1. When a price ceiling is imposed on a competitive market at a level below the equilibrium price

a) both producers and consumers lose surplus.

b) total surplus is not changed by the price ceiling.

c) consumers lose some or all of consumer surplus.

d) producers lose some or all of producer surplus.

2. Which equality can be observed when consumers are maximizing their utility and are constrained by a limited budget?

a) Marginal utility of good 1 multiplied by marginal utility of good 2 equals price of good 1 divided by price of good 2.

b) Marginal utility of good 1 divided by marginal utility of good 2 equals price of good 1 divided by price of good 2.

c) Marginal utility of good 1 equals marginal utility of good 2.

d) Price of good 1 equals price of good 2

e) All of the above.

3.When you were a child and said "Mum, please buy me this thing. It is very important to have it, everybody in my school has this thing.", which economic principal did you demonstrate:

a) The law of diminishing returns to scale.

b) The law of supply and demand.

d) The principle of scarcity.

c) The bandwagon effect.

4. When do you see that the income effect dominates the substitution effects?

a) While analyzing any good.

b) While analyzing a normal good.

c) While analyzing an inferior good.

d) While analyzing a Giffen good.

5. An elasticity of -0.5 indicates that a 100 percent increase in price leads to a

a) 0.05 percent decrease in quantity demanded.

b) 5.0 percent decrease in quantity demanded.

c) 50 percent decrease in quantity demanded.

d) 0.5 percent decrease in quantity demanded.