Top 150+ Solved Principles of Micro Economics MCQ Questions Answer
Q. Variable costs are:
a. sunk costs.
b. multiplied by fixed costs.
c. costs that change with the level of production.
d. defined as the change in total cost resulting from the production of an additional unit of output.
Q. Which is not a fixed cost?
a. monthly rent of rs. 1,000 contractually specified in a one-year lease
b. an insurance premium of rs. 50 per year, paid last month
c. an attorney\s retainer of rs. 50,000 per year
d. a worker\s wage of rs. 15 per hour
Q. If you know that with 8 units of output, average fixed cost is Rs. 12.50 andaverage variable cost is Rs. 81.25, then total cost at this output level is:
a. rs. 93.75.
b. rs. 97.78.
c. rs. 750.
d. rs. 880.
Q. With fixed costs of Rs. 400, a firm has average total costs of Rs. 3 and averagevariable costs of Rs. 2.50. Its output is:
a. 200 units.
b. 400 units.
c. 800 units.
d. 1,600 units.
Q. The reason the marginal cost curve eventually increases as output increases forthe typical firm is because:
a. of diseconomies of scale.
b. of minimum efficient scale.
c. of the law of diminishing returns.
d. normal profit exceeds economic profit.
Q. If the short-run average variable costs of production for a firm are rising, thenthis indicates that:
a. average total costs are at a maximum.
b. average fixed costs are constant.
c. marginal costs are above average variable costs.
d. average variable costs are below average fixed costs.
Q. If a more efficient technology was discovered by a firm, there would be:
a. an upward shift in the avc curve.
b. an upward shift in the afc curve.
c. a downward shift in the afc curve.
d. a downward shift in the mc curve.
Q. A firm encountering economies of scale over some range of output will have a:
a. rising long-run average cost curve.
b. falling long-run average cost curve.
c. constant long-run average cost curve.
d. rising, then falling, then rising long-run average cost curve.
Q. If all resources used in the production of a product are increased by 20 percent andoutput increases by 20 percent, then there must be:
a. economies of scale.
b. diseconomies of scale.
c. constant returns to scale.
d. increasing average total costs.
Q. Which of the following statements best describes the general form of a production function: (i) It is a purely technological relationship between quantities of input and quantities of output. (ii) It represents the technology of an organisation, sector of an economy.iii) Prices of inputs or of the output do not enter into the production function. (iv) It is a flow concept describing the transformation of inputs into output per unitof time.
a. (i),(ii) and (iv)
b. (i) and (ii)
c. (i) and (iv)
d. all of the above
Q. Which of the following statements describes the presence of diminishingreturns. Holding at least one factor constant …....
a. the marginal product of a factor is positive and rising.
b. the marginal product of a factor is positive but falling.
c. the marginal product of a factor is falling and negative.
d. the marginal product of a factor is constant.
Q. Which of the following statements describes increasing returns to scale:
a. doubling the inputs used leads to double the output.
b. increasing the inputs by 50% leads to a 25% increase in output.
c. increasing inputs by 1/4 leads to an increase in output of 1/3.
d. none of the above.
Q. Economies of scale exist if:
a. as the amount of capital increases, the cost of producing per unit rises
b. as the amount of capital increases, the cost of producing per unit falls
c. as the amount of capital increases, the marginal cost rises
d. as the amount of capital increases, the marginal physical product falls
Q. Whenever marginal product is declining with increasing use of an input,
a. total product is declining as input increases.
b. average product is declining as input use increases
c. marginal product is greater than average product
d. total product is increasing at a decreasing rate as input use increases.
Q. Whenever marginal product is increasing with increasing use of an input,
a. total product is increasing at a decreasing rate
b. total product is increasing at an increasing rate
c. marginal product is less than average product
d. average product is decreasing.