A) A market in which private businesses do not pay all of the production costs themselves represents a ________ and will produce ________ than the socially optimal quantity.

1. negative externality; less
2. negative externality; more
3. positive externality; more
4. positive externality; less
5. natural monopoly; less

B) Use the table to answer the question that follows.

Quantity of Labor MP of Labor Quantity of Capital MP of Capital 1 40 1 50 2 45 2 40 3 35 3 35 4 20 4 15 5 5 5 5

What combination of labor and capital would satisfy the input hiring rule that minimizes the cost of production, if the price of labor is $5 and the price of capital is $10?

1. 1 unit of labor; 3 units of capital
2. 2 units of labor; 1 unit of capital
3. 3 units of labor; 2 units of capital
4. 4 units of labor; 2 units of capital
5. 5 units of labor; 5 units of capital

C) What would be the effect of a new government subsidy on a good's supply curve, ceteris paribus?

1. No change
2. A shift to the left
3. A shift to the right
4. A decrease in price
5. A decrease in quantity supplied

D) A business hires workers to help groom people's pets. The following table shows the marginal productivity of each worker in number of pets groomed.

Number of Workers	Marginal Product
1	6
2	9
3	11
4	10
5	8
6	5

Which number of workers produces a total product of 36 pets groomed?

1. 2
2. 3
3. 4
4. 5
5. 6

E) A monopolist engages in perfect price discrimination. What will happen to the consumer surplus?

1. It significantly increases as it absorbs the producer surplus.
2. It disappears and becomes deadweight loss.
3. It decreases based on the elasticity of demand.
4. It is unchanged.
5. It is entirely converted to producer surplus.

F) Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices. The payoff matrix shows the profits of the companies in millions based on their possible actions.

	Company B
Company A		Increase Price	Maintain Price
Increase Price	$50, $40	$35, $30
Maintain Price	$55, $45	$60, $35

Company B Company A Increase Price Maintain Price Increase Price $50, $40 $35, $30 Maintain Price $55, $45 $60, $35 The government offers a $5 million subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy?

1. The Nash equilibrium changes, and both companies will maintain their prices.
2. The Nash equilibrium changes, and both companies will increase their prices.
3. The Nash equilibrium remains the same, and both companies will increase their prices.
4. Company A will increase its price, while Company B maintains its price.
5. Company A will maintain its price, while Company B increases its price.

G) A firm will continue to hire workers so long as ________ is less than ________.

1. total product; total cost
2. marginal product; marginal cost
3. marginal revenue; marginal cost
4. average revenue product; average factor cost
5. marginal factor cost; marginal revenue product

H) A production possibility curve would ________ if the availability of an input decreased and would ________ if a lack of technology decreased production efficiency.

1. shift outward; shift inward
2. not move; shift outward
3. not move; not move
4. shift outward; shift outward
5. shift inward; shift inward

I) Which of the following would increase the short-run supply for a business, regardless of market structure?

1. An income tax on consumers
2. A transfer payment
3. A lump-sum production subsidy
4. A per-unit production subsidy
5. An excise tax

J) Which of the following would cause the demand curve for brooms to shift to the right, assuming that brooms were an inferior good?

1. The price of brooms increases.
2. The price of a complement increases.
3. The income of all consumers decreases.
4. The economy strengthens because of decreased taxes.
5. The production of brooms decreases because of vacuum cleaners.

K) Use the graph to answer the question that follows

\f100 80 60 = Percentage of Income 2020 40 2015 20 2010 0 20 40 60 80 100 Percentage of Households$40 MC $30 ATC AVC Price $20 B P $10 A 0 2 4 5 6 7 9 Quantity