Saigon International School of Business

The collaborative training programme

Between Banking University Ho Chi Minh city and the University
of Bolton (United Kingdom)

MODULE TITLE: PRINCIPLES OF ECONOMICS

GROUP ASSIGNMENT
DATE OF SUBMISSION:

MULTIPLE CHOICE
No. CONTENTS
1 Raj opens a lemonade stand for two hours. He spends $10 for ingredients and sells $60 worth of lemonade. In the same two hours, he could
have mowed his neighbor’s lawn for $40. Raj has an accounting profit of ____ and an economic profit of _____.
A. $50, $10;
B. $90, $50;
C. $10, $50;
D. $50, $90
2 A firm is producing 1,000 units at a total cost of $5,000. If it were to increase production to 1,001 units, its total cost would rise to $5,008.
What does this information tell you about the firm?
A. Marginal cost is $5, and average variable cost is $8;
B. Marginal cost is $8, and average variable cost is $5;
C. Marginal cost is $5, and average total cost is $8;
D. Marginal cost is $8, and average total cost is $5;
3 A firm is producing 20 units with an average total cost of $25 and marginal cost of $15. If it were to increase production to 21 units, which of
the following must occur?
A. Marginal cost would decrease;
B. Marginal cost would increase;
C. Average total cost would decrease;
D. Average total cost would increase.
4 The government imposes a $1,000 per year license fee on all pizza restaurants. Which cost curves shift as a result?
A. Average total cost and marginal cost.
B. Average total cost and average fixed cost.
C. Average variable cost and marginal cost.
D. Average variable cost and average fixed cost.
5 What you give up for taking some action is called the _____
A. Fixed cost;
B. Variable cost;
C. Opportunity cost;
D. None of the above answers are correct.
6 ____________ is falling when marginal cost is below it and rising when marginal cost is above it.
A. Fixed cost;
B. Variable cost;
C. Average fixed cost;
D. Average total cost.
7 A cost that does not depend on the quantity produced is a(n) ____________.
A. Fixed cost;
B. Variable cost;
C. Average fixed cost;
D. Average total cost.
8 In the ice-cream industry in the short run, ____________ includes the cost of cream and sugar but not the cost of the factory.
A. Fixed cost;
B. Variable cost;
C. Average fixed cost;
D. Average total cost.
9 Profits equal total revenue minus _____________.
A. Total variable cost;
B. Total fixed cost;
Le T. Nhan Principles of Economics
 C. Total accounting cost;
D. Total fixed and variable cost;
10 The cost of producing an extra unit of output is the___________.
A. Fixed cost;
B. Variable cost;
C. Average fixed cost;
D. Marginal cost.
11 Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the
stock. In addition, she would have to quit her $50,000 per year job as an accountant.
What is the opportunity cost of something?
a. What must be given up to acquire it
b. The time it takes to do something
c. What you pay for it
d. The cost to produce it
12 Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the
stock. In addition, she would have to quit her $50,000 per year job as an accountant.
Your aunt's opportunity cost of running a hardware store for a year is __________.
A. $500,000;
B. $50,000;
C. $55,000;
D. $550,000.
13 Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in
order to minimize costs the firm should use:
A. more capital and less labor.
B. more labor and less capital.
C. three times more capital than labor.
D. none of the answers are correct.
14 Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of
labor are employed?
A. 3
B. 4
C. 7
D. 45
15 Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 10 units of capital and 10 units of
labor are employed?
A. 3
B. 4
C. 11
D. 45
16 Suppose the production function is given by Q = 3K + 4L. What is the marginal product of capital when 5 units of capital and 10 units of
labor are employed?
A. 3
B. 4
C. 11
D. 45
17 For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is:
A. 2.
B. 3.
C. 12.
D. 14.
18 For the cost function C(Q) = 100 + 2Q + 3Q2, the average fixed cost of producing 2 units of output is:
A. 100.
B. 50.
C. 3.
D. 2.
19 For the cost function C(Q) = 100 + 2Q + 3Q2, the total variable cost of producing 2 units of output is:
A. 16.
B. 12.
C. 4.
D. None of the answers are correct.
20 You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w =
$40, r = $100, MPL = 20, and MPK = 40 the firm:
A. is cost minimizing.
B. should use less L and more K to cost minimize.
C. should use more L and less K to cost minimize.
D. is profit maximizing but not cost minimizing.
21 You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w =
$40, r = $100, MPL = 4, and MPK = 40 the firm:
Le T. Nhan Principles of Economics
 A. is cost minimizing.
B. should use less L and more K to cost minimize.
C. should use more L and less K to cost minimize.
D. is profit maximizing but not cost minimizing.
22 For a cost function C = 100 + 10Q + Q2, the marginal cost of producing 10 units of output is:
A. 10.
B. 200.
C. 210.
D. None of the answers are correct.
23 For a cost function C = 100 + 10Q + Q2, the average variable cost of producing 20 units of output is:
A. 10.
B. 20.
C. 30.
D. None of the answers are correct.
24 For a cost function C = 100 + 10Q + Q2, the average fixed cost of producing 10 units of output is:
A. 10.
B. 5.
C. 1.
D. None of the answers are correct.
25 Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?
A. The MRTS is equal to the ratio of input prices.
B. The marginal product per dollar spent on all inputs is equal.
C. The marginal products of all inputs are equal.
D. The MRTS is equal to the ratio of input prices, and the marginal product per dollar spent on all
inputs is equal.
26 The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:
A. Land.
B. Production.
C. Capital.
D. Technology.
27 The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the:
A. Production function.
B. Technological constraint.
C. Research and development schedule.
D. Total product.
28 Inputs a manager may adjust in order to alter production are:
A. all factors.
B. variable factors.
C. long-run factors.
D. fixed factors.
29 What is the average product of labor, given that the level of labor equals 10, total output equals 1200, and the marginal product of labor
equals 200?
A. 20.
B. 120.
C. 6.
D. 2,000.
30 The change in total output attributable to the last unit of an input is the:
A. total product.
B. average product.
C. marginal product.
D. marginal return.
31 If the last unit of input increases total product, we know that the marginal product is:
A. positive.
B. negative.
C. zero.
D. indeterminate.
32 Total product begins to fall when:
A. Marginal product is maximized.
B. Average product is below zero.
C. Average product is negative.
D. Marginal product is zero.
33 Given the linear production function Q = 10K + 5L, if Q = 10,000 and K = 500, how much labor is utilized?
A. 600 units
B. 800 units
C. 500 units
D. 1,000 units
34 For the production function Q = 5.2K + 3.8L, if K = 16 and L = 12, we know that MPK is:

Le T. Nhan Principles of Economics

 A. 16.
B. 5.2.
C. 3.8.
D. 12.
35 The combinatiions of inputs thaat produce a given level of outpuut are depicted by: b
A. indifferencce curves.
B. budget linnes.
C. isocost currves.
D. isoquants.
36 Isoquants are normally
n drawn with a convex shhape because:
A. inputs are perfectly substittutable.
B. inputs are perfectly compllementary.
C. inputs are not perfectly su ubstitutable.
D. inputs are not perfectly co omplementary.
37 The absolute value
v of the slopee of the isoquantt is the:
A. marginal rate
r of technical substitution.
B. marginal product
p of capitaal.
C. marginal rate
r of substitutio on.
D. value margginal product off labor.
38 In order for isooquants to have a diminishing marginal
m rate of substitution, theyy must be:
A. L-shaped.
B. straight linnes.
C. vertical.
D. None of thhe statements is correct.
39 Changes in thee price of an inpu ut cause:
A. isoquants to become steep per.
B. slope channges in the isoco ost line.
C. parallel shhifts of the isocost lines.
D. changes inn both the isoquaants and isocostss of equal magniitude.
40 Which of the following
f sets off economic data is minimizing thhe cost of produccing a given leveel of output?
A. MPL = 20,, MPK = 40, w = $16, r = $32.
B. MPL = 20,, MPK = 40, w = $32, r = $16.
C. MPL = 40,, MPK = 20, w = $16, r = $32.
D. MPL = 40,, MPK = 40, w = $16, r = $32.
41 Fixed costs exist only in:
A. the long ruun.
B. capital-inttensive markets.
C. the short run.
r
D. labor-intennsive markets.
42 Costs that channge as output ch hanges are:
A. variable coosts.
B. fixed costss.
C. sunk costss.
D. None of thhe statements is correct.
43 Costs that are forever lost afterr they have beenn paid are:
A. productionn costs.
B. fixed costss.
C. sunk costss.
D. variable coosts.
44 According
A to the table
t below, whaat is the total cosst of producing 125
1 units of outpput?

A. 1,000
B. 2,050
C. 1,400
D. 2,400
45 Accord
ding to the table below,
b what is thhe average variaable cost of prodducing 50 units of
o output?

Le T. Nhan
n Principlles of Econom
mics
 A. 21
B. 34
C. 14
D. 20
46 Accorrding to the tablee below, what is the average totaal cost of producing 160 units off output?

A. 12.98
B. 16.31
C. 22.04
D. 19.38
47 Which curve(ss) does the marginal cost curve inntersect at the (ttheir) minimum point?
p
A. Average tootal cost curve
B. Average fixed
fi cost curve
C. Average variable
v cost curv
ve
D. Average tootal cost curve and
a average variaable cost curve
48 Given a cost fuunction C(Q) = 200
2 + 14Q + 8Q Q2, what is the maarginal cost funcction?
A. 14 + 16Q
B. 14Q + 8Q2
C. 200 + 8Q2
D. 14 + 16Q2
49 A production function:
f
A. defines thee minimum amo ount of output thaat can be producced with inputs such
s as capital annd
labor.
B. defines thee average amoun nt of output that can be producedd with inputs succh as capital andd labor.
C. representss the technology available for turrning inputs intoo output.
D. is determinned only by the expenditures onn R&D.
50 Variable factorrs of production are the inputs thhat a manager:
A. may adjusst in order to alteer sales.
B. may adjusst in order to alteer production.
C. cannot adjjust in the short run.
r
D. cannot adjjust in the long run.
r
51 The short run is
i defined as the time frame:
A. in which thhere are no fixed d factors of prodduction.
B. in which thhere are fixed faactors of producttion.
C. less than one
o year.
D. less than thhree years.
52 The long run is defined as:
A. the horizon in which the manager
m can adjuust all factors off production.
B. the horizon in which theree are only fixed factors
f of producction.
C. the horizon in which theree are both fixed and a variable facttors of productioon.
D. greater thaan one year.
53 The marginal product
p of an inpput is defined ass the change in:
A. average ouutput attributablee to the last unit of an input.
B. total outpuut attributable to
o the last unit of an
a input.
C. total inputt attributable to the
t last unit of ann output.
D. average ouutput attributablee to the last unit of an output.

Le T. Nhan
n Principlles of Econom
mics
54 As long as marginal product is increasing, marginal product is:
A. less than average product.
B. greater than average product.
C. equal to average output.
D. equal to total product.
55 As the usage of an input increases, marginal product:
A. initially increases then begins to decline.
B. initially decreases then begins to increase.
C. consistently decreases.
D. consistently increases.
56 The marginal product of capital for the Cobb-Douglas production function is given by:
A. bKa Lb-1.
B. aKa-1 Lb.
C. aKa-1 Lb-1.
D. bKa Lb.
57 An isoquant defines the combination of inputs that yield the producer:
A. higher levels of output than the desired level of output.
B. lower levels of output than the desired level of output.
C. the same level of output.
D. None of the statements is correct.
58 The isoquants are normally drawn with a convex shape because inputs are:
A. not perfectly substitutable.
B. perfectly substitutable.
C. perfect complements.
D. normal goods
59 The marginal rate of technical substitution:
A. determines the rate at which a producer can substitute between two inputs in order to increase
one additional unit of output.
B. is the absolute value of the slope of the isoquant.
C. is the absolute value of marginal revenue.
D. is constant along the isoquant curve.
60 Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are:
A. convex to the origin.
B. concave to the origin.
C. L-shaped.
D. linear.
61 An isocost line:
A. represents the combinations of w and K that cost the firm the same amount of money.
B. represents the combinations of K and L that cost the firm the same amount of money.
C. represents the combinations of r and w that cost the firm the same amount of money.
D. has a convex shape.
62 For given input prices, isocosts farther from the origin are associated with:
A. lower costs.
B. the same costs.
C. higher costs.
D. initially lower, then higher costs.
63 Average fixed cost:
A. initially declines, reaches a minimum, and then begins to increase as output increases.
B. increases continuously as output increases.
C. declines continuously as output is expanded.
D. keeps constant as output is expanded.
64 The marginal cost curve:
A. lies always below the average total cost curve (ATC).
B. lies always above the average variable cost curve (AVC).
C. intersects the ATC and AVC at their maximum points.
D. intersects the ATC and AVC at their minimum points.
65 The difference between average total costs and average variable costs is:
A. marginal cost.
B. average fixed cost.
C. fixed cost.
D. None of the statements is correct.
66 Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What are the fixed costs?
A. $50
B. $10
C. $1
D. $2
67 Suppose the cost function is C(Q) = 50 + Q - 10Q2 + 2Q3. What is the total cost of producing 10 units?
Le T. Nhan Principles of Economics
 A. $2,060
B. $1,060
C. $560
D. $1,010
68 Suppose the coost function is C(Q)
C 1 2 + 2Q3. Whhat is the variablee cost of produciing 10 units?
= 50 + Q - 10Q
A. $401
B. $1,060
C. $560
D. $1,010
69 The costs of prroduction includ de:
A. the costs thhat appear on thhe income statem ments.
B. the opporttunity costs foreg gone by producing a given produuct.
C. accountingg costs.
D. accountingg costs and oppo ortunity costs.
70 Suppose the marginal
m product of labor is 10 annd the marginal product
p of capitaal is 8. If the waage rate is $5 andd the price of cappital is $2, then
in order to minnimize costs the firm should use:
A. more capittal and less labor.
B. more labor and less capitaal.
C. equal amoounts of labor an nd capital.
D. None of thhe statements is correct.
71 For the cost fuunction C(Q) = 505 + 4Q + 2Q2, thhe total variable cost of producinng 7 units of outtput is:
A. 32.
B. 102.
C. 126.
D. None of thhe answers are correct.
72 Which of the following
f condittions is true whenn a producer minnimizes the costt of producing a given level of ouutput?
A. The margiinal product per dollar spent on all a inputs is equaal.
B. The MRTS is equal to the ratio of the quanntity of inputs.
C. The margiinal products of all inputs are eqqual.
D. The margiinal product per dollar spent on all a inputs is equaal and the MRTS S is equal to the ratio of
the quantitty of inputs.
73 The inputs that a manager usess to alter production are referredd to as:
A. variable faactors.
B. long-run factors.
f
C. fixed factoors.
D. All of the statements are correct.
c
74 The first-orderr conditions for maximizing
m proffits, π = P × F(K
K, L) - wL - rK, are:
a
A.
B. P × MPK - r = 0 and P × MP M L - w = 0.
C. VMPK = r and VMPL = w.
D. All of the answers are corrrect.
75 Suppose the w = $20 and r = $30.$ The isocost line for a firm inn this industry iss:
A. C = 20K + 30L.
B. K = 0.033C - 0.66L.
C. 1.5L + K = 0.5C.
D. Depends entirely
e on the fu
unctional form ofo the productionn function.

Le T. Nhan
n Principlles of Econom
mics
 SAIGON INTERNATIONAL SCHOOL OF BUSINESS
The collaborative training programme
Between Banking University Ho Chi Minh city and the University of Bolton
(United Kingdom)

MULTIPLE CHOICE ANSWER SHEET

Student’s full name: …………….……………………..……………….…………………………………………………………………………

Module: …….……………………..…………………………………. Exam: …….…………. Class: ……….

Mark
Mark Supervisor 1 Supervisor 2 Examiner 1 Examiner 2
(in words)

INSTRUCTIONS:
Shade one letter only for each question. Make sure you put your answer in line with the correct
question number.
01. Ⓐ Ⓑ Ⓒ Ⓓ 26. Ⓐ Ⓑ Ⓒ Ⓓ 51. Ⓐ Ⓑ Ⓒ Ⓓ 76. Ⓐ Ⓑ Ⓒ Ⓓ
02. Ⓐ Ⓑ Ⓒ Ⓓ 27. Ⓐ Ⓑ Ⓒ Ⓓ 52. Ⓐ Ⓑ Ⓒ Ⓓ 77. Ⓐ Ⓑ Ⓒ Ⓓ
03. Ⓐ Ⓑ Ⓒ Ⓓ 28. Ⓐ Ⓑ Ⓒ Ⓓ 53. Ⓐ Ⓑ Ⓒ Ⓓ 78. Ⓐ Ⓑ Ⓒ Ⓓ
04. Ⓐ Ⓑ Ⓒ Ⓓ 29. Ⓐ Ⓑ Ⓒ Ⓓ 54. Ⓐ Ⓑ Ⓒ Ⓓ 79. Ⓐ Ⓑ Ⓒ Ⓓ
05. Ⓐ Ⓑ Ⓒ Ⓓ 30. Ⓐ Ⓑ Ⓒ Ⓓ 55. Ⓐ Ⓑ Ⓒ Ⓓ 80. Ⓐ Ⓑ Ⓒ Ⓓ
06. Ⓐ Ⓑ Ⓒ Ⓓ 31. Ⓐ Ⓑ Ⓒ Ⓓ 56. Ⓐ Ⓑ Ⓒ Ⓓ 81. Ⓐ Ⓑ Ⓒ Ⓓ
07. Ⓐ Ⓑ Ⓒ Ⓓ 32. Ⓐ Ⓑ Ⓒ Ⓓ 57. Ⓐ Ⓑ Ⓒ Ⓓ 82. Ⓐ Ⓑ Ⓒ Ⓓ
08. Ⓐ Ⓑ Ⓒ Ⓓ 33. Ⓐ Ⓑ Ⓒ Ⓓ 58. Ⓐ Ⓑ Ⓒ Ⓓ 83. Ⓐ Ⓑ Ⓒ Ⓓ
09. Ⓐ Ⓑ Ⓒ Ⓓ 34. Ⓐ Ⓑ Ⓒ Ⓓ 59. Ⓐ Ⓑ Ⓒ Ⓓ 84. Ⓐ Ⓑ Ⓒ Ⓓ
10. Ⓐ Ⓑ Ⓒ Ⓓ 35. Ⓐ Ⓑ Ⓒ Ⓓ 60. Ⓐ Ⓑ Ⓒ Ⓓ 85. Ⓐ Ⓑ Ⓒ Ⓓ
11. Ⓐ Ⓑ Ⓒ Ⓓ 36. Ⓐ Ⓑ Ⓒ Ⓓ 61. Ⓐ Ⓑ Ⓒ Ⓓ 86. Ⓐ Ⓑ Ⓒ Ⓓ
12. Ⓐ Ⓑ Ⓒ Ⓓ 37. Ⓐ Ⓑ Ⓒ Ⓓ 62. Ⓐ Ⓑ Ⓒ Ⓓ 87. Ⓐ Ⓑ Ⓒ Ⓓ
13. Ⓐ Ⓑ Ⓒ Ⓓ 38. Ⓐ Ⓑ Ⓒ Ⓓ 63. Ⓐ Ⓑ Ⓒ Ⓓ 88. Ⓐ Ⓑ Ⓒ Ⓓ
14. Ⓐ Ⓑ Ⓒ Ⓓ 39. Ⓐ Ⓑ Ⓒ Ⓓ 64. Ⓐ Ⓑ Ⓒ Ⓓ 89. Ⓐ Ⓑ Ⓒ Ⓓ
15. Ⓐ Ⓑ Ⓒ Ⓓ 40. Ⓐ Ⓑ Ⓒ Ⓓ 65. Ⓐ Ⓑ Ⓒ Ⓓ 90. Ⓐ Ⓑ Ⓒ Ⓓ
16. Ⓐ Ⓑ Ⓒ Ⓓ 41. Ⓐ Ⓑ Ⓒ Ⓓ 66. Ⓐ Ⓑ Ⓒ Ⓓ 91. Ⓐ Ⓑ Ⓒ Ⓓ
17. Ⓐ Ⓑ Ⓒ Ⓓ 42. Ⓐ Ⓑ Ⓒ Ⓓ 67. Ⓐ Ⓑ Ⓒ Ⓓ 92. Ⓐ Ⓑ Ⓒ Ⓓ
18. Ⓐ Ⓑ Ⓒ Ⓓ 43. Ⓐ Ⓑ Ⓒ Ⓓ 68. Ⓐ Ⓑ Ⓒ Ⓓ 93. Ⓐ Ⓑ Ⓒ Ⓓ
19. Ⓐ Ⓑ Ⓒ Ⓓ 44. Ⓐ Ⓑ Ⓒ Ⓓ 69. Ⓐ Ⓑ Ⓒ Ⓓ 94. Ⓐ Ⓑ Ⓒ Ⓓ
20. Ⓐ Ⓑ Ⓒ Ⓓ 45. Ⓐ Ⓑ Ⓒ Ⓓ 70. Ⓐ Ⓑ Ⓒ Ⓓ 95. Ⓐ Ⓑ Ⓒ Ⓓ
21. Ⓐ Ⓑ Ⓒ Ⓓ 46. Ⓐ Ⓑ Ⓒ Ⓓ 71. Ⓐ Ⓑ Ⓒ Ⓓ 96. Ⓐ Ⓑ Ⓒ Ⓓ
22. Ⓐ Ⓑ Ⓒ Ⓓ 47. Ⓐ Ⓑ Ⓒ Ⓓ 72. Ⓐ Ⓑ Ⓒ Ⓓ 97. Ⓐ Ⓑ Ⓒ Ⓓ
23. Ⓐ Ⓑ Ⓒ Ⓓ 48. Ⓐ Ⓑ Ⓒ Ⓓ 73. Ⓐ Ⓑ Ⓒ Ⓓ 98. Ⓐ Ⓑ Ⓒ Ⓓ
24. Ⓐ Ⓑ Ⓒ Ⓓ 49. Ⓐ Ⓑ Ⓒ Ⓓ 74. Ⓐ Ⓑ Ⓒ Ⓓ 99. Ⓐ Ⓑ Ⓒ Ⓓ
25. Ⓐ Ⓑ Ⓒ Ⓓ 50. Ⓐ Ⓑ Ⓒ Ⓓ 75. Ⓐ Ⓑ Ⓒ Ⓓ 100. Ⓐ Ⓑ Ⓒ Ⓓ

Le T. Nhan Principles of Economics