ECO401 Solved MCQ from Quiz #3
chapters 1-24
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If the income elasticity of demand is 1/2, the good is:
Select correct option:
A luxury.
A normal good (but not a luxury).
Select correct option:
A luxury.
A normal good (but not a luxury).
An inferior good.
A Giffen good.
The cross elasticity of demand of complements goods is:
Select correct option:
Less than 0.
Select correct option:
Less than 0.
Equal to 0.
Greater than 0.
Between 0 and 1.
Greater than 0.
Between 0 and 1.
The point at which AC intersects MC is where:
Select correct option:
AC is decreasing.
MC is at its minimum.
AC is at its minimum.
AC is at its maximum.
Select correct option:
AC is decreasing.
MC is at its minimum.
AC is at its minimum.
AC is at its maximum.
Which of the following can be thought of as a barrier to entry?
Select correct option:
Scale economies.
Patents.
Strategic actions by incumbent firms.
All of the given options are true.
Select correct option:
Scale economies.
Patents.
Strategic actions by incumbent firms.
All of the given options are true.
When oligopolists collude, they are able to:
Select correct option:
Select correct option:
Raise price, but not restrict output
Raise price and restrict output, but not attain the monopoly profit
Raise price and restrict output, and therefore attain the monopoly profit
Restrict output, but not raise price
Raise price and restrict output, but not attain the monopoly profit
Raise price and restrict output, and therefore attain the monopoly profit
Restrict output, but not raise price
If marginal product is equal to average product:
Select correct option:
Select correct option:
The total product will fall
The average product will not change
Average variable costs will fall
Total revenue will fall
The average product will not change
Average variable costs will fall
Total revenue will fall
If marginal product is above the average product:
Select correct option:
The total product will fall
The average product will rise
Average variable costs will fall
Total revenue will fall
The marginal product is the extra output per factor (e.g. employee); the average product is the output per factor (e.g. per employee). If marginal product is below average product, the average product will fall
In a production process, all inputs are increased by 10%; but output increases more than 10%. This means that the firm experiences:
Select correct option:
Decreasing returns to scale.
Constant returns to scale.
Increasing returns to scale.
Negative returns to scale.
Which of the following is true?
a) If the marginal cost is greater than the average cost the average cost falls
b) If the marginal cost is greater than the average cost the average cost increases
c) If the marginal cost is positive total costs are maximised
d) If the marginal cost is negative total costs increase at a decreasing rate if output increases
The marginal cost measures the extra cost of producing another unit; the average cost measures the cost per unit. If the marginal cost is greater than the average cost the average cost increases.
According the law of diminishing returns:
a) The marginal product falls as more units of a variable factor are added to a fixed factor
b) Marginal utility falls as more units of a product are consumed
c) The total product falls as more units of a variable factor are added to a fixed factor
d) The marginal product increases as more units of a variable factor are added to a fixed factor
This occurs when variable factors are added to fixed factors. According to the law of diminishing returns the marginal product falls as more units of a variable factor are added to a fixed factor.
The law of diminishing returns assumes:
a) There are no fixed factors of production
b) There are no variable factors of production
c) Utility is maximised when marginal product falls
d) Some factors of production are fixed
This occurs when variable factors are added to fixed factors. It assumes some factors of production are fixed
When internal economies of scale occur:
a) Total costs fall
b) Marginal costs increase
c) Average costs fall
d) Revenue falls
These occur when the unit cost (average costs) falls as the scale of production increases.
The first level of output at which the long run average costs are minimised is called:
a) The Minimum Efficient Scale
b) The Minimum External Scale
c) The Maximum External Scale
d) The Maximum Effective Scale
This is the variable cost per unit; when added to the fixed cost per unit this leads to the total cost per unit. As output increases the average fixed cost falls so the average variable cost and average cost converge.
The average variable cost curve:
a) Is derived from the average fixed costs
b) Converges with the average cost as output increases
c) Equals the total costs divided by the output
d) Equals revenue minus profits
This is the variable cost per unit; when added to the fixed cost per unit this leads to the total cost per unit. As output increases the average fixed cost falls so the average variable cost and average cost converge.
If marginal cost is positive and falling:
a) Total cost is falling
b) Total cost is increasing at a falling rate
c) Total cost is falling at a falling rate
d) Total cost is increasing at an increasing rate
This means the extra cost of a unit is falling; total cost will increase at a decreasing rate.
If marginal product is below average product:
a) The total product will fall
b) The average product will fall
c) Average variable costs will fall
d) Total revenue will fall
The marginal product is the extra output per factor (e.g. employee); the average product is the output per factor (e.g. per employee). If marginal product is below average product, the average product will fall.
