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If your demand price for one unit of a good is $100 and the market price is
$75, your consumer's surplus is:
$25.
$50.
$75.
$100.
PAGE NO.41
Consumer Surplus:
Consumer surplus is the difference between willingness to pay and what the consumer
actually has to
pay: i.e. CS= MU-P
CS=100-75=25.
3. When the price of petrol rises by 8%, the quantity of petrol purchased falls by 6%.
This shows that the demand for petrol is:
Select correct option:
Perfectly elastic.
Unit elastic.
Price elastic.
Price inelastic.
7. : partial explanation for the inverse relationship between price and quantity
demanded is that a:
Select correct option:
9. When an industry's raw material costs decrease, other things remaining the same:
Select correct option:
The supply curve shifts to the right.
The supply curve shifts to the left.
Output increases regardless of the market price and the supply curve shifts upward.
Output decreases and the market price also decrease.
11. If the quantity supplied of mangoes exceeds the quantity demanded of mangoes:
Select correct option:
There is a shortage of mangoes.
Market forces will cause the price to fall.
Market forces will cause the price to rise.
The market is in equilibrium.
Page no.24 on handouts
.Because supply is at a high level. The increased supply creates a surplus which
pushes down the price
12. You observe that the price of houses and the number of houses purchased both
rise over the course of the year. You conclude that:
Select correct option:
13. If you sum all of the marginal utilities for the consumption of units one through
five, you will get:
The marginal utility for the consumption of the fifth unit.
The marginal utility for the consumption of the sixth unit.
The total utility for the consumption of the first five units.
The average utility for the consumption of the first five units.
PAGE NO .40
Bottle of coke TU MU
0 0 -------------
1 7 7
2 11 4
4 13 2
5 14 1
The marginal product is the extra output per factor (e.g. employee) the average
product is the output per factor (e.g. per employee). At input levels where marginal
product is above average product, the average product is rising (the curve slopes up as
more input is used).
15. The percentage change in quantity demanded of a given good, with respect to the
percentage change in the price of “another” good is called:
Select correct option:
20. Which of the following is considered to be a variable cost in the long run?
Select correct option:
Expenditures for wages.
Expenditures for research and development.
Expenditures for raw materials.
All of the given Costs.
23. If a firm pays cash to buy a building so as to have office space for its workers, the
monthly opportunity cost of the building is best measured as:
Select correct option:
The price the firm paid divided by twelve.
Zero.
The rent the firm could earn if it rented the building to another firm.
The monthly mortgage payment the firm would have had to pay.
OPPORTUNITY COST
The opportunity cost of a particular choice is the satisfaction that
would have been derived from the next best alternative foregone
25. If the supply of a product decreases and supply curve shifts leftward, and the
demand for that product simultaneously increases and demand curve shifts rightward,
then equilibrium:
Select correct option:
Perfectly elastic.
Unit elastic.
Price elastic.
Price inelastic.
In the above figure, Elasticity for firm is equal to 0.75; it is less than
1 (ignoring minus sign) which shows that the demand curve is
inelastic.
The demand (or AR) curve for the industry is downward sloping
but for any individual perfectly competitive firm, is horizontal.
29. If the cross price elasticity of demand between two products is +3.5, then:
Select correct option:
One of the products is expensive and one is relatively inexpensive.
One product is a normal good and the other is an inferior good.
The two products are complements.
The two products are substitutes.