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1.When does a positive externality take place?

When the social marginal costs exceed the private marginal costsWhen a good is absent from the free marketWhen social marginal cost matches social marginal benefitWhen social marginal benefits surpass private marginal benefits

2.The statement 'Income inequality may be significant in a free market and ought to be minimized' exemplifies which type of economic statement?

Economic statement based on legal judgmentDescriptive economic statementPrescriptive economic statementValue-based economic statementEmpirical economic statement

3.What is the expected effect on equilibrium price and quantity when there is a reduction in demand for a product?

Both equilibrium price and quantity will riseBoth equilibrium price and quantity will fallEquilibrium price will rise while quantity fallsEquilibrium price will fall while quantity risesNo change in equilibrium price or quantity

4.When does a change in demand influence the price more significantly than the quantity supplied?

The supply's price elasticity equals +3The supply's price elasticity equals +0.2The supply's price elasticity equals +2The supply's price elasticity is infinite

5.Which of the following is NOT a function performed by the price mechanism?

A signaling toolA motivator for economic decisionsA method for allocating scarce resourcesA measure of individual earnings

6.Which of the following is NOT a function of the price mechanism?

Serve as an indicatorProvide motivationFunction as a rationing toolCause the demand curve to move

7.What is the effect of a subsidy given to producers?

Causes the supply curve to shiftCauses the demand curve to moveResults in a decrease in supplyResults in an increase in quantity supplied

8.What is the likely outcome if the price is set lower than the market equilibrium price?

Surplus of goodsShortage of goodsMarket balancePrices tend to decrease

9.When supply changes, under which demand condition will the price be affected more significantly than the quantity sold?

Demand is sensitive to income changesDemand is not very responsive to income variationsDemand reacts strongly to price changesDemand shows little responsiveness to price changesNone of the above

10.What is the effect of a rise in income on the demand curve?

Cause movement along the demand curveResult in a shift of the supply curveCause the demand curve to shiftLead to an increase in quantity demanded along the curveHave no impact on demand or supply

12.If consumers develop a stronger preference for apples, how will this change affect the apple market?

The quantity of apples demanded rises along with an increase in apple supply.Both the demand for and the supply of apples grow.Demand for apples goes up while the supply of apples declines.The quantity demanded of apples falls, but apple supply increases.Demand for apples increases, leading to a higher quantity of apples supplied.

13.What is the correct effect on salad dressing when the price of lettuce rises?

The demand for lettuce drops and both the price and quantity of salad dressing decreaseLettuce supply declinesThere is a reduction in lettuce demandBoth the market price and quantity sold of salad dressing declineThe price and quantity of salad dressing increase

14.If both the supply and demand for personal computers increase simultaneously, what is the expected outcome in the personal computer market?

The equilibrium quantity will increase and the price will also increase.The equilibrium quantity will increase while the price decreases.The equilibrium quantity will increase and the price will stay the same.The change in equilibrium quantity is uncertain, but the price will increase.The equilibrium quantity will increase, but the direction of the price change is uncertain.

20.If a rise in the price of blue jeans causes the demand for tennis shoes to go up, what is the relationship between blue jeans and tennis shoes?

Goods that are used togetherProducts with declining demand as income risesProducts whose demand increases with incomeNone of the aboveGoods that can replace each other

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