Please circle one answer per question:

Q1. Sarah has decide to spend always $ 200 on clothing per month.Which one of the statements below is true?

A. Sarah's price elasticity of demand is one because she is maintaining her clothing expenditures as a constant fraction of the price.

B. Sarah income elasticity of demand is equal to zero because her clothing expenditures does not depend on the price.

C. Sarah's income elasticity of demand is infinite because she is willing to spend a huge amount of money on her clothing

D. None of the above

Q2. Producer's total revenue will stay the same if.

A. The price rises and demand is perfectly elastic

B. The price decrease and demand is perfectly inelastic.

C. The prices rises and demand is inelastic

D. The price decrease and demand is unit - elastic.

Q3. The income elasticity of demand of canned food is.

A. Positive as the higher is the income the higher is the demand for canned food.

B. Negative as the higher is the income the lower is the demand for canned food.

C. Equal to zero as the demand for canned food does not depend on income.

D. None of the above.

Q4. A price ceiling of 90 is

A. Not binding and has no effect on the equilibrium outcome.

B. Binding and results into a shortage of 30 hotel rooms

C. Binding and results into a surplus of 30 hotel rooms

D. None of the above

Q5. If you consider a price ceiling of 80 the producer surplus at equilibrium is equal to.

A. 3,200

B. 5,000

C. 2,500

D. 2,100

Q6. If the cross elasticity of demand between peanut butter and yoghurt is 1.5 then are peanut butter and yoghurt substitutes or complement?

A. They are substitute because when the price of yoghurt increases by 10% for example the demand for peanut butter decrease by 15%.

B. They are complements because when the price of yoghurt increases by 10% for example the demand for peanut butter decrease by 15%

C. They are substitute because when the price of yoghurt increase by 10% for example the demand for peanut butter increases by 15%

D. They ate completely because when the price of yoghurt increases by 10% for example the demand for peanut increases by 15%

Q 7.As consequence of a government subsidy ______ consumers are____ producer are which is _____ a government tax policy.

A. Quantity sold at equilibrium decrease better off worse off opposite to.

B. Quantity sold at equilibrium increases better off better off opposite to.

C. Quantity sold at equilibrium decrease worse off worse off similar to.

D. Quantity sold at equilibrium increases worse off better off similar to.

Q8. Which statements is not true?

A. AVC is increasing when marginal cost is below it and rising when marginal cost is above it.

B. AVC is falling when marginal cost is below it and rising when marginal cost is above it.

C. ATC is increasing when marginal cost is below it and rising when marginal cost is above it.

D. ATC is falling when marginal cost is below it and rising when marginal cost is above it.

Q 9. Which statements is true?

A. Economic of scale are more common when Q is low and occur when increasing production lowers ATC as for natural monopolies.

B. Diseconomies of scale are more common when Q is high and occur when increasing production decrease ATC as for natural monopolies.

C. Economic of scale are more common when Q is high and occur when increasing production increases ATC ad in a perfect competition framework

D. Diseconomies of scale are more common when Q is low and occur when increasing production decrease ATC as in a perfect competition framework

Q10. Which of the following is an implicit cost

A. The salary earned by a corporate executive

B. Corporate taxes

C. The opportunity cost of using your office space instead of renting it.

D. All of the above are implicit costs

Q11. If the accounting profit is equal to zero

A. The economic profit which consider both implicit and explicit costs can be positive

B. The economics profit which ignores implicit costs is certainly positive.

C. The economic profit which considers both implicit and explicit costs cannot be positive

D. The economic profit which ignores implicit costs is certainly negative

Q12. Ellay corp is a profit maximzing competitive firm selling baby diapers. The company sells each box for $30. Total costs are $4009 per day of which $1200 are a fixed cost. The number of boxes sold per day is 100. What can you say about Ella corp. short - run and long run decision?

A. Ellay corp will shut down in the short run an exit the market in the long run.

B. Ellay corp will not shut down in the short run and will not exit the market in the long run.

C. Ellay corp will shout down in the short run but will remain in the industry in the long run.

D. Ellay corp. will not shut down in the short run buy will exit the industry in the long run.

Q13. Which statement is true.

A. The firm depcited by the graphic is competitive as the marginal revenue is equal to the marginal cost at equilibrium.

B. The firm depicited by the graphic is a monopoly as the marginal revenue is equal to the marginal cost at equilibrium.

C. The firm depicted by the graphic is a monopoly as the marginal revenue is above the marginal cost for any quantity below 30.

D. The firm depicted by the graphic is competitive As the price is equal to the marginal revenue.

Q14. What is the profit of this firm

A.$480

B $300

C. $270

D. $120

Q15. The efficient level for this firm is

A. 30 units equalizing MR to MC

B. 18 units minimizing the ATC

C. 13 units where the MC is equal to zero

D. None of the above