1. The profit-maximizing rule of output can be expressed in two ways which of the following states the correct two ways.

a.Total profit is maximized when MR = MC and M = 0.

b.Total profit is maximized when MR = TC and M = 0.

c.Total profit is maximized when MR = 0 and M = MC.

d.Total profit is maximized when ATC = 0 and MR = MC.

e.Total profit is maximized when MC = 0 and M = MR.

2. Which market structure is characterized as "big business."

a.perfect competition

b.Monopoly

c.oligopoly

d.monopolisticcompetition

3. Assume a market is in equilibrium. The government then comes along and imposes a price restriction that causes a persistent surplus. Based on this information, you can conclude that government restriction was designed to protect the sellers in the market.

a.True

b.false

4. In which market structures are there barriers to entry? There is more than one correct answer to this question. You must mark all of the correct answers to receive full credit for this question

a.monopolistic competition

b.perfect competition

c.Monopoly

d.Oliogopoly

5. When a firm has diminishing marginal returns its total output diminishes.

A.True

B.false

6. When a firm has increasing returns to scale its average total cost _______.

a.Increase

b.Decrease

c.constant

7. Decreases in demand are graphed as leftward shifts of the demand curve. Similarly, decreases in supply are graphed as leftward shifts of the supply curve.

a.True

b.false

8. According to the law of demand, an increase in the price of gasoline will cause a decrease in the demand for gasoline.

A.Ture

B.false

9. Which characteristic makes it so that perfectly competitivefirms and monopolisticallycompetitive have zero economic profit in the long run

a.homogeneous product and perfect information.

b.heterogeneous product and easy entry/exit.

c.many buyers/sellers and easy entry/exit

d.easy entry/exit and perfect information

10. The rule of marginal analysis states that activity should continue long as the marginal benefit is at least as large as the marginal cost.

a.True

b.false

11. Which of the following would cause a definite decrease in the equilibrium price and a definite increase in the equilibrium quantity.

a.an increase in supply

b.an increase in demand

c.a decrease in demand for

d.a decrease in supply.

12. A store increased its prices by 8% and the quantity demanded decreased by 4%. The price elasticity of demand is _______ (in absolute value) and the demand is _______.

a.increases, decreases

b.increases, increases

c.decreases, increase

d.decreases, decreases

13. Which market structure provides a model of optimum efficiency from the firm and society's perspective?

a.Monopoly

b.monopolistic competition

c.perfect competition

d.oligopoly

14. Assume that a traffic accident occurs and the person whose car was hit sues the other party for an amount far above the losses actually incurred. This behavior is an example of which market failure?

a.Public goods

b.Moral hazardous.

c.Rent-seeking

d.An externality

15. In a cartel, competing firms _______ and generally try to _______ output.

a.Informatly cooperative, decrease

b.formally cooperate, increase

c.formally cooperate, decrease

d.informally cooperate, increase

16. Assume a market is in equilibrium. Now assume the government imposes a price floor. What happens to the consumer surplus?

a.The consumer surplus decreases.

b.The consumer surplus remains the same.

c.More information is needed to know how the consumer surplus will change.

d.The consumer surplus increases.

17. If a consumer has diminishing marginal utility and purchases one more unit, what happens to total utility?

a.Total utility remains constant

b.Total utility decreases

c.More information is needed to know what happens to utility

d.Total utility increases