ECON Exam #1

Refer to Figure 10-5. The socially optimal quantity of output is a) 80 units, since the value to the buyer of the 80th unit is equal to the cost incurred by the seller of the 80th unit. b) 80 units, since the value to society of the 80th unit is equal to the cost incurred by the seller of the 80th unit. c) 140 units, since the value to the buyer of the 140th unit is equal to the cost incurred by the seller of the 140th unit. d) 140 units, since the value to society of the 140th unit is equal to the cost incurred by the seller of the 140th unit.

d) 140 units, since the value to society of the 140th unit is equal to the cost incurred by the seller of the 140th unit.

Refer to Figure 2-3. Efficient production is represented by which point(s)? a) C, D b) B c) C, D, and B d) C, D, and A

a) C, D

Refer to Figure 5-4 . Total revenue when the price is P1 is represented by a) areas B + D. b) areas A + B. c) areas C + D. d) area D.

a) areas B + D.

Refer to Figure 4-7. Equilibrium price and quantity are, respectively, a) $30 and 500 units. b) $20 and 300 units. c) $25 and 400 units. d) $15 and 200 units.

c) $25 and 400 units.

A manufacturer produces 350 units when the market price is $10 per unit and produces 460 units when the market price is $14 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about a) 1.23. b) 0.27. c) 0.81. d) 0.33.

c) 0.81.

Which of the following would not be considered a private good? a) A pencil b) A sweater c) A jeep d) Cable TV service

d) Cable TV service

Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus? a) Producer surplus increases by $3,125 b) Producer surplus increases by $5,625 c) Producer surplus decreases by $3,125 d) Producer surplus decreases by $5,625

a) Producer surplus increases by $3,125

The law of demand states that, other things equal, when the price of a good a) falls, the demand for the good rises. b) rises, the quantity demanded of the good rises. c) rises, the demand for the good falls. d) falls, the quantity demanded of the good rises.

d) falls, the quantity demanded of the good rises.

The maximum price that a buyer will pay for a good is called a) consumer surplus. b) producer surplus. c) efficiency. d) willingness to pay.

d) willingness to pay.

Which of the following statements about comparative advantage is NOT true? a) Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. b) The principle of comparative advantage applies to countries as well as to individuals. c) Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. d) A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.

a) Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. A country has an absolute advantage in those products in which it has a productivity edge over other countries; it takes fewer resources to produce a product. A country has a comparative advantage when a good can be produced at a lower cost in terms of other goods.

If the demand for a good falls when income falls, then the good is called a) a normal good. b) a regular good. c) an ordinary good. d) an inferior good.

a) a normal good.

Trade between countries a) allows each country to consume at a point outside its production possibilities frontier. b) limits a country's ability to produce goods and services on its own. c) must benefit both countries equally; otherwise, trade is not mutually beneficial. d) can best be understood by examining the countries' absolute advantages.

a) allows each country to consume at a point outside its production possibilities frontier.

Cadence says that she would smoke one pack of cigarettes each day regardless of the price. If she is telling the truth, Cadence's a) demand for cigarettes is perfectly inelastic. b) price elasticity of demand for cigarettes is infinite. c) income elasticity of demand for cigarettes is 0. d) demand for cigarettes is unit elastic.

a) demand for cigarettes is perfectly inelastic.

The failure of markets to adequately protect the environment can be viewed either as a problem of a) externalities or as a problem of common resources. b) externalities or as a problem of private goods. c) the overprovision of public goods or as a problem of the underprovision of private goods. d) club goods or as a problem that arises when the quantity of excludable goods exceeds the socially-efficient quantity.

a) externalities or as a problem of common resources.

A supply schedule is a table that shows the relationship between a) price and quantity supplied. b) input costs and quantity supplied. c) quantity demanded and quantity supplied. d) profit and quantity supplied.

a) price and quantity supplied.

For private goods allocated in markets, a) prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources. b) prices guide the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources. c) the government guides the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources. d) the government guides the decisions of buyers and sellers and these decisions lead to an inefficient allocation of resources.

a) prices guide the decisions of buyers and sellers and these decisions lead to an efficient allocation of resources.

Income elasticity of demand measures how a) the quantity demanded changes as consumer income changes. b) consumer purchasing power is affected by a change in the price of a good. c) the price of a good is affected when there is a change in consumer income. d) many units of a good a consumer can buy given a certain income level.

a) the quantity demanded changes as consumer income changes.

A seller's opportunity cost measures the a) value of everything she must give up to produce a good. b) amount she is paid for a good minus her cost of providing it. c) consumer surplus. d) out-of-pocket expenses to produce a good but not the value of her time.

a) value of everything she must give up to produce a good.

Consider Miray's decision to go to college. If she goes to college, she will spend $24,000 on tuition, $12,000 on room and board, and $1,900 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Miray's cost of going to college is a) $37,900. b) $45,900. b) $53,900. d) $61,900.

b) $45,900. Miray's total cost of going to college will include her tuition fees, the money she spends on room and books as well as her opportunity cost of going to college. Opportunity cost of going to college is the lost income that she could have earned by working. Cost = 24,000 tuition + 12,000 room and board + 1,900 books + (16,000 - 8,000 opportunity cost) = 45,900

Table 3-2 ​ Hours Needed to Make 1 Unit of Bread Lemonade England 1 4 France 5 2 ​ ​ ​ Refer to Table 3-2. Assume that England and France each has 40 labor hours available. If each country devotes 20 to production of bread and 20 to production of lemonade, then total production is a) 8 units of bread and 10 units of lemonade. b) 24 units of bread and 15 units of lemonade. c) 40 units of bread and 20 units of lemonade. d) 48 units of bread and 30 units of lemonade.

b) 24 units of bread and 15 units of lemonade.

Table 2-2 ​ Supertown's Production Possibilities Toys Glasses 400 0 300 600 200 1,100 100 1,500 0 1,800 ​ ​ Refer to Table 2-2. What is the opportunity cost to Supertown of increasing the production of toys from 200 to 300? a) 600 glasses b) 500 glasses c) 400 glasses d) 300 glasses

b) 500 glasses

Refer to Figure 2-5. Which of the following events would explain the shift of the production possibilities frontier from A to B? a) A decrease in unemployment b) A general technological advance c) A technological advance in the necklace industry d) An improvement in the allocation of resources

b) A general technological advance

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct? a) Fossil fuels are unlimited resources. b) Fossil fuels are scarce resources. c) Fossil fuels are nonscarce resources. d) Fossil fuels are not resources.

b) Fossil fuels are scarce resources.

Suppose that coal producers create a negative externality equal to $5 per ton of coal. What is the relationship between the equilibrium quantity of coal and the socially optimal quantity of coal? a) They are equal. b) The equilibrium quantity is greater than the socially optimal quantity. c) The equilibrium quantity is less than the socially optimal quantity. d) There is not enough information to answer the question.

b) The equilibrium quantity is greater than the socially optimal quantity.

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem? a) Hannah offers Zaria $20 not to smoke. Zaria accepts and does not smoke. b) Zaria pays Hannah $16 so that Zaria can smoke. c) Zaria pays Hannah $14 so that Zaria can smoke. d) Hannah offers Zaria $15 not to smoke. Zaria accepts and does not smoke.

b) Zaria pays Hannah $16 so that Zaria can smoke.

Refer to Figure 4-1. The movement from point A to point B on the graph is caused by a) an increase in price. b) a decrease in price. c) a decrease in the price of a substitute good. c) an increase in income.

b) a decrease in price.

Refer to Figure 7-1 . Suppose that the price falls from P2 to P1. Area B represents the a) decrease in producer surplus that results from a downward-sloping demand curve. b) additional consumer surplus to initial consumers when the price falls . c) consumer surplus to new consumers who enter the market . d) decrease in producer surplus in the market when the price increases from P 1 to P 2 .

b) additional consumer surplus to initial consumers when the price falls .

Refer to Figure 4-4. The movement from point A to point B on the graph is caused by a) a decrease in the price of the good. b) an increase in the price of the good. c) an advance in production technology. d) a decrease in input prices.

b) an increase in the price of the good.

Market failure associated with the free-rider problem is a result of a) a problem associated with pollution. b) benefits that accrue to those who don't pay. c) benefits that accrue to providers of the product. d) market power.

b) benefits that accrue to those who don't pay.

At the equilibrium price, the quantity of the good that buyers are willing and able to buy a) is greater than the quantity that sellers are willing and able to sell. b) exactly equals the quantity that sellers are willing and able to sell. c) is less than the quantity that sellers are willing and able to sell. d) could be greater or less than the quantity that sellers are willing and able to sell.

b) exactly equals the quantity that sellers are willing and able to sell.

If a nonbinding price floor is imposed on a market, then the a) quantity sold in the market will decrease. b) quantity sold in the market will stay the same. c) price in the market will increase. d) price in the market will decrease.

b) quantity sold in the market will stay the same

The law of supply states that, other things equal, when the price of a good a) falls, the supply of the good rises. b) rises, the quantity supplied of the good rises. c) rises, the supply of the good falls. d) falls, the quantity supplied of the good rises.

b) rises, the quantity supplied of the good rises.

A baker recently has come to expect higher prices for bread in the near future. We would expect a) the baker to supply more bread now than she was supplying previously. b) the baker to supply less bread now than she was supplying previously. c) the demand for bread to fall. d) no change in the baker's current supply of bread; instead, future supply will be affected.

b) the baker to supply less bread now than she was supplying previously.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that a) the nation is producing beyond its capacity, so inflation will occur. b) the nation is not using all available resources or is using inferior technology or both. c) the nation is producing an efficient combination of goods. d) there will be a large opportunity cost if the nation tries to increase production of any good.

b) the nation is not using all available resources or is using inferior technology or both.

Efficiency in a market is achieved when a) a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. b) the sum of producer surplus and consumer surplus is maximized. c) all firms are producing the good at the same low cost per unit. d) no buyer is willing to pay more than the equilibrium price for any unit of the good.

b) the sum of producer surplus and consumer surplus is maximized.

The opportunity cost of an item is a) the number of hours needed to earn money to buy the item. b) what you give up to get that item. c) usually less than the dollar value of the item. d) the dollar value of the item.

b) what you give up to get that item.

Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to a) 0.33. b) 0.67. c) 1.5. d) 2.67.

c) 1.5.

If the price elasticity of demand for a good is 5, then a 10 percent increase in price results in a a) 0.50 percent decrease in the quantity demanded. b) 2.00 percent decrease in the quantity demanded . c) 50.00 percent decrease in the quantity demanded. d) 100.00 percent decrease in the quantity demanded.

c) 50.00 percent decrease in the quantity demanded.

For which of the following individuals would the opportunity cost of going to college be highest? a) A promising young mathematician who will command a high salary once she earns her college degree b) A student with average grades who has never held a job c) A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree d) A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

c) A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree The actor would get more fame and wealth if he didn't go to college, so he would lose the most opportunity by going to college

Which of the following is likely to have the most price elastic demand? a) Ice cream b) Frozen yogurt c) Häagen-Dazs® vanilla bean ice cream d) Vanilla ice cream

c) Häagen-Dazs® vanilla bean ice cream

For which pairs of goods is the cross-price elasticity most likely to be positive? a) Peanut butter and jelly b) Bicycle frames and bicycle tires c) Pens and pencils d) Digital college textbooks and iPhones

c) Pens and pencils A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.

A state-owned bridge is a) always a public good, whether or not it is congested. b) a public good when it is congested, but it is a common resource when it is not congested. c) a common resource when it is congested, but it is a public good when it is not congested. d) always a common resource, whether or not it is congested.

c) a common resource when it is congested, but it is a public good when it is not congested.

Refer to Figure 4-6. The shift from S' to S is called a) an increase in supply. b) a decrease in quantity supplied. c) a decrease in supply. d) an increase in quantity supplied.

c) a decrease in supply.

Education yields positive externalities. For example, a) colleges and universities have benefited, in recent years, from increases in tuition paid by students. b) as a result of earning a college degree, a person becomes a more productive worker and benefits by earning higher wages. c) a more educated population tends to result in lower crime rates. d) when students go to school, they reinforce the demand for teachers.

c) a more educated population tends to result in lower crime rates.

Refer to Figure 10-2. This market is characterized by a) government intervention. b) a positive externality. c) a negative externality. d) a price control.

c) a negative externality.

Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are a) a substitute good. b) a normal good. c) an inferior good. d) a complementary good.

c) an inferior good.

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor, a) only Dale is made better off by trade. b) only Terrence is made better off by trade. c) both Dale and Terrence are made better off by trade. d) neither Dale nor Terrence are made better off by trade.

c) both Dale and Terrence are made better off by trade.

A likely example of complementary goods for most people would be a) apple juice and orange juice. b) tennis balls and basketballs. c) coffee and sugar. d) butter and margarine.

c) coffee and sugar.

If the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a a) corrective tax. b) subsidy. c) command-and-control policy. d) market-based policy.

c) command-and-control policy.

Goods that are rival in consumption include both a) club goods and public goods. b) public goods and common resources. c) common resources and private goods. d) private goods and club goods.

c) common resources and private goods. Private Goods are products that are excludable and rival. They have to be purchased before they can be consumed. Thus, anyone who cannot afford private goods is excluded from their consumption. Likewise, the consumption of private goods by an individual prevents other individuals from consuming the same goods. Therefore, private goods are also considered rival goods. Examples of private goods include ice cream, cheese, houses, cars, etc. Public goods describe products that are non-excludable and non-rival. That means no one can be prevented from consuming them, and individuals can use them without reducing their availability to other individuals. Examples of public goods include fresh air, knowledge, national defense, street lighting, etc. Common resources are defined as products or resources that are non-excludable but rival. That means virtually anyone can use them. However, if one individual consumes common resources, their availability to other individuals is reduced. The combination of those two characteristics often results in an overuse of common resources (see also the tragedy of the commons). Examples of common resources include freshwater, fish, timber, pasture, etc. Club goods are products that are excludable but non-rival. Thus, individuals can be prevented from consuming them, but their consumption does not reduce their availability to other individuals (at least until a point of overuse or congestion is reached). Club goods are sometimes also referred to as artificially scarce resources. They are often provided by natural monopolies. Examples of club goods include cable television, cinemas, wireless internet, toll roads, etc.

Steak and chicken are substitutes. A sharp reduction in the supply of steak would a) increase producer surplus in the market for steak and decrease producer surplus in the market for chicken. b) decrease producer surplus in the market for steak and increase producer surplus in the market for chicken. c) decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken. d) increase consumer surplus in the market for steak and decrease producer surplus in the market for steak.

c) decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken.

In the markets for goods and services in the circular-flow diagram, a) households provide firms with savings for investment. b) households provide firms with labor, land, and capital. c) firms provide households with output. d) firms provide households with profit.

c) firms provide households with output.

The parable called the Tragedy of the Commons applies to goods and services such as a) police protection and cable TV. b) tornado sirens and medical research. c) grazing land and fishing. d) antipoverty programs and national defense.

c) grazing land and fishing.

An example of positive analysis is studying a) whether equilibrium outcomes are fair. b) whether equilibrium outcomes are socially desirable. c) how market forces produce equilibrium. d) if income distributions are fair.

c) how market forces produce equilibrium. Positive economics describes and explains various economic phenomena or the "what is" scenario. Normative economics focuses on the value of economic fairness, or what the economy "should be" or "ought to be." While positive economics is based on fact and cannot be approved or disapproved, normative economics is based on value judgments. Most public policy is based on a combination of both positive and normative economics.

Absolute advantage is found by comparing different producers' a) opportunity costs. b) payments to land, labor, and capital. c) input requirements per unit of output. d) locational and logistical circumstances.

c) input requirements per unit of output.

An externality is the uncompensated impact of a) society's decisions on the well-being of society. b) a person's actions on that person's well-being. c) one person's actions on the well-being of a bystander. d) society's decisions on the poorest person in the society.

c) one person's actions on the well-being of a bystander.

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that a) people respond to incentives. b) rational people think at the margin. c) people face tradeoffs. d) improvements in efficiency sometimes come at the expense of equality.

c) people face tradeoffs.

The adage, "There ain't no such thing as a free lunch," means a) even people on welfare have to pay for food. b) the cost of living is always increasing. c) people face tradeoffs. d) all costs are included in the price of a product.

c) people face tradeoffs.

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a) negative, and the good is an inferior good. b) negative, and the good is a normal good. c) positive, and the good is a normal good. d) positive, and the good is an inferior good.

c) positive, and the good is a normal good.

Markets fail to allocate resources efficiently when a) demanders and suppliers cannot agree on a price. b) goods are rival in consumption and excludable. c) property rights are not well established. d) too many buyers and sellers exist in the same market.

c) property rights are not well established.

People cannot be prevented from using a good if the good is a a) private good or a public good. b) private good or a common resource. c) public good or a common resource. d) public good or a club good.

c) public good or a common resource.

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the a) demand curve for physicals shifts to the right. b) supply curve for physicals shifts to the left. c) quantity demanded of physicals increases, and the quantity supplied of physicals decreases. d) number of physicals performed stays the same.

c) quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

Refer to Figure 4-7. At a price of $15, there would be a a) surplus of 400 units. b) surplus of 200 units. c) shortage of 400 units. d) shortage of 200 units.

c) shortage of 400 units.

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is a) the $22 she earns working. b) the $22 minus the enjoyment she would have received from going shopping. c) the enjoyment she would have received had she gone shopping. d) nothing, since she would have received less than $22 worth of enjoyment from going shopping.

c) the enjoyment she would have received had she gone shopping.

The marginal benefit Joseph gets from purchasing a fourth pair of shoes is a) the same as the total benefit he gets from purchasing four pairs of shoes. b) more than the marginal cost of purchasing the fourth pair of shoes. c) the total benefit he gets from purchasing four pairs of shoes minus the total benefit he gets from purchasing three pairs of shoes. d) the total benefit he gets from purchasing five pairs of shoes minus the total benefit he gets from purchasing four pairs of shoes.

c) the total benefit he gets from purchasing four pairs of shoes minus the total benefit he gets from purchasing three pairs of shoes.

It is commonly argued that national defense is a public good. Nevertheless, the weapons used by the U.S. military are produced by private firms. We can conclude that a) resources would be used more efficiently if the government produced the weapons. b) resources would be used more efficiently if private firms provided national defense. c) weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable. d) national defense is rival in consumption and excludable, but weapons are not rival in consumption and not excludable.

c) weapons are rival in consumption and excludable, but national defense is not rival in consumption and not excludable.

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct? a) At the current output level, the marginal social cost exceeds the marginal private cost. b) The current output level is inefficiently high. c) A per-shot tax could turn an inefficient situation into an efficient one. d) At the current output level, the marginal social benefit exceeds the marginal private benefit.

d) At the current output level, the marginal social benefit exceeds the marginal private benefit.

The distinction between efficiency and equality can be described as follows: a) Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers. b) Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers. c) Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. d) Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

d) Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

Which of the following events would cause a movement upward and to the left along the demand curve for olives? a) The number of people who purchase olives decreases. b) Consumer income decreases, and olives are a normal good. c) The price of pickles decreases, and pickles are a substitute for olives. d) The price of olives rises.

d) The price of olives rises.

Which of the following would not increase in response to a decrease in the price of ironing boards? a) The quantity of irons demanded at each possible price of irons b) The equilibrium quantity of irons c) The equilibrium price of irons d) The quantity of irons supplied at each possible price of irons

d) The quantity of irons supplied at each possible price of irons

Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of a) an opportunity cost. b) an implicit cost. c) a sunk cost. d) a transaction cost.

d) a transaction cost.

Refer to Figure 4-1. The movement from point A to point B on the graph shows a) a decrease in demand. b) an increase in demand. c) a decrease in quantity demanded. d) an increase in quantity demanded.

d) an increase in quantity demanded.

Demand is said to be price elastic if a) the price of the good responds substantially to changes in demand. b) demand shifts substantially when income or the expected future price of the good changes. c) buyers do not respond much to changes in the price of the good. d) buyers respond substantially to changes in the price of the good.

d) buyers respond substantially to changes in the price of the good.

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate a) increases, and producer surplus increases. b) increases, and producer surplus decreases. c) decreases, and producer surplus increases. d) decreases, and producer surplus decreases.

d) decreases, and producer surplus decreases.

Soup is an inferior good if the demand a) for soup falls when the price of a substitute for soup rises. b) for soup rises when the price of soup falls. c) curve for soup slopes upward. d) for soup falls when income rises.

d) for soup falls when income rises.

An increase in the price of a good will a) increase supply. b) decrease supply. c) decrease quantity supplied. d) increase quantity supplied.

d) increase quantity supplied.

Efficiency means that a) society is conserving resources in order to save them for the future. b) society's goods and services are distributed equally among society's members. c) society's goods and services are distributed fairly, though not necessarily equally, among society's members. d) society is getting the most it can from its scarce resources.

d) society is getting the most it can from its scarce resources.

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that a) the mayor thinks demand is elastic, and the city manager thinks demand is inelastic. b) both the mayor and the city manager think that demand is elastic. c) both the mayor and the city manager think that demand is inelastic. d) the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

d) the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

Economics is the study of how society manages its a) limited wants and unlimited resources. b) unlimited wants and unlimited resources. c) limited wants and limited resources. d) unlimited wants and limited resources.

d) unlimited wants and limited resources.

A cost-benefit analysis of a highway is difficult to conduct because analysts a) cannot estimate the explicit cost of a project that has not been completed. b) are unlikely to have access to costs on similar projects. c) are not able to consider the opportunity cost of resources. d) will have difficulty estimating the value of the highway.

d) will have difficulty estimating the value of the highway.