Microeconomics Part II Quiz

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Question 1 of 20

1. Question
Which of the following statements about a fixed input is true?
- a. Its price is fixed.
- b. The quantity of it that a firm can use in the long run is fixed.
- c. The quantity of it that a firm can use in the short run is fixed.
- d. The quantity of output that the firm can produce with it is fixed.
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Question 2 of 20

2. Question
In the short-run, which of the following always gets smaller as output increases?
- a. Average fixed cost.
- b. Average variable cost.
- c. Short-run average cost.
- d. Short-run marginal cost.
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Question 3 of 20

3. Question
Which of the following is the correct definition of the law of diminishing returns?
- a. If extra units of one variable input are added to a fixed amount of all other inputs, then sooner or later the marginal returns will get smaller.
- b. If extra units of one variable input are added to a fixed amount of all other inputs, then the marginal returns will always get smaller.
- c. If extra units of all variable inputs are added to a fixed amount of all fixed inputs, then the marginal returns will always get smaller.
- d. If extra units of all variable inputs are added to a fixed amount of all fixed inputs, then sooner or later the marginal returns will get smaller.
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Question 4 of 20

4. Question
Which of the following statements about profit maximization is true?
- a. It is something that all firms actually do.
- b. It is something which economists believe that all firms actually do.
- c. It is what economists believe is the most common aim of firms.
- d. It means that no firms ever make losses.
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Question 5 of 20

5. Question
To see whether a firm is making an economic profit, which of the following should be deducted from its revenue?
- a. Its explicit costs only.
- b. Its explicit costs plus depreciation.
- c. Its implicit costs only.
- d. Its explicit costs and its implicit costs.
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Question 6 of 20

6. Question
Suppose you give up a job and use some savings to buy a small bus which you drive on a remote rural route. Which of the following costs of your firm is an explicit cost?
- a. The depreciation on the bus.
- b. The wage of the job you gave up.
- c. The fuel you buy for the bus.
- d. The interest you earned on your savings before you used them to buy the bus
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Question 7 of 20

7. Question
Which of the following statements about a firm which is a price-taker is false?
- a. The firm will sell its product at the going market price.
- b. The demand curve faced by the firm is downward sloping.
- c. The demand curve faced by the firm is horizontal even though the market demand curve is downward sloping.
- d. The firm would sell nothing if it set a higher price than the market price.
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Question 8 of 20

8. Question
The cost which is varying with the output is called:
- a. Average variable cost
- b. Average fixed cost
- c. Variable cost
- d. Fixed cost
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Question 9 of 20

9. Question
In which stage of production a rational producer likes to operate in shot-run production ?
- a. First Stage
- b. Second Stage
- c. Third Stage
- d. None of these
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Question 10 of 20

10. Question
At which time all the factors of production may be changed ?
- a. Short run
- b. Long run
- c. Very Long run
- d. All the three
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Question 11 of 20

11. Question
Which of the following best defines the term utility as it is used by economists?
- a. the happiness or benefit a consumer experiences from a good
- b. when an input can be used efficiently by producers
- c. when a market allocates resources in a way that maximizes consumer and producer surplus
- d. the usefulness of a resource or factor of production to producers of a good
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Question 12 of 20

12. Question
This diagram below shows Marko’s utility for cheesecake. Which of the following does Marko’s utility function illustrate?
- a. Increasing marginal utility
- b. Decreasing total utility
- c. Increasing opportunity costs
- d. Diminishing marginal utility
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Question 13 of 20

13. Question
Which of following best describes how a consumer makes an optimal decision?
- a. Choose the combination of goods that minimizes how much is spent
- b. Choose the combination of goods that gives the highest profit
- c. Choose the combination of goods with the highest marginal utility
- d. Choose the optimal combination of goods subject to a budget constraint
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Question 14 of 20

14. Question
Which of the following equations would represent optimal combination for a utility maximizing consumer deciding how much to buy of three goods, X, Y, and Z?

A

B.

C.

D.
- A
- B
- C
- D
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Question 15 of 20

15. Question
Which of the following is a way to avoid diminishing marginal returns to labor?
- a. Increase the population
- b. Increase the amount of labor used
- c. Increase the quantity of capital
- d. Reduce the size of plant and equipment
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Question 16 of 20

16. Question
Marko Enterprises is experiencing economies of scale.

Which of the following must be true?
- a. Long-run average total cost decreases if Dineo Enterprises increases output.
- b. Dineo Enterprises’ economic profits will decrease if it increases output.
- c. This firm’s long-run average total cost curve is flat.
- d. Proportionate increases in inputs result in proportionate increases in outputs.
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Question 17 of 20

17. Question
Which of the following statements is true about the relationship between marginal cost
- a. If MC is less than ATC, then ATC is decreasing.
- b. If MC equals ATC, then ATC is at is maximum
- c. If MC is less than ATC, then ATC is minimized
- d. If MC is greater than ATC, then MC is decreasing
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Question 18 of 20

18. Question
Marko produces rice in a perfectly competitive market. It has a production function that exhibits diminishing marginal product.

Which of the following best describes this firm’s short-run marginal cost curve?
- a. MC slopes upward as output increases.
- b. MC is constant for all quantities produced.
- c. MC slopes downward and becomes steeper as output increases.
- d. MC slopes downward as output increases for all quantities produced.
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Question 19 of 20

19. Question
Which of the following best describes marginal cost?
- a. The costs that vary as output changes, per unit of output
- b. The cost of producing a typical unit of output
- c. The costs that do not vary as output changes
- d. The cost of producing one more unit of output
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Question 20 of 20

20. Question
Which of the following best describes a firm’s demand curve in a perfectly competitive market?
- a. Upward sloping
- b. Downward sloping
- c. Straight and vertical
- d. Straight and horizontal
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Microeconomics Part II Quiz

Microeconomics Part II Quiz

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