1. What is the central problem of microeconomics?
A. Problem of allocation resources
B. Problem of price-determination
C. Problem of determining income
D. Problem of unemployment
E. A&B F. All
2. One of the following is economic resource, which is scarce and have a price.
A. A. Land B. Labor C. Capital D. Entrepreneur E. All F. None
3. The process of using different factors of production in order to make goods and services
available is known as:
A. Investment
B. Production
C. Consumption
D. Resource
4. Any good or service that comes out of a production process, is known as:
A. Output
B. Input
C. Labour
D. Resource
5. When the short-run marginal product of labour is greater than the average product of
labour:
A. APL is increasing
B. APL decreasing
C. APL is equal to zero
D. None of these
6. When the short-run, MPL is negative:
A. TP is also negative
B. TP is declining
C. TP is rising at a constant rate
D. TP is rising but at a diminishing rate
7. Suppose the average product of 6 workers is 150 units of a good and that of 7 workers is
170 units. The MP of the seventh worker equals:
A. 200 B. 270 C. 290 D. 220
8. Total profit is maximized when:
A. TC exceeds TR by the greatest amount
B. TR = TC
C. MC equals AVC
D. TR exceeds TC by the greatest amount
9. The AR = MR = AC situation is:
A. A short-run equilibrium position
B. A break-even point for a perfectly competitive firm
C. A long-run equilibrium position
D. B and C
10. In the short run, a perfectly competitive firm maximizes its profit if:
A. TC is less than TR
B. MR = MC = AR and MC is rising
C. MR = MC = AR and MC is falling
D. A and B
11. Which is the first order conditions for the profit of a firm to be maximum?
A. AC=MR
B. MC=MR
C. MR=AR
D. AC=AR
12. Which of the following is not a condition at the level of output, where profit is
maximize?
A. Market price =marginal cost
B. Marginal cost is decreasing
C. In the short run the market price ≥ Average variable cost
D. In the long-run market price≥ Average cost
13. A firm is in equilibrium when its:
A. MR=MC
B. Total revenue maximum
C. Total cost is minimum
D. AR=MR
14. If a supply curve is a vertical straight line, the value of elasticity of supply(es )is:
A. ‘ B.> 1 C. <1 D. 0
Use the demand curve diagram below to answer the following question.
15. Suppose that a 2% increase in price results in a 6% decrease in quantity demanded. Own-
price elasticity of demand is equal to:
A. 1/3 B. 6 C. 2 D. 3
16. If own-price elasticity of demand equals 0.3 in absolute value, then what percentage
change in price will result in a 6% decrease in quantity demanded?
A. 3% B. 6% C. 20% D. 50%.
17. Suppose you are told that the own-price elasticity of supply equal 0.5. Which of the
following is the correct interpretation of this number?
A. 1% increase in price will result in a 50% increase in quantity supplied.
B. A 1% increase in price will result in a 5% increase in quantity supplied.
C. A 1% increase in price will result in a 2% increase in quantity supplied.
D. A 1% increase in price will result in a 0.5% increase in quantity supplied.
18. If goods X and Y are SUBSTITUTES, then which of the following could be the value of
the cross price elasticity of demand for good Y?
A. -1 B. -2 C. Neither a) nor b) D. Both a) and b)
19. If goods X and Y are COMPLEMENTS, which of the following could be the value of
cross price elasticity of demand?
A. 0 B. 1 C. -1 D.All of the above could be value of cross price elasticity of demand
Use the demand curve diagram below to answer the following TWO questions.
20. What is the own-price elasticity of demand as price decreases from $8 per unit to $6 per
unit? Use the mid-point formula in your calculation.
A. Infinity B. 7.0 C. 2.0 D. 1.75
21. At what point is demand unit-elastic?
A. P = $6, Q = 12
B. P = $4, Q = 8
C. P = $2, Q = 12
D. None of the above
22. Which of the following statements about the relationship between the price elasticity of
demand and revenue is TRUE?
A. If demand is price inelastic, then increasing price will decrease revenue
B. If demand is price elastic, then decreasing price will increase revenue
C. If demand is perfectly inelastic, then revenue is the same at any price
D. Elasticity is constant along a linear demand curve and so too is revenue
23. If a demand curve is VERTICAL, then own-price elasticity of demand for this good is
equal to:
A. Infinity B. Zero. C. One D. None of the above.
24. If a demand curve is HORIZONTAL, then own-price elasticity of demand for this good
is equal to:
A. Infinity B. Zero. C. One D. None of the above
25. Which of the following CANNOT reduce the equilibrium quantity sold in a market?
A. Price ceiling. B. Price floor
B. Quota D. All of the above can decrease equilibrium quantity sold
26. If a subsidy is introduced in a market, then which of the following statement is TRUE?
Assume no externalities
A. Consumer and producer surplus increase but social surplus decreases.
B. Consumer and producer surplus decrease but social surplus increases.
C. Consumer surplus, producer surplus, and social surplus all increase.
D. Consumer surplus, producer surplus, and social surplus all decrease
27. Which of the following correctly describes the equilibrium effects of a per-unit tax, in a
market with NO externalities?
A. Consumer and producer surplus increase but social surplus decreases.
B. Consumer and producer surplus decrease but social surplus increases.
C. Consumer surplus, producer surplus, and social surplus all increase.
D. Consumer surplus, producer surplus, and social surplus all decrease.
