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VERSION C
PAGE 1
Hours needed to make one unit of:
Cars
Airplanes
U.S.
40
160
Japan
50
150
Amount produced in 2400 hours:
Cars
Airplanes
60
15
48
16
1. Refer to the tables shown. If the U.S. and Japan trade based on the
principle of comparative advantage, the U.S. will export __________ and
Japan will export __________.
a.
b.
c.
d.
airplanes, airplanes
cars, cars
airplanes, cars
cars, airplanes
2. Comparative advantage is based on
a.
b.
c.
d.
dollar price.
labor costs.
opportunity costs.
capital costs.
3. The term tax incidence refers to
a.
b.
c.
d.
the
the
the
the
division of the tax burden between sales taxes and income taxes.
"flat tax" movement.
division of the tax burden between buyers and sellers.
Boston Tea Party.
4. On the graph, the movement from D to D1 is called
a.
b.
c.
d.
a decrease in demand.
an increase in demand.
a decrease in quantity demanded.
an increase in quantity demanded.
VERSION C
PAGE 2
Labor Hours Needed to Make 1 Pound of:
Meat
Potatoes
Farmer
10
5
Rancher
4
1
Pounds produced in 20 hours:
Meat
Potatoes
2
4
5
20
5. Refer to the tables shown. The Farmer and Rancher both could benefit by
the Farmer specializing in __________ and the Rancher specializing in
___________.
a.
b.
c.
d.
They cannot benefit by specialization and trade.
potatoes, meat
neither good, meat
meat, potatoes
6. Demand is said to be inelastic if the
a.
b.
c.
d.
quantity demanded changes proportionately the same as the price.
quantity demanded changes proportionately less than the price.
price changes proportionately more than income.
quantity demanded changes proportionately more than the price.
7. If there is a shortage of farm laborers, we would expect
a.
b.
c.
d.
a decrease in the demand for substitutes of farm labor.
the wages of farm laborers to increase.
the prices of farm commodities to decrease.
the wages of farm laborers to decrease.
8. In the graph shown, the section of the demand curve labeled A represents
a.
b.
c.
d.
the
the
the
the
elastic section of the demand curve.
inelastic section of the demand curve.
unit elastic section of the demand curve.
perfectly elastic section of the demand curve.
VERSION C
PAGE 3
Quantities Purchased
Income
Good X
Good Y
$30,000
2
20
50,000
5
10
9. Refer to the table. Using the midpoint method, what is the income
elasticity of good Y?
a.
b.
c.
d.
0
-1.33
-0.75
0.75
These figures illustrate the production possibilities frontiers for
Robinson Crusoe and Friday with 12 hours of labor.
10. Refer to the graphs given. For Robinson Crusoe the opportunity cost of 1
pound of fish is
a.
b.
c.
d.
2 pounds of coconuts.
1/2 pound of coconuts.
4 pounds of coconuts.
1/4 pound of coconuts.
VERSION C
PAGE 4
11. According to the graph, the amount of the tax imposed in this market is
a.
b.
c.
d.
$1.00.
$1.50.
$2.50.
$3.00.
Production Possibilities for Tuneland
Cars
Toys
50
0
40
250
30
450
20
600
10
700
0
750
12. The reference table shows the production possibilities for Tuneland.
What is the opportunity cost to Tuneland of increasing the production of
cars from 30 to 40?
a. It is impossible to tell what the opportunity cost is without knowing
production costs for cars and toys.
b. 450 toys
c. 200 toys
d. 250 toys
VERSION C
PAGE 5
13. According to the graph shown, the equilibrium price in the market before
the tax is imposed is
a.
b.
c.
d.
$8.00.
$6.00.
$5.00.
$3.50.
14. A supply curve slopes upward because
a. a decrease in input prices decreases supply.
b. as more is produced, per unit costs of production fall.
c. an increase in input prices increases supply.
d. an increase in price gives producers incentive to supply a larger
quantity.
15. The term market failure refers to
a. a situation in which competition among firms becomes ruthless.
b. a situation in which the market on its own fails to allocate
resources efficiently.
c. an unsuccessful advertising campaign.
d. a firm which is forced out of business because of losses.
16. As a seller, you would be considered part of a perfectly competitive
market if
a. your actions
b. increases in
price.
c. your pricing
d. your actions
essentially have no effect on the market price.
the price of your product have an impact on the market
has no impact on the amount you can sell.
are quickly followed by competitors.
17. Efficiency means that
a. society's goods and services are distributed fairly among society's
members.
b. society has lessened its dependence on foreign energy sources.
c. society is conserving resources in order to save them for the future.
d. society is getting the most it can from its scarce resources.
VERSION C
PAGE 6
18. The opportunity cost of an item is
a.
b.
c.
d.
always less than the dollar value of the item.
always equal to the dollar value of the item.
what you give up to get that item.
the number of hours needed to earn money to buy it.
19. Productivity is defined as
a. the amount of labor which can be saved by replacing workers with
machines.
b. the amount of goods and services produced from each hour of a
worker's time.
c. the number of workers required to produce a given amount of goods and
services.
d. the actual amount of effort workers put into an hour of working time.
20. Under rent control, bribery is a mechanism to
a. force the total price of an apartment (including the bribe) to be
less than the market price.
b. allocate housing to the most deserving tenants.
c. allocate housing to the poorest individuals in the market.
d. bring the total price of an apartment (including the bribe) closer to
the equilibrium price.
21. For economists, positive statements are
a.
b.
c.
d.
affirmative, justifying existing economic policy.
descriptive, making a claim about how the world is.
prescriptive, making a claim about how the world ought to be.
optimistic, putting the best possible interpretation on things.
22. Demand for a good would tend to be more elastic,
a.
b.
c.
d.
the
the
the
the
broader the definition of the market.
greater the availability of complements.
fewer substitutes there are.
longer the period of time considered.
23. Market power refers to
a. the power of the government to regulate a market.
b. the relative importance of a market to the overall economy.
c. the power of a single person (or small group of people) to unduly
influence market prices.
d. the ability of a person or group of people to successfully market new
products.
VERSION C
PAGE 7
24. In the graph shown, the slope of the curve between points A and B is
a.
b.
c.
d.
-2
-1/2
1/2
2
25. Which of the following is the most accurate statement about production
possibilities?
a. An economy can produce at any point on or inside the production
possibilities frontier, but not outside the frontier.
b. An economy can produce only on the production possibilities frontier.
c. An economy can produce at any point inside the production
possibilities frontier, but not on or outside the frontier.
d. An economy can produce at any point inside or outside a production
possibilities frontier.
Labor Hours Needed to Make 1 Pound of:
Meat
Potatoes
Farmer
10
5
Rancher
4
1
Pounds produced in 20 hours:
Meat
Potatoes
2
4
5
20
26. Refer to the tables shown. For the Farmer, the opportunity cost of 1
pound of meat is
a.
b.
c.
d.
2 pounds of potatoes.
8 hours of labor.
1/2 pound of potatoes.
4 hours of labor.
27. Suppose that 50 candy bars are demanded at a particular price. Using the
midpoint method, if the price of candy bars rises by 4 percent, the
number of candy bars demanded falls to 46 candy bars. This means that
a.
b.
c.
d.
the
the
the
the
price elasticity
demand for candy
demand for candy
demand for candy
of demand for candy bars is 0.
bars in this price range is elastic.
bars is unit elastic.
bars in this price range is inelastic.
VERSION C
PAGE 8
28. According to the graph, the amount of the tax that buyers would pay
would be
a.
b.
c.
d.
$1.00.
$1.50.
$2.00.
$3.00.
The table shows individual demand schedules for a market.
Price of the Good
$0.00
0.50
1.00
1.50
2.00
2.50
Quantities Demanded
John
Sally
Jane
25
22
10
20
20
6
15
18
2
10
16
0
5
14
0
0
12
0
Billy
5
4
3
2
1
0
29. Refer to the table shown. When the price of the good is $1.00, the
quantity demanded in this market would be
a.
b.
c.
d.
38 units.
5 units.
18 units.
15 units.
30. In the circular-flow diagram,
a.
b.
c.
d.
firms are sellers in the resource market and the product market.
spending on goods and services flow from firms to households.
households are sellers in the resource market.
firms are buyers in the product market.
VERSION C
PAGE 9
31. If a good is "normal," then an increase in income will result in
a.
b.
c.
d.
no change in the demand for the good.
a lower market price.
a decrease in the demand for the good.
an increase in the demand for the good.
Hours needed to make one unit of:
Cars
Airplanes
U.S.
40
160
Japan
50
150
Amount produced in 2400 hours:
Cars
Airplanes
60
15
48
16
32. Refer to the tables shown. If Japan and the U.S. trade based on the
principle of comparative advantage,
a. all individuals in both countries will gain.
b. one country will be better off and the other country will be worse
off.
c. car producers in Japan and airplane producers in the U.S. will gain.
d. some individuals within each society will be made worse off.
These figures illustrate the production possibilities frontiers for
Robinson Crusoe and Friday with 12 hours of labor.
33. Refer to the graphs given. Robinson Crusoe has a comparative advantage
in __________ and Friday has a comparative advantage in ___________.
a.
b.
c.
d.
fish, coconuts
coconuts, fish
fish, fish
fish, neither good
34. If a price ceiling is not binding,
a.
b.
c.
d.
it has no legal enforcement mechanism.
the equilibrium price is below the ceiling.
people must voluntarily agree to abide by it.
the equilibrium price is above the ceiling.
VERSION C
PAGE 10
35. According to the graph, the shift of the production possibilities
frontier from frontier A to frontier B was most likely caused by which
of the following?
a.
b.
c.
d.
an improvement in the technology of producing capital goods.
an improvement in the technology of producing consumer goods.
a general improvement in technology.
a reduction in the availability of resources.
36. According to the graph shown, when the supply curve for gasoline shifts
from S1 to S2
a.
b.
c.
d.
the price will increase to P3.
a surplus will occur at the new market price of P2.
the market price will stay at P1 due to the price ceiling.
a shortage will occur at the price ceiling of P2.
37. A model
a.
b.
c.
d.
assumes away irrelevant details.
can explain how the economy is organized.
simplifies reality.
all of the above
VERSION C
PAGE 11
38. Economists use the concept of price elasticity of demand to measure
a.
b.
c.
d.
how
how
how
how
much
much
much
much
worse off consumers are when the price of the good rises.
sellers respond to changes in the price of the good.
demand responds to changes in buyers' incomes.
buyers respond to changes in the price of the good.
39. 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.
40. Suppose that demand increases AND supply decreases. What would happen in
the market for the good?
a. Equilibrium price would increase, but the
quantity would be ambiguous.
b. Equilibrium price would decrease, but the
quantity would be ambiguous.
c. Both equilibrium price and quantity would
d. Both equilibrium price and quantity would
impact on equilibrium
impact on equilibrium
increase.
decrease.
VERSION C
PAGE 1
ANSWER KEY FOR TEST - UNTITLED
1. d. cars, airplanes
Chapter:3
QUESTION: 61
Chapter:3
QUESTION: 46
(p. )
2. c. opportunity costs.
(p. )
3. c. the division of the tax burden between buyers and sellers.
Chapter:6
QUESTION: 56
(p. )
4. a. a decrease in demand.
Chapter:4
QUESTION: 52
Chapter:3
QUESTION: 16
(p. )
5. d. meat, potatoes
(p. )
6. b. quantity demanded changes proportionately less than the price.
Chapter:5
QUESTION: 29
(p. )
7. b. the wages of farm laborers to increase.
Chapter:4
(p. )
QUESTION:113
8. a. the elastic section of the demand curve.
Chapter:5
(p. )
QUESTION: 24
9. b. -1.33
Chapter:5
QUESTION: 60
Chapter:3
QUESTION: 17
Chapter:6
QUESTION: 61
(p. )
10. c. 4 pounds of coconuts.
(p. )
11. d. 3.00.
(p. )
12. c. 200 toys
Chapter:2
QUESTION: 51
Chapter:6
QUESTION: 58
(p. )
13. b. $6.00.
(p. )
VERSION C
PAGE 2
14. d. an increase in price gives producers incentive to supply a larger
quantity.
Chapter:4
QUESTION: 64
(p. )
15. b. a situation in which the market on its own fails to allocate
resources efficiently.
Chapter:1
QUESTION: 50
(p. )
16. a. your actions essentially have no effect on the market price.
Chapter:4
QUESTION: 12
(p. )
17. d. society is getting the most it can from its scarce resources.
Chapter:1
QUESTION: 12
(p. )
18. c. what you give up to get that item.
Chapter:1
(p. )
QUESTION: 20
19. b. the amount of goods and services produced from each hour of a
worker's time.
Chapter:1
QUESTION: 74
(p. )
20. d. bring the total price of an apartment (including the bribe) closer to
the equilibrium price.
Chapter:6
QUESTION: 29
(p. )
21. b. descriptive, making a claim about how the world is.
Chapter:2
QUESTION: 58
(p. )
22. d. the longer the period of time considered.
Chapter:5
(p. )
QUESTION: 11
23. c. the power of a single person (or small group of people) to unduly
influence market prices.
Chapter:1
QUESTION: 61
(p. )
24. b. -1/2
Chapter:2
QUESTION: 86
(p. )
25. a. An economy can produce at any point on or inside the production
possibilities frontier, but not outside the frontier.
Chapter:2
QUESTION: 31
(p. )
26. a. 2 pounds of potatoes.
Chapter:3
(p. )
QUESTION:
8
VERSION C
PAGE 3
27. b. the demand for candy bars in this price range is elastic.
Chapter:5
QUESTION: 51
(p. )
28. c. 2.00.
Chapter:6
QUESTION: 62
Chapter:4
QUESTION: 42
(p. )
29. a. 38 units.
(p. )
30. c. households are sellers in the resource market.
Chapter:2
(p. )
QUESTION: 23
31. d. an increase in the demand for the good.
Chapter:4
(p. )
QUESTION: 21
32. d. some individuals within each society will be made worse off.
Chapter:3
QUESTION: 62
(p. )
33. b. coconuts, fish
Chapter:3
QUESTION: 21
(p. )
34. b. the equilibrium price is below the ceiling.
Chapter:6
(p. )
QUESTION:
35. c. a general improvement in technology.
Chapter:2
(p. )
QUESTION: 46
5
36. d. a shortage will occur at the price ceiling of P2.
Chapter:6
QUESTION: 21
(p. )
37. d. all of the above
Chapter:2
(p. )
QUESTION: 15
38. d. how much buyers respond to changes in the price of the good.
Chapter:5
QUESTION: 3
39. b. decrease the price charged to customers with the price elastic demand
and increase the price charged to customers with the price inelastic
demand.
Chapter:5
QUESTION: 98
40. a. Equilibrium price would increase, but the impact on equilibrium
quantity would be ambiguous.
Chapter:4
QUESTION:107