1. A horisontal demand curve is said to be

a. completely inelastic.

b. infinitely elastic.

c. highly (but not Infinitely) elastic.

d. highly (but not completely) inelastic.

2. What happened in the situation the price is initially above the market-clearing price?

a. Demand shifts out.

b. Supply shifts in.

c. Surplus occurs and quantity demanded will increase, quantity supplied will decrease and price falls.

d. Surplus occurs and quantity demanded will increase, quantity supplied will decreases and price rises.

3. Olu firm that has a kinked demand curve assumes that, if it raises its price, of its competitors will raise their prices and that, if it lowers its price, of its competitors will lower their prices.

a. all; all

b. none; all

c. all; none

d. none; none

4. Which of the following will result in an increase in a consumer's purchasing power?

a. An increase in the consumer's income.

b. An decrease in the price of the good on the vertical axis.

c. An decrease in the price of the good on the horizontal axis.

d. All of the above.

5. Bob views apples and oranges as perfect substitutes in his consumption, and marginal rate of substitution (MRS) = 1 for all combinations of the two goods in his indifference map. Suppose the price of apples is R3 each, the price of oranges is R5 each, and Bob's budget is R50 per week. What is Bob's utility maximising choice between these two goods?

a. 6 apples and 6 oranges.

b. 5 apples and 10 oranges.

c. 10 oranges and 4 apples.

d. 12 apples and 3 oranges.

e. None of the above.

6. When a firm charges each customer the maximum price that the customer is willing to pay, the firm ...

a. engages in a discrete pricing strategy.

b. charges the average reservation price.

c. engages in second-degree price discrimination.

d. engages in first-degree price discrimination.

e. engages in price war.

7. Which of the following is true concerning the substitution effect of an increase in price?

a. It always will lead to a decrease in consumption

b. It will lead to a decrease in consumption only for a normal good.

c. It will lead to a decrease in consumption only for an inferior good.

d. It will lead to a decrease in consumption only for a Giffen good.

8. Suppose Nomasa, Noleen and Nothan all purchase small white board markers for their rooms for R1500 each. Nomsa's willingness to pay was R3500, Noleen's willingness to pay was R2500, and Nothan's willingness to pay was R3000. Total consumer surplus for these three would be ...

a. R1500.

b. R3000.

c. R4500.

d. R9000.

e. R6000

9. Which of the following is a key assumption of a perfectly competitive market?

a. Firms can influence market price.

b. Commodities have few sellers.

c. It is difficult for new sellers to enter the market.

d. Each seller has a very small share of the market.

e. None of the above.

10. Joe owns a small coffee shop and his production function is q = 4KL, where q is total output in cups per hour, K is the number of coffee machines (capital) and L is the number of employees hired per hour (labour). If Joe's capital is currently fixed at K=4 machines, what is his short-run production function?

a. q = 16L

b. q = 4L

c. q = 16KL

d. q = 4K4

e. q= 16K4

11. If current output is less than the profit maximising output, then the next unit produced ...

a. will decrease profits.

b. will increase costs more than it increases revenue.

c. will increase revenue more than it increases costs.

d. will increase revenue without increasing costs.

e. may or may not change profits.

12. Although rice is a staple of the Japanese diet, the Japanese government has long restricted the importation of rice into Japan. The result of this import quota is to...

a. decrease the price of rice to the Japanese people.

b. decrease consumer surplus of Japanese rice consumers.

c. decrease producer surplus of Japanese rice producers.

d. Secure a welfare gain for the Japanese people.

e. Increase the consumption of rice by the Japanese people.

13. The difference between the economic and accounting costs of a firm are ...

a. the accountant's fees.

b. the corporate taxes on profits.

c. the opportunity costs of the factors of production that the firm owns.

d. the sunk costs incurred by the firm.

e. the explicit costs of the firm.

14. At the optimum combination of two inputs ...

a. the slopes of the isoquant and isocosts curves are equal.

b. costs are minimised for the production of a given output.

c. the marginal rate of technical substitution equals the ratio of input prices.

d. all of the above.

e. [1] and [3] only.

15. When a product transformation curve for a firm is bowed outward, there are ... in production.

a. economies of scope

b. economies of scale.

c. diseconomies of scope.

d. diseconomies of scale.