Why might salt be a resource with a high cost in one market and a very low cost in another market? (1 point)

	Trade could affect costs.
	Its supply could be scarce in one market and very great in another.
	The higher cost market might have a much lower demand for salt than its supply.
	The higher cost market might have no demand for salt.
	The lower cost market might have more trade-offs for salt harvesting.

2.

(01.02 LC) Resource allocation is determined by which of the following? (1 point)

	What are the most advantageous terms of trade?
	When does marginal cost equal marginal benefit?
	Which economy enjoys a lower opportunity cost for this good?
	What is essential knowledge to pass on to the next generation?
	What goods and services should be produced?

3.

(01.03 LC) (1 point) Which of the following points is productively efficient?

	A only
	C only
	D and E
	C and D only
	A, C, and D

4.

(01.03 MC) A production possibility curve would ________ if the availability of an input decreased and would ________ if a technology improvement increased production efficiency. (1 point)

	shift outward; shift inward
	not move; shift outward
	not move; not move
	shift inward; shift outward
	shift inward; shift inward

5.

(01.04 MC) Country A can produce gadgets at a lower opportunity cost than any other producer of gadgets. As a result, County A must have (1 point)

	a superior gadget making technology
	an absolute advantage in gadget production
	a comparative advantage in gadget production
	a constant opportunity cost associated with gadget production
	more factors of production devoted to gadget production than any other country

6.

(01.04 MC) Use the production possibilities table below to answer the following question. Assume constant opportunity costs for Steven and Matthew.

	Units of Cheese in a Day	Fish in a Day
Steven	10	25
Matthew	30	10

Which of the following is true regarding Steven and Matthew's trade advantages? (1 point)

	Matthew has an absolute advantage in fish.
	Matthew has a comparative advantage in fish.
	Steven has an absolute advantage in cheese and fish.
	Steven has an absolute and comparative advantage in fish.
	Steven has absolute and comparative advantages in cheese.

7.

(01.05 LC) Every choice requires a sacrificed or foregone best alternative. Economists call this the (1 point)

	fixed cost
	accounting cost
	normative cost
	positive cost
	opportunity cost

8.

(01.05 MC) The president of a small business is provided with the following options to improve his company by a consulting firm. Based on the data provided, which option should he choose?

	Cost (thousands of dollars)	Benefit (thousands of dollars)
Option A	10	50
Option B	50	100
Option C	120	150
Option D	5	15
Option E	125	200

(1 point)

	Option A
	Option B
	Option C
	Option D
	Option E

9.

(01.06 MC) The table below shows the total utility that Andrea enjoys based on the number of juices she consumes.

Juices Consumed	Total Utility (utils)
1	2
2	7
3	11
4	14
5	16

Based on the table above, what is the marginal utility of the third juice? (1 point)

	0
	1
	3
	4
	6

10.

(01.06 MC) Below is the total benefit Kenneth estimates he would get for jars of chocolate-flavored hazelnut butter.

Jars	Total Benefit (dollars)
1	5
2	9
3	12
4	14
5	15
6	14
7	10

If 3 is Kenneth's optimal quantity of jars consumed, what must be the price per jar? (1 point)

	$3
	$5
	$9
	$12
	$14

11.

(02.01 MC) According to the law of demand, any change in the own-price will cause a(n) (1 point)

	decrease in demand
	increase in demand
	increase in the supply
	opposing change in quantity demanded when demand is not perfectly inelastic
	opposing change in quantity supplied when supply is perfectly elastic

12.

(02.01 MC) In the cell phone market, what demand curve shift would occur if the price of cellular service decreased? (1 point)

	The demand for cell phones would shift to the left.
	The demand for cell phones would shift to the right.
	The demand for cell phones and the quantity demanded would remain constant.
	The quantity demanded of cell phones would increase, but the demand curve would not shift.
	The quantity demanded of cell phones would decrease, but the demand curve would not shift.

13.

(02.02 MC) If a firm with a supply schedule with positive units at every price leaves a market, ceteris paribus, what will happen to the market supply? (1 point)

	It will shift right by that firm's output quantity at every price.
	It will shift left or decrease by that firm's output quantity at every price.
	It will not change.
	It will become more elastic.
	Insufficient data to determine.

14.

(02.02 MC) What would be the effect on the market supply curve from the government imposing a per unit tax on the production of the good? (1 point)

	No change
	A shift to the left
	A shift to the right
	An increase in price
	An increase in the quantity supplied

15.

(02.03 MC) Own price elasticity of demand measures the (1 point)

	change in quantity demanded over change in price
	change in demand over time
	percentage change in quantity demanded of the good over percentage change in price of the same good
	average change in quantity demanded over time
	average percentage change in price over average percentage change in quantity demanded

16.

(02.03 MC) Use the graph to answer the question that follows. (1 point) What is the price elasticity of demand when price increases from $8 to $10?

	0.4
	0.5
	1
	1.25
	2

17.

(02.04 MC) What is the price elasticity of supply for a good that sees a 1% increase in quantity supplied for a 5% increase in price? (1 point)

	0.2
	1
	4
	5
	6

18.

(02.05 MC) The income elasticity of demand for a good is 4 and average consumer income goes down by 10%. The good's quantity demanded (1 point)

	is indeterminant
	must have increased by 40% and it is a normal good
	must have increased by 40% and it is an inferior good
	must have decreased by 2.5% and the good is inferior
	must have decreased by 0.4% and it is a normal good

19.

(02.06 HC) Use the graph to answer the question that follows. (1 point) If the market was initially in equilibrium and then the price was set at P3, what is the effect on the different surpluses that can be determined without calculations?

	Consumer surplus decreases, total surplus increases
	Producer surplus decreases, total surplus decreases
	Producer surplus decreases, total surplus increases
	Consumer surplus increases, total surplus decreases
	Consumer surplus decreases, producer surplus increases

20.

(02.06 MC) Which model illustrates the relationships between price and quantities and the relative benefits of producers and consumers in a market over time? (1 point)

	Circular flow
	Production possibility curve
	Supply and demand
	Marginal cost
	Total utility

21.

(02.07 MC) Use the graph to answer the question that follows. (1 point) This market will be efficient, maximizing economic surplus with no deadweight loss, when the price is

	above P2
	below P2
	equal to P2
	equal to P1
	below P1

22.

(02.08 MC) Which of the following would increase the short-run supply for a business, regardless of market structure? (1 point)

	An income tax on consumers
	A transfer payment
	A lump-sum production subsidy
	A per-unit production subsidy
	An excise tax

23.

(02.08 MC) If the supply for a good is very elastic and the demand is very inelastic, who would pay more for an excise tax? (1 point)

	Consumers
	Producers
	Consumers and producers share the burden equally
	The government
	Indeterminate

24.

(02.09 MC) If a good is heavily imported, what could that country's government do to increase domestic production? (1 point)

	Introduce an export tariff
	Remove an import quota
	Raise income taxes
	Introduce an import tariff
	Increase the average global price for the good

25.

(03.01 MC) A business hires workers to help detail car interiors at a car wash. The following table shows the marginal productivity of each worker in number of cars detailed.

Number of Workers	Marginal Product
1	5
2	9
3	12
4	13
5	13
6	10

Which number of workers produces a total product of 26 cars detailed? (1 point)

	2
	3
	4
	5
	6

26.

(03.02 MC) In the short run, a firm's total cost is $200 if it does not produce any units of output. Its variable cost is $10 per unit. If the firm produces 5 units, variable costs are ________, while fixed costs are ________. (1 point)

	$20; $200
	$20; $250
	$50; $200
	$50; $250
	$250; $450

27.

(03.02 MC) Use the graph to answer the question that follows. (1 point) Which of the following explains the shift indicated on the graph?

	Variable costs decreased
	Variable costs increased
	Fixed costs decreased
	Total costs increased
	Indeterminate

28.

(03.02 MC) Which of the following scenarios would produce the highest market concentration? (1 point)

	An industry with a very low minimum efficient scale
	An industry with many firms operating with efficient scale
	An industry with some firms operating with diseconomies of scale
	An industry where no firm has achieved maximum efficient scale
	An industry with a very high minimum efficient scale

29.

(03.03 MC) Use the graph to answer the question. (1 point) Where on the graph would firms be experiencing diseconomies of scale?

	Between A and B
	Point B
	Between B and C
	Between C and D
	Beyond D

30.

(03.04 MC) A firm's total revenue is $50,000. Its explicit costs are $40,000. Its accounting profit is $10,000, while its economic profit is $5,000. What are its implicit costs? (1 point)

	$0
	$5,000
	$10,000
	$40,000
	$90,000

31.

(03.05 MC) A firm's marginal cost is greater than its marginal revenue. The price is higher than the average total cost. Based on this, which of the following statements is true? (1 point)

	An increase in output will increase the firm's existing economic losses.
	A decrease in output will decrease the firm's existing economic losses.
	A decrease in output will increase profits.
	An increase in output will increase profits.
	A decrease in output will leave profits unchanged.

32.

(03.06 HC) A price-taking firm evaluates its production costs and revenue and decides it will operate in the short run and can stay in the market in the long run without conditions changing. Which of the following must describe the firm's short-run production? (1 point)

	Average variable cost > Price < Average total cost
	Average variable cost = Price = Average total cost
	Average variable cost < Price < Average total cost
	Price Average total cost
	Price > Average total cost

33.

(03.06 MC) The following information is available for a company that operates in a perfectly competitive market.

Current output	5000 units
Current market price	$5
Total cost	$25,000
Marginal cost	$4
Total variable cost	$20,000

What is the best action for this firm? (1 point)

	Increase output in the short run and stay in the market the long run
	Increase output in the short run and decrease output in the long run
	Shut down in the short run and exit in the long run
	Shut down in the short run and produce in the long run
	Reduce output in the short run and increase output in the long run

34.

(03.07 MC) What is true of a firm's production if it operates in a perfectly competitive market with short-run economic profits? (1 point)

	Marginal revenue = demand = marginal cost > average total cost
	Marginal revenue = marginal cost = average fixed cost
	Average total cost = price = average variable cost
	Marginal cost < Marginal revenue
	Price = marginal cost = average total cost

35.

(03.07 MC) Use the graph to answer the question below. The quantity is measured in thousands of units. (1 point) If this perfectly competitive firm's average fixed cost curve were illustrated, what would be its value at the quantity for point B?

	Zero dollars because the firm is earning normal profit
	The price difference between ATC and AVC above the ATC curve
	The price difference between ATC and AVC above the horizontal axis
	The price level at point A
	Insufficient data to determine

36.

(03.07 MC) Farm2U produces its product in a perfectly competitive market that is producing where MR = MC and price is higher than average variable costs. Farm2U is earning economic losses. What should the Farm2U do? (1 point)

	Increase output to reduce economic losses
	Shut down immediately
	Reduce output below minimum efficient scale
	Decrease price to increase revenue
	Leave the market in the long run

37.

(04.01 MC) If barriers to entry ________ or product differentiation ________, competition in a market will ________. (1 point)

	increase; increases; increase
	increase; decreases; increase
	decrease; increases; increase
	decrease; decreases; increase
	decrease; decreases; decrease

38.

(04.02 MC) Which of the following distinguishes a natural monopoly from all other market structures, including non-natural, or classic, monopolies? (1 point)

	A single firm with market power
	Multiple suppliers having higher production costs than a single supplier
	Average total costs that are rising at the profit-maximizing point
	Productive and allocative inefficiency at the profit-maximizing quantity and price
	A unique product

39.

(04.02 MC) Use the graph below. (1 point) What does the area formed by points G, M, and the intersection of MC and AR represent?

	The firm's total revenue at the profit-maximizing quantity
	The firm's profit at the profit-maximizing quantity
	The firm's total cost at the profit-maximizing quantity
	The deadweight loss in the market because of the monopoly
	The firm's missed revenue if it charges less than the profit-maximizing price

40.

(04.03 MC) A monopolist engages in perfect price discrimination. What will happen to the consumer surplus? (1 point)

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

41.

(04.04MC) Which of the following explains the price a monopolistically competitive firm charges when it is earning zero economic profits? (1 point)

	The price is equal to average total cost at the quantity where marginal revenue equals marginal cost.
	The price is equal to average total cost at a quantity where marginal revenue is less than marginal cost.
	The price is greater than average total cost at the quantity where marginal revenue equals marginal cost.
	It is equal to average total cost at a quantity where marginal revenue is greater than marginal cost.
	The price is greater than average total cost at a quantity where marginal revenue is less than marginal cost.

42.

(04.05 MC) Which of the following characterizes a cartel? (1 point)

	Price discrimination
	Price collusion and output quotas
	Productive efficiency but allocative inefficiency
	A more competitive oligopoly
	Persistent normal profit

43.

(04.05 HC) 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

The government announces a $5 million tax on firms that increase prices. After the tax, how much will each firm make if Company A maintains its price and Company B increases its price? (1 point)

	Company A would earn $55 million; Company B would earn $45 million.
	Company A would earn $30 million; Company B would earn $30 million.
	Company A would earn $50 million; Company B would earn $50 million.
	Company A would earn $55 million; Company B would earn $40 million.
	Company A would earn $45 million; Company B would earn $35 million.

44.

(05.01 MC) Use the graph to answer the question that follows. (1 point) Based on the chart above, if the product sells at a price of $10 per unit, what is the marginal revenue product of the seventh unit of labor?

	0
	$6.50
	About $5
	About $25
	Indeterminate

45.

(05.02 MC) If consumer tastes and preferences cause the equilibrium price of a product to increase steadily over time, ceteris paribus, what will happen to the market wage for the labor to produce that product? (1 point)

	It will increase.
	It will decrease.
	It will not be affected.
	It will increase and then increase back to its original equilibrium.
	Insufficient information to determine.

46.

(05.03 MC) If the wage in a perfectly competitive labor market is $16 and the firm can sell all the output it wants at $2 per unit, then the marginal product of the last worker employed must be (1 point)

	8 units
	14 units
	18 units
	32 units
	indeterminate

47.

(05.03 MC) 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	20
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 $20? (1 point)

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

48.

(05.04 MC) Which of the following is correct about a monopsonistic market? (1 point)

	Resources are efficiently allocated.
	There is one supplier and many buyers.
	The monopsony has the same quantity transacted as in a perfectly competitive market.
	The supply curve is horizontal and is equal to the average cost of labor.
	Purchase of an additional item increases the price of the item and of the existing items being purchased.

49.

(06.01 MC) Which of the following describes a situation where the marginal social benefit is equal to the marginal social cost at equilibrium? (1 point)

	Oligopoly
	Monopoly
	Positive externality
	Allocative efficiency
	Negative externality

50.

(06.01 MC) 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 point)

	negative externality; less
	negative externality; more
	positive externality; more
	positive externality; less
	natural monopoly; less

51.

(06.01 MC) Use the graph to answer the question that follows. (1 point) Which of the following can cause the relationship shown between MSC and MPC?

	A decrease in financial instability from unlawful investing
	Increased healthcare costs due to factory runoff in a city
	An increase in investment to support educational funding
	A decrease in air pollution caused by a nuclear energy plant
	An increase in research and development funding of a product

52.

(06.01 MC) In long-run equilibrium, the marginal social cost equals the marginal private cost, but the marginal social benefit exceeds the marginal private benefit. This describes which of the following markets? (1 point)

	Oligopoly with no externalities
	Perfect competition with a positive externality
	Monopoly with perfect information
	Perfect competition with a negative externality
	Perfect competition with asymmetric information

53.

(06.02 MC) A market has a cost or benefit not internalized, unclear property rights, and high transaction costs. This describes (1 point)

	monopolistic competition
	a natural monopoly
	an externality
	an oligopoly
	a monopsony

54.

(06.02 MC) Review the table below, which shows the quantity supplied and quantity demanded for a private good.

Price	Quantity Supplied	Quantity Demanded
$1	10	25
$3	20	20
$5	30	15
$7	40	5

If the good in the market above is non-excludable, the maximum quantity transacted in the market will be (1 point)

	10 units
	20 units
	30 units
	40 units
	Indeterminate

55.

(06.02 MC) Use the graph to answer the question that follows. (1 point) What is the deadweight loss that results from this externality?

	QE Q*
	PC PE
	PC PP
	(PC PP) x QE
	(PC PP) x (QE Q*) x

56.

(06.03 MC) Private businesses and consumers know that a resource will be spoiled if the whole society does not limit everyone's use of it. However, individuals are privately incentivized to increase their own use of it before it is spoiled and no longer available. This describes (1 point)

	a common pool good used efficiently
	the primary reason some goods are publicly provided
	the tragedy of the commons
	a good that is made artificially scarce
	one cause of a natural monopoly

57.

(06.04 MC) What is the most likely goal of a government that enacts a lump-sum subsidy? (1 point)

	To increase market competition
	To decrease market competition
	To correct for a negative externality
	To discourage production
	To encourage production

58.

(06.04 MC) Use the graph to answer the question that follows. (1 point) What is the seller's price before the tax?

	$2.00
	$3.00
	$3.50
	$4.00
	$5.00

59.

(06.05 MC) Use the graph to answer the question that follows. (1 point) In 2010, what percentage of households in this economy earned 20 percent of the income?

	10 percent
	20 percent
	40 percent
	60 percent
	80 percent

60.

(06.05 MC) Which of the following policies will most likely help a government to achieve a goal of reducing the wealth gap between those with great wealth and those with no wealth? (1 point)

	Increasing the interest rate on bank loans
	Switching from a regressive tax system to a progressive tax system
	Lowering taxes on income from interest earned on investments
	Increasing the nation's per capita income
	Encouraging actions that yield increased returns to entrepreneurs