1. If bread and peanut butter are complements, then an increase in the price of bread will lead to

a. an increase in the demand for peanut butter.

b. an outward shift of the supply curve for both bread and peanut butter.

c. a decrease in the demand for peanut butter.

d. an inward shift of the supply curve for both bread and peanut butter.

2. Which of the following is true in a purely competitive, price-taker market with low barriers to entry?

a. In the long run, firms will produce the quantity of output that minimizes per unit costs (ATC) of production.

b. If economic profits are present in the short run, new firms will enter the industry, driving down prices until the industry returns to zero economic profits.

c. Firms produce identical products.

d. All of the above statements are true.

3. When there is excess demand in the market for a good, there will be

a. incentives for producers to leave the market.

b. a tendency for price to increase.

c. downward pressure on the price of labor.

d. a tendency for price to fall.

4. In a market setting, if the demand for digital video recorders increases, we can expect that there will eventually be

a. a reduction in the price of digital video recorders.

b. a reduction in the quantity of digital video recorders supplied by producers.

c. more digital video recorders produced.

d. a shortage of digital video recorders.