Sub: Economics Topic: Micro Economics
Question:
Multiple choice questions from Perfect market competition.
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1. The owner of a carpet cleaning firm realizes that her firm is experiencing diminishing
marginal product in the short run. As she attempts to do even more carpet cleaning in the short
run, what will happen to the marginal cost of carpet cleaning?
a. increase
b. remain constant
c. decrease
d. approach zero
2. If average total cost is increasing as output increases,
a. average fixed costs will also be increasing.
b. average variable costs must be decreasing.
c. marginal cost must be greater than average total cost.
d. all of the above are true
3. Suppose that a production process has two inputs, capital and labor. In the short run, capital
is fixed and labor is variable. If, at the current level of output, marginal product of labor is
declining,
a. marginal cost of producing output must be rising.
b. average product of labor must also be rising.
c. average fixed cost must be greater than average total cost.
d. both a. and b. above must be true.
e. none of the above are true.
4. Which of the following products is most likely to be an inferior good?
a. generic bologna
b. designer jeans
c. Caribbean vacation
d. jewelry
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Sub: Economics Topic: Micro Economics
5. If the cross price elasticity of the quantity of hamburger to the price of chicken is +0.48, the
cross price elasticity of the quantity of chicken to the price of hamburger is:
a. 0.48
b. -0.48
c. 0.96
d. 2.08
e. not enough information to answer this question.
6. The best example of a business strategy seeking to gain economies of scale is:
a. buying bulk commodities to gain a lower purchase price.
b. paying time and a half wages to employees working over time.
c. consolidating many branch offices into a single location.
d. expanding the responsibilities of middle managers.
7. If the federal government offers a 51 cent per gallon subsidy to blenders for ethanol
production the supply curve of ethanol will:
a. shift to the downward and to the left
b. shift upward to the right.
c. remain unchanged.
d. move upward along the supply curve.
e. not enough information to answer this question.
Solution:
1. The owner of a carpet cleaning firm realizes that her firm is experiencing diminishing
marginal product in the short run. As she attempts to do even more carpet cleaning in the short
run, what will happen to the marginal cost of carpet cleaning?
a. increase
b. remain constant
c. decrease
d. approach zero
www.classof1.com
*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
lieu of your academic submissions for grades.

Sub: Economics Topic: Micro Economics
2. If average total cost is increasing as output increases,
a. average fixed costs will also be increasing.
b. average variable costs must be decreasing.
c. marginal cost must be greater than average total cost.
d. all of the above are true
3. Suppose that a production process has two inputs, capital and labor. In the short run, capital
is fixed and labor is variable. If, at the current level of output, marginal product of labor is
declining,
a. marginal cost of producing output must be rising.
b. average product of labor must also be rising.
c. average fixed cost must be greater than average total cost.
d. both a. and b. above must be true.
e. none of the above are true.
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ClassOf1 provides exert guidance for College, Graduate and High school homework and live online tutoring on subjects like
Finance, Marketing, Statistics, Economics and others. Check out more solved problems in our Solution Library.
www.classof1.com
*The Homework solutions from ClassOf1 are intended to help the student understand the approach to solving the problem and not for submitting the same in
lieu of your academic submissions for grades.