Questions:
Question 1
If the government imposes a maximum price for milk that is above the equilibrium price __________
A this maximum price for milk will have no economic impact
B quantity demanded of milk will be less than quantity supplied
C demand for milk will be greater than supply
D the available milk supply will have to be rationed
Question 2
The difference between the maximum amount a person is willing to pay for a good and its current market price is known as __________
A the paradox of value
B profits
C revealed preferences
D consumer surplus
Question 3
Laura makes hand-made jewelry and she would be willing to sell pairs of earrings for $50 If Laura sells each pair of earrings for $65, her producer surplus per pair of earrings sold would be equal to __________
A $115
B $65
C $15
D $50
Question 4
Assume that production costs rise and demand remains constant The equilibrium price will __________ and the producer surplus will __________
A increase; increase
B increase; decrease
C decrease; decrease
D decrease; increase
Question 5
Suppose that you are willing to pay $25 for a new shirt and the market price is $35 In this case __________
A you will not buy the good
B you will buy the good and receive a consumer surplus of $5
C you will buy the good and receive a consumer surplus of -$10
D you will buy the good and receive a consumer surplus of -$35
Question 6
Jody's bakery makes cakes and would be willing to sell each cake for $1250 If Jody's bakery sells 10 cakes for $13 each, the total producer surplus for Jody's bakery would be equal to __________
A $500
B $1250
C $12500
D $13000
Question 7
If the equilibrium price of gasoline is $275 per gallon and the government will not allow oil companies to charge more than $200 per gallon, which of the following will happen?
A Demand must eventually decrease so that the market will come into equilibrium at a price of $200
B Supply must eventually increase so that the market will come into equilibrium at a price of $200
C Total surplus in the market will be lower than it would be if the price was $275 per gallon
D The market will be in equilibrium at a price of $200
Question 8
Tom would be willing to pay a maximum of $2,500 to attend the Super Bowl this year, and he can buy a ticket for $2,050 His consumer surplus is __________
A $25
B $50
C $275
D $450
Question 9
Assume that there is rent control in Chicago Which of the following is true?
A All consumers in the rental market will benefit because the rent will be lower
B The total surplus will fall because there will be a shortage of apartments
C The total surplus will rise because consumer surplus will increase
D Consumer surplus will increase and as a result all consumers in the rental market will benefit
Question 10
If the market price of salmon is $899 per pound but the government will not allow salmon farmers to charge more than $499 per pound, which of the following will happen?
A The supply curve for salmon will shift to the left
B There will be an excess demand for salmon
C There will be an excess supply of salmon
D The market will be in equilibrium at a price of $499
Question 11
Suppose you receive a consumer surplus of $50 The $50 represents __________
A a monetary payment from the store
B a monetary payment from the government
C a reduction in the original price of the good
D the fact that you paid $50 less than you were willing to pay for the good
Question 12
At the free market equilibrium, the efficient level of output is produced because __________
A government regulates the output level that must be produced
B firms are maximizing profit
C willingness to pay is the same for all consumers
D total surplus is maximized
Question 13
Assume that the supply of smartphones remains constant, but the price of smartphones increases Producer surplus __________
A will decrease
B will increase
C will remain constant
D may increase or decrease depending on the amount of the price increase
Question 14
Consumer surplus can be defined as the __________
A value a consumer receives from a good minus the price paid for that good
B maximum amount the consumer would pay for a good
C actual amount paid for a good minus the benefit of using that good
D marginal utility of a good divided by its price
15.A ban on imported avocados would result in __________
A an increase in total surplus because domestic production will increase
B no change in total surplus because the reduction in consumer surplus will offset the increase in producer surplus
C a reduction in total surplus because a deadweight loss is created
D It is impossible to say what will happen to total surplus
Question 16
In the market equilibrium, with a price of $500 there are 2000 apartments If the government decides to enact a rent control policy, with a maximum price of $400, it reduces the quantity to 1500 apartments Due to the rent control decreasing the total surplus of the market, the policy generates a(n) __________
A excess supply
B equilibrium
C higher price
D deadweight loss
Question 17
If the government sets a minimum price above the equilibrium price for soybeans, which of the following statements will be correct?
A There will be an efficient level of output produced
B There will be excess supply
C There will be excess demand
D all of the above
Question 18
Which of the following would result from a quota imposed on the quantity of cars that can be imported into the United States?
A an increase in the total surplus
B an increase in producer surplus
C an increase in prices for consumers
D an increase in consumer surplus
Question 19
If the government sets a maximum price for gasoline above the equilibrium price, __________
A quantity demanded of gasoline will be equal to quantity supplied of gasoline
B there will be excess demand for gasoline
C there will be excess supply of gasoline
D demand for gasoline will be less than supply of gasoline
Question 20
Assume that Crystal's demand for handbags remains constant, but the price of handbags increases Crystal's consumer surplus __________
A decreases
B increases
C remains constant
D may increase or decrease depending on the amount of the price decrease
Part 2
Question 1
In the absence of government, an under-allocation of resources generally exists for __________
A goods with external costs
B imported goods and services
C public goods
D all of the above
Question 2
Once a firm is forced to consider an external cost, the price of its product will __________
A increase and output will decrease
B increase and output will increase
C decrease and output will decrease
D decrease and output will increase
Question 3
The biggest problem with using a tax as a way to solve an externality problem is that __________
A the tax sometimes increases the external cost
B damages must be estimated in financial terms to determine the correct level of the tax
C the firm will pass the entire tax onto the consumer
D the commerce clause forbids such taxes
Question 4
If a producer is imposing an external cost on society, the best response would be to __________
A lower the producer's taxes to offset pollution
B increase the production
C internalize the externality
D subsidize the producer
Question 5
When the government imposes a tax on a firm that generates external costs, the tax is __________
A always borne entirely by the firm
B always borne entirely by the consumer
C usually borne by both the firm and the consumer
D borne only by the government
6.A the level at which the polluting firms are able to maximize their profits
B the total cost of abatement
C the marginal benefit of abatement
D It is not possible to determine an optimal level of methane
7.Which of the following would be an example of an external benefit?
A More people start to ride the bus and as a result air pollution is reduced
B Firms are able to reduce their costs of production by using a more efficient technology
C The government requires polluting firms to pay a special tax
D A firm has just gotten permission to open a landfill on property that is adjacent to your home
Question 8
The idea behind the pollution tax equal to the external cost per unit of pollution is to __________
A increase the social benefit to be above the marginal cost
B internalize the externality
C allow the firm to evade external costs
D drive polluting firms out of developed countries
Question 9
When the government taxes a firm that generates an external cost, the profit maximizing firm will produce __________
A more units of output than before the tax was imposed
B the same number of units of output as before the tax was imposed
C fewer units of output than before the tax was imposed
D either more or fewer units of output than before the tax was imposed
10.Based on society's perspective, what are the benefits from pollution abatement?
A better health
B increased enjoyment of the natural environment
C lower production costs
D all of the above
Question 11
An external cost of production is __________
A a cost incurred by someone other than the producer
B the production cost borne by a producer
C the result of the sum of private and social cost
D another word for a tax
Question 12
If, while producing goods and services, a factory is producing pollution and not incurring the cost of this pollution, then a(n) __________ exists
A government failure
B market failure
C acceptable outcome
D none of the above
Question 13
Sirens located around a town to warn citizens of the approach of a tornado are an example of __________
A an external cost
B a private good
C a common resource
D a public good
Question 14
The government imposes taxes on firms that generate external costs in an effort to __________
A make it easier for economists to measure external costs
B lead to a zero level of output
C force decision makers to consider the full costs of their actions
D lower the firms' costs of production
Question 15
Goods that are nonrival in consumption and that have benefits that are nonexcludable are __________
A private goods
B neighbor effects
C public goods
D none of the above
Question 16
Markets that have external costs will produce __________ output than the socially efficient level, whereas markets that have external benefits will produce __________ output than the socially efficient level
A less; less
B more; more
C more; less
D less; more
Question 17
A harbor lighthouse that guides approaching ships is an example of __________
A a public good
B a private good
C a monopoly
D a good that is rival
Question 18
Private goods are __________
A rival in consumption and their benefits are excludable
B nonrival in consumption and their benefits are excludable
C nonrival in consumption and their benefits are nonexcludable
D rival in consumption and their benefits are nonexcludable
Question 19
Public goods are __________
A rival in consumption and their benefits are excludable
B nonrival in consumption and their benefits are excludable
C nonrival in consumption and their benefits are nonexcludable
D rival in consumption and their benefits are nonexcludable
Question 20
If the government taxes a firm that is generating an external cost, the price of the firm's product will __________
A increase and output will decrease
B increase and output will increase
C decrease and output will decrease
D decrease and output will increase
Question 21
The short run can be defined as any period of time __________
A less than one year
B in which some inputs are fixed
C in which all inputs are variable
D in which price is fixed
Question 22
Dan owns a factory that manufactures smartphones He has many costs every month to keep his factory running Which of the following is one of Dan's fixed costs?
A plastic used to make the smartphones
B his electricity bill for the factory
C his mortgage on the factory
D memory devices used to store music and video on the smartphones
Question 23
Dan is an entrepreneur who invests in commercial and residential real estate He has a savings account with $100,000 that earns 1% APY Dan wants to buy a house that will give him a monthly cash inflow of $200 What will be the opportunity cost of investing in the house?
A $1,000
B $1,200
C $800
D $200
Question 24
Juan is consuming three sandwiches and six sodas If a sandwich costs twice as much as a soda, then __________
A Juan should buy more sodas
B Juan should buy more sandwiches
C Juan is maximizing his utility if he derives twice as much utility from the last soda as from the last sandwich
D Juan is maximizing his utility if he derives twice as much utility from the last sandwich as from the last soda
Question 25
Consumers should allocate their scarce income so that __________
A the marginal utility for all goods consumed is zero
B the marginal utility for all goods consumed is equal
C the marginal utility divided by price is equal for all goods consumed
D the marginal utility divided by price is maximized for all goods consumed
Question 26
Suppose that / < / This implies that __________
A spending a dollar less on Y and spending a dollar more on X increases utility
B spending a dollar less on X and spending a dollar more on Y increases utility
C X is more expensive than Y
D Y is more expensive than X
Question 27
Brandon eats four slices of pizza on a Sunday night but admits each slice of pizza doesn't taste as delicious as the previous one This suggests that for Brandon __________
A the marginal utility of a slice of pizza is positive but decreasing
B the marginal utility of a slice of pizza is negative but increasing
C the total utility of slice of pizza is declining by larger and larger increments
D the total utility of slice of pizza is increasing by larger and larger increments
Question 28
Sarah has a savings account with a $1,000 balance that earns 3% APY She decides to withdraw the entire balance to buy a laptop computer What will be her opportunity cost in buying the laptop?
A the cost of the laptop
B the foregone interest
C the foregone interest and the cost of the laptop
D the cost of the laptop minus the foregone interest
Question 29
The equimarginal rule __________
A equates the marginal utility per dollar spent on each good purchased
B states that in order to maximize utility the consumer should buy more of those goods with a high marginal utility
C states that in order to maximize utility the consumer should buy more of those goods that cost less
D none of the above
Question 30
According to the law of diminishing marginal utility __________
A as the consumption of a particular good increases, marginal utility increases
B as the consumption of a particular good increases, marginal utility decreases
C total utility is negative
D Both B and C are correct
Question 31
The budget line shows __________
A the different combinations of two goods that a consumer can buy
B the quantity of a single good that a consumer is willing to buy at different prices
C the maximized utility from a good
D none of the above
Question 32
Total economic costs include __________
A a normal rate of return
B out-of-pocket costs
C opportunity costs of all inputs
D all of the above
Question 33
The period of time when a firm is unable to change all inputs, or factors of production, is called the __________
A economic term
B short run
C accounting term
D long run
Question 34
Marginal utility is the __________
A total amount of satisfaction gained by the consumption of a good or service
B additional satisfaction gained by the consumption or use of one more unit of something
C price of a good relative to the prices of other goods and services
D comparison of utility between two different people
Question 35
Maxine has a fixed income per month to spend on goods and services, so in allocating her limited income over a set of goods, she should purchase the goods that __________
A have the highest utility regardless of price
B have the highest marginal utility
C provide the most utility per dollar spent
D have equal marginal utilities
Question 36
If marginal product is negative, then __________
A total product will decrease if more of the input is hired
B total product is equal to zero
C marginal product will increase if more of the input is hired
D average product will increase if more of the input is hired
Question 37
A firm's objective is to maximize its economic profit, which is __________
A total revenue minus economic cost
B total profit minus total cost
C economic cost minus profit
D economic cost minus total revenue
Question 38
As more of any one good is consumed in a given period, its __________
A total utility decreases, then remains constant
B marginal utility decreases
C total utility decreases, then increases
D marginal utility increases
Question 39
Which of the following statements about fixed costs is correct?
A Fixed costs are not opportunity costs
B Fixed costs must be paid even if the firm's output is zero
C Fixed costs are always the largest portion of total costs
D none of the above
Question 40
The principle of opportunity cost is __________
A what someone sacrifices to get something
B the satisfaction of obtaining the best next alternative
C the choice someone has to make between two different goods
D the cost of paying for something someone needs