1			What does the doctrine of laissez-faire mean?
			A)	That government works best with limited market interference
			B)	That the market works best with limited government interference
			C)	That all externalities need to be corrected by government action
			D)	That social costs are as important as private costs
2			Which of the following is an example of a public good?
			A)	A prescription drug
			B)	Postsecondary education
			C)	A lighthouse
			D)	An orange orchard alongside a honey farm
3			What is a quasi-public good?
			A)	A private good provided by government
			B)	A public good sold privately to individuals
			C)	A private good provided by the market
			D)	A public good provided by government
4			What is producer surplus?
			A)	It is the difference between the price that consumers are willing to pay and the actual market price.
			B)	It is the difference between the higher market price and the price that producers are willing to accept.
			C)	It is the difference between the price that producers are willing to accept and the lower market price.
			D)	It is the total profits made by all forms in a particular industry.
			E)	5
5			Why does the market fail to produce public goods?
			A)	Because normally there is no demand for such goods
			B)	Because it is impossible for the producer to exclude nonbuyers from enjoying the benefit
			C)	Because such products usually entail large external costs
			D)	Because their production normally leads to increased income inequality
			E)	5
6			All of the following, except one, are features of a public good. Which is the exception?
			A)	Public goods are products whose benefits are not affected by the number of users.
			B)	Public goods could be produced by the market.
			C)	Public goods are provided by government.
			D)	Public goods could not be produced by private firms at a profit.
7			All of the following, except one, are examples of market failures. Which is the exception?
			A)	Competitive markets do not result in an equitable distribution of incomes and wealth.
			B)	Competitive markets do not ensure that the economy will be stable.
			C)	Competitive markets do not ensure that competition will continue.
			D)	Competitive markets do not ensure that individuals get the type of jobs they would like
			E)	Competitive markets do not take externalities into consideration.
8			When does allocative efficiency occur?
			A)	When the price of the product is equal to its short-run average cost
			B)	When the price of the product is equal to its long-run average cost
			C)	When the price of the product is equal to its marginal cost
			D)	When the price of the product is below its marginal cost
9			Which of the following statements is correct regarding the term marginal social cost?
			A)	It includes only the private costs of production.
			B)	It includes only the external costs of production.
			C)	It includes both the private and the external costs of production.
			D)	It is the difference between external costs and private costs of production.
10			What does productive efficiency mean?
			A)	A product is being produced at the lowest possible short-run average cost but not necessarily at the lowest long-run average costs.
			B)	A product is being produced at the lowest possible long-run average cost but not necessarily at the lowest short-run average costs.
			C)	A product is being produced at the lowest possible short- and long-run average costs.
			D)	A product is being produced at the lowest possible marginal costs.
11			What does allocative efficiency mean?
			A)	That a product is produced where its price is equal to its marginal costs
			B)	That a product is produced where its price is below its marginal costs
			C)	That a product is produced where its price is equal to its average costs
			D)	That a product is produced where its price is below its average costs
12			What does the term forces of uncompetition refer to?
			A)	The tendency in the market for some firms to grow larger and drive other firms out of business, thereby eroding perfect competition
			B)	The inability of firms to provide all the products that people want
			C)	The inevitable wealth and income inequalities resulting from the market
			D)	The tendency of governments to take over certain firms
13			All the following, except one, are benefits of the perfectly competitive market system. Which is the exception?
			A)	It is productively efficient.
			B)	It ensures that income is fairly distributed.
			C)	It is allocatively efficient.
			D)	It is a costless system.

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14			If using the road was presently free, what toll charge would be necessary to reduce traffic by 40 percent?
			A)	$1
			B)	$2
			C)	$3
			D)	$4

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15			If the toll charge was presently $1, what increase in the toll charge would be necessary to reduce traffic by 2000 vehicles per hour?
			A)	$1
			B)	$2
			C)	$3
			D)	$4