Microeconomics Quiz ECO111: IB1504 Term Exam - Student Solution

This document provides a solution to a Microeconomics quiz (ECO111) consisting of multiple-choice questions. The quiz covers key concepts such as total revenue, marginal product, diminishing returns, economies of scale, competitive markets, profit maximization, and cost analysis. Questions assess understanding of how firms make decisions regarding output, pricing, and cost structures. The solution includes the correct answers to each question, providing students with a valuable resource for studying and understanding core microeconomic principles. This resource, available on Desklib, aids students in preparing for exams and assignments by offering insights into the application of economic theory to real-world scenarios. The quiz explores topics like firm behavior, market structures, and profit maximization, essential for a comprehensive understanding of microeconomics.

ECO111 Microeconomics
Class: IB1504
Term:
Handed out:
Time allowed:
Student Information
NAME: ĐỖ THỊ MAI HƯƠNG ROLL NUMBER: HS150179
ROOM NO: CLASS: IB1504
FOR TEACHER ONLY
1. Total revenue equals
a. total output multiplied by price per unit of output.
b. total output divided by profit.
c. (total output multiplied by sales price) - inventory surplus.
d. (total output multiplied by sales price) - inventory shortage.
MARK MARKED BY
(NAME AND SIGNATURE)
Signature of Proctor

2. When adding another unit of labor leads to an increase in output that is smaller than increases in
output that resulted from adding previous units of labor, we have the property of
a. diminishing labor.
b. diminishing output.
c. diminishing marginal product.
d. negative marginal product.
3. Assume that a given firm experiences decreasing marginal product of labor with the addition of each
worker regardless of the current output level: average fixed cost will be
a. always rising.
b. always falling.
c. U-shaped.
d. constant.
4. Economies of scale occur when
a. long-run average total costs rise as output increases.
b. long-run average total costs fall as output increases.
c. average fixed costs are falling.
d. average fixed costs are constant.
5. When a firm in a competitive market receives $500 in total revenue, it has a marginal revenue of $10.
What is the average revenue, and how many units were sold?
a. $5 and 100
b. $10 and 50
c. $10 and 100
d. The answer cannot be determined from the information given.
6. If marginal cost exceeds marginal revenue, the firm
a. is most likely to be at a profit-maximizing level of output.
b. should increase the level of production to maximize its profit.
c. must be experiencing losses.
d. may still be earning a profit.

7. As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a
small business in Anywhere, USA. If Mary would have invested the $1 million in a risk-free bond
fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote
all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per year.
At the end of the first year of operating her new business, Mary's accountant reported an accounting
profit of $150,000. What was Mary's economic profit?
a. $25,000 loss
b. $50,000 loss
c. $25,000 profit
d. $150,000 profit
8. Which of the following statements is correct?
a. A competitive firm is a price maker and a monopoly is a price taker.
b. A competitive firm is a price taker and a monopoly is a price maker.
c. Both competitive firms and monopolies are price takers.
d. Both competitive firms and monopolies are price makers.
9. Competitive firms have
a. downward-sloping demand curves and they can sell as much output as they desire at the market
price.
b. downward-sloping demand curves and they can sell only a limited quantity of output at each
price.
c. horizontal demand curves and they can sell as much output as they desire at the market price.
d. horizontal demand curves and they can sell only a limited quantity of output at each price.
_____ 10. A firm will shut down when
a. it is not earning a profit.
b. price does not equal marginal cost.
c. price is less than average cost.
d. revenue is less than variable costs. E
e. revenue is less than total costs.

_____ 11. A perfectly competitive firm will maximize profit when
a. total revenue exceeds total cost.
b. marginal revenue exceeds marginal cost.
c. price equals marginal cost.
d. price equals marginal benefit.
e. marginal benefit exceeds marginal cost.
_____12. The difference between a firm’s average total cost and its average variable cost is its
a. profit.
b. marginal revenue.
c. average fixed cost.
d. producer surplus
e. excess supply.
______13. A firm's profit is equal to which of the following?
a. the value of its sales
b. marginal revenue minus marginal cost
c. total sales minus wages
d. total revenue minus total cost
e. none of the above
______14. When the quantity of an input can be altered in the short-run, the input is
a. fixed.
b. variable.
c. implicit.
d. explicit.
e. efficient.

_____15. Which of the following can a firm vary in the long-run?
a. no factors of production
b. all factors of production
c. all but one factor of production
d. only one factor of production
e. more information about the firm is needed to answer this question