# RSET: Economics MCQs (Practice-Test 44 of 122)

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The total area under the demand curve of a goods, measures

marginal utility

total utility

consumers'surplus

producers'surplus

If the price-consumption curve is horizontal, the price elasticity of demand for x (the price of which falls) would be

zero

one

greater than one

less than one

If two demand curves intersect, then at the point of intersection.

they are equally elastic

the steeper curve is more elastic

the flatter curve is more elastic

their elasticity cannot be compared

The production function Y = LK is

homogeneous of degree 2

Homogeneous of degree 1

homogeneous of degree zero

non-homogeneous

Suppose that output (Y) is a function of capital (KI); then the capital-elasticity of output is given by

MP/APK

APk/MPK

Y

none of these

Assume a production function Y = La K1 − a (Y = output, L = labour and K = capital) for a firm in a purely competitive market. Which one of the following would measure the share of labour in output?

a

L (a)

La

a/L

A supply curve will have a price-elasticity equal to 1 only when it is

a straight line with a positive intercept

a straight line with a negative intercept

a straight line passing through the origin

horizontal

If tow factors are perfect substitutes, the isoquant will be

a straight line

a parabola

a rectangular hyperbola

an L-shaped curve

Under perfect competition (when input prices are fixed and there are no external economics or diseconomies), the industry supply curve in derived by

vertically adding the average cost curves'horizontally adding the average cost curves

vertically adding the marginal cost curve

horizontally adding the marginal cost curves

Starting for a monopoly equilibrium without any policy intervention, market efficiency can be improved by imposing a

per-unit production tax

per-unit sales tax

profit tax

price ceiling below the existing equilibrium price

Application of the ‘Marginal-cost pricing’ principle in a decreasing cost industry would lead to

surpluses

losses needing subsidies

neither surpluses nor losses

a decline in output

In monopolistic competition a fir is longrun equilibrium

at the minimum point of the long-run average cost curve

in the declining segment of the longrun average cost curve.

in the rising segment of the long-run average cost curve

when the price is equal to marginal cost

If in a purely competitive market with downward-sloping demand and upward6 of 11 sloping supply curves, a specific excise tax per unit of output is imposed, then

price rises by the amount of the tax

the price-rise is less than the amount of the tax

the price-rise grater than the amount of the tax

the price remains the same.

Rent earned by a factor of production equals

what this factor can earn in its next best use

the sum of what this factor earns in its current use and what is can earn in its next best use

its current earnings

the difference between what this factor is currently earning and what is can earn in its next best use

the Adding Up Theorem under constant returns to scale holds when the factors of production are paid according to their

marginal productivities

average productivities

total productivities

ratio of marginal productivities to average productivities