Question

Q.16. The limit on the consumption bundles that a consumer can afford is known as o

A. An indifference curve o B. The marginal rate of substitution o C. The budget constraint o D. The consumption limit

Q.17. Suppose a consumer must choose between the consumption of sandwiches and pizza. If we measure the quantity of pizza on the horizontal axis and the quantity of sandwiches on the vertical axis, and if the price of pizza is $10 and the price of a sandwich is $5, then the slope of the budget constraint is

o A.- 5 B. 10 C.- 2 D. -1/2

Q.18. The slope at any point on an indifference curve is known as

o A. The trade-off rate

o B. The marginal rate of substitution

o C. The marginal rate of trade-off

o D. The marginal rate of indifference

Q.19. Which of the following statements is not true with regard to the standard properties of indifference curves?

o A. Indifference curves are downward sloping

o B. Indifference curves do not cross each other

o C. Higher indifference curves are preferred to lower ones

o D. Indifference curves are bowed outward

Q.20. Which of the following is true about the consumer's optimum consumption bundle? At the optimum,

o A. The indifference curve is tangent to the budget constraint

o B. The slope of the indifference curve equals the slope of the budget constraint

o C. The relative prices of the two goods equals the marginal rate of substitution

o D. All of the above are true

o E. None of the above are true

Q-21) In the short run,

A) there are no variable costs. B) at least one resource is fixed.

C) all resources are variable. D) all resources are fixed.

Q-22) The period of time during which all inputs can be varied is known as the

a) market period. b) short run. c) interim period. d) long run.

Q-23) Economists assume that the goal of the firm is to maximize

A. total revenue B. total profit

C. total costs D. total satisfaction

Q-24) Which of the following expressions is correct?

a. accounting profit = total revenue - explicit costs

b. economic profit = total revenue - implicit costs

c. economic profit = total revenue - explicit costs

d. Both a and b are correct.

Q-25) An important implicit cost of almost every business is

A. the cost of labor

B. the cost of utilities used in the manufacturing process

C. the opportunity cost of financial capital that has been invested in the business

D. the cost of raw materials used to manufacture a product

Answer 1

16. Ans: The budget constraint

17. Ans: -2

Explanation:

Slope of the budget constraint = -(Price of pizza / Price of sandwich) = -(10 / 5) = -2.

18. Ans: The marginal rate of substitution

19. Ans: Indifference curves are bowed outward.

Explanation:

The correct statement is Indifference curves are bowed inward.

20. Ans: All of the above are true

21. Ans: At least one resource is fixed.

22. Ans: long run.

23. Ans: Total profit.

24. Ans: Accounting profit = total revenue - explicit costs

Explanation:

Accounting profit = Total revenue - explicit costs

Economic profit = Total revenue - explicit costs - implicit costs

25. Ans: The opportunity cost of financial capital that has been invested in the business