1. Presume that at Jones and Smith Shoe Factory, the marginal cost of making a pair of shoes is $15 and average variable cost is $15. For the next pair of shoes produced marginal cost will be ________ $15 and average variable cost will be ________ $15.

A. greater than; less than

B. less than; greater than

C. less than; less than

D. greater than; greater than

2. The added revenue that a firm earns from selling an additional unit of output is:

A. marginal revenue

B. total revenue

C. variable revenue

D. fixed revenue

3.  If a restaurant charges senior’s one price and non seniors another price, the restaurant will apply the marginal principle:

A. once, because the two groups have the same demands

B. twice, because the two groups have different demands

C. only to the seniors because they consume the most

D. by averaging the price charged to both groups

4. At the market equilibrium, resources are allocated efficiently because:

A. the marginal cost of producing another unit is equal to zero.

B. the price buyers pay is greater than sellers' willingness to sell.

C. the price buyers pay accurately reflects the marginal cost of the resources used to produce the good.

D. all of the above

5. Presume that the quantity supplied of cars exceeds the quantity of cars demanded. We would expect that:

A. the price of cars will decrease.

B. the price of cars will increase.

C. the supply will increase to meet the demand.

D. the demand will decrease to meet the supply.