1. The amount of compensation associated with the income effect of a price change is called

A. A compensation variation
B. An income effect
C. Consumer surplus
D. A subsidy

2. Consumer surplus is
A. The amount of purchasing power a consumer receives when the price of a good falls
B. The amount of money that exactly compensates a consumer for a change in circumstances
C. The net benefit a consumer receives from participating in the market for some good
D. Negative whenever the price of a good increases

3. Refer to the figure above. Suppose the price of pizza is $9.75. Then consumer surplus is ______.
A. $3.75
B. $3.50
C. $29.25
D. $33.00

4. Suppose Eddie's demand curve for text messages is T=150-500Pt, where T stands for the number of text messages and Pt represents the price of text messages. What is Eddie's consumer surplus if Pt = $.10 per message?
A. $5
B. $10
C. $20
D. $50

5. A firm's _______ shows the amount of output a firm can produce from given amounts of inputs using efficient production methods.
A. Production possibilities set
B. Efficient production frontier
C. Production function
D. Production possibilities curve

6. Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 5√L√K. If the firm has 100 units of capital, what is its short-run production function?
A. Q = F(K) = 50 √K
B. Q = F(L) = 500√ L
C. Q = F(L,K) = 50√ L√K
D. Q = F(L) = 50√ L

7. Refer to the table above. What is the marginal product of the 3rd worker?
A. 4 units of output
B. 3 units of output
C. 15 units of output
D. 5 units of output

8. When the marginal product of an input is ______ than the average product, the marginal units of the input _____ the average product.
A. Larger; lower
B. Smaller; raise
C. Smaller; do not affect
D. Larger; raise

9. A ______ cost is ______ if the firm doesn't incur the cost if it produces no output.
A. Fixed; sunk
B. Fixed; explicit
C. Variable; sunk
D. Fixed; avoidable

10. Suppose a firm's short-run production function is given by Q = F(L) = 4L. If the wage rate is $12 and the firm has sunk costs of $300, then the firm's variable cost function is
A. VC(Q) = $12Q
B. VC(L) = $3L
C. VC(Q) = $3Q
D. VC(Q) = $300 + $12Q

11. Suppose the marginal rate of technical substitution for labor with capital is 5, the marginal product of labor is 8 and the marginal product of capital is 4. Assuming the law of diminishing marginal product applies to both labor and capital, this firm
A. Is minimizing the cost of producing its output
B. Could reduce costs by substituting workers with capital
C. Could reduce costs by substituting capital with workers
D. Could reduce the cost of producing the output by reducing workers and capital by the same proportion

12.Refer to the table above. Assume the wage rate is $10 and the firm has $1,000 in unavoidable fixed cost. What is the marginal cost of producing 83 units of output?
A. $0.50
B. $0.56
C. $1.00
D. $1.43

13. Given a demand function of D(P) = 500 - 10P, what is it's inverse demand function?
A. D(P) = 50 - P
B. P(Q) = 50P
C. P(Q) = 50 - Q/10
D. P(Q) = 500 - 10Q

14. Refer to the figure above. What is the maximum profit that can be achieved?
A. $250
B. $500
C. $750
D. $850

15. A price-taking firm's variable cost function is C = Q³, where Q is the output per week. It has an avoidable fixed cost of $2,000 per week. Its marginal cost is MC = 3Q². What is the profit maximizing output if the price is P = $192?
A. 0
B. 6
C. 8
D. 10

16. A price-taking firm's marginal revenue is ______ the price of its output.
A. Equal to
B. Greater than
C. Less than
D. Less than or equal to

17. The incidence of a tax
A. Indicates how much of the tax burden is borne by suppliers
B. Indicates how much of the tax burden is borne by consumers
C. Indicates how much of the tax burden is borne by various market participants
D. Depends upon the shape of the supply curve only

18. More of a tax is borne by firms
A. The more elastic is demand and the less elastic is supply
B. The less elastic is demand and the less elastic is supply
C. The more elastic is demand and the more elastic is supply
D. The less elastic is demand and the more elastic is supply

19. Suppose the market demand function for ice cream is and the market supply function for ice cream is , both measured in millions of gallons of ice cream per year. Suppose the government imposes a $0.50 tax on each gallon of ice cream. The loss in consumer surplus due to the tax is
A. $3
B. $1.80
C. $2
D. $1.20

20. A price support program
A. Lowers the market price by making purchases of a good, thereby increasing demand
B. Lowers the market price by making purchases of a good, thereby reducing demand
C. Raises the market price by making purchases of a good, thereby increasing demand
D. Raises the market price by making purchases of a good, thereby reducing demand