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.
81. 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.
Answer:C
82. 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
Answer:B
83. A basic distinction between the long run and the short run is that
A) If a firm produces no output in the long run it still incurs a cost, while in
the short run a firm incurs a cost only if produces output.
B) The opportunity costs of production are constant in the long run, while the
opportunity costs of production are variable in the long run.
C) In the long run some inputs are fixed, while in the short run all inputs are
variable.
D) In the short run complete adjustment of all inputs is impossible, while in
the long-run all inputs can be adjusted.
Answer:D
84. 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.
Answer:D
85. 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.
Answer:B
86. When average product is at a maximum, marginal product is
A) Zero
B) Increasing
C) Equal to average product
D) Greater than average product
Answer:C
87. Whenever average product is declining, with increases in input usage,
A) Marginal product is less than average product
B) Total product is declining with increases in input
C) Total product is increasing with increases in input
D) Marginal product is greater than average product
Answer:B
88. The total product curve may initially show output increasing at an increasing rate as more labour is hired because of the:
A) Declining quality of the labor force.
B) Principle of comparative advantage.
C) Law of diminishing marginal returns.
D) Increase in marginal physical product.
Answer:D
89. If labour is the only variable resource and its marginal physical product falls as more workers are hired:
A) The law of diminishing marginal returns is at work.
B) Marginal cost is rising.
C) Average cost may still be declining.
D) Average physical product may still be rising.
Answer:A
90. When both average and total product are greater than zero, and marginal product equals average product, then total product:
A) Is at a maximum.
B) Is positive and rising.
C) Is falling.
D) Is negative but rising.
Answer:B
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