Download Name: Date: ______ 1. An economy is efficient if it is: A) possible to

Name: __________________________ Date: _____________
1. An economy is efficient if it is:
A) possible to produce more of all goods and services.
B) possible to produce more of one good without producing less of another.
C) not possible to produce more of one good without producing less of another good.
D) producing at a combination of goods that lies between the production possibilities
curve and the origin.
2. The study of economics arises because of the necessity for choice, and the necessity for
choice arises because of the fundamental problem of scarcity of resources.
A) True
B) False
3. Specialization and trade should lead to all of the following except:
A) individuals learning specific skills and earning a salary.
B) a decrease in total economic output.
C) higher living standards.
D) the exchange of goods and services in markets.
4. Which of the following is an example of a positive statement?
A) The poverty rate should be 4%.
B) A high rate of economic growth is good for the country.
C) The federal government pays for 46% of U.S. health care costs.
D) Everyone in the country needs to be covered by national health insurance.
5. Which of the following statements is true?
A) Very talented people may have a comparative advantage in everything they do.
B) Very untalented people may have a comparative advantage in something they do.
C) Very talented people may have a very low opportunity cost in most things they do.
D) Very untalented people may have a very low opportunity cost in most things they
do.
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6. The primary difference between a change in supply and a change in the quantity
supplied is that:
A) a change in quantity supplied is a movement along the supply curve, while a
change in supply is a shift in the supply curve.
B) both a change in quantity supplied and a change in supply are movements along the
supply curve, only in different directions.
C) a change in supply is related to the supply curve, while a change in quantity
supplied is related to shifts in the demand curve that elicit a change in supply.
D) a change in supply is a movement along the supply curve, while a change in
quantity supplied is a shift in the supply curve.
7. Which would not cause the supply curve to shift?
A) a change in technology
B) a change in factor costs
C) a change in the price of the good
D) a change in suppliers' expectations of prices
8. The demand for a good will increase if:
A) there is a decrease in the price of the good.
B) the price of inputs needed in the production of the good decrease.
C) there is an increase in the number of consumers in this market.
D) the price of a complementary good increases.
9. A consumer's willingness to pay for a surfboard is the minimum price at which he or she
would buy the surfboard.
A) True
B) False
10. Producer surplus is represented by the area ________ the supply curve and ________
the price.
A) above; above
B) above; below
C) below; above
D) below; below
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Use the following to answer question 11:
Figure: Gain in Consumer Surplus
11. (Figure: Gain in Consumer Surplus) Identify the area(s) that represent the gain in
consumer surplus to those consumers already participating in the market when the price
falls from P1 to P2. Which of the following is correct?
A) A and B
B) B
C) B and C
D) C
Use the following to answer question 12:
Figure: Market Demand
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12. (Figure: Market Demand) The amount by which the total benefits to consumers exceeds
their total expenditure is called ________ and is depicted at quantity E by the area
________.
A) producer surplus; BCD
B) consumer surplus; OCDE
C) consumer surplus; BCD
D) net benefit; OBDE
13. A price control is:
A) when a firm controls the price of the good it produces.
B) a legal restriction on how high or low a price in a market may go.
C) an upper limit on the quantity of some good that can be bought or sold.
D) a tax placed on the sale of a good which controls the market price.
14. A price ceiling is:
A) a maximum price sellers are allowed to charge for a good or service.
B) the difference between the quantity supplied and quantity demanded.
C) a minimum price buyers are required to pay for a good or service.
D) the deadweight loss caused by an inefficiently low quantity.
15. A price floor is a ________ set ________ the equilibrium price.
A) minimum price; at
B) maximum price; below
C) minimum price; above
D) maximum price; above
Use the following to answer question 16:
Figure: Price Control
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16. (Figure: Price Control) Look at the figure Price Control. In the graph, one effective price
ceiling would be the price indicated at point________ and a ________ would exist
equal to the difference between points ________.
A) b; surplus; f and e
B) b; shortage; f and e
C) d; shortage; i and h
D) d; surplus; e and h
17. The ratio of the percentage change in the quantity demanded to the percentage change in
price is the:
A) price elasticity of demand.
B) quantity elasticity of demand.
C) income elasticity of demand.
D) cross-price elasticity of demand.
18. The price elasticity of supply measures:
A) the response of a supply shift to changes in technology.
B) how much supply changes when the prices of inputs change.
C) the responsiveness of the quantity supplied to changes in prices.
D) the response of a supply shift to changes in technology and to changes in prices.
19. Which of the following best describes the price elasticity of demand?
A) The price elasticity of demand measures the responsiveness of the change in the
quantity demanded to a change in the price.
B) The price elasticity of demand measures the change in the price versus a change in
the quantity demanded.
C) The price elasticity of demand measures the responsiveness of the change in the
slope of the demand curve to a change in the price.
D) The price elasticity of demand measures the change in the slope of the demand
curve versus a change in the quantity demanded.
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Use the following to answer question 20:
Figure: The Demand for Notebook Computers
20. (Figure: Demand for Notebook Computers) Look at the figure The Demand for
Notebook Computers. The change in total revenue resulting from a change in price from
P to T suggests that demand is:
A) inelastic.
B) price-elastic.
C) price-inelastic.
D) price unit-elastic.
Use the following to answer questions 21-22:
Figure: Demand Curves
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21. (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a
perfectly elastic demand curve?
A) A
B) B
C) C
D) D
22. (Figure: Demand Curves) Look again at the figure Demand Curves. Which graph shows
a perfectly inelastic demand curve?
A) A
B) B
C) C
D) D
23. Which of the following statements is true?
A) When the income elasticity of demand is positive, the good is an inferior good.
B) When the income elasticity of demand is negative, the good is a normal good.
C) Income elasticity of demand measures how much the demand for a good is affected
by changes in consumers' incomes.
D) Income elasticity of demand measures the effect of the change in one good's price
on the quantity demanded of the other good.
24. An excise tax is a tax charged on:
A) each unit of a good or service that is sold.
B) earnings.
C) the ownership of real estate.
D) the inheritance of assets.
25. Determining who pays the burden of the tax is a question about:
A) tax incidence.
B) externality analysis.
C) public interest theory.
D) public choice theory.
26. A tax:
A) generates tax revenue and creates deadweight loss.
B) increases consumer and producer surplus.
C) produces revenue for the government and increases total surplus.
D) is always efficient.
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27. A progressive tax:
A) takes a larger share of the income of high-income taxpayers than of low-income
taxpayers.
B) takes a smaller share of the income of high-income taxpayers than of low-income
taxpayers.
C) takes the same share of the income of high-income taxpayers as it does of
low-income taxpayers.
D) has no deadweight loss.
28. The deadweight loss of an excise tax arises because the tax prevents some mutually
beneficial transactions.
A) True
B) False
29. A tax system achieves efficiency when it maximizes the amount of tax paid by the
wealthiest citizens.
A) True
B) False
Use the following to answer questions 30-31:
Figure: A Market with a Tax
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30. (Figure: A Market with a Tax) Look at the figure A Market with a Tax. The excise tax
imposed on this good is equal to:
A) P1 – P2.
B) P1 – P3
C) P2 – P3.
D) P1 – P5.
31. (Figure: A Market with a Tax) Look at the figure A Market with a Tax. The transfer of
consumer surplus to the government is equal to:
A) B.
B) C.
C) D.
D) F.
32. By law, FICA (the Federal Insurance Contributions Act), a payroll tax, is collected
equally from the employers and the employees. In reality:
A) the law works—the employers and the employees each bear half of the burden of
the tax.
B) the employees bear almost all of the burden of the tax.
C) the employers bear almost all of the burden of the tax.
D) it's impossible to determine who bears the burden of the tax.
33. Goods and services purchased from abroad are ________, while goods and services sold
abroad are ________.
A) exports; imports
B) imports; exports
C) exports; quotas
D) quotas; factors
34. The term autarky refers to a situation in which a country:
A) trades goods and services based upon the principle of comparative advantage.
B) trades goods and services based upon the principle of absolute advantage.
C) trades goods and services based upon the principle of Ricardian advantage.
D) does not trade with other countries.
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35. The belief that trade must be bad for exporting countries because those workers are paid
very low wages by our standards is the:
A) pauper labor fallacy.
B) sweatshop labor fallacy.
C) third-world country fallacy.
D) Nike fallacy.
36. A tax on imports of foreign goods is called:
A) a quota.
B) a subsidy.
C) a tariff.
D) an export restriction.
37. A regulation that specifies the maximum amount of a good or service that may be
imported during a specified period is:
A) quota.
B) tariff.
C) nontariff barrier.
D) export quota.
38. The World Trade Organization (WTO):
A) oversees trade agreements.
B) is an example of a trade agreement.
C) includes all nations.
D) was created before World War II.
Use the following to answer questions 39-41:
Figure: The Market for Melons in Russia
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39. (Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons
in Russia. Without trade, the country's producer surplus will equal area ________ and
consumer surplus will equal area ________.
A) ACJ; ABJ
B) BCJ; ABJ
C) ABJ; BCJ
D) BJDK; ABJ
40. (Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons
in Russia. If the world price of melons is equal to E, Russia will:
A) import H – I of melons.
B) export H – I of melons.
C) import F – G of melons.
D) export F – G of melons.
41. (Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons
in Russia. Suppose the world price of melons is D. Russia will:
A) import H – I of melons.
B) export H – I of melons.
C) import F – G of melons.
D) export F – G of melons.
42. Jacquelyn is a student at a major state university. Which of the following is not an
example of an explicit cost of her attending college?
A) tuition
B) textbooks
C) the salary that she could have earned working full-time
D) computer lab fees
43. Money that must be paid for the use of factors of production such as labor and capital is
an:
A) explicit cost.
B) accounting profit.
C) implicit cost.
D) economic profit.
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44. Accounting profit differs from economic profit because:
A) of differences in the manner in which revenue is calculated.
B) economic costs include depreciation, while accounting costs do not.
C) accounting costs are generally higher than economic costs because accounting
costs include explicit and implicit costs, while economic costs include only explicit
costs.
D) economic costs are generally higher than accounting costs because economic costs
include all opportunity costs, while accounting costs include explicit costs only.
45. Accountants use only ________ costs in their computations of short-run total cost.
A) opportunity
B) implicit
C) explicit
D) variable
46. An “either–or” decision involves
A) deciding how much of an activity to do.
B) a choice between two activities.
C) calculating marginal costs for each activity.
D) calculating the marginal benefits for each activity.
47. Marginal benefit:
A) is the subsidiary benefit from an activity; for example, the main benefit from
weight training is an increase in muscle mass, and the subsidiary or marginal
benefit might be a reduction in cholesterol.
B) is the addition to total benefit due to undertaking one more unit of an activity.
C) must be increasing if total benefit is increasing.
D) normally increases as more of an activity is undertaken.
48. Sunk costs:
A) affect economic profit.
B) are the losses associated with failed business ventures.
C) are an important component of marginal analysis.
D) are the same as fixed costs.
49. A rational economic decision:
A) must always result in the largest economic payoff.
B) usually results in the smallest economic payoff.
C) may or may not result in the largest economic payoff.
D) is concerned with efficiency but not with equity or fairness.
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50. The willingness to sacrifice some economic payoff in order to avoid a potential loss is:
A) irrational behavior.
B) bounded rationality.
C) the result of a concern about fairness.
D) risk aversion.
BONUS QUESTION WORTH 5 PTS
In the video shown in our last class before Spring Break, what two countries are expected
to surpass the US and the UK in economic growth per capita?
BONUS QUESTION WORTH 5PTS
In what year did the video presenter “predict” that it would happen?
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