PRACTICE 1 BEFORE MID TERM 1 International trade arises from A absolute advantage B comparative advantage C importation duties D the advantage of execution 2 With international trade a country will export tires Prior to international trade the quantity of tires produced in the country the quantity of tires consumed in the country A must be more than B must be less than C might be more than less than or equal to D must equal 3 The problem of scarcity applies A only in industrially developed countries because resources are scarce in these countries B only in underdeveloped countries because there are few productive resources in these countries C only in economic systems that are just beginning to develop because specialized resources are scarce D to all economic systems regardless of their level of development 4 The gains from trade that are possible when two countries have different opportunity costs for wheat and coffee are realized when A trade occurs and resources are reallocated within the two countries B the two countries continue to produce the same quantities of wheat and coffee C each country has an absolute advantage in one of the two commodities D the demand curves in both countries shift inward 5 A country opens up to trade and imports clothing In the clothing market surplus has been redistributed from A producers to consumers B consumers to producers C government to consumers D producers to government 6 An import quota is A a tariff that is a fixed percentage of the price of a good B a tariff that is a fixed dollar amount per unit of a good C an agreed upon price for a good to be imported at a specified future date D a restriction that specifies the maximum amount of a good that may be imported 7 A rent ceiling set above the equilibrium rent A decreases the quantity demanded but not the quantity supplied B decreases the quantity supplied but not the quantity demanded C decreases both the quantity demanded and the quantity supplied D has no effect on the market outcome 8 If the US government sets a price ceiling below the equilibrium price the result will be to A increase total surplus B create deadweight loss C increase surplus and create deadweight loss D eliminate deadweight loss Rent dollars per month 200 300 400 500 600 Quantity of apartments supplied per month 20 40 60 80 100 Quantity of apartments demanded per month 100 80 60 40 20 9 The above table gives the demand schedule and the supply schedule for housing in Fairview U S A If a rent ceiling of 300 is imposed in the housing market then A there would be a surplus of apartments B there would be a shortage of apartments C the market would reach equilibrium at the quantity of 60 housing units D the supply of housing would increase 10 In the figure above the initial demand curve is D0 There are no rent ceilings nor rent floors The equilibrium monthly rent is A 100 per month B 200 per month C 300 per month D 400 per month 11 In the figure above the demand curve shifts rightward from D0 to D1 There are no rent controls In the short run the increase in demand results in A higher rents and a decrease in the equilibrium quantity B lower rents and a decrease in the equilibrium quantity C higher rents and an increase in the equilibrium quantity D lower rents and an increase in the equilibrium quantity 12 The above figure shows the demand and supply curves for housing What would be the effects of a rent ceiling equal to 500 per month A a surplus equal to 3 000 apartments B a shortage equal to 3 000 apartments C a shortage equal to 250 apartments D nothing because the rent ceiling has no effect on the equilibrium price and quantity 13 A minimum wage set above the equilibrium wage rate for low skilled workers A creates more employment opportunities for low skilled workers B creates more prosperity among younger people C creates unemployment among low skilled workers D increases the number of good paying jobs available to young people 14 Consider the PPF for office buildings and housing shown in the figure above Which point in the diagram shows that resources to produce office buildings and housing are being misallocated unused or both A Point F B Point G C Point H D Point I 15 The value of one more unit of a good or service is the A marginal benefit B minimum price that people are willing to pay for another unit of the good or service C marginal cost D opportunity cost of producing one more unit of a good or service 16 A market demand curve measures A how much a consumer is willing to pay for an additional unit of the good B the marginal social benefit of an additional unit of the good C the marginal social cost of an additional unit of the good D Both answers A and B are correct 17 The market demand curve is constructed by adding the A quantities demanded by each individual at each price B prices that each individual is willing to pay at each quantity C Neither answer A nor answer B is correct D Both answer A and answer B are correct 18 The above figure shows Dana s marginal benefit curve for ice cream If the price of ice cream is 2 per gallon then the maximum that Dana is willing to pay for the 8th gallon of ice cream is A 1 B 2 C 3 D 5 19 The opportunity cost of a good is the same as its A money price B relative price C price index D none of the above 20 Elasticity measures the A percentage change in a variable B slope of a curve C change in a variable D responsiveness of a variable to a change in another variable 21 If the quantity demanded changes by a relatively small amount for a given change in price then demand is A perfectly inelastic B perfectly elastic C elastic D inelastic 22 If the price elasticity is between 0 and 1 demand is A elastic B inelastic C unit elastic D perfectly elastic 23 If a 20 percent increase in the price of a used car results in a 10 percent decrease in the quantity of used cars demanded then the demand for used cars is A elastic B inelastic C unit elastic D arc elastic 24 A substitute is a good A that can be used in place of another good B that is not used in place of another good C of lower quality than another good D of higher quality than another good 25 A complement is a good A of lower quality than another good B used in conjunction with another good C used instead of another good D of higher quality than another good 26 In the above figure which demand curve illustrates perfectly elastic demand A G B H C I D …