1. Which of the following is least likely to be an obstacle to the efficient allocation of resources?

A) Price controls.
B) Technological advancement.
C) Common resources.

2. Which of the following statements is most accurate with respect to the effects of taxes imposed on goods
and services?
A) The statutory incidence will fall more heavily on the buyer if the supply is less elastic relative to demand.
B) The actual incidence will fall more heavily on the seller if the supply is less elastic relative to demand.
C) The actual incidence will fall more heavily on the buyer if the demand is more elastic relative to supply.

3. Which of the following two factors are most likely to be considered variable during the short run?
A) Labor and technology.
B) Labor and raw materials.
C) Raw materials and technology.

4. Under which pair of conditions is a factor of production least likely to earn economic rent?
Supply curve Demand curve
A) Perfectly inelastic Perfectly elastic
B) Upward sloping Downward sloping
C) Perfectly elastic Downward sloping

5. A columnist is discussing how the efficient quantity of output for a good or service is determined. These
two statements appear in his column:
Statement 1: The equilibrium quantity of production for a good or service can be considered
efficient as long as the marginal social benefit of that quantity is greater than its marginal social
cost.
Statement 2: Subsidies and quotas typically result in production of a good or service in quantities at
which the marginal social cost exceeds the marginal social benefit.

With respect to these statements:

A) both are correct.

B) only one is correct.
C) both are incorrect.

6. Which of the following statements about price floors and the labor market is least accurate?
A) Setting a minimum wage above the equilibrium wage rate will lead to an excess supply of labor.
B) In the long run, effective price floors lead to inefficiencies in production.
C) If a price floor is set below the equilibrium price, the quantity demanded will exceed the quantity
supplied.

7. A firm realizes that it is producing more than the profit maximizing level of output and makes a shortrun
decision to decrease its output. Which of the firm's cost measures is least likely to decrease as a result?
A) Average variable cost.
B) Marginal cost.
C) Average fixed cost.

8. Which of the following most accurately describes the typical relationship between marginal product (MP)
and average product (AP)? As the quantity of labor increases:
A) initially, AP > MP, then AP = MP, then AP < MP.
B) initially, AP = MP, then AP > MP.
C) initially, AP < MP, then AP = MP, then AP > MP.

9. The law of diminishing returns states that for a given production process, as more and more of a resource
(such as labor) are added, holding the quantities of other resources fixed:
A) output increases at a decreasing rate.
B) cost declines at a decreasing rate.
C) cost declines at an increasing rate.
10. In the context of consumer choice, the concept of utility measures:
A) how often consumers utilize specific combination of goods.
B) the types of goods and services that consumers desire most frequently.
C) the satisfaction consumers receive from consuming a specific combination of goods.

11. The "winner's curse" is associated with what type of auction?

A) Ascending price auction.
B) Common value auction.
C) Private value auction.

12. Which of the following statements regarding marginal costs (MC) and average variable costs (AVC) is most
accurate?
A) MC = AVC when average total cost is at its minimum.
B) MC = AVC when AVC is at its minimum.
C) MC = Average total cost when AVC is at its minimum.

13. Factors of production for a firm least likely include:

A) land.
B) technology.
C) capital.

14. Which of the following factors of production is least likely to be fixed in the short run?
A) Plant size.
B) Labor.
C) Technology.

15. Which of the following conditions is most likely to exist for a typical production process when average
product is at its maximum?
A) Average variable cost is at a minimum.
B) Marginal product is increasing.
C) Marginal cost is at a minimum.

16. If quantity supplied = 28 + 7 × price, the slope of the supply curve is:
A) 4.
B) 7.
C) 1/7.

17. A price ceiling is only effective if it:

A) is set below the equilibrium price.
B) is set above the equilibrium price.
C) has been in effect in over a relatively short time.

18. Compared to the shortrun supply curve, the longrun supply curve is:
A) flatter.
B) more inelastic.
C) steeper sloping upward to the right.

19. When a tax is imposed on the consumption of a good, which of the following terms refers to who bears the
burden of the tax?
A) Consumer surplus.
B) The incidence of a tax.
C) The deadweight loss.

20. Which of the following statements about indifference curves is most accurate?
A) A consumer's optimal bundle of goods is the bundle at which the indifference curves intersect.
B) All bundles of goods on an indifference curve provide equal utility to a consumer.
C) On any indifference curve, the bundle nearest the origin is the consumer's least preferred bundle.

21. An oligopolistic industry least likely has:

A) many sellers.
B) large economies of scale.
C) high barriers to entry.
22. For a perfectly competitive firm in the shortrun, what will be the effect of an increase in market demand on
equilibrium price and quantity, respectively?
A) Decrease; increase.
B) Increase; increase.
C) Increase; decrease.

23. Which of the following statements about monopolies is most accurate?

A) A monopoly structure is characterized by a well-defined product for which there are no good
complements.
B) A monopolist's optimal production quantity is at the point where marginal revenue equals marginal
cost.
C) Monopolists charge the highest possible price.

24. Which of the following is the most likely result of a technological improvement in a perfectly competitive
industry?
A) The costs for individual firms increase.
B) The industry supply curve shifts to the right.
C) Individual firms' supply curves shift to the left.

25. Which of the following is least likely to be considered a reason why regulation of monopolies is not
effective?
A) Regulators do not know the firm's cost structure.
B) Regulation reduces the incentive for firms to reduce costs.
C) Regulation shifts industry demand and increases prices.

26. In which of the following market structures is price least likely to be greater than marginal cost?
A) Perfect competition.
B) Monopolistic competition.
C) Monopoly.

27. Monopolistic competition differs from pure monopoly in that:

A) monopolistic competitors have low barriers to entry and monopolists do not.
B) monopolistic competitors are price takers and monopolists are not.
C) monopolists maximize profits and monopolistic competitors do not.

28. Firms in a perfectly competitive industry will increase their output until which of the following conditions is
met?
A) Marginal cost equals price.
B) Marginal revenue equals average total cost.
C) Total revenue equals price.

29. A profit maximizing firm will expand output as long as marginal revenue is:
A) less than marginal cost.
B) greater than marginal cost.
C) greater than average fixed cost.

30. Which of the following is least likely a characteristic of an oligopoly?

A) Relatively small economies of scale.
B) There are few sellers.
C) Products can either be similar or differentiated.

31. The type of economic market that features a large number of competitors offering differentiated products is
best characterized as:
A) oligopoly.
B) monopolistic competition.
C) perfect competition.

32. Consider a price fixing agreement between Spain and Italy that restricts cheese production such that
maximum economic profit will be realized by both countries. The possible outcomes of the agreement are
presented in the table below. Based on the Prisoners' Dilemma framework, the most likely strategy
followed by the two countries will be:
A) both countries will increase output.
 B) Italy will increase output; Spain will produce at the agreed level.
C) neither country will increase output.

33. Assume that a perfectly competitive firm produces 10 units of a good and sells them each for a price (P)
equal to $15. If the marginal cost (MC) of the 10th unit is $15 and the average total cost (ATC) is $13,
economic profit for the firm is closest to:
A) $120.
B) $20.
C) $0.

34. The practice of charging different consumers different prices for the same product or service is called:
A) price searching.
B) price discrimination.
C) variable pricing.

35. In the longrun, after all firms in a perfectly competitive industry have adopted new technology, the:
A) price will equal minimum average total cost.
B) individual firm supply will increase as demand decreases.
C) price will be set where average variable cost is equal to marginal revenue.

36. Even though the producer surplus increases under a monopoly scenario, relative to one of perfect
competition, the consumer surplus decreases by:
A) a lesser amount.
B) a greater amount.
C) an equal amount.

37. In a natural monopoly:

A) one firm controls all natural resources.
B) the price charged by a monopolist is determined by the intersection of the demand curve with the
marginal cost curve.
C) the average total cost of production continually declines with increased output.

38. Concentration measures are most likely to be used to:

A) analyze barriers to entry into an industry.
B) measure elasticity of demand facing an industry.
C) identify the market structure of an industry.

39. Monopolists will maximize profit by producing at an output level where which of the following conditions
exists?
A) Price = demand = marginal revenue = marginal cost.
B) Marginal revenue = marginal cost < price.
C) Price = marginal revenue = marginal cost.

40. Which of the following is most likely the longterm adjustment in a perfectly competitive industry that is
characterized by firms incurring economic losses?
A) The industry supply curve will shift downward and to the right.
B) Equilibrium price will decrease.
C) Some existing firms will exit the market.