5. A good that is rival but not excludable would be a A) public good B) private good) C) natural monopoly. D) common resource.

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1 ECONOMICS ASSESSMENT 1. A higher price for batteries would tend to A) increase the demand for flashlights. B) increase the demand for electricity. C) decrease the demand for electricity. D) increase the demand for batteries. 2. In a free market system, what coordinates the actions of millions of people with their varying abilities and desires? A) producers B) prices C) consumers D) the government 3. Refer to the figure above. A binding price ceiling is shown in A) panel (a). B) panel (b). C) both panel (a) and panel (b). D) neither panel (a) nor panel (b). 4. A tax placed on a good A) causes the price of the good to fall. B) affects buyers of the good, but not sellers. C) causes the size of the market for the good to shrink. D) is usually borne entirely by the seller of the good

2 5. A good that is rival but not excludable would be a A) public good B) private good) C) natural monopoly. D) common resource. 6. The Tragedy of the Commons occurs because A) government property is most heavily used by the wealthy. B) everyone deserves an equal share of government property. C) social and private incentives differ. D) established property rights create competition. 7. Excessive fishing occurs because A) each individual fisherman has little incentive to maintain the species for the next year. B) fishermen rely on government managers to worry about fish populations. C) fishermen are concerned about the population dynamics of fish biomass, not current harvest rates. D) fishermen have other marketable skills and do not fear exploitation of fish reserves. 8. Taxes create deadweight losses because they A) reduce profits of firms. B) distort incentives. C) cause prices to rise. D) create revenue for the government. 9. Minimum-wage laws serve to (i) have little or no effect on many workers' wages. (ii) create above-equilibrium wages for some unskilled workers. (iii) create a shortage of unskilled labor. A) (i) and (ii) B) (ii) and (iii) C) (i) and (iii) D) All of the above are correct.

3 10. Why would a wage differential due to discrimination be unlikely to persist in a competitive labor market? (i) Workers who are victims of discrimination will eventually drop out of the labor market. (ii) Competing firms will demand more labor from the workers who are temporarily victimized by discrimination. (iii) There is a cost advantage for firms that do not discriminate. A) (i) and (ii) B) (ii) and (iii) C) (i) and (iii) D) All of the above are correct. 11. The forces that make market economies work are A) price and quantity. B) demand and supply. C) the Senate and House of Representatives. D) the Constitution and the Bill of Rights. 12. You lose your job and as a result you buy fewer mystery books. This shows that you consider mystery books to be a/an A) normal good B) inferior good C) luxury good D) complementary good 13. Refer to the figure above. If the price is $10, there would be a A) shortage of 200 and price would rise. B) surplus of 200 and price would fall. C) shortage of 600 and price would rise. D) surplus of 600 and price would fall.

4 14. An early frost in the vineyards of Napa Valley would cause A) an increase in the demand for wine, increasing price. B) an increase in the supply of wine, decreasing price. C) a decrease in the demand for wine, decreasing price. D) a decrease in the supply of wine, increasing price. 15. Which of the following is NOT a result of government imposed rent controls? A) fewer new apartments offered for rent B) less maintenance provided by landlords C) bribery D) higher quality housing 16. The real rate of interest is the nominal rate of interest minus A) the expected inflation rate. B) the price level. C) real GDP. D) bond interest rate. 17. What do we call an increase in the average level of prices in an economy? A) recession B) stagflation C) deflation D) price inflation 18. According to the quantity theory of money, the major cause of inflation in the long run is an increase in: A) the standard of living. B) the velocity of money. C) the growth of real GDP. D) the growth of the money supply. 19. To be considered money, an asset must be: A) backed by gold or other precious metals. B) widely accepted as a means of payment. C) currency. 20. Which of the following is a tool that the Federal Reserve uses to try to Influence Aggregate Demand? A) open market operations B) lending to banks and other financial institutions C) changes in reserve requirements and the interest rate paid on reserves

5 21. The annual amount by which federal spending exceeds federal revenues is called: A) the government deficit. B) the national debt. C) the debt held by the public D) the debt to GDP ratio. 22. Which of these is a form of fiscal policy? A) changes in government spending. B) tax rebates. C) tax cuts. 23. The primary tools of fiscal policy are: A) money supply and money demand B) government expenditure and money supply. C) government expenditure and taxation. D) taxation and interest rates. 24. Fiscal policy is: A) government borrowing to finance the national debt. B) government taxes and spending that affect the income distribution among people. C) government taxes, spending, and borrowing that affect business fluctuations. D) the change of the money supply that affects business fluctuations. 25. According to the theory of comparative advantage, a country should specialize in producing a good that involves: A) more inputs than those in other countries. B) fewer inputs than those in other countries. C) a higher opportunity cost than that of other countries. D) a lower opportunity cost than that of other countries.