ASU ECON 211 2026 STUDY GUIDE COMPLETE
QUESTIONS AND SOLUTIONS
◉ What is a normative statement? Answer: Policymakers should
increase the minimum wage to improve standard of living.
◉ The opportunity cost of helping a friend move is... Answer: the
next best use of the time and energy spent helping your friend.
◉ An entity has a comparative advantage if it can produce what?
Answer: At a lower opportunity cost than another entity.
◉ T/F: Suppose the United States has an absolute advantage in the
production of oil and wheat. This means that the U.S. would not gain
from trading these goods. Answer: FALSE
◉ The United States has a comparative advantage in the production
of wheat and an absolute advantage in the production of both apples
and wheat relative to Canada. If the U.S. and Canada specialize and
trade, the U.S. should produce what? Answer: Wheat
◉ The law of the demand states that if price rises, quantity
demanded does what? Answer: Decreases
,◉ We would expect demand for cars to increase if... Answer: The
price of gasoline falls.
◉ As income increases, consumers purchase more cars. Cars what
type of good? Answer: Normal goods
◉ Supply curves show the relationship between price and quantity
demanded. Assuming the law of supply holds, supply curves are
what? Answer: Upward sloping
◉ Which causes a leftward shift in the supply curve for apples?
Answer: An increase in the price of labor
◉ An increase in the equilibrium price of coffee could be caused by
Answer: A decrease in supply of coffee.
◉ What is Consumer surplus? Answer: The amount a buyer is
willing to pay for a good less the amount the buyer actually pays.
◉ When is a market is efficient? Answer: The sum of consumer and
producer surplus is maximized.
, ◉ What is Producer surplus? Answer: The difference between the
price producers collect and the minimum price required to bring
goods to market.
◉ Rent control is an example of what? Answer: A price ceiling
◉ A price ceiling on a coffee would likely cause what? Answer: A
shortage of coffee
◉ What is minimum wage an example of? Answer: A price floor
◉ In the labor market, suppliers of labor are Answer: Households
◉ T/F: A payroll tax on a firm will raise more revenue than an
income tax of the same amount on households. Answer: FALSE
◉ T/F: If the government decides to impose a $1 tax on coffee, it
makes no difference if the government collect the tax from
producers or consumers. Answer: TRUE
◉ T/F: The revenue collected by the government from a tax is not
considered part of total surplus. Answer: FALSE
QUESTIONS AND SOLUTIONS
◉ What is a normative statement? Answer: Policymakers should
increase the minimum wage to improve standard of living.
◉ The opportunity cost of helping a friend move is... Answer: the
next best use of the time and energy spent helping your friend.
◉ An entity has a comparative advantage if it can produce what?
Answer: At a lower opportunity cost than another entity.
◉ T/F: Suppose the United States has an absolute advantage in the
production of oil and wheat. This means that the U.S. would not gain
from trading these goods. Answer: FALSE
◉ The United States has a comparative advantage in the production
of wheat and an absolute advantage in the production of both apples
and wheat relative to Canada. If the U.S. and Canada specialize and
trade, the U.S. should produce what? Answer: Wheat
◉ The law of the demand states that if price rises, quantity
demanded does what? Answer: Decreases
,◉ We would expect demand for cars to increase if... Answer: The
price of gasoline falls.
◉ As income increases, consumers purchase more cars. Cars what
type of good? Answer: Normal goods
◉ Supply curves show the relationship between price and quantity
demanded. Assuming the law of supply holds, supply curves are
what? Answer: Upward sloping
◉ Which causes a leftward shift in the supply curve for apples?
Answer: An increase in the price of labor
◉ An increase in the equilibrium price of coffee could be caused by
Answer: A decrease in supply of coffee.
◉ What is Consumer surplus? Answer: The amount a buyer is
willing to pay for a good less the amount the buyer actually pays.
◉ When is a market is efficient? Answer: The sum of consumer and
producer surplus is maximized.
, ◉ What is Producer surplus? Answer: The difference between the
price producers collect and the minimum price required to bring
goods to market.
◉ Rent control is an example of what? Answer: A price ceiling
◉ A price ceiling on a coffee would likely cause what? Answer: A
shortage of coffee
◉ What is minimum wage an example of? Answer: A price floor
◉ In the labor market, suppliers of labor are Answer: Households
◉ T/F: A payroll tax on a firm will raise more revenue than an
income tax of the same amount on households. Answer: FALSE
◉ T/F: If the government decides to impose a $1 tax on coffee, it
makes no difference if the government collect the tax from
producers or consumers. Answer: TRUE
◉ T/F: The revenue collected by the government from a tax is not
considered part of total surplus. Answer: FALSE
