MCQ / Choose the best ans from the option

1.The utility obtained by one person ________ be scientifically or objectively compared with the utility obtained from the same thing by another person.

a)can with considerable effort

b)can easily and routinely

c)in the U.S. can

d)Cannot

2.The "diamondwater paradox" refers to the.

a)well known fact that diamonds made from supercooled ice are worth more than real diamonds.

b)observation that diamonds that have been under water for a lengthy period develop a patina that makes them worth more than diamonds that have remained dry

c)observation that things with the greatest value in use often have little value in exchange whereas things that have great value in exchange often have little value in use

d)none of the above

3.Which of the following represents a key assumption underlying the economic theory of consumer choice?

a)Consumers have unlimited budgets

b)Consumers can avoid the law of diminishing marginal utility by using credit cards instead of cash

c)Consumers wish to maximize marginal utility regardless of the cost of the good

d)Consumers are utility maximizers.

4.For any two goods, X and Y, if MUX divided by PX = 2.5 and MYY divided by PY = 4.0, then with a given income and prices the consumer should

a)buy more of good X and less of good Y

b)buy more of good Y and less of good X.

c)buy only good Y and no X

d)stop because equilibrium is achieved.

5.Which of the following statements describes the presence of diminishing returns. Holding at least one factor constant.

a)the marginal product of a factor is positive and rising.

b)the marginal product of a factor is positive but falling.

c)the marginal product of a factor is falling and negative

d)the marginal product of a factor is constant

6.Which of the following statements best describes the general form of a production function: (i) It is a purely technological relationship between quantities of input and quantities of output.(ii) It represents the technology of an organization, sector of an economy.(iii) Prices of inputs or of the output do not enter into the production function.(iv) It is a flow concept describing the transformation of inputs into output per unit of time.

a)(i),(ii) and (iv)

b)(i) and (ii

c)(i) and (iv)

d)all of the above

7.Which of the following statements describes increasing returns to scale:

a)Doubling the inputs used leads to double the output.

b)Increasing the inputs by 50% leads to a 25% increase in output.

c)Increasing inputs by 1/4 leads to an increase in output of 1/3.

d)None of the above.

8.In the short-run, a profit-maximizing firm will produce additional units of a product as long as.

a)price at least covers average fixed cost

b)total revenue is increasing

c)A change in the rate of technical substitution

d)elasticity of demand is infinite

e)price at least covers average variable cost

9.Why are sellers price takers in a perfectly competitive market?

a)There are only a few sellers, and so they have the power to take whatever price they want

b)Sellers in a perfectly competitive market have the power to influence price by colluding with one another and using quotas to limit overall market output and thus raise price.

c)Individual buyers in a perfectly competitive market have the power to influence price, and thus can impose prices and other conditions on powerless sellers

d)A seller takes the price determined in the market, it sells a homogeneous product, and buyers and sellers are fully informed.

10.Fill in the blank: In a perfectly competitive market, a firm's marginal revenue is the same as ____________.

a)sunk costs.

b)total fixed costs.

c)price.

d)profit.

11.Which of the following is true in a perfectly competitive market in short-run equilibrium?

a)Profit equals zero.

b)Profit can be negative, zero, or positive

c)Profit can be zero or positive, but not negative.

d)Profit is positive, otherwise firms would not produce

12.Which of the following is the perfectly competitive firm's short-run supply curve?

a)That portion of its marginal cost curve that lies above average variable cost.

b)That portion of its average variable cost curve that lies below its marginal cost.

c)Market price

d)The entire range of average fixed cost.

13.What is the relationship between price and marginal revenue for a monopolist?

a)Price equals marginal revenue.

b)Price is greater than marginal revenue.

c)Price is less than marginal revenue.

d)None of the above.

14.To sell a larger quantity, a monopolist must reduce price. How is this inverse relationship between price and quantity embodied in marginal revenue?

a)By lowering price, revenue is lost on all existing sales (previous units sold).

b)Revenue is gained from the additional units of output sold by the monopolist at the new lower price

c)Marginal revenue is equal to market price, and thus marginal revenue is negative when price is reduced.

d) Both (a). and (b).

15.Suppose a market can be supplied by either a monopolist or served by a large number of small, perfectly competitive firms. What would be the difference in consumers' surplus under these two situations?

a)There is no difference, since market demand is the same in both cases

b)Consumers' surplus is larger under perfect competition, since price is lower and quantity is higher than under monopoly.

c)Consumers' surplus is larger under monopoly, since the monopolist has a higher level of profit that flows to shareholders, all of whom buy various goods and services

d)None of the above.

16.A defining characteristic of a natural monopoly is that

a)it exists because of legal barriers to entry.

b)It has no close substitutes

c)its average total cost curve slopes downward as it intersects the demand curve

d)its demand curve slopes downward.

17.Fill in the blank: The ____________ states that a monopolistic competitor in equilibrium produces an output smaller than the one that would minimize its costs of production.

a)law of demand.

b)law of increasing opportunity cost.

c)excess capacity theorem

d)coase theorem.

18.Which of the following is true in the long-run equilibrium under monopolistic competition?

a)Each firm is producing at maximum capacity at the lowest point on their long-run average total cost curve.

b)Each firm is producing with excess capacity at a higher than minimum level of long-run average total cost.

c)Each firm is earning positive economic profits and prevents entry through protective government regulation.

d)Each firm is earning negative economic profits and receives a subsidy from the federal government.

19.An example of a monopolistically competitive industry is

a)phone service.

b)the restaurant industry.

c)wheat farming.

d)the automobile industry.

20.One important difference between monopoly and monopolistic competition is the

a)greater restriction of output in monopolistic competition.

b)point there are no barriers to entry in monopolistic competition

c)point that the marginal revenue and demand curves are the same for a monopoly

d)slope of the demand curve that the firms faces