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.
61. The law of diminishing returns only applies in cases where:
A) There is increasing scarcity of factors of production.
B) The price of extra units of a factor is increasing.
C) There is at least one fixed factor of production.
D) Capital is a variable input.
Answer:C
62. The marginal product of labor 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.
B) One-unit increase in the quantity of a particular resource used, holding
constant other resources.
C) Change in the cost of a variable resource.
D) Change in the cost of a fixed resource.
Answer:B
63. When the total product curve is falling, the:
A) Marginal product of labor is zero.
B) Marginal product of labor is negative.
C) Average product of labor is increasing.
D) Average product of labor must be negative
.
Answer:B
64. When marginal product reaches its maximum, what can be said of total product?
A) Total product must be at its maximum
B) Total product starts to decline even if marginal product is positive
C) Total product is increasing if marginal product is still positive
D) Total product levels off
Answer:C
65. 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.
Answer:C
66. 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
Answer:D
67. If you know that with 8 units of output, average fixed cost is Rs. 12.50 and average 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.
Answer:C
68. With fixed costs of Rs. 400, a firm has average total costs of Rs. 3 and average variable costs of Rs. 2.50. Its output is:
A) 200 units.
B) 400 units.
C) 800 units.
D) 1,600 units.
Answer:C
69. The reason the marginal cost curve eventually increases as output increases for the 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.
Answer:C
70. If the short-run average variable costs of production for a firm are rising, then this 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.
Answer:C
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