1. A newspaper reports, "Coffee growers in Brazil and Columbia organized to consider world coffee supply levels." If this group should decide to act in a concerted effort for the benefit of the group as a whole, the likely result is:

A. Increased coffee production and prices.
B. Decreased coffee production and increased prices.
C. Increased prices with no change in coffee production.
D. Increased coffee production and decreased prices.
E. Coffee production and prices at competitive levels.

2. The fundamental problem of economics is:

A. to establish an equitable system of personal and business taxation.
B. to establish a democratic political framework for the provision of social goods and services.
C. the establishment of prices which accurately reflect the relative scarcities of products and resources.
D. the scarcity of productive resources relative to material wants.
E. to achieve a more equitable distribution of money income in order to mitigate poverty.

3. Assuming that the market for a good is in equilibrium, the initial effect of an increase in demand is:

A. the generation of a surplus of the good.
B. the generation of a shortage of the good.
C. a shift in the supply of the good.
D. an increase in the price of the good.
E. a decrease in the price of the good.

4. What might cause the demand for a good to increase?

A. A decrease in consumers’ income (due perhaps to a tax increase).
B. New research indicates there is a strong link between use of this good and heart disease.
C. The price of a close substitute for this good rises.
D. A large group of consumers decide to boycott this good due to the political beliefs of some of the producers.
E. Technological breakthroughs in the production of this good dramatically lower the cost of producing it.

5. What is the opportunity cost of buying a new car?

A. The value of other goods and services you could have purchased with the money you spent on the car.
B. The price you paid for the car.
C. The cost of operating and maintaining the car.
D. The difference between the price of the car and the price of a used car.
E. the difference between what the car costs now and what a similar car like it will cost a year from now.

6. Suppose Mindy’s happiness could be measured in units called "utils." If one shirt gives her 20 utils of happiness, then what amount of utils is it possible for two shirts to giver her without violating the usual assumptions economists make about people’s want and desires?

A. 15
B. 20
C. 30
D. 40
E. 45

7. "US companies are taking advantage of falling oil prices resulting from increased world output by switching to oil for fuel. This is expected to depress coal prices and output." In terms of conventional demand and supply analysis, this statement is best described as a :

A. shift in the demand curves for both oil and coal.
B. movement along the demand curves for both oil and coal.
C. shift in the demand curve for oil and a movement along the demand curve for coal.
D. movement along the demand curve for oil and a shift in the demand curve for coal.
E. change in prices, but not a change in demand for either oil or coal.

8. A shortage of good A:

A. indicates that its current price is too high.
B. is a possible result of a government-imposed price ceiling.
C. could be eliminated by a decrease in the price of A.
D. can only be eliminated by producing more of good A.
E. indicates that government intervention into the market for good A is required.

9. Workers in the United States enjoy a high standard of living because:

A. unions keep overall wages in the U.S. high.
B. we have protected industries from foreign competition.
C. Congress has established a high minimum wage.
D. workers in the U.S. are highly productive.
E. the lack of capital resources in the U.S. has increased the demand for workers.

10. Suppose hot dogs and colas yield Clark the same amount of satisfaction (that is, he likes 2 hot dogs exactly the same as he likes 2 colas, etc.), but that the price of hot dogs is twice that of colas. Given that he has a limited amount of income, to maximize his satisfaction he should:

A. buy the same amount of hot dogs and colas.
B. buy more colas than hot dogs.
C. buy more hot dogs than colas.
D. buy only colas.
E. buy only hot dogs.

11. The basic characteristic of the short run is that:

A. barriers to entry prevent new firms from entering the industry.
B. the firm does not have sufficient time to change the size of its plant.
C. the firm does not have sufficient time to cut its rate of output to zero.
D. a firm does not have sufficient time to change the amounts of any of the resources it employs.
E. none of the above.

12. Which of the following is not an economic cost?

A. wages
B. rents
C. interest
D. economic profits
E. normal profits

13. If a good’s production entails substantial spillover benefits and no spillover costs, then too:

A. much of the good will be produced unless firms are subsidized.
B. much of the good will be produced unless firms are taxed.
C. little of the good will be produced unless firms are subsidized.
D. little of the good will be produced unless firms are taxed.
E. none of the above.

14. If one of a firm’s fixed costs rises,

A. its profit-maximizing output level will increase.
B. its profit-maximizing output level will decrease.
C. its profit-maximizing output level will not change.
D. its profits will remain the same after it adjusts its output level (either up or down).
E. it would likely increase its price.

15. When critics of farm policy say that it treats symptoms rather than causes, they mean that:

A. policy attempts to bolster low farm income, while the real problem is an over allocation of resources to agriculture.
B. policy deals with the over allocation of resources to agriculture, while the basic farm problem is low incomes.
C. policy attempts to bolster low farm incomes, while the real problem is an under allocation of resources to agriculture.
D. the restriction of output in the short run may reduce our productive capacity in agriculture in the long run.
E. policy is misguided and should be abandoned.