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.

2.5 points

QUESTION 31

1. Adam Smith's metaphor of the "invisible hand" refers to the notion that:

	A	greed is always good when externally motivated.
	B	behavior based on self-interest can lead to an overall benefit to society.
	C	market incentive can lead to negative side effects.
	D	markets always align self-interst with social interest.

2.5 points

QUESTION 32

1. Consumers maximize their utility when:

	A	the total benefits are greater than total costs.
	B	the marginal utility per dollar is equal across all goods consumed and all income is spent.
	C	they consume the good on which they place the highest overall value.
	D	they diversify their consumption across goods.

2.5 points

QUESTION 33

1. Amy purchased 4 cantaloupes at $2 each and 3 watermelons at $4 each. If Amy is following the optimal consumption rule, the marginal utilities of the fourth cantaloupe and third watermelon are:

	A	12 and 24, respectively
	B	4 and 3, respectively
	C	40 and 10, respectively
	D	6 and 8, respectively

2.5 points

QUESTION 34

1. The consumption bundle that maximizes utility for a consumer is the bundle that:

	A	equates the slope of the budget constraint with the slope of the indifference curve.
	B	maximizes marginal utility across all goods.
	C	minimizes the costs of production.
	D	maximizes the marginal rate of substitution.

2.5 points

QUESTION 35

1. Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

	A	Owen Wilson has fully specialized in action comedy movies, while Tom Cruise has fully specialized in serious action movies.
	B	Due to filmography protectionism, Owen Wilson is unable to secure serious action roles, and Tom Cruise is unable to secure action comedy roles.
	C	Casting directors see Owen Wilson as relatively better at action comedy roles and Tom Cruise as relatively better at serious action roles and cast them accordingly.
	D	Owen Wilson does not have the talent necessary to act in more serious films.

2.5 points

QUESTION 36

1. The demand curve shows the relationship between:

	A	demand and supply.
	B	quantity demanded and quantity supplied.
	C	price and quantity supplied.
	D	price and quantity demanded.

2.5 points

QUESTION 37

1. Government can help to align self-interest with the social interest by:

	A	enacting policies that increase incentives to work and trade.
	B	decreasing international trade.
	C	promoting charity work.
	D	banning free markets.

2.5 points

QUESTION 38

1. If the goal of education were solely to support economic growth, the ideal graduate would be a:

	A	jack-of-all-trades but master of none (where a "jack" is a serviceable tradesperson).
	B	jack-of-all-trades and master of one.
	C	jack-of-all-trades and master of none.
	D	jack-of-some-trades but master of none.

2.5 points

QUESTION 39

1. According to economists, socially good outcomes arise whenever people pursue:

	A	self-interest.
	B	either self-interest or the social interest.
	C	self-interest, and it aligns with the social interest.
	D	self-interest, and it does not align with the social interest.

2.5 points

QUESTION 40

1. Assume that the unit price of good A is $4 and the unit price of good B is $5. If an individual has an income of $44, which consumption bundle of (good A, good B) is on the edge of the budget constraint?

	A	(5, 5)
	B	(5, 4)
	C	(6, 4)
	D	(6, 5)