QUESTION 15

1. Because of the government price controls, a business must now sell soft-serve ice cream at half its original price. This business might respond by:

	A	offering smaller servings of ice cream.
	B	skimping on toppings of nuts, fudge sauce, and cherries.
	C	reducing hours of operation.
	D	all of the answers are correct.

2.5 points

QUESTION 16

1. An increase in demand shifts the demand curve:

	A	up and to the right.
	B	down and to the right.
	C	up and to the left.
	D	down and to the left.

2.5 points

QUESTION 17

1. In ancient Egypt, the Bronze Law set maximum prices for wages, preventing them from rising above what rulers perceived as the minimum needed to survive. If this was $0.10 a day for a porter (someone who carries things short distances) and the marktet wage was $0.08 a day, which of the following would be a plausible consequence of this law?

	A	Porters would travel less quickly than they otherwise would.
	B	Porters would transport items they normally would not.
	C	Unemployment for porters would decrease.
	D	Nothing unusal would happen.

2.5 points

QUESTION 18

1. In the case of a binding price ceiling, the price paid in the market will be:

	A	more than the free market equilibrium price.
	B	less than the free market equilibrium price.
	C	equal to the free market equilibrium price.
	D	unable to be compared with the free market equilibrium price.

2.5 points

QUESTION 19

1. Absolute advantage derives from which of the following?

	A	the lowest cost of production
	B	the most suitable climate
	C	the least expensive labor force
	D	the best educated labor force

2.5 points

QUESTION 20

1. The elasticity of demand:

	A	equals the inverse of price to quantity demanded.
	B	measures how far the demand curve shifts from a change in price.
	C	tells us how responsive consumer purchases are to price changes.
	D	estimates the relationship between quantity demanded and production costs.

2.5 points

QUESTION 21

1. The idea that markets work efficiently:

	A	refers to the fact that self-interest can be aligned with social interest.
	B	means that trade-offs can be reduced by channeling greed toward good ends.
	C	suggests that there is never any need for government regulation, taxes, or subsidies.
	D	has been known for many centuries.

2.5 points

QUESTION 22

1. If Major League Baseball ticket prices rise by 15%, the number of tickets sold falls by 5%. The elasticity of demand is:

	A	-3
	B	-1/3
	C	-7.5
	D	-0.75

2.5 points

QUESTION 23

1. Estimates suggests that tens of thousands of people have died because the FDA withheld beta-blockers from the market while testing to determine whether the drugs were safe and effective. This is an example of:

	A	drug lag.
	B	drug loss.
	C	bureaucratic incompetence.
	D	market failure.

2.5 points

QUESTION 24

1. Several states offer rebates on the purchase of electric vehicles. This practice highlights the idea of:

	A	self-interest.
	B	trade-offs.
	C	incentives.
	D	thinking on the margin.

2.5 points

QUESTION 25

1. A guaranteed income welfare program:

	A	encourages workers to work more on average.
	B	encourages workers to work less on average.
	C	will not affect work effort at all.
	D	results in higher income but lower utility for workers.

2.5 points

QUESTION 26

1. A 4% increase in the price of beer will cause a 1% decline in the quantity of beer demanded. The demand for beer is:

	A	elastic.
	B	unitary elastic.
	C	inelastic.
	D	elastic at 4 (in absolute value).

2.5 points

QUESTION 27

1. In the opening story, the payment to captains of prisoner transport ships for each convict who arrived in Australia instead of for each convict who boarded the ship:

	A	made no difference.
	B	saved the lives of hundreds of convicts.
	C	increased the volume of slave trafficking.
	D	shows that people care more about morality than about their self-interest.

2.5 points

QUESTION 28

1. David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is TRUE?

	A	David and Cameron must have different preferences for the car.
	B	This trade did not create value because Cameron is buying a car that David considers is worthless.
	C	Cameron is the only one made better off by the trade.
	D	David is made better off by the trade, but Cameron is made worse off.

2.5 points

QUESTION 29

1. Only a very small portion of people who use microwaves know how they work. This is an example of:

	A	a production possibility frontier.
	B	the division of knowledge.
	C	absolute advantage.
	D	opportunity cost.

2.5 points

QUESTION 30

1. Price ceilings would create all of the following effects EXCEPT:

	A	shortages.
	B	reductions in product quality.
	C	a misallocation of resources.
	D	maximum gains from trade.