1. The concept of scarcity implies ________.a) limited human wants and unlimited producer resourcesb) unlimited human resources and limited producer wantsc) unlimited human wants and limited producer resourcesd) limited human resources and unlimited producer wants2. In a market economy, goods are allocated on the basis of ________.a) strength of desiresb) needc) willingness and ability to payd) political power3. When a curve shifts, it implies that ________.1. the variables on the X- and Y-axis are switched2. there is a movement from one point to another point on the same curve3. there is some type of disequilibrium in the market4. for each given amount of the X variable there is a new amount of the Y variable4. When graphing cross-sectional data, one should ________.a) place the various years on the X-axisb) always be drawn using a line chartc) investigate variables in a single time periodd) concentrate on collecting data on a single variable5. Which of the following is not part of the input market?a) Capitalb) Entrepreneurshipc) Firmsd) Lands6. With specialization of resources, ________.a) the slope of the PPF is decreasing as more of the good on the X-axis is producedb) marginal opportunity costs increasec) opportunity costs tend to be constantd) there is more emphasis on self reliance7. Which of the following will cause the production possibilities frontier to shift outward?a) an increase in the size of the labor forceb) a decrease in the unemployment ratec) a decrease in the size of the capital stockd) an inefficiency that has been corrected8 Shortages ________.a) occur when the price is above the equilibrium priceb) are identical to scarcity, but just shown through the use of the demand and supply modelc) are due to the fact that quantity demanded exceeds the quantity supplied at a given priced) can be eliminated by providing some of the good to each consumer9. Suppose that the demand for apples is downward sloping, and the price per bushel decreases from $6.50 to $5.50. We would expect ________.a) the demand curve for apples to shift toward the originb) the demand for apples to decreasec) the quantity demanded of apples to increased) the quantity demanded of apples to fall10. The market clearing price is ________.a) the lowest price that you are willing to payb) the price which creates an excess demandc) the price which creates an excess supplyd) the price which eliminates all excess quantities supplied or excess quantities demanded11. Quantity demanded ________.a) is the amount of a good a consumer is willing and able to purchase at a given priceb) is identical to the quantity suppliedc) is a downward sloping curved) is the amount equal to what producers are willing and able to produce at given prices12. Suppose that you are evaluating the market for Kellogg’s cereal. The prices of Post and General Mills cereals increase. What will happen to Kellogg’s cereals?a) The demand for Kellogg’s cereals increases causing the price to rise.b) The quantity supplied of Post cereals will decrease since General Mills prices rose.c) The demand will increase and prices fall.d) The quantity demanded of Post and General Mills cereals will increase.13. A minimum wage ________.a) is another name for a guaranteed contractb) is simply a price floor in the labor marketc) causes a shortage of workersd) covers every job in the United States14. Opening a country up to trade will ________.a) create greater inefficiencies in domestic productionb) lower the domestic prices of all goodsc) decrease the income of that country’s citizensd) will cause price in the domestic market to come equal to the world market price15 As the minimum wage increases, ________.a) incomes, especially of single parents, increaseb) employment increasesc) the competition for jobs increasesd) poverty is eliminated16. If the marginal cost exceeds the marginal benefit, ________.a) the price of the good is above the equilibrium priceb) consumers have an incentive to buy less of the goodc) producers should increase production of the goodd) the price is greater than the total cost of production17. Which of the following is true in the water-diamond paradox?a) Consumer surplus of water exceeds consumer surplus of diamondsb) Producer surplus of water exceeds producer surplus of diamonds.c) People will always pay more for a diamond than they do for water.d) Producer surplus exceeds consumer surplus for water.18. Which of the following must lead to an increase in the price for tomatoes?a) The weather is optimal for growing tomatoes the entire growing season.b) There is a successful advertising campaign for tomatoes and the wages fall for tomato farmers.c) Researchers discover that tomatoes reduce cancer and the wages increase for tomato farmers.d) A technology breakthrough allows farmers to produce more tomatoes with the same inputs19. Arthur would be willing to pay up to $50 for one new Nintendo Wii game, up to $40 for a second Wii game, up to $30 for a third Wii game, and up to $20 for a fourth Wii game. If the price of a Wii game is $30 each, what is Arthur’s consumer surplus?a) $140b) $40c) $30d) None of the above20. Which of the following countries is an example of a command and control economy?a) North Koreab) United States of Americac) All of the aboved) None of the above21. The government requires that new safety equipment be installed in all new table saws produced, ceteris paribus. This will lead to a decrease in ______.a) the supply of table sawsb) the quantity supplied of table sawsc) the demand of table sawsd) the quantity demanded of table saws22. Susan begins to examine shifts in demand for shoes. She discovers that as the population increases then it is likely that there will be a shift in demand to the right for shoes. She also discovers that when there are more houses being built, sometimes this seems to shift the demand to the right for shoes. Since the population increase describes the shifts in demand for shoes better than the number of houses being built, Susan omits the variable of housing construction in her analysis of shifts in demand for shoes. What is this an example of?a) The law of demandb) A normal goodc) Occam’s razord) A Giffen good23. Scotts income rises by 10%. Due to his higher income, his demand for antique clocks increases by 25%. For Scott, antique clocks are ______ goods.A. normal ?B. inferior ?C. superiora) A and B onlyb) A and C onlyc) B and C onlyd) None of the above24. Markets are efficient to the extent that they maximize _______.a) consumer surplusb) producer surplusc) social surplusd) deadweight loss25. Money in the economy today ________.a) is needed in order for barter to occurb) is primarily commodity moneyc) facilitates the circular flow of economic activityd) is an economic resource from the input market

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