Economics MCQs

Page No. 164

Which of the following is not a method firms use to avoid the moral hazard problem in the employment relationship ?


aThey pay employees with delayed compensation such as a year-end bonus


bThey buy life insurance on their workers


c They pay above equilibrium wages


dThey put hidden video cameras in the workplace



Which of the following is an example of a signal that is used to reveal private information ?


a Enzo carefully chooses a special gift for Josephine


bJosephine earns her MBA from the Harvard Business School


c Lexus advertises its cars during the football World Cup Final.


d All of these answers are correct



Markus is a travelling salesman for an apparel company. In this employment relationship, Markus is the ?


aagent


bprinciple


cscreener


dsignaler


View Answer agent

Jamil’s car is in need of repair, so John decides to sell it avoid the repair bill. Unaware of the problem, Shahab buys the car. This is an example of ?


ahidden actions


badverse selection


cmoral hazard


dadverse selection


View Answer hidden actions

If as the quantity produced increase a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will ?


abe flat (horizontal)


bslope upward


cslope downward


dbe U-shaped.


View Answer be U-shaped.

Which of the following statements is true ?


aAll costs are fixed in the short run


bAll costs are variable in the long run


caverage total cost is raising


daverage total cost is minimized



If a production function exhibits diminishing marginal product. its slope ?


ais linear (a straight line)


bbecomes steeper as the quantity of the input increase


ccould be any of these answers


d becomes flatter as the quantity of the input increase



Naila owns a small pottery factory. She can make 1000 pieces of pottery per year and sell them for Rs 100 each. It costs Naila Rs 20,000 for the raw materials to produce the 1,000 pieces of pottery She has invested Rs100,000 in her factory and equipment: Rs50,000 from her savings and Rs50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 her per cent, too) Naila can work at a competing pottery factory for Rs40,000 per year. The economics profit at Naila’s pottery factory is ?


a Rs80,000


bRs30,000


c Rs75,000


d Rs70,000


View Answer Rs30,000

Economic profit is equal to total revenue minus ?


avariable costs


b implicit costs


cexplicit costs


d marginal costs


View Answer implicit costs

The efficient scale of production is the quantity of output that minimizes ?


aaverage fixed cost


baverage total cost


caverage variable cost


dmarginal cost


View Answer average total cost

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