PRACTICE 1 BEFORE MID TERM1) International trade arises fromA) 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 thanB) must be less thanC) might be more than, less than, or equal toD) must equal3) The problem of "scarcity" appliesA) 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 whenA) 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 fromA) producers to consumersB) consumers to producersC) government to consumersD) producers to government6) An import quota isA) 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 rentA) 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 toA) increase total surplus.B) create deadweight loss.C) increase surplus and create deadweight loss.D) eliminate deadweight loss.Rent(dollars permonth)Quantity ofapartmentssupplied(per month)Quantity ofapartmentsdemanded(per month)200 20 100300 40 80400 60 60500 80 40600 100 209) 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, thenA) 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 isA) $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 inA) 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 apartmentsB) a shortage equal to 3,000 apartmentsC) a shortage equal to 250 apartmentsD) nothing because the rent ceiling has no effect on the equilibrium price and quantity13) A minimum wage set above the equilibrium wage rate for low-skilled workers ________.A) creates more employment opportunities for low-skilled workersB) creates more prosperity among younger peopleC) creates unemployment among low-skilled workersD) increases the number of good paying jobs available to young people14) Consider the PPF for office buildings and housing shown in the figure above. Which point in the diagram showsthat resources to produce office buildings and housing are being misallocated, unused, or both?A) Point FB) Point GC) Point HD) Point I15) The value of one more unit of a good or service is theA) 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 measuresA) 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 theA) 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 isA) $1.B) $2.C) $3.D) $5.19) The opportunity cost of a good is the same as itsA) money price.B) relative price.C) price index.D) none of the above20) Elasticity measures theA) 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 isA) perfectly inelastic.B) perfectly elastic.C) elastic.D) inelastic.22) If the price elasticity is between 0 and 1, demand isA) 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 isA) elastic.B) inelastic.C) unit elastic.D) arc elastic.24) A substitute is a goodA) 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 goodA) 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