1) The Latin phrase ceteris paribus means that when a relationship between two variables is being studied: 1) _______ A) we recognize that some factors are unknown. B) all other variables are held fixed. C) both are treated as unpredictable. D) neither of those two variables is allowed to change.

2) Which of the following is an example of scarcity? 2) _______ A) If you choose to play video games you will not have as much time for exercise. B) If I decide to buy a new car I may not have enough money to go away on vacation this year. C) If a city uses an acre of land to build a park there will be less land for houses. D) All of the above are examples of scarcity.

3) Diminishing returns occurs because: 3) _______ A) not enough people have jobs. B) consumers do not buy enough of the products produced. C) one of the inputs to the production process is fixed. D) people have not satisfied their self-interests.

4) The economic reason why you voluntarily pay tuition to get into the university/college that you are in right now is because: 4) _______ A) you believe the value of education is lower than the tuition costs. B) the marginal benefit of education is positive. C) you believe the value of education is higher than the tuition costs. D) the marginal benefit of money is zero.

6) You rent a copy of a new action/adventure movie. The rental is for seven days and you watch the movie on the first day. You tell a friend about the film and your friend asks to come over and watch the movie with you before it is due back. What is your opportunity cost of watching the movie a second time? 6) _______ A) Zero, because it won't cost you any money to keep the movie for another day. B) One half the rental cost, because you have already watched the movie one time. C) The answer depends on how much you liked the movie in the first place. D) The answer depends on what else you could do besides watching the movie.

7) Which of the following tend to reduce economic uncertainty? 7) _______ A) health insurance. B) social security. C) unemployment insurance. D) All of the above are correct.

8) One of the most obvious clues to the relative scarcity of a product in a market economy is: 8) _______ A) its current market price. B) the variations in available sizes. C) the limited selection of colors. D) none of the above

9) Consumer surplus is equal to: 20) ______ A) the good's price times the quantity purchased. B) the area under the demand curve. C) the area under the demand curve above the good's price. D) the area under the demand curve below the good's price.

10) In a market economy, what is the role of the government with regards to public goods? 10) ______ A) The government must hold a referendum before any public good is produced. B) The government has to facilitate the collective decision making in the production of public goods. C) The government must force the firms to produce all the public goods. D) The government must take over the production of all goods in the market, public or private.

12) A change in the quantity demanded of a product cannot be the result of a change in: 12) ______ A) the buyer's preference. B) consumer income. C) the price of related goods. D) all of the above are correct.

13) When the price of a substitute product decreases, the demand for a substitute product: 13) ______ A) changes to balance the price change. B) decreases. C) increases. D) none of the above

14) When consumers are willing to buy more than producers are willing to sell: 14) ______ A) there is excess supply of the product in the market. B) the market is in equilibrium. C) the demand curve will shift until the quantity supplied equals the quantity demanded. D) there is excess demand for the product in the market.

15) Suppose that the price of fertilizer, an input in the production of corn, falls. We would predict that the equilibrium quantity of corn will ________ and the equilibrium price of corn will ________. 15) ______ A) rise; rise B) rise; fall C) fall; rise D) fall; fall

16) If the price of hotdogs are expected to increase in the future, then: 16) ______ A) the current demand for hotdogs will decrease. B) the current quantity demanded for hotdogs will increase. C) the current demand for hotdogs will increase. D) the current quantity demanded for hotdogs will decrease.

17) Assume the price of ice cream cones falls from $1.50 to $1.00 and the quantity supplied decreases from 150 to 125 per week. Using the initial price method the price elasticity of supply is: 17) ______ A) 2. B) 1.2. C) .50. D) .75.

18) Suppose the price elasticity of supply for rocking chairs is 1.2 and the price increases by 20%. The quantity supplied will increase by ________ %. 18) ______ A) 20 B) 18 C) 24 D) 12

19) Which of the following is a true statement? 19) ______ A) If demand is elastic and the price increases, the total revenue will increase. B) If demand is elastic and the price decreases, the quantity demanded will decrease. C) If demand is inelastic and the price increases, the total revenue will decrease. D) If demand is inelastic and the price increases, the total revenue will increase.