D) productivity increases

E) low inflation

4. Which of the following most closely describes a perfectly competitive market?

A) Large number of buyers, one seller, perfect information, homogenous production

B) Large number of buyers and sellers, same product for all firms, free entry and exit from the market

C) Differentiated product, many sellers, easy entry into a market

D) Differentiated or identical products, many sellers, easy entry, perfect information

E) Small number of buyers and sellers, same product for all firms, free entry and exit from the market

5. Price discrimination:

A) Is practiced by competitive firms as well as by those with monopoly power.

B) Refers to the practice of selling the several good at same prices to different customers.

C) Occurs when a company charges a higher price for high-cost goods than for low-cost goods.

D) Is always illegal.

E) Refers to the practice of selling the same good at different prices to different customers.

6. Which of the following would decrease the demand for butter (i.e., shift the demand curve to the left)?

A) An increase in the price of margarine (a substitute for butter)

B) A medical study finding that butter is useful for health.

C) A decrease in the price of bread (a complement to butter)

D) An increase in the price of butter

E) A medical study finding that butter contributes to heart disease

7. Because cars and gasoline are complements, and increase in the price of gasoline will:

A) Increase the demand for cars.

B) Decrease the demand for cars.

C) Increase the demand for gasoline.

D) Decrease the demand for gasoline.

E) There will be no change in the market.

8. Which of the following is a characteristic of perfect competition?

A) A single seller

B) A small number of buyers

C) Buyers and sellers are price setters.

D) Buyers and sellers are price takers.

E) Buyers and sellers are price makers.

9. A change in which of the following will cause a movement along the supply curve?

A) A change in the state of technology

B) A change in taxes

C) A change in expectations about future prices

D) A change in the price of the good

E) No change in the price of the good

10. Other things being equal, which of the following would NOT shift the supply curve for gasoline?

A) A fall in the price of crude oil (from which gasoline is refined)

B) An increase in the price of gasoline.

C) An improvement in refining techniques that allows more gasoline to be squeezed out of a barrel of crude oil

D) An increase in the wages paid to people working in oil refineries

E) A decrease in the wages paid to people working in oil refineries

11. Profit equals:

A) price minus average cost.

B) total revenue minus total cost.

C) total revenue minus average cost.

D) price times quantity.

E) total cost minus total revenue.

12. The ability of a commodity to satisfy the needs of consumers due to some physical or other qualities is called:

A) Consumption value of a commodity

B) Consumer utility

C) Utility maximization principle

D) Marginal utility

E) Satisfactory price

13. 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;

14. What of following expressions represents Marginal costs?

A) ∆TVC: Q

B) ∆TC: ∆Q

C) TFC:Q

D) (P Q): ∆Q

E) ∆TFC: Q

15. Diminishing marginal product refers to the fact that:

A) The marginal product of an input decreases as the quantity of the input increases.

B) The marginal product of an input increases as the quantity of the input increases.

C) The marginal product of an input does not change as the quantity of the input increases.

D) Output will increase at an increasing rate as more inputs are hired.

E) The marginal product of an input decreases as the quantity of the input decreases.

16. Which of the following is an appropriate function of government?

A) Making a market less competitive by forcing individuals from the market