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This set of Managerial Economics 1 Multiple Choice Questions & Answers (MCQs) focuses on Managerial Economics 1 Set 4

Q1 | The utility may be defined as:
  • the desire for a commodity
  • the usefulness of a commodity
  • the necessity of a commodity
  • the power of a commodity to satisfy wants
Q2 | The utility of a commodity is:
  • its expected social value
  • the extent of its practical use
  • its relative scarcity
  • the degree of its fashion
Q3 | Marginal utility curve of a given consumer is also his:
  • indifference curve
  • total utility curve
  • demand curve
  • supply curve
Q4 | The relationship between demand for a commodity and price, ceteris paribus, is:
  • negative
  • positive
  • non-negative
  • non-positive
Q5 | A demand curve which takes the form of horizontal line parallel to quantity axisillustrates elasticity which is:
  • zero
  • infinite
  • greater than one
  • less than one
Q6 | Consider a demand curve which takes the form of a straight line cutting both axes.Elasticity at the mid-point of the line would be:
  • zero
  • one infinite
  • infinite
  • cannot be calculated
Q7 | The elasticity of demand for a product will be higher:
  • the more available are substitutes for that product
  • the more its buyers demand loyalty
  • the more the product is considered a necessity by its buyers
  • all of the above
Q8 | In case of Giffen goods, demand curve will slope:
  • vertical
  • horizontal
  • upward
  • downward
Q9 | Cross elasticity of demand between tea and sugar is:
  • positive
  • zero
  • infinity
  • negative
Q10 | If the percentage increase in quantity of a commodity demanded is its price, thecoefficient of price elasticity of demand is:
  • greater than 1
  • equal to 1
  • less than 1
  • zero
Q11 | If the quantity of a commodity demanded remains unchanged as its price changes, thecoefficient of price elasticity of demand is
  • greater than 1
  • equal to 1
  • less than 1
  • zero
Q12 | Unitary elasticity of demand is:
  • zero
  • equal to one
  • greater than 1
  • less than 1
Q13 | The real business cycle theory is most closely related to
  • keynesian theory
  • monetarist theory
  • the classical theory
  • the new keynesian theory
Q14 | In the real business cycle model, business cycles are
  • efficient and do not represent lost output
  • driven by technology shocks
  • occur when markets clear
  • all of the above
Q15 | Real business cycle proponents argue that
  • recessions are caused by movements of output away from the natural rate of output
  • prices and wages are sticky
  • macroeconomics should be based on the same assumptions as microeconomics
  • monetary policy is important in determining recessions
Q16 | Implicit costs are:
  • equal to total fixed costs.
  • comprised entirely of variable costs.
  • payments" for self-employed resources.
  • always greater in the short run than in the long run.
Q17 | The law of diminishing returns only applies in cases where:
  • there is increasing scarcity of factors of production.
  • the price of extra units of a factor is increasing.
  • there is at least one fixed factor of production.
  • capital is a variable input.
Q18 | When the total product curve is falling, the:
  • marginal product of labour is zero.
  • marginal product of labour is negative.
  • average product of labour is increasing.
  • average product of labour must be negative.
Q19 | When marginal product reaches its maximum, what can be said of total product?
  • total product must be at its maximum
  • total product starts to decline even if marginal product is positive
  • total product is increasing if marginal product is still positive
  • total product levels off
Q20 | Variable costs are:
  • sunk costs.
  • multiplied by fixed costs.
  • costs that change with the level of production.
  • defined as the change in total cost resulting from the production of an additional
Q21 | The reason the marginal cost curve eventually increases as output increases for thetypical firm is because:
  • of diseconomies of scale.
  • of minimum efficient scale.
  • of the law of diminishing returns.
  • normal profit exceeds economic profit.
Q22 | If the short-run average variable costs of production for a firm are rising, then thisindicates 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.
Q23 | 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.
Q24 | The firm's short-run marginal-cost curve is increasing when:
  • marginal product is increasing.
  • marginal product is decreasing.
  • total fixed cost is increasing.
  • average fixed cost is decreasing.
Q25 | 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.