Question 1

The MC curve cuts the AC curve at
A)the maximum point
B)the initial point
C)the minimum point
D)any point

Accepted Answer

B

Question 2

The minimum point of ATC is at.............. position of the minimum point of AVC
A)right
B)left
C)same
D)all of above can be

Accepted Answer

B

Question 3

If the long run cost curve shifts down wards it is an indication of
A)technological progress
B)lower factor prices
C)both of these
D)reserve capacity

Accepted Answer

A downward shift in the long-run cost curve can be caused by technological progress, which makes production more efficient, or by lower factor prices, which reduce the cost of inputs. Both of these factors contribute to reducing the overall cost of production.

Question 4

The U shape of the LAC reflects
A)law of variable proportions
B)laws of returns to scale
C)reserve capacity
D)none of these

Accepted Answer

The answer of The U shape of the LAC reflects
A)law...

Question 5

A production possibility curve is concave to the point of origin because of
A)increasing marginal rate of transformation (mrt)
B)increasing marginal opportunity cost (moc)
C)both of the above
D)decreasing marginal rate of transformation

Accepted Answer

The production possibility curve is concave to the point of origin because of both increasing marginal rate of transformation (MRT) and increasing marginal opportunity cost (MOC). This reflects the law of increasing opportunity cost, which states that as production of one good increases, the opportunity cost of producing an additional unit of this good increases, due to factors of production not being perfectly substitutable between goods.

Question 6

The deductive method is also called
A)abstract
B)analytical
C)priori method
D)all the above

Accepted Answer

The deductive method is also known by various terms that reflect its nature and approach, including abstract, analytical, and a priori method. These terms emphasize the method's reliance on logical reasoning from general principles to specific conclusions, without necessarily requiring empirical evidence.

Question 7

An Essay on the Nature and Significance of Economic Science was written by
A)adamsmith
B)alfred marshall
C)lord robbins
D)samuelson

Accepted Answer

"An Essay on the Nature and Significance of Economic Science" is a book written by Lionel Robbins, also known as Lord Robbins. His work, published in 1932, is significant for its definition of economics and its approach to the discipline as a science.

Question 8

Other things being equal a decrease in demand can be caused by
A)a fall in price of the commodity
B)a fall in income of the consumer
C)a rise in price of the substitute
D)none of these

Accepted Answer

A decrease in demand can be caused by a fall in the income of the consumer, as it reduces their purchasing power, leading to a decrease in the quantity demanded at each price level.

Question 9

When price of a product falls, more of it is purchased because of
A)the substitution effect
B)the income effect
C)neither substitution effect nor income effect
D)both the substitution and income effects

Accepted Answer

When the price of a product falls, both the substitution effect (consumers substitute the cheaper product for more expensive alternatives) and the income effect (consumers have more purchasing power, effectively increasing their real income) contribute to an increase in the quantity demanded.

Question 10

"Utility or satisfaction is a subjective concept; therefore it could only be ranked". The statement supports
A)cardinal utility theorist
B)ordinal utility theorist
C)behavioral theorist of the firm
D)none of the above

Accepted Answer

Ordinal utility theorists argue that utility or satisfaction is subjective and cannot be measured in absolute terms, but can be ranked in order of preference. This contrasts with cardinal utility theory, which suggests that utility can be quantitatively measured.

Question 11

The basic doctrine of consumers surplus is based on
A)indifference curve analysis
B)revealed preference theory
C)law of substitution
D)law of diminishing marginal utility

Accepted Answer

The basic doctrine of consumer's surplus is primarily based on the law of diminishing marginal utility. This principle suggests that as a consumer consumes more of a good, the additional satisfaction (marginal utility) derived from each additional unit decreases, which is foundational to understanding consumer's surplus.

Question 12

According to Marshall, The law of diminishing marginal utility
A)applies on money in the manner in which it applies on commodity
B)do not applies on money except bank money
C)does not applies on bank money but applies on cash
D)applies on all commodities except money

Accepted Answer

Marshall's law of diminishing marginal utility states that as a person consumes more units of a good, the additional satisfaction from consuming an extra unit of the good decreases. Marshall believed this law applies to all commodities except money, as money is a medium of exchange and its utility is in what it can be exchanged for, rather than in the consumption of the money itself.

Question 13

Indifference curve is always
A)concave to the origin
B)convex to the oringin
C)l shaped
D)a straight line

Accepted Answer

Indifference curves are typically convex to the origin because they reflect the principle of diminishing marginal rate of substitution. This means that as a consumer substitutes one good for another, the amount of the second good needed to maintain the same level of utility increases.

Question 14

Price effect is
A)income effect - substitution effect
B)substitution effect - income effect
C)income effect + substitution effect
D)income effect + substitution effect- negative effects

Accepted Answer

The price effect is the total effect of a change in the price of a good on the quantity demanded of that good. It is composed of both the income effect, which is how the change in price affects consumer purchasing power, and the substitution effect, which is how the change in price alters the relative attractiveness of other goods. Therefore, the price effect is the sum of the income effect and the substitution effect.

Question 15

For a giffen good, when price falls
A)demand increases at a faster rate
B)demand decreases
C)demand remains constant
D)demand curve has a negative slope

Accepted Answer

For a Giffen good, when the price falls, demand decreases because the income effect of the price decrease outweighs the substitution effect, leading consumers to buy less of the good as it becomes cheaper.

Question 16

Inferior goods are the goods with
A)falling income effect
B)rising income effect
C)negative income effect
D)positive marshallian effects

Accepted Answer

Inferior goods are characterized by a negative income effect, meaning that as consumers' income increases, the demand for these goods decreases.

Question 17

Which of the following is called gossans first law
A)law of substitution
B)law of equi marginal utility
C)law of diminishing marginal utility
D)none of the above

Accepted Answer

Gossen's First Law is known as the Law of Diminishing Marginal Utility, which states that as a person consumes more units of a good, the utility (satisfaction) gained from consuming each additional unit decreases.

Question 18

According to Marshall consumer surplusis:
A)total utility - marginal utility
B)total utility + marginal utility
C)total utility derived - price
D)price - marginal utility

Accepted Answer

Consumer surplus is the difference between the total utility derived from a good or service and the total amount paid for it. Hence, it is calculated as the total utility derived minus the price paid.

Question 19

If both the products X & Y are normal goods
A)slopes down towards right
B)slopes up towards right
C)slopes up towards left
D)slopes down towards left

Accepted Answer

For normal goods, as income increases, the demand for the goods also increases, which is represented by a demand curve that slopes up towards the right.

Question 20

Which of the following statement is TRUE with regard to total utility
A)total utility is the utility derived from last unit
B)total utility increases at a diminishing range
C)as consumption increases total utility goes on diminishing
D)at saturation point total utility is negative

Accepted Answer

Total utility increases as more of a good is consumed, but it does so at a diminishing rate due to the law of diminishing marginal utility. This means that while total utility continues to rise with each additional unit consumed, the rate of increase slows down.

Quiz 2: Economic Concepts and Principles

The MC curve cuts the AC curve at

The minimum point of ATC is at.............. position of the minimum point of AVC

If the long run cost curve shifts down wards it is an indication of

The U shape of the LAC reflects

A production possibility curve is concave to the point of origin because of

The deductive method is also called

An Essay on the Nature and Significance of Economic Science was written by

Other things being equal a decrease in demand can be caused by

When price of a product falls, more of it is purchased because of

"Utility or satisfaction is a subjective concept; therefore it could only be ranked". The statement supports

The basic doctrine of consumers surplus is based on

According to Marshall, The law of diminishing marginal utility

Indifference curve is always

Price effect is

For a giffen good, when price falls

Inferior goods are the goods with

Which of the following is called gossans first law

According to Marshall consumer surplusis:

If both the products X & Y are normal goods

Which of the following statement is TRUE with regard to total utility