Week 1

1 . Revenue increases when
A. producer surplus increases
B. producer surplus decreases
C. consumer surplus increases
D. consumer surplus decreases
Answer : A. producer surplus increases

2 . An increase in the price of an inelastic good
A. decreases revenues
B. decreases the percentage change in quantity less than the percentage change in price
C. increases revenues
D. increases the percentage change in quantity more than the percentage change in price
Answer: C. increases revenues

3 . Price elasticity of Demand increases when
A. the number of complementary goods decreases
B. the number of substitute goods decreases
C. people become more price sensitive over time
D. people become less price sensitive over time
Answer: N/A

4 . The purpose of a market in a market system is to
A. allow government to control what is sold
B. set constraints between buyers and sellers
C. bring buyers and sellers into contact
D. allow an organization to set prices in relation to their products
Answer: C. bring buyers and sellers into contact

5 . By specializing in the production of one good, a company is able to benefit from economies of scale which increases its revenue. Which of the following is an attribute of specialization?
A. Reducing costs by creating a surplus
B. Saving time by allowing a worker to focus on one task
C. Encouraging workers to learn new skills
D. Encouraging workers to learn a number of different skills
Answer: B. Saving time by allowing a worker to focus on one task

6 . The market system promotes progress by
A. creating incentive to continue to do things in the same way
B. restricting the amount of capital directed to specific goods
C. slowly adjusting to changes in the prices of resources
D. providing incentive for technological advances
Answer: D. providing incentive for technological advances

12 . Because the goals of firms, entrepreneurs, and workers have different incentives, which of the following principles