ECO401 Midterm Solved Papers

Eco401 – Economics Midterm Solved · Papers Subjective and Objective For · Exam Preparation

Which of the following is considered to be a variable cost in the long run?

1. Expenditures for wages.
2. Expenditures for research and development.
3. Expenditures for raw materials.
4. All of the given options.

Correct answer: All of the given options.

A perfectly competitive firm maximizes profit by finding the level of production at which:

1. Price = Marginal Cost.
2. Price = Average Total Cost.
3. Average Total Cost = Marginal Cost.
4. Price < Marginal Cost.

Correct answer: Price = Marginal Cost.

If the cross price elasticity of demand between two goods X and Y is positive; it means that goods are:

1. Independent.
2. Complements.
3. Substitutes.
4. Inferior.

Correct answer: Substitutes.

The long-run average total cost curve:

1. Traces out the points on the lowest short-run average total cost curve for each level of production.
2. Is inversely related to the depth of the short-run marginal cost curve.
3. Traces out the midpoints on an average of several short-run average total cost curves.
4. Is downward-sloping under decreasing returns to scale.

Correct answer: Traces out the points on the lowest short-run average total cost curve for each level of production.

Marginal profit is equal to:

1. Marginal revenue minus marginal cost.
2. Marginal revenue plus marginal cost.
3. Marginal cost minus marginal revenue.
4. Marginal revenue times marginal cost.

Correct answer: Marginal revenue minus marginal cost.

Because of unusual warm weather, the supply of strawberries has substantially increased. This statement indicates that:

1. The demand for strawberries will necessarily rise.
2. The equilibrium quantity of strawberries will fall.
3. The quantity of strawberries that will be available at various prices has increased.
4. The price of strawberries will fall.

Correct answer: The equilibrium quantity of strawberries will fall.

In a free-market economy, the allocation of resources is determined by:

1. Votes taken by consumers.
2. A central planning authority.
3. Consumer preferences.
4. The level of profits of firms.

Correct answer: Consumer preferences.

We know that the demand for a product is elastic:

1. When price rises, total revenue rises.
2. When price rises, total revenue falls.
3. When income rises, quantity demanded rises.
4. When income falls, quantity demanded rises.

Correct answer: When price rises, total revenue falls.

At the profit-maximizing level of output, marginal profit:

1. Is positive.
2. Is increasing.
3. Is zero.
4. Is also maximized.

Correct answer: Is zero.

An individual whose attitude towards risk is known as:

1. Risk averse.
2. Risk loving.
3. Risk neutral.
4. None of the given options.

Correct answer: Risk averse.

Q31. What will happen if current output is more than the profit-maximizing output? (1 marks)

1. The next unit produced will increase profit.
2. The next unit produced will decrease revenue more than it increases cost.
3. The next unit produced will decrease cost more than it increases revenue.
4. The next unit produced will increase revenue without increasing cost.

Correct answer: The next unit produced will decrease revenue more than it increases cost.

Which of the following is TRUE about L-shaped isoquant?

1. It indicates that the firm could switch from one output to another costlessly.
2. It indicates that the firm could not switch from one output to another.
3. It indicates that capital and labor cannot be substituted for each other in production.
4. It is impossible.

As price increases total revenue decreases in case of

1. Inelastic demand.
2. Unit elastic demand.
3. Zero elastic demand.
4. Elastic demand.

Correct answer: Elastic demand.

The break-even point occurs when:

1. Price < Average Variable Cost.
2. Price < Average Total Cost.
3. Price = Average Total Cost.
4. Price > Average Variable Cost.

Correct answer: Price = Average Total Cost.

Which of the following is true about supply curve under monopoly?

1. It is same as the competitive market supply curve.
2. It is the portion of marginal cost curve where marginal costs exceed the minimum value of average variable costs.
3. It is the result of market power and production costs.
4. None of the given statements is true.

Correct answer: None of the given statements is true.

At the equilibrium price:

1. There will be a shortage.
2. There will be neither a shortage nor a surplus.
3. There will be a surplus.
4. There are forces that cause the price to change.

Correct answer: There will be neither a shortage nor a surplus.

Subjective 100% in lecture no 18 to 22 Monopoly , · Paper # 02 · Spring 2010

Microeconomics is the branch of economics that deals with which of the following topics?

1. The behavior of individual consumers.
2. Unemployment and interest rates.
3. The behavior of individual firms and investors.
4. The behavior of individual consumers and behavior of individual firms and investors.

Correct answer: The behavior of individual consumers and behavior of individual firms and investors.

A market is said to be in equilibrium when:

1. Demand equals output.
2. There is downward pressure on price.

Correct answer: Demand equals output.