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

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

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

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

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

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

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

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.   Rent control is an example of a price floor.

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

A.   Changes in the price of a substitute or complement

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

C.   Household’s income and wealth.

D.   The price of the item

A.   TRUE

B.   FALSE

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.   Deadweight gain

C.   Consumer surplus

D.   Producer surplus

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

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

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

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

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

B.   government intervenes in the functioning of private markets.

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

D.   prices rise.

A.   Positive externalities.

B.   Negative externalities.

C.   Public goods.

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

A.   negative externality.

B.   government failure.

C.   supply-side market failure.

D.   demand-side market failure.

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

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

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

D.   maximizes the net benefit to society.

A.   Demand-side market failure.

B.   Positive externality.

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

D.   Supply-side market failure.

A.   nonrivalry and nonexcludability.

B.   production at constant marginal cost and rising demand.

C.   nonexcludability and production at rising marginal cost.

D.   nonrivalry and large negative externalities.

A.   A television set.

B.   A weather warning system.

C.   A sofa.

D.   A bottle of soda.

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.   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.   Coercing all firms to innovate and invest.

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

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

D.   Weakening enforcement of laws and contracts.

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.   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.   special-interest effect.

B.   pressure by special-interest groups.

C.   bureaucratic inefficiency.

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

A.   the principal-agent problem.

B.   logrolling.

C.   moral hazard.

D.   rent-seeking behavior.

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

B.   chronic budget deficits.

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

A.   unfunded liabilities.

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

C.   inappropriate monetary policy.

D.   state budget laws.

A.   unemployment insurance.

B.   national defense.

C.   Social Security.

D.   Medicare.