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# Business Economics: Coursework Quiz 2 (Lecture Sessions 3 & 4)

## The correct answers are in yellow

Please note: the order of the questions and answers in the online quiz were randomized so
they will not have necessarily appeared in the following order:
Quiz Instructions
Choose what you think is the best answer from the alternatives provided
You score 2 points for each correct answer
You score zero for each blank answer
Only record one answer per question

## The slope of an indifference curve shows:

a) the transitivity of consumer preferences
b) the marginal rate of substitution between one good and another
c) the ratio of market prices
d) all of the above
e) none of the above

## If a consumer prefers bundle A to bundle B, and bundle B to bundle C, then we can

conclude that bundle A is preferred to bundle C. This conclusion relies on the
assumption that:
a) consumer preferences are transitive
b) the consumers indifference curve is convex to the origin
c) consumers prefer more goods to fewer goods
d) consumer equilibrium is reached at the point where utility is maximised
e) all of the above

## The consumers budget line shows :

a) the marginal benefit derived from the consumption of an additional unit of
output when household incomes and prices are given
b) the structure of consumer preferences when budgets are constrained

c) the combinations of output that the consumer can purchase at current prices
with a given level of income
d) the cost-benefit ratio of each additional unit of output consumed
e) none of the above

Suppose the total cost (TC) of producing Q units of output is given as: TC = 100 + 6Q.
It follows that average variable cost is:
(a) 100/Q + 6Q
(b) 106/Q
(c) 106
(d) 100
(e) 6

## Consumer surplus is measured as:

a) the difference between the maximum amount that consumers would be prepared
to pay to obtain units of output and the amount they actually pay
b) the total money value of all units of output consumed
c) the difference between the marginal cost of producing units of output and the
marginal benefit obtained from their consumption
d) the surplus value of the last unit purchased at the margin of consumption
e) all of the above

Suppose a firm is able to produce 100 units of output per month when 10 workers
are employed, 180 units of output per month when 11 workers are employed, and
240 units of output when 12 workers are employed. From this information we can
deduce that:
a) marginal cost is falling as production expands
b) the marginal product of labour is declining as employment rises
c) the marginal product of labour is 240 for the last unit of labour employed
d) profits are maximized when the firm produces 10 units of output
e) all of the above

If production conditions for a firm are such that the marginal rate of technical
substitution (MRTS) is always constant, we can infer that:
a) the firms isoquant shows that the factor inputs can only be used in fixed
proportions
b) the firms isoquant is a straight line
c) the firms isoquant map exhibits constant returns to scale
d) all of the above
e) none of the above

## The production function exhibits increasing returns to scale when:

a) a given proportionate increase in output requires a proportionately larger
increase in the labour and capital inputs
b) a given proportionate increase in the labour input requires a larger proportionate
increase in the capital input to achieve an increase in production
c) a given proportionate increase in the labour and capital inputs yields a
proportionately larger increase in output
d) the marginal products of both labour and capital are falling as output rises
e) none of the above

Suppose total production costs are described by the cost function: TC = 40 + 7Q2 . Next
suppose that the fixed cost component rises from 40 to 90, so that production costs are
now TC = 90 + 7Q2. This increase in fixed cost implies:
a)

## marginal cost is higher at each level of output

b)

marginal cost must be lower at each level of output because fixed cost is higher
in relation to variable costs

c)

marginal cost is always higher than fixed cost at each output level

d)

e)

## The short run is usually defined as a period during which:

a) the firm is not able to change the price at which units of output are sold
b) all inputs into the production process are fixed
c) at least one of the inputs into the production process is fixed
d) the labour input is fixed, but capital and technology can change
e) all of the above