1. When there is a shortage in a market, prices are likely to rise because:
A. Buyers do not wish to buy as much as sellers want to sell.
B. Some buyers will attempt to outbid other buyers for the available units of output.
C. Higher prices will induce sellers to reduce their production.
D. All the above.

2. David is horrified to see that the price of his favorite beverage has increased. Which of the following would unequivocally (under all conditions) be responsible for this price increase?
A. a simultaneous decrease in demand and decrease in supply.
B. a simultaneous increase in demand and decrease in supply.
C. a simultaneous decrease in demand and increase in supply.
D. an increase in supply.

3. If the federal government imposes a price ceiling on ice cream and the equilibrium price is above the governmentâ??s price ceiling:
A. Too much ice cream will be supplied relative to demand.
B. Too little ice cream will be supplied relative to demand.
C. Suppliers will compete against each other and prices will fall.
D. None of the above.

4. What happens to the demand and supply of textbooks if the cost of paper used in books increases? The increase shifts:
A. The supply curve to the right.
B. The demand curve to the left
C. The demand curve to the right
D. The supply curve to the left.

5. All of the following may lead to a monopoly for your local cable television company EXCEPT:
A. Control over essential inputs
B. Lack of close substitutes
C. Charging a price equal to the marginal cost of service
D. Barriers to entry that are costly to overcome

6. For the perfectly competitive firm the marginal revenue curve is:
A. An upward sloping curve because the goodâ??s price increases with output for the firm.
B. A horizontal line because the firm acts as if its production will not change price.
C. A downward sloping curve because the firm acts as if its production will depress prices.
D. None of the above

7. A perfectly competitive firm's short run supply curve is the segment of the:
A. marginal cost curve that lies above the average total cost curve
B. marginal cost curve that lies above the average variable cost curve
C. average total cost curve that lies above the marginal cost curve
D. average variable cost curve that lies above the marginal cost curve

8. Owners of cable television companies might justify their monopoly status on the grounds that cable television is an industry characterized by:
A. A relatively small number of firms
B. Low fixed costs and high variable costs
C. High employee costs because it is skilled labor.
D. Substantial economies of scale

9. If a new tax is placed on gasoline in order to pay for infrastructure improvements, the tax will mostly be borne by:
A. Gas Purchasers
B. Gas Suppliers
C. Oil Producers
D. Uncertain, it depends on the relative responsiveness (elasticities) of gas buyers and suppliers.

10. As a monopolist, suppose that a firm produces MORE than the profit maximizing output using a typical production technology. As a result:
A. Average total cost will exceed the price of the good.
B. Marginal revenue will exceed average total cost
C. Marginal cost will exceed marginal revenue
D. Marginal revenue will remain constant.