The IIT Madras BS Managerial Economics (Managerial Economics) Quiz 1 paper sat on 25 Feb 2024, in the January 2024 term: 19 questions for 25 marks in 120 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
The Cobb-Douglas production function F(K, L)=K^(p)L^(q)
Shows only constant returns to scale
Shows Increasing, decreasing or constant returns to scale based on the value of p+q
Has constant marginal product of labour
Has constant marginal product of capital
Correct answer
Shows Increasing, decreasing or constant returns to scale based on the value of p+q
When one is not able to compare two goods and is confused about which one to choose, his preference violates
Completeness
Reflexivity
Transitivity
All of these
Correct answer
Completeness
When a person prefers Mango to Apple, Apple to Guava and Guava to Mango, his preference violates
Completeness
Reflexivity
Transitivity
Convexity
Correct answer
Transitivity
The marginal product of labour is defined as
a firm’s total output divided by total labour input
the extra output produced by employing one more unit of labour while allowing other inputs to vary
the extra output produced by employing one more unit of labour while holding other inputs constant
the extra output produced by employing one more unit of capital while holding labour input constant
Correct answer
the extra output produced by employing one more unit of labour while holding other inputs constant
If marginal costs equal average total costs
average total costs are falling
average total costs are maximized
average total costs are rising
average total costs are minimized
Correct answer
average total costs are minimized
A chair manufacturer hires its assembly-line labour for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination.
Based on the above data, answer the given subquestions.
If the firm is currently using 3 hours of labour for each hour of machine time, is it minimizing its costs of production?
Yes
No
Correct answer
No
A chair manufacturer hires its assembly-line labour for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination.
Based on the above data, answer the given subquestions.
If not, what will be the optimal combination of labour L*=______________
Correct answer: 0
A chair manufacturer hires its assembly-line labour for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labour or machinery in any combination.
Based on the above data, answer the given subquestions.
If not, what will be the optimal combination of capital K*=_____________
Correct answer: 4
The production function for a product is given by q = 100KL If the price of capital is INR 1200 per day and the price of labour INR 300 per day.
Based on the above data, answer the given subquestions.
What will be the optimal capital-labour ratio ______________
Correct answer: 0.25
The production function for a product is given by q = 100KL If the price of capital is INR 1200 per day and the price of labour INR 300 per day.
Based on the above data, answer the given subquestions.
Optimal level of Labour (L*) for producing 10000 units of output will be____________
Correct answer: 20
The production function for a product is given by q = 100KL If the price of capital is INR 1200 per day and the price of labour INR 300 per day.
Based on the above data, answer the given subquestions.
Optimal level of capital (K*) for producing 10000 units of output will be_______________
Correct answer: 5
The production function for a product is given by q = 100KL If the price of capital is INR 1200 per day and the price of labour INR 300 per day.
Based on the above data, answer the given subquestions.
Minimized cost corresponding to 10000 units of output will be ____________
Correct answer: 12000
Elmo finds himself at a Coke machine on a hot and dusty Sunday. The Coke machine requires exact change-two quarters and a dime. No other combination of coins will make anything come out of the machine. No stores are open; no one is in sight. Elmo is so thirsty that the only thing he cares about is how many soft drinks he will be able to buy with the change in his pocket; the more he can buy, the better.
Based on the above data, answer the given subquestions.
If Elmo has 2 quarters and a dime in his pockets, he can buy 1 soft drink. How many soft drinks can he buy if he has 4 quarters and 2 dimes?____________
Correct answer: 2
Elmo finds himself at a Coke machine on a hot and dusty Sunday. The Coke machine requires exact change-two quarters and a dime. No other combination of coins will make anything come out of the machine. No stores are open; no one is in sight. Elmo is so thirsty that the only thing he cares about is how many soft drinks he will be able to buy with the change in his pocket; the more he can buy, the better.
Based on the above data, answer the given subquestions.
Does Elmo have convex preferences between dimes and quarters?
Yes
No
Correct answer
Yes
Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $100 for these cases. You have a deal with your grocers that they will pay you $0.25 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $55 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
Based on the above data, answer the given subquestions.
What is the opportunity cost of filling this order (i.e., selling these cartons to the
fraternity)?_____________(in $)
Correct answer: 25
Last week you purchased five large cases of Fritos for a customer who, as it turned out, did not accept delivery. You paid $100 for these cases. You have a deal with your grocers that they will pay you $0.25 for each dollar of returned merchandise. Just this week, you found a fraternity on campus that will buy the five cartons for $55 (and will pick them up from your apartment, relieving you of the need to deliver them to the frat house).
Based on the above data, answer the given subquestions.
Should you sell the Fritos to the fraternity?
Yes
No
Correct answer
Yes
The short run cost function of a company is given by the equation TC=100+25q+q2, where TC is total cost and q is no of units produced.
Based on the above data, answer the given subquestions.
What will be the average fixed cost if company produces 100 units ___________________
Correct answer: 1
The short run cost function of a company is given by the equation TC=100+25q+q2, where TC is total cost and q is no of units produced.
Based on the above data, answer the given subquestions.
What is marginal cost of company at q=25? _______________
Correct answer: 75
The short run cost function of a company is given by the equation TC=100+25q+q2, where TC is total cost and q is no of units produced.
Based on the above data, answer the given subquestions.
What is average variable cost at q=25?__________________
Correct answer: 50
