1) According to the opportunity cost principle, the true cost of something is:

A) The total number of dollars you pay for it.

B) The marginal number of dollars you pay for it.

C) The benefits you get from it.

D) What you give up to get it.

2) Which of the following scenarios does not illustrate the law of demand?

A)  When Kit-Kats are cheaper, Mary opts to buy more Kit-Kats.

B)  Darren buys two pairs of jeans when they are $40 each, but only one pair when they are $60 each. C)  Layla buys less tea when the price of tea rises.

D)  Freya buys more doughnuts when the price of doughnuts is higher.

3) The                      suggests that decisions about quantities are best made incrementally (a little bit at a time).

A) cost-benefit principle

B) opportunity cost principle

C) marginal principle

D) interdependence principle

4) It costs $9 to make 5 coffee mugs and $12 to make 6 coffee mugs. What is the marginal cost of the sixth coffee mug?

A) $.50

B) $2

C) $3

D) $1.33

5) You have a coupon for a free item at Starbucks. You can have either a cookie, a

cappuccino, or an iced tea. You choose the cookie because that is your favorite item.

Your second choice would have been the iced tea. What is the opportunity cost of the

cookie you chose?

A) An iced tea

B) Nothing, because it was free

C) A cappuccino

D) A cookie

E) An iced tea and a cappuccino

6) Sasha has diminishing marginal benefit for hot wings. Which of the following must be true:

A) She would rather have 10 hot wings than 11 hot wings.

B) She does not like hot wings.

C) She will eat the number of hot wings that maximizes her marginal benefit.

D) She receives more enjoyment from the 10th hot wing than from the 11th hot wing

E) The hot wing eaten gives a marginal benefit of zero.

7) The Gap increases the price it charges for sweatshirts. As a result, fewer people buy sweatshirts from The Gap. What happened?

A) Demand shifted left.

B) Demand shifted right.

C) Movement up and to the left on the demand curve.

D) Movement down and to the right on the demand curve.

8) Use the following graph of the demand for coffee to answer the question below. Refer to the three

demand curves for coffee and assume that coffee is a normal good. Which of the following would shift the demand for coffee from D1 to D2?

A) A decrease in consumer incomes.

B) A decrease in the price of coffee.

C) An increase in consumer incomes.

D) An increase in the price of coffee.

9) The price of beer goes up. Following this price increase, you observe an increase in the amount of bottled water sold. This suggests that beer and bottled water are:

A) Substitutes

B) Complements

C) Normal goods

D) Inferior goods

10) You want to get a new iPhone, but you don’t want to have the color phone as your friends – you want yours to be unique. All of your friends feel the same way. This suggests that yellow iPhones are:

A) Network goods

B) Congestion goods

C) Inferior goods

D) Normal goods

11) In the graphs we saw in class, surpluses occur:

A) At the equilibrium price.

B) At prices below the equilibrium price.

C) At prices above the equilibrium price.

D) When quantity demand exceeds quantity supplied.

The following two questions refer to the following graph:

12) The diagram above shows three supply curves for apples. Which of the following would cause the supply of apples to shift from S1 to S3?

A) A decrease in the price of fertilizer that is used to grow apples.

B) A new bacteria that destroys apple crops.

C) An increase in the price of apples.

D) A decrease in the price of apples.

13) The diagram above shows three supply curves for apples. Apples and peaches are substitutes in production. Which of the following would cause the supply of apples to shift from S1 to S3?

A) An increase in the price of apples.

B) An increase in the price of peaches.

C) A decrease in the price of apples.

D) A decrease in the price of peaches.

14) Which of the following is an example of a reason why the supply curve for an oil company slopes up?

A) When the company produces a lot of oil, it has to pay its employees overtime, which increases the marginal cost of making oil.

B) Oil is a normal good with lots of substitutes.

C) Oil is heavily taxed.

D) When the price of oil increases, people switch to hybrid cars that use less gasoline, which is made from oil.

E) Suppliers know that people need to use oil in order to commute to work, so demand is inelastic.

15) This problem concerns the market for used electric scooters. At a price of $100 per scooter, there are 100 people wanting to buy scooters and 50 people wanting to sell scooters. According to what we learned in

class, what do we expect to happen?

A) 50 scooters will be sold at a price of $100 per scooter.

B) The price will increase until 100 people are willing to sell scooters.

C) Some sellers will offer to sell at a price of less than $100 per scooter.

D) Some buyers will offer to pay more $100 per scooter.

16) Peanut butter and jelly are complements. Due to poor growing conditions, not many strawberries are

grown this year, and the price of strawberries increases. Strawberries are an input good used in making jelly. What happens to the market for peanut butter?

A) Price increases and quantity increases.

B) Price increases and quantity decreases.

C) Price decreases and quantity increases.

D) Price decreases and quantity decreases.

E) Quantity decreases and price is unaffected.

17) Consider the market for sunglasses. Demand increases and supply decreases. Which of the following is true?

A) Price increases. The effect on quantity is indeterminate.

B) Price decreases. The effect on quantity is indeterminate.

C) Price decreases. Quantity decreases.

D) The effect on price is indeterminate. Quantity decreases.

E) Price increases. Quantity decreases.

18) Sarah runs a snowplow business. Usually, she charges $30 per hour and works 40 hours per week. After a big blizzard, she finds that she has lots more people wanting to hire her than usual. Based on what we’ve   learned in class, what do we expect to happen? (Hint: Think about how the equilibrium price and quantity for Sarah’s services will change.)

A) She increases her hourly rate and works more hours.

B) She keeps her hourly rate the same and works fewer hours.

C) She keeps her hourly rate the same and works more hours.

D) She increases her hourly rate and works the same number of hours.

19) Celine enjoys watching episodes of Friends. The table below shows her total benefits from watching different numbers of episodes. What is the marginal benefit of the third episode?

A) $4

B) -$2

C) $21

D) $7

20) You are deciding whether to live with your parents in their house or in an on-campus apartment. You can live with your parents for free, but the apartment costs $500 per month. You will have less privacy if you live with your parents. Both places are a 30 minute drive from campus, and you commute to campus every day. Which of the following is an opportunity cost of living in the apartment?

A) Having less privacy

B) The time you spend commuting

C) $500 in rent

D) Your college tuition

21) Toni is building a swimming pool in her backyard. Marginal costs and marginal benefits for the pool are

shown below. How big of a pool should Toni build?

A) 100 square feet

B) 101 square feet

C) 300 square feet

D) 500 square feet

22) Alton is deciding whether to commute to work via Uber or purchase a new car. If he commutes by Uber, he will spend $50 per week in Uber fares. All else equal, Alton prefers the convenience of owning a car and  values this convenience at $10 per week. Based on this information, Alton should purchase a car if the cost   of a car is            than          per week.

A) More; $40

B) More; $60

C) Less; $40

D) Less; $60

23) When cellphones first came out, the technology used in them was extremely advanced and made

producing cellphones very expensive. Overtime, the cost of cellphone components (inputs) has gone down drastically. Based on what we’ve learned in class, how do we expect this to affect the market price and

market quantity of cellphones? (Hint: think about how equilibrium changes.)

A) Price decreases and quantity decreases.

B) Price decreases and quantity increases.

C) Price increases and quantity decreases.

D) Price increases and quantity increases.

24) Demand slopes down. This implies that:

A) There is an inverse (negative) relationship between the price of a good and the quantity demanded. B) There is a positive relationship between the price of a good and the quantity demanded.

C) When demand increases, the curve shifts to the left.

D) Supply is equal to demand.

25) A survey of 100 people finds that, when the price of a hat is $15, the people in the survey will buy a total of 75 hats. Suppose the total market size is 10,000 people. When the price of a hat is $15, what is the total

number of hats that will be sold in the market?

A) 0.75

B) 7,500

C) 1,500

D) 75

E) 10,750

26) The supply curve of milk for consumers is shifted by all of the following EXCEPT                 . A) an increase in the price of cheese (which is made from milk)

B)  improved milking technology

C)  the price of milk

D) a major dairy going out of business

27)  In the graph, the movement from point H to point G is caused by

A) an increase in the price of the item.

B)  a decrease in the price of the item.

C)  a decrease in the supply of the item.

D) an increase in the supply of the item.

28) Daisy is a milk farmer in a perfectly competitive market where there are many milk farmers. The market price of milk is $0.15 per gallon, which is also the marginal cost per gallon of milk. If Daisy

charges $0.25 per gallon, she will

A) not sell any milk.

B)  sell more milk than the other farmers.

C)  sell the same amount of milk as she did when she charged $0.15 per gallon. D) increase her profitability by $0.10 per gallon.

29) Refer to the table. It costs $13 to make three T-shirts and $19 to make four T-shirts. What is the marginal cost of the fourth T-shirt?

30) In the market for airline flights, what happens if the cost of fuel (an input into airline flights) increases? (Hint: think about how equilibrium changes.)

A) Demand will shift left.

B)  Demand will shift right.

C)  There will be movement up and to the left along the demand curve.

D) There will be movement down and to the right along the demand curve.

31) Use Figure: If the price of quinoa is $3 per bushel, a             of bushels per period will result and we expect that price will          toward the equilibrium.

A)  Surplus; rise

B)  Shortage; rise

C)  Surplus; fall

D)  Shortage; fall

32) PureBites, a pet nutrition company, sells bags of dog treats. The marginal cost of producing a bag of treats is indicated in the table below in 25-unit increments per day.

If the market price of a bag of dog treats is $7.00, how many bags of dog treats should PureBites produce per day to maximize its profits?

A)  50

B)  75

C)  100

D)  125