A competitive firm will shut down when:

a.

price is below the minimum of average total cost

b.

price is below the minimum of average variable cost

c.

average fixed costs are rising

d.

fixed costs are higher than variable costs

If the relative price of a particular good falls, the substitution effect suggests that consumers will buy:

Select one:

a.

Less of that good and more of its substitutes

b.

More of that good and more of its substitutes

c.

More of that good and less of its substitutes

d.

Less of that good and less of its substitutes

Michael values a refrigerator for his new house at $3500, but succeeds in buying one for $3000. Michael's willingness to pay is:

a.

$6500

b.

$500

c.

$3500

d.

$3000

Suppose after graduating from university and getting a full-time job, Kate finds she buys fewer frozen pizzas. This means frozen pizzas are for Kate:

a.

a luxury good

b.

a substitute good

c.

a normal good

d.

an inferior good

If society is producing at a point lying inside the production possibilities curve, then this society:

a.

can produce more of both goods and zero opportunity cost

b.

is utilising all resources and allocating resources to their best possible use

c.

must be doing the best it can with limited resources

d.

has a high opportunity cost of moving from this point