Download A "production function" is the name for:

The Islamic University
Faculty Of Commerce
Dep't of Economics
Micro Economic
Date:13/1/2007
Time:11.30 - 13.30
Name: ------------------------------------------------------ St/No:-----------------------
Q 1: Multiple Choices
15 Marks
1- A "production function" is the name for:
A) a working part.
D) all of the above.
B) a relationship between inputs and output. E) none of the above.
C) technological change.
2- At a consumer's equilibrium demand choices for goods 1 and 2:
A) MU1 = MU2
D) P1 = P2
B) MU1/Q1 = MU2/Q2
E) none of the above.
C) MU1/P1 = MU2/P2
3- A change in which of the following should not affect the demand for hot
coffee?
A) The price of coffee.
D) The weather.
B) The price of tea.
E) All the above affect the
demand for coffee.
C)
Consumer incomes
4- To maximize profits or minimize losses (if the firm produces), a firm
must be sure it is producing at an output where:
A) total revenue is greater than average cost.
B) total revenue is equal to average cost.
C) marginal revenue is greater than marginal cost.
D) marginal revenue is equal to marginal cost.
E) none of the above is correct.
Total Utility
Units
Good X
Good Y
1
120
90
2
216
160
3
288
220
4
336
270
5
360
305
5- Refer to the above Table. If good X costs $6 per unit and good Y costs
$5 per unit, at what quantities of X and Y is utility maximized if the
budget is $33?
A) X = 2, Y = 3
D) X = 3, Y = 3
B) X = 4, Y = 5
E) None of the above
C) X = 3, Y = 4
6- Refer to Table 5-1. Suppose X costs $8 per unit and Y costs $5 per unit.
What quantities of X and Y will the consumer buy if she has $31 to
spend?
A) X = 3, Y = 4
D) X = 1, Y = 2
B) X = 4, Y = 5
E) None of the above
C) X = 2, Y = 3
7- The quantity of a good which a person will purchase will not depend on
which one of the following items?
A) The price of the good.
D) His or her income.
B) His or her tastes.
E) The elasticity of supply.
C) The prices of substitute goods.
1
8- If demand is price elastic within the relevant price range, then total
revenue:
A) will rise with a fall in price.
B) will fall with a fall in price.
C) will remain constant with a fall in price.
D) may either rise or fall with a fall in price.
E) will rise if price is greater than $1, but fall if price is less than $1.
9- Suppose the absolute value of the slope of a straight-line demand curve
is 1. The price elasticity at any point along this demand curve is:
A) equal to 1.
D) infinite.
B) greater than 1, but less than infinite. E) none of the above are
necessarily true.
C) less than 1.
10- The quantity of good X demanded by an individual may depend upon:
A) the individual's income.
D) all of the above.
B) the price of X.
E) answers a and b, only.
C) the price of some other goods.
11- When the demand curve shifts to the right:
A) equilibrium price increases.
D) a and c.
B) equilibrium price decreases.
E) b and c.
C) equilibrium quantity increases
12- Upward-sloping supply curves are the result of:
A) increasing returns to scale.
D) changes in technology.
B) increasing costs of labor.
E) none of the above
C) changes in government policies.
13- Suppose that at the current market price, the amount which
producers wish to produce and sell exceeds the amount that
consumers wish to purchase. This price:
A) lies above the market clearing price. D) will induce a shift in the
demand schedule.
B) lies below the market clearing price. E) none of the above.
C) is impossible
14- The short run is a period of time so short that:
A) output cannot be varied.
D) all inputs are variable.
B) at least one input is fixed.
E) none of the above.
C) all inputs are fixed.
15- Marginal cost is the:
A) total cost divided by the number of units produced.
B) fixed cost divided by the number of units produced
C) extra fixed cost of producing an additional unit of output.
D) extra average cost of producing an additional unit of output.
E) extra cost of producing an additional unit of output.
16- Which of the following is true at the quantity of output where average
cost has reached its minimum level?
A) AVC = FC. B) MC = AVC. C) MC = AC. D) AC = AFC.
E) Output price = AVC.
2
17- Which of the following is typically not U-shaped?
A) Average cost
D) Marginal cost
B) Average variable cost
E) All of the above are
usually U-shaped.
C) Average fixed cost
18- The intersection of the marginal cost curve and the average cost curve
characterizes the point of:
A) maximum profit.
D) minimum opportunity cost.
B) minimum average cost.
E) minimum profit.
C) minimum marginal cost.
19- Oligopoly is a market situation with:
A) the consumers' best interest at heart. D) only a few competing
sellers.
B) no competition.
E) only a few competing
buyers.
C) a single buyer.
20- In long-run equilibrium, a firm in a perfectly competitive industry will
produce at the point where:
A) marginal cost equals average total cost. D) its opportunity cost is
lowest.
B) total revenue is maximized.
E)price equals average fixed cost.
C) marginal cost equals average variable cost.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Q 2: True and False
15 Marks
1- If you can now buy a good at a reduced price, your "consumer surplus"
must increase.
2- As you increase the consumption of X, total and marginal utility tend to
increase.
3- If A and B are substitutes, then an increase in the price of A will tend to
result in an increase in the demand for B.
4- Marginal utility tends to rise as the level of consumption rises.
5- Consumer surplus measurement is a key element in cost-benefit analysis.
6- Models are descriptions of the relationship between two or more
variables.
7- Capital goods are goods used to produce other goods and services.
8- A time series graph shows how a single variable changes over time.
9- Households are the consuming units in an economy/
10- Inferior Goods are goods for which demand falls when income rises.
11- A price floor is a maximum price that sellers may charge for a good.
12- The value of demand elasticity is not always negative.
13- When demand does not respond at all to a change in price, demand is
perfectly elastic.
14- Demand is elastic in the upper range and inelastic in the lower range of
the line.
3
15- The budget line shifts inward in a pivot way when you get less income.
16- If production displays increasing returns to scale, then it cannot
display diminishing returns for all of its inputs.
17- If the marginal product of an input is increasing, then average product
must also be increasing.
18- The marginal cost curve can cut the average variable cost curve from
below only at its minimum.
19- MC is the same whether it is computed from TVC or from TC.
20- Average fixed cost intersects average variable cost at the minimum
level of average variable cost.
21- Least-cost relationships tell the firm how much output it should finally
produce.
22- The tangency of an equal-product curve and an equal-cost line
determines one point of a firm's total least-cost curve.
23- When its variable costs are less than total revenue, a firm should shut
down.
24- A perfect competitor is defined as one who can earn economic profits,
even in the long run.
25- Profit maximization will occur where the elasticity of demand is
unitary.
26- An individual perfect competitor faces a horizontal demand curve.
27- An imperfect competitor is distinguished by, among other things,
having some control over price.
28- Differentiation of the product is necessary in an oligopoly.
29- Technological change, have a powerful influence on factor demands
30- in the long run, no monopoly is completely secure from attack by
competitors.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Q 3: Define 8 points from the following terms.
1- Price- takers.
2- Scarcity.
3- Productive Efficiency.
4
20 marks
4- Economic Cost.
5- Graphs.
6- Elasticity of Demand.
7- The Low of Diminishing Returns.
8- Marginal Revenue.
9- Shut-Down point.
10-
Monopoly.
5
Q 4:
1: State the characteristics of Isoquant curves.
2: When MU1/P1 = MU2/P2, the indifference curves and
budget line are necessarily tangent, Draw the graph.
6
3- Explain the graph.
7