1.

The goal of a firm is to

A. maximize its total revenue.
B. minimize its total cost.
C. maximize its profit.
D. All of the above are correct.

ANSWER: C

2. In the long run, output Q or TP depends on

A. capital
B. capital and labour
C. technology
D. labour

ANSWER: B

3. Which of the following statements is correct?

A. When average product of labour is at its maximum, marginal product of labour equals
average product of labour.
B. When average product of labour is at its minimum, maginal product of labour equals
average product of labour.
C. When marginal product of labour is greater than average product of labour, average
product of labour is decreasing.
D. When marginal product of labour is less than average product of labour, average
product of labour is increasing.

ANSWER: A

4. A good is an inferior good if the consumer buys less of it when

A. the price of the good increases.
B. the price of a substitute good decreases.
C. his income increases.
D. his income decreases.

ANSWER: C

5. When a firm experiences diseconomies of scale,

A. its LRATC curve would be horizontal.
B. its LRATC curve would slope upward.
C. its LRATC curve would slope downward.
D. None of the above is correct.

ANSWER: B

6. Each of the following is a determinant of supply except

A. the prices of inputs
B. expectations
C. production technology
D. the prices of related goods

ANSWER: D

7. When demand is inelastic, an increase in price will cause

A. no change in total revenue but an increase in quantity demanded.
B. a decrease in total revenue.
C. no change in total revenue but a decrease in quantity demanded.
D. an increase in total revenue.

ANSWER: D

8. Average fixed cost

A. declines as output increases.
B. rises as output increases.
C. remains constant as output increases.
D. declines then rises as output increases.

ANSWER: A

9. Production function: Q = 5 KαLβ, α is determined by.

A. α = (delta Q/ delta K) * (L/Q)
B. α = (delta Q/ delta K) * (K/Q)
C. α = (delta Q/ delta L) * (L/Q)
D. None of the above is correct.

ANSWER: B

10. The length of short run is

A. one week.
B. one year.
C. the period of time in which at least one factor of production is fixed.
D. the period of time in which all factors of production are variable.

ANSWER: C

11. At a point inside a consumer’s budget constraint,

A. the consumer doesn’t spend all of his or her income.
B. the consumer spends all of his or her income.
C. the consumer cannot afford it.
D. this point cannot be determined.

ANSWER: A
12. Which of the following is not an example of variable costs in the short run?
A. rent of office space
B. cost of raw materials
C. cost of fuels
D. wages of workers

ANSWER: A

13. If there is a tax on the sellers of a product,

A. buyers pay more, and sellers receive more than they did before the tax.
B. buyers pay more, and sellers receive less than they did before the tax.
C. buyers pay less, and sellers receive more than they did before the tax.
D. buyers pay less, and sellers receive less than they did before the tax.

ANSWER: B

14. The opportunity cost of going to university is

A. tuition, fees and books.

B. accommodation, transportation and entertainment.
C. zero for students who are fortunate enough to have all of their expenses paid by
someone else.
D. the wages given up to attend school.

ANSWER: D

15. A shortage results when

A. the market price is above the equilibrium price, and quantity demanded is greater than
quantity supplied.
B. the market price is above the equilibrium price, and quantity supplied is greater than
quantity demanded.
C. the market price is below the equilibrium price, and quantity demanded is greater than
quantity supplied.
D. the market price is below the equilibrium price, and quantity supplied is greater than
quantity demanded.

ANSWER: C

16. A monopolist
A. faces competition from other firms.
B. faces a horizontal demand curve.
C. must lower its price to sell more of its product.
D. All of the above are correct.

ANSWER: C
17. If buyers expect higher vegetable prices in the near future, what will happen in the
market for vegetables now?
A. The demand for vegetables will increase.
B. The demand for vegetables will decrease.
C. The demand for vegetables will be unaffected.
D. The supply of vegetables will increase.

ANSWER: A

18. Last month, a coffee shop sold 600 cups of coffee at a price of VND 15,000 a cup. For
last month, the shop’s
A. total revenue was VND 9 million.
B. economic profit was VND 9 million.
C. accounting profit was VND 9 million.
D. explicit costs were VND 9 million.

ANSWER: A

19. Which of the following would shift the demand curve for beef to the right?
A. a decrease in the expected future price of beef
B. a decrease in the price of beef
C. a decrease in the price of pork, a substitute for beef
D. an increase in consumer income, assuming beef is a normal good

ANSWER: D

20. Which of the following events must cause equilibrium quantity to fall?
A. demand and supply both increase
B. demand increases and supply decreases
C. demand and supply both decrease
D. demand decreases and supply increases

ANSWER: C

21. The functional relationship between input and output is known as

A. supply function
B. demand function
C. elasticity
D. production function

ANSWER: D

22. A rice farm has production function: Q = 7K5/7L3/7, then this farm has
A. economies of scale
B. constant returns to scale
C. diseconomies of scale
D. negative profits

ANSWER: A

23. Mai Anh buys a hat for VND 60,000, and her consumer surplus is VND 20,000. How
much is Mai Anh willing to pay for the hat?
A. VND 60,000
B. VND 20,000
C. VND 80,000
D. VND 40,000

ANSWER: C

24. Opinion-based analysis is known as

A. Positive analysis
B. Factual analysis
C. Normative analysis
D. Microeconomic analysis

ANSWER: C

25. The consumer’s optimum choice is represented by

A. MUx/MUy = Py /Px
B. MUx/Px = MUy /Py
C. MUx/Py = MUy /Px
D. MUy /MUx = Px/Py

ANSWER: B

26. A movement upward and to the right along a supply curve is called

A. a decrease in quantity supplied

B. an increase in quantity supplied
C. a decrease in supply
D. an increase in supply

ANSWER: B

27. The vertical distance between the ATC and AVC curves is

A. the value of MC
B. the value of AFC
C. constant
D. impossible to measure

ANSWER: B

28. For a monopoly firm,

A. price = average revenue

B. price is greater than average revenue
C. price = marginal revenue
D. price is less than marginal revenue

ANSWER: A

29. Economic models are built based partly on

A. recommendations
B. hypotheses
C. assumptions
D. policies

ANSWER: C

30. Demand is unit elastic if the price elasticity of demand is

A. less than 1
B. greater than 1
C. equal to 1
D. greater than 0

ANSWER: C

31. Average variable cost

A. is unchanged as output increases.

B. is U-shaped.
C. will increase if marginal cost is less than AVC.
D. None of the above is correct.

ANSWER: B

32. Suppose that a coffee shop had revenues of VND 400,000,000 in a given year. The
owner spent VND 60,000,000 on utilities (gas, water, electricity etc.), VND 120,000,000 on
supplies (coffee beans, milk, sugar etc.) and VND 100,000,000 on equipment, including
maintenance. The owner could have earned VND 200,000,000 working at another occupation.
What is the accounting profit for the coffee shop?
A. VND 120 million
B. VND 220 million
C. VND 320 million
D. VND 200 million

ANSWER: A

33. Which of the following is an example of implicit cost?

A. cash payments for raw materials

B. salaries paid to workers
C. interest on money borrowed to purchase equipment
D. the owner of a firm forgoing an opportunity to earn a large salary working for a bank

ANSWER: D

34. The goal of the consumer is to

A. maximize utility.
B. minimize expenses.
C. spend more income in the current time period than in the future.
D. All of the above are correct.

ANSWER: A

35. Student A spends her income on two goods: books and lipsticks. Student A has VND
2,000,000 to allocate to these two goods, the price of a book is VND 100,000, and the price of a
lipstick is VND 200,000. What is the maximum number of books student A can buy?

A. 10
B. 20
C. 40
D. 50

ANSWER: B

36. A perfectly competitive firm has

A. constant marginal cost

B. perfectly elastic demand
C. a downward-sloping demand curve
D. market power

ANSWER: B
37. Monopoly may result in

A. deadweight loss
B. an increase in consumer surplus
C. an increase in total surplus
D. economic efficiency

ANSWER: A

38. Producer surplus is

A. the amount a seller is paid minus the cost of production.

B. the area between the supply and demand curves.
C. the cost to sellers of participating in a market.
D. All of the above are correct.

ANSWER: A

39. To maximize profit, firms should produce at a level of output where

A. P = AVC
B. P = ATC
C. MP = MC
D. MR = MC

ANSWER: D

40. Which of the following is not a reason for the existence of a monopoly?

A. diseconomies of scale
B. patents
C. sole ownership of a key resource
D. copyrights

ANSWER: A

41. A monopoly market is characterized by

A. free entry and exit

B. many buyers and sellers
C. a product without close substitutes
D. rising fixed costs

ANSWER: C

42. Which of the following is a characteristic of a perfectly competitive market?

A. Firms have difficulty entering the market.
B. Demand curve is horizontal.
C. There are only a small number of sellers.
D. Firms sell very similar products.

ANSWER: D

43. A decrease in income will cause a consumer’s budget constraint to

A. remain unchanged.
B. shift outward, parallel to its initial position.
C. shift inward, parallel to its initial position.
D. pivot along the vertical axis.

ANSWER: C

44. The short-run supply curve of a perfectly competitive firm is

A. downward-sloping.
B. the marginal cost curve above average total cost.
C. horizontal.
D. the marginal cost curve above average variable cost.

ANSWER: D

45. When new firms enter a perfectly competitive market,

A. profits of existing firms increase.

B. the market supply curve shifts right.
C. demand decreases.
D. the price of the product increases.

ANSWER: B

46. Exercise 1 (Ex 1): The market for product X is perfectly competitive with the following
demand and supply schedule (Unit: 1000): Price is 30, 34 and 42 respectively. Quantity
demanded is 90, 82 and 66 respectively. Quantity supplied is 80, 92 and 116 respectively.
Refer to (Ex 1), demand curve of the market is given by the equation
A. QD = -2P + 150
B. PE = 32.5
C. QD = -2P + 30
D. None of the above is correct.

ANSWER: A
47. Refer to (Ex 1), supply curve of the market is given by the equation
A. QS = 4P - 10.
B. QS = 3P + 10
C. QS = 3P - 10
D. None of the above is correct.

ANSWER: C

48. Refer to (Ex 1), what are the equilibium price and equilibrium quantity in the market?
A. PE = 30.5 and QE = 82.5
B. PE = 32.5 and QE = 86.5
C. PE = 32 and QE = 86
D. None of the above is correct.

ANSWER: C

49. Refer to (Ex 1), what is the price elasticity of demand E d at equilibrium price and
quantity?
A. 1.4
B. 0.7
C. 0.6
D. None of the above is correct.

ANSWER: B

50. Refer to (Ex 1), demand curve of a perfectly competitive firm is given by the equation:
A. PE = 30.5
B. PE = 32
C. QD = -2P + 150
D. None of the above is correct.

ANSWER: B

51. Refer to (Ex 1), Total cost function is: TC = Q2/150 + 500. MC is:
A. 500/Q
B. Q/150
C. 2Q/150
D. None of the above is correct.

ANSWER: C

52. Refer to (Ex 1), Total cost function is: TC = Q2/150 + 500. Find TFC; TVC?
A. Q2/150; 500/Q.
B. Q2/150; 500
C. 500; Q2/150
D. None of the above is correct.

ANSWER: C

53. Refer to (Ex 1), Total cost function is: TC = Q2/150 + 500. Find ATC?
A. Q/150 + 500/Q.
B. Q/50 + 500/Q.
C. Q2/150 + 500/Q.
D. None of the above is correct.

ANSWER: A

54. Refer to (Ex 1), Total cost function is: TC = Q2/150 + 500. Find AFC; AVC?
A. 500/Q; Q2/150.
B. 500/Q; Q/150.
C. Q2/150; 500/Q.
D. None of the above is correct.

ANSWER: B

55. Refer to (Ex 1), Total cost function is: TC = Q 2/150 + 500. At what quantity Q does a
perfectly competitive firm maximize profits?
A. 86.
B. 2500.
C. 2400.
D. None of the above is correct.

ANSWER: C

56. Refer to (Ex 1), assuming that the market is monopoly, find MR?
A. MR = (-1/2) QD + 75
B. MR = 32
C. MR = - QD + 75
D. None of the above is correct.

ANSWER: C

57. Exercise 2 (Ex 2): The cost of a coffee farm in a given year is C = VND 400,000,000
spent on two inputs K and L, with the price of K is r = VND 400,000/unit and the price of L is w
= VND 200,000/unit. The farm has Cobb-Douglas production function: Q = 4K 3/4L1/4. Refer to
(Ex 2), MPL is:
A. K-3/4L3/4
B. K3/4L-3/4
C. 4K1/4L3/4
D. None of the above is correct.

ANSWER: B

58. Refer to (Ex 2); MPK is:

A. 3K1/4L-1/4
B. 4K-1/4L1/4
C. 3K-1/4L1/4
D. None of the above is correct.

ANSWER: C

59. Refer to (Ex 2), condition for production optimization is:

A. MPL/w = MPK/r and C = w*L + r*K
B. MPL/r = MPK/w and C = r*L + w*K
C. MPL/L = MPK/K and C = w*L + r*K
D. None of the above is correct.

ANSWER: A

60. Refer to (Ex 2), find K and L for production optimization?

A. K=700 and L=600
B. K=750 and L=500
C. K=500 and L=700
D. None of the above is correct.

ANSWER: B