Questions 1–5.

Questions 6–10. Select the TWO correct answer choices.

Questions 11–15 are based on the passage below.

Minimum wage policy has long served as a testing ground for competing economic theories. Classical supply-and-demand reasoning predicts that raising the price of labor above its market-clearing level should reduce the quantity of labor demanded, leading employers to hire fewer workers or cut hours. For decades, this prediction was treated largely as settled fact among economists. A pivotal 1994 study of fast-food employment across the New Jersey–Pennsylvania border, however, found no evidence of job losses following a minimum wage increase in New Jersey relative to Pennsylvania, where wages remained unchanged. Critics of the study raised methodological objections, and subsequent research has produced a genuinely mixed picture: some studies find modest negative employment effects, particularly for teenage workers and in regions with large wage increases, while others replicate the original finding of negligible impact. One proposed reconciliation is that labor markets are not perfectly competitive the way classical theory assumes; employers with some wage-setting power (monopsony power) may be paying workers below their productive value, meaning a moderate minimum wage increase can be absorbed without job losses, up to a point beyond which the classical prediction reasserts itself.

Questions 16–20 are based on the passage below.

Nudge theory, popularized by behavioral economists in the early 2000s, proposes that subtle changes to the way choices are presented — the "choice architecture" — can steer people toward better decisions without restricting their options or altering economic incentives. A frequently cited example involves retirement savings: switching a company's default enrollment policy from opt-in to opt-out dramatically increases participation rates, even though employees remain entirely free to leave the plan. Proponents describe such interventions as libertarian paternalism, a deliberately paradoxical term meant to capture the idea of guiding behavior while preserving freedom of choice. Critics have raised two distinct objections. The first is practical: nudges that work well in one cultural or institutional context often fail to replicate elsewhere, suggesting the technique is less a universal principle than a context-dependent tool. The second objection is more philosophical: even a nudge that preserves formal freedom of choice may still be manipulative if it exploits predictable cognitive biases rather than persuading through reasons, raising questions about whether the ends of better outcomes justify such means. Defenders respond that choice architecture is unavoidable — every system of presenting options nudges in some direction — so the real question is not whether to nudge but whether the nudging is done transparently and toward outcomes people would endorse on reflection.