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Thursday, March 1, 2012

Economics Quiz - 17 (Economics For Exams)

1. When marginal utility is negative, total utility is
[A]Increasing.
[B]At a minimum.
[C]Equal to zero.
[D]Decreasing.



2. Which of the following is false in first-degree price discrimination?
[A]The monopolist will be able to extract the entire consumer’s surplus
[B]The price of each unit will be different
[C]By following first degree price discrimination the profit of the monopolist will be more than what he could otherwise earn at a single price
[D]The price of the first unit will be less than that of the subsequent units



3. At a given price, if quantity demanded of a product is greater than quantity supplied, the market forces will respond by
[A]Reducing the price of the product and thereby reducing profits of the firms
[B]Increasing the price of the product and thereby increasing profits of the firms
[C]Reducing the price of the product and thereby increasing profits of the firms
[D]Increasing the price of the product and thereby reducing profits of the firms



4. Which of the following is an example of implicit cost?
[A]Interest payments on an outstanding loan of the firm
[B]Salaries paid to the firm's managers
[C]Salaries paid to the firm's assembly-line workers
[D]Rental income foregone on assets owned by the firm and employed in the business.



5. In the short run a firm should shut down if
[A]Price is below marginal cost
[B]Price is below average fixed cost
[C]Price is below average variable cost
[D]Price is below average total cost



6. Floods in Brazil, Columbia, and Bolivia wipe out 30% of the entire world's coffee production. As a result, if the price of coffee rises by 200%, the elasticity of demand for coffee is
[A]– 6.67
[B]– 67.00
[C]– 3.00
[D]None of the above.



7. Which of the following is true of a straight-line demand curve?
[A]Elasticity is equal to zero at the midpoint
[B]As you move down along the curve, the elasticity falls
[C]As you move down along the curve, the elasticity rises, and then falls
[D]As you move down along the curve, the elasticity rises



8. The long-run equilibrium outcome in monopolistic competition and perfect competition is similar, because in both the market structures
[A]The efficient level of output will be produced in the long run
[B]Firms will be producing at their minimum average cost of production
[C]Firms will only earn normal profits
[D]Firms realize all economies of scale



9. Total cost function of a firm is TC = 6000 + 10Q. If price of the product sold by the firm is 12 per unit, the break-even sales revenue is
[A]3000
[B]6000
[C]36000
[D]60000



10. When people have very little time to respond to price changes, demand becomes
[A]More elastic
[B]Less elastic
[C]Unitary elastic
[D]Perfectly elastic



11. Which of the following statements is not correct?
[A]The fixed cost of a firm in the long run will be less than the fixed cost of the firm in the short run
[B]Fixed costs are not dependent on the firm’s level of output
[C]The difference between average total cost and average variable cost indicates the amount of average fixed cost of a firm
[D]With the increase in output, the average fixed cost of the firm initially decreases at a decreasing rate and later at an increasing rate



12. Which of the following is not true with respect to a perfectly competitive market?
[A]There are many sellers in the market
[B]Individual firms are price makers
[C]Products sold by the firms are identical
[D]Anyone can enter or exit the industry without difficulty



13. If sales of CD players increase from 10,000 to 14,000 per month as per capita income increases from Rs. 15,000 to Rs.20,000, which of the following is true?
[A]Demand for CD players is income inelastic
[B]CD player is a Giffen good
[C]CD player is an inferior good, but not a Giffen good
[D]CD player is a luxury



14. A profit maximizing firm seeks to maximize the difference between
[A]Marginal revenue and marginal cost
[B]Marginal revenue and average cost
[C]Total revenue and marginal revenue
[D]Average revenue and average cost



15. The daily income of Kamesh is Rs.100. He spends all his income on goods X and Y. Currently, the prices of goods X and Y are Rs.6 and Rs.4, respectively. Mr. Kamesh daily buys 10 units of good X and 10 units of good Y. If the utility of the last unit of good X and good Y consumed added same amount of utility to the total utility, then we can say that
[A]The current consumption pattern of Mr. Kamesh gives him the maximum possible utility
[B]He obtains higher additional utility per rupee from good X than from good Y
[C]He should buy more of good X and fewer of good Y
[D]He should buy more of good Y and fewer of good X



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