CH # 1

NATURE AND SCOPE

A.
1.
2.
3.
4.
5.
6.
7.
8.
9.

10.

11.
12.
13.
14.
15.

SELECT THE CORRECT ANSWERS:

Father of political economy is:
a)
adamAdam smith
b)
MathusMalthus
d)
Marshalls
.. describeDescribe economics as a science of material welfare.
a)
Rotations
b)
Marshall
c)
Riecando
Economics laws are . .
a)
Exact b)
Approximate c)
brief
Economics is a science.
a)
Spiritual
b)
Social c)
Dismal.
Economics laws are . .
a)
Scientific
b)
normal
c)
natural
Economic problems arise because of ..
a)
Of med
b)
Scarcity
c)
dishonesty
Micro economics deals with
a)
Firms only
b)
Small economics unit
c)
banking
Marshal is considered as a economics
a)
Classical
b)
nco-classical
c)
modern
Which statement related to micro economics?
a)
Oil prices are rising in Pakistan
b)
Profit rate is high in textile industry
c)
The firms try more huge profits
d)
The government has failed to constant inhation
Ceteris paribus means ..
a)
Other things equal
b)
All variables are independence
c)
All relationships are inverse.
d)
That no other assumptions are mode
Economic principles are also called.
a)
Economic law
b)
Economic theory
c)
Economic model
d)
All of the a above
Wealth of nation was written by.
a)
Adam Smith
b)
Malthus
c)
Marshall
d)
Newton
Select the correct statement.
a)
Economic affects statement
b)
Economic affects history
c)
Geography affects economic
d)
All of the above are true
Every should study economic.
a)
IS a positive statement
b)
Is a normative statement
c)
Is a true statement
d)
Is nonsense
Utility and usefulness are.
a)
Equal
b)
Different
c)
Similar
d)
Unrelated

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

a
b
b
b
b
b
b
b
c
a

CH # 1
SHORT QUESTIONS
1.

What is meant by Economics?

2.

State the Adam smiths definition of Economics?

3.

Write the Alferd Marchals Definition of Economics?

4.

How Adam smiths definition of Economics is criticized?

5.

Narrate the Robins definition of Economics?

6.

Describe the main point of Robins definition for Economics?

7.

Write the four drawback of Alfard Marchals definition of Economics?

8.

Write the four merits of Robins definition of Economics?

9.

What is meant by scare means?

10.

What is science?

CH # 2
CONSUMER BEHAVIOUR
1.
2.
3.
4.
5.
6.
7.
8.
109.

Rotten eggs are.

a)
Free good
b)
Economic good
c)
Service
d)
Weather
Human wants are.
a)
One thousand
b)
Few
c)
Innumerable
d)
Countable
A consumer is in equilibrium when marginal utilities are.
a)
Minimum
b)
Highest
c)
Equal
d)
Increasing
In economics, one or more person sharing common consumer budget is called.
a)
Business firm
b)
Additional
c)
Organization
d)
Household
When marginal is negative, it must be true that.
a)
The average is negative
b)
The average is decreasing
c)
The total is negative
d)
The total is decreasing
The term marginal in economics means
a)
Unimportant
b)
Additional
c)
The Minimum
d)
Just barely passing
Utility is must closely related to the term.
a)
Useful
b)
Useless
c)
Necessary
d)
Satisfaction
Demand curve slopes downward because of the law of.
a)
Consumer equilibrium
b)
Utility maximisation
c)
Utility minimization
d)
Diminishing marginal uitility
A consumers spending is restricted because of.
a)
Marginal utility
b)
Budget constraint
c)
Demand curve
d)
Utility maximization

10.

Law of substitution is another name for law of.

a)
Law of diminishing MU
b)
Law of equi MU
c)
Law of demand
d)
Satisfaction

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

c
c
d
d
b
d
d
b
d
c

CH # 2
SHORT QUESTIONS
1.

What is meant by wants?

2.

What are the types of wants?

3.

What are the types of economics wants?

4.

State the four characterizes of economics wants?

5.

What is the different between economics and non-economics goods?

6.

What is the different between consumer goods and capital goods?

7.

What is meant utility?

8.

What is the different between Utility and Usefulness?

9.

What is meant by initial utility?

10.

What is meant by positive utility?

CH # 3
SOME METHETICAL AND STATISTICAL CONCEPTS
1.
2.
3.

4.
5.
6.
7.
8.

A statement by one variable affects other variables is.

a)
A quadrant
b)
A variable
c)
An assumption
d)
A functional relationship
The curve in the opposite fig.
a)
Non-linear relationship
b)
Negative slope
y
c)
Inverse relationship
d)
Indirect relationship
The curve in fig.
a)
Negative slope with decreasing absolute values.
b)
Negative slope with increasing absolute values.
c)
Positive slope with decreasing absolute values
d)
Positive slope with increasing absolute values.
Which is the general form of quadratic equation?
a)
x2 x 20 = 0
b)
ax2 + bx + c = 0
c)
x2 x c = 0
d)
None
2
3x = 0 is an equation
a)
Linear
b)
Quadratic
c)
General
d)
First degree
Rohen eggs are.
a)
Free good
c)
economic good
d)
Service
Human want are.
a)
One thousand b)
ten
c)
Innumerable
When M U = 0 T U.

Fig.3
x

a)
Maximum
b)
Minimum
c)
A consumer is in equilibrium when MUS are.
a)
Highest
c)
Equal
c)
Law of substitution to another name for law of.
a)
Diminishing M U
b)
Equi M U

9.
10

Non of them
None
c)

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

d
a
d
b
b
a
c
a
a
b

CH # 3
SHORT QUESTIONS
1.

Define the variable?

MU

2.

What is meant by the constant?

3.

Define parameter?

4.

What is the different between continuous and discontinuous variable?

5.

Explain the different between independent and dependent variable?

6.

Define the function?

7.

What is different between explicit and implicit function?

8.

What is the different between single valued and multi valued function?

9.

What is different between increasing and decreasing function?

10.

Explain the different between equation and identical equation?

CH # 4
DEMAND
1.

2.

Normally the correct answer.

a)
Horizontal
b)
c)
Downward
d)

Vertical
Upward sloping

Law of demand shows relation between.

a)
Income and price of commodity
b)
Price and quantity of commodity.

c)
d)

Supply should not change

Quantity demanded and quantity supplied

3.

This is an assumption of law of demanded.

a)
Price of the commodity should not change
b)
Quantity should not change
c)
Supply should not change
d)
Income of consumer should not change

4.

If quantity demanded is completely unresponsive to change in price, demand is.

a)
Inelastic
b)
Unity elastic
c)
Elastic
d)
Perfectly inelastic

5.

Other things equal. If a good has more substitutes. Its price elasticity of demanded is.
a)
Larger
b)
Smaller
c)
Zero
d)
Unity

6.

Price of product falls by 10 % and its demanded rises by 30 %. The elasticity of

demanded is
a)
10 %
b)
30 % c)
3
d)
1/3

7.

If elasticity of demanded is very low it shows that the commodity is

a)
A necessity
b)
A luxury
c)
Has little importance in total budget
d)
A and C above

8.

The following are causes of shift in demand EXCEPT the one.

a)
Change in income
b)
Change in price
c)
Change in fashion
d)
Change in price of substitutes

9.

When demand is perfectly inelastic, an increase in price will result in

a)
A decrease in total revenue b)
An increase in total revenue
c)
No change in total revenue d)
A decrease in quantity demanded

10.

If demand is unitary elastic, a 25b % increase in price will result in.

a)
A 25 % change in total revenue
b)
No change in quantity demanded
c)
A 1 % decreases quantity demanded
d)
A 25 % decrease in quantity demanded

Key:
1.
2.
3.
4.
5.
6.
7.
8.

c
b
d
d
a
c
a
b

9.
10.

b
d

CH # 4
SHORT QUESTIONS
1.

What is meant by demand?

2.

Define the law of demand?

3.

What is meant by demand function?

4.

State the four assumptions of law of demand?

5.

On which of the following commodity, law of demand does not apply?

6.

What is meant by derived demand?

7.

What is meant by joint demand?

8.

What is meant by composite demand?

9.

Explain the term extension of demand and contraction of demand?

10.

What is meant by the rise and fall of demand?

CH # 5
SUPPLY
1.
2.

Which one is increase function of practice?

a)
Demand
b)
Utility c)
Supply
It describe the law of supply
a)
Supply curve
b)
c)
Supply equation
d)

Supply schedule
All the three

d)

Consumption

3.

Supply curve will shift when

a)
Price falls
b)
c)
Demand shift
d)

4.

Prices rises
Technology changes

An increase in demand would cause supply curve to

a)
Shift to the lift
b)
Shift to the right
c)
Change in slope of supply curve
d)
No effect on supply

5.
a)
c)
6.

If price changes by one % and supply changes by 2 % then supply is.

Elastic
b)
Inelastic
Indeterminate
d)
static

If elasticity of supply is greater then one. Supply curve will be

a)
c)

7.

Horizontal
Passing through origin

b)
d)

Supply curve.
a)
Is vertical in long run
b)
c)
Is same in long and short run

8.
9.
10.

Vertical
Touching y-axis
Is flatter in long run

is increasing function of price

a)
Demand
b)
Utility

c)

Supply

has a negative slope

a)
Demand
b)

c)

Supply

Utility

When supply of a commodity increase without change in price it is called

a)
Fall in supply
b)
Expansion in supply
c)
DownwardRise in supply
d)
No direction

Key:
1.
2.
3.
4.
5.
6.

c
d
d
d
a
d

7.
8.
9.
10.

b
a
a
c

CH # 5
SHORT QUESTIONS
1.

What is meant by supply?

2.

What is meant by stock?

3.

Define supply function?

4.

Define the law of demand?

5.

What is meant by joint supply?

6.

What is meant by composite demand?

7.

State the four assumption of law of supply?

8.

State the four exceptions / limitation of law of supply?

9.

What is meant by extension of supply?

10.

What is meant by contraction of supply?

CH # 6
MARKET EQUILIBRIUM
1.
2.

A decrease in demand causes the equilibrium price to

a)
Rice b)
Fail c)
Remain constant
Which price is below equilibrium level, There will be
a)
Surplus commodity in the market

d)

Indeterminate

b)
the market
c)
Supply curve will shift
d)
Demand curve will shift

Shortage of commodity in

3.

If equilibrium price rises but equilibrium quantity remains unchanged, the cause is
a)
Supply and demand both increase equally
b)
Supply and demand both decrease equality
c)
Supply decreases and demand increases
d)
Supply increases and demand decreases

4.

Price of product in determined in a free market

a)
By demand for the product
b)
By supply of the product
c)
By both demand and supply
d)
By the government

5.

An increases in the price of the mutton provides information which

a)
Tells consumers to buy more mutton
b)
Tells consumers to buy more chicken
c)
Tells producers to produce more mutton
d)
Provides no information

6.

In market equilibrium, supply is vertical downward sloping demand curve shifts to

the right. Then
a)
Price will fall
b)
Price remains same
c)
Price will rise
d)
Quantity rises

7.

Equilibrium
a)
Is a state that can never be achieved in economics.
b)
Is an important idea for predicting economic changes
c)
Is a stable condition
d)
Is an unstable condition

8.

Ten rupees is the equilibrium price for good Z. if govt, fixes prices at Rs.5. then is
a)
A shortage
b)
A surplus
c)
Excess supply
d)
Loss

9.

A rice in supply and demand in equal proportion will result in.

a)
Increase in equilibrium price and decrease in equilibrium quantity
b)
Decrease in equilibrium price and increase in equilibrium quantity
c)
No change in the equilibrium prices and increase in equilibrium quantity
d)
Increase in equilibrium price and no change in equilibrium quantity

10.

A decrease in demand causes the equilibrium prices to

a)
Rice b)
Tall c)
demand

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

b
b
c
c
a
c
b
a
c
b

CH # 6
SHORT QUESTIONS
1.

Define Market?

2.

Narrate the different elements of market?

3.
market?

State the four factors that affect the size of

4.
period?

How many types of market according to time

5.

What is meant by day and day market?

6.

What is meant by short period market?

7.

What is meant by Long period market?

8.

Define the Local market?

9.

Define the Regional market?

10.

Define the National Market?

CH # 7
PRODUCTION AND PRODUCTION FUNCTI0N
1.

Labour is hirable but you cannot hire.

a)
Capital
b)
Land c)

Manager

2.

The three broad type of productive resources are.

a)
Money, profit and interest
b)
Capital, Labour and natural resources
c)
Bond, stock shares and deposits
d)
Technology, human and markets

3.

Land means

d)

Entrepreneur

a)
c)

Sea
Natural forests

b)
d)

Surface of earth
All natural resources

4.

Economic development of a country requires

a)
Skilled labour
b)
diplomacy
c)
Abundant natural resources d)
A and c of above

5.

Productivity of land can be raised by

a)
Extensive cultivation
b)
c)
Better marking
d)

Intensive cultivation
A and B of above

Land
a)
Is a free gift of nature
c)
Is not hirable

Lacks geographical mobility

A and b of above

6.

b)
d)

7.

Which of the following is not an input

a)
Labour
b)
Entrepreneurship
c)
Natural resources
d)
production

8.

Which of the following input factor takes risk, innovates and coordinates
a)
Capital
b)
Labour
c)
Productivity
d)
Entrepreneur

9.

Which of the following is correct with respect to resources

a)
Money is a capital good
b)
Human skills are a labour input
c)
Management and administration are part of the labour input
d)
Natural resources include human input

10.

The transformation of resources into economic goods and services is

a)
Technical efficiency
b)
Input
c)
Production
d)
Increasing returns

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

d
b
c
d
b
d
d
d
b
c

CH # 7
SHORT QUESTIONS
1.

What is meant by production?

2.

State factors of production?

3.

What is meant by Land?

4.

What is meant by labour?

5.

What is meant by capital?

6.

What is meant by organization?

7.

What is meant by production function?

8.

What is meant by inputs?

9.

What is meant by output?

10.

What is different between input and output?

CH # 8
HUMAN RESOURCES
1.

According of Malthus, population increased by progression of kind

a)
Systematic
b)
Arithmetic
c)
Geometric
d)
Automatic

2.

Productivity of labour can be increased by

a)
Raising minimum wages
b)
c)
Increasing skills of workers d)

Raising average wages

Punching absentee workers

3.

All labour is
a)
Homogenous
c)
Lazy

4.

b)
d)

Heterogeneous
Intelligent

Mobility of labour
a)
Increases efficiency of labour
c)
Increase division of labour

b)
d)

Spoil labour
A and C of above

5.

Unemployment due to mechanization of organization is

a)
Seasonal
b)
Structural
c)
Industrial
d)
Personal

6.

In Pakistan rate of labour participation is

a)
10 %
b)
20 %
c)
30 %
d)
40 %

7.

According to census 1998. Pakistans total population is

a)
13.1
b)
15.1
c)
17.1 Corves d)
None

8.
a)
c)
9.

Optimum Theory of population was given by

Malthus
b)
Cannon
Keynes
d)
None

Average age of Pakistan is

a)
52
b)
62

10.

c)

72

d)

58 years

Unemployment due to mechanization of agricullate

a)
Seasonal
b)
Structural
c)
Industrial

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.

c
a
b
a
a
c
b
a
d

d)

None

10.

CH # 8
SHORT QUESTIONS
1.

State the four characteristics of land?

2.

What is meant by extensive cultivation?

3.

What is meant by intensive cultivation?

4.

State the factors affecting the productivity of land?

5.

State the four characteristics of labour?

6.

State the four factors affecting the efficiency of productivity of labour?

7.

What is meant by mobility of labour?

8.

What is meant by occupational mobility of labour?

9.

What is meant by horizontal mobility of labour?

10.

What is meant by vertical mobility of labour?

CH # 9
CAPITAL RESOURCES
1.

2.

Which of the following is capital?

a)
Toy of a child
c)
Calculator of the student

b)
d)

Plough of the farmer

Novel book in the library

Which is true?
a)
Capital depreciates
c)
Capital is not hireable

b)
d)

Capital is primary factor of production

Human capital is real capital

3.

To the economist, investment refers to

a)
Sale of real estate
b)
c)
Purchase of a prize bond
d)

4.

A factory is an example of
a)
Capital
b)
c)
Natural

Creation of new capital

Decrease in inventories

Scarcity
d)
None of the above

5.

In an economy government constructed a new water reservoir for the purpose of

irrigation, this might be taken as
a)
Increase in supply of capita b)
Increase in supply of land
c)
Increase in supply of land and supply of capital
d)
None of the above

6.

Which of the following is not capital as economists use the term?

a)
An office building
b)
machinery in a factory
c)
An industrial robot d)
Money

Key:
1.
2.
3.
4.
5.
6.

b
a
b
a
a
d

CH # 9
SHORT QUESTIONS

1.

What is meant by capital?

2.

What is different between capital and land?

3.

What is the difference between capital and wealth?

4.

What is the difference between capital and money?

5.

What is difference between income and capital?

6.

What is meant by floating capital?

7.

What is meant by working capital?

8.

What is meant by fixed capital?

9.

What is meant by national capital?

10.

What is meant by foreign capital?

CH # 10
ORGANIZATION
1.

Those who inverts in joint stock companies are called

a)
Partners
b)
Shareholders
c)
Members
d)
Associates

2.

Limited liability is one of the advantages of

a)
Partnership
b)
Sole proprietor
c)
Join stock company d)
Cooperative society

3.

He prepares the initial plan of the business

a)
Capitalist
b)
Manager
c)
Entreporation
d)
Officer

4.

It is must suitable for large scale business

a)
Proprietorship
b)
Partnership
c)
Corporation
d)
Cooperative society

5.

A public limited company is run by

a)
Board of governors
b)
c)
Board of advisors
d)

Board of managers
Board of directors

6.

They can expend their business by selling shares in the stock market
a)
Proprietor of a business
b)
Partners of the business
c)
Joint stock Company
d)
Industrial Cooperative societies

7.

Reward of which factor of production is not pre-determined?

a)
Labour
b)
Land
c)
Capital
d)
Organization

Key:
1.
2.
3.
4.
5.
6.
7.

b
c
c
d
c
d
c

CH # 10
SHORT QUESTIONS
1.

Define the terms of organization?

2.

What is meant by partnership?

3.

What is meant by sleeping partner?

4.

What is meant active partner?

5.

Write the four merits of partnership?

6.

State the four demerits of partnership?

7.

What is meant by joint stock company?

8.

What are the types of joint stock company?

9.

What is meant by private limited company?

10.

What is meant by public limited company?

CH # 11
SCAL OF PRODUCTION AND LAW OF RETURNS
1.
a)
c)

Negative in the short run imply that

Average product is negative
Marginal is negative

b)
d)

total product is negative

total cost is failing

2.

Economies of scale
a)
Occur when an increase in input causes a less than proportional input
b)
Suggest that firms marginal cost curve lies above its average cost
c)
Suggest that firms marginal cost curve is declining

3.

In law of diminishing returns at least one factor

a)
Must be constant
b)
Must be owned by the firm
c)
Must be purchasable d)
must be deficient

4.

Economies of purchasable
a)
Temporary and permanent
c)
Managerial and industrial

b)

Internal and external

d)
Natural and artificial

5.

Laws of return apply to firms working in

a)
Perfect competition b)
Monopoly
c)
Small firm
d)
All kinds of market situations

6.

During short period, diminishing returns may follow because

a)
Quantity of labour is fixed b)
Quantity is fixed
c)
Quantity of capital is fixed d)
Quantity of any one factor is fixed

7.
rue?

Which of the following sayings describes diminishing marginal returns in the short
a)
b)
c)
d)

8.

When the cot is away, the mouse will play

Too many cooks spoil the broth
A rolling stone gathers no moss
A stitch in time saves nine

When a firm using a fixed amount of land and capital takes on more workers , it
finds that marginal product (MP ) of labour falls but the average product (AP ) labour
rises. This can be explained by the factor that
a)
The MP of labour is greater than AP of labour
b)
The additional workers are moves in opposite in directions
c)
MP and AP always move in opposite directions

9.

Which of the following is example of external economies of scale?

a)
Discount on purchases of raw materials
b)
Technical progress leads to development of machines at low price
c)
Hiring of specialized staff due to increase in scale of production
d)
A firm starts producing by products

10.

The maximum point on TP curve is at quantity of labour where

a)
Average physical product of labour is equal to 1
b)
MPP of labour is at its maximum
c)
Curves of APP and MPP of labour interest
d)
MPP of labour is zero

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

c
c
a
b
d
d
b
b
b
b

CH # 11
SHORT QUESTIONS
1.

What is meant by scale of production?

2.

What is meant by small scale of production?

3.

What is meant by large scale of production?

4.

State the different internal economies of large scale of production?

5.

State the four external economies of large scale of production?

6.

State the four merits of small scale of production?

7.

State the four demerits of small scale of production?

8.

State the four merits of large scale of production?

9.

State the four demerits of large scale of production?

10.

Define the law of returns?

CH # 12
MARKET NAD REVENUE CURVES
1.

Which of the following is one of the assumptions of perfect competition?

a)
Few buyers and few sellers
b)
Many buyers and few sellers
c)
Many buyers and many sellers
d)
All sellers and buyers are honest

2.

A firm under perfect competition is

a)
Price maker
b)
price break
c)
Price taker
d)
Price shaker

3.

Which of the following markets comes closest to perfect market

a)
Wheat market
b)
Cigarette market
c)
Cold drinks market d)
Stock market

4.

This kind of market is undesirable

a)
General market
c)
Local market

5.

b)
d)

Specialized
National market

Which is a condition for existence of monopoly?

a)
Big size
b)
c)
Absence of government taxes
d)

Identical product
No close substitute

6.

In case of monopoly
a)
Marginal revenue curve always slopes upward
b)
Total revenue curve always slope upward
c)
Marginal revenue is always equal to average revenue
d)
Marginal revenue is always less than average revenue

7.

The major difference between perfect competition and monopolistic is

a)
Number of firms
b)
Differentiate product
c)
Rate of profit
d)
Free exit and entry

8.

Marginal revenue is always less than price at all level of output in

a)
Perfect competition
b)
Monopoly
c)
Both A and B
d)
None of the above

9.

Which of the following is not a characteristic of perfect competition?

a)
Free entry and exit of the firms
b)
The demand curve of a firm is horizontal
c)
The marginal revenue curve is horizontal
d)
An individual firm can influence the price

10.

When marginal revenue is zero, total revenue

a)
Maximum
b)
Minimum
c)
Zero
d)
Decreasing

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

c
c
a
e
d
d
b
b
d
a

CH # 12
SHORT QUESTIONS
1.
and its

Explain the relationship between the elasticity of demand of a monopolist firm

marginal revenue?

2.

Explain the revenue curve under monopoly?

3.

Under perfect competition, explain the revenue of the firm?

4.

What is meant by marginal revenue?

5.

What is meant by the average revenue of the firm?

6.

What is mean by total revenue?

7.

Explain the firms implicit cost?

8.

Explain the firms explain cost?

9.

What is meant by opportunity cost?

10.

Explain the relationship between long run average cost and long run marginal cost?

CH # 13
COST AND COST CURVES
1.

The shape of rectangular hyperbola is made by

a)
MC
b)
AFC
c)

2.

As out put increases

a)
MC curve firstly falls then rises
b)
MC firstly rises than falls
c)
MC cautiously rises

3.

Unit cost is another name for

a)
MC
b)
AVC
c)
ATC
d)
AFC

4.

All input can be varied

a)
Short run
b)
c)
Both periods d)

5.

6.

7.

8.

MC is given by
a)
Slope of TFC
c)
Slope of AC

AVC

Long run
Non of the period
b)

Slope of TC

TC
a)
c)

Starts from origin

Is parallel to y-axis

b)

Does not starts from origin

TVC
a)
c)

Starts from origin

Starts from x-axis

b)

Does not starts from origin

TC
a)
c)

Rises continuously
Is horizontal

b)

Falls after reaching a maximum

9.

All the following are U-shaped except

a)
AVC
b)
AFC
c)
AC
d)
MC

10.

The cost which a firm incurs for purchasing or hiring factors is called
a)
Implicit
b)
Explicit
c)
Real
d)
Nominal

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

b
a
c
b
b
b
a
a
b
b

CH # 13
SHORT QUESTIONS
1.

What is meant by cost of production?

2.

What is meant by short run cost?

3.

What by long run cost?

4.

What is meant by total variable cost?

5.

What is meant by total fixed cost?

6.

What is meant by total cost?

7.

What is meant by average fixed cost?

8.

What is meant by average variable cost?

9.

What is meant by average cost (AC)?

10.

What is meant by marginal cost?

CH # 14
MAXIMIZATION OF PROFIT
1.

The necessary condition for equilibrium position of a firm is

a)
MC > MR
b)
MC > price
c)
MC is falling
d)
MC = AC

2.

Profit is maximum when

a)
Slope of TR and TC is maximum
b)
Distance between AR and AC is maximum
c)
Distance between MR and MC is maximum

3.

Profit is maximum when

a)
Slope of MC and MR is the same
b)
Slope of TC and TR is the same
c)
Slope AC and AR is the same

4.

Profit is maximum when

a)
TC and TR curves are parallel
b)
MC and MR curves are parallel
c)
AC and AR curves are parallel

5.

At the point of equilibrium of firm

a)
MC curve must be rising
b)
MC curves must be failing
c)
MR curve must be rising

6.

Normal profit is
a)
Part of total cost
b)
c)
Total revenue minus explicit cost

Part of economic profit

7.

Economic profit is
a)
Part of total cost
b)
Total revenue minus total cost
c)
Total revenue minus explicit cost
d)
Total variable cost minus total fixed cost

8.

A firm earns economic profit when total profit exceeds

a)
Normal profit
b)
Implicit costs
c)
Explicit costs
d)
Variable costs

9.

The basic goal of a firm is to

a)
Maximize revenue
c)
Maximize profit

10.

b)
d)

Maximize welfare of its employees

Maximize out put

A firms MR exceed its MC, maximum profit rule requires that firm to
a)
Increase in out put in both profit and imperfect competition
b)
Increase in perfect competition but not necessarily in imp

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

e
a
b
a
a
a
b
b
c
a

CH # 14
SHORT QUESTIONS
1.

State the conditions of perfect competition?

2.

Where a perfect competition equilibrium, in short run?

3.

How price and out put is determined under perfect competition I short run?
Construct the diagram?

4.

Construct a diagram, showing the equilibrium of firm attained by TC and TC

Method?

5.

State the conditions of firms equilibrium?

6.

Under perfect competition, in short run, construct a diagram showing the

abnormal profit?

7.

Construct a diagram, showing the firms normal profit, under perfect competition,
in short run?

8.

Construct a diagram, showing the loss condition of firm, under perfect

competition, in short run?

9.

Construct a diagram, showing the firms shut down situation under perfect
competition, in short run?

10.

Under perfect competition. Show the long run equilibrium of the firm with the
help of diagram?

CH # 15
EQUILIBRIUM FIRM UNDER PERFECT
COMPOTITION AND MONOPOLY
1.

A firm decides to exit the industry when

a)
AC starts rising
b)
c)
Price is raising
d)

MC starts rising
TC starts rising

2.

Profit is maximum when

a)
TC and TR curves are parallel
b)
MC and MR curves are parallel
c)
TC and TR curves cross each other
d)
AC and AR curves cross each other

3.

In monopoly and perfect competition the cost curves are

a)
Same
b)
Different
c)

4.

5.

6.

Opposite

Normal profit is called normal because

a)
Its neither very high nor very low
b)
It is minimum acceptable to the producer
c)
It is minimum which buyer wants to pay
d)
It is the maximum allowed by govt
If a firm shuts down temporarily, it will incur loss equal to
a)
AFC
b)
AVC
c)
TFC
d)
TVC
Under perfect competition
a)
AC = AVC
c)
AR = MC

b)
d)

AR = AC
AR= MR

7.

The necessary condition for equilibrium position of a firm is

a)
MR > MC
b)
MC > price
c)
MC = MR
d)
MC = AC

8.

When a competitive firm achieves long run equilibrium then

a)
P = MC
b)
MR = MC
c)
P = ATC
d)
All of the above

9.

The most efficient Scale of production of a firm is where

a)
LAC is minimum
b)
SAC is minimum
c)
LMC is minimum
d)
SMC is minimum

10.

A firm should shut down in the short run if it is not covering its
a)
Variable cost
b)
Fixed cost

c)

Total cost

d)

Explain cost

Key:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

c
a
a
b
c
d
c
d
a
a

CH # 15
SHORT QUESTIONS
1.

Define monopoly?

2.

Explain the demand curve and marginal revenue curve of the firm?

3.

Contract the diagram of average revenue and marginal revenue under monopoly?

4.

Where does a monopolist firm attain equilibrium according to total cost, total
revenue method?

5.

State the condition of equilibrium of a monopolist firm?

6.

State the relationship between the elasticity of demand of a monopolist firm and
its marginal revenue?

7.

Condition a diagram, showing the abnormal profit a monopolist, in short run?

8.

Construct a diagram, showing the equilibrium of monopolist firm in long run?

9.
10.

Discuses evils of monopoly?

Give three examples from Pakistan economy in which you find total or partial
monopoly?