.1

OBJ: TYPE: M

REF: SECTION: 7.2

OBJ: TYPE: M

REF: SECTION: 7.2

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DIF: 2 REF: SECTION: 7.3 133. ANS: B increase, and producer surplus in the industry will increase. DIF: 3 REF: SECTION: 7.3 134. ANS: B would leave the market first if the price were any lower. DIF: 1 135. ANS: C A + B + C. DIF: 2 REF: SECTION: 7.2

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.2

OBJ: TYPE: M

136. ANS: C decreases by an amount equal to A + B. DIF: 2 REF: SECTION: 7.2 137. ANS: C The total cost of what is now sold by sellers is actually higher. DIF: 3 REF: SECTION: 7.2 138. ANS: B well-being of sellers. DIF: 2 REF: SECTION: 7.2 139. ANS: A the well-being of sellers. DIF: 1 140. ANS: B $80. DIF: 1 141. ANS: D $16. REF: SECTION: 7.2 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.2

OBJ: TYPE: M

DIF: 3 REF: SECTION: 7.3 OBJ: TYPE: M 142. ANS: B the total value to buyers of the goods less the costs to sellers of providing those goods. DIF: 2 REF: SECTION: 7.3 143. ANS: A equal to producer surplus plus consumer surplus. DIF: 1 144. ANS: A AC. REF: SECTION: 7.3 OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 7.3 145. ANS: A total surplus would fall. DIF: 2 REF: SECTION: 7.3 146. ANS: C Value to buyers - Costs of sellers. DIF: 2 147. ANS: D $480. DIF: 3 148. ANS: D REF: SECTION: 7.3

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 7.3

OBJ: TYPE: M

$570. DIF: 3 149. ANS: B P2. REF: SECTION: 7.3 OBJ: TYPE: M

DIF: 1 REF: SECTION: 7.3 150. ANS: D is P3 and the cost to sellers is P2. DIF: 2 REF: SECTION: 7.3 151. ANS: C not being produced by the lowest-cost producers. DIF: 2 REF: SECTION: 7.3 152. ANS: A the shortage of organs would be eliminated.

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 7.3 OBJ: TYPE: M 153. ANS: B a concept used by Adam Smith to describe the virtues of free markets. DIF: 1 REF: SECTION: 7.3 154. ANS: D keep the cost of tickets to consumers low. DIF: 2 REF: SECTION: 7.3 155. ANS: C ability to influence price. OBJ: TYPE: M

OBJ: TYPE: M

DIF: 1 REF: SECTION: 7.4 OBJ: TYPE: M 156. ANS: A side effects passed on to a party other than the buyers and sellers in the market. DIF: 1 REF: SECTION: 7.4 OBJ: TYPE: M 157. ANS: B can potentially remedy the problem and increase economic efficiency. DIF: 2 REF: SECTION: 7.4 158. ANS: C consumer surplus might increase or decrease. DIF: 3 REF: SECTION: 7.3 159. ANS: D neither consumer nor producer surplus. DIF: 3 160. ANS: C REF: SECTION: 7.3 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

decrease consumer surplus in the market for orange juice but increase producer surplus in the market for apple juice. DIF: 3 REF: SECTION: 7.3 161. ANS: B income tax rates fell. DIF: 2 REF: SECTION: 8.0 162. ANS: C both price and quantity of the good sold will change. DIF: 2 REF: SECTION: 8.1 163. ANS: D to be higher and the price the seller receives to be lower. DIF: 3 REF: SECTION: 8.1 164. ANS: A supply curve upward (or to the left). DIF: 2 165. ANS: B B. DIF: 1 166. ANS: C C. REF: SECTION: 8.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

DIF: 1 REF: SECTION: 8.1 167. ANS: C shifts left (up) by an amount equal to the tax. DIF: 2 REF: SECTION: 8.1 168. ANS: C causes the size of the market for the good to shrink. DIF: 2 169. ANS: C T(Q). DIF: 2 170. ANS: C deadweight loss. DIF: 1 171. ANS: C P3. DIF: 2 172. ANS: B REF: SECTION: 8.1

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.2

OBJ: TYPE: M

P3 - P2. DIF: 3 173. ANS: C P2 - P1. DIF: 3 174. ANS: A P3 A C P1. DIF: 3 175. ANS: C $8. DIF: 3 176. ANS: A $210. DIF: 3 177. ANS: B A + B + C. DIF: 2 178. ANS: C A + B + D + F. DIF: 2 179. ANS: B $10 and 600. DIF: 1 180. ANS: D $6000. DIF: 3 181. ANS: D $16. DIF: 2 182. ANS: B $6. DIF: 2 183. ANS: D $3000. DIF: 3 184. ANS: B $12. REF: SECTION: 8.2 OBJ: TYPE: M

REF: SECTION: 8.2

OBJ: TYPE: M

REF: SECTION: 8.2

OBJ: TYPE: M

REF: SECTION: 8.2

OBJ: TYPE: M

REF: SECTION: 8.2

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.1

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REF: SECTION: 8.1

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REF: SECTION: 8.1

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DIF: 1 185. ANS: D $45. DIF: 3 186. ANS: C $40.

REF: SECTION: 8.1

OBJ: TYPE: M

REF: SECTION: 8.1

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DIF: 3 REF: SECTION: 8.1 187. ANS: D Both b and c are correct. DIF: 3 REF: SECTION: 8.1 188. ANS: C Sheila will gain $10 per week. DIF: 2 REF: SECTION: 8.1 189. ANS: A are the price we pay for a civilized society. DIF: 1 190. ANS: A positively related. REF: SECTION: 8.1

OBJ: TYPE: M

OBJ: TYPE: M

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DIF: 1 REF: SECTION: 8.2 OBJ: TYPE: M 191. ANS: C a relatively large change in the amounts sellers are willing to sell. DIF: 3 192. ANS: B relatively large. DIF: 2 193. ANS: A relatively large. DIF: 2 194. ANS: C perfectly inelastic. REF: SECTION: 8.2 OBJ: TYPE: M

REF: SECTION: 8.2

OBJ: TYPE: M

REF: SECTION: 8.2

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DIF: 1 REF: SECTION: 8.2 195. ANS: A entirely by the landowners. DIF: 2 REF: SECTION: 8.2 196. ANS: B the value of unimproved land. DIF: 1 REF: SECTION: 8.2

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

197. ANS: D increase by a factor of nine. DIF: 2 REF: SECTION: 8.3 198. ANS: C large budget deficits. DIF: 1 REF: SECTION: 8.3 199. ANS: D very high if income tax rates are very high. DIF: 3 REF: SECTION: 8.3 200. ANS: E Both b and c are correct. DIF: 2 201. ANS: B $125. REF: SECTION: 8.3 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

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DIF: 3 REF: SECTION: 8.1 202. ANS: C increase and the revenue generated from it would fall. DIF: 3 REF: SECTION: 8.2 203. ANS: D A tax on unimproved land would have no deadweight loss.

OBJ: TYPE: M

OBJ: TYPE: M

DIF: 2 REF: SECTION: 8.2 OBJ: TYPE: M 204. ANS: C As the tax rate rises, tax revenue rises for a while, but eventually begins to fall; deadweight loss continually rises. DIF: 2 REF: SECTION: 8.3 OBJ: TYPE: M 205. ANS: D American companies that manufacture automobile parts become worse off. DIF: 2 REF: SECTION: 9.0 206. ANS: B textile and clothing industry. DIF: 1 REF: SECTION: 9.0 207. ANS: A the country will become an exporter of the good. DIF: 2 REF: SECTION: 9.1 208. ANS: C has a comparative advantage in that product. DIF: 2 REF: SECTION: 9.1 OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

OBJ: TYPE: M

209. ANS: D an ability to control domestic and world prices DIF: 1 REF: SECTION: 9.1 OBJ: TYPE: M 210. ANS: C domestic producers are worse off, and domestic consumers are better off. DIF: 3 REF: SECTION: 9.2 211. ANS: C the gains of the winners exceed the losses of the losers. OBJ: TYPE: M

DIF: 2 REF: SECTION: 9.2 OBJ: TYPE: M 212. ANS: C The losses of domestic consumers exceed the gains of domestic producers. DIF: 3 REF: SECTION: 9.2 OBJ: TYPE: M 213. ANS: B The losses of domestic producers exceed the gains of domestic consumers. DIF: 3 REF: SECTION: 9.2 214. ANS: C the domestic price will equal the world price. DIF: 2 215. ANS: C is a price taker. DIF: 2 216. ANS: B $245. REF: SECTION: 9.2 OBJ: TYPE: M

OBJ: TYPE: M

REF: SECTION: 9.1

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DIF: 3 REF: SECTION: 9.1 217. ANS: D export 250 pencil sharpeners. DIF: 2 218. ANS: A $500. DIF: 2 219. ANS: A $625. DIF: 2 220. ANS: A will be better off. DIF: 2 221. ANS: A will increase. REF: SECTION: 9.2

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DIF: 2 222. ANS: C import 50 wagons. DIF: 3 223. ANS: C $367.50. DIF: 3 224. ANS: A $80. DIF: 3 225. ANS: D $687.50. DIF: 3 226. ANS: C gain by $240.

REF: SECTION: 9.2

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DIF: 3 REF: SECTION: 9.1 227. ANS: A consumers will gain more than producers will lose. DIF: 2 228. ANS: B Q2 - Q1. DIF: 2 229. ANS: C A + B + C + D. DIF: 2 230. ANS: C A + B + D. DIF: 2 231. ANS: D $14 and 600. DIF: 2 232. ANS: C 300 and 900. DIF: 2 233. ANS: D $3600. REF: SECTION: 9.1

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DIF: 2 234. ANS: C 600

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DIF: 2 REF: SECTION: 9.2 235. ANS: C raises the price of the imported good above the world price. DIF: 2 REF: SECTION: 9.2 236. ANS: A a decrease in total surplus in the market. DIF: 2 REF: SECTION: 9.2 237. ANS: B lose and Turkish producers of pillows will gain. DIF: 2 238. ANS: A G. DIF: 2 239. ANS: B C + G. REF: SECTION: 9.2

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DIF: 2 REF: SECTION: 9.2 OBJ: TYPE: M 240. ANS: A supply curve (above the world price) shifts to the right by the amount of the quota. DIF: 2 REF: SECTION: 9.2 241. ANS: C reduce the quantity of imports and raise domestic price. DIF: 3 242. ANS: D P2 and Q3. DIF: 2 243. ANS: C D + F. REF: SECTION: 9.2 OBJ: TYPE: M

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DIF: 2 REF: SECTION: 9.2 244. ANS: C a surplus for import license holders. DIF: 2 REF: SECTION: 9.2 245. ANS: D revenue to government is raised. DIF: 2 REF: SECTION: 9.2

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246. ANS: D the efficiency argument DIF: 1 REF: SECTION: 9.3 247. ANS: B Protection is not necessary for an industry to grow. DIF: 2 REF: SECTION: 9.3 248. ANS: C worse off if Germany doesn't give in to the threat. DIF: 2 REF: SECTION: 9.3 249. ANS: B reduces its trade restrictions while other countries do the same. DIF: 1 REF: SECTION: 9.3 250. ANS: D incense, lower for steel and the same for rugs. DIF: 3 REF: SECTION: 9.2 OBJ: TYPE: M

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