1.) Right now we are observing a sharp increase in the price of gasoline due to supply-side changes to do with the war in Ukraine and sanctions on Russia. Thinking about the fact that gasoline demand is relatively inelastic, what changes do we expect we will see in the quantity demanded Qd? Assume the supply-side changes we see now persist into the future.

a. Qd will decline a little right now, and by much more in the long run

b. Qd will decline a lot right now, but will increase in the long run

c. Qd will decline a little right now, and that will remain constant in the long run

d. Nothing will change

2.) When there is a negative externality, economists often suggest fixing the externality by placing a tax on the good with the negative externality. Which of the following demonstrates the logic behind this idea?

a. The tax changes individual incentives to match social incentives

b. The tax ensures that no externalities are produced

c. The tax increases the amount of the good that is produced until the efficient level is reached

d. The tax, set at the correct level, acts as a cap on production and disallows anyone from producing more than the efficient amount

3.) Angie is considering going out for dinner, and she also considered going out for dinner yesterday. Both today and yesterday she would get the same food, which she would value the same, and would cost the same.

She decided not to go out yesterday, when her favorite show dropped a new episode, so she could watch that instead. Shedid decide to go out today, when there was no new episode.

What is different between these two scenarios?

a. The opportunity cost / indirect cost of going out was higher yesterday than today

b. The opportunity cost / indirect cost of going out is higher today than yesterday

c. The direct cost of going out was higher yesterday than today

d. The direct cost of going out is higher today than yesterday