1. _______ loss is a measure of inefficiency such that the loss of welfare of one party exceeds the gain in welfare of another party.

A. Absolute

B. Marginal

C. Deadweight

D. Relative

2. Regarding the law of supply and demand, which of the following statements is most likely to be true, all things being equal?

A. An equilibrium price is reached when demand outruns supply.

B. As supply decreases, prices will establish an equilibrium price.

C. As prices rise, demand will determine an equilibrium supply.

D. As prices decline, demand will increase.

3. The measure of the extent to which the rich pay more in taxes than the poor is called _______ equity.

A. progressive

B. internal

C. proportional

D. vertical

4. The budget is fixed. If more money is spent on project A, less money is available for project B. This scenario illustrates a/an _______-sum game.

A. zero

B. negative

C. average

D. positive

5. Perverse consequences can be defined as ______.

A. incentives that cause rational individuals and firms to behave in ways that are not consistent with the policy

B. consequences that are what were expected given how the policy was written

C. results that cause rational individuals and firms to behave in a virtuous manner

6. If you choose to adopt one of the most powerful tools for changing people's behavior, you'll probably focus on making changes in

A. human nature.

B. the market system.

C. human capital.

D. incentives.

7. Which of the following can said to be true of deadweight loss?

A. It measures inefficiency that occurs when the loss of welfare imposed on one party exceeds the gain in welfare afforded to another party.

B. Because resources are not really wasted, no one loses in this situation.

C. Minimum wages do not create deadweight loss.

D. When reallocating the resources more people are better off but others are worse off.

8. _______ economics examines the processes by which people make decisions.

A. Behavioral

B. Competitive

C. Contingency

D. Subjective

9. As illustrated by academic credentials, the process by which individuals or firms engage in activities with no direct value to convey intangible information to some other party is referred to as

A. branding.

B. screening.

C. signaling.

D. certification.

10. Your text states that public policy requires a delicate balance between honoring the wishes of the majority and respecting the rights of the minority. How is this is best shown in the Constitution?

A. Supreme Court judges unlike their Federal counterparts are not elected to their posts for life.

B. Federal judges are elected for life but are not immune to political vicissitudes.

C. The First Amendment of the Bill of Rights guarantees freedom of speech even when a vast majority of citizens might find the content of that speech hateful.

D. The Constitution created the House of Representatives to help the most populated states and the Senate which evens out the votes by the states.

11. Which of the following best illustrates a collective-action problem?

A. The tragedy of the commons

B. Nondemocratic safeguards

C. Trade-offs among basic values

D. Disagreements over basic values

12. Prior to Robert Mugabe's rise to power, Zimbabwe was

A. among the richest nations of sub-Saharan Africa.

B. a land wherein about half the children were suffering from malnutrition.

C. engaged in a civil war.

D. among the poorest nations of sub-Saharan Africa.

13. In many ways, public policy can be compared to

A. physics.

B. human nature.

C. medicine.

D. engineering.

14. Disagreements over basic values are most likely to arise in the context of _______ issues.

A. theoretical

B. monetary

C. imaginary

D. social

15. Wall Street brokers are compensated on the basis of how much money they make for the firm. However, in instances where individual brokers bet on big returns associated with significant risks and the investment goes sour, the firm, not the broker, will bear the full burden of financial loss. This scenario illustrates

A. a collective-action problem.

B. asymmetry of information.

C. incomplete information.

D. a principle-agent problem.

16. In any economic system, the allocation of resources is Pareto-efficient if it's

A. possible to deprive some people in order to assure the welfare of some other people.

B. possible to make one or more persons better off without making anyone else worse off.

C. not possible to deprive any person of his or her private property.

D. not possible to make any one person better off unless some other person is