1. MICRO ECONOMICS
CompiledbyLakshmi Kumaresh – 98422 23982
1) The various combinations of goods that can be
produced in any economy when if used its available
sources and technology efficiently are depicted by
a) Demand curve
b) Production curve
c) Supply curve
d) Production possibilities curve.
2) According to Table the opportunity cost of increasing
Good A’s production from 2 to 4 units is equal to:
a) 10 units of B
b) 14 units of B
c) 24 units of B
d) 2 units of B
3) Under inductivemethods, the logic proceeds from:
a) General to particulars
b) Particulars to general
c) Both (a) and (b)
d) None
4) Accordingto Robbins,‘means’ are
a) Scarce
b) Unlimited
c) Undefined
d) all of these
5) Which of these would cause a rightward shift of the
PPC curve?
a) Improvement in technology
b) Greater capital formation
c) Increasein population
d) All of these
6) The opportunity cost of increasing wine production
from D to E is:
a) 0 litres of grape juice
b) 5 litres of grape juice
c) 1 litres of wine
d) 0.2 liters of wine.
7) What implication (s) does resources scarcity has for the
satisfaction of wants?
a) Not all wants can be satisfied.
b) We will never be faced with the need to make
choices.
c) We must develop ways to decrease out individual
wants
d) The discovery of new natural resources in
necessary to increaseout ability to satisfy wants.
8) Which of the following would be considere a
disadvantage of allocating resources using a market
system?
a) Income will tend to be unevenly distributed
b) Significantunemployment may occur.
c) It cannot prevent the wastage of scarce economic
resources.
d) Profits will tend to be low.
9) Labour intensivetechnique would get chosen is a
a) Labour surplus economy
b) Capital surplus economy
c) Developed economy
d) Developing economy
10) What is the “Fundamental premiseof Economics”?
a) Natural resources will always bescare
b) Individual are capable of establishing goals and
actingin a manner consistent with achievement of
those goals
c) Individual choose the alternative for which they
believe the net gains to be the greatest
d) No matter what the circumstances, individual
choicealways involves a trade- off
11) Which of followingis a normativestatement?
a) Planned economics allocate resource via
government departments
b) Most transitional economics have experienced
problems of falling output and rising prices over
the pastdecade.
c) There is a greater degree of consumer sovereignty
in market economics than planned economics
d) Reducing inequality should be a major priority for
mixed economics
12) Which of the following does not suggest a macro
approach for India?
a) Determining the GNP of india
b) Finding the causes of failure of x and co
c) Identifyingthe causeof inflation in india
d) Analyse the causes of failure of industry in
providinglargescaleemployment
13) If the demand for a good is inelastic, an increase
in its price will cause the total expenditure of the
consumersof the goodsto:
a) Remainthe same
b) Increase
c) Decrease
d) Anyof these
14) The law of demandis:
a) A quantitative statement
b) Qualitative statement
c) Both a quantitative and a qualitative
statement
d) Neither a quantitative nor a qualitative
statement
15) A movement along the demand curve for soft
drinksisbestdescribedas:
a) An increase indemand
b) A decrease indemand
c) A change in quantity demanded
d) A change indemand
16) If a good is a luxury, its income elasticity of
demandis:
a) Positive andlessthanI.
b) Negative butgreaterthan – I
c) Positive and greater than I.
d) Zero.
17) If the quantity demanded of beef increase by 5%
when the price of chicken increases by 20%, the
cross- price elasticity of demand between beef
and chickenis
a) – 0.25
b) 0.25
c) -4
d) 4
2. MICRO ECONOMICS
CompiledbyLakshmi Kumaresh – 98422 23982
18) Suppose the price of movies seen at a theater
rises from Rs. 120 per person to Rs. 200 per
person. The theater manager observes that the
rise in price because attendance at a given movie
to fall from 300 persons to 200 persons. What is
the price elasticityof demandformovies?
a) .5
b) .8
c) 1.0
d) 1.2
19) If the local pizzeria raises the price of a medium
pizza from Rs. 60 to Rs. 100 and quantity
demanded falls from 700 pizzas a night to 100
pizzas a night, the price elasticity of demand for
pizzasis:
a) .67
b) 1.5
c) 2.0
d) 3.0
20) Suppose the demand for meals at a medium-
priced restaurant is elastic. If the management of
the restaurant is considering raising prices, it can
expectarelatively:
a) Large fall in quantitydemanded
b) Large fall indemand
c) Small fall inquantitydemanded
d) Small fall indemand
21) Demand for a good will tend to be more inelastic
if it exhibits which of the following
characteristics?
a) The good has manysubstitutes
b) The good is a luxury ( as opposed to a
necessity)
c) The good is a small part of the consumer’s
income
d) There is a great deal of time for the consumer
to adjustto the change in prices.
22) An increase in price will result in an increase in
total revenue if:
a) The percentage change in quantity
demanded is less than the percentage
change in price
b) The percentage change in quantity demanded
isgreaterthan the percentage change inprice
c) Demandiselastic
d) The consumer is operating along a liner
demand curve at a point at which the price is
very high and the quantity demanded is very
low.
23) The consumer is in equilibrium at a point where
the budgetline:
a) Is above n indifference curve
b) Is belowanindifference curve
c) Is tangent to an indifference cure?
d) Cuts an indifference curve.
24) Which of the following is a property of an
indifferencecurve?
a) It is convex to the origin
b) The marginal rate of substitution is constant
as youmove alongan indifference curve.
c) Marginal utility is constant as you move along
an indifferencecurve
d) Total utility is greatest where the 45- degree
line the indifference curve.
25) If burgers sell of for Rs. 14 each, what is Bozzo’s
profitmaximizinglevel of output:
a) 10 burgers
b) 40 burgers
c) 50 burgers
d) 60 burgers
26) What is the total variable cost when 60 burgers
are produced?
a) Rs. 690
b) Rs. 960
c) Rs. 110
d) Rs. 440
27) What is average fixed cost when 20 burgers are
produced?
a) Rs. 5
b) Rs. 3.33
c) Rs. 10
d) Rs. 2.5
28) Between 10 to 20 burgers, what is the marginal
cost ( perburger)?
a) Rs. 11
b) Rs. 13
c) Rs. 14
d) Rs. 9
Use Table to answerquestions68.To Rs.69 table
Hours of
labour
Total
output
Marginal
product
0
1
2
3
0
200
-
480
0
200
160
-
29) What is the total output when 2 hours of labour
are employed?
a) 160
b) 200
c) 360
d) 400
30) What is the marginal product of the third hour
labour?
a) 120
b) 160
c) 200
d) 480
31) The law of diminishingreturns
a) States that beyond some level of a variable
input, the average product if that variable
inputbeginstoincrease steadily
3. MICRO ECONOMICS
CompiledbyLakshmi Kumaresh – 98422 23982
b) Assumes that there is technological
improvementovertime
c) States that beyond some level of a variable
input, the marginal product of that variable
beginsto decrease steadily.
d) Informs a firm whether or not to use a factor
input
32) When --- we known that the firms must producing
at the minimum point of the average cost curve
and so there A productive efficiency.
a) Ac= AR
b) Mc=AC
c) MC= MR
d) AR=MR
33) What is the total output when 2 hours of labour
are employed?
a) 160
b) 200
c) 360
d) 540
34) What is the marginal product of the third hour of
labour?
a) 120
b) 160
c) 200
d) 180
35) All of the following are U shaped curves except
the
a) AVCcurve
b) AFC curve
c) AC curve
d) MC curve
36) The following are some of he costs of a clothing
manufacturing. State which among them will you
considerasfixedcost?
a) Cost of cloth
b) Piece wagespaidtoworkers
c) Depreciationon machinesowing to time
d) Cost of electricityforrunningmachines
37) Under market condition, firms make normal profits in
the long run.
a) Perfect competition
b) Monopoly
c) Oligopoly
d) None of the above
38) When ----, we known that the firms are earning just
normal profits.
a) AC= AR
b) MC= MR
c) MC= AC
d) AR= MR
39) Under perfect competition the priceof product
a) Can be controlled
b) Cannot be controlled
c) Controlled within certain limit
d) None of the above
40) Pricetaker firms:
a) Advertise to increase the demand for their
products
b) Do not advertise because most advertising is
harmful for the society
c) Do not advertise because they can sell as much as
they want at the current price
d) Who advertise will get more profits than those
who do not
41) The AR curve and industry demand curve aresame:
a) In the case of monopoly
b) In the caseof oligopoly
c) In the caseof perfect competition
d) None of the above
42) While analyzing Marshall’s measure of consumer’s
surplus oneassumes ----
a) Imperfect competition
b) Perfect competition
c) Monopoly
d) Monopsony
43) Excess capacity is notfound under ----
a) Monopoly
b) Monopolistic completion
c) Perfect competition
d) Oligopoly
44) The average profitis the different between -----
a) AC and TC
b) AC and VC
c) AC and AR
d) AC and TR
45) When the perfectly competitive firm and industry re in
longrun equilibriumthen:
a) P= MR= SAC= LAC
b) D= MR= SMC= LMC
c) P= MR= lowest pointon the LAC curve
d) All of the above
46) In monopoly, the relationship between average and
marginal revenue curve is as follows:
a) AR curve lies above the MR curve
b) AR curve coincides with the MR curve
c) AR curve lies belowthe MR curve
d) AR curve is parallel to the MR Curve
47) The sale of branded articles is common in a situation of
------
a) Excess capacity
b) Monopolistic competition
c) Monopoly
d) Pure competition
Questions 97 to 100 are based on the demand and
supply diagrams in Figure D1 and S1 are the original
demand and supply curves. D2, D3, S2 and S3 are
possible new demand and supply curves. Starting from
initial equilibrium point (1) what point on the graph is
most likely to resultfrom each change?
P S3
2 S1
5
3 7 S2
1
4 8 D2
6 D1
4. MICRO ECONOMICS
CompiledbyLakshmi Kumaresh – 98422 23982
9 D3
Q
48) Suppose wage rate of coal miners increase and price of
natural gas decreases. (cost and natural gas are
substitutes) ‘What point in above figure is most likely
to be the equilibriumpriceand quantity?
a) Point6
b) Point 4
c) Point3
d) Point2
49) Assume that consumer income has increased. Given
that y is an inferior good, which point in figure is most
likely to be new equilibriumpriceand quantity?
a) Point4
b) Point 6
c) Point5
d) Point8
50) Assume that the government has just removed the
10% excise duty on good X. what point in Figure 1 is
most likely to be the new equilibrium price and
quantity?
a) Point6
b) Point4
c) Point7
d) Point 8