1.The General Agreement on Tariffs and Trade (GATT) is

A) legislation that substantially increased tariffs in the early 1930s.

B) legislation that substantially lowered tariffs in the early 1930s.

C) an organization established after World War II to set the rules for international trade and reduce trade barriers among member nations.

D) an organization established in the early 1960s to protect U.S. industries from low-cost foreign producers.

2.Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are

A) P1 and Q1.

B) P1 and Q4.

C) P2 and Q2.

D) P2 and Q3.

In Figure 17-13, the world price of a baseball is $3. With free trade, how many baseballs will the United States import?

A) 4,000

B) 6,000

C) 8,000

D) 10,000

E) 12,000

4.A nation can gain from international trade when

A) its relative production costs are the same as those of other countries

B) it exports goods for which it is a low-opportunity cost producer while importing goods that it could produce only at a high opportunity cost.

C) it imports goods for which it is a low-opportunity cost producer and exports goods for which it is a high opportunity cost producer.

D) it has a trade deficit

5.The benefit (or satisfaction) that an individual expects to derive from an activity is called

A) opportunity cost

B) utility

C) marginal cost

D) scarcity

6.When economists say an individual displays economizing behavior, they simply mean that she is

A) making a lot of money

B) buying only those products that are cheap and of low quality

C) learning how to run a business more effectively

D) seeking the lowest cost method to accomplish her objectives

7.When economists say an individual has made a rational choice, they mean the individual has

A) made the choice by weighing their own subjective costs and benefits

B) made a "good" decision, one that reasonable outside observers would have also made

C) neglected to consider the unintended consequences arising from their decision

D) ignored their own personal interests and made the choice that is best for society

8.Which of the following is not scarce?

A) an individual's time

B) air

C) pencils

D) automobiles

9.Which of the following statements about exchange is false?

A) The expectation of gain motivates people to engage in trade.

B) If a party to a potential exchange does not believe that it will lead to personal gain, he or she can chose not to engage in the trade.

C) Voluntary exchange is generally mutually beneficial to the trading partners.

D) If one trading partner gains, the other must lose.     

10.Use the production possibilities data below for Lebos and Slavia to answer the following question(s).

Refer to Table 2-1. Which of the following would be a mutually agreeable rate of exchange?

A) 1F = 1C

B) 1F = 2C

C) 1F = 3C

D) No exchange rate would be mutually agreeable

11.Which of the following is NOT true of opportunity cost?

A) Opportunity costs are subjective because they depend upon how the decision-maker values his or her options.

B) Opportunity costs are only the monetary costs of lost options.

C) Opportunity costs are the highest-valued alternative sacrificed in order to choose an option.

D) Only the decision-maker can determine his or her opportunity costs for any particular action.

12.In which statement(s) is "demand" used correctly?(I) "An increase in the price of hot dogs will reduce the demand for hot dogs."(II) "An increase in the price of hot dogs will reduce the demand for hot dog buns."

A) in both statements I and II

B) in statement I only

C) in statement II only

D) in neither statements I nor II

13.Assume that black beans and rice are consistently in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

A) If the price of black beans rose and the consumption of rice remained the same, they would be substitutes.

B) If the price of black beans rose and the consumption of rice increased, they would be substitutes.

C) If the price of black beans rose and the consumption of rice decreased, they would be substitutes.

D) If the price of black beans rose and the consumption of both goods remained the same, they would be complements.

14.Suppose the demand for tacos decreases. What will happen to producer surplus in the market for tacos?

A) It increases.

B) It decreases.

C) It remains unchanged.

D) It may increase, decrease, or remain unchanged.

15.Refer to Table 3-2. If the price is $775, who would be willing to supply the product?

A) Dale and Jill

B) Dale, Jill and Denise

C) Denise, Catherine and Jackson

D) Catherine and Jackson

16.If we observe a decrease in the price of a good and an increase in the amount of the good bought and sold, this could be explained by

A) an increase in the supply of the good

B) an increase in the demand for the good

C) a decrease in the demand for the good

D) a decrease in the supply of the good

17.Figure 3-2

Given the supply and demand conditions illustrated in Figure 3-2, the equilibrium price of steak is

A) $2 per pound

B) $4 per pound

C) $6 per pound

D) $8 per pound

18.Refer to Figure 3-19. Sellers whose costs are less than price are represented by which line segment?

A) AC

B) CE

C) BC

D) CD

19.The efficiency of market organization is dependent on which of the following?

A) well-regulated supply and demand

B) the availability of low cost resources and high tariffs on foreign imports

C) competitive markets and well-defined and enforced private property rights

D) Government establishment of the invisible hand principle and the inelasticity of certain goods.

Points Earned:   2.0/2.0 

Correct Answer(s):         

20.Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,

A) the demand curve for physicals shifts to the right.

B) the supply curve for physicals shifts to the left.

C) the quantity demanded of physicals increases and the quantity supplied of physicals decreases.

D) the number of physicals performed will increase.

21.About 35,000 general aviation multiengine airplanes are licensed to operate in the United States. If an additional $1,000-per-year tax was levied on each plane to raise general revenue, economic thinking suggests the

A) annual revenue from this tax would be less than $35,000,000.

B) annual revenue from this tax would be $35,000,000.

C) annual revenue from this tax would be more than $35,000,000.

D) number of airplanes would increase dramatically.

22.A $25 government subsidy paid directly to buyers of jeans will result in

A) a downward shift in the demand curve for jeans by $25.

B) an upward shift in the demand curve for jeans by $25.

C) a downward shift in the supply curve for jeans by $25.

D) an upward shift in the supply curve for jeans by $25.

23.When government gives a subsidy to buyers of good X, the benefits of the subsidy flow to

A) the buyers of good X only.

B) the sellers of good X only.

C) the buyers and sellers of good x equally.

D) both the buyers and sellers of good x, and the distribution of the benefits will be dependent on the elasticity of demand and the elasticity of supply.

24. Refer to Figure 4-18. In this market, which of the following price controls would be binding?

A) a price ceiling of $2.00, and it would cause a shortage

B) a price ceiling of $5.00, and it would cause a surplus

C) a price floor of $2.00, and it would cause a shortage

D) All of the above are correct.

25.Refer to Figure 4-21. How much tax revenue does this tax produce for the government?

A) $480

B) $600

C) $800

D) $1,080