Economics MCQs

Page No. 326

If the ABC Typing Service is earning a rate of return greater than the return necessary for the business to continue operations, then ?


anormal profit is zero


btotal costs exceed total revenue


ctotal costs exceed normal profit


dthe firm is earning are economic profit



In the long run ?


aall firms must make economic profits.


b there are no fixed factors of production


ca firm can vary all inputs, but it cannot change the mix of inputs it uses.


da firm can shut down, but it cannot exit the industry



The short run, as economists use the phrase, is characterized by ?


a a period where the law of diminishing returns does not hold.


bat least one fixed factor of production and firms neither leaving nor entering the industry


c all inputs being variable


dno variable inputs – that is all of the factors of production are fixed



Relative to a competitively organized industry a monopoly ?


a Produces less output, charges higher prices and earns economic profits.


bProduces less output, charges lower prices and earns only a normal profit


c produces more output, charges higher prices and earns economics profits


d produces less output, charges lower prices and earns economic profits



When ________ substitutes exist, a monopolist has ________ power to raise price?


amore; more


bfewer; less


c more; less


dno; infinite


View Answer more; less

If you were running a firm in a perfectly competitive industry, you would be spending your time making decisions on ?


a how much to spend on advertising?


bhow much of each input to use?


cWhat price to charge


dnone of these



Maximum profit can be shown on a diagram using ?


athe MR and MC curves


b the AC and AR curves


cthe AC and MC curves


dthe MR and AR curves



Marginal revenue is ?


athe additional profit the firms earns when it sells an additional unit of output


bthe difference between total revenue and total cost


c The ratio of total revenue to quantity.


d the added revenue that a firm takes in when it increases output by one additional unit.



The formula for average fixed costs is ?


aDq/DTFC


bTFC – q


cTFC/q


d q/TFC


View Answer TFC/q

The rate at which a firm can substitute capital for labour and hold output constant is the ?


a marginal rate of factor substitution


bmarginal rate of substitution


claw of diminishing marginal returns.


dmarginal rate of production



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