A.   A change in the supply of an item will cause a change in its price, but a change in the price of an item will not cause a change in its supply.

B.   There is a direct (positive) relationship between price and quantity supplied.

C.   When the supply curve for an item shifts to the right, ceteris paribus, it will cause the price of that item to go up. 

D.   When the price of an item goes down, ceteris paribus, the quantity supplied will go down, but the supply will not change.

A.   When the price of an item increases, you buy more because it is more valuable.

B.   Income effect -- that is, a price change can affect the amount of some item you can afford to purchase.

C.   Diminishing marginal utility -- as you consumer more, as the result of a price decrease, the additional satisfaction received from the additional units consumed will start to go down.

D.   Substitution effect -- that is, a price change can affect the opportunity cost of purchasing some item and your willingness  to switch to (or from) another item.

A.   A price ceiling set below the equilibrium price in a particular market will cause a shortage.

B.   A price floor set above the equilibrium price, in a particular market, will have no effect on that market.

C.   A price floor set below the equilibrium price in a particular market will cause a shortage.

D.   A price ceiling set above the equilibrium price, in a particular market, will cause a surplus. 

A.   A price ceiling on gasoline, set below its current equilibrium price, would assure that everyone would be able to buy gasoline at an affordable price.

B.   A price ceiling on some item, set below its equilibrium price, creates rationing problems.

C.   Rent control is an example of a price floor.

D.   A price floor for a resource, such as the minimum wage, set above its equilibrium price, would increase the demand for that resource.

A.   Household’s income and wealth.

B.   The price of the item

C.   Consumers’ expectations about their income, wealth and/or the price of the item

D.   Changes in the price of a substitute or complement

A.   FALSE

B.   TRUE

A.   It will cause too many workers to be demanded.

B.   It will decrease production costs and ultimately make the price of the product they produce too low.

C.   If it is too high, it will cause fewer workers to be demanded.

D.   All of the above are valid arguments against the minimum wage.

A.   Producer surplus

B.   Consumer surplus

C.   Deadweight loss

D.   Deadweight gain

A.   Producer surplus has been maximized and consumer surplus has been minimized

B.   The sum of producer and consumer surplus is zero.

C.   Consumer surplus has been mazimized and producer surplus has been minimized.

D.   The sum of producer and consumer surplus has been maximized

A.   private markets do not allocate resources in the most economically desirable way.

B.   government intervenes in the functioning of private markets.

C.   prices rise.

D.   some consumers who want a good do not obtain it because the price is higher than they are willing to pay.

A.   Public goods.

B.   Negative externalities, positive externalities, and public goods.

C.   Negative externalities.

D.   Positive externalities.

A.   negative externality.

B.   government failure.

C.   supply-side market failure.

D.   demand-side market failure.

A.   maximizes the net benefit to society.

B.   costs more to produce than it provides in benefits.

C.   produces a benefit exactly equal to the cost of producing the last unit.

D.   generates more of a benefit than it costs to produce.

A.   Supply-side market failure.

B.   Positive externality.

C.   Demand-side market failure.

D.   Demand-side market failure, supply-side market failure and positive externality.

A.   nonexcludability and production at rising marginal cost.

B.   nonrivalry and large negative externalities.

C.   nonrivalry and nonexcludability.

D.   production at constant marginal cost and rising demand.

A.   A bottle of soda.

B.   A sofa.

C.   A television set.

D.   A weather warning system.

A.   public enterprises can produce such goods at lower cost than can private enterprises.

B.   there is no need or demand for such goods.

C.   their production seriously distorts the distribution of income.

D.   private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.

A.   Private economic activities create externalities; government activities do not.

B.   Government focuses primarily on equity; private firms focus only on efficiency.

C.   Private firms face the constraint of scarcity; government does not.

D.   Government has the legal right to force people to do things; private firms do not.

A.   Coercing all firms to innovate and invest.

B.   Taxing polluters and subsidizing firms that are creating significant positive externalities.

C.   Weakening enforcement of laws and contracts.

D.   Promising to cover every risk of loss for private firms.

A.   improve accountability of government officials, thus leading to more efficient policies.

B.   lead to economic inefficiencies because of difficulty aggregating and conveying information.

C.   better allow the invisible hand to direct government resources to their best uses.

D.   enhance government's ability make effective decisions quickly.

A.   is not a problem because government bureaucrats are not affected by the self-interest that affects private sector individuals.

B.   is easy to monitor because of the small size and scope of government.

C.   tends to be lacking because of civil service protections and the complexity of government.

D.   tends to be greater than in private firms, making government more efficient than private firms.

A.   bureaucratic inefficiency.

B.   pressure by special-interest groups.

C.   extensive positive externalities from public and quasi-public goods.

D.   special-interest effect.

A.   the principal-agent problem.

B.   logrolling.

C.   moral hazard.

D.   rent-seeking behavior.

A.   chronic budget deficits.

B.   chronic budget deficits, misdirection of stabilization policy, and unfunded liabilities.

C.   misdirection of stabilization policy.; and, unfunded liabilities.

A.   unfunded liabilities.

B.   inappropriate monetary policy.

C.   state budget laws.

D.   voters wanting government programs but not wanting to pay taxes.

A.   unemployment insurance.

B.   Medicare.

C.   Social Security.

D.   national defense.