1. Refer to the diagram above. Total revenue at price P1 is indicated by area(s)
A. A + C.
B. A.
C. C + D.
D. A + B.
2. In a representative democracy, voters are _______ and politicians are _______.
A. logrollers; principals
B. principals; agents
C. agents; employees
D. employees; agents
3. The fact that most medical care purchases are financed through insurance
A. reduces the amount of health care consumed by raising the price of additional units of care.
B. has no effect on health care consumption because aggregate costs are the same regardless of payment method.
C. increases the amount of health care consumed by reducing the price of additional units of care.
D. has decreased health care costs and therefore reduced aggregate health care expenditures.
4. What have countries done to prevent the politicization of fiscal policy?
A. Passed laws requiring bi-partisan fiscal policy commissions
B. Returned to the gold standard to strengthen the value of their currency
C. Decided to avoid engaging in fiscal policy
D. Set up independent central banks
5. Refer to the diagram above. Assuming equilibrium price P1, producer surplus is represented by areas
A. a + c.
B. a + b + c + d.
C. a + b.
D. c + d.
6. Which of the following is a determinant of demand?
A. The price of related goods
B. The growth in GDP that year
C. The features added to a product
D. The expectations of the seller
7. If total revenue increases while price decreases, demand for that good can be considered
A. unprofitable.
B. inelastic.
C. profitable.
D. elastic.
8. Ken really enjoyed his first vacation to Ocean City. Since then, he has visited Ocean City four times, and each time he visits, he has less and less fun. Ken's experience is an example of
A. the law of total utility.
B. the law of capital depreciation.
C. the law of diminishing marginal utility.
D. lack of public infrastructure investment.
9. What factor might explain why humans have a hard time planning for the future?
A. Anchoring
B. Mental accounting
C. Utility
D. Myopia
10. Why might government have problems efficiently allocating resources?
A. Politicians are usually incapable of making tough economic decisions.
B. Government always has higher operational costs than private businesses.
C. Government involvement always leads to a command economy.
D. It lacks the "invisible hand" to direct resources.
11. Which of the following is true regarding the elasticity of supply in the short run?
A. Producers have many options in reallocating resources.
B. Producers do not have many options to reallocate resources.
C. Consumers will have a large reaction.
D. Consumers have little time to react to changes in prices.
12. John would have paid $18 to see a new movie but the price was $10 to get in. What would the extra $8
be considered in economic terms?
A. Consumer shortage
B. Producer surplus
C. Producer shortage
D. Consumer surplus
13. Refer to the diagram above. A decrease in quantity demanded is depicted by a
A. shift from D1 to D2.
B. move from point x to point y.
C. shift from D2 to D1.
D. move from point y to point x.
14. Which of the following would be a way to correct a positive externality?
A. Tax on producers
B. Market for externality rights
C. Subsidy to consumers
D. Direct controls
15. If the quantity demanded of a good does not react very much to an increase in price, which of the following statements is true?
A. The good may be a necessity.
B. The good may be a luxury good.
C. The good has many close substitutes.
D. Consumers have had a lot of time to consider other options.
16. Economists call the pursuit of a transfer of wealth through government at someone else's expense
A. rent-seeking behavior.
B. the benefits-received principle.
C. the paradox of voting.
D. adverse selection.
17. Which of the following cognitive biases refers to people's tendency to attribute their successes to personal ability and effort, and failures to forces outside their control?
A. Overconfidence effect
B. Confirmation bias
C. Self-serving bias
D. Hindsight bias
18. A consumer's demand curve for a product is down sloping because
A. marginal utility diminishes as more of a product is consumed.
B. total utility falls below marginal utility as more of a product is consumed.
C. the income and substitution effects precisely offset each other.
D. time becomes less valuable as more of a product is consumed.
19. The price elasticity of supply measures how
A. responsive the quantity supplied of Y is to changes in the price of X.
B. responsive the quantity supplied of X is to changes in the price of X.
C. easily labor and capital can be substituted for one another in the production process.
D. responsive quantity supplied is to a change in incomes.
20. What is likely to happen to price over time if there is currently a surplus of a good on the market?
A. Price will increase.
B. Price will decrease.
C. Price will move away from equilibrium.
D. Price will stay the same.
