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.   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.

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

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

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

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

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

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.   Rent control is an example of a price floor.

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

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.   Changes in the price of a substitute or complement

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

A.   TRUE

B.   FALSE

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

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

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

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

A.   Consumer surplus

B.   Producer surplus

C.   Deadweight gain

D.   Deadweight loss

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

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

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

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

A.   prices rise.

B.   government intervenes in the functioning of private markets.

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

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

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

B.   Negative externalities.

C.   Public goods.

D.   Positive externalities.

A.   government failure.

B.   demand-side market failure.

C.   supply-side market failure.

D.   negative externality.

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

B.   maximizes the net benefit to society.

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

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

A.   Positive externality.

B.   Supply-side market failure.

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

D.   Demand-side market failure.

A.   nonexcludability and production at rising marginal cost.

B.   production at constant marginal cost and rising demand.

C.   nonrivalry and nonexcludability.

D.   nonrivalry and large negative externalities.

A.   A weather warning system.

B.   A bottle of soda.

C.   A sofa.

D.   A television set.

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

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

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 firms face the constraint of scarcity; government does not.

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

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

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

A.   Weakening enforcement of laws and contracts.

B.   Coercing all firms to innovate and invest.

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

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

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

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

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

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

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

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

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

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

A.   pressure by special-interest groups.

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

C.   bureaucratic inefficiency.

D.   special-interest effect.

A.   moral hazard.

B.   rent-seeking behavior.

C.   logrolling.

D.   the principal-agent problem.

A.   chronic budget deficits.

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

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

A.   state budget laws.

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

C.   inappropriate monetary policy.

D.   unfunded liabilities.

A.   Medicare.

B.   Social Security.

C.   unemployment insurance.

D.   national defense.