1. According to the text, economics is the study of how:
A) governments allocate resources in the face of constraints.
B) government policies can be used to meet individuals' wants and desires.
C) human beings coordinate their wants and desires in the face of constraints.
D) scarce resources are allocated to their most productive uses.

2. Your opportunity cost of taking this course is:
A) the tuition you paid for the course.
B) the net benefit of the activity you would have chosen if you had not taken the course.
C) the net benefit of taking this course.
D) the cost of the activity you would have chosen if you had not taken the course.

3. Microsoft has just taken some Senators out to dinner in Paris in a private jet. This is likely an example of an attempt to influence:
A) economic forces.
B) political forces.
C) social forces.
D) the price mechanism.

4. Price controls in competitive markets cause shortages, is an example of:
A) positive economics.
B) normative economics.
C) the art of economics.
D) Classical economics.

5. Which of the following cannot be determined using a production possibility table?
A) What combination of outputs can be produced.
B) How much less of one output can be produced if more of another output is produced.
C) What combination of outputs is best.
D) How much output can be produced from a given level of inputs.

6. Two countries that specialize their production along the lines of comparative advantage and then trade with one another will:
A) both produce and consume more.
B) produce more and consume less.
C) produce less and consume more.
D) both produce and consume less.

7. Countries gain from trade by producing:
A) the goods they produce at the highest opportunity cost.
B) the goods they can produce at the lowest opportunity cost.
C) where the production possibility curve has a slope of -1.
D) all goods in equal amounts.

8. When firms do not have to compete, they are able to:
A) determine what consumers will buy.
B) ignore government regulations.
C) control the prices charged by their competitors.
D) raise the price of their product.

9. The Industrial Revolution was important to the history of economic systems because it:
A) changed the way people exchanged goods-from barter to using money as a medium of exchange.
B) concentrated wealth in the hands of a few noblemen who then controlled the land in their region, creating a feudal system.
C) increased the wealth of merchants and artisans and eventually led to a change in economic systems to mercantilism.
D) increased the power of capitalists and eventually led to a revolution instituting capitalism as the dominant economic system.

10. One advantage of a partnership over a sole proprietorship is:
A) greater accountability.
B) limited liability.
C) ease of formation.
D) the ability to share the work and risks of business.

11. Which group has ultimate control over the U.S. economy?
A) Business
B) Households
C) Multinationals
D) Government

12. If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $2, and U.S. workers produce 5 times as much output per hour as Mexican workers, then it would be efficient to locate production facilities in:
A) the U.S. since the cost per unit of output will be higher.
B) the U.S. since the cost per unit of output will be lower.
C) Mexico since the cost per unit of output will be higher.
D) Mexico since the cost per unit of output will be lower.

13. Suppose farmers can use their land to grow either wheat or corn. The law of supply predicts that an increase in the market price of wheat will cause:
A) farmers to substitute production of wheat for production of corn.
B) farmers to substitute production of corn for production of wheat.
C) farmers to lower production of corn and wheat.
D) farmers to raise production of wheat and corn.

14. Suppose a market has an excess demand and price starts to rise. What will the rise in price cause?
A) A fall in both quantity supplied and quantity demanded.
B) A rise in both quantity supplied and quantity demanded.
C) A rise in quantity supplied and a fall in quantity demanded.
D) A fall in quantity supplied and a rise in quantity demanded.

15. In a market where there are strong social and political forces:
A) quantity demanded will be expected to equal quantity supplied.
B) quantity demanded might not equal quantity supplied.
C) the market will be in disequilibrium.
D) the invisible hand will overcome all other forces.

16. If both buyers and sellers expect the price of a commodity to rise in future, it is likely that equilibrium:
A) price will fall with little change in equilibrium quantity.
B) price will rise with little change in equilibrium quantity.
C) quantity will fall with little change in equilibrium price.
D) quantity will rise with little change in equilibrium price.

17. In the late 1990s and early 2000s, more and more devices were introduced in the market that performed tasks similar to that of PCs. At the same time, the price of computer chips to make high-end PCs has fallen by 75 percent. What is the effect of the events on equilibrium price and quantity of high-end PCs?
A) Price falls continuously as does quantity sold.
B) Price rises then falls while quantity sold falls continuously.
C) Price falls continuously while quantity falls initially but then rises, recouping earlier losses.
D) Price falls continuously and quantity rises continuously.

18. If the government imposes an excise tax on gasoline equal to $0.25 per gallon and the demand curve for gasoline is downward-sloping, the supply of gasoline will:
A) shift upward and the price will increase by $0.25 per gallon.
B) shift upward and the price will increase by less than $0.25 per gallon.
C) shift downward and the price will decrease by $0.25 per gallon.
D) shift downward and the price will decrease by less than $0.25 per gallon.

19. Quantity restrictions benefit which group the most?
A) Consumers.
B) Suppliers wanting to enter the market.
C) Existing suppliers.
D) Government.

20. Assume that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If a minimum wage is set at $4.00 (W = 4), then:
A) 15 workers will be supplied and demanded.
B) 20 workers will be supplied and demanded.
C) 20 workers will be supplied, but only 10 workers will be demanded.
D) 10 workers will be supplied, but 20 workers will be demanded.