1. If barriers to entry ________ or product differentiation ________, competition in a market will ________.

a. increase; increases; decrease

b. decrease; decreases; decrease

c. increase; decreases; increase

d. decrease; increases; increase

e. increase; increases; increase

2. In the country Gamma, it takes 6 hours to produce 1 automobile and 1 hour to produce a bale of cotton. Gamma and the country of Delta currently have an agreement to trade 1 car for 5 bales of cotton. Assuming the trade agreement is mutually beneficial, which of the following production rates must be true for Delta?

a. One car in 4 hours and one bale of cotton in 1 hour

b. One car in 15 hours and one bale of cotton in 1 hour

c. One car in 10 hours and one bale of cotton in 1 hour

d. One car in 2.5 hours and one bale of cotton in 10 hours

e. Delta's production rate is the same as Gamma's

3. If the average income increases by 3 percent, which of the following is true of the quantity demanded for necessity goods?

a. Quantity demanded increases by 1 percent.

b. Quantity demanded remains constant.

c. Quantity demanded increases by at least 3 percent.

d. Quantity demanded decreases by 1 percent.

e. Quantity demanded decreases by at least 3 percent.

4.The law of diminishing marginal utility pushes consumers' willing purchase-price down for every additional unit of consumption. The law of diminishing marginal returns pushes marginal costs up for firms and increases the price they must charge to make normal profits. These two phenomena are illustrated most clearly by which model?

a. Supply and demand

b. Circular flow

c. Total utility

d. Production possibility curve

e. Production function