# Extraction of Caffeine from Tea Leaves

**Topics:**Economics, Marginalism, Diminishing returns

**Pages:**8 (854 words)

**Published:**October 17, 2012

ECO402

Quiz # 2

ECO402 (Microeconomics)

Semester Spring 2008

Total Marks 15

Instructions:

1.

2.

3.

4.

5.

This quiz covers Lesson 14-17.

Last date for submission of quiz is 12/05/08.

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In MCQs, write only one option in the answer sheet which you think is correct. More than one answer will be marked zero.

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Virtual University of Pakistan

QUIZ 02

ECO402

Answer Sheet

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providing answers in the given column.

In the “selected option” column, write the option number (A, B, C, D) which you think is the correct option for MCQs.

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Q no.

Selected option

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Virtual University of Pakistan

QUIZ 02

ECO402

Quiz

1) The weighted average of all possible outcomes of a project, with the probabilities of the outcomes used as weights, is known as the: A.

B.

C.

D.

Variance.

Standard deviation.

Expected value

Coefficient of variation.

2) Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity:

A.

B.

C.

D.

A because it has less risk.

A because it provides higher potential earnings.

B because it has less risk.

B because of its higher potential earnings.

3) Assume that one of two possible outcomes will follow a decision. One outcome yields a $75 payoff and has a probability of 0.3; the other outcome has a $125 payoff and has a probability of 0.7. In this case the expected value is:

A.

B.

C.

D.

$85.

$60.

$110.

$35.

Virtual University of Pakistan

QUIZ 02

ECO402

4) A function that indicates the maximum output per unit of time that a firm can produce, for every combination of inputs with a given technology, is called:

A.

B.

C.

D.

An isoquant.

A production possibility curve.

A production function.

An isocost function.

5) The law of diminishing returns assumes that:

A.

B.

C.

D.

There is at least one fixed input.

All inputs are changed by the same percentage.

Additional inputs are added in smaller and smaller increments. All inputs are held constant.

6) Which of the following inputs are variable in the long run? A.

B.

C.

D.

Labor.

Capital and equipment.

Plant size.

All of given options.

7) When labor usage is at 12 units, output is 36 units. From this we may infer that:

A.

B.

C.

D.

The marginal product of labor is 3.

The total product of labor is 1/3.

The average product of labor is 3.

None of the given options.

Virtual University of Pakistan

QUIZ 02

ECO402

8) The rate at which one input can be reduced per additional unit of the other input, while holding output constant, is measured by the: A.

B.

C.

D.

Marginal rate of substitution.

Marginal rate of technical substitution.

Average product of the input.

None of the given options.

9) A risk-averse individual has:

A.

B.

C.

D.

An increasing marginal utility of income.

An increasing marginal utility of risk.

A diminishing marginal utility of income.

A diminishing marginal utility of risk.

10) A production function assumes a given:

A.

B.

C.

D.

Technology.

Set of input prices.

Ratio of input prices.

Amount of capital and labor.

11) According to the law of diminishing returns:

A.

B.

C.

D.

The total product of an input will eventually be negative.

The total product of an input will eventually decline.

The...

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