Which of the following is a defining characteristic of a market economy?

• Private ownership of resources

• Equitable distribution of income

• Taxation of personal income

• Reliance on public goods

• Government-guided resource allocation

Good X (units) Good Y (units)

0 100

20 95

40 85

60 65

80 35

100 0

The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X?

• It decreases, because the production of good Y decreases by greater amounts

• It decreases, because the production of good Y increases by smaller amounts

• It remains constant, because the production of good X increases by the same amount

• It increases, because the production of good Y decreases by greater amounts

• It increases, because the production of good Y increases by smaller amounts

An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded that good Y is

• an inferior good

• a luxury good

• a normal good

• a substitute for good X

• a complement for good X

Which of the following will shift the supply curve for apples to the right?

• An increase in consumers' income

• An increase in the price of apples

• An increase in the wages of apple pickers

• A decrease in the rental price for apple harvesting equipment

• A decrease in the demand for oranges, a substitute in consumption

Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent?

i)Price Elasticity of Demand ii)Change in Price iii)Change in Total Revenue

• i) Elastic

  ii) Increase

  iii) Increase

• i) Elastic

  ii) Decrease

  iii) Decrease

• i) Unit Elastic

  ii) Decrease

  iii) Decrease

• i) Inelastic

  ii) Decrease

  iii) Increase

• i) Inelastic

  ii) Decrease

  iii) Decrease

Which of the following best describes how a consumer maximizes total utility from the consumption of a bundle of goods and services?

• By choosing the quantity of each good such that the quantity demanded of each good is equal to the quantity supplied

• By choosing the quantity of each good such that the marginal utility from each good is equal to zero

• By choosing the quantity of each good such that the price is equal to the marginal revenue

• By choosing the level of output where marginal revenue is equal to marginal cost

• By choosing the combination of goods such that the marginal utility per dollar spent on the last unit of each good is equal

The marginal benefit of consuming a good is

• the change in average utility that results from consuming one more unit of the good

• the same as the total benefit

• equal to the marginal cost of the good

• the change in total expenditures as a result of buying one more unit of the good

• the maximum amount a consumer is willing to pay for one more unit of the good

The economic concept of total consumer surplus refers to which of the following?

• The difference between the quantity of a good or service that people purchase and the amount that they actually consume

• The overproduction of goods and services relative to the socially optimal level of output

• The sum of the differences between the prices that consumers are willing to pay for a good or service and the price they actually pay

• The sum of the differences between the prices that consumers are willing to pay for a good or service and the minimum prices that sellers must receive to offer that quantity

• The difference between the quantity demanded and the quantity supplied of a product at a given price

The table below is partially filled in with the different types of costs for a firm. Based on the information in the table, what is the marginal cost of producing the second unit?

Quantity Variable Cost Fixed Cost Total Cost Average Total Cost

0 0 60

1 130

2 90

• $50

• $60

• $70

• $90

• $180

• 0

• Q1

• Q2

• Q3

• Q4