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Single choice
1.The phenomenon of scarcity stems from the fact that（）.A)most economies’ production methods are not very good.B)in most economies, wealthy people consume disproportionate quantities of goods and services.C)governments restrict production of too many goods and services.D)resources are limited.2.In a market economy, supply and demand are important because they（）.A)play a critical role in the allocation of the economy’s scarce resources.B)determine how much of each good gets produced.C)can be used to predict the impact on the economy of various events and policies.D)All of the above are correct.3.What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold?（）A)Price will rise.B)Price will fall.C)Price will stay exactly the same.D)The price change will be ambiguous.4.The presence of a price control in a market for a good or service usually is an indication that（）.A)an insufficient quantity of the good or service was being produced in that market to meet the public’s need.B)the usual forces of supply and demand were not able to establish an equilibrium price in that market.C)policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.D)policymakers correctly believed that price controls would generate no inequities of their own once imposed.5.Policymakers use taxes（）.A)to raise revenue for public purposes but not to influence market outcomes.B)both to raise revenue for public purposes and to influence market outcomes.C)when they realize that price controls alone are insufficient to correct market inequities.D)only in those markets in which the burden of the tax falls clearly on the sellers.6.The particular price that results in quantity supplied being equal to quantity demanded is the best price because it（）.A)maximizes costs of the seller.B)maximizes tax revenue for the government.C)maximizes the combined welfare of buyers and sellers.D)minimizes the expenditure of buyers.7.Economists say that a market where goods are not consumed by those valuing the goods most highly is（）.A)laiez-faire..B)unequal.C)inefficient.D)rational.8.To fully understand how taxes affect economic well-being, we must compare the（）.A)consumer surplus to the producer surplus.B)price paid by buyers to the price received by sellers.C)reduced welfare of buyers and sellers to the revenue raised by the government.D)consumer surplus to the deadweight lo.9.Labor taxes may distort labor markets greatly if（）.A)labor supply is highly inelastic.B)many workers choose to work 40 hours per week regardle of their earnings.C)the number of hours many part-time workers want to work is very sensitive to the wage rate.D)“underground” workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.10.The difference between accounting profit and economic profit is（）.A)explicit costs.B)implicit costs.C)total revenue.D)marginal product.11.Resources are（）.A)scarce for households but plentiful for economies.B)plentiful for households but scarce for economies.C)scarce for households and scarce for economies.D)plentiful for households and plentiful for economies.12.The principle that “trade can make everyone better off” applies to interactions and trade between（）.A)families.B)states within the United States.C)nations.D)All of the above are correct.13.One advantage market economies have over centrally-planned economies is that market economies（）.A)provide an equal distribution of goods and services to households.B)establish a significant role for government in the allocation of resources.C)solve the problem of scarcity.D)are more efficient.14.The production poibilities frontier is a graph that shows the various combinations of output that an economy can poibly produce given the available factors of production and（）.A)society’s preferences.B)the available production technology.C)a fair distribution of the output.D)the available demand for the output.15.When economists are trying to explain the world, they are（）.A)scientists.B)policy advisers.C)in the realm of microeconomics rather than macroeconomics.D)in the realm of normative economics rather than positive economics.16.For a self-sufficient producer, the production poibilities frontier（）.A)is the same as the consumption poibilities frontier.B)is greater than the consumption poibilities frontier.C)is le than the consumption poibilities frontier.D)is always a straight line.17.Suppose Susan can wash three windows per hour or she can iron six shirts per hour.Paul can wash two windows per hour or he can iron five shirts per hour.（）A)Susan has an absolute advantage over Paul in washing windows.B)Susan has a comparative advantage over Paul in washing windows.C)Paul has a comparative advantage over Susan in ironing shirts.D)All of the above are correct.18.In a competitive market, the price of a product（）.A)is determined by buyers, and the quantity of the product produced is determined by sellers.B)is determined by sellers, and the quantity of the product produced is determined by buyers.C)and the quantity of the product produced are both determined by sellers.D)None of the above is correct.19.What would happen to the equilibrium price and quantity of lattés if the cost of producing steamed milk, which is used to make lattés, rises?（）A)Both the equilibrium price and quantity would increase.B)Both the equilibrium price and quantity would decrease.C)The equilibrium price would increase, and the equilibrium quantity would decrease.D)The equilibrium price would decrease, and the equilibrium quantity would increase.20.The price elasticity of demand measures how much（）.A)quantity demanded responds to a change in price.B)quantity demanded responds to a change in income.C)price responds to a change in demand.D)demand responds to a change in supply.21.If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?（）A)immediately after the price increase B)one month after the price increase C)three months after the price increase D)one year after the price increase 22.For which of the following types of goods would the income elasticity of demand be positive and relatively large?（）A).all inferior goods B)all normal goods C)goods for which there are many complements D)luxuries 23.To fully understand how taxes affect economic well-being, we must（）.A)aume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed.B)compare the taxes raised in the United States with those raised in other countries, especially France.C)compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.D)take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.24.When a tax on a good is enacted,（）.A)buyers and sellers share the burden of the tax regardle of whether the tax is levied on buyers or on sellers.B)buyers always bear the full burden of the tax.C)sellers always bear the full burden of the tax.D)sellers bear the full burden of the tax if the tax is levied on them;buyers bear the full burden of the tax if the tax is levied on them.25.A decrease in the size of a tax is most likely to increase tax revenue in a market with（）.A)elastic demand and elastic supply.B)elastic demand and inelastic supply.C)inelastic demand and elastic supply.D)inelastic demand and inelastic supply.26.If the tax on a good is doubled, the deadweight lo of the tax（）.A)increases by 50 percent.B)doubles.C)triples.D)quadruples.27.Economists aume that the typical person who starts her own busine does so with the intention of（）.A)donating the profits from her busine to charity.B)capturing the highest number of sales in her industry.C)maximizing profits.D)minimizing costs.28.If Darren sells 300 glaes of iced tea at $0.50 each, his total revenues are（）.A)$150.B)$299.50.C)$300.D)$600.29.Total cost is the（）.A)amount a firm receives for the sale of its output.B)fixed cost le variable cost.C)market value of the inputs a firm uses in production.D)quantity of output minus the quantity of inputs used to make a good.30.A firm's opportunity costs of production are equal to its（）.A)explicit costs only.B)implicit costs only.C)explicit costs + implicit costs.D)explicit costs + implicit costs + total revenue.31.Which of the following products would be considered scarce?（）A)automobiles B)footballs autographed by Mei C)tomatos D)All of the above are correct.32.Which of the following statements about the price elasticity of demand is correct?（）A)The price elasticity of demand for a good measures the willingne of buyers of the good to buy le of the good as its price increases.B)Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes.C)Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y.D)All of the above are correct.33.Given the market for illegal drugs, when the government is succeful in reducing the flow of drugs into the United States,（）.A)supply decreases, demand is unaffected, and price increases.B)demand decreases, supply is unaffected, and price decreases.C)demand and supply both decrease, leaving price eentially unchanged.D)supply decreases, demand increases, and price increases substantially.34.The imposition of a binding price floor on a market causes quantity demanded to be（）.A)greater than quantity supplied.B)le than quantity supplied.C)equal to quantity supplied.D)Both a)and b)are poible.35.A tax imposed on the buyers of a good will（）.A)raise both the price buyers pay and the effective price sellers receive.B)raise the price buyers pay and lower the effective price sellers receive.C)lower the price buyers pay and raise the effective price sellers receive.D)lower both the price buyers pay and the effective price sellers receive.36.If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that（）.A)producer surplus equals consumer surplus in the market for wallpaper.B)the market for wallpaper is in equilibrium.C)on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers.D)All of the above are correct.37.A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it（）.A)maximizes both the total revenue for firms and the quantity supplied of the product.B)maximizes the combined welfare of buyers and sellers.C)minimizes costs and maximizes output.D)minimizes the level of welfare payments.38.Other things equal, the deadweight lo of a tax（）.A)decreases as the size of the tax increases.B)increases as the size of the tax increases, but the increase in the deadweight lo is le rapid than the increase in the size of the tax.C)increases as the size of the tax increases, and the increase in the deadweight lo is more rapid than the increase in the size of the tax.D)increases as the price elasticities of demand and/or supply increase, but the deadweight lo does not change as the size of the tax increases.39.Taxes cause deadweight loes because they（）.A)lead to loes in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.B)distort incentives to both buyers and sellers.C)prevent buyers and sellers from realizing some of the gains from trade.D)All of the above are correct.40.In a competitive market, the actions of any single buyer or seller will（）.A)have a negligible impact on the market price.B)have little effect on market equilibrium quantity but will affect market equilibrium price.C)affect marginal revenue and average revenue but not price.D)adversely affect the profitability of more than one firm in the market.41.If the price of milk rises, when is the price elasticity of demand likely to be the lowest?（）A)immediately after the price increase B)one month after the price increase C)three months after the price increase D)one year after the price increase 42.Suppose good X has a negative income elasticity of demand.This implies that good X is（）.A)a normal good.B)a neceity.C)an inferior good.D)a luxury.43.To fully understand how taxes affect economic well-being, we must compare the（）.A)benefit to buyers with the lo to sellers.B)price paid by buyers to the price received by sellers.C)profits earned by firms to the loes incurred by consumers.D)decrease in total surplus to the increase in revenue raised by the government.44.A tax placed on a good（）.A)causes the effective price to sellers to increase.B)affects the welfare of buyers of the good but not the welfare of sellers.C)causes the equilibrium quantity of the good to decrease.D)creates a burden that is usually borne entirely by the sellers of the good.45.An increase in the size of a tax is most likely to increase tax revenue in a market with（）.A)elastic demand and elastic supply.B)elastic demand and inelastic supply.C)inelastic demand and elastic supply.D)inelastic demand and inelastic supply.46.If the tax on a good is tripled, the deadweight lo of the tax（）.A)remains constant.B)triples.C)increases by a factor of 9.D)increases by a factor of 12.47.Economists normally aume that the goal of a firm is to（）.A)maximize its total revenue.B)maximize its profit.C)minimize its explicit costs.D)minimize its total cost.48.If Tanya sells 200 glaes of fruit punch at $0.50 each, her total revenues are（）.A)$100.B)$199.50.C)$200.D)$400.49.Profit is defined as（）.A)net revenue minus depreciation.B)total revenue minus total cost.C)average revenue minus average total cost.D)marginal revenue minus marginal cost.50.A difference between explicit and implicit costs is that（）.A)explicit costs must be greater than implicit costs.B)explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do.C)implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.D)implicit costs must be greater than explicit costs.1.D
2.D3.D4.C5.B 6.C7.C8.C 9.C10.B 11.C12.D13.D14.B15.A16.A17.D18.D19.C20.A
21.D 22.D 23.C 24.A 25.A 26.D 27.C 28.A 31.D32.D33.A34.B35.B36.B37.B38.C39.D40.A
41.A 42.C 43.D 44.C 45.D 46.C 47.B 48.A
29.C 30.C
49.B 50.C
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