ECO501 Midterm Preparation by ZB

Q1. Which of the following is the primary goal of microeconomics? a) Study of inflation

1. Study of national income
2. Allocation of resources
3. Study of government policies

Answer: C) Study of government policies Allocation of resources

Q2. The law of demand states that: a) Price and quantity demanded are inversely related

1. Price and quantity demanded are directly related
2. Quantity demanded remains constant
3. None of the above

Answer: A) Price and quantity demanded are directly related Price and quantity demanded are inversely related

Q3. Which of the following is a characteristic of a perfectly competitive market? a) Product differentiation

1. Barriers to entry
2. Many buyers and sellers
3. Price maker

Answer: C) Price maker Many buyers and sellers

Q4. Which of the following is an example of a public good? a) Private television channels

1. National defense
2. Club goods
3. Private parks

Answer: B) Club goods National defense

Q5. A price ceiling is: a) A minimum price set by the government

1. A maximum price set by the government
2. The equilibrium price
3. The price at which supply equals demand

Answer: B) The equilibrium price A maximum price set by the government

Q6. The marginal cost curve intersects the average total cost curve at: a) The maximum of the average total cost curve

1. The minimum of the average total cost curve
2. The point of diminishing returns
3. None of the above

Answer: B) The point of diminishing returns The minimum of the average total cost curve

Q7. What is meant by the term 'elasticity of demand'? a) The responsiveness of demand to changes in price

1. The responsiveness of supply to changes in price
2. The relationship between price and supply
3. The change in supply due to a change in demand

Answer: A) The responsiveness of supply to changes in price The responsiveness of demand to changes in price

Q8. Which of the following is not a factor affecting demand? a) Income of consumers

1. Prices of related goods
2. Technology
3. Tastes and preferences

Answer: C) Tastes and preferences Technology

Q9. A firm operates in a perfectly competitive market and is earning normal profit. The firm's: a) Total revenue equals total cost

1. Total revenue exceeds total cost
2. Total cost exceeds total revenue
3. Profit is negative

Answer: A) Total revenue exceeds total cost Total revenue equals total cost

Q10. The law of diminishing marginal utility states that: a) As consumption increases, total utility increases at a decreasing rate

1. Marginal utility increases with consumption
2. Total utility decreases with consumption
3. None of the above

Answer: A) Marginal utility increases with consumption As consumption increases, total utility increases at a decreasing rate

Q11. In the short run, firms can: a) Change all inputs

1. Only change some inputs
2. Not change any inputs
3. None of the above

Answer: B) Not change any inputs Only change some inputs

Q12. Which of the following is true about monopolistic competition? a) There are no barriers to entry

1. Firms produce identical products
2. Firms are price takers
3. Firms can earn economic profits in the long run

Answer: A) Firms produce identical products There are no barriers to entry