Class: Date: Exam1 2014 Spring Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Ch.6 When a tax is imposed on the buyers of a good, the demand curve shifts a. downward by the amount of the tax. b. downward by less than the amount of the tax. c. upward by less than the amount of the tax. d. upward by the amount of the tax. Figure 5-13 2. Ch.5 Refer to Figure 5-13. Over which range is the supply curve in this figure the least elastic? a. $16 to $40 b. $220 to $430 c. $40 to $100 d. $100 to $220 1
Figure 6-1 Panel (a) Panel (b) 3. Ch.6 Refer to Figure 6-1. The price ceiling shown in panel (a) a. creates a surplus. b. is not binding. c. creates a shortage. d. Both a) and b) are correct. Figure 2-4 4. Ch.2 Refer to Figure 2-4. Suppose this economy is producing at point W. Which of the following statements would best explain this situation? a. The economy lacks the resources to produce at a more desirable point. b. The economy s available technology prevents it from producing at a more desirable point. c. There are unused resources in the economy. d. Any of the above statements would be a legitimate explanation for this situation. 2
5. Ch.6 If a tax is levied on the sellers of a product, then the demand curve will a. become flatter. b. shift up. c. not shift. d. shift down. 6. Ch.8 Suppose the government increases the size of a tax by 40 percent. The deadweight loss from that tax a. increases but by less than 40 percent. b. increases by 40 percent. c. increases by more than 40 percent. d. decreases by 40 percent. 7. Ch.2 When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good a. does not change as more of the good is produced. b. may increase, decrease, or not change as more of the good is produced. c. decreases as more of the good is produced. d. increases as more of the good is produced. 3
Figure 7-5 8. Ch.7 Refer to Figure 7-5. If the government imposes a price floor of $120 in this market, then consumer surplus (compared to the surplus at equilibrium price) will decrease by a. $300. b. $225. c. $75. d. $125. 4
Figure 2-8 Panel (a) Panel (b) 9. Ch.2 Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point J to point L is a. 6 cups of coffee. b. 2 cups of coffee. c. 2 donuts. d. 2 donuts and 2 cups of coffee. 10. Ch.4 If a increase in income decreases the demand for a good, then the good is a(n) a. substitute good. b. inferior good. c. complementary good. d. normal good. 11. Ch.5 If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is a. 1.5. b. 1. c. 2. d. 0.50. 5
Figure 3-7 Bintu s Production Possibilities Frontier Juba s Production Possibilities Frontier 12. Ch.3 Refer to Figure 3-7. Bintu has a comparative advantage in the production of a. cups and Juba has a comparative advantage in the production of bowls. b. bowls and Juba has a comparative advantage in the production of cups. c. both goods and Juba has a comparative advantage in the production of neither good. d. neither good and Juba has a comparative advantage in the production of both goods. 13. Ch.4 Suppose roses are currently selling for $20 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. surplus to exist and the market price of roses to decrease. b. surplus to exist and the market price of roses to increase. c. shortage to exist and the market price of roses to increase. d. shortage to exist and the market price of roses to decrease. 14. Ch.5 When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for bubble gum is a. elastic. b. unit elastic. c. inelastic. d. perfectly inelastic. 15. Ch.4 Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are a. inferior goods. b. normal goods. c. substitute goods. d. complementary goods. 6
Figure 8-2 The vertical distance between points A and B represents a tax in the market. 16. Ch.8 Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is a. $5. b. $7.50. c. $2.50. d. $10. 7
Figure 7-20 17. Ch.7 Refer to Figure 7-20. At equilibrium, total surplus is measured by the area a. CFG. b. KBG. c. AFG. d. ACG. Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. Hours Needed To Make 1 Amount Produced in 40 Hours mixer toaster mixers toasters Maya 8 5 5 8 Miguel 20 10 2 4 18. Ch.3 Refer to Table 3-6. The opportunity cost of 1 mixer for Miguel is a. 8 hours of labor. b. 1/2 toaster. c. 2 toasters. d. 1/2 hour of labor. 8
Figure 6-3 Panel (a) Panel (b) 19. Ch.6 Refer to Figure 6-3. In panel (b), there will be a. neither a surplus nor a shortage b. a shortage of wheat. c. a surplus of wheat. d. equilibrium in the market. 20. Ch.7 All else equal, what happens to consumer surplus if the price of a good increases? a. Consumer surplus decreases. b. Consumer surplus may increase, decrease, or remain unchanged. c. Consumer surplus increases. d. Consumer surplus is unchanged. 9
Figure 3-5 Hosne s Production Possibilities Frontier Merve s Production Possibilities Frontier 21. Ch.3 Refer to Figure 3-5. Hosne has an absolute advantage in the production of a. both goods and Merve has an absolute advantage in the production of neither good. b. neither good and Merve has an absolute advantage in the production of both goods. c. purses and Merve has an absolute advantage in the production of wallets. d. wallets and Merve has an absolute advantage in the production of purses. Figure 4-18 22. Ch.4 Refer to Figure 4-18. At a price of $4, there is a a. shortage of 6 units. b. surplus of 3 units. c. shortage of 3 units. d. surplus of 6 units. 10
Figure 2-3 23. Ch.2 Refer to Figure 2-3. Inefficient production is represented by which point(s)? a. K, N b. J, L c. J, L, M d. M Figure 7-12 24. Ch.7 Refer to Figure 7-12. When the price is P1, producer surplus is a. C+D. b. C. c. A. d. A+B. 11
Table 3-9 Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies. Minutes Needed to Number of Computers Set Up or Tested in a 40-Hour Week Set Up 1 Computer Test 1 Computer Computers Set Up Barb 48 60 50 40 Jim 30 40 80 60 Computers Tested 25. Ch.3 Refer to Table 3-9. Jim has an absolute advantage in a. neither setting up nor testing computers and a comparative advantage in setting up computers. b. both setting up and testing computers and a comparative advantage in setting up computers. c. both setting up and testing computers and a comparative advantage in testing computers. d. neither setting up nor testing computers and a comparative advantage in testing computers. Figure 8-9 The vertical distance between points A and C represent a tax in the market. 26. Ch.8 Refer to Figure 8-9. The amount of tax revenue received by the government is a. $10,000. b. $24,000. c. $4,000. d. $6,000. 12
27. Ch.8 When a tax is levied on a good, a. neither buyers nor sellers are made worse off. b. only buyers are made worse off. c. only sellers are made worse off. d. both buyers and sellers are made worse off. Figure 5-16 28. Ch.5 Refer to Figure 5-16. Using the midpoint method, what is the price elasticity of supply between point B and point C? a. 0.96 b. 0.78 c. 1.29 d. 1.44 13