Micro Economics MCQ
Micro Economics MCQ Definition: Microeconomics is the study of individuals, households and firms’ behavior in decision making and allocation of resources. It generally applies to markets of goods and services and deals with individual and economic issues.
91. Costs incurred only when production occurs are known as:
A) Explicit costs.
B) Fixed costs.
C) Variable costs.
D) Technological expenses.
Answer:C
92. The law of diminishing marginal returns is encountered as increasing amounts of labour are hired because:
A) As production rises, the additional labor hired is less and less skilled.
B) Experienced workers are hired before the less skilled.
C) Each extra worker hired decreases the amounts of land and capital per
worker, so the work place becomes more congested and managerial
control becomes more difficult.
D) As more and more is produced, selling it requires cutting prices.
Answer:C
93. Which of the following is irrelevant for rational decision making?
A) Total variable cost (TVC)
B) Explicit cost.
C) Average fixed cost (AFC).
D) Marginal cost (MC).
Answer:A
94. A curve that can never be “U” shaped is the:
A) Average variable cost curve.
B) Marginal cost curve.
C) Average fixed cost curve.
D) Average total cost curve.
Answer:C
95. Diminishing marginal returns are most compatible with:
A) Economies of scale.
B) Advantages from specialization.
C) Positively-sloped marginal cost curves
D) Depreciation of the capital stock.
Answer:B
96. If average variable costs fall as output grows:
A) Marginal costs must also be declining.
B) Fixed cost must also be declining.
C) Total cost must also be declining.
D) Average cost must be below average variable cost.
Answer:C
97. In economic theory the costs of a firm
A) Tend to be less than the everyday use of the term costs would suggest
B) Includes implicit as well as explicit outlays
C) Always decline as more output is produced
D) Are usually defined in such a way that profits will be larger than the
everyday use of the term costs would imply
Answer:B
98. The average total costs of the firm as defined in standard economic theory
A) Are the sum of the fixed and any variable costs divided by the number of
units of labour input
B) Are the sum of the fixed and any variable costs
C) Are the sum of the average fixed and the total variable costs
D) Are the sum of the fixed and variable costs divided by the number of units
of output
Answer:D
99. The short run as the term is used in connection with the theory of the firm is a period of time:
A) Too short for the firm to vary all its inputs
B) No more than a week
C) Long enough for the firm to vary the quantity of all its inputs
D) In which the fixed costs are zero
Answer:A
100. According to the principle of diminishing marginal physical productivity, in the short run
A) As output increases, costs per unit of output must eventually decline
B) Marginal product will decrease continually as output is expanded
C) As output is increased, the quantity of inputs needed to produce additional
units of output will increase, causing costs per unit of output to increase
D) Total output will become negative once marginal product begins to decline
Answer:C
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