1) Economics does not study correct or incorrect behaviors, but rather it assumes that economic agents make the best decisions given their knowledge of the costs and benefits. What term best describes this behavior?
A. equitably
B. rationally
C. emotionally
D. selfishly

2) According to economics, what causes us to have to make choices?
A. unemployment.
B. scarcity.
C. greed.
D. unlimited resources.

3) What is the term in economics by which a group of buyers and sellers of a product come together to trade?
A. collective
B. cooperative
C. market
D. trade-off

4) If a commercial dairy farm wants to raise funds to purchase feeding troughs, in which market does it do so?
A. output market.
B. product market.
C. factor market.
D. dairy products market.

5) Danielle Ocean pays for monthly pool maintenance for her home swimming pool. Last week the owner of the pool service informed Danielle that he will have to raise his monthly service fee because of increases in the price of pool chemicals. How is the market for pool maintenance services affected by this?
A. There is a decrease in the supply of pool maintenance services.
B. There is a decrease in the quantity of pool maintenance services supplied.
C. There is a decrease in the demand for pool maintenance services.
D. There is an increase in the supply of pool maintenance services.

6) What might you call an outward shift of a nation’s production possibilities frontier?
A. economic growth.
B. rising prices of the two goods on the production possibilities frontier model.
C. an impossible situation.
D. a situation in which a country produces more of one good and less of another.

7) If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is
A. unit-elastic.
B. perfectly elastic.
C. relatively inelastic.
D. relatively elastic.

8) Suppose the value of the price elasticity of demand is -3. What does this mean?
A. A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent.
B. A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.
C. A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent.
D. A $1 increase in price causes quantity demanded to fall by 3 units.

9) Price elasticity of demand measures
A. how responsive suppliers are to price changes.
B. how responsive quantity demanded is to a change in price.
C. how responsive sales are to a change in buyers’ incomes.
D. how responsive sales are to changes in the price of a related good.

10) Which of the following countries is not close to the free market benchmark?
A. North Korea.
B. Canada.
C. Singapore.
D. Germany.

11) Which of the following is the correct way to describe equilibrium in a market?
A. At equilibrium, demand equals supply.
B. At equilibrium, market forces no longer apply.
C. At equilibrium, scarcity is eliminated.
D. At equilibrium, quantity demanded equals quantity supplied.

12) A decrease in the price of GPS systems will result in
A. a smaller quantity of GPS systems supplied.
B. a decrease in the demand for GPS systems.
C. an increase in the supply of GPS systems.
D. a larger quantity of GPS systems supplied.

13) Marginal revenue product of labor for a competitive seller is
A. the change in total product from hiring one more worker.
B. the output price multiplied by the quantity sold.
C. the marginal revenue of the product multiplied by the output price.
D. equal to the marginal product of labor multiplied by the output price.

14) Let MP = marginal product, P = output price, and W = wage, then the equation that represents the condition where a competitive firm would hire another worker is
A. P × MP = W.
B. P × MP > W.
C. P × W > MP.
D. P × MP < W.

15) Marginal revenue product for a perfectly competitive seller is equal to
A. the output price multiplied by the total product of labor.
B. the change in total revenue that results from hiring another worker.
C. the marginal cost of production.
D. the output price multiplied by the number workers hired.

16) An individual’s labor supply curve shows
A. the maximum wage rates offered to that individual by various potential employers.
B. the relationship between the quantity of hours worked and total income earned by that individual.
C. the relationship between wages and the quantity of labor that a firm is willing to employ.
D. the relationship between wages and the quantity of labor that she is willing to supply.

17) The labor supply for an industry would decrease if
A. the wage rate falls.
B. a greater percentage of women want to work outside the home.
C. the government welcomes foreign workers into the country.
D. the percentage of the population from age 16 to 65 decreases.

18) How will an increase in population affect the labor market?
A. It will shift the market supply curve.
B. It will increase the opportunity cost of leisure.
C. It will increase the supply of jobs.
D. It will cause a decrease in the quantity of labor demanded.

19) Which of the following displays these two characteristics: rivalry and nonexcludability?
A. a public good
B. a common resource
C. a quasi-public good
D. a private good

20) Which of the following displays rivalry and excludability in consumption?
A. public goods
B. common resources
C. quasi-public goods