MULTIPLE CHOICE QUESTIONS

1.11 The following will result in a definite increase in equilibrium price and decrease in equilibrium quantity

a) An increase in demand and in supply

b) A decrease in demand and in supply

c) An increase in demand and a decrease in supply

d) None of the above

1.12 In order for the minimum wage to be effective

a) It must be fixed below the equilibrium price

b) It must be fixed above the equilibrium price

c) It must be fixed equal to the equilibrium price

d) None of the above

1.13 When quantity demanded equals zero

a) Price elasticity of demand equals zero

b) Price elasticity of demand equals one

c) Price elasticity of demand equals infinity

d) Price elasticity of demand lies between one and infinity

1.14 The price of short bread biscuits increased by 25% and it was noted that demand for them decreased by 40%. The type of price elasticity of demand observed here for short bread biscuits is

a) Perfectly elastic

b) Perfectly inelastic

c) Inelastic

d) Elastic

1.15 The following will increase the price elasticity of demand for a product...

i. A broader definition of the market

ii. An increase in the proportion of income spent on the product

iii. An increase in the number of substitutes available for the product

a) i only

b) i and ii

c) i and iii

d) i, ii and iii

1.16 Economic profit is equal to

a) Normal profit plus accounting profit

b) Total revenue less implicit costs

c) All of the above

d) None of the above

1.17 The number of additional units of output produced by adding one additional unit of the variable input is referred to as

a) Marginal cost

b) Marginal product

c) Average product

d) Average cost

1.18 In Figure 1, the firm will make an economic loss but continue to produce at Price