Macroeconomics Test #2 Questions

question

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin’s first movie. Each has in mind a maximum amount that he will bid. This maximum is called a. a resistance price b. willingness to pay c. consumer surplus d. producer surplus
answer

b. willingness to pay
question

Consumer surplus is a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. the amount a buyer is willing to pay for a good minus the cost of producing the good. c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d. a buyer’s willingness to pay for a good plus the price of the good.
answer

a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
question

Lori $50.00 Audrey $30.00 Zach $20.00 Calvin $10.00 If the price of the product is $22, then who would be willing to purchase the product? a. Lori b. Lori and Audrey c. Lori, Audrey, and Zach d. Lori, Audrey, Zach, and Calvin
answer

b. Lori and Audrey
question

Michael $500 Earvin $400 Larry $350 Charles $300 You have an extra ticket to the Midwest Regional Sweet 16 game in the men’s NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the ticket. Who makes the winning bid, and what does he offer to pay for the ticket? a. Michael; $501 b. Michael; more than $400 but less than or equal to $500 c. Earvin; $400 d. Earvin; more than $350 but less than or equal to $400
answer

b. Michael; more than $400 but less than or equal to $500
question

Producer surplus is a. measured using the demand curve for a good. b. always a negative number for sellers in a competitive market. c. the amount a seller is paid minus the cost of production d. the opportunity cost of production minus the cost of producing goods that go unsold.
answer

c. the amount a seller is paid minus the cost of production.
question

Ivana produces cookies. Her production cost is $6 per dozen. She sells the cookies for $8 per dozen. Her producer surplus per dozen cookies is a. $2 b. $6 c. $8 d. $14
answer

a. $2
question

Abby $1,500 Bobby $1,200 Carlos $1,000 Dianne $750 Evalina $500 If the market price is $1,000, the producer surplus in the market is a. $700 b. $750 c. $2,250 d. $3,700
answer

a. $700
question

Abby $1,500 Bobby $1,200 Carlos $1,000 Dianne $750 Evalina $500 If the market price is $900, the producer surplus in the market is a. $350 b. $550 c. $750 d. $1,000
answer

b. $550
question

Consumer surplus equals the a. value to buyers minus the amount paid by buyers. b. value to buyers minus the cost to sellers. c. amount received by sellers minus the cost to sellers. d. amount received by sellers minus the amount paid by buyers.
answer

a. value to buyers minus the amount paid by buyers.
question

$12.00 0 36 $10.00 3 30 $8.00 6 24 $6.00 9 18 $4.00 12 12 $2.00 15 6 $0.00 18 0 The equilibrium price is a. $10.00 b. $8.00 c. $6.00 d. $4.00
answer

d. $4.00
question

Economics is the study of a. production methods b. how society manages its scarce resources. c. how households decide who performs which tasks. d. the interaction of business and government.
answer

b. how society manages its scarce resources
question

In 1776, the American Revolution was sparked by anger over a. the extravagant lifestyle of British royalty. b. the crimes of British soldiers stationed in the American colonies. c. British taxes imposed on the American colonies. d. the failure of the British to protect American colonists from attack by hostile Native Americans.
answer

c. British taxes imposed on the American colonies.
question

A tax on a good a. raises the price that buyers effectively pay and raises the price that sellers effectively receive. b. raises the price that buyers effectively pay and lowers the price that sellers effectively receive. c. lowers the price that buyers effectively pay and raises the price that sellers effectively receive. d. lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.
answer

b. raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
question

What happens to the total surplus in a market when the government imposes a tax? a. Total surplus increases by the amount of the tax. b. Total surplus increases but by less than the amount of the tax. c. Total surplus decreases. d. Total surplus is unaffected by the tax.
answer

c. Total surplus decreases.
question

A tax levied on the sellers of a good shifts the a. supply curve upward (or to the left). b. supply curve downward (or to the right). c. demand curve upward (or to the right). d. demand curve downward (or to the left).
answer

a. supply curve upward (or to the left).
question

A tax levied on the buyers of a good shifts the a. supply curve upward (or to the left). b. supply curve downward (or to the right). c. demand curve downward (or to the left). d. demand curve upward (or to the right).
answer

c. demand curve downward (or to the left).
question

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the a. tax revenue increases at first, but it eventually peaks and then decreases. b. deadweight loss increases at first, but it eventually peaks and then decreases. c. tax revenue always increases, and the deadweight loss always increases. d. tax revenue always decreases, and the deadweight loss always increases.
answer

a. tax revenue increases at first, but it eventually peaks and then decreases.
question

The higher a country’s tax rates, the more likely that country will be a. at the top of the Laffer curve. b. on the positively sloped part of the Laffer curve. c. on the negatively sloped part of the Laffer curve. d. experiencing small deadweight losses.
answer

c. on the negatively sloped part of the Laffer curve.
question

According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like a. a U. b. an upside-down U. c. a horizontal straight line. d. an upward-sloping line or curve.
answer

b. an upside-down U.
question

When the government imposes taxes on buyers or sellers of a good, society a. loses some of the benefits of market efficiency. b. gains efficiency but loses equality. c. is better off because the government’s tax revenues exceed the deadweight loss. d. moves from an elastic supply curve to an inelastic supply curve.
answer

a. loses some of the benefits of market efficiency.
question

With which of the Ten Principles of Economics is the study of international trade most closely connected? a. People face tradeoffs b. Trade can make everyone better off. c. Governments can sometimes improve market outcomes. d. Prices rise when the government prints too much money.
answer

b. Trade can make everyone better off.
question

A logical starting point from which the study of international trade begins is a. the recognition that not all markets are competitive. b. the recognition that government intervention in markets sometimes enhances the economic welfare of the society. c. the principle of absolute advantage. d. the principle of comparative advantage.
answer

d. the principle of comparative advantage.
question

Patterns of trade among nations are primarily determined by a. cultural considerations b. political considerations. c. comparative advantage. d. differences in the income elasticity of demand among nations.
answer

c. comparative advantage
question

A tax on an imported good is called a a. quota b. tariff c. supply tax d. trade tax
answer

b. tariff
question

Suppose England exports cars to Australia and imports cheese from Mexico. This situation suggests that a. England has a comparative advantage relative to Mexico in producing cheese, and Australia has a comparative advantage relative to England in producing cars. b. England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese. c. England has an absolute advantage relative to Mexico in producing cheese, and Australia has an absolute advantage relative to England in producing cars. d. England has an absolute advantage relative to Australia in producing cars, and Mexico has an absolute advantage. relative to England in producing cheese.
answer

b. England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese.
question

When a country allows trade and becomes an importer of a good, a. both domestic producers and domestic consumers become better off. b. domestic producers become better off, and domestic consumers become worse off. c. domestic producers become worse off, and domestic consumers become better off. d. both domestic producers and domestic consumers become worse off.
answer

c. domestic producers become worse off, and domestic consumers become better off.
question

“Owners of firms in young industries should be willing to incur temporary losses if they believe that those firms will be profitable in the long run.” This observation helps to explain why many economists are skeptical about the a. national-security argument b. infant-industry argument c. unfair-competition argument d. jobs argument
answer

b. infant-industry argument

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