COURSE TITLE: PRINCIPLES OF MICROECONOMICS

COURSE CODE: ECN 211

SEMESTER: FIRST SEMESTER EXAMINATION

SESSION: 2010/2011 SESSION

TIME: 1HR 30MINUTES

1. Which of the following is not a technical relationship connecting the

factor inputs and output?

a) Cost function

b) Production function c) Revenue function D) *A and C only

2. Which of these isoquants assume perfect substitutability of factors of

production?

A)*Linear b) Kinked c) Input-Output d) Smooth complex

3. In principle, the marginal product of a factor may assume any value,

positive, zero, negative.

A) *Agree b) Disagree c) Not realistic d) False

4. The following attributes describe the traditional isoquant,

except______

a) Negative slope B) *Second derivative is negative c) Convex to

the origin d) represents dependency on preference

5. Given the Cobb Douglas production function, where "v" is the degree

of homogeneity, the production function is linear homogeneity if _____

A) *v=1 b) v>1 c) v<0 d) v=0

6. For a homogeneous production function with constant or decreasing

returns to scale everywhere on the production surface, productivity of the

variable factor will be ____

a) Constant b) *Rising C) Diminishing d) Variable

7. Which of the following is not a reward of factor of production?

a) Wages B) *Money c) Rent d) Profit

8. The slope of the isocost line is ___

a) r/w B) *-(w/r) c) w/r d) -(r/w)

9. given that TC=a+b1q+b2q2, what is the average fixed cost?

a) 1/q b) a c) a/q d) *FC/q

10. What is the marginal cost of the cost function given in question 9

above?
a) b1 q b) ∆TC/∆q c) *b1+2b2 q d) All of the above

11. Which of the following cost is envelope in nature?

a) Average cost B) *Long run average cost c) Long run variable

cost d) Long run marginal cost

12. The U-shape of the average cost and marginal cost reflects the

operation of _____

a) Labor b) Capital C) *Law of variable proportions d) Law of

economies of scale

13. The fixed costs of underground bread, Akoka may include the

following, except_____

a) Salaries of administrative staff b) Depreciation of plants and oven

c) Expenses for shop depreciation D) *Cost of direct labor

14. Should Unilag ventures, producer of Unilag water, employ only one

variable input, its marginal cost is equal to _______

a) MC=q b) MC=(∆TC/∆q) C) *MC=(w/MPL ) d) MC=(∆TP/∆L)

15. Which of the following does not represent the relationship between

MC, AVC and ATC?

A) *AVC tilts towards ATC when it is falling b) MC cuts ATC from

below. c) AVC is below ATC. d) AVC and ATC are U-shaped

16. A situation in which output can be doubled for less than a doubling of

cost is known as _____

A) *Economies of scale b) Decreasing returns to scale c)

Diseconomies of scale d) Law of variable proportion

17. ________ shows the various combination of different outputs that can

be produced with a given set of inputs

A) *Isoquant b) Production transformation curve c) Indifference

curve d) Budget line

18. The maximum money a risk averse person is willing to pay in order to

eliminate risk is known as _______

a) Risk neutral fee b) Risk averse fee C) *Risk premium d)

Risk-loving fee

19. When a consumer cares about the probability of the first outcome only,

his/her preference is ________

a) Complete b) *Incomplete c) Dependent d) Independent

20. Von Neumann and Morgenstern argue that a rational consumer

chooses the alternative with the ________

a) Highest expected value b) Lowest expected value c) *Highest

expected utility d) Lowest expected utility

21. A young graduate is offered a commission-based job. He would be

paid #10,000 if he attains the set target, else he gets #4,500. What is the

expected value of this job?

a) #7,000 b) #9,425 c) #7,250 d) *#7,500

22. _______ refers to the value of money which when received for certain

would make one indifferent to holding a lottery.

a) Risk premium b) *Certainty equivalent c) Transitivity d) Wealth

23. For a rational consumer, the equality MUx/Px = MUy/Py is called

the______

a) Normal equation *B) Equi-marginal principle c) Ratio of utility to

per naira spent d) Equilibrium

24. When the real income rises, the quantity demanded of a _______

good falls.

a) Public b) Private c) Normal D) *Inferior

25. The slope of the indifference curve is

a) Marginal indifference curve B) *Marginal rate of substitution

between two goods c) Marginal efficiency of capital d) Marginal

efficiency of labor

26. Given a gamble in which you win #30 if your coin comes up heads,

but you'll lose #30 if tail. What is the expected utility of this gamble?

a) 40 b) 70 C) *0 d) -5

27. In a very competitive market, ______

A) *Firms make no profit above normal returns and they produce at the

lowest possible cost. b) Firms make very high profits, because

competition makes firms profitable. c) Firms don't necessarily produce

at minimum cost, because competition is costly. d) The price of goods is

above average cost, because consumers also compete to buy goods,

raising the price above cost.

28. In a monopoly with only one producer in the industry,

a) The firm can set whatever price and quantity it wants b) The firm

maximizes profit where its average cost equals the extra revenue from

selling one more unit C) *The firm sets the quantity where its extra
profit just equals its extra cost d) The profit maximizing quantity is less

than the revenue maximizing quantity if the costs are positive.

29. If you own your business, your real gain is ______

a) The revenue minus what you pay for costs b) The total revenue

minus what you could sell your own resources for C) *The revenue

minus what you pay for costs minus the best return elsewhere for your

labor and resources d) The revenue minus what you pay for costs plus

the value of your own resources

30. An employer hires the amount of labor at the level where

A) *The wage equals the extra amount the worker adds to production b)

The wage equals the average amount the worker produces c) The total

wages of all workers is greater than what they all add to production d)

The productivity of the last worker hired is the maximum possible

31. The smallest quantity of output at which long run average cost is at a

minimum is a firm's ________

a) Efficient output point b) Maximum efficient scale C) *Minimum

efficient scale d) Profit maximizing output point

32. In perfect competition, a firm maximizes its economic profit for it

produces the output at which ________

A) *Price equals marginal cost b) Economic profit equals zero in the

short run c) Total revenue equals total cost d) Price equals average

cost

33. If firms in a competitive industry are making _________ then there is

________ for firms to _________ the industry.

A) *Positive economic profits; an incentive; enter b) Zero economic

profits; an incentive; exit c) Economic losses; no incentive; exit d)

Normal profits; an incentive; enter

34. Suppose a firm starts with a single price and then switches to a price

discriminating scheme, the firm will _________ the price for the group of

customers with the more elastic and _______ the price for the group with

less elastic demand.

A) *Lower, raise b) Raise, lower c) Raise, raise d) Lower, lower

35. A monopoly is inefficient because they get profit at the expense of

consumers

a) True *B) *False c) Uncertain d) None of the above

36. To show the dead weight loss from monopoly, we compare the
monopoly outcomes to what would happen under _________

a) Production with substitution b) An elastic demand C) *A perfectly

competitive market d) A monopolistic market

37. A patent increases the incentive to develop a new product because it

_________ the price of the product and this generate profit to cover a

firm's cost of _______

a) Increases, collaboration B) *Increases, development c) Increases,

competition d) Decreases, monopolization

38. A long run equilibrium in a monopolistic competitive market satisfies

the following two conditions:

a) MR=MC and AVC=P b) MR=MC and FC=P C) *MR=MC and

AC=P d) AC=MR and FC=P

39. D'banj advertised for Glo company, as a result of the advertisement,

Glo recharge card sales will __________ because advertisement promotes

_________

a) Decrease, limitation b) Increase, price competition c) Decrease,

sales D) *Increase, profit

40. The trade off with enter is that an increase in the number of firms
leads to higher _________, but great ____________

a) Profit, limitation b) Average product cost, variety c)

Competition, monopoly. D) *Varieties, production

41. In Nash equilibrium, each player is doing the best he or she can, given

A) *The action of the other player b) The level of competition c) The

number of player d) All of the above

42. Oligopoly market structure is well known for these two strategies

________

A) *Cut price and increase output b) Advertisement and branding c)

Price discrimination and supernormal product d) None of the above

43. A firm that is operating an unprofitable business will be advised to

shut down if its _______

a) TR exceed MC b) TR exceed AC c) TR exceed P D) *None of

the above

44. In a perfect competitive market, the demand curve measures the

________ if ________ exist and the market supply curve measures the

_________ if _________ exist.

A) *Marginal social benefit; no external benefits; marginal social cost; no

external costs b) Firms' marginal benefit; external benefits; consumers'

marginal cost; external costs c) Consumers' margin benefits; external

benefits; firms' marginal cost; external costs d) Margin social benefit;

no external costs; marginal social cost; no external benefit

45. To deter an entry, a monopolist can simply threaten that if a second

firm enters the market, it will reduce its price below the average cost.

A) *True b) False c) Uncertain d) None of the above

46. When a student is willing to sell a room space to a student who lives

on campus at a lower price than it is willing to sell the same room to a

student who lives a block away from the campus, the student is _______

a) incurring a loss on on-campus sales b) Unfair C) *Practicing price

discrimination d) Eliminating all competition

47. Consumer surplus ______

a) Plus producer surplus equals the gains from trade B) *Is maximized

when the market outcome is efficient c) equals total revenue minus

marginal cost d) Equals total revenue minus opportunity cost

48. The granting of a patent or copyright ______

A) *Creates a legal monopoly b) Creates a natural monopoly c)

Reduces prices d) Stimulated competition in the arts

49. Deadweight loss measures the inefficiency of the market as the loss of

_________

a) Consumer surplus only b) Consumer surplus minus producer surplus.

C) *Consumer surplus and producer surplus d) Producer surplus only

50. When the demand for a good or service limits the quantity that can be

sold to an output at which the firm experiences economies of scale, the

________

A) *Firm is a natural monopoly b) Firm is a single-price monopoly c)

Good that the industry produces has close substitutes d) Firms are

protected from competition by a legal barrier

51. Monopolistic competition is a market in which ______ firms produce

________ goods and services

a) Many; identical b) Few; differentiated C) *Many; differentiated d)

Few; identical

52. Fanta and sprite are examples of ________

A) *Substitutes b) Identical products c) Complements d)

Differentiated products
53. A monopolistic competitive firm can increase its economic profit by

_______

a) Advertising less b) Eliminating excess capacity c) Inviting a

celebrity D) *Developing new products

54. Selling costs of a monopolistic competitive firm are _______

a) Greater than a monopoly but less than a competitive firm b) The

same as a competitive firm c) Greater than a competitive firm or a

monopoly d) *The same as a monopoly

55. When each player takes the best possible action, given the action of

his opponent, _________

a) Both players deny b) A competitive equilibrium is reached c) A

*Nash equilibrium is reached d) One player denies and one player

confesses

56. In the long run, the monopolistic competitive firms ________

a) Incur an economic loss and require more capacity b) Make an

economic profit and have excess capacity ) *Make a normal profit and

require more capacity

57. The nature and scope of economics strongly focus on ________

a) What economics is all about b) Whether economics is a study of

wealth or human behavior c) Whether economics is a positive or a

normative science D) *All of the above

58. Economic choices are necessary because ______

A) *Resources are scarce b) Resources are abundant c) Human beings

are difficult to please d) Price mechanism favor them

59. There would be no economic problem if:

a) We were dealing with an economy consisting of one man on a desert

island b) A command economy had been in action c) A typical barter

system existed. D) *We were dealing with societies whose want could

be more than fully satisfied by the resources at their command

60. The classical economists were the earliest generation if economists

A) *True b) False c) Uncertain

61. The prime focus of economics is the problem of allocation of

resources that are limited in supply in relation to numerous human wants

A) *True b) False c) Undecided

62. Economics is a social science because

a) It can construct social experimental models and verify validity b) It

studies the problem of scarcity c) Its methodology established observed

patterns of economic behavior D) *Only (a) and (c) above are correct

63. One of these is an intangible good

a) Motor vehicle b) Dresses C) *Health d) Hospital building

64. Economic goods are termed "Scarce goods" because they

a) Are of high quality b) Are not productive in sufficient quantities to

satisfy the effective demands for them c) Are of primary importance in

satisfying the needs of a society D) *Are not available in sufficient

quantities to satisfy the effective demands for them

65. If a good is considered inferior, then

a) As its price falls, more of it will be purchased B) *As the consumer's

income increases, less of it will be purchased c) As its price rises, less

of it will be purchased d) If price of income changes no change will be

induced in its consumption

66. The concept of opportunity cost emphasizes the problem of

a) Scale of preference B) *Choice c) Factors of production d)

Scarcity

67. The basic economic problems do not include:

a) Scarcity b) Choice C) *Factors of production d) Scale of

preference

68. A student had #50 with which to buy a ruler costing #20 and an

exercise book costing #30. If he buys the exercise book, his opportunity

cost is

A) *The ruler b) The exercise book c) #30 d) #20

69. Which of the following had a positive income elasticity of demand?

a) An inferior good B) *A normal good c) A luxury good d) The

budget constraint

70. Which of the following has a negative income elasticity of demand?

_______

A) *An inferior good b) Normal good c) Luxury good d) Intangible

good

71. Micro economic analysis focuses on production decisions, the market

behavior and prices. Thus, microeconomics is sometimes referred to as

______

a) Economic theory b) Price mechanism C) *Price theory d)

Welfare theory

72. Which of the following is not a feature of a centrally planned

economy?

A) *Priorities in agricultural production set by agricultural producers b)

State direction and ownership of the economy c) State ownership of

means of production d) Limited operations of the market mechanism

73. A skeletal representation of reality used to simplify something which

seems complex is called

a) Methodology b) System c) Variable d) *Model

74. Economics is founded on the principle that:

a) Human needs are satisfiable b) Mixed economy is superior to

capitalist economy c) Human needs are greater than the material

resources for satisfying these needs d) creates the necessity of making

economic choices with respect to production, consumption, growth and

distribution (exchange) e) *Only (c) and (d) are correct

75. Normative statements are _______

a) *Disagreements b) Testable c) Never testable d) None of the

above

76. Many positive statements are testable and disagreements over them

are appropriately handled by an appeal to the facts

A) *True b) False c) Uncertain d) None

77. An economic problem arises when

a) Manufactured goods are short supply b) Money is in short supply c)

Buyers are many or sellers are few d) Scarcity and choice are involved

e) *All of the above

78. Air is essential to life but commands no price! Diamond is not

essential to life but commands high price! This is a paradox of

a) Thrift B) *Value c) Abundance d) Scarcity

79. The best method of production in an under populated country is

a) Labor-intensive b) Labor-extensive c) Land-intensive D)

*Capital-intensive

80. The quantity demanded of any good depends on

a) The price of other commodities B) *Whether the commodity is cheap

or costly c) The nature of the commodity d) Whether it has a close

substitute

81. The concept of price system also means

a) Price mechanism b) The process by which the monetary value of a

commodity, service or factor of production is determined by the interplay

of the forces of supply and demand c) The systems allocating scarce

resources among alternative uses d) *All of the above

82. The concept of "invisible hand" was developed by

a) Prof. Lionel Robbins b) Alfred Marshal c) M.L Jhingan d)

*Adam Smith

83. Two goods A and B are said to be complementary when

A) *A fall in the price A raises the demand for B b) A fall in the price A

causes a fall in the demand for B c) A fall in the price A does not affect

the demand for B d) The two goods are competitive

84. If two commodities are good substitutes e.g Butter and Margarine, an

increase in the demand for one will reduce the demand for the other. This

type of demand is called

a) Composite demand b) Elastic demand c) Derived demand. D)

*Competitive demand

85. If a commodity has many substitutes, it is most likely that

a) The demand curve is fairly inelastic B) *The demand curve is fairly

elastic c) The demand curve is parallel to the quantity axis d) The

demand curve is positively sloped

86. If income rises from #300 to #350 and the amount spent on good P

falls from #40 to #30, then good P is

a) An income elastic demand b) A normal good C) *An inferior good

d) Demand elastic good

87. The demand for a commodity is said to be a derived demand when the

commodity

a) And another have joint demand B) *Is demanded because for

different purposes d) Has inelastic demand

88. Production is said to be complete when

A) *Goods and services reach the consumers b) Prices of goods or

services are determined c) Goods are sold to the wholesalers d) Goods

are well packaged

89. The price of a good rises from #6 to #9 and the quantity demanded

falls from 205 to 200units. Over this price range, the price elasticity of

this good is _______

a) Perfectly inelastic b) Fairly inelastic c) *Perfectly elastic d)

Fairly elastic

90. Externalities lead to ________

a) Public awareness b) Excessive demand c) Market success D)

*Market failures

91. The following induces negative externalities, except _____

A) *Education b) Litter c) Pollution d) All of the above

92. The demand curve for a normal good will shift to the left if

_________

a) The incomes of consumers rise B) *The price of the goods rises c)

The prices of complementary goods rise d) Advertising expenditure on

complementary goods rise

93. When there is excess demand, all things being equal, market price

will _______

A) *Rise b) Reduce c) Remain static d) Uncertain

94. The following are the determinants of quantity demanded of any

commodity, except _______

a) Price of the commodity under consideration b) Prices of other

commodities c) The size of the household's income and the household's

taste and fashion d) *Level of technology

95. The following are alternative theories or approaches of consumer

behavior, except ________

a) The marginal utility theory b) The indifference curve theory c)

The revealed preference theory d)*Consumption theory

96. In the case of excessive consumption of alcohol, disutility can be

practically noticeable in the form of ________

a) Vomiting b) Loss of consciousness c) Irrational behavior and red

eye sight d) Rapid urinating effects e) *All of the above

97. Which of the following is generally referred to as Gossen's first law?

a) The marginal utility b) The revealed law C) *The law of

diminishing marginal utility d) Herons first law

98. A budget line is often also called

a) Isocost line b) Consumer line c) *Income path D) An equal

revenue line

99. Given two commodities, a consumer achieves equilibrium when,

_____

a) *MUa/Pa = Pb/MUb b) Pa/MUb = MUa/Pb c) MUa/Pa = MUa/Pb

d) Only (c) and (d) are correct

100. If the income of the consumer increases, his budget line will shift

_____

a) To the left B) *Upward to the right c) Will pivot upward d) None

of the above
2011/2012

1. Suppose the price of apples increases by 5% and the income elasticity

for apples is 0.5. What will happen to the quantity of apples demanded?

a) Increase b) Decrease c) Constant d) Decrease and later increase

E) Increase and later decrease

2. Given that the price of flour reduces by 1% and the income elasticity

for flour is 0.36. What will happen to the quantity of flour demanded?

a) Constant b) Increase c) Decrease d) Uncertain e) Increase and

later decrease

3. Two factors of production, say A and B, have the same price. The

least-cost combination of A and B for producing a given output will be at

the point where the isoquant had a slope of minus 1

a) True b) False c) Uncertain d) None of the above

4. Assume only two factors A and B are used to produce output X. A

decrease in the price of A leads to less of B being used.

A) True b) False c) Uncertain d) None of the above

5. When two commodities are substitute for each other, the cross
elasticity of demand between them is:

a) Negative B) Positive c) Uncertain d) None of the above

6. When total utility increases, marginal utility is:

a) Negative and increase b) Negative and declining C) Positive and

declining d) Zero e) All of the above

7. All points on a consumer's demand curve represents:

A) Points of utility maximization for the consumer b) Do not represent

points of utility maximization c) Uncertain d) Addition information

required e) All of the above

8. At equilibrium, the slope of the indifference curve is:

A) Equal to the slope of the budget line b) Greater than the slope of the

budget line c) Smaller than the slope of the budget line d) Either equal,

larger or smaller than the slope of the budget line e) None

9. The line joining points of consumer equilibrium resulting when only

the consumer's income is varied is called:

a) The demand curve B) The income consumption curve c) The Engel

curve d) The price consumption curve e) None

10. The substitution effect for a fall in the price of a commodity (all

things being equal) is given by

a) A movement up a given indifference curve B) A movement from a

higher to a lower indifference curve c) Any of the above d) A

movement down a given indifference curve e) None

11. Within the relevant range, isoquants:

a) Are negatively sloped b) Are positively sloped C) Are convex to

the origin d) Cannot cross e) None

12. The LAC curve falls as output expands, this fall is due to:

a) Economies of scale b) The law of diminishing returns C)

Diseconomies of scale d) Any of the above e) None

13. Which of the following industries most closely approximates the

perfectly competitive model?

A) Telecommunications industry b) Newspaper c) Cigarette d)

Broking firm e) None

14. Total profit are maximized where_____

A) TR equals TC b) TR and TC curves are parallel c) TR and TC

curves are parallel and TC exceeds TR d) TR and TC curves are parallel

and TR exceeds TC e) None

15. When the perfectly competitive firm and industry are both in long-run

equilibrium

a) P = MR = SMC = LMC b) P = MR = SAC = LAC c) P = MR =

Lowest point on LAC d) All of the above e) A and B above

16. Laptops suddenly become more popular than desktops. Which of the

following will result?

a) A shortage of laptops B) A shortage of desktops c) A surplus of

laptops d) A surplus of desktops e) None

17. If the price of lamb rises and that of pork falls

a) More lamb will be bought b) More beef will be bought C) More

pork will be bought d) Less lamb and pork will be bought e) None

18. A supply curve that was a vertical straight would indicate that

a) There was a maximum price below which no supply would be

forthcoming b) Every increase in price would increase the quantity

supplied C) The quantity supplied was very responsive to price d) The

same quantity would be supplied whatever the price e) None

19. A rightward shift in the supply curve of some products will reduce the

equilibrium price to a greater degree.

a) The more elastic is the demand curve b) The less elastic is the

demand curve c) The more the elasticity of demand diverges from unity

in either direction d) The closer the elasticity of demand is to unity e)

None

20. A demand curve which is a horizontal straight line has an elasticity

that is

a) Zero b) Greater than one C) Infinite d) Less than one e) None

21. Households may attain consumption of a higher indifference curve by

all but which of the following?

a) An increase in money income b) A reduction in absolute prices c) A

proportionate increase in money income and absolute prices d) A

change in relative prices caused by a reduction in one price d) None

22. The production function relates

a) Cos to input b) Cost to output c) Wages to profit d) Inputs to

outputs e) All of the above

23. Each short run average cost curve

a) Never touches the long run curve b) Always crosses the long run

curve c) Always lies above all points on the long-run curve d)

Coincides with the long run curve at one point

24. A change in factor prices

a) Changes long-run cost curve positions b) Changes short-run cost

curve positions c) Alters the optimal factor proportions d) Is likely to

do all of the above e) None

25. An isocost line of factors D and L (their respective prices are Pd and

PI) could have which of the following equations?

a) LD = #1000 b) #1,000 = PD + Pl C) #1,000 = PIL + PdP d)

#1,000 = PID e) None

26. Which of the following statements is correct for a profit maximizing

firm? TR greater than or equal to TC is

a) Necessary but not sufficient b) Sufficient but not necessary C)

Necessary and sufficient d) Neither necessary nor sufficient e) None

27. In short run competitive equilibrium, we predict that

a) Marginal cost is rising b) P= MC C) There is no incentive for firms

to enter the industry d) All of the above e) Both a and b

28. If more firms enter a competitive industry, theory predicts that;

a) Marginal cost curves rise b) The industry supply curve shifts to the

right c) Output of all existing firms increases d) Product price falls e)

both a and d

29. In long-run competitive equilibrium, theory predicts that

a) TC = TR b) Firms operate at a minimum total average cost c) MC

= MR d) There is no incentive for entry or exit of firms E) All of the

above

30. If firms are suffering losses in a short-run competitive equilibrium,

we predict that:

a) Production will be stopped by the industry B) Some firms will exist

from the industry c) More efficient new firms will enter the industry d)

Both b and c e) None of the above

31. Marginal revenue is less than average revenue for a monopolist

because the monopolist

a) Must advertise in order to sell his products B) Must reduce the price

in order to increase sales c) Worries about the entry of new firms d)

All of the above answers e) None

32. Equilibrium of the monopolistic firm

a) Occurs where P = MC b) Occurs where MR = MC c) Occurs where

P = MR d) Both a and c e) None

33. The theory of price discrimination predicts that in comparison to

single price monopoly

a) Output will increase and average revenue will decrease b) Output

will increase and average revenue will increase c) Output will decrease

and average revenue will increase D) Output will decrease and average

revenue will increase e) None

34. The important difference between the assumptions for monopolistic

competition is that monopolistic competition

A) Don't try to maximize profits b) Worry about their influence on the

market c) Have an inelastic demand curve facing them d) Sell similar

but not identical products e) None

35. An important prediction of monopolistic competition is that the

equilibrium output of the firm occurs at an output

a) Where price exceeds average cost b) Less than the one at which

average cost is at a minimum c) Less than the one which average cost
equals average revenue D) Less than the one at which average cost

equals marginal revenue e) None

36. The fact that the equilibrium of a monopolistic competitive industry is

"Zero profit" equilibrium is due to the assumption of

A) Downward sloping demand curve b) Rising marginal cost c)

U-shaped average cost d) Free entry and exit e) All of the above

37. Which of the following conditions are met at long run equilibrium in

monopolistic competition?

A) MR = MC b) P = ATC c) P = MR d) P = MC e) All of the

above

38. Among the essential aspects of oligopoly is

a) Excess capacity b) Non-price competition c) A large number of

firms D) Mutual recognition of interdependence e) None

39. A rise in unit cost is predicted to cause a

a) Rusr in price in monopoly but not in competition B) Rise in price in

competition but not in monopoly c) Rise in price in both competition

and monopoly d) None

40. A fall in demand for the product of a competitive industry is predicted

to lead to

a) A fall in price B) A decrease in the output of each firm c) A

decrease in the number of firms in the long run d) All of the above

41. In a competitive market

A) Firms make normal profit, and they produce at the lowest possible

cost b) Firms make very high profits because competition makes firms

profitable c) Firms don't necessarily product at minimum Cody because

competition is costly d) The price of goods is above average cost

because consumers also compete to buy goods, raising the price above

cost

42. In a monopoly with only one producer in the industry,

A) The firm can either set whatever price or quantity it wants at a time

b) The firm maximizes profit where its average cost equals the extra

revenue from selling one more unit c) The firm sets the quantity where

its extra profit just equals its extra cost d) The profit maximizing

quantity is less than the revenue maximizing quantity if the costs are

positive

43. In a perfect competitive factor market, an employer hires labor at the

level where

A) The wage equals the extra amount the worker adds to production b)

The wage equals the marginal resource cost of labor c) The total wages

of all workers is greater than what they all add to production d) The

productivity of the last worker hired is the maximum possible

44. The smallest quantity of output at which long run average cost is at a

minimum is a firm's _____

A) Efficient output point b) Maximum efficient scale c) Minimum

efficient scale d) Profit maximizing output point

45. A long run equilibrium in a monopolistic competitive market satisfies

the following two condition:

A) MR = MC and AVC = P b) MR = MC and FC = P c) MR = MC

and AC= P d) AC = MR and FC = P

46. D'banj advertised for glo company and as a result of the

advertisement, GLO recharge card sales will_______ because

advertisement promotes _______

a) Decrease, limitation b) Increase, price competition c) Decrease,

sales D) Increase, profit

47. In Nash equilibrium, each player is doing the best he or she, given

a) The action of the other player b) The level of competition c) The

number of player D) All of the above

48. Oligopoly market structure is well known for these two strategies

___________ and __________

a) Price and output manipulation B) Advertisement and branding c)

Price discrimination and supernormal product d) None of the above

49. The granting of a patent or a copyright _______

A) Creates a legal monopoly b) Creates a natural monopoly c)

Reduces prices d) Stimulated competition in the arts

50. Fanta and sprite are examples of

a) Perfectly competitive industries b) Identical products c) Oligopoly

D) Product differentiation

51. A monopolistic ccompetitive firm can increase its economic profit by

_______

a) Advertising less b) Eliminating excess capacity c) Inviting a

celebrity D) Developing new products

52. When each player takes the best possible action given the action of

his opponent _______

a) Both players deny b) A competitive equilibrium is reached C) A

Nash equilibrium is reached d) One player denies and one player

confesses

53. The value of marginal revenue product is downward sloping because

of

a) The law of diminishing returns b) Diseconomies of scale c)

Economies of scale d) A and B

54. The value of marginal revenue of a factor is a special case of marginal

revenue product

A) True b) False c) Uncertain d) None

55. Computationally marginal revenue product of a factor is

A) MP × P b) MP × MC c) MP × MR d) None

56. In perfect competition in both factor and product markets factors are

hired up to the point where

a) Wage rate equals marginal resource cost b) Marginal revenue product

is equal to wage rare c) A and B D) None

57. Given perfect competition in the factor mark.et and imperfect

condition in the product mark.et, equilibrium is achieved where

a) Marginal resources cost is equal to the value of marginal revenue

product b) Wage rare is equal to marginal revenue product C) Wage

rate is equal to marginal resource cost d) None

58. Economics strongly bothered and investigated on

a) What economics is all about b) Whether economics is a study of

wealth or human behavior c) Whether economics is a positive or a

normative science D) All of the above

59. Economically choices are necessary because

A) Resources are scarce b) Resources are abundant c) Human beings

are difficult please d) Price mechanism favor them

60. There would be no economic problem is

a) We were dealing with an economy consisting of one man in a desert

island b) A command economy had been in action c) A typic barter

system economy existed D) we were dealing with societies whose want

could be more than dully satisfied by the resources at their command.

61. The classical economists are the earliest generation economists

A) True b) False c) Hoax

62. According to the scarcity definition of economics,the prime focus of

economics is the problem of resources that are limited in supply in

relation to human wants that are unlimited

A) True b) False c) Undecided

63. Economics is a social science because

a) It can construct social experimental models and verify validity b) It

studies the problem of scarcity c) Its methodology established observed

patterns of economic behavior D) Only a and c are correct

64. One of these is an intangible good

a) Motor vehicle b) Dresses C) Health d) Hospital building e)

Only c and d are correct

65. Economic goods are termed scarce goods because they:

a) Are of high quality b) Are not productive in sufficient quantities to

satisfy the effective demands for them c) Are of primary importance in

satisfying the needs of a society D) Are not available in sufficient

quantities to satisfy the effective demands for them

66. If a good is considered inferior, then

a) As its price falls, more of it will be purchased B) As the consumer's

income increases, less of it will be purchased c) As its price rises, less

of it will be purchased d) If price of income changes no change will be

induced in its consumption

67. The concept of opportunity cost emphasizes the problem of

a) Scale of preference B) Choice c) Factors of production d)

Scarcity

68. Economic problem, simply put does not include:

a) Scarcity b) Choice C) *Factors of production d) Scale of

preference

69. A student had #50 with which to buy a ruler costing #20 and an

exercise book costing #30. If he buys the exercise book, his opportunity

cost is

A) *The ruler b) The exercise book c) #30 d) #20

70. Which of the following had a positive income elasticity of demand?

a) An inferior good B) A normal good c) A luxury good d) The

budget constraint

71. Which of the following has a negative income elasticity of demand?

_______

A) *An inferior good b) Normal good c) Luxury good d) Intangible

good

72. In microeconomic analysis, the focus is with reference to production

decisions, the behavior of markets and their prices. Thus,

microeconomics is sometimes referred to as

a) Economic theory b) Price mechanism. C) *Price theory. d)

Welfare theory

73. Which of the following is not a feature of a centrally planned

economy?

A) *Priorities in agricultural production set by agricultural producers b)

State direction and ownership of the economy c) State ownership of

means of production d) Limited operations of the market mechanism

74. A skeletal representation of reality used to simplify something which

seems complex is called

A) *Methodology b) System c) Variable d) Model

75. Economics is founded on the principle that:

a) Human needs are satisfiable b) Mixed economy is superior to

capitalist economy c) Human needs are greater than the material

resources for satisfying these needs d) Creates the necessity of making

economic choices with respect to production, consumption, growth and

distribution (exchange) E) *Only c and d are correct

76. Normative statements are _______

A) *Disagreements b) Testable c) Never testable d) None

77. Many positive statements are testable and disagreements over them

are appropriately handled by an appeal to the facts

A) *True b) False c) Hoax d) None

78. An economic problem arises when

a) Manufactured goods are short supply b) Money is in short supply c)

Buyers are many or sellers are few d) Scarcity and choice are involved

e) *All of the above

79. Air is essential to life but commands no price! Diamond is not

essential to life but commands high price! This is a paradox of

a) Thrift B) *Value c) Abundance d) Scarcity

80. The best method of production in an under populated country is

a) Labor-intensive b) Labor-extensive c) Land-intensive D)

*Capital-intensive

81. The quantity demanded of any good depends on

a) The price of other commodities *B) Whether the commodity is cheap

or costly c) The nature of the commodity d) Whether it has a close

substitute

82. The concept of price system also means

a) Price mechanism b) The process by which the monetary value of a

commodity, service or factor of production is determined by the interplay

of the forces of supply and demand c) The systems allocating scarce

resources among alternative uses D) *All of the above

83. The concept of "invisible hand" was developed by

a) Prof. Lionel Robbins b) Alfred Marshal c) M.L Jhingan D)

*Adam Smith

84. Two goods A and B are said to be complementary when

A) *A call in the price A raises the demand for B b) A fall in the price A

causes a fall in the demand for B c) A fall in the price A does not affect

the demand for B d) The two goods are competitive

85. If two commodities are good substitutes e.g Butter and Margarine, an

increase in the demand for one will reduce the demand for the other. This

type of demand is called

a) Composite demand b) Elastic demand c) Derived demand. D)

*Competitive demand

86. If a commodity has many substitutes, it is most likely that

a) The demand curve is fairly inelastic B) *The demand curve is fairly

elastic c) The demand curve is parallel to the quantity axis d) The

demand curve is positively sloped

87. If income rises from #300 to #350 and the amount spent on good P

falls from #40 to #30, then good P is

a) An income elastic demand b) A normal good C) *An inferior good

d) Demand elastic good

2012/2013

1. A positive statement is concerned with

a) what ought to be b) Facts c) What is supposed to be D) *B and C

above

2. A normative statement is concerned with

a) value judgment b) Personal thinking c) what ought to be D) *all

of the above
3. For a good or service to be called economic good or service, it must be

A) *scarce b) available c) unaffordable d) all of the above

4. The problem of scarcity gives rise to the problem of

A) *Choice b) Preferences c) wants d) all of the above

5. Human beings are said to be rational in making their selection; as a

result, it gives rise to

a) scale of preference b) ranking c) selection D) *a and b

6. The sacrifice made by individual in making a choice is called

a) scarcity B) *opportunity cost c) forgone alternative d) all of the

above

7. The concept of opportunity cost is applied only to

a) real goods b) giffen goods C) *economic goods d) none

8. An outward shift in the production possibility curve is an indication of

a) development b) growth c) decrease in production D) *economic

growth
9. The study of the economy as a whole is called

a) microeconomics b) development economics C) *macroeconomics

d) none

10. The basic language used in expressing economics includes

a) Graphical expression b) Verbal language c) Algebraic solution D)

*all of the above

11. Goods that violate the simple law of demand of a change in price is

referred to as

a) inferior goods b) giffen goods c) goods of ostentation D) *all of

the above

12. The traditional theory of demand starts with the examination of

a) the behavior of the industry b) the development of the industry C)

demand elasticity d) *none

13. There are two basic approaches to the problem of comparison of

utilities

a) the marginalist and the cardinalists b) the cardinalist and the utilities

C) *none of the above d) a and b above

14. Other factors apart from the commodity's own price that can affect

demand are

a) price of related commodities b) taste of consumer c) money income

of consumers D) *all of the above

15. What will happen to the price of a substitute for a product if the

quantity demand of that product increases?

a) the price of a substitute will increase B) *the price of a substitute will

reduce c) the price of a substitute will remain constant d) none of the

above

16. Those goods that violated the law of demand are called

a) inferior goods b) giffen goods c) goods of ostentation D) *all of

the above

17. The demand function could be written as

a) Qd = f (P, In, PR, CT, E) B) *Qd = f (P) all things being equal c)

Qd = f (K, L, M, T, E) d) A and C above

18. A fall in the commodity's own price will lead to

A) *increase in demand b) decrease in demand c) increase in supply

d) decrease in supply
19. Increase in quantity demanded will lead to an

a) inward shift in the demand curve b) outward shift in the quantity

demand C) *a movement along the demand curve d) none of the

above

20. Increase in demand will cause the demand curve to

a) shift inward b) move along the same demand curve C) *shift

outward d) none of the above

21. When two goods are used and demanded together, they are called

A) *joint demand b) competitive demand c) complementary demand

d) a and b above

22. We have competitive demand for goods if

a) they are complementary goods b) they are composite C) *they are

substitute d) all of the above

23. An exceptional demand curve is having a

a) negative slope b) downward slope C) *positive slope d) a and c

above
24. Exception to the law of demand includes

a) inferior goods b) fear of future rise in the price of commodity c)

consumer's ignorance D) *all of the above

25. The law of supply is

a) in line without that of demand B) *the opposite of that of demand c)

a negation that of demand d) none of the above

26. A state of rest that is characterized by lack of tendency for a change is

called

A) *equilibrium b) disequilibrium c) disutility d) none of the above

27. When we want to know how the buying/selling decisions in one

market affect the happening in another, we carry out

a) equilibrium analysis b) market analysis c) interdependence of one

market on another market D) *a general equilibrium analysis

28. An upward movement along a stable supply curve is caused by

a) B) *an increase in quantity supplied c) a decrease in supply d) a

decrease in quantity supplied

29. A total shift in the supply curve to the right is caused by

A) *an increase in supply b) an increase in quantity supplied c) a

decrease in supply d) a decrease in the quantity supplied

30. A downward movement along a stable supply curve is caused by

A) *a decrease in the quantity supplied b) a decrease in supply c) an

increase in quantity supplied d) an increase in supply

31. A total shift in the supply curve to the left is caused by

A) *a decrease in supply b) a decrease in quantity supplied c) an

increase in supply d) an increase in quantity supplied

32. A table that shows the quantity offered for sale at different prices is

called

A) *a supply schedule b) a table of purchase c) a demand schedule d)

none of the above

33. The point at which the quantity demanded is equal to quantity

supplied is called

a) the break even point B) *the equilibrium point c) the point of

quality d) the maximum point

34. When we analyze the forces of demand and supply in a particular

single market separate from all other markets, we call it

a) equilibrium analysis B) *partial equilibrium analysis c) general

equilibrium analysis d) market analysis

35. The basic type of economic system include

a) capitalist b) socialist c) mixed d) *all of the above

36. The functions of an economic system include

a) economic stability b) organization of production c) allocation of

resources D) *all of the above

37. The first law of demand stipulates that

a) the lower the price, the lower the quantity demanded b) the higher

the price, the higher the quantity demanded C) *the lower the price, the

higher the quantity demanded d) none of the above

38. The law of demand is shown graphically by

a) an upward sloping demand b) a negative sloping curve c) a

downward sloping demand curve D) *b and c above

39. Economic theory aims at

a) construction of models b) describing the economics of behavior of

individual unity c) creating the economic system of a region D) *all

of the above

40. What is a model?

a) a dynamic representation of a real situation b) a comprehensive

representation of a real situation C) *a simplified representation of a

real situation d) all of the above

41. As the prices of a good rises, the consumer will experience

a) a desire to consume a different bundle b) a decrease in utility c) a

southwesterly movement on the indifference map d) only a and b E)

*all of the above

42. An increase in the price of goods causes

A) *a change in the slope of the budget line b) an increase in the

consumption of that good c) a rightward shift of the demand curve for

that good d) a leftward shift of the demand curve for that good e) a

parallel rightward shift of the budget line

43. Suppose a graph is drawn to show a consumer's preference for rice

and Amala. The quantity of rice is measured on the horizontal axis. If the

price consumption curve is horizontal when the price of rice changes,

then

a) rice is an inferior good b) the demand for rice is perfectly elastic C)

*the demand for rice is unit elastic d) the demand curve for rice will be

horizontal e) none of the above

44. An inferior good exhibits

a) a negative income elasticity b) a downward sloping Engel curve c)

a decline in the quantity demanded as income rises d) none of the above

e) *all of the above

45. Median household income is #50,000 per year. The typical household

spends about #125 per year on milk which has an income elasticity of

about 0.07. From this information, we can conclude that

a) milk is a luxury b) milk is a giffen good c) the income effect from a

change in the price of milk is very large *D) *the income effect from a

change in the price of milk is very small e) none of the above

46. Suppose that frozen dinners were once a normal good for John, but

now, frozen dinners are an inferior good for him. John's demand curve for

frozen dinners

A) *has become steeper as a result b) has become flatter as a result c)

has not changed as a result d) has disappeared as a result e) it can

either be steeper or flatter

47. One characteristics of a giffen good is that it

a) is a luxury good B) *is an inferior good c) has an upward-sloping

Engel curve d) only a and b e) all of the above

48. If a good is an inferior good, then its

a) demand curve will be upward sloping b) income effect reinforces the

substitution effect C) *income elasticity is negative d) Engel curve

cannot be drawn e) none of the above

49. A priori expectation between the price of a certain product and its

determinants implies reflect the

a) theoretical explanations b) theoretical conjecture C) *theoretical

prediction d) theoretical proposition e) all of the above

50. The main difference between a desire and effective demand in

economics is

a) willingness b) ability C) *willingness and ability d) price of the

product and time period e) none of the above

51. Given a normal demand and supply condition, educational materials

in Unilag, gaining successful education was further enhanced by granting

of facilities to both potential and existing students. The likely implication

of this action is that

a) it will have an impact of boosting only the demand for educational

materials b) it will have an impact of boosting only the supply for

educational materials C) *it will have an impact for boosting only the

demand for and supply educational materials d) no appreciate impact

will be felt since the size of facilities cannot be overstretched e) none of

the above

52. Nigerian government can boost her revenue profile if any of the

followings are given due consideration

a) taxing fairly elastic goods and reducing fairly inelastic goods are the

same time b) taxing fairly inelastic goods and increasing fairly inelastic

goods at the same time c) *taxing fairly elastic goods and increasing

fairly inelastic goods at the same time d) taxing fairly inelastic goods

and reducing fairly elastic goods at the same time e) only b and c

53. An upward salary review being embarked upon by Unilag has reduced

Ajide's salary income from #200,000 to #100,000 and this consequently

reduces his consumption of Unilag table water from 8 to 5 bottles per day

despite the fact that the price of per bottle remains the same. The above
situation can be plausibly explained under

a) change in quantity demand analysis b) change in demand and supply

theories c) change in demand analysis D) *consumer theory e) all of

the above

54. Assume that the market of computers begin in equilibrium. Then,

there is a decrease in a price of Pentium processors used in the production

of computers. When the new equilibrium is reached,

a) the price and quantity of computers will both have risen b) the price

and quantity of computers will both have fallen c) the price of

computers will have risen and the quantity will have fallen D) *the

price of computers will have fallen and the quantity will have risen e)

none of the above

55. Suppose it is announced that industry analysts are predicting that

decreased oil supplies from Saudi (a swing supplier of crude oil) will

cause gasoline prices to rise in Nigeria, beginning next month. In the

current week, the announcement would;

a) shift the supply of gasoline right b) shift the demand for gasoline left

C) *shift the demand for gasoline right d) have no effect on the demand

or supply of gasoline e) none of the above

56. Assume that the market for the stock of Microsoft begins in

equilibrium. Then, both buyers and sellers expect that the new Linux (a

competitor of Microsoft windows) will be a large success, reducing

Microsoft sales. When the new equilibrium is reached

a) the price and quantity of the stock will both have risen B) *the price

and quantity of the stock will both have fallen c) the quantity of the

stock will fall and the price will rise d) the quantity of the stock will fall

but the effect on price cannot be determined e) the price of the stock

will fall but the effect on quantity cannot be determined

57. "At the price of #500, tickets for the super bowl are expensive. Yet,

there are long lines of people who wish to buy them. Many people who

desire tickets will not be able to find them." From this quote, we know

that the price of super bowl tickets must be:

A) *below equilibrium b) above equilibrium c) equal to equilibrium

d) indeterminate e) none of the above

58. One of these best describes rationality in economics means

a) efficiency in the use of resources b) maximizing utility subjects to

commodity prices c) minimizing expenditure subjects to cost of

production d) maximizing utility subjects to income and market prices

E) *all of the above

59. The slope of a budget line and indifference curve is same as

a) marginal ratios and relative price ratio b) marginal rate of

substitution and relative price ratios C) *relative price ratios and

marginal rate of substitution d) market prices and marginal utility

60. Ajide loves taking ordinary Rice to Amala dudu, prefers Amala dudu

to Beans, and Beans to Spaghetti, it can thus logically be concluded that

he must have preferred ordinary Rice to Spaghetti. His preference must

be characterized as

a) reflectivity b) deductivity c) completedness d) addictivity e)

*none of the above

61. The necessary and sufficient conditions for constrained utility

maximization

a) equimarginal condition b) budget constraints c) marginal utility and

budget constraint D) *marginal utility and budget per naira worth and

budget constraint e) all of the above

62. The necessary condition for constrained utility maximization

A) *equimarginal condition b) budget constraints c) marginal utility

and budget constraint d) marginal utility and budget per naira worth and
budget constraint e) all of the above

63. At the point of saturation on a total utility curve

a) marginal utility is already falling b) marginal is rising at an

increasing rate c) marginal utility is already at a negative value d)

marginal utility is at a maximum E) *marginal utility is at a zero level

64. At the point on a total utility curve where diminishing marginal utility

creeps in,

A) *marginal utility is already falling at an increasing rate b) marginal

utility is already at a negative value c) marginal utility is slowly falling

d) marginal utility is at a zero level e) marginal utility is at a maximum

point

65. It is expected along indifference curve, two products say ECN 111

and ECN 112, that

a) whenever consumption for the former increases, then that of the latter

must fall a little to maintain the same level of satisfaction b) whenever

consumption for the former increases, then that of the latter must fall

substantially to compensate for such increases C) *whenever

consumption for the former increases, then that of the latter must fall to

maintain the same level of satisfaction d) whenever consumption for the

former increases, then that of the latter must rise to maintain the sane

level of satisfaction e) only a and b

66. One of these can be used to represent AJIDE's preference

a) demand function b) utility function c) indifference curve d)

budget constraint e) *only b and d

67. As a rational consumer, more is always preferred to less. This

principle therefore is a direct negation of

a) optimality condition b) rationality principle C) *law of diminishing

marginal utility d) law of demand e) none of the above

68. The main difference between midpoint elasticity and arc elasticity of

demand lies in

A) *degree of responsiveness b) graphing of variables c) averaging of

variables d) elasticity of coefficients e) none of the above

69. Win-win situation in economic parlance simply means

a) optimality B) *efficiency c) inefficiency d) equilibrium e)

opportunity cost

70. Along indifference curve and the budget line curve, the slope of
commodities are

a) almost constant B) *differs substantially c) slightly differs d)

always constant e) they are not equal

71. Increasing the supply of a factor decreases the income received by the

factor when the elasticity of ____

A) *demand is greater than 1 b) demand is less than 1 c) supply is

greater than 1 d) supply is less than 1

72. You notice that a factory's price and total income rises. This set of

events can be the result of the

a) demand for the factor decreasing and the supply of factor being elastic

b) demand for the factor increasing and the supply of factor being elastic

c) demand for the factor decreasing and the supply of the factor being

inelastic D) *none of the above is correct because higher factor prices

decreases the quantity of the factor firms demand and hence must

increase the factor's income

73. An example of derived demand is the demand for

a) sweaters derived by an economic student b) sweaters produced by

labor and capital C) *labor used in the production of sweaters d)

sweater brushes
74. The change in total revenue resulting from employing an additional

worker is the

a) marginal product of labor b) marginal revenue of labor c) marginal

revenue cost of labor D) *marginal revenue product of labor

75. A firm's marginal revenue product of labor curve is the same as its

a) labor supply curve B) *labor demand curve c) marginal cost curve

d) marginal revenue curve

2013/2014

1. A normative statement is concerned with

a) Value judgment b) Personal thinking c) What ought to be D) *All

of the above

2. For a good or service to be called economic good or service, it must be

A) *Scarce b) Available c) Unaffordable d) All of the above

3. Human beings are said to be rational in making their selection; as a

result, it gives rise to

a) Scale of preference b) Ranking c) Selection D) *a and b

4. The concept of opportunity cost is applied only to

a) Real goods b) Giffen goods C) *Economic goods d) None of the

above
5. An outward shift in the production possibility curve is an indication of

a) Development b) Growth C) *Economic growth d) Decrease in

production

6. The traditional theory of demand started with the examination of

a) The behavior of the industry b) The development of the industry C)

*Demand elasticities d) None of the above

7. The demand function could be written as

a) Qd = f (P, In, Pr, CT, E) B) *Qd = f (P), all things being equal c)

Qd = f ( K, L, M, T, E) d) a and c above

8. Increase in quantity demanded will lead to an

a) Inward shift in the demand curve b) Outward shift in the quantity

demand C) *A movement along the demand curve d) None of the

above

9. Increase in demand will cause the demand curves to

a) Shift inward b) Move along the same demand curve C) *Shift

outward d) None of the above

10. A total shift in the supply curve to the right us cause by

A) *An increase in supply b) An increase in quantity supplied c) A

decrease in supply d) A decrease in the quantity supplied

11. When we analyze the forces of demand and supply in a particular

single market separate from all other market, we call if

a) Equilibrium analysis B) *Partial equilibrium analysis c) General

equilibrium analysis d) Market analysis

12. Economic theory aims at

a) Construction of models b) Describing the economic behavior of

individual unit c) Creating the economic system of a region D) *All

of the above

13. What is a model?

a) A dynamic representation of real situation b) A comprehensive

representation of a real situation C) *A simplified representation of a

real situation d) All of the above

14. The validity of a model could be judged by

a) Its power of prediction b) Realistic assumptions c) Consistency D)

*All of the above

15. In the theory of consumer behavior in its early period, the total utility

was assumed to be

a) Consistence b) Aggregative C) *Additive d) None of the above

16. If MUx = Px, This signifies the

a) Consumer's decision on good x B) *Equilibrium of the consumer c)

Equilibrium of the market d) None of the above

17. If MUx > Px, what can the consumer do to increase his welfare?

a) Consume less of x B) *Increase the demand for x c) Remain

indifferent d) All of the above

18. Some of the properties of an indifference curve are

a) Convexity, concavity, negatively sloped b) Convexity, no intersection,

corner solution C) *Convexity, negative slope, diminishing marginal

rate of substitution d) All of the above

19. The marginal rate of substitution of x for y is defined as

a) The number of units if commodity y that must be given up in exchange

for addition extra unit of x B) *MRSxy c) MRSyx d) None of the

above
20. A fall in money income will lead to

a) A parallel shift in the budget line b) An inward parallel shift in

money income c) An outward shift in the budget line D) *An inward

parallel shift in the budget Lind

21. The assumptions of an indifference curve include

a) Ordinal utility b) Consistency c) Ranking of preferences D) *All

of the above

22. The negativity of the slope of an indifference curve at any point is

called:

a) The marginal utility rate b) The marginal rate of technical

substitution C) *The marginal rate of substitution of the two

commodities x and y d) None of the above

23. The equation for the question above is given as

a) -dy = MRSx,y b) -dy = MRSx,y C) *-dy/dx = MRSx,y d) None

of the above

24. What is an isoquant?

a) Is a locus of all the technically efficient methods of production b) Is a

production function c) A combination of all factors of production D)

*All of the above

25. Between two ridge lines (upper and lower) production is

a) Inefficient B) *Efficient c) Adequate d) None of the above

26. The slope of the isoquant

a) Increase in absolute terms as we move downwards along the isoquant

b) Decreases as we move downward along the isoquant c) Decreases as

we move upwards along the isoquant D) *Decreases in absolute terms

as we move downwards along the isoquant

27. An undefined constant that could be used for solving a constraint

maxima or minima is known as the

a) Substitution method B) *Lagragian multiplier c) Lagragian

equation d) Lagragian solution

28. If a production is homogenous, the expansion path will turn out to be

a) Rectangular in shape b) A curve C) *A straight line through the

origin d) None of the above

29. On a convex isoquant,

a) The MRTS increase along the isoquant B) *The MRTS decrease

along the isoquant c) The MRTS is constant along the isoquant d)

None of the above

30. The equation below measures

a) The degree of relationship between factor input and output b) The

degree of substitutability of factors c) Elasticity of factor substitution

D) *a and b above

31. Price elasticity of demand is defined to be

a) The change in quantity demanded resulting from a 1% change in price

b) The percentage change in price resulting from a 1unit change in

quantity demanded C) *The percentage change in quantity demanded

resulting from a 1% change in price d) The maximum amount

consumers will pay for 1% more of a good

32. Suppose that the price elasticity of demand for maple syrup gas been

estimated at -2. If quantity demanded increased by 10%, price must have

changed by

A) *5% lower b) 5% higher c) 10% lower d) 10% higher

33. Along any straight line, negatively sloped demand curve,

a) The price elasticity and the slope vary B) *The price elasticity varies,

but the slope remains the same c) The slope varies, but the price

elasticity remains the same d) The price elasticity and slope remains the

same

34. Price elasticity at a given price is not affected by

a) The price of complements b) The price of substitutes c) The

consumer's income D) *A change in supply

35. The arc elasticity formula is used to estimate elasticity when

a) The product is thought to be inelastic b) The product is thought to be

elastic c) The demand function is known D) *There are two

observations of price and quantity

36. The price elasticity of demand is the same thing as the negative of the

a) Slope b) Reciprocal of slope c) The first derivative of the demand

function D) R*eciprocal of slope times the ratio of price to quantity

37. An elasticity coefficient of 2 means that

a) The demand curve is perfectly inelastic b) The demand curve is

perfectly elastic C) The relative changes in price and quantity are equal

d) *Expenditures on the good would increase if prices were reduced

38. If the demand curve for a good is downward sloping, then the good

must be

A) *Normal b) Inferior c) Giffen d) either a or b

39. The most important determinant of price elasticity is

a) The slope of the demand curve B) *The availability of substitutes c)

The price of other goods d) The income of the consumer

40. If consumers spend $15million a month on CDs, regardless of

whether the price they pay goes up or down, that implies that their price

elasticity of demand for CDs is

a) *0 B) 1 c) Infinite d) 15

41. Which of the following will not be a determinant of the price

elasticity of demand for a commodity?

a) The absence of substitute for the good b) The presence of substitute

for the good c) The importance of the commodity in consumers' budgets

d) The length of time period to which the demand curve pertains e)

*The cost of producing the commodity

42. If the demand for emeralds is elastic, then

a) Emeralds will have a high price b) A reduction in price will lead to an

increase in the expenditure on emeralds C) *The slope of the demand

curve for emeralds must be greater than one d) A price reduction will

not appreciably affect sales

43. The market demand for a product is found by

A) *Horizontally summing the individual demand curves b) Vertically

summing the individual demand curved c) Both horizontally and

vertically summing the individual demand curves d) None of the above

44. The price elasticity of demand will increase with the length of the

period to which the demand curve pertains because

a) Consumers' income will increase b) The demand curve will shift

outward c) All prices will increase over time d) *Consumers will be

better able to find substitutes

45. If the income elasticity of demand is +4

a) The good is an inferior good b) The good is an inelastic normal good

C) The good is an elastic normal good d) The good is an elastic inferior

good e) *None of the above

46. Luxuries are distinguished from necessities by

a) The number of substitutes available for each b) The fact that luxuries

have high prices and necessities have low ones c) The high price

elasticity of demand for luxuries and the low price elasticity of demand

for necessities d) *The high income elasticity of demand for luxuries

and the low income elasticity of demand for necessities

47. The income elasticity of demand

a) Is negative for normal goods b) Is positive for inferior goods C)

*Equals the relative change in demand for a good divided by the relative

change in the income of consumers, all things being equal d) Is

correctly described by all of the above

48. If a good's income elasticity of demand estimate equaled

a) 2.46, an economist would call the good a luxury good b) *0.37, an

economist would call the good a necessity c) -0.50, an economist would

call the good a complementary one

49. "At the price of $500, tickets for the super bowl are expensive. Yet,

there are long lines of people who wish to buy them. Many people who

desire tickets will not be able to find them." From this quote, we know

that the price of super bowl tickets must be

A) *Below equilibrium b) Above equilibrium c) Equal to equilibrium

d) Disequilibrium

50. Suppose the price of a product increases from £12 to £20 and the

quantity demanded falls from 55 a week to 45. What is the PED?

a) *0.4 b) -0.4 c) 2.5 d) -2.5

51. Suppose a demand curve runs from the price axis to the quantity axis

in a straight line. Whereabouts will PED = -1.0?

a) Where the curve meets the price axis b) Everywhere along the curve

c) At the midpoint of the curve d) *Nowhere along the curve

52. Which of the following factors would not help to explain this?

a) There are few substitutes available b) Any substitutes there are have

higher prices c) The product accounts for a small percentage of

consumer expenditure d) The product is a normal good

53. Suppose the price of a product increases from £50 to £70 and the

quantity supplied rises from 40 a day to 80. What is the PES?

a) 0.5 b) -0.5 C) *2.0 d) -2.0

54. Which of the following statements is false?

a) PES is infinity all along any horizontal supply curve B) *PES is 1.0
all along any supply curve which passes through the origin c) PED is

zero all along any vertical demand curve d) PE is -1.0 along any

demand curve where spending would be the same at each price

55. A consumer product has a PES of 0.2 which of the following factors

would not help him explain this?

a) The producers are close to full capacity b) *One or more of the key

intermediate products needed to make the product are themselves items

with an inelastic supply c) Consumers need very little time to respond

fully to price changes d) One type of labor used by the producers may

be in inelastic supply

56. The factor return to scale refers to

A) *The long run analysis of the laws of proportion b) The short run

analysis of the laws of proportion c) The long and short run analysis of

the laws of proportion d) The med run analysis of the laws of

proportion

57. The production function is a purely technological relationship

between quantities of inputs and quantities of output

a) Measurement of output and other factors in terms of value added b)

Measurement of labor and capital in terms of value added d) *All of the

above

58. The isoquant that assumes only one method of production for one

commodity is called

a) Linear isoquant B) *Leonetief isoquant c) Kinked isoquant d)

Smooth convex isoquant

59. Which of this is a concepts in production function

a) Factor intensity b) The efficiency of production c) Return to scale

D) *All of the above

60. The value that can be assumed by the marginal product of a factor is

a) Positive value only b) Negative value only c) Zero value only D)

*Positive, negative and zero value

61. The isoquant that assumed limited substitutability of capital andabor

is called

a) Linear isoquant b) Leontief isoquant C) *Kinked isoquant d)

Smooth convex isoquant

62. In a production function the marginal product of each factor is

a) The full derivative of the function with respect to the factor b) The
derivative of the function with respect to the factor c) The partial

derivative of the function with respect to the factor D) *The partial

derivative of the function with respect to both factors

63. The slope of the isoquant decreases (in absolute terms) as we move

A) *Downwards along the isoquant b) Upwards along the isoquant c)

Downwards along the curve d) Upwards along the curve

64. Which of the following may not be included in explaining the term

production?

a) Provision of services b) Manufacture of goods c) Changing raw

materials to finished goods D) *Use of consumer goods

65. The condition of positive, but declining marginal products of the

factors defines the range of

A) *Efficient production b) Return to scale c) Technical substitution

of factors d) Production function

66. The elasticity of substitution is defined as the % change in the capital

- labor ratio

a) Plus the % change in the rate of technical substitution B) *Divided

by the % change in the rate of technical substitution c) Divided by

the % change in the factor intensity d) Divided by the % change in the

rate of the slope of the isoquant

67. If we have a constant returns to scale. The production function is

sometimes called?

A) *Linear homogeneous b) Increasing returns to scale c) Degree of

homogeneous d) Increasing homogeneous

68. The law if variable proportions referred to

a) The expansion of output with one factor (at least) constant b) The

expansion of output with two factor ( at least) constant c) The

expansion of output with all factors varies D) *The expansion of output

with all factors constant

69. Cobweb model is an economic model that attempts to predict the

relationship between

a) Prices of a particular product and the supply and demand levels of that

product b) Prices of a particular product and the demand levels of that

product c) The supply and demand levels of that product D) *Prices

of a particular product and the supply levels of that product

70. The cobweb model is based on a time lag between supply and demand
decisions of

a) Prices of a particular product and the supply and demand levels of that

product b) Prices of a particular product and the demand levels of that

product c) The supply and demand levels of that product D) *Prices

of a particular product and the supply levels of that product

71. When the price of a given product is reduced from #100 to #90, the

quantity demanded increases from 50 to 60 units. From this, we can

conclude that the product's

a) Demand is elastic B) *Demand is inelastic c) Demand us perfectly

inelastic d) Demand has declined

72. Who bears the greater burden if the indirect tax when the demand for

a commodity is inelastic?

a) The wholesaler b) The shareholder c) The retailer D) *The

consumer

73. The equilibrium position of a firm is attained

a) When MC = AR b) When MC = P C) *When MC = MR d) When

AR = MR

74. The price of fleece blankets goes up from $10 to $11. At the same
time, demand goes down from 1,000 blankets to 800 blankets. Which of

the following statements is true?

A) *Demand is elastic b) Demand is inelastic c) The price elasticity

quotient, or elasticity demand is less than 1 d) The price elasticity

quotient or elasticity of demand is equal to 1

75. If demand for a commodity is elastic, an increase in the price will lead

to a

a) Decrease in total marginal revenue b) Increase in total marginal

revenue c) Increase in total revenue income D) *Decrease in total

revenue

76. If demand is unitary, what do you advise a seller to do?

a) A seller need alter his output b) A seller need alter his price c) A

seller need not alter his output D) *A seller need not alter his price

77. In a cobweb model, the convergent case requires that the slope of the

______

a) Supply curve be less than the absolute value of the slope of the demand

curve b) Supply curve be greater than the absolute value of the slope of

the demand curve *C) Demand curve can be greater than the absolute

value of the slope of the supply curve d) Supply curve can be equaled to
the absolute value of the slope of the demand curve

78. In a cobweb model, the divergent case occurs when the ______

a) Supply curve is more elastic than the demand curve at the equilibrium

point b) Demand curve is more elastic than the demand curve, at the

equilibrium point C) *Supply curve is more elastic than the demand

curve at the equilibrium point d) Supply curve is more elastic to the

demand curve, at the equilibrium point

79. The cobweb model is an economic model of cyclical supply and

demand in which there is a lag between responses of ______

a) producers and consumers to a change of price B) *producers to a

change of price c) consumes to a change of price d) retailers to a

change of price

80. Assuming that farmers look back at the most recent prices in order to

forecast future priced might seem very reasonable, this backward looking

forecasting in cobweb model is called

A) *Adaptive expectations b) Rational expectations c) Assumed

traditional expectations d) All of the above

88. A commodity is said to have a derived demand when the commodity

a) And another have joint demand B) *Is demanded because of what it

can help to produce c) Is demanded for different purposes d) Has

inelastic demand

89. Production is said to be completed when

A) *Goods and services reach the consumer b) Prices or goods or

services are determined d) Goods are well packaged

90. The price of a good rises from #6 to #9 and the quantity demanded

falls from 205 to 200 units. Over this price range, the demand curve is

a) Perfectly inelastic b) Fairly inelastic c) Perfectly elastic D)

*Fairly elastic

91. Externalities lead to

a) Public awareness b) Excessive demand c) Market success D)

*Market failure

92. Externalities include all of the following except

a) Noise b) litter c) Pollution d) *All of the above

93. The demand curve for a normal good will shift to the left if

a) The incomes of consumers rise B) *The price of the good rises c)

The prices if complementary goods rise d) Advertising expenditure on

complementary goods rise

94. When there is excess demand, all things being equal, market price

A) *Rise b) Reduce c) Absorb more goods and services d) Slogan

for advertisement

95. The determinants of quantity demanded of any commodity give favor

to all the following except

a) Price of the commodity under consideration b) Prices of other

commodities c) The size of the household's income, tastes and fashion

D) *Level of technology

96. The determinants of quantity demanded of any commodity give favor

to all the following except

a) Price of the commodity under consideration b) Prices of other

commodities c) The size of the household's income, tastes and fashion

D) *Level of technology

97. The alternative theories or approach of consumer behavior are these

except

a) The marginal utility theory b) The indifference curve theory c) The

revealed preference theory D) *Consumption theory

98. In the case of excessive consumption of alcohol, disunity can be

practically noticeable in the form of

a) Vomiting b) Loss of consciousness c) Irrational behavior and red

eyes sight d) Rapid urinating effects E) *All of the above

99. The law that is generally referred to as Says law is

a) Demand creates its supply B) *Supply creates its demand c) The

law if diminishing marginal utility d) Jerons first law

100. A budget line is often also called

A) *Isocost line b) Consumer line c) Income path d) An equal revenue

line