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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