Economics MCQs

Page No. 324

A firm in perfectly competitive industry is producing 50 units, its profit-maximising quantity. Industry price is £2 and total fixed costs and total variable cost are £25 and £40 respectively. The firm’s economic profit is ?


a£35


b £15


c£30


d£60


View Answer £35

The formula for average variable cost (AVC) is ?


aDTVC/Dq


b q/TVC


cDq/DTVC


d TVC/q


View Answer TVC/q

A graph showing all the combinations capital and labor available for a given total cost is the ?


aexpenditure set


bisocost line.


c budget constraint


disoquant


View Answer isocost line.

A graph showing all the combinations of capital and labor that can used to produce a given amount of output is ?


aan indifference curves.


b an isoquant.


c an isocost line


da production functions


View Answer an isoquant.

Suppose Handel’s Ice Cream experiences economies of scale up to a certain point and diseconomies of scale beyond that point. Its long-run average cost curve is most likely to be ?


adownward sloping to the right


b U-shaped


cHorizontal


d upward sloping to the right


View Answer U-shaped

If the total product of two workers is 80 and the total product of 3 workers is 90 then the average product of the third worker is ________ and the marginal product of the third worker is _________?


a160; 270


b 10; 30


c10; 3.33


d 30; 10


View Answer 30; 10

Diminishing marginal return implies ?


a decreasing average fixed costs.


b decreasing marginal costs.


cdecreasing average variable costs.


dincreasing marginal costs.



The costs that depend on output in the short run are ?


a total fixed cost only.


btotal variable costs only.


cboth total variable costs and total costs.


dboth total variable costs and total costs.



Which of the following statements is False ?


aparticipants in a contestable market are continuously faced with competition or the threat of competition because entry is cheap


bIn a contestable market, economic profits cannot persist in the long run.


c. In a contestable market forces will guarantee that the firms produce efficiently or be driven out of business


dFor a market to be contestable, the product must be produced with a labor-intensive technology



A major weakness of the kinked demand curve model of oligopoly is that ?


at assumes that firms believe that their rivals will not respond to any price change they initiate


b it fails to explain how a firm arrived at its price and output decision initially


cThe model cannot be tested empirically.


dReal-world pricing strategies are more simple than those assumed in this model



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