1. Which of the following statements are (in general) true?
a. Marginal cost (MC) is minimized where MC = Average Variable Cost (AVC)
b. Average Total Cost (ATC) is minimized where MC = ATC
c. Average Variable Cost (AVC) is minimized where MC = AVC
d. Total revenue is maximized where MC = Marginal Revenue (MR)
2. Which of the following functions have unit elasticity at P = 6?
a. Demand: Qd = 10/P
b. Demand: log Qd = 100 - 3 log P
c. Demand: Qd = 24 - 2 P
d. Supply: Qs = 5 P
3. The function y = f(x) reaches a (relative) minimum where:-
a. f(x) = 0 and f '(x) < 0
b. f(x) = 0 and f '(x) > 0
c. f '(x) = 0 and f ''(x) < 0
d. f '(x) = 0 and f ''(x) > 0
4. The supply and demand model applies when three of the following four conditions are
met. Which condition is not required?
a. There must be many buyers.
b. There must be many sellers.
c. The buyers and sellers must trade an identical item.
d. The item traded must be a product.
5. f(x) = 3x3
- 4x2
+ 10 implies
a. f(1) = 10
b. f '(x) = 9x2
- 8x + 10
c. f ''(x) = 18x – 8
d. f '(2) = 20
6. Which of the following predictions is not made by the supply and demand model?
a. If there is excess demand, the price will rise.
b. If there is excess supply, the price will fall.
c. If there is no excess demand or excess supply, the market will be in equilibrium.
d. A market which is out of equilibrium will always move rapidly to the equilibrium.
7. Suppose there is excess supply in a market and the price decreases. Which of the
following combinations of events will occur?
a. There will be a fall in quantity supplied and a rise in quantity demanded.
b. There will be a fall in quantity supplied and a rise in demand.
c. There will be a fall in supply and a rise in quantity demanded.
d. There will be a fall in supply and a rise in demand.
8. Suppose there is a decrease in supply in a market where the supply curve slopes upwards
and the demand curve slopes downwards. Which of the following would not occur?
a. An excess supply.
b. A fall in price.
c. A fall in supply.
d. A fall in the equilibrium level of expenditure.
9. Which of the following are true?
a. f(x) = ax3
- bx + c implies f '(x) = 3ax2
- b + c
b. f(x) = 4x + 3 / x2
implies f '(x) = 4 - 6/x3
c. f(x) = 3x2/3 implies f '(x) = 6x-1/3
d. f(x) = 6x3
- 3x-2
+ 5x + 7 implies f '(x) = 18x2
+ 6x-3
+ 5
10. Which of the following might not lead to an increase in the demand for a product that can
be stored?
a. A fall in the price of a complement.
b. A rise in consumer incomes.
c. An increase in the number of buyers.
d. An expected rise in price.
11. y = 100/x + 4x has
a. a maximum point where x = 5
b. a minimum point where x = 5
c. a maximum point where x = -5
d. a minimum point where x = -5
12. Which of the following would not lead to a decrease in the supply of a product that can
be stored?
a. An increase in the demand for a joint product.
b. A rise in the price of another input.
c. A decrease in the number of firms supplying the product.
d. An expected rise in the price of the product.
13. Suppose incomes double over a period of years. Which sorts of product will experience
the biggest increases in price?
a. Those with a PES close to 0.0 and an IED well above 0.0.
Those with a PES close to 0.0 and an IED well below 0.0
Those with a PES well above 1.0 and an IED well above 0.0
Those with a PES well above 1.0 and an IED well below 0.0
14. 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
15. 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. PED is -1.0 along any demand curve where spending would be the same at each
price.
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