Multiple-Choice Questions
1. An individual's value for a good or service is the
a. The amount of money he or she used to pay for a good.
b. The amount of money he or she is willing to pay for it.
c. The amount of money he or she has to spend on goods.
d. None of the above.

2. The biggest advantage of capitalism is that
a. It generates equality.
b. Prices assist in moving assets from high value to low-value uses.
c. It is fair.
d. It creates wealth by letting a person follow his or her own self-interest.

3. Wealth-creating transactions are more likely to occur
a. With private property rights.
b. With strong contract enforcement.
c. With black markets.
d. All of the above.

4. Government regulation
a. provides incentives to conduct business in an illegal black market.
b. Plays no role in generating wealth.
c. Is the best way to eliminate poverty.
d. Does not enforce property rights.

5. An example of a price floor is
a. Minimum wages.
b. Rent controls in New York.
c. Both a and b
d. None of the above

6. A price ceiling
a. Is a government-set maximum price.
b. Is an implicit tax on producers and an implicit subsidy to consumers.
c. Will create a surplus.
d. Causes an increase in consumer and producer surplus.

7. Taxes:
a. Impede the movement of assets to higher valued uses.
b. Reduce incentives to work.
c. Decreases the number of wealth creating transactions.
d. All the above

8. A consumer values a car at $30,000 and it costs a producer $20,000 to make the same car. If the transaction is completed at $24,000, the transaction will generate:
a. No surplus.
b. $4,000 worth of seller surplus and unknown amount of buyer surplus.
c. $6,000 worth of buyer surplus and $4,000 of seller surplus.
d. $6,000 worth of buyer surplus and unknown amount of seller surplus.

9. A consumer values a car at $525,000 and a producer values the same car at $485,000. If sales tax is 8% and is levied on the seller, then the sellers bottom line price is
a. $527,000.
b. $523,800.
c. $525,000.
d. $500,000.

10. Efficiency implies opportunity,
a. Always.
b. Never.
c. Only if accompanied by secure property rights.
d. None of the above.