1. Which government regulation DISCOURAGES the formation of a monopoly?

A.

Patents for new businesses.

B.

Tariffs for foreign competitors.

C.

License requirements for new businesses.

D.

Tax credits for new businesses.

2. A potential negative externality of a paper company may be

A.

A decrease in the price of paper.

B.

The foul odor as a result of the paper production.

C.

The tax revenue the local government collects from the factory.

D.

Increased jobs in the area where the factory is located.

3. The law of supply states that as the price of a good increases

A.

Consumer demand increases.

B.

Producers are willing to make more.

C.

Producers are willing to make less.

D.

The supply curve changes to a negative slope.

4. The current market equilibrium price for milk is $5 a gallon, suppose the government enforces a price ceiling on $2.50 a gallon. In this market we would expect A.

An increased production in milk due to law of diminishing returns.

B.

Reduced demand due to the price ceiling.

C.

A shortage of milk due to the price ceiling.

D.

A surplus of milk due to the price ceiling.

5. Suppose the price of wood, a major input in table production, goes up. We would expect the supply curve of tables to

A.

Shift right and equilibrium price to go down.

B.

Shift left and equilibrium price to go up.

C.

Shift left and equilibrium price to go down.

D.

Shift right and equilibrium price to go up.

6. If a labor market is experiencing a shortage of workers, eventually, in a free market system, we would expect

A.

Consumption to decrease.

B.

Wages to decrease.

C.

Wages to increase.

D.

Wages to remain the same.

7. At the point of equilibrium

A.

Surplus occurs.

B.

A shortage occurs.

C.

No shortages or surplus occur.

D.

Excess quantity supplied occurs.