Question 1

1 / 1 point


Refer to the above graph. Which of the following schedules correctly reflects "demand"?



a) Option A



b) Option B



c) Option C



d) Option D


Question 2

1 / 1 point
When the price of a product falls, the purchasing power of our money income rises and thus permits
consumers to purchase more of the product. This statement describes:


a) an inferior good.



b) the rationing function of prices.



c) the substitution effect.



d) the income effect.


Question 3

1 / 1 point
Firms are motivated to minimize production costs because:


a) it is the most environmentally friendly way to produce goods.



b) least-cost production techniques use the smallest total quantity of resources.



c) competitive pressures in the market will drive out higher-cost producers.



d) the government provides tax credits and subsidies to low-cost producers.


Question 4

1 / 1 point


Refer to the above graph. Which of the following schedules correctly reflects "supply"?



a) Option A



b) Option B



c) Option C



d) Option D


Question 5

1 / 1 point
If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:


a) decrease the amount demanded by more than 10 percent.



b) increase the amount demanded by more than 10 percent.



c) decrease the amount demanded by less than 10 percent.



d) increase the amount demanded by less than 10 percent.


Question 6

1 / 1 point
In which of the following cases will total revenue increase?


a) price falls and demand is inelastic



b) price falls and supply is elastic



c) price rises and demand is inelastic



d) price rises and demand is elastic


Question 7

1 / 1 point
A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of
beer) would reduce the demand for marijuana. We can conclude that:


a) beer and marijuana are substitute goods.



b) beer and marijuana are complementary goods.



c) beer is an inferior good.



d) marijuana is an inferior good.


Question 8

1 / 1 point
An efficiency loss (or deadweight loss):


a) is measured as the combined loss of consumer surplus and producer surplus.



b)
results from producing a unit of output for which the maximum willingness to pay exceeds
the minimum acceptable price.



c) can result from underproduction, but not from overproduction.



d) can result from overproduction, but not from underproduction.


Question 9

1 / 1 point
Specialization in production is important primarily because it:


a) results in greater total output.



b) allows society to avoid the coincidence-of-wants problem.



c) allows society to trade by barter.



d) allows society to have fewer capital goods.


Question 10

1 / 1 point
The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by:


a) 5 percent and quantity supplied rises by 7 percent.



b) 8 percent and quantity supplied rises by 8 percent.



c) 10 percent and quantity supplied remains the same.



d) 7 percent and quantity supplied rises by 5 percent.


2 points
Question 11

2 / 2 points


Refer to the above diagram. A government-set price floor is best illustrated by:


a) price A.



b) quantity E.



c) price C.



d) price B.


Question 12

2 / 2 points
Normative statements are concerned primarily with:


a) facts and theories.



b) what ought to be.



c) what is.



d) rational choice involving costs and benefits.


Question 13

2 / 2 points
The French term "laissez-faire" means:


a) "there is no free lunch."



b) "let it be."



c) "circular flow."



d) "public ownership."


Question 14

2 / 2 points
Market failure is said to occur whenever:


a) private markets do not allocate resources in the most economically desirable way.



b) prices rise.



c)
some consumers who want a good do not obtain it because the price is higher than they are
willing to pay.



d) government intervenes in the functioning of private markets.


Question 15

2 / 2 points
Which of the following is an example of a public good?


a) a weather warning system



b) a television set



c) a sofa



d) a bottle of soda


Question 16

2 / 2 points
Producer surplus:


a)
is the difference between the maximum prices consumers are willing to pay for a product
and the lower equilibrium price.



b) rises as equilibrium price falls.



c)
is the difference between the minimum prices producers are willing to accept for a product
and the higher equilibrium price.



d)
is the difference between the maximum prices consumers are willing to pay for a product
and the minimum prices producers are willing to accept.


Question 17

2 / 2 points
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:


a) demand curve for cigarettes rightward.



b) demand curve for cigarettes leftward.



c) supply curve for cigarettes rightward.



d) supply curve for cigarettes leftward.


Question 18

2 / 2 points
The competitive market system:


a)
encourages innovation because government provides tax breaks and subsidies to those who
develop new products or new productive techniques.



b)
discourages innovation because it is difficult to acquire additional capital in the form of new
machinery and equipment.



c)
discourages innovation because firms want to get all the profits possible from existing
machinery and equipment.



d) encourages innovation because successful innovators are rewarded with economic profits.


Question 19

2 / 2 points
Economics involves marginal analysis because:


a) most decisions involve changes from the present situation.



b) marginal benefits always exceed marginal costs.



c) marginal costs always exceed marginal benefits.



d) much economic behavior is irrational.


Question 20

2 / 2 points
The invisible hand refers to the:


a) fact that the U.S. tax system redistributes income from rich to poor.



b)
notion that, under competition, decisions motivated by self-interest promote the social
interest.



c) tendency of monopolistic sellers to raise prices above competitive levels.



d) fact that government controls the functioning of the market system.


Question 21

2 / 2 points
Which one of the following expressions best states the idea of opportunity cost?


a) "A penny saved is a penny earned."



b) "He who hesitates is lost."



c) "There is no such thing as a free lunch."



d) "All that glitters is not gold."


Question 22

2 / 2 points
If a demand for a product is elastic, the value of the price elasticity coefficient is:


a) zero.



b) greater than one.



c) equal to one.



d) less than one.


Question 23

2 / 2 points
The scarcity problem:


a) persists only because countries have failed to achieve continuous full employment.



b) persists because economic wants exceed available productive resources.



c) has been solved in all industrialized nations.



d) has been eliminated in affluent societies such as the United States and Canada.


Question 24

2 / 2 points
According to the marginal-cost-marginal-benefit rule:


a)
only government projects (as opposed to private projects) should be assessed by comparing
marginal costs and marginal benefits.



b) the optimal project size is the one for which MB = MC.



c) the optimal project size is the one for which MB exceeds MC by the greatest amount.



d) project managers should attempt to minimize both MB and MC.


Question 25

2 / 2 points
The term "quantity demanded":


a) refers to the entire series of prices and quantities that comprise the demand schedule.



b) refers to a situation in which the income and substitution effects do not apply.



c) refers to the amount of a product that will be purchased at some specific price.



d) means the same thing as demand.


Question 26

2 / 2 points
In the simple circular flow model:


a) households are buyers of resources.



b) businesses are sellers of final products.



c) households are sellers of final products.



d) there are real flows of goods, services, and resources, but not money flows.


Question 27

2 / 2 points
Consumer surplus:


a)
is the difference between the maximum prices consumers are willing to pay for a product
and the lower equilibrium price.



b)
is the difference between the maximum prices consumers are willing to pay for a product
and the minimum prices producers are willing to accept.



c)
is the difference between the minimum prices producers are willing to accept for a product
and the higher equilibrium price.



d) rises as equilibrium price rises.


Question 28

2 / 2 points
Which of the following is a distinguishing feature of a market system?


a) public ownership of all capital.



b) central planning.



c) wide-spread private ownership of capital.



d) a circular flow of goods, resources, and money.


Question 29

2 / 2 points
The elasticity of supply of product X is unitary if the price of X rises by:


a) 5 percent and quantity supplied rises by 7 percent.



b) 8 percent and quantity supplied rises by 8 percent.



c) 10 percent and quantity supplied stays the same.



d) 7 percent and quantity supplied rises by 5 percent.


Question 30

2 / 2 points
When economists say that people act rationally in their self interest, they mean that individuals:


a) look for and pursue opportunities to increase their utility.



b) generally disregard the interests of others.



c) are mainly creatures of habit.



d) are usually impulsive and unpredictable.