Name: __________________________ Date: _____________ 1.

If resources are scarce it means that they: A) cannot provide enough goods or services to satisfy all human material wants and needs. B) have no opportunity cost. C) D) are probably not valued by consumers. have an unlimited supply.

2. The best measure of the opportunity cost of any choice is: A) the monetary cost of that choice. B) C) D) whatever you have given up to make that choice, even if no monetary costs are involved. the cost associated with not taking full advantage of the opportunity offered by that choice. your hourly wage.

3. Marginal analysis studies how individuals decide: A) whether to live on the margin of society. B) C) D) to do a bit more activity versus a bit less activity. to analyze marginal businesses. how much down payment to make when buying stocks.

4. Some Bears fans decide to leave the Patriots game after the 1st quarter in order to avoid the post-game traffic. The fans are: A) not considering they have already paid the cost of their tickets. B) C) D) making marginal decisions by comparing the cost of leaving early to the benefit of leaving early. thinking only about the benefits of avoiding traffic. finally realizing how awful the Bears truly are.

Use the following to answer questions 5-7: Figure: Strawberries and Submarines

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5. Suppose the economy is operating at point G. This implies that: A) the economy can move to a point such as C only if it improves its technology. B) the economy is experiencing unemployment and/or inefficient allocation of resources. C) the economy lacks the resources to achieve a combination such as C. D) people in this economy don't really like strawberries and submarines.

6. As the economy moves from point A toward point D, it will find that the opportunity cost of each additional submarine: A) falls B) rises C) remains unchanged D) doubles

7. (Figure: Strawberries and Submarines) Suppose the economy is now operating at point C. Moving to point E would require that the economy: A) achieve full employment and an efficient allocation of resources. B) C) D) eliminate its production of strawberries. reduce its production of submarines. improve its technology or increase the quantities of factors of production it has.

8. All points outside the production possibility frontier represent: A) efficient production points. B) C) D) inefficient production points. nonfeasible production points. economic growth.

9. In a single day, Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. We then know that: A) Sarah has a comparative advantage in making hamburgers. B) C) D) Sarah has an absolute advantage in making hamburgers. Abe has a comparative advantage in making hamburgers. Abe has an absolute advantage in making hamburgers.

10. If the price of mozzarella cheese (an ingredient in pizza) declines due to a major technological breakthrough in the dairy industry, there would be: A) a decrease in the supply of pizza. B) C) an increase in the supply of pizza. an increase in the quantity of pizza supplied.
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D)

no change in the supply of pizza.

11. Which would not cause the supply curve to shift? A) a change in technology B) C) D) a change in factor costs a change in the price of the good a change in suppliers' expectations of prices

12. When the price of corn is rising, we would expect: A) the quantity demanded for corn to be rising. B) C) D) the quantity supplied of corn to be rising. the demand for corn to be shifting inward. the supply of corn to be shifting outward.

Use the following to answer questions 13-16:

13. If the price of chocolate-covered peanuts is $0.60, the price will: A) remain unchanged. B) fall to $0.30 C) fall to $0.50 D) rise to $0.70 14. The equilibrium quantity and the equilibrium price are ________ bags and ________. A) 140; $0.40 B) 175; $0.60 C) 175; $0.80 D) 210; $0.50 15) If the price of chocolate-covered peanuts is $0.80, there is: A) a surplus of 140 bags per month. B) a shortage of 140 bags per month. C) a surplus of 70 bags per month. D) a shortage of 70 bags per month. 16. A shortage of 210 bags of chocolate-covered peanuts exists if the price is ________ per bag. A) $0.80 B) $0.60 C) $0.40 D) 0.30
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17. Economists generally believe that a country should specialize in the production of a good or service if: A) the production possibility frontier is larger than that of any other country. B) C) D) the production possibility frontier is smaller than that of any other country. the country can produce the product using fewer resources than any other country. the country can produce the product while forgoing fewer alternative products than any other country.

18. If they produce only hamburgers, then in a single day Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. If they only make milkshakes, then in a single day Sarah can produce 10 milkshakes while Abe can produce 4 milkshakes. We then know that: A) Sarah has an absolute advantage and a comparative advantage in making hamburgers. B) Sarah has an absolute advantage and a comparative advantage in making milkshakes. C) Abe has an absolute advantage and a comparative advantage in making hamburgers. D) Abe has an absolute advantage and a comparative advantage in making milkshakes. 19. If goods A and B are substitutes, a decrease in the price of good B will: A) increase the demand for good A. B) C) D) increase the demand for good B. decrease the demand for good A. increase the demand for good B and decrease the demand for good A.

20. If goods A and Z are complements, an increase in the price of good Z will: A) increase the demand for good A. B) C) D) decrease the demand for good A. decrease the demand for good Z. decrease the demand for good A and decrease the demand for good Z.

21. A decrease in the price of a good will result in: A) an increase in demand. B) C) D) an increase in supply. an increase in the quantity demanded. more being supplied.

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22. The demand for meals at a local Applebee's will fall if: A) the Olive Garden offers a 10% discount coupon in the local newspaper. B) C) D) the price of a meal at Applebee's rises. local incomes increase and Applebee's is a normal good. people finally realize that Applebee's is terrible. Seriously, go anywhere else!!

23. The demand curve for videos has shifted to the right. What could have caused it? A) a fall in the price of videos B) C) D) an increase in the price of videos an increase in the supply of videos an increase in the incomes of buyers

Use the following to answer questions 24-26: Figure: Market for Hamburgers

24. The figure shows the weekly market for hamburgers at the Tasty Burger Palace. If the price of a burger is $2, consumer surplus will equal: A) $650. B) $400 C) $225 D) $450 25. The figure shows the weekly market for hamburgers at the Tasty Burger Palace. If the Palace sells 400 burgers, consumer surplus will equal: A) $650. B) $400 C) $225 D) $450 26. The figure shows the weekly market for hamburgers at the Tasty Burger Palace. If the Palace lowers the price of a burger from $2 to $1.50, the gain in consumer surplus to consumers who are persuaded to buy at the lower price (and who were not buying when the price was $2) is equal to: A) $100. B) $75 C) $50 D) $25
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Use the following to answer questions 27-30:

27. (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if the price for Phantom tickets is $55, which student has the highest individual producer surplus? A) Tim B) Laura C) Rick D) Ralph 28. (Table) Given the information in the table, if the price for Phantom tickets is $140, and there is no other market for tickets, total producer surplus for these five students is: A) $139. B) $110 C) $40 D) $379 29. (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if the price for Phantom tickets is $55, total producer surplus for the five students is: A) $54. B) $79 C) $84 D) $64 30. (Table: Producer Surplus and Phantom Tickets) Given the information in the table, if these students can sell their Phantom tickets for only $5, then: A) Tim will be the only student not to sell his ticket. B) C) D) Laura, Whitney, Ralph, and Rick will sell their tickets. the total producer surplus for the five students will be $4. the total producer surplus for the five students will be $330.

31. The likely result of a price floor is: A) a surplus of the good at a price above the market equilibrium price. B) C) D) a shortage of the good at a price below the market equilibrium price. a surplus of the good at a price below the market equilibrium price. a shortage of the good at a price above the market equilibrium price.

32. A persistent shortage may occur if: A) the government imposes a price ceiling. B) a price floor is imposed.
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C) D)

demand keeps falling. supply shifts rightward.

Use the following to answer question 33: Figure: Market for Hybrid Cars

33. (Figure: Market for Hybrid Cars) Identify the area(s) that represent deadweight loss if there is a binding price floor. A) a + b + c B) C) D) b+c+d+e c+e c

34. The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to ________ and demand is described as ________. A) 0.2; inelastic B) C) D) 5; inelastic 0.2; elastic 5; elastic

35. The demand for textbooks is price inelastic. Which of the following would explain this? A) Many alternative textbooks can be used as substitutes. B) Students have a lot of time to adjust to price changes.

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C) D)

Textbook purchases consume a large portion of most students' income. The good is a necessity.

36. A perfectly price-inelastic demand curve is: A) horizontal. B) C) D) downward-sloping. upward-sloping. vertical.

37. On a linear demand curve: A) demand is elastic at high prices. B) C) D) demand is inelastic at high prices. elasticity is the same at all points on the demand curve. demand is elastic at low prices.

38. A linear demand curve: A) has a constant price elasticity of demand. B) C) D) has price elasticity of demand equal to one. has price elasticity of demand that is positive. can have both elastic and inelastic price elasticities of demand.

39. A good is likely to have an inelastic demand curve if: A) the consumer has significant time to respond to the price change. B) C) D) the good has few available substitutes. the good is a luxury. the good accounts for a large share of consumer income.

40. If the University of Michigan increases the price of football tickets, this will result in increasing revenues if the price elasticity of demand is: A) price-inelastic. B) C) D) price-elastic. equal to 1. perfectly elastic.
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41. The principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably: A) greater than that from the first. B) C) D) equal to that from the first. less than that from the first. not comparable to that from the first.

Use the following to answer questions 42-44:

42. (Table: Utility II) The marginal utility for the sixth unit is: A) 25. B) 0 C) 25 D) -15 43. (Table: Utility II) Total utility is maximized at the ________ unit. A) First B) second C) fourth D) sixth 44. (Table: Utility II) Marginal utility is zero for the ________ unit. A) First B) second C) third D) fifth 45. A) B) C) D) The short run is defined as a: period of time less than 1 year. period of time less than 6 months. period in which some inputs are considered to be fixed in quantity. time period in which some inputs are fixed, but it cannot exceed 1 year.

46. In the long run: A) all inputs are fixed. B) C) D) inputs are neither variable nor fixed. at least one input is variable and one input is fixed. all inputs are variable.

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Use the following to answer questions 47-48:

47. (Table: Production of Bagels) The marginal product of the fifth worker is: A) 5,000. B) 9,000 C) 10,000 D) 12,000 48. (Table) Diminishing marginal returns begin with the addition of the ________ worker. A) Third B) fourth C) fifth D) sixth

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Use the following to answer questions 49-50: Figure and Table: Variable, Fixed, and Total Costs

49. (Figure and Table: Variable, Fixed, and Total Costs) In the figure, the marginal cost of increasing production from 51 to 64 bushels of wheat is: A) $16. B) C) D) $15.38. $12.50. $18.75.

50. (Figure and Table: Variable, Fixed, and Total Costs) In the figure, when 96 bushels of wheat are produced, average fixed cost is ________, average variable cost is ________, and average total cost is ________. A) $7.84; $11.76; $19.60 B) C) D) $133.33; $200; $333.33 $4.17; $16.67; $20.83 $5.33; $13.33; $18.67

51. When an increase in the firm's output reduces its long-run average total cost, it experiences: A) increasing returns to scale (economy in scale). B) decreasing returns to scale.
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C) D)

constant returns to scale. variable returns to scale.

52. An assumption of the model of perfect competition is: A) discrimination. B) C) D) difficult entry and exit. many buyers and sellers. limited information.

53. If all firms in an industry are price-takers, then: A) each firm can take the price that it wants to charge and sell at this price, provided it is not too different from the prices other firms are charging. B) each firm takes the market price as given for its current output level, recognizing that the price will change if it alters its output significantly. C) an individual firm cannot alter the market price even if it doubles its output. D) the market sets the price, and each firm can take it or leave it (by setting a different price). 54. If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit: A) is maximized. B) C) D) can be increased by increasing production. can be increased by decreasing production. can be increased by decreasing the price.

55. If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit: A) is maximized. B) C) D) can be increased by increasing production. can be increased by decreasing production. can be increased by decreasing the price.

56. In the short run, if AVC < P < ATC, a perfectly competitive firm: A) produces output and earns an economic profit. B) C) D) produces output and incurs an economic loss. does not produce output and earns an economic profit. does not produce output and earns zero economic profit.

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57. In the short run, if P < AVC, a perfectly competitive firm: A) produces output and earns an economic profit. B) C) D) produces output and incurs an economic loss. does not produce output and earns an economic profit. does not produce output and incurs an economic loss.

58. People with more education tend to experience lower poverty rates. A) True B) False

59. The welfare state often: A) takes up a large share of government spending in wealthy countries. B) C) D) is referred to as Social Security. makes up only a small share of government spending in wealthy countries. impacts only low-income households.

60. Political conservatives and liberals: A) both oppose the creation of welfare state programs. B) C) D) strongly agree on their support of welfare state programs, but disagree on the appropriate extent of these programs. have conflicting views; conservatives support the creation of welfare state programs while liberals oppose the creation of welfare state programs. have conflicting views; liberals support the creation of welfare state programs while conservatives oppose the creation of welfare state programs.

61. The poverty threshold depends upon: A) only the major wage earner's annual income. B) C) D) the size and composition of a family. only the size of the family. only the composition of the family.

62. Means-tested programs: A) provide benefits for all. B) C) D) are poverty programs that specifically help those with low incomes. provide benefits only for those households that earn below the mean household income in the United States for a given year. provide only in-kind benefits.
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63. Non-means-tested programs: A) provide benefits for all regardless of income level. B) C) D) are poverty programs that specifically help those with low incomes. provide benefits only for those households that earn below the mean household income in the United States for a given year. provide only in-kind benefits.

64. Increases in income inequality in the United States have been attributed to: A) equal and rising increases in the salaries of low-wage workers. B) C) D) the impact of technological innovation on the demand for labor. a drop in international trade's effects on the economy. stricter immigration policies.

65. A social insurance program would be one aimed at: A) keeping people from earning less than $10,000. B) C) D) people who have encountered unexpected financial distress. reducing the percentage of families earning incomes below the poverty line. households with children.

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Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. A B B B B B B C B B C B A B A D D B C B C A D C B D A D C C A A C A D D A D B A C A C D C D B B B C A C
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53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65.

C B A B D A A B B B A B B

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