eco401 mid term current paper fall november 2011

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Question No: 1 ( Marks: 1 ) - Please choose one
Figure
In figure given above, the marginal utility of income is:
► Increasing as income increases.
► Constant for all levels of income.
► Diminishes as income increases.
► None of the given options.

Question No: 2( Marks: 1 ) - Please choose one
A consultant for Mattel (the producer of Barbie) reports that their long run
average cost curve is decreasing. In other words, he is saying that:

► The firm has increasing returns to scale and the law of diminishing marginal
productivity does not apply to this firm.
► The firm has decreasing returns to scale and the law of diminishing marginal
productivity does not apply to this firm.
► The firm has increasing returns to scale but the law of diminishing marginal
productivity may still apply to this firm.
► The firm has decreasing returns to scale but nonetheless the law of diminishing
marginal productivity may still apply to this firm.

Question No: 3( Marks: 1 ) - Please choose one
A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour
for tennis lessons for adults. The tennis pro is practicing:
► First-degree price discrimination.
► Second-degree price discrimination.
► Third-degree price discrimination.
► All of the given options.

Question No: 4 ( Marks: 1 ) - Please choose one
Marginal profit is equal to:
► Marginal revenue minus marginal cost.
► Marginal revenue plus marginal cost.
► Marginal cost minus marginal revenue.
► Marginal revenue times marginal cost.

Question No: 5 ( Marks: 1 ) - Please choose one
If current output is less than the profit-maximizing output then which of the
following must be TRUE?
► Total revenue is less than total cost.
► Average revenue is less than average cost.
► Marginal revenue is less than marginal cost.
► Marginal revenue is greater than marginal cost.

Question No: 6 ( Marks: 1 ) - Please choose one
The total cost (TC) of producing computer software diskettes (Q) is given as: TC =
200 + 5Q. What is the average total cost?
► 5Q.
► 5.
► 5 + (200/Q).
► None of the given options.

Question No: 7 ( Marks: 1 ) - Please choose one
Cross-price elasticity measures whether:
► Goods are normal or inferior.
► Two goods are substitutes or complements.
► Demand is elastic or inelastic.
► Supply is steeper than demand or vice versa.

Question No:8 ( Marks: 1 ) - Please choose one
Because of the relationship between a perfectly competitive firm's demand
curve and its marginal revenue curve, the profit maximization condition for
the firm can be written as:
► P = MR.
► P = AVC.
► AR = MR.

Question No: 9 ( Marks: 1 ) - Please choose one
Third-degree price discrimination involves:
► Charging each consumer the same two part tariff.
► Charging lower prices the greater the quantity purchased.
► The use of increasing block rate pricing.
► Charging different prices to different groups based upon differences
in elasticity of demand.

Question No: 10 ( Marks: 1 ) - Please choose one
In order for a taxicab to be operated in New York City, it must have a
medallion on its hood. Medallions are expensive but can be resold and are
therefore an example of:
► A fixed cost.
► A variable cost.
► An implicit cost.
► An opportunity cost.

Question No: 11 ( Marks: 1 ) - Please choose one
Government authorities have managed to reduce the unemployment rate
from 8% to 4% in a hypothetical economy. As a result:
► The economy's production possibilities curve will shift outward.
► The economy's production possibilities curve will become steeper.
► The economy will move downward along its production possibilities curve.
► The economy will move from a point inside to a point closer to its
production possibilities curve.

Question No: 12( Marks: 1 ) - Please choose one
The "perfect information" assumption of perfect competition includes all of the
following EXCEPT:
► Consumers know their preferences.
► Consumers know their income levels.
► Consumers know the prices available.
► Consumers can anticipate price changes.

Question No: 13 ( Marks: 1 ) - Please choose one
According to the utility model of consumer demand, the law of diminishing marginal utility
indicates that the demand curve is:
► Vertical.
► U-shaped.
► Upward-sloping.
► Downward-sloping.

Question No: 14 ( Marks: 1 ) - Please choose one
Cross-price elasticity measures whether:
► Goods are normal or inferior.
► Two goods are substitutes or complements.
► Demand is elastic or inelastic.
► Supply is steeper than demand or vice versa.

Question No: 15 ( Marks: 1 ) - Please choose one
Which of the following will be TRUE if demand is inelastic?
► The coefficient of elasticity is greater than one.
► The percentage change in quantity demanded is same as the percentage change in the
price.
► An increase in price will increase total revenue.
► None of the given options.

Question No: 16 ( Marks: 1 ) - Please choose one
The concept of a risk premium applies to a person that is:
► All of the given options.
► Risk averse.
► Risk neutral.
► Risk loving.

Question No: 17 ( Marks: 1 ) - Please choose one
A normative economic statement:
► Is a statement of fact.
► Is a hypothesis used to test economic theory.
► Is a statement of what ought to be, not what is.
► Is a statement of what will occur if certain assumptions are true.

Question No: 18 ( Marks: 1 ) - Please choose one
Economics is different from other social sciences because it is primarily concerned with the
study of ________, it is similar to other social sciences because they are all concerned with
the study of ________.
► Limited resources, market behavior.
► Scarcity, human behavior.
► Social behavior, limited resources.
► Biological behavior, scarcity.

Question No:19 ( Marks: 1 ) - Please choose one
Because of the relationship between a perfectly competitive firm's demand curve and its
marginal revenue curve, the profit maximization condition for the firm can be written as:
► P = MR.
► P = AVC.
► AR = MR.
► P = MC.

Question No:20 ( Marks: 1 ) - Please choose one
At the profit-maximizing level of output, what is TRUE of the total revenue (TR) and total
cost (TC) curves?
► They must intersect with TC cutting TR from below.
► They must intersect with TC cutting TR from above.
► They must be tangent to each other.
► They must have the same slope.

Question No: 21 ( Marks: 1 ) - Please choose one
According to the utility model of consumer demand, the law of diminishing marginal utility
indicates that the demand curve is:
► Vertical.
► U-shaped.
► Upward-sloping.
► Downward-sloping.

Question No: 22 ( Marks: 1 ) - Please choose one

For the monopolist shown below, the profit maximizing level of output is:
► Q1.
► Q2.
► Q3.
► Q4.

Question No: 23 ( Marks: 1 ) - Please choose one
If Average Physical Product (APP) is increasing then which of the following must be true?
► Marginal physical product is greater than average physical product.
► Marginal physical product is less than average physical product.
► Marginal physical product is increasing.
► Marginal physical product is decreasing.

Question No: 24 ( Marks: 1 ) - Please choose one
Suppose the first four units of an output produced incur corresponding total costs of 50,
150, 300, and 500. The marginal cost of the second unit of output is:
► 50.
► 100.
► 150.
► 200.

Question No:25 ( Marks: 1 ) - Please choose one
An individual whose attitude towards risk is known as:
► Risk averse.
► Risk loving.
► Risk neutral.
► None of the given options

Question No: 26 ( Marks: 1 ) - Please choose one
The numerical measurement of a consumer’s preference is called:
► Use.
► Pleasure.
► Utility.
► Satisfaction.

Question No: 27 ( Marks:3)
What is mean by economies ?
Question No: 28 ( Marks:3)
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Question No: 29 ( Marks:5)
Differentiate between average variable cost and average fixed cost with help of formulas and examples?