Each question carries ONE (1) mark.

1. Which of the following statements about the use of resources is not one of the key questions in economics?

A. How are resources used?

B. Where are resources used?

C. For what are resources used?

D. For whom are resources used?

2. Suppose a market is in equilibrium, and then the demand increases. Which of the following would be shown on a graph that illustrated the effects?

A. An excess demand at the initial equilibrium price.

B. An excess demand at the new equilibrium price.

C. An excess supply at the initial equilibrium price.

D. An excess supply at the new equilibrium price.

3. What is meant by intermediate goods and services?

A. The same as capital goods, such as plant, buildings, vehicles and machinery.

B. Products which one firm buys off another and then uses up in its own products.

C. All inputs bought by firms, including labour and raw materials.

D. Imports.

4. Suppose the price of a product increases from P12 to P20 and the quantity demanded falls from 55 a week to 45. What is the price elasticity of demand?

A. 0.4

B. -0.4

C. 2.5

D. -2.5

5. Which of the following statements about a profit-maximizing firm is false?

A. It might set its daily output at a higher level in the short run than in the long run.

B. It might set its daily output at a lower level in the short run than in the long run.

C. If it had a daily output of zero in the short run, it would be sure to have a total cost of zero.

D. If it had a daily output of zero in the long run, it would be sure to have a total cost of zero.

6. Utility _________________

A. is the satisfaction the consumer experiences when he or she consumes a good.

B. is not a topic for economists.

C. can be used to compare different people's likes and dislikes.

D. all of the above

7. Marginal utility is defined as the ________________

A. additional utility gained by consuming an extra unit of a good.

B. total utility from all units consumed of a good.

C. total utility from all units consumed divided by the number of units consumed.

D. additional utility gained divided by the price of the good.

8. A profit-maximizing monopolist sets an output of 100 per day and a price of P10. Which of the following statements is true?

A. The firm's short-run MC and MR curves intersect at an output of 100, and the point on its demand curve at this output is at P10.

B. The firm's short-run MC and MR curves intersect at an output of 100, and the point on its MR curve at this output is at P10.

C. The firm's short-run MC and AR curves intersect at an output of 100, and the point on its MR curve at this output is at P10.

D. The firm's short-run MC and AR curves intersect at an output of 100, and the point on its AR curve at this output is at P10.

9. Which of the following will not cause a country's AD curve to shift left?

A. A reduction in government transfers.

B. An increase in VAT

C. A reduction in exports.

D. An increase in the price level.

10. The long run aggregate supply curve is vertical because __________________

A. an increase in the price level does not change the economy's resource base.

B. it is impossible for the economy to ever exceed the maximum output rate implied by the long run aggregate supply curve, even on a temporary basis.

C. structural unemployment is at a maximum at that level of output.

D. there is a zero rate of joblessness at this level of output.

State whether each of the following statements is TRUE or FALSE.

1. Utility is easily measured and quantified.

2. Economic models explore decision making by individuals, firms and other organizations.

3. A key assumption of most economic analysis is that people act rationally, meaning they respond to incentives.

4. Macroeconomics helps explain economic fluctuations, why the economy shrinks and expands and why some of the economy's resources are idle.

5. One example of a microeconomic question is, "How will prices in the satellite TV industry change if a new firm enters the market?"

6. The opportunity cost of going to a particular college is not the same for everyone.

7. Economists argue that individuals should continue to consume until total benefit equals total cost.

8. According to the principle of diminishing returns, an additional worker decreases total output.

9. The market demand curve shows the relationship between the price and the quantity demanded by all consumers, everything else being equal.

10. The price elasticity of demand is constant along a downward -sloping linear demand curve.