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

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

C.   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.

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.   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.

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

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

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

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

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

B.   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.

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.   The price of the item

B.   Household’s income and wealth.

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.   FALSE

B.   TRUE

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

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

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

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

A.   Deadweight loss

B.   Consumer surplus

C.   Deadweight gain

D.   Producer surplus

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

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

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

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

A.   prices rise.

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

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

D.   government intervenes in the functioning of private markets.

A.   Public goods.

B.   Positive externalities.

C.   Negative externalities.

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

A.   government failure.

B.   negative externality.

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

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

A.   Supply-side market failure.

B.   Demand-side market failure.

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

D.   Positive externality.

A.   nonexcludability and production at rising marginal cost.

B.   nonrivalry and nonexcludability.

C.   production at constant marginal cost and rising demand.

D.   nonrivalry and large negative externalities.

A.   A weather warning system.

B.   A sofa.

C.   A bottle of soda.

D.   A television set.

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

B.   their production seriously distorts the distribution of income.

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

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

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

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

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

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

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

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

C.   Coercing all firms to innovate and invest.

D.   Weakening enforcement of laws and contracts.

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

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

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

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

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

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

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

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

A.   pressure by special-interest groups.

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

C.   special-interest effect.

D.   bureaucratic inefficiency.

A.   the principal-agent problem.

B.   logrolling.

C.   rent-seeking behavior.

D.   moral hazard.

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

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

C.   chronic budget deficits.

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

B.   unfunded liabilities.

C.   inappropriate monetary policy.

D.   state budget laws.

A.   Medicare.

B.   national defense.

C.   unemployment insurance.

D.   Social Security.