TMA4/ECO232 – Micro Economic Theory II TMA 4 QUESTIONS AND ANSWERS

TMA Quiz Questions

ECO232 – Micro Economic Theory II
Mr. Adedeji Abiodun Liadi ( )

1 In a market economy with five goods and four resources, there would be a need for

A. five markets
B. four markets
C. six markets
D. nine markets  

2 The optimal input combination will occur where

A. the MRTS is equal to the price of capital
B. MRTS = w/r  
C. MRTS = – w/r
D. the marginal products are at a maximum

3 When the law of diminishing returns begins to operate, the TVC curve begins to

A. fall at an increasing rate,
B. rise at a decreasing rate
C. fall at a decreasing rate
D. rise at an increasing rate  

4 Normally, long run and short run expansion path will

A. intersect only once  
B. be congruent
C. never intersect
D. intersect at two output levels

5 MC is given by

A. the slope of the TFC curve
B. the slope of the TVC curve but not by the slope of the TC curve
C. the slope of the TC curve but not by the slope of the TVC curve
D. either the slope of the TVC curve or the slope of the TC curve  

6 At the point of producer equilibrium

A. the isoquant is tangent to the isocost
B. the MRTSLK equals PL/PK
D. all of the above  

7 The imposition of an effective price ceiling will

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A. increase price and quantity supplied
B. reduce price and quantity supplied  
C. increase price and reduce quantity supplied
D. reduce price and increase quantity supplied

8 The dimensions of the production box in the Edge-worth geometric approach are determined by

A. the PPF
B. the fixed quantities of inputs available  
C. the state of technology
D. quantities of goods produced

9 Which of the following is not a necessary condition for a pareto efficient allocation of resources

B. production efficiency
D. consumption efficiency

10 The break-even point is

A. the minimum MC point
D. the minimum AVC point
C. the minimum AFC point
D. the minimum ATC point  

11 The shutdown point is

A. the minimum MC point
B. the minimum AVC point  
C. the minimum AFC point
D. the minimum ATC point

12 As output increases, which of the following declines steadily?

B. AFC  

13 If a firm’s AFC equals N20 and total cost equals N1000, when output is twenty units, then AVC for twenty units is

A. N20
B. N30
C. N50
D. none of the above  

14 Which of the following do economists consider a productive economic resource?

A. money capital
B. capital goods  
C. interest
D. profit

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15 The price paid for a natural resource that is completely fixed in supply is

A. profit
B. interest
C. rent  
D. a risk payment

16 In total, the supply of land is

A. perfectly inelastic  
B. of unitary elasticity
C. perfectly elastic
D. elastic but not perfectly elastic

17 Which is the minimum return or payment necessary to retain the entrepreneur in some specific line of production?

A. normal profit  
B. explicit
C. real interest rate
D. pure rate of interest

18 The demand for health care is

A. price elastic
B. price inelastic  
C. income elastic
D. income inelastic

19 According to the theory of second best, eliminating a monopoly from one market in the economy

A. will improve the welfare of the society
B. will decrease the welfare of the society
C. will not change welfare of society
D. may increase or decrease social welfare  

20 The locus of Pareto optimality in production and consumption is given by

A. the social welfare function
B. the utility-possibility curve
C. the transformation curve
D. the grand utility-possibility curve  


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