1. Noelle quits her $80,000-a-year job to stay home. What is the opportunity cost of her decision? a. zero, since she will no longer be earning a salary b. depends on the “going-rate” for stay-at-home mothers c. at least $80,000 d. the value she attributes to the joy of not working e. $80,000

2. Scarcity: a. stems from the incompatibility between limited resources and unlimited wants b. can be overcome by discovering new resources c. can be eliminated by rationing products d. is a bigger problem in market economies than in socialist economies e. is not experienced by the very wealthy

3. The attainable production points on a production possibilities curve are: a. The horizontal and vertical intercepts b. The points along the production possibilities curve c. The points outside the area enclosed by the production possibilities curve d. The points along and inside the production possibilities curve e. The horizontal intercept

4. Which of the following is evidence of a surplus of bananas? a. Firms raise the price of bananas b. The price of bananas is lowered in order to increase sales c. The equilibrium price of bananas rises due to an increase in demand d. The quantity demanded of bananas is greater than the quantity supplied e. The quantity demanded of bananas is equal to the quantity supplied

5. Olive oil producers want to sell more olive oil at a higher price. Which of the following events would have this effect? a. An increase in the price of olive oil presses (machinery used to press olives). b. A decrease in the cost of transporting olive oil to markets c. An increase in the price of land used to plant olives d. Research finds that consumption of olive oil reduces the risk of heart disease e. Wine, a substitute in production, commands a higher price in the market

6. Prices of California Merlot wine (assume that this is a normal good) have risen steadily in recent years. Over this same period, prices for French oak barrels used for wine storage have dropped and consumer incomes have risen. Which of the following best explains the rising prices of California Merlots? a. The supply curve for Merlot has shifted rightward while the demand curve has shifted to the left b. The demand curve for Merlot has shifted rightward faster than the supply curve has shifted rightward c. The demand curve and the supply curve for Merlot have both shifted to the left d. The supply curve for Merlot has shifted rightward faster than the demand curve has shifted rightward e. The demand curve for Merlot has shifted rightward faster than the supply curve has shifted leftward

7. A decrease in the demand for eggs due to changes in consumer taste, accompanied by a decrease in the supply of eggs as a result of an outbreak of Avian flu, will result in: a. A decrease in the equilibrium quantity of eggs and no change in the equilibrium price b. A decrease in the equilibrium price of eggs and no change in the equilibrium quantity c. A decrease in the equilibrium price of eggs; the equilibrium quantity may increase or decrease d. An increase in the equilibrium quantity of eggs; the equilibrium price may increase or decrease e. A decrease in the equilibrium quantity of eggs and decrease in the equilibrium price

8. Suppose the government announces plans to provide a weather warning service at a cost of $1200. Also, assume there are only 4 individuals in society equally sharing the tax expense of the good, if provided, at a rate of $300 each. The benefits of the weather warning service are estimated at $900, $200, $250 and $100, respectively from each citizen. Which of the following does this scenario demonstrate? a. An efficient voting outcome of “no” vote for the proposal b. An inefficient voting outcome of “yes” vote for the proposal c. An efficient voting outcome of “yes” vote for the proposal d. An inefficient voting outcome of “no” vote for the proposal

9. A product is considered to be non-excludable if: a. your consumption of the product reduces the quantity available for others to consume b. it is jointly owned by all members of a community c. you cannot keep those who did not pay for the item from enjoying its benefits d. you can keep those who did not pay for the item from enjoying its benefits e. it is a private good

10. A negative externality occurs because of: a. an underproduction of a particular product due to an under-allocation of resources to that product b. an overproduction of a particular product due to an under-allocation of resources to that product c. an underproduction of a particular product due to an over-allocation of resources to that product d. an overproduction of a particular product due to an over-allocation of resources to that product e. none of the above