1. The market for corn is initially in equilibrium. Suppose the production of biofuels, which use corn as an input, decreases, and at the same time, decreases in the price of oil cause farm production costs to fall.

Which of the following explains the effect on equilibrium price and quantity in the corn market?

A. The quantity of corn will fall, but the effect on equilibrium price cannot be determined without more information.

B. The price of corn will fall, but the effect on equilibrium quantity cannot be determined without more information.

C. The quantity of corn will rise, but the effect on equilibrium price cannot be determined without more information.

D. The price and quantity of corn will rise.

E. The price and quantity of corn will fall.

2. Consider the figure. If the price is $20, find the area that represents producer surplus.

A. F + E + D.

B. c + D

C. A + B + C

D. A + B.

3. What happens in the market with an upward sloping supply curve when there is a shift in the demand curve due to an external shock?

A. Price will not change.

B. Production decisions will be unaffected.

C. A new equilibrium price will be achieved over some period of time.

D. Price will immediately adjust to a new equilibrium.

4.Government-entorced prices such as price ceilings.

A. Are only imposed on goods where market price has no useful function.

B. Aid in the rationing function performed by prices in a market system.

C. Disrupt the rationing function performed by prices in a market system.

D. Ration economic resources more efficiently than prices in a market system.

5. Labor is a key input at fast-food restaurants. Suppose that the government boosts the minimum wage above the equilibrium wage of fast-food workers. Which of the following best describes the response of the quantity of labor employed at restaurants?

A. More workers will be employed since the wage increase encourages people to seek jobs at these restaurants.

B. More workers will be employed since the wage increase tells managers that more workers are available.

C. The same number of workers will be employed since a restaurant's operation requires a fixed amount of labor.

D. Fewer workers will be employed since the wage increase will induce managers to seek to substitute other inputs for the now relatively more expensive labor.

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