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• Which of the following is an example of a normative question? Should Sweden decrease the diesel tax to relieve the burden of the current high prices?, How will a decrease in diesel tax affect tax revenues?, What fraction of an income tax cut will be spent on imported goods?, How will an increase in unemployment benefits affect the unemployment rate?
• The principle that the cost of something is equal to what is sacrificed to get it is known as the principle of opportunity cost, marginal principle, principle of diminishing returns, reality principle
• Consumer surplus is the difference between the market price consumers are willing to pay for a product and the actual price they pay, the difference between the highest market price consumers are willing to pay for a product and the minimum amount producers are willing to accept for that product, the difference between the utility the consumer receives for product minus the utility the consumer would have received for a substitute product., the economic profit earned from the sale of a good, minus its marginal cost of production.
• Which of the following is likely to have a demand curve that is the most elastic? Demand for the perfectly competitive firm's output., Demand for the monopoly firm's output., Demand for the monopolistically competitive firm's output., Demand for the oligopoly firm's output with a homogenous product.
• The short-run shutdown point for the perfectly competitive firm occurs when the demand curve facing the firm is tangent to its average variable cost curve, where total revenue is just sufficient to cover all explicit cost but not any implicit or imputed costs., when the firm is able to cover all of its fixed costs and part of its variable costs, where total revenue is just sufficient to cover total cost
• The differences between a monopolistic competition firm and a perfectly competitive firm include all of the following except: In the long-run monopolistic competitive firms can sustain positive economic profits while perfectly competitive firms cannot, the demand curve for the monopolistic competition firm is downward sloping and for the perfectly competitive firm is horizontal., Marginal revenue is less than price for the monopoly and equal to price for the perfectly competitive firm., There is a degree of product differentiation in the monopolistic competition market while the perfect competition market sells a homogeneous good.
• The monopolist's supply curve does not exist, is the marginal cost curve above average variable cost, is the marginal cost curve above average total cost, is the upward sloping portion of the marginal cost curve.
• Suppose that a war is fought with biological weapons. The weapons destroy people but not capital. What is likely to happen to equilibrium wages and rental rates after the war when compared to their values before the war? Wages rise and rental rates fall., Wages rise and rental rates rise., Wages fall and rental rates rise., Wages fall and rental rates fall.
• As the number of sellers in an oligopoly increases the price in the market moves closer to marginal cost., collusion is more likely to occur because a larger number of firms can place pressure on any firm that defects., the price in the market moves further from marginal cost., total output in the market tends to fall because each firm must cut back on production
• The reason that so many economic activities create externalities is that property rights are poorly defined, government failure prevents them from being halted, third parties become involved in decision making, free riders exist
• A public good is a good whose benefits are not diminished as it is consumed and whose benefits cannot be withheld from anyone, diminished as it is consumed and whose benefits cannot be withheld from anyone, not diminished as it is consumed and whose benefits can be withheld from anyone, concentrated among a select few.
• .To internalize a positive externality, an appropriate public policy response would be to subsidize the good., ban the good creating the externality., tax the good., have the government produce the good until the value of an additional unit is zero
• To internalize a negative externality, an appropriate public policy response would be to tax the good., subsidize the good., have the government take over the production of the good causing the externality, ban the production of all goods creating negative externalities
• Tradable pollution permits set the price of pollution, set the quantity of pollution, determine the demand for pollution rights, reduce the incentive for technological innovations to further reduce pollution
• Assume that the rent for the premises used by Firm A increases by 5%. What is most likely to happen if Firm A is a profit maximizing company? Firm A will produce the same quantity and at the same price although their profit will be lower., irm A will increase the price of their good in order to compensate for the increase in rent., Firm A will decrease the price of their good in order to sell more and thus compensate for the increase in rent., Firm A’s supply curve will shift to the left, and lower its production.
• Sture buys three pairs of designer trousers at 2000 SEK a pair. If the price equals the amount Sture is willing to pay for the third pair, then: he might have earned some consumer surplus on the first two pairs of trousers., he earned no consumer surplus., he would have earned consumer surplus if he bought one more pair of trousers., he would have earned more consumer surplus if he bought one less pair of trousers.
• The following are examples of a natural monopoly A bridge over a river connecting two small towns., A view of the Grand Canyon, A radio signal, A good where the firm’s profits are protected by a patent.

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