1. The concept of scarcity implies ________.

a) limited human wants and unlimited producer resources

b) unlimited human resources and limited producer wants

c) unlimited human wants and limited producer resources

d) limited human resources and unlimited producer wants

2. In a market economy, goods are allocated on the basis of ________.

a) strength of desires

b) need

c) willingness and ability to pay

d) political power

3. When a curve shifts, it implies that ________.

1. the variables on the X- and Y-axis are switched

2. there is a movement from one point to another point on the same curve

3. there is some type of disequilibrium in the market

4. for each given amount of the X variable there is a new amount of the Y variable

4. When graphing cross-sectional data, one should ________.

a) place the various years on the X-axis

b) always be drawn using a line chart

c) investigate variables in a single time period

d) concentrate on collecting data on a single variable

5. Which of the following is not part of the input market?

a) Capital

b) Entrepreneurship

c) Firms

d) Lands

6. With specialization of resources, ________.

a) the slope of the PPF is decreasing as more of the good on the X-axis is produced

b) marginal opportunity costs increase

c) opportunity costs tend to be constant

d) there is more emphasis on self reliance

7. Which of the following will cause the production possibilities frontier to shift outward?

a) an increase in the size of the labor force

b) a decrease in the unemployment rate

c) a decrease in the size of the capital stock

d) an inefficiency that has been corrected

8 Shortages ________.

a) occur when the price is above the equilibrium price

b) are identical to scarcity, but just shown through the use of the demand and supply model

c) are due to the fact that quantity demanded exceeds the quantity supplied at a given price

d) can be eliminated by providing some of the good to each consumer

9. Suppose that the demand for apples is downward sloping, and the price per bushel decreases from $6.50 to $5.50. We would expect ________.

a) the demand curve for apples to shift toward the origin

b) the demand for apples to decrease

c) the quantity demanded of apples to increase

d) the quantity demanded of apples to fall

10. The market clearing price is ________.

a) the lowest price that you are willing to pay

b) the price which creates an excess demand

c) the price which creates an excess supply

d) the price which eliminates all excess quantities supplied or excess quantities demanded

11. Quantity demanded ________.

a) is the amount of a good a consumer is willing and able to purchase at a given price

b) is identical to the quantity supplied

c) is a downward sloping curve

d) is the amount equal to what producers are willing and able to produce at given prices

12. Suppose that you are evaluating the market for Kellogg's cereal. The prices of Post and General Mills cereals increase. What will happen to Kellogg's cereals?

a) The demand for Kellogg's cereals increases causing the price to rise.

b) The quantity supplied of Post cereals will decrease since General Mills prices rose.

c) The demand will increase and prices fall.

d) The quantity demanded of Post and General Mills cereals will increase.

13. A minimum wage ________.

a) is another name for a guaranteed contract

b) is simply a price floor in the labor market

c) causes a shortage of workers

d) covers every job in the United States

14. Opening a country up to trade will ________.

a) create greater inefficiencies in domestic production

b) lower the domestic prices of all goods

c) decrease the income of that country's citizens

d) will cause price in the domestic market to come equal to the world market price

15 As the minimum wage increases, ________.

a) incomes, especially of single parents, increase

b) employment increases

c) the competition for jobs increases

d) poverty is eliminated

16. If the marginal cost exceeds the marginal benefit, ________.

a) the price of the good is above the equilibrium price

b) consumers have an incentive to buy less of the good

c) producers should increase production of the good

d) the price is greater than the total cost of production

17. Which of the following is true in the water-diamond paradox?

a) Consumer surplus of water exceeds consumer surplus of diamonds

b) Producer surplus of water exceeds producer surplus of diamonds.

c) People will always pay more for a diamond than they do for water.

d) Producer surplus exceeds consumer surplus for water.

18. Which of the following must lead to an increase in the price for tomatoes?

a) The weather is optimal for growing tomatoes the entire growing season.

b) There is a successful advertising campaign for tomatoes and the wages fall for tomato farmers.

c) Researchers discover that tomatoes reduce cancer and the wages increase for tomato farmers.

d) A technology breakthrough allows farmers to produce more tomatoes with the same inputs

19. Arthur would be willing to pay up to $50 for one new Nintendo Wii game, up to $40 for a second Wii game, up to $30 for a third Wii game, and up to $20 for a fourth Wii game. If the price of a Wii game is $30 each, what is Arthur's consumer surplus?

a) $140

b) $40

c) $30

d) None of the above

20. Which of the following countries is an example of a command and control economy?

a) North Korea

b) United States of America

c) All of the above

d) None of the above

21. The government requires that new safety equipment be installed in all new table saws produced, ceteris paribus. This will lead to a decrease in ______.

a) the supply of table saws

b) the quantity supplied of table saws

c) the demand of table saws

d) the quantity demanded of table saws

22. Susan begins to examine shifts in demand for shoes. She discovers that as the population increases then it is likely that there will be a shift in demand to the right for shoes. She also discovers that when there are more houses being built, sometimes this seems to shift the demand to the right for shoes. Since the population increase describes the shifts in demand for shoes better than the number of houses being built, Susan omits the variable of housing construction in her analysis of shifts in demand for shoes. What is this an example of?

a) The law of demand

b) A normal good

c) Occam's razor

d) A Giffen good

23. Scotts income rises by 10%. Due to his higher income, his demand for antique clocks increases by 25%. For Scott, antique clocks are ______ goods.

A. normal B. inferior C. superior

a) A and B only

b) A and C only

c) B and C only

d) None of the above

24. Markets are efficient to the extent that they maximize _______.

a) consumer surplus

b) producer surplus

c) social surplus

d) deadweight loss

25. Money in the economy today ________.

a) is needed in order for barter to occur

b) is primarily commodity money

c) facilitates the circular flow of economic activity

d) is an economic resource from the input market