Section: PRC

Total marks: 40
Subject: Economics
Time allowed: 30 Minutes.
Teacher: Mr. HM Hasnan
Test- Ch 4 Date: March 4, 2022

Name: _________________________________ Rise ID:______________

Q.1 The main difference between short run and long-run in economics is:
A) In short run, all inputs are fixed, while in long run all inputs are variable
B) In short run the firm varies all of its inputs to find the least cost combination of inputs.
C) In short run, at least one of the firm's input level is fixed.
D) In the long run, the firm is making a constrained decision about how to use existing plant and
equipment efficiently.

Q.2 Which of the following is NOT a barrier to entry for monopoly?

A) a patent
B) government licensing
C) large economies of scale
D) a large number of existing firms in a market

Q.3  The basic reason of operating the Law of Diminishing Returns is:
(a) Scarcity of Factors
(b) Imperfect Substitution between Factors
(c) Both (a) and (b)
(d) None of the above

Q.4 Law of variable proportion explains three stages of production. In the first stage of production:
(a) Both MP and AP rise (b) MP rises but AP falls
(c) AP Falls (d) MP is zero

Q.5 Diminishing marginal returns implies that firms:

A) require fewer and fewer workers to produce each additional unit of output.
B) require more and more workers to produce each additional unit of output.
C) get decreasing amounts of revenue for each unit of output they produce.
D) get increasing amounts of revenue for each unit of output they produce.

Q.6 The shape of average cost curve is:

(a) U-shaped (b) Rectangular Hyperbola shaped
(c) Line parallel to x-axis (d) None of these

Q.7 Which of the following is a true statement?

(a) AR indicates price
(b) AR Curve and Demand Curve are the same
(c) Both (a) and (b)
(d) None of the above

Q.8 In the long run there is enough time for the firm to cover its losses and earn normal profits.
This is because in the long run, all inputs are __________.
A) identical B) homogenous
C) variable D) fixed
Q.9 Which of the following best defines price discrimination?
A. charging different prices on the basis of race
B. charging different prices for goods with different costs of production
C. charging different prices based on cost-of-service differences
D. selling a certain product of given quality and cost per unit at different prices
to different buyers

Q.10 In pure monopoly, what is the relation between the price and the marginal revenue?
A. the price is greater than the marginal revenue
B. the price is less than the marginal revenue
C. there is no relation
D. they are equal

Q.11 If a marginal revenue exceeds marginal cost, a monopolists should?

A. increase output
B. decrease output
C. keep output the same because profits are maximized when marginal revenue exceeds
marginal cost
D. raise the price

Q.12 Refer to Figure 5.1, which shows a family of average cost curves. The average total cost
curve is represented by:

A) Curve 1. B) Curve 2.
C) Curve 3. D) The vertical sum of curve 1 and curve 2.

Q.13 Which of the followings is not an advantage of Oligopoly?

A. Oligopolistic firms are able to make large profits as there are few players in the market.
B. Stable prices in the market make planning easier for both the supplier and the customer.
C. Innovation of small players in the industry is stifled.
D. Customers are easily able to make price comparisons among the few players existing in the
market and this may lead to competitive pricing.

Q.14 Which of the followings is not the harmful effect of a price cartel?
A. Un-restricted output B. Lack of lucidity
C. Higher prices D. Poor quality goods

Q.15 Which of the followings is not the pre-condition to create a price cartel among firms:
A. There are significant barriers on entry of new firms.
B. The market is un-stable.
C. Non - intervention by the Government to hinder Collusions.
D. Production techniques and costs of all the firms are similar.
Q.16 In order to practice price discrimination a firm must:
A) avoid detection by the government.
B) have some degree of market power.
C) have a homogeneous product.
D) advertise their product.

Q.17 A market structure in which many firms sell products that are similar but not identical is
known as ?
A. monopolistic competition B. monopoly
C. perfect competition D. oligopoly

Q.18 In the Kinked demand curve theory?

A. There is a kink in the marginal reveune curve
B. Demand is price inelastic
C. Demand is price elastic
D. Price competition is likely

Q.19 Firms in oligopoly are likely to.?

A. Invest heavily in branding
B. Act independently of other firms
C. Not Try to differentiate its products
D. Try to be a price maker

Q.20 Price discrimination can be profitable if consumers can resell the product.
a) True b) False