Unit 1 Test

What does the Law of Supply state?

• As the price of a good increases, the quantity supplied decreases.

• As the price of a good increases, the quantity supplied increases.

What occurs when a price ceiling is below equilibrium price?

• It causes a shortage.

• No effect.

Which is a negative externality in production?

• Bees pollinating crops.

• Factory emitting pollution.

What is a characteristic of a public good?

• Non-excludable and non-rival.

• Non-excludable but rival.

What occurs when a market reaches equilibrium?

• Supply equals demand.

• Demand exceeds supply.

What occurs when a price floor is set above the equilibrium price?

• It leads to a surplus.

• It leads to a shortage.

Which is an example of market failure?

• Monopoly power.

• Efficient resource allocation.

What causes scarcity?

• Unlimited resources.

• Limited resources and unlimited wants.

How does a positive externality affect social benefit?

• It increases social benefit.

• It has no effect on social benefit.

What best describes a public good?

• A good that everyone can use, and one person's use doesn’t reduce its availability to others.

• A product that can only be used by those who pay for it.