ECO404 Important short Questions and Answers

Question: Differentiate between explicit and implicit costs.
Answer: Explicit costs: Explicit costs are the actual out of pocket
expenditures of the firm to purchase or hire the inputs it
requires in production. Implicit costs: Implicit costs refer
to the value of the inputs owned and used by the firm in
its own production processes.


Question: Differentiate between accounting profit and economic
profit.
Answer: Business or Accounting Profit: Total revenue minus the
explicit or accounting costs of production. Economic
Profit: Total revenue minus the explicit and implicit costs
of production.


Question: Differentiate between direct demand and derived
demand.
Answer: Direct Demand Individual’s demand for goods and
services that directly satisfy consumer desires is known
as direct demand. This is also known as consumer
demand. Derived Demand Goods that are demanded not
for direct consumption but rather for their use in
providing other goods and services are known as derived
demand. Their demand is derived from the demand for
the products they are used to provide. Input demand is
called derived demand. It is also called business demand.


Question: Differentiate between the situation of surplus and
shortage.
Answer: Surplus: A surplus is created when producers supply
more of a product at a given price than buyers demand.
Surplus describes a condition of excess supply. Shortage:
A shortage is created when buyers demand more of a
product at a given price than producers are willing to
supply. Shortage describes a condition of excess demand.


Question: Differentiate between short run and long run.
Answer: Short run: The short run is the period of time in which
sellers already in the market respond to a change in
equilibrium price by adjusting variable inputs. Buyers
already in the market respond to changes in equilibrium
price by adjusting the quantity demanded for the good or
service. Long run: The long run is the period of time in
which new sellers may enter a market, existing sellers
may exit from a market, existing sellers may adjust fixed
factors of production, and buyers may react to a change
in equilibrium price by changing their tastes and
preferences.

ECO 404 100% MCQ

Question 1 of 20
The price that equates the quantity demanded with the quantity supplied is called:
Select correct option:
Equilibrium price
Price floor
Support price
Nominal Price

Question 2 of 20
In fiscal policy, tax rates are determined by the:
Select correct option:
Government
Central bank
General public
Commercial bank


Question 3 of 20
Percentage change in profit due to one unit change in sales is known as:
Select correct option:
Degree of operating leverage
Economies of scale
Degree of freedom
Cost elasticity


Question 4 of 20
Which economist introduces the simplex method?
Leonid Kantorovich
George B Dantzig
John von Neumann
Ioel Dean

Question 5 of 20
Change in total cost caused by one unit change in output is known as:
Select correct option:
Marginal revenue
Average revenue
Marginal cost
Average cost

Question 6 of 20
Suppose Y = f(x), if Y = 16X + 57? then what will be dY/dX according to rules of
differentiation?
Select correct option:
16
16X
57
57X


Question 7 of 20
Which of the following is also known as analysis of variance?
Select correct option:
T statistic
Z statistic
F statistic
Durbin Watson Statistic

Question 8 of 20
Firms are price makers in which of the following market structures?
Select correct option:
Perfect competition
Monopoly
Monopolistic competition
Oligopoly

Question 9 of 20
We get the point of optimal input combination if:
Select correct option:
lsocost and lsoquant curves are tangent
Budget line and indifference curves are tangent
Demand and supply curves intersect
Isocost and supply curve intersect

Question 10 of 20
lf the percentage change in profit is Rs. 400 and percentage change in sales is Rs. 100 then
what will be the degree of operating leverage?
1
2
3
4
Question 11 of 20
Which of the following computer soft wares are used to solve the problem of linear
programming'?
Select correct option:
Fore Profit software
LINDU
MS Excel Solver
All of the above
Question 12 of 20
Which of the following is a behavioral equation?
Select correct option:
GNP=C+I+G
St=b0+btRt+u1
Profit = TR / TC
None of the given options
Question 13 of 20
If oligopoly firm is producing homogenous product, it is known as:
Select correct option:
Pure oligopoly
Differentiated oligopoly
Triopoly
Monopoly
If there are three sellers, we have Triopoly.
If the product is homogenous, it is called pure oligopoly.
If the product is differentiated, it is called differentiated oligopoly.
Question 14 of 20
Cigarettes are an example of which type of market structure?
Select correct option:
Perfect competition
Monopoly
Monopolistic competition
Oligopoly
Question 15 of 20
The branch of economics which deals with the study of overall behavior of the economy is
known as:
Select correct option:
Microeconomics
Macroeconomics
Development economics
Mathematical economics
Question 16 of 20
Short run average cost curves are U-shaped because of:
Select correct option:
The law of diminishing returns
The law of diminishing utility
The law of demand
The law of supply
Question 17 of 20
Derived demand is also known as:
Select correct option:
Consumer's demand
Direct demand
Market demand
Business demand
Question 18 of 20
Percentage change in output due to 1% change in inputs is called:
Select correct option:
Output elasticity of inputs
Inputs elasticity of output
Elasticity of substitution
Cross price elasticity
Question 19 of 20
Which of the following is TRUE for the law of supply'? :
Select correct option:
There is inverse relationship between the price of a good and quantity demanded of that good
There is positive relationship between the price of a good and quantity demanded of that good
There is positive relationship between the price of a good and quantity supplied of that good
There is inverse relationship between income and quantity supplied of a good
Question 20 of 20
Which of the following shows accounting profit of the firm'?
Select correct option:
Total revenue + explicit or accounting costs of production
Total revenue - explicit or accounting costs of production
Total revenue / explicit or accounting costs of production
Total revenue X explicit or accounting costs of production

ECO 404 Past Papers, MCQ,s

4:- In which of the following games, players decide about their strategy choices at the same
time?
Select correct option:
Repeated games
Non-repeated games
Simultaneous games
Sequential games
5:-Public utilities are an example of:
Select correct option:
Perfect competition
Natural monopoly
Monopolistic competition
Oligopoly
6:- Question # 11 of 20 ( Start time: 06:11:25 PM ) Total Marks: 1
Y = 3.35 + 2.63X shows slop in this regression equation.
Select correct option:

2.63
3.35

4.5
2.5
7:- GNP=C+I+G equation is
Definitional Equation
Behavior equation
8:- Cigarettes are an example of which type of market structure?
Select correct option:
Perfect competition
Monopoly
Monopolistic competition
Oligopoly
9:- Which of the following is TRUE for the law of supply'? :
Select correct option:
There is inverse relationship between the price of a good and quantity demanded of that good
There is positive relationship between the price of a good and quantity demanded of that good
There is positive relationship between the price of a good and quantity supplied of that good
10:-There is inverse relationship between income and quantity supplied of a good
Decreasing part of marginal product of labor curve shows which of the following law?
Select correct option:
Law of diminishing returns
Law of diminishing marginal utility
Law of demand
Law of supply
Y=a +b1X1 +b2X2. This equation is an example of:
Multiple regression model shez correct
Which of the following is an example of a deterministic relation?
Profit relation shez correct
wo products are said to be compliments if cross price elasticity of demand between these two
products is:
Zero shez correct


Out of pocket costs of firm are known as:
Explicit costs shez correct
St = S0 + bt is an example of:
Linear trend analysis shez correct


Multiple equation econometric models consist of:
Select correct option:
Equalities only
Identities only
Behavioral equations only
Both Identities and behavioral equations
Question # 2 of 10
Profit is maximized where:
Select correct option:
Marginal revenue = Marginal cost

Marginal revenue = Average cost
Marginal cost = Average revenue
Average revenue = Average cost



Question # 3 of 10 ( Start time: 02:42:05 PM ) Total Marks: 1
If a firm takes opinion of different individuals for the purpose of forecasting, this is known as:
Select correct option:
Personal insight approach to forecasting
Panel consensus approach to forecasting
Delphi approach to forecasting
Time series analysis

Question # 4 of 10 ( Start time: 02:43:17 PM ) Total Marks: 1
Fluctuations should be random. It is the requirement of which of the following technique(s)?
Select correct option:
Moving average technique only
Exponential smoothing technique only
Both moving average and exponential techniques
Barometric technique

Question # 5 of 10 ( Start time: 02:44:32 PM ) Total Marks: 1
Non-price determinant of supply includes:
Select correct option:
Prices of other goods or services
Input prices
Weather conditions
All of the given options


Question # 6 of 10 ( Start time: 02:45:31 PM ) Total Marks: 1
If the percentage change in profit is Rs. 400 and percentage change in sales is Rs. 100 then what
will be the degree of operating leverage?
Select correct option:
1
2
3
4
Question # 7 of 10 ( Start time: 02:46:43 PM ) Total Marks: 1
Given the Cobb Douglas production function: Q = ALaKb There will be decreasing returns to
scale if:
Select correct option:
a + b > 1
a + b < 1
a + b = 1
a + b = 0
Question # 8 of 10 ( Start time: 02:47:37 PM ) Total Marks: 1
Y = a + bX + e "b" shows ----------------- in this regression equation.
Select correct option:
Intercept
Slope
Elasticity
Power
Question # 9 of 10 ( Start time: 02:49:01 PM ) Total Marks: 1
Given the marginal cost function, MC = 5Q2 – 10Q + 50, what is dMC/dQ?
Select correct option:
5Q + 50
10Q - 10
10Q + 50
5Q – 10Q
Question # 10 of 10 ( Start time: 02:49:44 PM ) Total Marks: 1
In which of the following cases, cost elasticity will be more than one?
Select correct option:
When percentage change in cost is less than the percentage change in output
When percentage change in cost is greater than the percentage change in output
When percentage change in cost is equal to the percentage change in output
When percentage change in cost is less than the percentage change in input