Please either highlight or circle the BEST answer. There are 10 multiple choice questions, and each question is worth

1. A shift in the demand curve occurs when ____________.

a. suppliers place more goods on the market

b. the price of a commodity rises

c. consumers want to buy more than before at a given price

d. the price of a commodity falls

2. If a 5% decrease in the price of a long-distance phone call leads to a 25% increase in the number of calls made, we can then conclude that the demand for long-distance phone calls at the current rate is __________________.

a. elastic

b. inelastic

c. unitarily elastic

d. cannot be determined on the basis of the data given

3. A wage decrease agreement by the United Auto Workers would lead to a(n) _______ shift in the _____________ function for cars, leading to a(n) _____________ in the price of the domestically produced cars.

a. upward, demand, increase

b. upward, supply, no change

c. downward, supply, decrease

d. downward, demand, increase

4. When a new product (e.g., product “B”) appears on the market, and “B” can be readily used to substitute for an existing product (e.g., product “A”), then the demand function for “A” may be expected to _________________.

a. shift inward (leftward)

b. shift outward (rightward)

c. remain unchanged

d. move perfectly vertical

5. The U.S. government banned cigarette advertising on radio and television in the early 1970’s. You would expect to find that, after the ban took effect, _______________.

a. the demand for magazine ads for cigarettes will also decrease

b. there should be no change in demand for magazine ads for cigarettes

c. the demand for magazine ads for cigarettes will increase

d. the demand for magazine ads for cigarettes will remain unchanged but the demand

for ads by other products will rise.

6. If the international oil price keeps rising, then we can expect the supply curves of products using oil to _________________.

a. shift outward to the right

b. remain unchanged

c. shift inward to the left

d. the supply curve itself will still be the same, except that its slope tilts rightward

7. The concept of derived demand be best be illustrated by the statement:

a. An increase in the price of butter results in an increase in the demand for margarine.

b. A decrease in the price of automobiles results in greater demand for automobiles, and

the greater demand in automobiles results in greater demand for automobile windshields.

c. The demand curve is derived from the law of supply.

d. The demand for clothes depends upon buyers’ incomes.

8. One way to view the law of diminishing marginal productivity is to say that ____________.

a. as more and more inputs (e.g., labor) are added to the production process, there will come a point where the marginal productivity will actually fall and even become negative.

b. as more and more inputs are added to the production process, there will not be a change to total productivity.

c. adding inputs to the production process will cause marginal productivity to keep rising infinitely, because, like money, there can never be enough supplies.

d. as more and more units of input are added, the total product becomes ever lower.

9. The costs of a firm that vary with the level of production are called _____________.

a. fixed costs

b. total costs

c. variable costs

d. sunk costs

10. A perfect competitor can reap an economic profit ______________.

a. in the short run

b. in the long run

c. never

d. in both the short run and long run