1. Economists are particularly adept at understanding that people respond to
c. punishments more than rewards.
2. Which is the most accurate statement about trade?
a. Trade can make every nation better off.
b. Trade makes some nations better off and others worse off.c. Trading for a good can make a nation better off only if the
3. Allocative efficiency is:
a. Using the very latest technology.
b. Distributing goods fairly.
c. Making goods as cheaply as possible.
4. A production possibilities frontier can shift outward if
a. government increases the amount of money in the economy.
b. there is no technological improvement.
c. the economy abandons inefficient production methods in favor of efficient production methods.
5. The price at which quantity supplied equals quantity demanded is called the
a. coordinating price.
b. monopoly price.
c. equilibrium price.
6. When the price of a good is higher than the equilibrium price,
a. a shortage will exist.
b. buyers desire to purchase more than is produced.
c. sellers desire to produce and sell more than buyers wish to purchase.
7. If the supply of a product increases, we would expect
a. equilibrium price to increase and equilibrium quantity to decrease.
b. equilibrium price to decrease and equilibrium quantity to increase.
8. Good X and good Y are substitutes. If the price of good Y decreases, then the
a. quantity demanded for good X will decrease.
b. market price of good X will decrease.
c. demand for good X will decrease.
9. A oligopoly market is a market in which
a. an auctioneer helps set prices and arranges sales.
b. there are only a few sellers.
c. the forces of supply and demand do not apply.
10. If Francis experiences a increase in his income, we would expect that, as a result, Francis’s demand for
a. each good he purchases will remain unchanged.
b. normal goods will decrease.
c. all goods will decrease.
d. inferior goods will decrease.
11. Which of the following changes would not shift the demand curve for a good or service?
a. a change in income
b. a change in the price of the good or service
c. a change in expectations about the future price of the good or service
12. An increase in demand is represented by
a. a movement downward and to the right along a demand curve.
b. a movement upward and to the left along a demand curve.
c. a rightward shift of a demand curve.
13. Which of the following events could cause an increase in the supply of ceiling fans?
a. The number of sellers of ceiling fans increases.
b. There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as
c. There is an increase in the price of the motor that powers ceiling fans.
14. Lead is an important input in the production of crystal. If the price of lead decreases, other things equal, we would
expect the supply of
a. crystal to be unaffected.
b. crystal to decrease.
c. crystal to increase.
15. When we compare an increase in supply with an increase in quantity supplied, we know that.
the former could be caused by a decrease in input costs and the latter would be caused by an increase in the price of the good.
16. A binding price ceiling would cause a
c. neither a shortage nor a surplus condition would exist.
17. Neutrality in taxation is when
a. a tax does not affect peoples economic behavior.
b. a tax treats everybody the same.
c. people who pay taxes are all assumed to be the same.
18. The income tax is rated very good on the________ criterion.
19. Deadweight loss from taxation result from
a. governments spending money unwisely.
b. the funding of government services for which you have no utility.
c. forfeited trades and the loss of consumer and producer surplus.
20. Demand is said to be elastic if
a. the price of the good responds substantially to changes in demand.
b. buyers respond substantially to changes in the price of the good.
21. For a good that is a necessity,
a. quantity demanded tends to respond substantially to a change in price.
b. demand tends to be inelastic.
22. Other things equal, the demand for a good tends to be more inelastic, the
a. fewer the available substitutes.
b. longer the time period considered.
23. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall more substantially over a ten-year period because
buyers tend to be much less sensitive to a change in price when given more time to react.
24. When the price of bubble gum is $0.50, the quantity demanded is 400 packs per day. When the price falls to $0.40,
the quantity demanded increases to 600. Given this information and using the point method, we know that the
demand for bubble gum is
25. Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is
26. If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a
a. 0.4 percent decrease in the quantity demanded.
b. 2.5 percent decrease in the quantity demanded.
c. 40 percent decrease in the quantity demanded.
27. When demand is inelastic, a decrease in price will cause
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue, but an increase in quantity demanded.
28 The cross-price elasticity of demand can tell us whether goods are
a. normal or inferior.
b. elastic or inelastic.
c. luxuries or necessities.
d. complements or substitutes.
29. If two goods are substitutes, their cross-price elasticity will be
30. Consumer surplus is
a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
b. the amount a buyer is willing to pay for a good minus the cost of producing the good.
31. Utility is a measure of
a. second-string infielders batting ability.
b. a persons pleasure from consuming a good or service.
c. a good’s practicality.
32. The best example of an exception to the law of diminishing marginal utility is
a. a two-car garage.
b. a person that collects things that often come in sets.
33. A person who eats a McDonald’s Double Cheese Burger rather than a “dreamed about” steak dinner at a local supper club is demonstrating
a. marginal utility.
b. total utility.
c. the principle of diminishing marginal utility.
34. An indifference curve shows
a. the opportunity cost of consuming one more of a good.
b. the relative marginal utility of a good.
c. the marginal rate of substitution.
d. all of the above are true.
35. A person maximizes their utility when
a. the principle of equal marginal utility per last dollar spent has been met.
b. where the budget line is tangent to the indifference curve.
c. when he or she gets the most pleasure from consumption of a good given its price and the person’s budget.
D. all of the above are true.