[neo232]

Here are some of the (tricky) microeconomic multiple choice questions (only one answer is right) that I can not finish hope someone help A brief explanation is appriciated.

1. The marginal utility per £1 spent on B is less then the marginal utility per £1 to spent on A. To increase total ultility consumer should buy:

a.less A
b.less B
c.more of both
d.less of both

2. As price rises, for a Giffen good:

a.the price and income effects act in the same direction
b.price effect is -ve, income effect is +ve
c.price effect is +ve, but is exceeded by a +ve income effect
d.price effect is -ve and exceeded by a-ve income effect

3. A consumer spends 1/4 of their income on food. The price of food increases by 10% and incomes by 3%, the consumer's ultility is:

a.unchanged
b.better
c.worst
d.cannot tell

4. Profit to an economist is defined as:

a.revenue less tax deductible input costs
b.share dividend payments
c.revenue minus input costs
d.revenue minus variable input costs

5. A monopoly firm with a constant marginal cost curve will price its output in which region of the demand curve:

a.elastic
b.unitary
c.inelastic
d.zero

6.The demand for a factor of production is:

a.The average physical product curve (APP)
b.The marginal physical product curve (MPP)
c.APP x product price
d.MPP x product price

7. The wage rate (W) set by a monopoly supplier of labour is such that: (M marginal, R revenue, L labour, P production, C cost)

a.MRPL > W
b.MCL < W
c.MCL = W
d.none of these

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[Mavefr]

Hi there,

I'll try and help, well do my best anyway

1. The marginal utility per £1 spent on B is less then the marginal utility per £1 to spent on A. To increase total ultility consumer should buy:

a.less A
b.less B
c.more of both
d.less of both

I would say more of both because a consumer prefers a mix of goods rather than one. But on the other hand the consumer should buy more of A up to the point where both marginal utilities are equal.

2. As price rises, for a Giffen good:

a.the price and income effects act in the same direction
b.price effect is -ve, income effect is +ve
c.price effect is +ve, but is exceeded by a +ve income effect
d.price effect is -ve and exceeded by a-ve income effect

Broadly ( and from memory ) the definition of a Giffen good is when the income effect is more important than the price effect.

3. A consumer spends 1/4 of their income on food. The price of food increases by 10% and incomes by 3%, the consumer's ultility is:

a.unchanged
b.better
c.worst
d.cannot tell

My initial answer would have been c.worst. But I think it's d.cannot telt because it depends on the price effect and the income effect, and so it depends on the type of good

4. Profit to an economist is defined as:

a.revenue less tax deductible input costs
b.share dividend payments
c.revenue minus input costs
d.revenue minus variable input costs

I would say it's the last one, I've always used Revenue minus costs in profit equations in micro .

5. A monopoly firm with a constant marginal cost curve will price its output in which region of the demand curve:

a.elastic
b.unitary
c.inelastic
d.zero

For me it's c.inelastic, but I'm not sure. The reason is that an inelastic demand means you can put the price as high as you want, and if Mc is a constant then average cost is also, so the higher the price the higher the profit.

6.The demand for a factor of production is:

a.The average physical product curve (APP)
b.The marginal physical product curve (MPP)
c.APP x product price
d.MPP x product price

I think it's a), but I don't know or can't remember

7. The wage rate (W) set by a monopoly supplier of labour is such that: (M marginal, R revenue, L labour, P production, C cost)

a.MRPL > W
b.MCL < W
c.MCL = W
d.none of these

I suppose we have to consider this as a monopoly. Normaly I think the price of the good is given by:
(P+MC)/P=1/E(demand)

So:
P=MC/(1+(1/E))
(E is elasticity)

If my assumption is correct, then the answer is d.

I hope that helped!