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- 1. Multiple Choice
Which of the following is an example of a positive economic statement?
A college education should be provided tuition free to all students.
Economics is the study of scarcity and choice.
Governments should not run budget deficits.
Universities should do more to prepare students to make ethical decisions.
Corporate income taxes in the United States should not be increased.
- 2. Multiple Choice
Which of the following would cause an increase in the quantity demanded of tea?
an increase in the supply of coffee, a substitute
a decrease in the price of coffee, a substitute
a decrease in the price of tea
a decrease in the supply of sugar, a complement
an increase in the price of sugar, a complement
- 3. Multiple Choice
Which of the following would occur in the market for grapefruits if an increase in popularity caused the price of grapefruits to rise?
a shift of the demand curve to the left
a shift of the supply curve to the right
a movement down along the supply curve
a movement up along the supply curve
a movement down along the demand curve
- 4. Multiple Choice
A new price ceiling set below the equilibrium price in a competitive market with relatively elastic supply and demand would result in which of the following?
an increase in the quantity demanded and an increase in the quantity supplied
an increase in the quantity demanded and no change in the quantity supplied
an increase in the quantity demanded and a decrease in the quantity supplied
a decrease in the quantity demanded and an increase in the quantity supplied
a decrease in the quantity demanded and no change in the quantity supplied
- 5. Multiple Choice
For what type of good does a decrease in income lead to an increase in demand?
a normal good
an inferior good
a good with price-elastic demand
a good with price-inelastic demand
a good with price-unit-elastic demand
- 6. Multiple Choice
Which of the following curves always falls as output increases?
the marginal cost curve
the average variable cost curve
the average total cost curve
the average fixed cost curve
the total fixed cost curve
- 7. Multiple Choice
What is necessarily true about a perfectly competitive market?
In the long run, economic profits are positive.
In the short run, there are no fixed costs.
Productive efficiency will be achieved in the short run.
Allocative efficiency is not achieved in the short run.
Productive efficiency will be achieved in the long run.
- 8. Multiple Choice
What does the Herfindahl-Hirschman Index measure?
the degree of comparative advantage one nation has relative to another
the amount of specialization and trade between nations
opportunity cost differences between firms
the amount of market concentration in a given industry
the amount of government intervention in a market
- 9. Multiple Choice
Which two market structures are characterized by free entry into and exit from the industry in the long run?
monopolistic competition and monopoly
monopolistic competition and perfect competition
monopolistic competition and oligopoly
oligopoly and perfect competition
monopoly perfect competition
- 10. Multiple Choice
Firms generally produce the quantity that equates marginal revenue with
price, because that minimizes average total cost.
average total cost, because that minimizes total cost.
average variable cost, because that stabilizes cost.
marginal cost, because that minimizes average total cost.
marginal cost, because that maximizes profit or minimizes loss.
- 11. Multiple Choice
For a competitive firm, if marginal revenue exceeds marginal cost at the current level of output and the firm is currently earning economic losses, what can the firm certainly do?
increase output to ensure economic profits
decrease output to ensure economic profits
increase output to reduce economic losses
decrease output to reduce economic losses
shut down to reduce economic losses
- 12. Multiple Choice
The price below which a firm in a perfectly competitive industry will shut down in the long run is determined by the minimum of
marginal cost
average total cost
total cost
total variable cost
average fixed cost
- 13. Multiple Choice
Which of the following will most likely happen in the market for good X if the price of good X decreases?
The supply of good X will decrease.
The demand for good X will increase.
The quantity demanded for good X will
increase.
The demand will decrease and the supply will
increase.
The quantity supplied for good X will
increase.
- 14. Multiple Choice
Which of the following is most likely to occur if a single-price monopolist is replaced by a perfectly competitive market?
Prices will increase.
The deadweight loss will decrease.
Profits will increase.
Output will decrease.
The firm’s cost curves will shift upward.
- 15. Multiple Choice
When consumption of a good generates a positive externality, which of the following must be true at the market equilibrium?
Marginal social benefit is less than marginal private cost.
Marginal social benefit is greater than marginal private benefit.
Marginal social cost is greater than marginal social benefit.
Marginal social cost is less than marginal private benefit.
Marginal social cost is equal to marginal external benefit.
- 16. Multiple Choice
Oscar spent his entire income on only two goods: good X and good Y. At his current consumption of the two goods, the marginal utility of X is 8 and the marginal utility of Y is 2. If the price of X is $4.00 and the price of Y is $0.50, then to maximize his total utility, Oscar should have
bought more X and more Y
bought more X and less Y
bought less X and more Y
bought less X and less Y
maintained his current consumption
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