(a) Which one of the following is a factor of production?

(1)
A Land

B Profit

C Wages

D Manufacturing

(b) A firm has total fixed costs of $40 000 per month and variable costs of
$150 per unit. If it produces 1,000 units, what are the total costs per
month for the firm?
(1)
A $190 000

B $150 000

C $41 150

D $40 150

(c) The figure represents the world market for chocolate bars.

Price
S

P1

D
D1
Q1 Q Quantity

In the above Figure the change in price from P to P1 is most likely to have been caused by
(1)
A An increase in population.
B a decrease in supply.
C an increase in advertising.
D a decrease in the price of a substitute

(d) Which one of the following is part of the economic problem of scarcity?
(1)
A When to produce

B What to produce

C Whether to produce

D Where to produce

(e) Which one of the following statements is true about the demand curve?
(1)
A A demand curve is always vertical

B A demand curve will shift to the right if the price falls

C A demand curve shows the relationship between demand and supply

D A demand curve shows the amount demanded by consumers at a given

price

(f) The second step in the Decision-Making Process is

A To Identify the Problem

B To Determine the Objective

C To Identify the Possible Solutions

D To Examine the Alternatives

(g) The Total Revenue Curve shows the total revenue (TR) of the firm
A at each quantity sold

B at each quantity bought

C at each quantity produced

D None of the above

(h) The reason that the total cost is positive when output is zero is that the
firm incurs some costs that are

A Fixed
B Variable

C Marginal
D Additional

(i) Economies of scale means

A an increase in revenue caused by increasing the scale of production

B a decrease in costs caused by the increased scale of production

C an increase in supply caused by the increased scale of production

D A decrease in total average cost by the increased scale of production

(j) ___________________ refers to the value of the inputs owned and used by
the firm in its own production process

A Inventory
B Implicit Costs

C Economic Profit
D Explicit Costs

Identify TRUE and FALSE statements.

1. The ability and willingness of consumers to buy a product is known as

effective demand.
2. An economic situation in which the market demand for a product is
exactly equal to its market supply. As there is neither a surplus nor
shortage of the product, the market price tends to be stable in this
situation.
3. The demand curve shifts to the right whenever there is a decrease in
the price of a product.
4. Increase in the advertisement would lead to an increase in the supply
of a product.
5. The expected return on stocks has to be higher on bonds because of
the greater risk of the former. The statement is indicating the risk-
bearing theory of profit.
6. The point at which the total cost curve cuts the marginal cost is known
as the optimization point.
7. Reengineering refers to finding out in an open and above-board way,
how other firms may be doing something better and cheaper so that
your firm can copy and improve.
8. Opportunity cost refers to the relationship between the total revenue
(TR) and quantity (Q) of the good or service that a firm sells over a
given period of time.
9. The basic objective of a firm is to maximize its profits.
10. Microeconomics focuses on the study of individual decision-making
units.