Multiple Choice Qn....another one......

1		The price elasticity of demand measures ________________
			A)	the responsiveness of quantity demanded to a change in price
			B)	how far a demand curve shifts
			C)	a change in price
			D)	a change in quantity demanded
2		If demand is ___________ then price cuts will __________ spending
			A)	inelastic, increase
			B)	elastic, increase
			C)	elastic, decrease
			D)	none of the above
3		The cross-price elasticity of demand measures how the quantity demanded of one good is related to consumer income
			A)	TRUE
			B)	FALSE
4		Positive cross-elasticities suggest that goods are _________ and negative cross-elasticities that goods are __________
			A)	substitutes, inferior
			B)	normal, complements
			C)	substitutes, complements
			D)	normal, inferior
5		A measurement showing how quantity demanded varies with income is the
			A)	price elasticity of demand
			B)	cross-price elasticity of demand
			C)	budget elasticity of demand
			D)	income elasticity of demand
6		Inferior goods have ___________ and luxury goods have ____________
			A)	negative income elasticities, income elasticities greater than 1
			B)	income elasticities greater than 1, negative income elasticities
			C)	positive income elasticities, negative income elasticities
			D)	none of the above
7		If your income doubles and the prices of the goods you buy double, then your demand for these goods will likely ________
			A)	increase
			B)	not change
			C)	decrease
			D)	shift
8		Any price change can be decomposed into an income effect and a complementary effect
			A)	TRUE
			B)	FALSE
9		The income effect of a price increase of a normal good is to __________ of that good and the substitution effect is to _______ of that good
			A)	increase quantity demanded, reduce quantity demanded
			B)	increase quantity demanded, increase quantity demanded
			C)	reduce quantity demanded, reduce quantity demanded
			D)	reduce quantity demanded, increase quantity demanded
10		The opportunity cost of a student is
			A)	Course fees and rent
			B)	A loan from the bank
			C)	What the student could have earned in the best job available by not studying
			D)	What the student will earn after graduation
11		Economics assumes that people consume goods and services to achieve
			A)	Status
			B)	Prestige
			C)	Utility
			D)	Self-esteem
12		The extra utility from consuming one more unit of a good is called
			A)	Marginal utility
			B)	Additional utility
			C)	Surplus utility
			D)	Bonus utility
13		Adding up the quantities demanded of a good by different people facing the same price gives us the
			A)	Supply curve
			B)	Market demand curve
			C)	Demand curve
			D)	Market supply curve
14		Firms are assumed to _________ costs and to _________ profits
			A)	incur, desire
			B)	pay, make
			C)	charge, earn
			D)	minimize, maximize
15		The increase in total cost when one more unit is produced is known as
			A)	marginal cost
			B)	opportunity cost
			C)	limited cost
			D)	average cost
16		Marginal revenue is the _________ when output is ____________
			A)	change in average revenue, increased
			B)	change in total revenue, increased by one unit
			C)	change in average revenue, increased by one unit
			D)	change in total revenue, increased
17		Profits are maximized when _________________
			A)	costs are minimized
			B)	revenue is maximized
			C)	average cost is less than average revenue
			D)	marginal cost equals marginal revenue
18		If a firm is producing a level of output where marginal cost is greater than marginal revenue, it should increase output to maximise profits
			A)	TRUE
			B)	FALSE
19		If a firm's wage costs increase this will cause __________ and ________
			A)	marginal cost to increase, output to fall
			B)	marginal revenue to increase, output to fall
			C)	opportunity cost to increase, the firm will close
			D)	average cost will rise, output will increase
20		An upward shift in marginal cost ________output and an upward shift in marginal revenue ________ output
			A)	reduces, reduces
			B)	reduces, increases
			C)	increases, increases
			D)	increases, reduces
21		A firm should close down if profits are zero
			A)	TRUE
			B)	FALSE
22		A firm that breaks even after all economic costs are paid is earning
			A)	Economic profit
			B)	Accounting profit
			C)	Normal profit
			D)	Supernormal profit
23		A firm that makes profit in addition to normal profit is making
			A)	Economic profit
			B)	Accounting profit
			C)	Normal profit
			D)	Supernormal profit
24		If both marginal cost and marginal revenue increase, a firm __________
			A)	should increase output
			B)	should reduce output
			C)	will require further information on how to respond
			D)	should not change output