BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE, PILANI

SECOND SEMESTER – 2016-17

COURSE NO.:ECON F211 Marks 15 (1*15), Weightage 5%

COURSE TITLE: Principles of Economics Date: 01st April 2017
Tutorial Test - 4 (25 Minutes) Weight-age 5% (15 Marks)
ID. No: NAME: Tutorial Sec. No.
Read ALL instructions carefully.
 All questions are compulsory.
 For multiple choice questions, pick the most appropriate answer only.
 All questions carry 1 Mark. 0.25 Mark will be deducted for every INCORRECT answer.
 Write the answers in the Table given below . Ambiguous/Overwritten answers will NOT be
evaluated.
Write your answers in the table given below. Answers written elsewhere will NOT be evaluated.
1 5 9 13
2 6 10 14
3 7 11 15
4 8 12

1. Assume that VK manufacturing unit produced 6000 shirts, but sold only 5000 of them. The
remaining 1,000 shirts would be classified as
(a) A loss to the firm.
(b) Part of the firm's intangible capital.
(c) Part of the firm's tangible capital.
(d) A factor of production.

2. Monopolist can fix

(a) Both price and output.
(b) Either price or output.
(c) Neither price nor output.
(d) None of these.

3. Goodwill is an example of
(a) Financial capital.
(b) Intangible capital.
(c) A public service industry.
(d) Physical capital.
(e) None of the above

4. It is likely that if a natural monopoly is broken up into two smaller firms,

(a) The market price will be unchanged.
(b) Industry output will increase.
(c) Production costs will increase.
(d) Production costs will decrease.
(e) Industry profits will increase.

5. Industry demand is given by: P = 200 - .4Q and long-run industry costs are: AC = MC = $80.
a) If the market is a pure monopoly, QM = 200 and PM = $120.
b) If the market is a perfectly competitive, QC = 300.
 c) If the market is a perfectly competitive, PC = $100.
d) Answers a and b are both correct.
(e) None of the above.

6. The supply curve of a perfectly competitive firm is simply its

(a) MC curve above MR.
(b) MC curve above AC.
(c) MC curve above AVC.
(d) AC curve above AVC.
(e) AVC curve.

7. The idea that the demand for autoworkers stems from the demand for automobiles is
(a) Derived demand.
(b) Indirect demand.
(c) The value of the marginal product of autoworkers.
(d) Output demand.
(e) None of the above.

8. Assume that a monopolist has a demand curve with constant price elasticity with absolute
value 4. The monopolist charges a price of Rs60 per unit of output. What is her marginal cost at
this level of output?
(a) 24.
(b) 45.
(c) 50.
(d) None of the above.

9. Assume that a monopolist has a demand curve D (p) = 1-P, where P is the unit price of the
firm's product in rupees. Given that firm's output in short-run equilibrium is 0.1, what is the
marginal cost of the firm at the equilibrium level of output?
(a) 1.1.
(b) 0.9.
(c) 0.8.
(d) None of the above.

10. A monopsony is a market situation with?

(a) One seller.
(b) Two seller.
(c) Many sellers.
(d) None of the above.

True or False

1. The marginal revenue product of labor is the additional revenue the firm makes by selling one
unit of labor. (False)
The marginal revenue product of labor is the additional revenue a firm earns by
employing one additional unit of labor. (Correct)
2. If the price of the product produced by labor decreases, the marginal revenue product of labor
curve will be unaffected because productivity of labor has not changed. (False)
If the price of the product produced by labor decreases, the marginal revenue product of
labor curve will shift to the left. (Correct)

3. When we compare to a monopoly price without price discrimination, firms in a perfectly

competitive industry produces more output and has a lower price. (True)

4. Firms will employ an input up to the point where the input's price equals its marginal product
(False)
Firms will employ an input up to the point where the input's price equals its marginal
revenue product. (correct)

5. Assume that the current interest rate is 6%. You invest Rs10,000 of your own money in a
restaurant that you own and operate. The normal return on this investment is Rs0, as you used
your own money (False)

Correct answer: Rs600, as that is the interest forgone by not lending the money to
someone else at a 6% interest rate