Economics Worksheet
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BUS 499 ECONOMICS
Indicate the answer choice that best completes the statement or answers the question.
1. What term refers to the property that society has limited resources and therefore cannot produce all the goods and
services people wish to have?
a. scarcity
b. inefficiency
c. market failure
d. inequality
2. When a market experiences a positive externality,
a. the government can internalize the externality by imposing a tax on the product.
b. the demand curve does not reflect the value to society of the good.
c. too much of the good is being produced.
d. the private value is greater than the social value.
3. The first major piece of antitrust legislation was the
a. Obama Care Act.
b. Clayton Act.
c. Clinton Act.
d. Sherman Act.
4. A U.S.-owned automobile factory uses $100,000 worth of parts purchased from foreign countries along with U.S.
inputs to produce 30 cars worth $20,000 each. Twenty of these cars are sold and 10 are left in inventory. How much did
these actions add to GDP?
a. $500,000
b. $300,000
c. $600,000
d. $700,000
5. The Federal Reserve will tend to tighten monetary policy when
a. it thinks inflation is too high today, or will become too high in the future.
b. it thinks the unemployment rate is too high.
c. interest rates are rising too rapidly.
d. the growth rate of real GDP is quite sluggish.
6. According to Adam Smith, the success of decentralized market economies is primarily due to
a. partnerships that are forged between business and government.
b. individuals’ pursuit of self-interest.
c. society’s legal system.
d. the basic benevolence of society.
Figure 35-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD)
curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment
rate.
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7. Refer to Figure 35-3. What is measured along the vertical axis of the left-hand graph?
a. the change in output from one year to the next
b. the price level
c. the inflation rate
d. the wage rate
Figure 6-8
8. Refer to Figure 6-8. If the government imposes a price floor of $5 on this market, then there will be
a. no surplus of the good.
b. a surplus of 10 units of the good.
c. a surplus of 5 units of the good.
d. a surplus of 15 units of the good.
9. If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about
a. 1.60, and supply is inelastic.
b. 1.60, and supply is elastic.
c. 0.63, and supply is elastic.
d. 0.63, and supply is inelastic.
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10. A likely example of complementary goods for most people would be
a. lawnmowers and automobiles.
b. chips and salsa.
c. cola and lemonade.
d. butter and margarine.
11. Which of the following is not correct?
a. Economists use some familiar words in specialized ways.
b. The value of the economists language lies in its ability to provide you with a new and useful way of thinking
about the world in which you live.
c. Economics has its own language and its own way of thinking, but few other fields of study do.
d. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all terms that
are part of the economists language.
12. Which of the following is not equal to total surplus?
a. buyers willingness to pay – sellers costs
b. value to buyers – amount paid by buyers + amount received by sellers – cost to sellers
c. consumer surplus – producer surplus
d. value to buyers – cost to sellers
Figure 6-6
13. Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?
a. $8
b. $12
c. $6
d. $10
14. In a competitive market, the quantity of a product produced and the price of the product are determined by
a. both buyers and sellers.
b. buyers.
c. sellers.
d. None of the above is correct.
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Table 13-9
Number of
Workers
0
1
2
3
4
5
Output
0
100
180
240
280
300
Fixed
Cost
$30
$30
$30
$30
$30
$30
Variable
Cost
$0
$15
$30
$45
$60
$75
15. Refer to Table 13-9. The average variable cost of producing 240 units is
a. $0.80.
b. $0.19.
c. $0.13.
d. $0.32.
16. Tyler and Camille both live in Oklahoma. A new-car dealer in Oklahoma bought a new car from the manufacturer for
$18,000 and sold it to Tyler for $22,000. Later that year, Tyler sold the car to Camille for $17,000. By how much did
these transactions contribute to U.S. GDP for the year?
a. $57,000
b. $39,000
c. $22,000
d. $18,000
Table 3-23
Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate.
Farmer
Rancher
Labor Hours Needed to Make 1 Pound of
Pork
Tomatoes
6
3
4
4
Pounds Produced in 24 Hours
Pork
Tomatoes
4
8
6
6
17. Refer to Table 3-23. The farmer has an absolute advantage in the production of
a. pork.
b. tomatoes.
c. both goods.
d. neither good.
18. As new firms enter a monopolistically competitive market, profits of existing firms
a. decline, and product diversity in the market decreases.
b. rise, and product diversity in the market increases.
c. decline, and product diversity in the market increases.
d. rise, and product diversity in the market decreases.
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19. The adage, “There is no such thing as a free lunch,” means
a. even people on welfare have to pay for food.
b. people face tradeoffs.
c. all costs are included in the price of a product.
d. the cost of living is always increasing.
20. The length of the short run
a. is always less than 6 months.
b. can never exceed 1 year.
c. can never exceed 3 years.
d. is different for different types of firms.
21. Raiman’s Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost
of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do?
a. produce more custom-made shoes
b. produce fewer custom-made shoes
c. shut down the business
d. decrease the price
Figure 6-7
22. Refer to Figure 6-7. Suppose a price ceiling of $5 is imposed on this market. As a result,
a. the demand curve shifts to the left; quantity sold is now 30 units and the price is $5.
b. the quantity of the good supplied decreases by 20 units.
c. buyers total expenditure on the good decreases by $80.
d. the price of the good continues to serve as the rationing mechanism.
23. Experiments show that when real people play the ultimatum game, starting with $100,
a. Player A usually proposes giving Player B more than $50.
b. Player B usually accepts Player A’s proposal if Player A proposes giving Player B $30 or $40.
c. players show themselves to be rational wealth-maximizers.
d. Both B and C are correct.
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24. As the number of firms in an oligopoly market
a. decreases, the market approaches the competitive market outcome.
b. increases, the market approaches the competitive market outcome.
c. decreases, the price charged by firms likely decreases.
d. increases, the market approaches the monopoly outcome.
25. Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This
failure is referred to as a
a. breach.
b. risk.
c. term failure.
d. default.
26. High-school athletes who skip college to become professional athletes
a. understand that the opportunity cost of attending college is very high.
b. usually do so because they cannot get into college.
c. obviously do not understand the value of a college education.
d. are not making a rational decision since the marginal benefits of college outweigh the marginal costs of
college for high-school athletes.
27. The agency responsible for regulating the money supply in the United States is
a. the Comptroller of the Currency.
b. the U.S. Bank.
c. the U.S. Treasury.
d. the Federal Reserve.
28. Which of the following is correct? A tax burden
a. falls more heavily on the side of the market that is more elastic.
b. is distributed independently of the relative elasticities of supply and demand.
c. falls more heavily on the side of the market that is closest to unit elastic.
d. falls more heavily on the side of the market that is less elastic.
29. A nations standard of living is determined by
a. the productivity of its workers.
b. factors and events that are beyond the nations control.
c. the quantity of natural resources with which it is endowed.
d. the percentage of its GDP that is accounted for by government purchases.
Scenario 9-2
For a small country called Boxland, the equation of the domestic demand curve for
cardboard is
,
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where
represents the domestic quantity of cardboard demanded, in tons, and
represents the price of a ton of cardboard.
For Boxland, the equation of the domestic supply curve for cardboard is
,
where
represents the domestic quantity of cardboard supplied, in tons, and
represents the price of a ton of cardboard.
again
30. Refer to Scenario 9-2. Suppose the world price of cardboard is $45. Then, relative to the no-trade situation,
international trade in cardboard
a. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00.
b. benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.
c. benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50.
d. harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.
31. Economists view positive statements as
a. optimistic, putting the best possible interpretation on things.
b. affirmative, justifying existing economic policy.
c. prescriptive, making a claim about how the world ought to be.
d. descriptive, making a claim about how the world is.
Figure 2-20
Relationship Between Years of Education and Annual Income
32. Refer to Figure 2-20. The graph above is a
a. time series analysis
b. bar graph
c. pie chart
d. scatterplot
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Figure 6-15
33. Refer to Figure 6-15. For a price floor to be binding in this market, it would have to be set at
a. any price above $3.
b. a price between $2 and $3.
c. any price below $3.
d. a price between $3 and $4.
34. Robin owns a horse stables and riding academy and gives riding lessons for children at pony camp. Her business
operates in a competitive industry. Robin gives riding lessons to 20 children per month. Her monthly total revenue is
$4,000. The marginal cost of pony camp is $100 per child. In order to maximize profits, Robin should
a. continue to give riding lessons to 20 children per month.
b. give riding lessons to fewer than 20 children per month.
c. give riding lessons to more than 20 children per month.
d. We do not have enough information to answer the question.
Table 4-12
A country club usually only allows members to purchase tickets for its celebrity golf tournament, but the club is
considering allowing non-members to purchase tickets this year. The demand and supply schedules are as follows:
Quantity Demanded
Quantity Demanded
Price
Quantity Supplied
by Members
by Non-members
$10
1000
500
600
$15
800
400
600
$20
600
300
600
$25
400
200
600
$30
200
100
600
35. Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year’s celebrity golf
tournament and the country club sets the ticket price at $30, then there will be
a. a surplus of 300 tickets.
b. a shortage of 300 tickets.
c. 600 tickets sold.
d. 600 tickets unsold.
36. If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about
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a. 0.63, and supply is inelastic.
b. 0.63, and supply is elastic.
c. 1.60, and supply is inelastic.
d. 1.60, and supply is elastic.
37. To increase their individual profits, members of a cartel have an incentive to
a. ignore the choices made by the other firms and act as a monopolist.
b. charge the same price a monopolist would charge.
c. charge a higher price than the other members of the cartel.
d. increase production above the level agreed upon.
38. Which of the following is not an example of the opportunity cost of going to school?
a. The money a student could have earned by working if he had not gone to college.
b. The money a student spends on rent for his apartment while attending school.
c. The party a student could have enjoyed if he had not stayed in to study for his exam.
d. The nap a student could have enjoyed if he had not attended class.
Table 7-1
Buyer
Calvin
Sam
Andrew
Lori
Willingness To Pay
$150.00
$135.00
$120.00
$100.00
39. Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is
a. $41.
b. $43.
c. $405.
d. $28.
40. Evidence of differences in the average wages of black workers compared to white workers
a. is seldom used to provide evidence of discriminatory bias.
b. does not alone provide conclusive evidence of discrimination.
c. clearly indicates differences in productivity between races.
d. clearly indicates discrimination on the basis of race.
41. The percentage change in the price level from one period to another is called
a. the inflation rate.
b. the GDP deflator.
c. the unemployment rate.
d. the growth rate.
Figure 6-14
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42. Refer to Figure 6-14. If the horizontal line on the graph represents a price ceiling, then the price ceiling is
a. binding and creates a shortage of 20 units of the good.
b. not binding, and there will be no surplus or shortage of the good.
c. not binding but creates a shortage of 40 units of the good.
d. binding and creates a shortage of 40 units of the good.
43. You watch a lot of HGTV during your summer vacation, and you notice that most housing buyers list granite
countertops in their must have lists when buying a new or existing house. You expect the demand for
a. substitute products such as marble countertops to be unaffected by buyers preferences for granite.
b. substitute products such as marble countertops to shift to the right.
c. granite countertops to shift to the left.
d. granite countertops to shift to the right.
Figure 4-9
Panel (a)
Panel (b)
44. Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (a), the arrows are consistent with which of
the following events?
a. The price of cigarettes increased.
b. Tobacco is a gateway drug, and the price of marijuana increased.
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c. Tobacco and marijuana are complements, and the price of marijuana decreased.
d. The arrows are consistent with all of these events.
45. Imagine a 2,000-acre park with picnic benches, trees, and a pond. Suppose it is publicly owned, and people are invited
to enjoy its beauty. When the weather is nice, it is difficult to find parking on summer afternoons. Otherwise, it is a great
place. An efficient solution to the parking problem would be to
a. police the parking area and ticket cars that are parked illegally.
b. prohibit parking in the vicinity of the park.
c. charge higher prices for parking at busy times.
d. do nothing.
46. Other things the same, continued increases in the money supply lead to
a. continued increases in the price level but not continued increases in real GDP.
b. continued increases in real GDP but not continued increases in the price level.
c. a one-time permanent increase in both prices and real GDP.
d. continued increases in the price level and real GDP.
Figure 2-1
47. Refer to Figure 2-1. Which arrow represents the flow of goods and services?
a. C
b. B
c. D
d. A
48. Refer to Figure 2-1. Raymond buys a refrigerator for his new home. To which of the arrows does this transaction
directly contribute?
a. C only
b. A and B
c. A only
d. C and D
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Table 11-3
This table describes the police protection demands for three equal sized groups of people in Safetyville. The second, third,
and fourth columns show the number of person-hours of police protection per day that a group will demand for a given
price (the first column).
Price
$42
$36
$30
$ 24
$ 18
$ 12
$6
$0
Group #1
0
0
0
9
18
39
66
99
Group #2
0
0
9
18
39
66
99
132
Group #3
0
9
18
39
66
99
132
174
49. Refer to Table 11-3. If the marginal cost of police protection is constant at $72 per person-hour, what is the efficient
level of police protection to provide?
a. 39 person-hours
b. 9 person-hours
c. 66 person-hours
d. 18 person-hours
50. When studying how some event or policy affects a market, elasticity provides information on the
a. tradeoff between equality and efficiency.
b. change in the costs of production.
c. direction and magnitude of the effect.
d. effect on the budget deficit or surplus.
51. A firm that has little ability to influence market prices operates in a
a. competitive market.
b. power market.
c. thin market.
d. strategic market.
Figure 4-27
Panel (a)
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Panel (b)
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Panel (c)
Panel (d)
52. Refer to Figure 4-27. Panel (d) shows which of the following?
a. a decrease in demand and a decrease in quantity supplied
b. a decrease in demand and a decrease in supply
c. a decrease in quantity demanded and a decrease in quantity supplied
d. a decrease in quantity demanded and a decrease in supply
53. Jennifer lives in a home that was newly constructed in 2011 for which she paid $240,000. In 2014 she sold the house
for $260,000. Which of the following statements is correct regarding the sale of the house?
a. The 2014 sale increased 2014 GDP by $20,000 and had no effect on 2011 GDP.
b. The 2014 sale increased 2014 GDP by $260,000 and had no effect on 2011 GDP.
c. The 2014 sale affected neither 2014 GDP nor 2011 GDP.
d. The 2014 sale increased 2014 GDP by $260,000; furthermore, the 2014 sale caused 2011 GDP to be revised
upward by $20,000.
54. Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of
working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would
require you to quit your job at the bank. Which of the following should not be included in a calculation of your
opportunity cost?
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a. the cost of tuition and books to attend the graduate program
b. the $30,000 salary that you could have earned if you retained your job at the bank
c. the $45,000 salary that you will be able to earn after having completed your graduate program
d. the value of insurance coverage and other employee benefits you would have received if you retained your job
at the bank
55. All remedies for externalities share the goal of
a. increasing the allocation of resources.
b. decreasing the allocation of resources.
c. moving the allocation of resources toward the market equilibrium.
d. moving the allocation of resources toward the socially optimal equilibrium.
56. To say that a price ceiling is nonbinding is to say that the price ceiling
a. causes quantity demanded to exceed quantity supplied.
b. results in a surplus.
c. is set above the equilibrium price.
d. All of the above are correct.
Table 7-12
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.
Seller
Marcia
Jan
Cindy
Greg
Peter
Bobby
Cost
$200
$250
$350
$400
$700
$800
57. Refer to Table 7-12. The equilibrium market price for 10 piano lessons is $300. What is the total producer surplus in
the market?
a. $50
b. $1,050
c. $1,500
d. $150
58. If a good has become more scarce, then we know for sure that
a. the supply of it decreased.
b. both the supply of it and the demand for it decreased.
c. the demand for it increased.
d. either the demand for it increased or the supply of it decreased.
Figure 3-21
Uzbekistans Production Possibilities Frontier
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Azerbaijans Production Possibilities Frontier
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59. Refer to Figure 3-21. Suppose Azerbaijan decides to increase its production of nails by 20. What is the opportunity
cost of this decision?
a. 80 bolts
b. 4 bolts
c. 5 bolts
d. 1/4 bolt
Figure 6-1
Panel (a)
Panel (b)
60. Refer to Figure 6-1. A binding price ceiling is shown in
a. panel (b) only.
b. neither panel (a) nor panel (b).
c. both panel (a) and panel (b).
d. panel (a) only.
Figure 28-4
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61. Refer to Figure 28-4. If the government imposes a minimum wage of $3, how many workers will be unemployed?
a. 4,000
b. 0
c. 2,000
d. 6,000
62. When quantity demanded decreases at every possible price, the demand curve has
a. shifted to the right.
b. shifted to the left.
c. not shifted; rather, we have moved along the demand curve to a new point on the same curve.
d. not shifted; rather, the demand curve has become flatter.
63. Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the
latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can
only choose one activity. This illustrates the basic principle that
a. rational people think at the margin.
b. people face tradeoffs.
c. people respond to incentives.
d. improvements in efficiency sometimes come at the expense of equality.
Figure 3-15
Perrys Production Possibilities Frontier
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Jordans Production Possibilities Frontier
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64. Refer to Figure 3-15. Perry has a comparative advantage in the production of
a. neither good and Jordan has a comparative advantage in the production of novels.
b. novels and Jordan has a comparative advantage in the production of poems.
c. poems and Jordan has a comparative advantage in the production of novels.
d. novels and Jordan has a comparative advantage in the production of neither good.
65. The quantity sold in a market will increase if the government
a. decreases a binding price floor in that market.
b. decreases a binding price ceiling in that market.
c. increases a tax on the good sold in that market.
d. More than one of the above is correct.
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Economics Packets Answer Key
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