QN=1 (1633) (17147) The invisible hand refers to

a. how central planners made economic decisions.

b. how the decisions of households and firms lead to desirable market outcomes.
c. the control that large firms have over the economy.
d. government regulations without which the economy would be less efficient.

QN=2 (1628) (17128) When a society cannot produce all the goods and services people wish to have
it is said that the economy is experiencing
a. scarcity.
b. communism.
c. externalities.
d. market failure.

QN=3 (1605) (17134) The term used to describe a situation in which markets do not allocate
resources efficiently is
a. economic meltdown.
b. market failure.
c. equilibrium.
d. the effect of the invisible hand.

QN=4 (1668) (17174) The production possibilities frontier is a graph that shows the various
combinations of output that an economy
a. should produce.
b. wants to produce.
c. can produce.
d. demands.

QN=5 (1641) (17152) Refer to Figure 2-2. Malika works as an attorney for a corporation and is paid a
salary in exchange for the legal services she performs. Jarel owns office buildings and
rents his buildings to companies in exchange for rent payments. If Malika’s income is
represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then
Jarel’s income is represented by a flow of dollars
a. from Box A to Box C.
b. from Box C to Box A.
c. from Box B to Box D.
d. from Box D to Box B.

QN=6 (1637) (17182) Which of the following is not an example of a positive, as opposed to
normative, statement?
a. Higher gasoline prices will reduce gasoline consumption.
b. Equality is more important than efficiency.
c. Trade restrictions lower our standard of living.
d. If a nation wants to avoid inflation, it will restrict the growth rate of the quantity of
money.

QN=7 (1701) (17223) Which of the following would shift the supply curve for gasoline to the right?
a. An increase in the demand for gasoline.
b. An increase in the price of gasoline.
c. An increase in the number of producers of gasoline
d. An increase in the price of oil, an input into the production of gasoline.

QN=8 (1677) (17211) Which of the following is an example of a market?

a. (i) a gas station
b. (ii) a garage sale
c. (iii) a barber shop
d. All of (i), (ii), and (iii) are examples of markets.
QN=9 (1679) (17188) Soup is an inferior good if
a. The demand for soup falls when the price of a substitute for soup rises.
b. The demand for soup rises when the price of soup falls.
c. The demand curve for soup slopes upward.
d. The demand for soup falls when income rises.

QN=10 (1716) (17239) The flatter the demand curve through a given point, the
a. greater the price elasticity of demand.
b. smaller the price elasticity of demand.
c. closer the price elasticity of demand will be to the slope of the curve.
d. more equal the price elasticity of demand will be to the slope of the curve.

QN=11 (1712) (17191) In a market economy,

a. supply determines demand and demand, in turn, determines prices.
b. demand determines supply and supply, in turn, determines prices.
c. the allocation of scarce resources determines prices and prices, in turn, determine
supply and demand.
d. supply and demand determine prices and prices, in turn, allocate the economy’s scarce
resources.

QN=12 (1718) (17251) Which of the following is not a determinant of the price elasticity of demand
for a good?
a. the time horizon
b. the steepness or flatness of the supply curve for the good
c. the definition of the market for the good
d. the availability of substitutes for the good

QN=13 (1752) (17243) The price elasticity of supply measures how responsive
a. sellers are to a change in price.
b. sellers are to a change in buyers' income.
c. buyers are to a change in production costs.
d. equilibrium price is to a change in supply.

QN=14 (1775) (17292) A tax on the sellers of popcorn

a. increases the size of the popcorn market.
b. decreases the size of the popcorn market.
c. has no effect on the size of the popcorn market.
d. may increase, decrease, or have no effect on the size of the popcorn market.

QN=15 (1743) (17250) Which of the following statements is correct?

a. (i) The demand for natural gas is more elastic over a short period of time than over a
long period of time.
b. (ii) The demand for smoke alarms is more elastic than the demand for Persian rugs.
c. (iii) The demand for bourbon whiskey is more elastic than the demand for alcoholic
beverages in general.
d. All of (i), (ii), and (iii) are correct.

QN=16 (1742) (17236) An inelastic demand means that

a. consumers hardly respond to a change in price.
b. consumers respond substantially to a change in price.
c. consumers respond directly to a change in income.
d. the change in quantity demanded is equal to the change in price.

QN=17 (1744) (17248) In the market for oil in the short run, demand
a. and supply are both elastic.
b. and supply are both inelastic.
c. is elastic and supply is inelastic.
d. is inelastic and supply is elastic.

QN=18 (1763) (17275) A shortage results when

a. a nonbinding price ceiling is imposed on a market.
b. a nonbinding price ceiling is removed from a market.
c. a binding price ceiling is imposed on a market.
d. a binding price ceiling is removed from a market.

QN=19 (1749) (17229) Knowing that the demand for wheat is inelastic, if all farmers voluntarily did
not plant wheat on 10 percent of their land, then
a. consumers of wheat would buy more wheat.
b. wheat farmers would suffer a reduction in their total revenue.
c. wheat farmers would experience an increase in their total revenue.
d. the demand for wheat would decrease.

QN=20 (1784) (17273) When a tax is levied on buyers of tea

a. buyers of tea and sellers of tea both are made worse off.
b. buyers of tea are made worse off and the well-being of sellers is unaffected.
c. buyers of tea are made worse off and sellers of tea are made better off.
d. the well-being of both buyers of tea and sellers of tea is unaffected.

QN=21 (1807) (17323) Suppose there is an early freeze in California that ruins the lemon crop. What
happens to consumer surplus in the market for lemons?
a. It increases.
b. It decreases.
c. It is not affected by this change in market forces.
d. It increases very briefly then decreases.
QN=22 (1799) (17313) Brock is willing to pay $400 for a new suit, but he is able to buy the suit for
$350. His consumer surplus is
a. $50.
b. $150.
c. $350.
d. $400.

QN=23 (1803) (17330) Which of the Ten Principles of Economics does welfare economics explain
more fully?
a. The cost of something is what you give up to get it.
b. Markets are usually a good way to organize economic activity.
c. Trade can make everyone better off.
d. A country’s standard of living depends on its ability to produce goods and services.

QN=24 (1800) (17340) Consumer surplus is equal to the

a. Value to buyers - Amount paid by buyers.
b. Amount paid by buyers - Costs of sellers.
c. Value to buyers - Costs of sellers.
d. Value to buyers - Willingness to pay of buyers.

QN=25 (1827) (17307) Which tools allow economists to determine if the allocation of resources
determined by free markets is desirable?
a. profits and costs to firms
b. consumer and producer surplus
c. the equilibrium price and quantity
d. incomes of and prices paid by buyers

QN=26 (1820) (17325) Consumer surplus

a. is the amount of a good that a consumer can buy at a price below equilibrium price.
b. is the amount a consumer is willing to pay minus the amount the consumer actually
pays.
c. is the number of consumers who are excluded from a market because of scarcity.
d. measures how much a seller values a good.

QN=27 (1824) (17339) Consumer surplus equals the

a. value to buyers minus the amount paid by buyers.
b. value to buyers minus the cost to sellers.
c. amount received by sellers minus the cost to sellers.
d. amount received by sellers minus the amount paid by buyers.

QN=28 (1869) (17378) Which of the following policies is the government most inclined to use when
 faced with a positive externality?
a. taxation
b. permits
c. subsidies
d. usage fees

QN=29 (1879) (17399) Goods that are nonexcludable and nonrival are
a. public goods.
b. private goods.
c. natural monopolies.
d. common resources.

QN=30 (1873) (17347) An externality is

a. the costs that parties incur in the process of agreeing and following through on a
bargain.
b. the uncompensated impact of one person's actions on the well-being of a bystander.
c. the proposition that private parties can bargain without cost over the allocation of
resources.
d. a market equilibrium tax.

QN=31 (1892) (17409) An overcrowded beach is an example of

a. a positive externality.
b. a Tragedy of the Commons.
c. an environmentally inefficient allocation of resources.
d. an economically unfair allocation of resources.

QN=32 (1898) (17397) If one person's use of a good diminishes another person's enjoyment of it, the
good is
a. rival.
b. excludable.
c. normal.
d. exhaustible.

QN=33 (1912) (17401) Suppose a human life is worth $10 million. Installing a better lighting system in
the city park would reduce the risk of someone being murdered there from 2.6 to 1.9
percent over the life of the system. The city should install the new lighting system if its
cost does not exceed
a. $70,000.
b. $260,000.
c. $190,000.
d. $10,000,000.
QN=34 (1925) (17450) Kirsten sells 300 glasses of lemonade at $0.50 each. Her total costs are $125.
Her profits are
a. $25.
b. $124.50.
c. $125.
d. $150.

QN=35 (1948) (17443) When, for a firm, long-run average total cost decreases as the quantity of
output increases, we have a situation of
a. economies of scale.
b. diseconomies of scale.
c. coordination problems arising from the large size of the firm.
d. fixed costs greatly exceeding variable costs.

QN=36 (1946) (17444) Which of the following costs would be regarded as an implicit cost?
a. the cost of accounting services
b. the opportunity cost of financial capital that has been invested in the business
c. the cost of compliance with government regulation
d. all costs that involve outlays of money by the firm

QN=37 (1973) (17507) Which of the following represents the firm's long-run condition for exiting a
market?
a. exit if P < MC
b. exit if P < FC
c. exit if P < ATC
d. exit if MR < MC

QN=38 (1952) (17448) Refer to Figure 13-9. The firm experiences economies of scale at which output
levels?
a. (i) output levels less than M
b. (ii) output levels between M and N
c. (iii) output levels greater than N
d. All of (i), (ii), and (iii) are correct as long as the firm is operating in the long run.

QN=39 (1956) (17466) Refer to Table 13-6. What is the average variable cost of producing 5 units of
output?
a. $4
b. $5
c. $40
d. $44

QN=40 (2018) (17548) Antitrust laws allow the government to

a. (i) prevent mergers.
b. (ii) break up companies.
c. (iii) promote competition.
d. All of (i), (ii), and (iii) are correct.

QN=41 (2016) (17527) Refer to Figure 15-5. A profit-maximizing monopoly's profit is equal to
a. P4 * Q3.
b. (P4-P2) * Q3.
c. (P4-P1) * Q3.
d. (P5-P0) * Q1.

QN=42 (2014) (17532) If a monopolist has zero marginal costs, it will produce
a. the output at which total revenue is maximized.
b. in the range in which marginal revenue is still increasing.
c. at the point at which marginal revenue is at a maximum.
d. in the range in which marginal revenue is negative.

QN=43 (2040) (17558) A monopoly market

a. always maximizes total economic well-being.
b. always minimizes consumer surplus.
c. generally fails to maximize total economic well-being.
d. generally fails to maximize producer surplus.

QN=44 (2035) (17543) A movie theater can increase its profits through price discrimination by
charging a higher price to adults and a lower price to children if it
a. (i) can prevent children from buying the lower-priced tickets and selling them to
adults.
b. (ii) has some degree of monopoly pricing power.
c. (iii) can easily distinguish between the two groups of customers.
d. All of (i), (ii), and (iii) are correct.

QN=45 (2028) (17534) Which of the following is an example of a barrier to entry?

(i) A key resource is owned by a single firm.
(ii) The costs of production make a single producer more efficient than a large number
of producers.
(iii) The government has given the existing monopoly the exclusive right to produce
the good.
a. (i) and (ii)
b. (ii) and (iii)
c. (i) only
d. All of these examples are barriers to entry.

QN=46 (2091) (17615) In which of the following market structures is the number of sellers less than
"many?"
(i) monopolistic competition
(ii) monopoly
(iii) oligopoly
a. (i) and (ii) only
b. (ii) and (iii) only
c. (ii) only
d. In all of (i), (ii), and (iii).

QN=47 (2061) (17581) When quality cannot be easily judged in advance, what provides consumers
with information about the quality of a product?
a. a brand name
b. a tie-in
c. the quantity available for sale
d. the amount of deadweight loss

QN=48 (2120) (17636) The prisoners' dilemma game

a. (i) is a situation in which two players both have dominant strategies which lead to the
highest total payoff for the two players.
b. (ii) has no Nash equilibrium since players, after agreeing to play their dominant
strategy, will have an incentive to switch to another strategy.
c. (iii) has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the
players would agree to if they could cooperate with each other.
d. Both (i) and (iii) are correct.

QN=49 (2149) (17653) Labor markets are different from most other markets because labor demand is
a. represented by a vertical line on a supply-demand diagram.
b. represented by an upward-sloping line on a supply-demand diagram.
c. such an elusive concept.
d. derived.

QN=50 (2089) (17624) In which of the following games is it clearly the case that the cooperative
outcome of the game is good for the two players and good for society?
a. Two guilty criminals have been captured by the police, and each prisoner decides
whether to confess or to remain silent.
b. Two airlines dominate air travel between City A and City B, and each airline decides
whether to charge a “high” airfare or a “low” airfare.
c. Two duopoly firms account for all of the production in a market, and each firm decides
whether to produce a “high” amount of output or a “low” amount of output.
d. Two oil companies own adjacent oil fields over a common pool of oil, and each
company decides whether to drill one well or two wells.
[id=1633, Mark=1]1. B

[id=1628, Mark=1]2. A

[id=1605, Mark=1]3. B

[id=1668, Mark=1]4. C

[id=1641, Mark=1]5. D

[id=1637, Mark=1]6. B

[id=1701, Mark=1]7. C

[id=1677, Mark=1]8. D

[id=1679, Mark=1]9. D

[id=1716, Mark=1]10. A

[id=1712, Mark=1]11. D

[id=1718, Mark=1]12. B

[id=1752, Mark=1]13. A

[id=1775, Mark=1]14. B

[id=1743, Mark=1]15. C

[id=1742, Mark=1]16. A

[id=1744, Mark=1]17. B

[id=1763, Mark=1]18. C

[id=1749, Mark=1]19. C

[id=1784, Mark=1]20. A

[id=1807, Mark=1]21. B

[id=1799, Mark=1]22. A

[id=1803, Mark=1]23. B

[id=1800, Mark=1]24. A

[id=1827, Mark=1]25. B

[id=1820, Mark=1]26. B

[id=1824, Mark=1]27. A

[id=1869, Mark=1]28. C

[id=1879, Mark=1]29. A
[id=1873, Mark=1]30. B

[id=1892, Mark=1]31. B

[id=1898, Mark=1]32. A

[id=1912, Mark=1]33. A

[id=1925, Mark=1]34. A

[id=1948, Mark=1]35. A

[id=1946, Mark=1]36. B

[id=1973, Mark=1]37. C

[id=1952, Mark=1]38. A

[id=1956, Mark=1]39. C

[id=2018, Mark=1]40. D

[id=2016, Mark=1]41. C

[id=2014, Mark=1]42. A

[id=2040, Mark=1]43. C

[id=2035, Mark=1]44. D

[id=2028, Mark=1]45. D

[id=2091, Mark=1]46. B

[id=2061, Mark=1]47. A

[id=2120, Mark=1]48. C

[id=2149, Mark=1]49. D

[id=2089, Mark=1]50. D