1. Practice Questions Two goods are ________. A(n) _________ in the price of one good will _________ the demand for the other good: (A) substitutes; increase; increase; (B) substitutes; increase; decrease; (C) complements; increase; increase; (D) complements; increase; decrease; (E) A & D.

2. Practice Questions _____ elasticity of demand refers to the degree of consumer responsiveness to the percentage change in _______ with respect to the percentage change in _______: (A) Income; price of the a good; income; (B) Income; quantity of a good; income; (C) Own-price; price of a good; demand for that good; (D) Own-price; quantity demanded; price of a good; (E) Cross-price; quantity of one good; price of the other good; (F) B & D & E.

3. Practice Questions The _____ substitutes available, the ____ elastic the demand for a good is: (A) more; less; (B) more; more; (C) less; more; (D) Not enough information.

4. Practice Questions The price of a product is ______ the marginal revenue under conditions of perfect competition: (A) greater than; (B) equal to; (C) less than; (D) Not enough information; (E) None of the above.

5. Practice Questions A shift in the demand curve is generally caused by changes in ______: (A) the prices of substitutes and complements; (B) incomes; (C) both of the above; (D) none of the above.

6. Practice Questions The law of diminishing marginal returns says: (A) Less goods will be available to consume over time; (B) Marginal utility declines as more of a good is consumed during a period of time; (C) There is a maximum amount of total utility; (C) Two of the above; (D) None of the above.

7. Practice Questions A budget constraint reflects: (A) the income available for consumption; (B) the prices for the goods a consumer may purchase; (C) the marginal rate of substitution that will result in consumer equilibrium; (D) all of the above.

8. Practice Questions A firm’s supply curve corresponds to: (A) the average total cost curve; (B) the marginal cost curve above the minimum average variable cost curve; (C) the average variable cost curve; (D) the marginal cost curve.

9. Practice Questions Which of the following is true: (A) Average Fixed Cost + Average Variable Cost = Average Total Cost; (B) A shift to the right of the demand curve makes consumer better off; (C) The law of diminishing marginal returns states that as the use of an input increases, ceteris paribus, its Marginal Physical Product will eventually fall; (D) All of the above.

10. Practice Questions A firm acts as a profit maximizer with its MC, AVC, ATC as shown in graph. At market price P2, it will produce an output of ____, making a loss of ____: (A) Q1; P2P3KG; (B) Q2; P1P2ED; (C) Q3; P1P2ED; (D) None of the above. MC ATC AVC P Q P1 P2 Q3 P3 Q2Q1 D F E H G K

11. Practice Questions Generally, firms want to maximize profit, which is equivalent to setting: (A) MPP = 0; (B) MR = 0; (C) MR = MC; (D) MPP = APP.

12. Practice Questions In the graph, IQ indicates an isoquant curve of a firm; EE’ indicates the price ratio of capital over labor; & A indicates the firm’s current input mix. To increase its profit, the firm should use: (A) more capital, less labor; (B) more labor, less capital; (C) more labor, same amount of capital; (D) maintain the input mix at A. Capital A E E’ Labor IQ

13. Practice Questions If marginal cost exceeds average variable cost, then ____ cost is ____: (A) average total; increasing; (B) average variable; increasing; (C) average total; at a minimum; (D) average fixed; increasing; (E) average total; at a maximum.

14. Practice Questions To maximize profit, firms should NOT produce in the stage during which: (A) MPP is decreasing; APP is greater than MPP; (B) MPP is increasing; MC is less than AVC & ATC; (C) MPP is decreasing; MVP equals MIC; (D) None of the above.

15. Practice Questions Billy Bob’s Fried Chicken Palace has an Average Fixed Cost of $0.25/chicken wing producing 500 wings/day. If production doubles to 1000 wings/day, AFC will: (A) Increase; (B) Increase, then decrease; (C) Decrease, then increase; (D) Decrease; (E) None of the above;

16. Practice Questions Billy Bob’s also has the following information regarding demand for their chicken: at a price of $6/chicken wing, demand for their good is 0 chicken wings, while at the current market price of $2, demand is 100 wings. Suppose consumer willingness-to-pay for wings increases by $1 (i.e. the demand curve shifts up in a parallel manner). Consumer surplus _______ by _______ if the market price stays at $2: (A) Increases; $112.50; (B) Increases; $225; (C) Decreases; $100; (D) Not enough information is provided;

17. Practice Questions The own-price elasticity of demand for a good is -1 at the current market price. At this price: (A) The firm selling the good is maximizing revenue; (B) The firm selling the good could increase revenue by lowering the price; (C) The firm selling the good could decrease revenue by raising the price; (D) A + C; (E) B + C;

18. Practice Questions Stage 2 of production is where: (A) Firms do not want to produce to maximize profits; (B) Marginal physical product is greater than average physical product; (C) Marginal physical product is negative; (D) Average physical product is decreasing and marginal physical product is less than average physical product but still positive; (E) None of the above;

19. Practice Questions Pat consumes pudding and pickles. Pat’s marginal utility from pudding is 10, and Pat’s marginal utility from pickles is 20. Pudding costs $1 while pickles cost $2. Assuming Pat’s current bundle of goods is on the frontier of the budget constraint, which of the following are true?: (A) Pat could increase total utility by consuming more pickles and less pudding; (B) Pat could increase total utility by consuming less pickles and more pudding; (C) Pat is maximizing total utility given the budget constraint; (D) None of the above;