1.

(02.01 LC) Revenue, profit, and utility represent ________ that play a significant role in determining people's choices. (2 points)

	factors of production
	inputs
	outputs
	marginally increasing values
	incentives

2.

(02.01 MC) An increase in price has the practical effect of making consumers more constrained by budget in their consumption of that good. Economists call this (2 points)

	diminishing marginal utility
	the substitution effect
	the income effect
	diminishing marginal returns
	rational choice theory

3.

(02.01 MC) (2 points) Which of the following could explain the change illustrated in the graph?

	The price of computers increases and the good is an inferior good.
	The price of a substitute decreases and the good is an inferior good.
	The price of a complement increases and the good is a normal good.
	The income of all consumers increases and the good is a normal good.
	The quantity demanded of computers decreases and the good is a normal good.

4.

(02.02 MC) According to the law of supply, a change in the price of a product itself can be represented on a supply curve as a (2 points)

	shift in the product supply curve
	shift in the product demand curve
	movement along the product demand curve
	movement along the product supply curve
	movement along the product demand and product supply curves

5.

(02.02 MC) Consider the following supply schedules for Joseph, Talia, and Shen, who are the only suppliers in the market for cogs:

	Joseph	Talia	Shen
Price per Cog	Cogs Produced
$4	12	8	4
$3	11	6	3
$2	9	4	2
$1	5	2	1
$0	2	1	0

If the equilibrium price is $4 per cog, what is the market quantity supplied? Assume the market is perfectly competitive and in equilibrium. (2 points)

	3 cogs
	8 cogs
	15 cogs
	20 cogs
	24 cogs

6.

(02.02 MC) Which of the following would increase the quantity a firm would produce at every price, ceteris paribus? (2 points)

	Expectations of demand going down for their product
	Consumer incomes going up
	A decrease in the number of suppliers
	A significant increase in opportunity cost
	A decrease in the price of a factor of production

7.

(02.03 MC) Widgets are known to have inelastic demand when their price increases from $2 to $4. What must be true of the change in quantity demanded over this price range? (2 points)

	It increased by exactly 100 percent.
	It decreased by exactly 100 percent.
	It decreased by less than 100 percent.
	It increased by more than 100 percent.
	It decreased by an indeterminate amount.

8.

(02.03 MC) If there are many substitutes for a good, its price elasticity of demand is likely to (2 points)

	increase with each marginal unit produced
	be relatively high
	be relatively low
	depend on the prices of those substitutes
	directly impact the demand for its substitutes

9.

(02.04 MC) What is the price elasticity of supply for a good that sees a 4% increase in quantity supplied for a 1% increase in price? (2 points)

	0.25
	1
	3
	4
	5

10.

(02.04 MC) Assume a new technology is created that causes the cost of metal to decrease as the quantity increases. If metal is a major input in the production of automobiles, how is the change in economies of scale for metal from the new technology guaranteed to affect the elasticity of supply for automobiles? (2 points)

	The elasticity of supply for automobiles will become unit elastic.
	The elasticity of supply for automobiles will become more elastic.
	The elasticity of supply for automobiles will become more inelastic.
	The elasticity of supply for automobiles will become perfectly elastic.
	The elasticity of supply for automobiles will become perfectly inelastic.

11.

(02.05 MC) If the income elasticity of demand for a good is -4, then (2 points)

	quantity demanded decreases by 4 percent while income increases by 1 percent
	quantity demanded increases by 4 percent while income increases by 1 percent
	quantity demanded and income percent changes are indeterminate
	quantity demanded and income decrease by 4 percent
	quantity demanded and income increase by 4 percent

12.

(02.05 HC) If the price of good A goes up by 3 percent and the quantity demanded of good B goes down by 3 percent, which of the following is true? (2 points)

	The goods are substitutes and cross-price elasticity is 1.
	The goods are substitutes and cross-price elasticity is 1.
	The goods are complements and cross-price elasticity is 9.
	The goods are complements and cross-price elasticity is 1.
	The goods are complements and cross-price elasticity is 1.

13.

(02.06 MC) If the demand for a product is so great that firms are unable to fulfill all of the orders, what might it conclude? (2 points)

	The product is an inferior good.
	There is a shortage, and the price is below equilibrium.
	The product is experiencing diminishing marginal returns.
	At the current price, the supply is greater than the demand.
	Foreign governments recently placed a tariff on the product.

14.

(02.06 MC) (2 points) If the price is set at P1, what area represents the consumer surplus in the graph shown above?

	A
	A + B
	A + B + E
	A + B + C + D
	A + B + C + D + E + F

15.

(02.07 MC) Whenever price falls below the equilibrium price, it must be the case that (2 points)

	a surplus will exist
	price elasticity of supply will increase
	price elasticity of demand will decrease
	quantity supplied will be less than quantity demanded
	quantity supplied will be greater than quantity demanded

16.

(02.07 MC) Which of the following is most likely to occur if a competitive market has moved from one equilibrium to another? (2 points)

	An increase in demand lowers the equilibrium price and increases the equilibrium quantity.
	An increase in supply lowers the equilibrium price and increases the equilibrium quantity.
	A decrease in demand and increase in supply will cause equilibrium price to increase but make equilibrium quantity indeterminate.
	An increase in demand will decrease equilibrium price, quantity, and producer surplus.
	An increase in supply increases the equilibrium price and quantity and lowers producer surplus.

17.

(02.08 HC) A government imposes a $10 per-unit tax in a competitive market. Afterward, the seller's after-tax price falls from the original equilibrium price of $20 to $18. Based on this, which of the following is true? (2 points)

	Producers are bearing 100% of the tax burden.
	The next after-tax equilibrium price will be $30.
	Consumers are bearing 80% of the tax burden.
	The government will collect less than $10 per unit exchanged of the good.
	The quantity demanded will decrease by 10%.

18.

(02.08 MC) (2 points) The graph above illustrates a binding price floor. Which area represents a new area of producer surplus after the price floor is implemented?

	A
	B
	C
	D
	F

19.

(02.09 MC) What will happen to an economy that produces and imports a good if an import tariff is removed? (2 points)

	There will be a decrease in consumer surplus for domestic consumers.
	Domestic producer surplus will increase.
	The domestic consumption of the good will increase.
	Both domestic production and imports will increase.
	There will be some deadweight loss.

20.

(02.09 MC) (2 points) If an import tariff in the economy above is set such that the effective domestic price is A, what area represents the tax revenue gained?

	D + E + F + G + H
	I + J
	I
	G + I + K
	K + L