3. Compare the price elasticity of demand for coffee and for latte.
(A) The demand for coffee is more elastic than the demand for latte.
(B) The demand for latte is more elastic than the demand for coffee.
(C) The demand for coffee and the demand for latte are equally elastic.
(D) There is no sufficient information to tell.

4. The reason why China trades with countries with high labor cost, such as the United States, is because (A) the United States has absolute advantages in some productions. (B) the United States has absolute advantages in all productions. (C) the United States has comparative advantages in some productions. (D) the United States has comparative advantages in all productions.

5. You have purchased a ticket for a concert at $200. At the evening of the concert, some people outside of the concert hall without tickets are willing to pay you $500 for your ticket. You decide not to sell and attend the concert. How much did the concert ticket cost you? (A) $500. (B) $300. (C) $200. (D) $700.

6. The demand facing a perfectly competitive firm is (A) perfectly elastic. (B) perfectly inelastic. (C) unitary elastic. (D) downward-sloping.

7. If an economy is producing efficiently, then (A) there is no way to produce more of one good without producing less of another good. (B) it is possible to produce more of both goods without increasing the quantities of inputs that are being used. (C) it is possible to produce more of one good without producing less of the other. (D) it is not possible to produce more of any good at any cost.

8. To construct the market demand for a private good, we should sum the quantity each consumer demands (A) at a given price. (B) at all prices and then sum this amount across all consumers. (C) All of the above. (D) None of the above.

9. In the labor market, if the government imposes a minimum wage that is below the equilibrium wage, then (A) workers who wish to work at the minimum wage will have a difficult time finding jobs. (B) firms will hire fewer workers than without the minimum wage law. (C) some workers may lose their jobs as a result. (D) nothing will happen to the wage rate or employment.

10. Mike was selling his used car. He asked for a price of $220,000, and he decided he would take no less than $200,000. After some negotiation, Smith purchased the car for $205,000. Smith's consumer surplus is (A) $5,000. (B) $15,000. (C) $20,000. (D) not able to be calculated from the information given.

11. Over time, people have come to rely more on market-produced goods and less on goods that they produce for themselves. For example, busy people with high incomes, rather than cleaning their own houses, hire people to clean their houses. By itself, this change has (A) caused GDP to fall. (B) not caused any change in GDP. (C) caused GDP to rise. (D) probably changed GDP, but in an uncertain direction; the direction of the change depends on the difference in the quality of the cleaning that has resulted.

12. Suppose the price of gasoline increases rapidly, and that consumers respond by buying a smaller quantity of gasoline. The consumer price index (A) reflects this price increase accurately. (B) understates the price increase due to the so-called income bias. (C) overstates the price increase due to the so-called income bias. (D) overstates the price increase due to the so-called substitution bias.

13. If there are diminishing returns to capital, then (A) capital produces fewer goods as it ages. (B) old ideas are not as useful as new ones. (C) increases in the capital stock eventually decrease output. (D) increases in the capital stock increase output by ever smaller amounts.

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