______ 1. The Equilibrium Price is:

a. The price at which quantity supplied is higher than quantity demanded

b. The price at which quantity supplied is lower than the quantity demanded

c. The price at which quantity supplied equals quantity demanded

d. The quantity demanded when there is a shortage

______ 2. In an Industry with Perfect/Pure Competition:

a. It is extremely difficult for buyers and sellers to enter and exit the market

b. There are very few buyers and sellers

c. Buyers and sellers have very little knowledge about market conditions

d. All the products are identical and interchangeable

______ 3. Life insurance for babies is:

a. A good investment

b. A scam because babies don't need life insurance

c. A good way to keep bad things from happening to a baby

d. Better than buying life insurance for the parents

______ 4. You know your money is safe in a bank or credit union if:

a. It has an FDIC or NCUA sticker on the door or website

b. The employees seems trustworthy

c. It runs a lot of ads on the internet

d. Your friends recommend it

______ 5. The principle that, at some point, the increase in production from additional input begins to decrease is called:

a. Marginal Employees

b. Production Function

c. Diminishing Returns

d. Overhead Costs

______ 6. An example of a Market Failure is:

a. Not enough competition

b. Not enough information

c. Too little investment in public projects

d. All of the above

______ 7. Government intervenes in the Market by:

a. Controlling prices

b. Rescuing failing companies/industries

c. Protecting consumers

d. All of the above

______ 8. In an Industry with Monopolistic Competition:

a. The products are identical or interchangeable

b. Sellers use differentiation and non-price competition to set their goods apart

c. There are very few sellers

d. The Sellers have complete control over prices

______ 9. A price ceiling is:

a. The highest legal price that can be paid for a product

b. When there is more supply than demand for a product

c. The lowest legal price that can be paid for a product

d. When there is more demand than supply for a product

______ 10. When stock market prices rise or fall sharply, this can be a signal that:

a. Investors approve or disapprove of business conditions or government action

b. Everyone should invest in the stock market

c. Everyone should get out of the stock market

d. Nothing is happening in the U.S. market

______ 11. Most companies try to keep their number of employees in which Stage of Production?

a. Stage I

b. Stage II

c. Stage III

d. Stage IV

______ 12. Prices are a useful way to allocate products because they are:

a. Inefficient because the government controls them

b. Flexible so they react quickly to changes in resources and markets

c. Unfamiliar to most people

d. Biased in favor of producers

______ 13. Although rent control (where a government requires landlords to charge rent that is below the Equilibrium Point) seems like a good idea, in the long term, it:

a. Creates a shortage of housing because landlords stop renting their property

b. Creates a surplus of housing because renters don't want it any more

c. Keeps housing in very good shape because landlords are more likely to

maintain the property carefully

d. Harms the people who get to rent low-priced apartments

______ 14. Buying Insurance:

a. Keeps bad things from happening to you

b. Is a good way to invest your money

c. Helps protect you from the financial consequences of bad events

d. All of the above

______ 15. A company is producing 256 new machines every day. They add a new worker and production goes up to 268 machines per day. What is the marginal product of the new worker?

a. 3

b. 12

c. 268

d. 524

______ 16. When the price of gasoline goes up, people are likely to:

a. Buy cars that use less gas

b. Take more road trips

c. Take their own car to work, instead of the bus

d. Move into housing that requires them to make a long commute

______ 17. Variable Costs include:

a. Rent

b. Property Taxes

c. Insurance

d. Labor

______ 18. Because of government intervention, the U.S. economy is labelled as:

a. Free Enterprise

b. Modified Free Enterprise

c. Assistive Support

d. Democratic Socialist

______ 19. An example of a Market that is closest to a Pure Monopoly would be:

a. Farmers

b. Sports Cars

c. Utilities such as water and electricity

d. Designer clothing

______20. Credit Unions are different from Banks because:

a. Credit Unions loan money to people to buy houses and Banks don't

b. Banks are non-profit organizations and Credit Unions are for-profit

c. Credit Unions are owned by the people who put money in them

d. Deposits in Credit Unions are not insured by the Federal government

Matching (2 points each):

_____ 21. Price A. Market structure in which a few sellers dominate the industry

_____ 22. Production B. The monetary value of a product

_____ 23. Oligopoly C. A system of allocating goods and services without prices

_____ 24. Fixed Costs D. Costs of production that do not change when output changes

_____ 25. Rationing E. The output from a business

_____ 26. Total Profit F. Production costs that vary as output changes

_____ 27. Variable Costs G. Total Revenue minus Total Costs

32. Short Answer (7 pts): Identify and describe an example of a Market Externality. State whether it is Negative, Positive, or Mixed. Identify the parties it helps and/or harms. Suggest a solution for spreading the cost/benefit more fairly.