1. Gas prices have fallen to under $2 per gallon in Orlando since last month.This means that:

a. There had been a surplus of gas right before prices began to fall.

b. The information being conveyed was that the price of gasoline was above equilibrium before prices increases.Now, because of lower prices, there is certainly a shortage of gas.

c.Quantity demanded was less than quantity supplied right before prices started to fall.Now, the gasoline market is most likely closer to, or at, an equilibrium condition.

d.As priceshave decreased demand has increased, leading the market to a place where the invisible hand no longer is putting downward pressure on prices.

e.A and C only.

2.When Adam Smith talked about "the invisible hand" he argued that sellers and buyers:

a.Are usually incapable of reaching agreements, thus price ceilings and floors are necessary.

b.Will push prices to a point were both fairness and efficiency are achieved.

c.Lead prices towards an "end" which neither party is totally happy with, thus government interference in markets becomes necessary.

d.Create mutually agreed upon prices over time if the market is free of outside interference.

e.Tend to face transactions costs that make it difficult for supply and demand to intersect.

3.The state of Minnesota rations camping sites on a first-come, first served system. This has led to__________ and is _____________ to what America did during World War II.Venezuela ___________ on __________ to distribute food which is _________ to what Minnesota does with camping sites.

a.An increase in the demand for camping sites and a decrease in supply; not similar; relies; prices; similar

b.A surplus of camping sites and downward pressure on prices; similar to; does not rely; non-price rationing; similar

c.The state failing to maximize revenue from this shortage-creating system; similar to; does not rely; prices; similar

d.The opportunity cost of wasted time for many would-be campers; similar to; refuses to rely; the invisible hand; similar

e.C and D only.

4.An increase in the minimum wage to $15 per hour would drive wages __________ market equilibrium for low-level workers at Wal-Mart in poorer urban areas and would __________ the market for the same type of workers in Williston, North Dakota.

a.Below; have no impact on

b.Above; have no impact on

c.Below; cause unemployment

d.Above; cause unemployment

e.None of the above

5.Which of the following is the clearest example (according to the lessons of Adam Smith) of when government should attempt to interfere, in some manner, with a market outcome?

a.When people use their earnings to buy vaping products - that they use in public places.

b.When the market outcome generates neither negative, nor positive externalities.

c.When people sell generators on the side of the road during hurricanes for twice what they paid for them.

d.When businesses pay wages that are too low to support a family.

e.When banks charge high interest rates to people with poor credit scores.