SECTION 1

ANSWER ALL QUESTIONS

1. A fall in the price of X from $12 to $8 causes an increase in the quantity of Y demanded from 900 to 1,100 units. X and Y are:

A) Complements.

B) Normal goods.

C) Substitutes.

D) Inferior goods.

1. Which of the following statement defines marginal utility?

A) The change in total utility divided by the price of a product

B) The additional satisfaction received from consuming one more unit of a product

C) The maximum amount of satisfaction from consuming a product

D) The total satisfaction received from consuming the product

1. The short run is a time period in which:?

A) All resources are fixed.

B) The level of output is fixed.

C) The size of the production plant is variable.

D) Some resources are fixed and others are variable.

1. A decrease in quantity demanded is graphically represented by:

A) A leftward shift in the demand curve

B) A rightward shift in the demand curve

C) A movement up and to the left along a demand curve D) A movement down and to the right along a demand curve

1. The law of diminishing returns only applies in cases where:

A) Demand is increasing at a constant rate.

B) There is at least one fixed factor of production.

C) The price of extra units of a factor is increasing.

D) Capital is a variable input.

SECTION -2

A perfectly competitive producing microchips has recorded its fixed cost a $128. Its output levels and variable costs are shown in the table below.

output level	Variable Cost	Total Cost	Marginal Cost	Fixed Cost	Total Revenue	Profit/ Loss	Marginal Revenue
0		128
1	56
2	90
3	108
4	116

1. Copy and complete the table to show the cost for each level of output. [15 marks]

1. With the aid of a diagram, explain the relationship between' marginal cost' and 'average total cost' [5 marks]

TOTAL-25 marks