QUIZ NO.

3
APPLICATION OF MICROECONOMICS THEORY
MULTIPLE CHOICE QUESTIONS

1.

All of the following are complementary goods except

a. Margarine and butter
b. Cameras and rolls of film
c. VCRs and video cassettes
d. Razors and razor blades

2. When the government imposes health and safety regulations on certain

products, one of the most likely results is
a. Greater consumption of the product
b. Lower prices for the product
c. Greater tax revenues for the government
d. Higher prices for the product
3. An increase in the market supply of beef would result in a(n)
a. Increase in the price of beef.
b. Decrease in demand for beef.
c. Increase in the price of pork.
d. Increase in the quantity of beef demanded.
4. If Rosanna used 10,000 from her savings account, which was paying 5%
interest annually, to invest in saloon, the opportunity cost of this investment
would annually be
a. 500
b. The dividend paid by the saloon
c. 10,000
d. 10,500
5.

Companies A, B, and C had the following results for last year as reported on
financial statements prepared in conformity with Philippine Financial Reporting
Standards (PFRS):

Sales
Cost of goods
sold

A
100,000
60,000

B
200,000
120,000

C
400,000
200,000
1

Gross Profit
Other expenses
Net income

40,000
10,000
30,000

80,000
20,000
60,000

200,000
80,000
120,000

Equity

500,000

300,000

900,000

Assets are equal to equity. The company has no long-term debt outstanding. The
cost of internally-generated equity capital is 12%. Which company has the highest
economic profit?
a. Company A
b. Company B
c. Company C
d. Cannot be determined from the information given.
6.

The output and cost information for a firm is presented below.

Output
Total Variable Cost
0
-01
150
2
260
3
350
The marginal cost of the second unit of

Total Cost
100
250
360
450
output is

a. 100
b. 110
c. 150
d. 180
For item Numbers 7-9
Lionel Company is selling in a purely competitive margin and has the
following cost data.
Output

Average Fixed
Average
Average Total
Marginal Cost
Cost
Variable Cost
Cost
1
600
100
700
100
2
300
75
375
50
3
200
70
270
60
4
150
73
223
80
5
120
70
190
110
6
100
90
190
190
7
86
105
191
200
8
76
119
195
230
9
67
138
205
290
10
60
160
220
360
7. If the market price for Lionels product is 190, the firm should produce
a. 5 units at an economic loss of 70.
2

b. 6 units and break-even.

c. 8 units and break-even.
d. 8 units at an economic profit of 74.
8.

If
a.
b.
c.
d.

the market price for Leonels product is 290, this firm should produce
7 units at an economic profit of 707.
8 units at an economic profit of 760.
9 units at an economic profit of 765.
10 units at an economic profit of 700.

9.

A
a.
b.
c.
d.

long equilibrium price will be set at

110
190
200
230

The following data apply for Numbers 10-12

Number of Workers
10
11
12

Total Product Units

20
25
28

Average Selling Price

50.00
49.00
47.50

10. The marginal physical product when one worker is added to a team of 10
workers is
a. 1 unit
b. 8 units
c. 5 units
d. 25 units
11. The marginal revenue per unit when one worker is added to a team of 11
workers is
a. 35.00
b. 225.00
c. 105.00
d. 47.50
12. The marginal revenue product when one worker is added to a team of 11
workers is
a. 42.00
b. 225.00
c. 105.00
d. 47.50
The following data apply to items 13-14

Total Units of

Average Fixed Cost

Average Variable

Average Total Cost

3

Products
6
7
8
9

15.00
12.86
11.25
10.00

Cost
25.00
24.00
23.50
23.75

40.00
36.86
34.75
33.75

13. The total cost of producing seven units is

a. 90.00
b. 168.00
c. 258.02
d. 280.00
14. The marginal cost of producing the ninth unit
a. 23.50
b. 23.75
c. 25.75
d. 33.75
15.In a theory of demand, the marginal utility per peso of a product
a. Increases when consumption expands
b. Decreases when consumption expands
c. Explains why short-run supply curves are upward sloping
d. Increases as more units of a variable input are added to the production
process.