ECO 402 QUIZ SOLLUTION ........

ECO401 QUIZ NO. 2 ON 22 JUNE 2016

Q No. 1

--------------- is the rate at which a firm can substitute capital for labor and hold output constant.

a.         Marginal rate of Production.

b.         Marginal rate of technical substitution

c.         Diminishing marginal returns

d.         Marginal rate of substitution

Q No.2

Marginal rate of technical substitution is the slope of:

a.         Isocost curve

b.         Isoquant curve

c.         Budget line

d.         Indifference curve

Q No. 3

In which of the following cases, shape of long run average cost curve is downward sloping?

a.         Economies of scale

b.         Diseconomies of scale

c.         External diseconomies of scale

d.         Returns to scale (Not Confirm)

Q No. 4

Suppose a person is willing to give up 20 units of good A (on the vertical axis) for 10 units of good B (on the horizontal axis), and his level of satisfaction is unchanged, the marginal rate of substitution is:

a.         0.5.

b.         2.

c.         5.

d.         10.

Q No.5

Consumer will consume additional units of commodity until marginal utility becomes:

a.         Equal to zero (Not Confirm)

b.         Equal to the price

c.         Equal to the utility

d.         Equal to the income

Q No. 6

Which of the followings best describes the fixed cost?

a.         A cost that is unaffected by change in time

b.         A cost which is affected by change in output

c.         A cost which is unaffected by level of output

d.         A cost which is unaffected by change in inflation

Q No.7

Suppose firm A is producing bicycles. If demand for bicycles is increased and firm A has enough time to increase supply by employing all factors of production, then one can say that:

a.         Firm A is operating in the short run.

b.         Firm A is operating in the long run.

c.         Firm A has inelastic supply curve for bicycles. (Not Confirm)

d.         Firm A has inelastic demand curve for bicycles.

Q No.8

If sugar and tea are considered to be perfect complements, than a decrease in price of sugar will lead to:

a.         Decrease in quantity demanded of sugar.

b.         Decrease in quantity demanded of tea.

c.         Increase in quantity demanded of tea.

d.         Increase in quantity supplied of tea.

Q No. 9

A good whose consumption increases due to increase in income is categorized as:

a.         Inferior good

b.         Giffen good

c.         Inferior and normal good

d.         Normal good

Q No. 10

Total revenue is equal to price times:

a.         Quantity.

b.         Quantity minus total cost.

c.         Quantity minus average cost.

d.         Quantity minus marginal cost.