Choose the best answer and write the letter of the correct answer in a separate sheet (1 pt. each, a total of 15 pts).

Question

1) Which one of the following is incorrect about consumption under the cardinal utility approach?
A) With more consumption, the LDMU applies.
B) Utility is measurable in objective units.
C) Constant marginal utility of a unit of money.
D) Utility is subject to the law of diminishing marginal rate of substitution
E) None of the above.
2) Which one of the following characteristics of indifference curves helps to show the concept of the law of diminishing marginal rate of substitution?
A) The fact that indifference curves are positively-sloped.
B) The fact that indifference curves are concave towards the origin.
C) The fact that indifference curves are negatively-sloped.
D) The fact that indifference curves are convex to the origin.
E) All of the above
3) With a 10% rise in the consumer’s income, the quantities demanded increased from 120 to 200 units. Which one of the following is true?
A) The good is luxury C) The good is inferior
B) The good is necessity D) The good is Giffen E) None of the above.
4) Which one of the following is necessarily true?
A) Transitive preference is not necessary for consumer consistency
B) If the good is undesirable, consumers always prefer more of any good to less
C) As the price of good X falls, the consumer is induced to spend more on the substitute good, Y.
D) Under cardinal utility analysis, when the consumer can raise his/her satisfaction by consuming more units of good X
E) None of the above.
5) Which one of the following is false about Stage –II of production?
A) It is the stage of diminishing returns because TP increase at decreasing rate.
B) MPL is greater than APL.
C) Both MPL& APL are diminishing but positive.
D) MPL decline at slower rate than APL.
E) None
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6) Which one is true when total product reaches its maximum point?
A) �
B) Marginal product reaches its maximum
C) This is the phenomenon of stage I
D) Marginal product is above AP
E) At this point marginal cost reaches its minimum
F) None of the above.
7) �
8) Which one of the following is false?
A) ATC is always above the AVC
B) With the increasing output, ATC & AVC are getting closer.
C) TC change only due to the change in TVC
D) AFC forming a rectangular hyperbola
E) None of the above
9) �
10) Which one of the following is true about the costs of non-purchased inputs?
A) They are treated as accounting costs.
B) They are recorded as direct costs.
C) They are used in determining accounting profits.
D) They are treated as implicit costs.
E) None of the above.
11) Which one of the following is incorrect about the long run equilibrium of a competitive firm?
A) Firm leaves the industry to avoid normal profits.
B) Long-run average cost curve is tangent to the demand curve.
C) Firms can change their plant size.
D) Firms earn a normal profit.
E) Price and average cost of the firm are equal due to free entry.
12) Which one is incorrect about a monopolistic competitive market?
A) Firms are predominantly engaged in non-price competition.
B) The market is significantly competitive.
C) Many products in such a market have close substitutes.
D) Easy entry is a reason for monopoly power of the firms in the market.
E) Entry is made easy through product differentiation.
13) Firms within perfectly competitive market may encounter one of the following in short run depending on average cost:
A) �
B) Excess profit
C) Normal profit
D) Negative profit
E) All of the above
F) Unknown
14) �
15) Which one of the following is true about a monopolist under long run equilibrium?
A. �
A) It can operate a plant which is larger than the optimal size.
B) It can operate a plant with a sub-optimal size.
C) It can reap a positive profit although the plant size is less than the optimal size.
D) In the absence of competitive pressures, the monopolist does not have interest to operate an optimal scale of plant. E) All of the above.
16) Which one of the following cannot be a source of monopoly power?
A) A franchise made between the government and a company allowing the latter to have an exclusive right to provide a good or service.
B) A government license allowing a firm to produce and sell a certain good or service.
C) A patent right for producing and selling a product.
D) A government license allowing for more entry into the market for a product.
E) An ancestral control of the source of a raw material.
17) Which one of the following statements is wrong about a multi-plant monopolist?
A) Produces using more than one plant and sells it in one market place.
B) Makes costs across plants the same.
C) Maximizes his profits based on the low-cost plant.
D) Charges same prices in different markets
E) All of the above.
18) If a profit maximizing monopoly’s MR exceeds its MC, then it should _____________.
A. �
B. Raise its price
C. Lower its output
D. Raise its output
E. Lower its price
F. Raise both its price and output�
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Answer 1

Here are the answers to the questions as requested:

1. C
2. D
3. A
4. D
5. D
6. F
7. (Question missing)
8. D
9. (Question missing)
10. D
11. A
12. D
13. E
14. (Question missing)
15. E
16. D
17. D
18. D

Please let me know if you need any further explanations for these answers or if you have other questions!