Micro Economics 1 Set 14

Bachelor of Arts in Economics (BA Economics)

Practice Mode Previous Next
On This Page

This set of Micro Economics 1 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics 1 Set 14

Q1 | With fixed costs of Rs. 400, a firm has average total costs of Rs. 3 and average variable costs of Rs. 2.50. Its output is:
  • 200 units.
  • 400 units.
  • 800 units.
  • 1,600 units.
Answer: 800 units.
Q2 | The reason the marginal cost curve eventually increases as output increases for the typical firm is because:
  • Of diseconomies of scale.
  • Of minimum efficient scale.
  • Of the law of diminishing returns.
  • Normal profit exceeds economic profit.
Answer: Of the law of diminishing returns.
Q3 | If the short-run average variable costs of production for a firm are rising, then this indicates that:
  • Average total costs are at a maximum.
  • Average fixed costs are constant.
  • Marginal costs are above average variable costs.
  • Average variable costs are below average fixed costs.
Answer: Marginal costs are above average variable costs.
Q4 | If a more efficient technology was discovered by a firm, there would be:
  • An upward shift in the AVC curve.
  • An upward shift in the AFC curve.
  • A downward shift in the AFC curve.
  • A downward shift in the MC curve.
Answer: A downward shift in the MC curve.
Q5 | A firm encountering economies of scale over some range of output will have a:
  • Rising long-run average cost curve.
  • Falling long-run average cost curve.
  • Constant long-run average cost curve.
  • Rising, then falling, then rising long-run average cost curve.
Answer: Falling long-run average cost curve.
Q6 | When a firm doubles its inputs and finds that its output has more than doubled, this isknown as:
  • Economies of scale.
  • Constant returns to scale.
  • Diseconomies of scale.
  • A violation of the law of diminishing returns.
Answer: Economies of scale.
Q7 | The larger the diameter of a natural gas pipeline, the lower is the average total cost oftransmitting 1,000 cubic feet of gas 1,000 miles. This is an example of:
  • Economies of scale.
  • Normative economies.
  • Diminishing marginal returns.
  • An increasing marginal product of labour.
Answer: Economies of scale.
Q8 | If all resources used in the production of a product are increased by 20 percent andoutput increases by 20 percent, then there must be:
  • Economies of scale.
  • Diseconomies of scale.
  • Constant returns to scale.
  • Increasing average total costs.
Answer: Constant returns to scale.
Q9 | Which of the following statements describes the presence of diminishing returns. Holding at least one factor constant …....
  • The marginal product of a factor is positive and rising.
  • The marginal product of a factor is positive but falling.
  • The marginal product of a factor is falling and negative.
  • The marginal product of a factor is constant.
Answer: The marginal product of a factor is positive but falling.
Q10 | Which of the following statements describes increasing returns to scale:
  • Doubling the inputs used leads to double the output.
  • Increasing the inputs by 50% leads to a 25% increase in output.
  • Increasing inputs by 1/4 leads to an increase in output of 1/3.
  • None of the above.
Answer: Increasing inputs by 1/4 leads to an increase in output of 1/3.
Q11 | Economies of scale exist if:
  • As the amount of capital increases, the cost of producing per unit rises
  • As the amount of capital increases, the cost of producing per unit falls
  • As the amount of capital increases, the marginal cost rises
  • As the amount of capital increases, the marginal physical product falls
Answer: As the amount of capital increases, the cost of producing per unit falls
Q12 | Whenever marginal product is declining with increasing use of an input,
  • Total product is declining as input increases.
  • Average product is declining as input use increases
  • Marginal product is greater than average product
  • Total product is increasing at a decreasing rate as input use increases.
Answer: Total product is increasing at a decreasing rate as input use increases.
Q13 | Whenever marginal product is increasing with increasing use of an input,
  • Total product is increasing at a decreasing rate
  • Total product is increasing at an increasing rate
  • Marginal product is less than average product
  • Average product is decreasing.
Answer: Total product is increasing at an increasing rate
Q14 | When average product is at a maximum, marginal product is
  • Zero
  • Increasing
  • Equal to average product
  • Greater than average product
Answer: Equal to average product
Q15 | Whenever average product is declining, with increases in input usage,
  • Marginal product is less than average product
  • Total product is declining with increases in input
  • Total product is increasing with increases in input
  • Marginal product is greater than average product
Answer: Total product is declining with increases in input
Q16 | The total product curve may initially show output increasing at an increasing rate as more labour is hired because of the:
  • Declining quality of the labor force.
  • Principle of comparative advantage.
  • Law of diminishing marginal returns.
  • Increase in marginal physical product.
Answer: Increase in marginal physical product.
Q17 | If labour is the only variable resource and its marginal physical product falls as moreworkers are hired:
  • The law of diminishing marginal returns is at work.
  • Marginal cost is rising.
  • Average cost may still be declining.
  • Average physical product may still be rising.
Answer: The law of diminishing marginal returns is at work.
Q18 | When both average and total product are greater than zero, and marginal product equals average product, then total product:
  • Is at a maximum.
  • Is positive and rising.
  • Is falling.
  • Is negative but rising.
Answer: Is positive and rising.
Q19 | Costs incurred only when production occurs are known as:
  • Explicit costs.
  • Fixed costs.
  • Variable costs.
  • Technological expenses.
Answer: Variable costs.
Q20 | Which of the following is irrelevant for rational decision making?
  • Total variable cost (TVC)
  • Explicit cost.
  • Average fixed cost (AFC).
  • Marginal cost (MC).
Answer: Total variable cost (TVC)
Q21 | A curve that can never be “U” shaped is the:
  • Average variable cost curve.
  • Marginal cost curve.
  • Average fixed cost curve.
  • Average total cost curve.
Answer: Average fixed cost curve.
Q22 | Diminishing marginal returns are most compatible with:
  • Economies of scale.
  • Advantages from specialization.
  • Positively-sloped marginal cost curves
  • Depreciation of the capital stock.
Answer: Advantages from specialization.
Q23 | If average variable costs fall as output grows:
  • Marginal costs must also be declining.
  • Fixed cost must also be declining.
  • Total cost must also be declining.
  • Average cost must be below average variable cost.
Answer: Total cost must also be declining.
Q24 | In economic theory the costs of a firm
  • Tend to be less than the everyday use of the term costs would suggest
  • Includes implicit as well as explicit outlays
  • Always decline as more output is produced
  • Are usually defined in such a way that profits will be larger than the
Answer: Includes implicit as well as explicit outlays
Q25 | The short run as the term is used in connection with the theory of the firm is a period of time:
  • Too short for the firm to vary all its inputs
  • No more than a week
  • Long enough for the firm to vary the quantity of all its inputs
  • In which the fixed costs are zero
Answer: Too short for the firm to vary all its inputs
Previous Next