1. In contrast to perfect competition, a:

monopoly produces more at a lower price.

monopoly produces whereMR>MC.

monopoly may have lower economic profits in the long run.

monopoly produces less at a higher price.

2. In contrast with perfect competition, a monopolist:

produces more at a lower price.

produces whereMR>MC,and a perfectly competitively firm produces whereP=MC.

may have economic profits in the long run.

earns zero economic profits in the long run.

3. An indifference curve shows

the combinations of the two products among which the consumer is indifferent.

the maximum combinations of the two products available to the consumer, given the consumer's income.

the minimum combination of the two products available, given the consumer's income.

how the total satisfaction the consumer derives from consuming alternative market baskets changes as we move along the curve.

4. Risk-averse individuals have:

Linear indifference curves.

Vertical indifference curves.

Convex (to the origin) indifference curves.

Concave (to the origin) indifference curves.

Horizontal indifference curves.

5. A consumer attains equilibrium by_____.

A.

allocating income such that the total amount spent on each good is equal

B.

consuming all goods to the point where the total utility of each are equal

C.

consuming all goods to the point where the marginal utility of each are equal

D.

allocating income such that the marginal utility of the last dollar spent on each good is the same

6. A demand curve will have a positive slope when:

A.

the good can be consumed only with some other good.

B.

there are no substitutes for the good.

C.

the income effect of a price change outweighs the substitution effect.

D.

the good is an inferior good.

7. A risk-averse individual _____.

A.

prefers a sure return to an uncertain prospect generating the same expected return

B.

will avoid all risky investments no matter what the return

C.

is indifferent between a sure return and an uncertain prospect generating the same expected return

D.

will forgo a sure return in favor of an uncertain prospect generating the same expected return

8. At any point on an indifference curve, the slope indicates

the relative price ratio of the two goods.

the way the consumer' s budget is allocated between the two goods.

the marginal rate of substitution between the two goods.

how the total satisfaction of the consumer changes with different market baskets.

9. Consider the income and consumption of an individual between two time periods. If consumption in period 2 (C₂) is on the horizontal axis, consumption in period 1 (C₁) is on the vertical axis, and the interest rate is 11 percent, the slope of the budget constraint must be _____.

A.

1.11

B.

0.11

C.

11

D.

0.9

10. For normal goods, the demand curve is:

A.

downward sloping only if the substitution effect is larger than the income effect.

B.

upward sloping only if the income effect is larger than the substitution effect.

C.

always upward sloping.

D.

always downward sloping.

11. Suppose consumption in year 2 (C₂) is on the vertical axis and consumption in year 1 (C₁) is on the horizontal axis. An increase in the interest rate:

A.

causes more people to shift their consumption from year 2 to year 1.

B.

causes the budget line to rotate outward along the vertical axis.

C.

makes borrowers better off and lenders worse off.

D.

will reduce savings in year 2.