1. Which of the followings is not true when a firm acts as a price taker.

A firm cannot influence the price it sells its product;

A firm takes the market price as given;

A firm make decisions in pursuit of its own self-interest;

A firm cannot raise its price without losing all sales.

None of the above.

2. Tom decided to spend $100 on CD and cassette tapes. The price of CD is $10, and the price of cassette tape is $5. Which of the followings is true?

He can choose the combination of 5 CDs and 8 cassette tapes, which is efficient;

The opportunity cost of CD is giving up 2 cassette tapes;

The slope of the budget constraint shows the opportunity cost of the good in vertical axis.

b. and c.

3. Which of the followings is not true when there are diminishing returns?

The production possibilities frontier is curved, bowed out from the origin;

As the output of the good measured on the vertical axis increases, the slope of the production possibilities frontier becomes flatter;

As more inputs are used, output decreases;

As the output of the good measured on the vertical axis falls, increases in the output of the good measured on the horizontal axis gets smaller and smaller.

4. If Japan has a comparative advantage in the production of computer, then

Japan should have an absolute advantage in production of computer;

the relative cost of producing computer is lower in Japan;

Japan will export computer;

a. and c.

b. and c.

5. Along an individual demand curve, a decrease in the quantity demanded occurs when

a.    price has increased;

b. price has declined;

c. the consumer’s income has fallen;

d. the consumer’s income has increased;

e. a. and c.