Part 1: Multiple Choice Questions (5 points)

1 The Vietnam's economy relies

A. exclusively on the market mechanism
B. exclusively on the market mechanism in a mixed economy
C. exclusively on the command mechanism
D. equally on market and command mechanisms in a mixed economy
2 Which of the following is a normative statement?
A. Pollution is an example of an external cost.
B. Firms that pollute should be forced to shut dowi
C. Pollution makes people worse off.
D. Pollution imposes opportunity costs on others.
3 If both demand and supply increase, then equilibrium price
A. will rise and quantity will increase
B. could rise or fall or unchanged and quantity will increase
C. will fall and quantity will increase
D. will rise and quantity could either increase or decrease
4 A relative price is
A. A price expressed in terms of money.
B. the ratio of one money price to another.
C. what you get paid for babysitting your cousin.
D. equal to a money price.
5 The quantity demanded of a good or service is the amount that
A. consumers plan to buy during a given time period at a given price.
B. firms are willing to sell during a given time period at a given price.
C. consumer would like to buy but might no be able to afford.
D. is actually bought during a given time period at a given price.
6 In the book market, the supply of books will decrease if any of the following occur
except
A. a decrease in the number of book publishers.
B. an increase in the future expected price of a book
C. a decrease in the price of a book.
D. an increase in the price of paper.
7 A country has a comparative advantage in a product if the world price is
A. lower than that country's domestic price without trade.
B. higher than that country's domestic price without trade.
C. equal to that country's domestic price without trade.
D. not subject to manipulation by organizations that govern international trade.

Absolute advantage: lợi thế tuyệt đối: Sản xuất hàng hóa tốn ít chi phí đầu vào hơn
Comparative advantage: Lợi thế so sánh: Sản xuất hàng hóa tốn ít chi phí cơ hội
hơn => Ai có lợi thế so sánh thì nên sản xuất

 A country has a comparative advantage => Nên sản xuất hàng hóa => Xuất khẩu
(Export) => Giá thế giới (world price) cao hơn giá trong nước
8 If, as people's incomes increase, the quantity demanded of a good decreases, the
good is called
A. a substitute.
B. an inferior good.
C. a normal good.
D. a complement.
9 A market for good X given by the following function: P = 132 − 4Q; P = 66 + 2Q.
Consumer and producer surplus at the equilibrium point are:
A. 𝐶𝑆 = 121; 𝑃𝑆 = 242
B. 𝐶𝑆 = 422; 𝑃𝑆 = 121
C. 𝐶𝑆 = 242; PS = 121
D. 𝐶𝑆 = 242; PS = 211

10 The quantity supplied of a good or service is the amount that

A. is actually bought during a given time period at a given price.
B. producers wish they could sell at a higher price.
C. producers plan to sell during a given time period at a given price.
D. people are willing to buy during a given time period at a given price.
11 Good 𝐴 and good 𝐵 are substitutes in production. The demand for good 𝐴
increases so that the price of good 𝐴 rises. The inerease in the price of good 𝐴
shifts the
A. demand curve for good 𝐵 rightward.
B. demand curve for good B leftward.
C. supply curve of good B rightward.
D. supply curve of good B leftward.
12 A fall in the price of cabbage from $10.50 to $9.50 per bushel increases the
quantity demanded from 18,800 to 21,200 bushels. The price elasticity of
demand is
A. 1.20.
B. 0.80.
C. 8.00.
D. 1.25.
13 If the price of the Walkman is below the equilibrium price, there will be a the
price will
A. surplus; fall
B. shortage; rise
C. shortage; fall
D. surplus; rise
14 An indifference curve shows
A. affordable combinations of goods.
B. the relative price of one good relative to another.
C. consumption possibilities that a consumer faces at different prices and income.
D. different combinations of two goods among which the consumer is indifferent.
15 When price of the fixed input increases
A. Average variable cost curve shifts up
B. Average total cost curve shifts down
C. Average total cost curve shifts up
D. Marginal cost curve shifts up
16 A perfectly competitive firm has average variable cost function as follow 𝐴𝑉𝐶 =
𝑄 + 1. The firm's supply function is:
A. 𝑃 = 2𝑄 + 1
B. 𝑃 = 𝑄 + 2
C. 𝑃 = 𝑄 + 1
D. 𝑃 = 2𝑄 + 2
17 A competitive firm wants to maximize profit must
A. Maximize total revenue
B. Maximize unit profit
C. Minimize total cost
D. None of the above
18 Monopolist does not set highest price for its product because
A. Monopolist will not have maximum profit
B. Monopolist wants to maximize total revenue
C. Monopolist wants to maximize consumer's welfare
D. Cost of production is very low
19 When marginal revenue is negative:
A. Price is negative
B. Firm to shut down
C. Firm to increase output
D. Demand is inelastic at that output
20 Kevin quit his $65,000 a year corporate lawyer job to open up his own law
practice. In Kevin's first year in business his total revenue equaled $150,000.
Kevin's explicit cost during the year totaled $85,000 Using the information from
Kevin's first year in business, what is his economic profit?
A. $0
B. $65,000
C. $20,000
D. $85,000
 Part 2: True/False Questions. Explain why (3 point)
1. A decrease in income will shift the demand curve to the left.

2. Economics is the study of how to use unlimited resources to satisfy limited wants.

3. The supply curve of a monopoly firm is its marginal cost curve

Part 3: Short-Answer Questions (2 points)

A monopoly faces a demand function as follow: D: P($) = 50 − Q
The firm's total cost function is given by: TC ($) = 𝑄 2 + 6𝑄 + 40

1. Assuming that the firm wants to maximize its profit, determine the quantity and
price? Find the profit of the firm.

2. Assuming that government imposes a specific tax as $5 per unit on this firm, how
do price, quantity and profit change? What are tax burdens by consumers and
producers?