1.) What should a seller do if the demand for its product is decreasing?

Select one:

a.

It should reduce the price

b.

It should raise the price to make up for the lower demand, regardless if demand is elastic or inelastic

c.

It should raise the price to make up for the lower demand, but only if demand is elastic

d.

It should raise the price to make up for the lower demand, but only if demand is inelastic

2.)What is the primary determinant of differences in wages?

Select one:

a.

differences in opportunity cost

b.

differences in productivity

c.

compensating differentials

d.

discrimination

3.)What is the economic solution to the market failure created by a negative externality?

Select one:

a.

Impose a tax to make the Private Cost equal to the Social Cost

b.

Impose a tax to make the Private Benefit equal to the Social Benefit

c.

Give a subsidy to make the Private Cost equal to the Social Cost

d.

Give a subsidy to make the Private Benefit equal to the Social Benefit

4.)In the poor country of Haiti, people eat chicken when the can get it; when they can't get chicken, they eat dirt. If the government sets a price ceiling on chicken below the equilibrium price of chicken, what will happen to the price of dirt as a result?

Select one:

a. The quantity demanded of chicken will increase, so the supply of chicken will go down, and therefore the demand for dirt will increase and the price of dirt will go up

b. The quantity demanded of chicken will increase, creating a shortage of chicken, so the price of chicken will go up, and therefore the demand for dirt will increase and the price of dirt will go up

c. The demand for chicken will increase, so the supply of chicken will go down, and therefore the demand for dirt will increase and the price of dirt will go up

d. The demand for chicken will increase, so the quantity demanded of chicken will increase, so therefore the demand for dirt will decrease and the price of dirt will go down

5.)Why does society have to make choices?

Select one:

a.

Because prices are too high

b.

Because of shortages and surpluses

c.

Because of scarcity

d.

Because incomes are too low

6.)A financial expert offered this tip for saving money: make disposable razor blades last longer by was to carefully drying the razor with a towel and a hair dryer after each use. (Disposable razor blades have a price of about 20 cents each.) Why does this advice make you wonder how much of an "expert" he really is?

Select one:

a.

His advice would decrease the demand for razor blades, thus forcing producers to raise price.

b.

His advice fails to take into account the costs of rationing razor blades.

c.

His advice doesn't recognize that the purchase of razor blades is a sunk cost.

d.

His advice ignores the opportunity cost of time spent drying the razor blades.