Economics_MCQs

MCQ's
In monopolist market a new entrant firm should produce where:

• MC
• MC>MR
• MC=MR
• MC=AR

Shape of production curve is:

• Concave
• Convex
• Linear
• Positive

Which of the following leads to an inward sift of a nation's production possibilities curve:

• Immigration of skilled workers into the nation
• An increase in the size of the working age population.
• A decrease in the size of the working age population.
• Increased production of capital goods.

The concave shape of the production possibilities curve for the two goods X and Y illustrates:

• Increasing opportunity cost for both goods
• Increasing opportunity cost for good X and not for good Y.
• Increasing opportunity cost for good Y and not for X.
• Constant opportunity cost for both

New technology which reduces cost for firms:

• Shift the supply curve to the right
• Reduce equal quantity curve to the left
• Raise equal quantity price

Sugar can be refined from sugar beets. when the price of those beets fall:

• The demand curve for the sugar would shift right
• The demand curve for the sugar would shift left
• The supply curve for the sugar would shift right
• The supply curve for the sugar would shift right

The income effect for a price change is:

• Always positive
• Always negative
• May be positive
• May be negative

In economics, the long-run is a time period in which all inputs:

• are rare
• are paid
• loans are repaid

What happens to an incumbent firm's demand curve in monopolistic competition as new firm enter:

• It shifts rightward
• It shifts leftward
• It becomes horizontal
• New elements will not affect an incumbent firm's demand curve.

Price elasticity of demand measures the responsiveness of the quantity demanded to:

• Quantity x Demand
• Quantity x Supply
• Output
• Production

A)Define equilibrium?
B)Suppose quantity demanded and Qs od a cane of soap is described by the following equation:
Qd=1000-200p
Qs=300+150p
I)What is the quantity of soap?
II)if the price of soap is $3.00 per cane, will there be a surplus or shortage? what would be the size of surplus or shortage? (2+4+4)

Define equilibrium. Qd=100-10p find price =? Qs=40+2p (10)

A market is said to be in equilibrium when:

• Demand equals output
• There is downware pressure on price
• The amount consumers wish to buy at the current price equals the amount producers wish to sell at.
• All buyers are able to find sellers willing to sell to them at the current price.

Price floor results in:

• All of the given options.
• Excess supply
• Equilibrium
• Excess demand

For calculating price elasticity of supply, you need to know

• Two prices and two quantities supplied
• The slope of the supply curve.
• The equilibrium price and quantity in the market
• The quantity supplied at two different prices, all else equal

Costs determine all of the following EXCEPT:

• Demand for a product
• firm's behavior
• firm's profitability
• How firms should expand?

A production function assumes a given:
► Technology.
► Set of input prices.
► Ratio of input prices.
► Amount of output

Which of the following is NOT a generally accepted measure of the riskiness of an investment?

► Standard deviation.
► Expected value.
► Variance.
► None of the given options


AN isoquant:
► Must be linear.
► Cannot have a negative slope.
► Is a curve that shows all the combinations of inputs that yield the same total output.
► Is a curve that shows the maximum total output as a function of the level of labor input.



A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology, is called:

► An isoquant.
► A production possibility curve.
► A production function.
► An isocost function.

The presence of a learning curve may induce a decision maker in a startup firm to choose:
► Low levels of output to exploit economies of scale.
► High levels of output to exploit economies of scale.
► Low levels of output to shift the average cost curve down over time.
► High levels of output to shift the average cost curve down over time.


Fixed costs are fixed with respect to changes in:
► Output.
► Capital expenditure.
► Wages.
► Time.

Assume that one of two possible outcomes will follow a decision. One outcome yields a $75 payoff and has a probability of 0.3, the other outcome has a $125 payoff and has a probability of 0.7. In this case the expected value is:
► $35.
► $85.
► $60.
► $110.


The expected value is a measure of:

► Risk.
► Variability.
► Uncertainty.
► Central tendency.

What is the advantage of the standard deviation over the average deviation?

► Because the standard deviation requires squaring of deviations before further computation, positive and negative deviations do not cancel out.
► Because the standard deviation does not require squaring of deviations, it is easy to tell whether deviations are positive or negative.
► The standard deviation expresses the average deviation in percentage terms, so that different choices can be more easily compared.
► The standard deviation transforms subjective probabilities into objective ones so that calculations can be performed.


Rabia and Samina are shopping for new cars (one each). Rabia expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samina expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability.
Refer to the above scenario, Samina’s expected expense for her car is:
► $19,000.
► $18,000.
► $17,500.
► $15,000.

When the snob effect exists, a change in price is likely to:

► Change total revenue less than if there were no network externalities.
► Change total revenue more than if there were no network externalities.
► Change total revenue the same amount as if there were no network externalities.
► Not change total revenue at all.



Which of the following is TRUE concerning the substitution effect of a decrease in price?

► It will lead to an increase in consumption only for a normal good.
► It will always lead to an increase in consumption for all type of goods.
► It will lead to an increase in consumption only for an inferior good.
► It will lead to an increase in consumption only for a Giffen good.



For an inferior good, the income and substitution effects:

► Work together.
► Work against each other.
► Can work together or in opposition to each other depending upon their relative magnitudes.
► Always exactly cancel each other.


Which of the following describes the Giffen good case?
► When the price of the good rises, the income effect is opposite to and greater than the substitution effect and consumption falls.
► When the price of the good falls, the income effect is in the same direction as the substitution effect and consumption rises.
► When the price of the good falls, the income effect is in the opposite direction to the substitution effect and consumption falls.
► When the price of the good falls, the income effect is in opposite direction to the substitution effect and consumption rises.



Marginal utility measures:

► The slope of the indifference curve.
► The additional satisfaction from consuming one more unit of a good.
► The slope of the budget line.
► The marginal rate of substitution.



Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior?
► Preferences are complete.
► Preferences are transitive.
► Perfectly vertical.
► None of the given options.

Indifference curves that are convex to the origin reflect:

► An increasing marginal rate of substitution.
► A decreasing marginal rate of substitution.
► A constant marginal rate of substitution.
► A marginal rate of substitution that first decreases then increases.



Use the following two statements to answer this question:
A. If utility is ordinal, a market basket that provides 30 utils provides twice the satisfaction of a market basket that provides 15 utils.
B. When economists first studied utility it was believed that utility was cardinal, but it was later discovered that ordinal preferences are sufficient to explain how most individual decisions are made.

► Both I and II are true.
► I is true and II is false.
► I is false and II is true.
► Both I and II are false.



If indifference curves are concave to the origin, which of the following assumptions regarding preferences is being violated?

► Diminishing marginal rates of substitution.
► Transitivity of preferences.
► More is preferred to less.
► Completeness.


Which of the following will cause a leftward shift in the supply curve of gasoline?

► A decrease in the price of gasoline.
► An increase in the wage rate of refinery workers.
► An improvement in oil refining technology.
► All of the given options.



"Consumer Price Index (CPI) is higher this year than the last year". This means that:

► The rate of inflation has increased.
► There has been inflation since last year.
► Real prices have increased.
► Real prices have decreased.



Scarcity can be avoided by making:

► Needs unlimited.
► Wants unlimited.
► Resources limited.
► Wants and needs limited.



Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market is:
► The extent to which any firm can influence the price of the product.
► The size of the firms in the market.
► The annual sales made by the largest firms in the market.
► The presence of government intervention.



--------------- questions have to do with explanation and prediction, ------------------- questions have to do with what ought to be.

► Positive; negative.
► Negative; normative.
► Affirmative; positive.
► Positive; normative.


In a perfectly competitive market:

► There are few buyers.
► There is a single seller.
► There is a cartel.
► Perfectly vertical.

Which of the following is a normative statement?

► The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S.
► Presidential candidates should not be given funds from the federal government to run campaigns.
► The sea otter should not be allowed to spread into Southern California coastal waters, because it will reduce the value of fisheries.
► All of the given options.


Economics is about the allocation of scarce resources. Which of the following is NOT an example of economic scarcity?

► If Steve goes to see the movie Master and Commander on Saturday, he will not be able to afford buying ice cream.
► If Jenny studies for her economics quiz this evening, she will not have time to walk her dog.
► If General Motors increases its production of SUV’s this year, it will have to spend more on advertising.
► If Borders Books increases the number of titles it carries, it will have to reallocate shelf space to accommodate the new titles.

The demand curve facing a perfectly competitive firm is:
► The same as the market demand curve.
► Downward-sloping and less flat than the market demand curve.
► Perfectly horizontal.
► Perfectly vertical.


Total Revenue (TR) is equal to:
► Price times quantity.
► Price times quantity minus total cost.
► Price times quantity minus average cost.
► Price times quantity minus marginal cost.


Subjective:

Suppose a person allocates a given budget between two goods, food and clothing. If food is an inferior good, can you tell whether clothing is inferior or normal? Explain. ( Marks: 10 )

Discuss the slope of income consumption curve when the good is: ( Marks: 5 )
a. Normal
b. Inferior

couin tosed head comes u pay 200 tail come u ogt 200 .do u play this game or not . explain ur answer


what is the difference between risk and uncertainty ? (3)

RELATIONSHIP BETWEEN AVERAGE PHYSICAL PRODUCT AND MARGINAL PHYSICAL PRODUCT

With respect to Demand and Supply curve what will be effect in following both cases with respect to Price of Butter and Quantity purchased and supplied? (5+5)

A. When the price of milk increased? 5
B. When Average income levels decreases?

An individual whose attitude towards risk is known as:

► Risk averse.
► Risk loving.
► Risk neutral.
► None of the given options.

The concept of a risk premium applies to a person that is:

► All of the given options.
► Risk averse.
► Risk neutral.
► Risk loving.

A normative economic statement:

► Is a statement of fact.
► Is a hypothesis used to test economic theory.
► Is a statement of what ought to be, not what is.
► Is a statement of what will occur if certain assumptions are true.

Economics is different from other social sciences because it is primarily concerned with the study of ________, it is similar to other social sciences because they are all concerned with the study of ________.


► Limited resources, market behavior.
► Scarcity, human behavior.
► Social behavior, limited resources.
► Biological behavior, scarcity.

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as:
► P = MR.
► P = AVC.
► AR = MR.
► P = MC.

A welfare loss occurs in monopoly where:

► The price is greater than the marginal cost.
► The price is greater than the marginal benefit.
► The price is greater than the average revenue.
► The price is greater than the marginal revenue.


The "perfect information" assumption of perfect competition includes all of the following EXCEPT:
► Consumers know their preferences.
► Consumers know their income levels.
► Consumers know the prices available.
► Consumers can anticipate price changes.


Figure
















In figure given above, the marginal utility of income is:


► Increasing as income increases.
► Constant for all levels of income.
► Diminishes as income increases.
► None of the given options.


A consultant for Mattel (the producer of Barbie) reports that their long run average cost curve is decreasing. In other words, he is saying that:


► The firm has increasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
► The firm has decreasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
► The firm has increasing returns to scale but the law of diminishing marginal productivity may still apply to this firm.
► The firm has decreasing returns to scale but nonetheless the law of diminishing marginal productivity may still apply to this firm.

If the cross price elasticity of demand between two goods X and Y is positive; it means that goods are:


► Independent.
► Complements.
► Substitutes.
► Inferior.

A demand schedule is best described as:

► A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
► A graphical representation of the law of demand.
► A systematic listing of all the variables that might conceivably bring about a change in demand.
► A symbolic representation of the law of demand: P,Q and Q, P.

Which of the following best expresses the law of demand?

► A higher price reduces demand.
► A lower price reduces demand.
► A higher price reduces quantity demanded.
► A lower price shifts the demand curve to the right.

Which of the following would most likely shift the production possibilities curve for a nation outward?


► A reduction in unemployment.
► An increase in the production of capital goods.
► A reduction in discrimination.
► An increase in the production of consumer goods.

The primary use of the kinked-demand curve is to explain price rigidity in:

► Oligopoly.
► Monopoly.
► Perfect competition.
► Monopolistic competition.

A monopolistically competitive firm in short run equilibrium:

► Will make negative profit (lose money).
► Will make zero profit (break-even).
► Will make positive profit.
► Any of the given are possible.

A market with few entry barriers and with many firms that sell differentiated products is:

► Purely competitive.
► A monopoly.
► Monopolistically competitive.
► Oligopolistic.


The maximum price that a consumer is willing to pay for a good is called:

► The reservation price.
► The market price.
► The first-degree price.
► The block price.

Third-degree price discrimination involves:

► Charging each consumer the same two part tariff.
► Charging lower prices the greater the quantity purchased.
► The use of increasing block rate pricing.
► Charging different prices to different groups based upon differences in elasticity of demand.


A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing:

► First-degree price discrimination.
► Second-degree price discrimination.
► Third-degree price discrimination.
► All of the given options.


An electric power company uses block pricing for electricity sales. Block pricing is an example of:

► First-degree price discrimination.
► Second-degree price discrimination.
► Third-degree price discrimination.
► Block pricing is not a type of price discrimination.

A firm never operates:

► At the minimum of its average total cost curve.
► At the minimum of its average variable cost curve.
► On the downward-sloping portion of its average total cost curve.
► On the downward-sloping portion of its average variable cost curve.

Marginal profit is equal to:
► Marginal revenue minus marginal cost.
► Marginal revenue plus marginal cost.
► Marginal cost minus marginal revenue.
► Marginal revenue times marginal cost.

If current output is less than the profit-maximizing output then which of the following must be TRUE?
► Total revenue is less than total cost.
► Average revenue is less than average cost.
► Marginal revenue is less than marginal cost.
► Marginal revenue is greater than marginal cost.

At the profit-maximizing level of output, what is TRUE of the total revenue (TR) and total cost (TC) curves?
► They must intersect with TC cutting TR from below.
► They must intersect with TC cutting TR from above.
► They must be tangent to each other.
► They must have the same slope.

The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the average total cost?
► 5Q.
► 5.
► 5 + (200/Q).
► None of the given options.

In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive but can be resold and are therefore an example of:
► A fixed cost.
► A variable cost.
► An implicit cost.
► An opportunity cost.
Costs determine all of the following EXCEPT:

► Demand for a product.
► Firm's behavior.
► How firms should expand?
► Firm's profitability.


The rate at which a firm can substitute capital for labour and hold output constant is the:

► Law of diminishing marginal returns.
► Marginal rate of substitution.
► Marginal rate of factor substitution.
► Marginal rate of production.


If a simultaneous and equal percentage decrease in the use of all physical inputs leads to a larger percentage decrease in physical output, a firm’s production function is said to exhibit:

► Decreasing returns to scale.
► Constant returns to scale.
► Increasing returns to scale.
► Diseconomies of scale.

At any given point on an indifference curve, the absolute value of the slope equals:

► Unity--otherwise there would be no indifference.
► The marginal rate of substitution.
► The consumer’s marginal utility.
► None of the given options.

According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:
► Vertical.
► U-shaped.
► Upward-sloping.
► Downward-sloping.


Cross-price elasticity measures whether:
► Goods are normal or inferior.
► Two goods are substitutes or complements.
► Demand is elastic or inelastic.
► Supply is steeper than demand or vice versa.


Which of the following will be TRUE if demand is inelastic?
► The coefficient of elasticity is greater than one.
► The percentage change in quantity demanded is same as the percentage change in the price.
► An increase in price will increase total revenue.
► None of the given options.


Suppose your local public golf course increases the greens fees for using the course. If the demand for golf is relatively inelastic, you would expect:

► A decrease in total revenue received by the course.
► An increase in total revenue received by the course.
► No change in total revenue received by the course.
► An increase in the amount of golf played on the course.


Aslam decides to stay at home and study for his exam rather than going out with his friends to a movie. His dilemma is an example of:


► The economic perspective.
► Marginal analysis.
► Allocative efficiency.
► Opportunity cost.

Government authorities have managed to reduce the unemployment rate from 8% to 4% in a hypothetical economy. As a result:

► The economy's production possibilities curve will shift outward.
► The economy's production possibilities curve will become steeper.
► The economy will move downward along its production possibilities curve.
► The economy will move from a point inside to a point closer to its production possibilities curve.


Land is best described as:

► Produced factors of production.
► "Organizational" resources.
► Physical and mental abilities of people.
► "Naturally" occurring resources.


In pure capitalism, the role of government is best described as:

► Significant.
► Extensive.
► Nonexistent.
► Limited.


Microeconomics is the branch of economics that deals with which of the following topics?

► The behavior of individual consumers.
► Unemployment and interest rates.
► The behavior of individual firms and investors.
► The behavior of individual consumers and behavior of individual firms and investors.

SUBJECTIVE:

(Marks: 6+4)
A.Define “Law of supply” and explain it with a schedule and diagram.
B.What are the factors which cause the shift in market supply curve?