B) Consumer utility

C) Utility maximization principle

D) Marginal utility

E) Satisfactory price

15. The price elasticity of demand will tend to be higher for goods with more substitutes because:

A) goods with many substitutes tend to be inexpensive.

B) as the price of substitutes rises, the quantity demanded will increase greatly.

C) buyers can buy alternatives to the good in question.

D) the cross-price elasticity of demand will be low.

E) buyers can never buy alternatives to the good in question.

16. Costs which represent additional general costs at increase in volume of production at unit, refer to:

A) Marginal costs

B) Average costs

C) Full costs

D) Constant costs

E) There is no right answer

17. Characteristics of curves of indifference

A) The curve laying above and more to the right than other curves, is most preferable.

B) Curves of indifference are convex to the beginning of coordinates;

C) Curves of indifference are never crossed;

D) Curves of indifference have a negative inclination;

E) All below listed;

18. What of following expressions represents Marginal costs?

A) ∆TVC: Q

B) ∆TC: ∆Q

C) TFC:Q

D) (P Q): ∆Q

E) ∆TFC: Q

1. The difference between the amount a seller is paid for a good and the cost of producing that good is known as:

A) net social cost.

B) producer surplus.

C) consumer surplus.

D) total utility.

E) net surplus of the market.

2. Producer surplus is measured as:

A) the area above the supply curve and below the market price.

B) the area below the supply curve and above the market price.

C) the area lying above the market price, as bounded by the supply curve.

D) the area below the supply curve and above the market price as long as the market is in an equilibrium position.

E) the area above the supply curve and below the demand curve.

3. A perfectly competitive firm is producing notebooks for $1.00 each. If the firm produces 1,200 notebooks, its total revenue will be:

A) $12,000.

B).$12

C) $120.

D) $1,200

E) 10 cents.

4. Suppose that nominal GDP is $6,000 and real GDP is $3,000. What is the GDP price deflator?

A) 150

B) 125

C) 200

D) 250

E) 300.

5. The purchase of final goods and services by households is called:

A) investment.

B) consumption.

C) public sector expenditure.

D) net exports.

E) outflow.

6. Investment is the purchase of capital equipment, inventories, and:

A) structures.

B) nondurable goods.

C) depreciation.

D) import investment.

E) appreciation.

7. A monopoly may arise for which of the following reasons?

A) Too many buyers

B) Firms can only produce a similar product

C) Government antitrust laws

D) A lot of people own a key resource

E) A single firm owns a key resource

8. Whenever the price of a good is below the equilibrium price, we know that:

A) the market is in equilibrium.

B) a surplus exists.

C) a shortage exists.

D) government interferes the prices.

E) quantity supplied exceeds quantity demanded.

9. Suppose Joe's Pizzeria would have to pay a wage of $8 per hour to hire an additional employee. If hired, the employee would generate $9 of revenue per hour. In this case, Joe's should:

A) Hire the extra employee as this will increase its profits.

B) Not hire the extra employee because employing them would decrease Joe's profits.

C) Not hire the extra employee as profits will only increase by $1, but the extra employee will cost $8 per hour to hire.

D) Be indifferent about hiring the extra employee because profits at Joe's will not change if the extra employee is hired.

E) Hire the extra employee as this will increase employment level.

10. Suppose that nominal GDP is $6,000 and real GDP is $3,000. What is the GDP price deflator?

A) 150

B) 125

C) 200

D) 250

E) 300.

11. The purchase of final goods and services by households is called:

A) Investment.

B) Consumption.

C) Public sector expenditure.

D) Net exports.

E) Outflow.

12. Investment is the purchase of capital equipment, inventories, and:

A) Structures.

B) Nondurable goods.

C) Depreciation.

D) Import investment.

E) Appreciation.

13. Gross domestic product:

A) Is the market value of all final goods and services produced within a country in a given period (usually a year).

B) Is the income in the hands of individuals after deducting income taxes; income available to households to spend.

C) Is the value of goods and services purchased by all levels of government -federal, state, and local - in a given period.

D) Is the market value of all final goods and services produced by permanent residents of a nation in a given time period.

E) Is the market value of all final goods and services produced by citizens of a nation in a given time period.

14. A shortage will occur if:

A) A price ceiling is set above the equilibrium price.

B) A price floor is set below the equilibrium price.

C) A price floor is set above the equilibrium price.

D) A price ceiling is set below the equilibrium price.

E) A price floor is at the equilibrium price.

15. Jason has just received his bachelor's degree in finance. He is now comparing the costs and benefits of getting a master's degree with working at a full-time job. This is an example of:

A) Increasing cost.

B) Decreasing the cost

C) Thinking at the margin.

D) Irrational behavior.

E) The law of diminishing returns.

16. The "invisible hand" that Adam Smith writes about as coordinating economic activity is:

A) man's natural affinity for his fellow-man

B) The government