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1. Suppose that demand increases AND supply decreases. What would happen in the market for the good? (A) Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. (B) Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. (C) Both equilibrium price and quantity would increase. (D) Both equilibrium price and quantity would decrease.

2. Exports are (A) a limit placed on the quantity of goods brought into a country. (B) goods produced abroad and sold domestically. (C) a country’s ability to produce a good (D) goods produced domestically and sold abroad

3. A perfectly inelastic demand implies that buyers (A) decrease their purchases when the price rises. (B) purchase the same amount when the price rises or falls. (C) increase their purchases only slightly when the price falls. (D) respond substantially to an increase in price.

4. The area below a demand curve and above the price measures (A) producer surplus. (B) total surplus. (C) consumer surplus. (D) willingness to pay.

5. Public goods are (A) rival and excludable. (B) rival but excludable. (C) nonrival but excludable. (D) nonrival and nonexcludable.

6. When a tax is levied on the sellers of a good, the supply curve shifts (A) up by the amount of the tax. (B) down by the amount of the tax. (C) up by more than the tax. (D) down by less than the tax.

7. To compute GDP we (A) simply sum the number of final goods and services. (B) sum the cost of producing final goods and services. (C) use weights determined by a survey regarding how much people value different sorts of goods and services to compute GDP as a weighted average. (D) sum the market values of final goods and services.

8. The term “inflation” is used to describe a situation in which (A) the overall level of prices in the economy is increasing. (B) incomes in the economy are increasing. (C) stock-market prices are rising. (D) the economy is growing rapidly.

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