1- The change in the quantity demanded of a goodresulting from a change in relat
ID: 1254336 • Letter: 1
Question
1- The change in the quantity demanded of a goodresulting from a change
in relative price with the level of satisfaction heldconstant is called:
A. Giffen effect.
B. Real price effect.
C. Income effect.
D. Substitution effect.
2- As the price of good X increases from Rs.5 to Rs.8,quantity demanded
falls from 100 to 80. Based upon this information, wecan conclude that the
demand for X is:
A. Elastic.
B. Inelastic.
C. Unit inelastic.
D. Insufficient information for judgment.
3- When the price of wood (which is an input in theproduction of furniture)
falls, the consumer surplus associated with theconsumption of furniture:
A. Increases.
B. Decreases.
C. Does not change.
D. Insufficient information for judgment.
4- When the snob effect exists, a change in price islikely to:
A. Change total revenue less than if there were no networkexternalities.
B. Change total revenue more than if there were no networkexternalities.
C. Change total revenue by the same amount as if there were nonetwork
externalities.
D. Not change total revenue at all.
5- Assume that one of two possible outcomes will followa decision. One
outcome yields a Rs.75 payoff and has a probability of0.3; the other
outcome has a Rs.125 payoff and has a probability of0.7. In this case, the
expected value is:
A. Rs.85.
B. Rs.60.
C. Rs.110.
D. Rs.35.
Quiz 02 ECO402
Spring 2009 VU
6- An investment opportunity has two possible outcomes,and the value of
the investment opportunity is Rs.250. One outcome yieldsRs.100 payoff
and has a probability of 0.25. What is the probabilityof the other outcome?
A. 0.
B. 0.25.
C. 0.5.
D. 0.75.
7- A person with a diminishing marginal utility ofincome:
A. Will be risk averse.
B. Will be risk neutral.
C. Will be risk loving.
D. Cannot decide without more information.
8- Salman would prefer a certain income of Rs.20, 000 toa gamble with a
0.5 probability of Rs.10, 000 and a 0.5 probability ofRs.30, 000. Based on
this information:
A. We can infer that Salman is risk neutral.
B. We can infer that Salman is risk averse.
C. We can infer that Salman is risk loving.
D. We cannot infer Salman’s risk preferences.
9- The correlation between an asset's real rate ofreturn and its risk (as
measured by its standard deviation) isusually:
A. Positive.
B. Strictly linear.
C. Flat.
D. Negative.
10- The indifference curve between expected return andthe standard
deviation of return for a risk-averseinvestor:
A. Is downward-sloping.
B. Is upward-sloping.
C. Is horizontal.
D. Is vertical.
Quiz 02 ECO402
Spring 2009 VU
11- When labor usage is at 12 units, output is 36 units.From this we may
infer that:
A. The marginal product of labor is 3.
B. The total product of labor is 1/3.
C. The average product of labor is 3.
D. None of the given options.
12- What describes the graphical relationship betweenaverage product and
marginal product?
A. An average product cuts a marginal product from above, at themaximum
point of marginal product.
B. An average product cuts a marginal product from below, at themaximum
point of marginal product.
C. Marginal product cuts average product from above, at themaximum point
of average product.
D. An average and marginal product does not intersect.
13- L-shaped isoquant:
A. Is impossible.
B. Would indicate that the firm could not switch from one outputto another.
C. Would indicate that capital and labor cannot be substitutedfor each other
in production.
D. Would indicate that capital and labor are perfect substitutesin production.
14- In a production process, all inputs are increased by10%; but output
increases less than 10%. This means that the firmexperiences:
A. Decreasing returns to scale.
B. Constant returns to scale.
C. Increasing returns to scale.
D. Negative returns to scale.
15- Fixed costs are fixed with respect to changesin:
A. Output.
B. Capital expenditure.
C. Wages.
D. Time.
Quiz 02 ECO402
Spring 2009 VU
16- Which of the following costs always decline asoutput increases?
A. Average cost.
B. Fixed cost.
C. Average fixed cost.
D. Average variable cost.
17- Assume that a firm spends Rs.500 on two inputs,labor (graphed on the
horizontal axis) and capital (graphed on the verticalaxis). If the wage rate
is Rs.20 per hour and the rental cost of capital isRs.25 per hour, the slope
of the isocost curve will be:
A. 500.
B. 25/500.
C. 4/5.
D. 25/20 or 5/4.
18- Rabia knows average total cost and average variablecost for a given
level of output. Which of the following costs can shenot determine given
this information?
A. Average fixed cost.
B. Fixed cost.
C. Variable cost.
D. Rabia can determine all of the above costs given theinformation provided.
19- Suppose that the price of labor (PL) is Rs.10 andthe price of capital
(PK) is Rs.20. What is the equation of the isocost linecorresponding to a
total cost of Rs.100?
A. PL + 20PK.
B. 100 = 10L + 20K.
C. 100 = 30(L+K).
D. None of the given options.
20- The cost-output elasticity is used tomeasure:
A. Economies of scope.
B. Economies of scale.
C. The curvature in the fixed cost curve.
D. Steepness of the production function.
Explanation / Answer
A,A,B,A,D,D,C,D,A,A,C,A,B,C,A,D,C,B,D
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