1 All information provided for reference only Join us on Facebook.com/thetopgrades CHAPTER 2 1) When the market is in equilibrium, a) Total surplus is minimized b) Total s ...

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1
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CHAPTER 2

1) When the market is in equilibrium,
a) Total surplus is minimized
b) Total surplus is maximized without government intervention
c) Government maximizes total revenue
d) None of the above
ANS: B

2) The difference between the minimum price the producer is willing to accept and the price the
producer actually receives for a product is referred to as:
a) market surplus
b) market shortage
c) buyer surplus
d) seller surplus.
ANS: D

3) If you are willing to sell your lawn mower business for $355,000 and someone offers you
$420,000 for it, this transaction will generate:
a) There is no surplus created
b) $65,000 worth of seller surplus and unknown amount of buyer surplus
c) $30,000 worth of buyer surplus and $35,000 of seller surplus
d) $65,000 worth of buyer surplus and unknown amount of seller surplus
ANS: B

4) Taxes cause:
a) Market distortions
b) Reduce incentives to work
c) Decrease wealth creating transactions
d) All of the above
ANS: D


5) A price ceiling is binding when
a) the government sets price above market equilibrium price.
b) the equivalent of an implicit tax on producers and an implicit subsidy to consumers.
c) the government sets price below market equilibrium price.
d) Both b and c.
ANS: B

6) Economic reasoning is based on the premise that:
a) all decisions or actions are costless.
b) only non -economic decisions or actions have a cost associated with them.
c) only economic decisions or actions have a cost associated with them.
d) all decisions and acti ons have a cost associated with them.
ANS: D

7) Social forces:
a) affect the price mechanism through cultural norms.
b) affect the price mechanism through the educational system.
c) affect the price mechanism through scarcity.
d) do not affect the price mechanism.
ANS: A

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8) One lesson of business:
a) is tracing the consequences of a policy
b) promoting a policy change to eradicate inefficiencies
c) buy a low -valued assets and sell it to someone who values it higher.
d) None of the above
ANS: C

9) The difference between the maximum price the consumer is willing to pay and the price the
consumer actually pays for a product is referred to as:
a) market surplus
b) market shortage
c) buyer surplus
d) seller surplus.
ANS: C

10) If you are willing to sell your car bus iness for $500,000 and someone offers you $420,000 for
it, this transaction will generate:
a) There is no surplus created
b) $80,000 worth of seller surplus and unknown amount of buyer surplus
c) $40,000 worth of buyer surplus and $40,000 of seller surplus
d) $80,000 worth of buyer sur