ECON 304 TEST PAPER 2025/2026 QUESTIONS WITH
ANSWERS GRADED A+
✔✔If a domestic suppliers can supply the product for less than the world price the
product should not be produced domestically and the product should be imported. -
✔✔False
✔✔A tariff is a tax on imported goods. - ✔✔True
✔✔There is a deadweight loss that results from assessing a tariff. This deadweight loss
lowers the total surplus of the domestic economy by reducing the consumer surplus that
buyers enjoy by paying lower prices. - ✔✔True
✔✔When the government imposes a tariff, it has decided to reward a few producers at
the expense of the many buyers. - ✔✔True
✔✔The world price for sugar is higher than the domestic price of sugar in the United
States. - ✔✔False
✔✔Suppose that Greece and Switzerland both produce oil and olives. Greece's
opportunity cost of producing a crate of olives is 5 barrels of oil while Switzerland's
opportunity cost of producing a crate of olives is 10 barrels of oil.
Which country has a comparative advantage in producing olives? - ✔✔Greece
✔✔Suppose that Greece and Switzerland consider trading olives and oil with each
other. Greece can gain from specialization and trade as long as it receives more than 5
barrels of oil for each crate of olives it exports to Switzerland. Similarly, Switzerland can
gain from trade as long as it receives more than _______ crate of olives for each barrel
of oil it exports to Greece.
Fill in the Blank - ✔✔1/10
✔✔Based on the answers for questions 17 and 18, Greece and Switzerland should
trade olives and oil.
Correct! - ✔✔True
✔✔Globalization is widely accepted without any real criticism. - ✔✔False
✔✔During the 1990s positive technological change in the production of chicken caused
the price of chicken to fall. Holding everything else constant, how would this affect the
market for pork (a substitute for chicken)? - ✔✔The demand for pork would decrease
and the equilibrium price of pork would decrease.
,✔✔Which of the following statements is true? - ✔✔A decrease in supply causes
equilibrium price to rise; the increase in price then results in a decrease in quantity
demanded.
✔✔Which of the following would cause an increase in the equilibrium price and
decrease in the equilibrium quantity of watermelon? - ✔✔a decrease in supply
✔✔When Toyota introduced its 2010 Prius, it announced that the average retail price of
the 2010 model would be lower than the average retail price was for the equivalent
2009 model. Which of the following would explain the price differential? - ✔✔The
demand for the Prius had decreased, and the supply of the Prius had increased.
✔✔Assume that both the demand curve and the supply curve for DVD players shift to
the left but the demand curve shifts more than the supply curve. As a result - ✔✔both
the equilibrium price and quantity of DVD players will decrease.
✔✔Suppose a price ceiling is imposed on grapes above their equilibrium price. The
likely result will be: - ✔✔no result the price ceiling is not binding
✔✔If rent control is applied to apartment housing, what is likely to occur? - ✔✔there
may be an excess demand for apartments
✔✔Which of the following is the best example of an excise tax? - ✔✔a tax on gasoline
✔✔If the government imposes an excise tax on motorcycles equal to $250 per
motorcycle, the supply of motorcycles will shift to the: - ✔✔left and the price of
motorcycles will increase by an unknown amount
✔✔Under a third-party payer system: - ✔✔buyers generally choose to purchase more
✔✔Price floors cause a surplus. - ✔✔True
✔✔A price ceiling keeps a price from rising above a certain level (the "ceiling"). A good
example of a price ceiling is minimum wage. - ✔✔False
✔✔Laws that government enact to regulate prices are called price controls. - ✔✔True
✔✔A shift in demand happens when: - ✔✔there is a change in some economic factor
other than price
✔✔We often use the goods together, because consumption of one good tends to
enhance consumption of the other. When this happens we consider goods to be: -
✔✔complements
, ✔✔Which of the following are shift factors for demand? - ✔✔income, expectations, the
price for other goods
✔✔The term ceteris paribus means: - ✔✔all things being equal
✔✔At prices above the equilibrium price: - ✔✔there is a surplus
✔✔The supply schedule and the supply curve are: - ✔✔two different ways of displaying
the same information
illustrate how a higher price lead to a higher quantity supplied
shows the quantity supplied at a range of different prices
(all are correct)
✔✔The term demand focuses only on the ability of a person to purchase a good or
service. - ✔✔False
✔✔The wage elasticity of labor supply is the percentage change in hours worked
divided by the percentage change in wages - Please explain. - ✔✔The elasticity of labor
supplied = the % change in quantity of hours supplied/% change in wage. For certain
groups, a lot of times an increase in wage will increase in the hours supplied. As age
increases, people are less likely to supply extra hours of labor even for higher wages.
The wage elasticity of labor supply shows this relationship.
✔✔For those who are very wealthy the textbook chapter provides and example of an
inferior good. The example given is: - ✔✔a hamburger
✔✔When the income elasticity of demand is negative, we call the good an inferior good.
- ✔✔true
✔✔If demand is more inelastic than supply, producers bear most of the tax burden. -
✔✔false
✔✔Addictive substances, for which demand is inelastic, are products for which
producers can pass higher costs on to consumers. - ✔✔true
✔✔When does raising the price bring in more revenue? - ✔✔when price elasticity of
demand is inelastic
✔✔A perfectly inelastic supply curve is: - ✔✔a verticle line
✔✔A perfectly elastic demand curve is: - ✔✔a horizontal line
ANSWERS GRADED A+
✔✔If a domestic suppliers can supply the product for less than the world price the
product should not be produced domestically and the product should be imported. -
✔✔False
✔✔A tariff is a tax on imported goods. - ✔✔True
✔✔There is a deadweight loss that results from assessing a tariff. This deadweight loss
lowers the total surplus of the domestic economy by reducing the consumer surplus that
buyers enjoy by paying lower prices. - ✔✔True
✔✔When the government imposes a tariff, it has decided to reward a few producers at
the expense of the many buyers. - ✔✔True
✔✔The world price for sugar is higher than the domestic price of sugar in the United
States. - ✔✔False
✔✔Suppose that Greece and Switzerland both produce oil and olives. Greece's
opportunity cost of producing a crate of olives is 5 barrels of oil while Switzerland's
opportunity cost of producing a crate of olives is 10 barrels of oil.
Which country has a comparative advantage in producing olives? - ✔✔Greece
✔✔Suppose that Greece and Switzerland consider trading olives and oil with each
other. Greece can gain from specialization and trade as long as it receives more than 5
barrels of oil for each crate of olives it exports to Switzerland. Similarly, Switzerland can
gain from trade as long as it receives more than _______ crate of olives for each barrel
of oil it exports to Greece.
Fill in the Blank - ✔✔1/10
✔✔Based on the answers for questions 17 and 18, Greece and Switzerland should
trade olives and oil.
Correct! - ✔✔True
✔✔Globalization is widely accepted without any real criticism. - ✔✔False
✔✔During the 1990s positive technological change in the production of chicken caused
the price of chicken to fall. Holding everything else constant, how would this affect the
market for pork (a substitute for chicken)? - ✔✔The demand for pork would decrease
and the equilibrium price of pork would decrease.
,✔✔Which of the following statements is true? - ✔✔A decrease in supply causes
equilibrium price to rise; the increase in price then results in a decrease in quantity
demanded.
✔✔Which of the following would cause an increase in the equilibrium price and
decrease in the equilibrium quantity of watermelon? - ✔✔a decrease in supply
✔✔When Toyota introduced its 2010 Prius, it announced that the average retail price of
the 2010 model would be lower than the average retail price was for the equivalent
2009 model. Which of the following would explain the price differential? - ✔✔The
demand for the Prius had decreased, and the supply of the Prius had increased.
✔✔Assume that both the demand curve and the supply curve for DVD players shift to
the left but the demand curve shifts more than the supply curve. As a result - ✔✔both
the equilibrium price and quantity of DVD players will decrease.
✔✔Suppose a price ceiling is imposed on grapes above their equilibrium price. The
likely result will be: - ✔✔no result the price ceiling is not binding
✔✔If rent control is applied to apartment housing, what is likely to occur? - ✔✔there
may be an excess demand for apartments
✔✔Which of the following is the best example of an excise tax? - ✔✔a tax on gasoline
✔✔If the government imposes an excise tax on motorcycles equal to $250 per
motorcycle, the supply of motorcycles will shift to the: - ✔✔left and the price of
motorcycles will increase by an unknown amount
✔✔Under a third-party payer system: - ✔✔buyers generally choose to purchase more
✔✔Price floors cause a surplus. - ✔✔True
✔✔A price ceiling keeps a price from rising above a certain level (the "ceiling"). A good
example of a price ceiling is minimum wage. - ✔✔False
✔✔Laws that government enact to regulate prices are called price controls. - ✔✔True
✔✔A shift in demand happens when: - ✔✔there is a change in some economic factor
other than price
✔✔We often use the goods together, because consumption of one good tends to
enhance consumption of the other. When this happens we consider goods to be: -
✔✔complements
, ✔✔Which of the following are shift factors for demand? - ✔✔income, expectations, the
price for other goods
✔✔The term ceteris paribus means: - ✔✔all things being equal
✔✔At prices above the equilibrium price: - ✔✔there is a surplus
✔✔The supply schedule and the supply curve are: - ✔✔two different ways of displaying
the same information
illustrate how a higher price lead to a higher quantity supplied
shows the quantity supplied at a range of different prices
(all are correct)
✔✔The term demand focuses only on the ability of a person to purchase a good or
service. - ✔✔False
✔✔The wage elasticity of labor supply is the percentage change in hours worked
divided by the percentage change in wages - Please explain. - ✔✔The elasticity of labor
supplied = the % change in quantity of hours supplied/% change in wage. For certain
groups, a lot of times an increase in wage will increase in the hours supplied. As age
increases, people are less likely to supply extra hours of labor even for higher wages.
The wage elasticity of labor supply shows this relationship.
✔✔For those who are very wealthy the textbook chapter provides and example of an
inferior good. The example given is: - ✔✔a hamburger
✔✔When the income elasticity of demand is negative, we call the good an inferior good.
- ✔✔true
✔✔If demand is more inelastic than supply, producers bear most of the tax burden. -
✔✔false
✔✔Addictive substances, for which demand is inelastic, are products for which
producers can pass higher costs on to consumers. - ✔✔true
✔✔When does raising the price bring in more revenue? - ✔✔when price elasticity of
demand is inelastic
✔✔A perfectly inelastic supply curve is: - ✔✔a verticle line
✔✔A perfectly elastic demand curve is: - ✔✔a horizontal line
