Micro Economics Theory Applications I Set 3
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This set of MicroEconomics, Theory and Applications 1 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics Theory Applications I Set 3
Q1 | A game that involves interrelated decisions that are made over time is a
- sequential game
- repeated game
- zero-sum game
- nonzero-sum game
Q2 | A game that involves multiple moves in a series of identical situations is called a
- sequential game
- repeated game
- zero-sum game
- nonzero-sum game
Q3 | Sequential games can be solved using
- tit-for-tat
- dominated strategies
- backward induction
- risk averaging
Q4 | A firm that is threatened by the potential entry of competitors into a market builds excessproduction capacity. This is an example of
- a prisoners’ dilemma
- collusion
- a credible threat
- tit-for-tat
Q5 | 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
Q6 | Which would be an implicit cost for a firm? The cost:
- of worker wages and salaries for the firm
- paid for leasing a building for the firm
- paid for production supplies for the firm
- of wages foregone by the owner of the firm.
Q7 | If a firm’s revenues just cover all its opportunity costs, then:
- normal profit is zero
- economic profit is zero
- total revenues equal its explicit costs
- total revenues equal its implicit costs
Q8 | Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used toproduce it. Which is true?
- the firm will earn accounting and economic profits
- the firm will face accounting and economic losses
- the firm will face an accounting loss, but earn economic profits
- the firm may earn accounting profits, but will face economic losses
Q9 | The short run is a time period in which:
- all resources are fixed
- the level of output is fixed
- the size of the production plant is variable
- some resources are fixed and others are variable
Q10 | The law of diminishing returns states that:
- as a firm uses more of a variable resource, given the quantity of fixed resources, the average product of the firm will increase
- as a firm uses more of a variable resource, given the quantity of fixed resources, marginal product of the firm will eventually decrease
- in the short run, the average total costs of the firm will eventually diminish
- in the long run, the average total costs of the firm will eventually diminish
Q11 | 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
Q12 | The marginal product of labour curve shows the change in total product resulting from a:
- one-unit increase in the quantity of a particular resource used, letting other resources vary
- one-unit increase in the quantity of a particular resource used, holding constant other resources
- change in the cost of a variable resource
- change in the cost of a fixed resource
Q13 | When the total product curve is falling, the:
- marginal product of labor is zero
- marginal product of labor is negative
- average product of labor is increasing
- average product of labor must be negative
Q14 | 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
Q15 | 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 unit of output.
Q16 | Which is not a fixed cost?
- monthly rent of rs.1,000 contractually specified in a one-year lease
- an insurance premium of rs.50 per year, paid last month
- an attorney\s retainer of rs.50,000 per year
- a worker\s wage of rs.15 per hour
Q17 | If you know that with 8 units of output, average fixed cost is Rs.12.50 and average variablecost is Rs.81.25, then total cost at this output level is:
- rs.93.75
- rs.97.78
- rs.750
- rs.880
Q18 | With fixed costs of Rs.400, a firm has average total costs of Rs.3 and average variable costsof Rs.2.50. Its output is:
- 200 units
- 400 units
- 800 units
- 1600 units
Q19 | The reason the marginal cost curve eventually increases as output increases for the typicalfirm is because:
- of diseconomies of scale
- of minimum efficient scale
- of the law of diminishing returns
- normal profit exceeds economic profit
Q20 | If the short-run average variable costs of production for a firm are rising, then this indicatesthat:
- 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
Q21 | If a more efficient technology was discovered by a firm, there would be:
- an upward shift in the avc curve
- a downward shift in the afc curve
- an upward shift in the afc curve
- a downward shift in the mc curve
Q22 | 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
Q23 | 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
Q24 | When a firm doubles its inputs and finds that its output has more than doubled, this is knownas:
- economies of scale
- constant returns to scale
- diseconomies of scale
- a violation of the law of diminishing returns
Q25 | 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