1. If the income elasticity of a particular good is negative 0.

2, it would be considered:

a. an elastic good

b. a superior good.

c. an inferior good

d. a normal good

2. The following question is based on the production function Q=80L0.7K0.3 where the cost of

labour is $6 and the cost of capital is $4. The total cost of production is $120. Based on the

production function given in the question, what are the returns to scale?

a. U - Shaped

b. Increasing

c. Decreasing

d. Constant

3. Given the production function Q = 120 L0.3K0.4. What can we say about the returns to scale?

a. Insufficient information.

b. Decreasing returns to scale.

c. Constant returns to scale.

d. Increasing returns to scale.

4. When the R2 of a regression equation is very high, it indicates that:

a. the intercept term has no economic meaning.

b. all the coefficients are statistically significant.

c. None of these answers are correct

d. a high proportion of the variation in the dependent variable can be accounted for by

the variation in the independent variable

Quantity Purchased per Month

Monthly Income Steaks Pizzas

$2,000 2 8

$3,000 4 6

Pizzas are classified as a(n)

a. inferior good

b. marginal good

c. normal good

d. positive good

6. Which of the following statements is true about R2?

a. It represents the percent of variation in X that is explained by Y.

b. It ranges in value from -1 to + 1.

c. It is also called the coefficient of correlation.

d. It is also called the coefficient of determination.

7. Using the demand function QD = 150 − 10P. What is the marginal revenue function?

a. 8QD

b. QD –2QD

c. None of these are correct.

d. 15 – (QD/5)
8. The table below gives the game matrix for Digicel and B-mobile where the outcomes

represent profits.

B-mobile

Advertise Don’t advertise

Digicel High price (7,10) (4,8)

Low price (8,1) (12,17)

Which of the following is true about the outcome strategies?

a. The cooperative outcome is (12,17).

b. The cooperative outcome is (29).

c. All these answers are incorrect.

d. There is no cooperative outcome.

9. What will happen the returns to scale if production function moves from Q = 120 L0.1K

0.1 to Q = 240 L0.1K0.9?

a. There will be no effect on the value for returns to scale.

b. The value will change to decreasing returns to scale.

c. The value will be constant returns to scale.

d. Insufficient information

10. The following question is based on the production function Q=80L0.7K0.3 where the cost of

labour is $6 and the cost of capital is $4. The total cost of production is $120. What is the partial

differential of labour?

a. All these answers are incorrect.

b. 56L0.3/ K - 6λ

c. 56L0.3/ K0.3- 6λ

d. 56K0.3/ L0.3- 6λ
11. Using the demand function QD = 150 − 10P. What is the total revenue function?

a. 15QD –(Q2D/10)

b. QD –bP

c. 10QD –Q2D

d. 15QD –Q2D

12. Using the following data:

Income (Y) Sales (X)

5 10

4 7

2 9

The regression model is Y = b0 + b1X + e. What is the approximate value of the intercept (b0)?

a. 275

b. 5.81

c. 2.43

d. 7.90

13. The following question is based on the production function Q=80L0.7K0.3 where the cost of

labour is $6 and the cost of capital is $4. The total cost of production is $120. What is the capital

to labour ratio?

a. L=0.51K

b. K=L

c. None of these answers are correct.

d. K=0.644L
14. When the price of a product is $2.00 the corresponding quantity is 5 units. When the price of

the commodity is $4.00 the corresponding quantity is 1 unit. What is the value for the price

elasticity of demand?

a. All these answers are incorrect

b. -3.87

c. -1.00

d. -1.34

15. The following question is based on the production function Q=80L0.7K

0.3 where the cost of labour is $6 and the cost of capital is $4. The total cost of production is

$120. What is the optimal level

of labour?

a. 4

b. 14

c. 7.1

d. 5.83

16. The following information provided for Tony Romo's income and expenditures.

Quantity Purchased per Month

Monthly Income Steaks Pizzas

$2,000 2 8

$3,000 4 6

Tony's income elasticity of demand for steaks is:

c. less than 1.0.

d. greater than 1.0.

Q = 40 – P

Where TC is total cost, Q is the total product and P is price. What is the correct expression for

total profit?

a. 30Q – 2Q2 – 20

b. 25Q – 2Q2 + 20

c. 20Q – 2Q2 + 40

d. 25Q – 2Q2 – 20

18. Using the following data:

Income (Y) Sales (X)

5 10

4 7

2 9

The regression model is Y = b0 + b1X + e. What is the approximate value of the R2 ?

a. 0.020

b. 0.037

c. 1

d. 0.487

19. Given the production function Q= 4LK. What is the percentage change in output if labour

and

capital increases by 30%?

a. There will be no effect on the output level.

b. Capital contribution will be more than the labour contribution

c. The increase will be approximately 0.70 only

20. What is the opposite of a dominant strategy?

a. Nash strategy

b. All these options are incorrect

c. Mixed strategy

d. Dominant strategy

21. Using the following data:

Income (Y) Sales (X)

5 10

4 7

2 9

The regression model is Y = b0 + b1X + e. Calculate the slope of the regression (b1).

a. None of these answers are correct.

b. -0.469

c. 1

d. 0.143

22. TC = 20 + 10Q + Q2

Q = 40 – P

Where TC is total cost, Q is the total product and P is price.

Derive the expression for Marginal Revenue (MR).

a. 10 – 2Q

b. 20 – 2Q

c. 40 – 2Q

d. None of these are correct

0.3 where the cost of labour

is $6 and the cost of capital is $4. The total cost of production is $120.

What is the partial differential of capital?

a. K0.3/ L0.3- 6λ

b. 56K0.3/ L0.3- 6λ

c. 24L0.7/ K0.7- 4λ

d. L0.7/ K0.7- 4λ

24. The following question is based on the production function Q=80L0.7K0.3 where the cost of

labour is $6 and the cost of capital is $4. The total cost of production is $120.

What is the optimal level of capital?

a. 36

b. 4

c. 9

d. 5

25. Which of the following equalities is correct?

a. SST = SSR + SSE

b. SSR = SST + SSE

c. SSE = SSR + SST

d. SST = SSC + SSR

Q = 40 – P

Where TC is total cost, Q is the total product and P is price.

What is the total profit, given the profit maximizing quantity?

a. 92.5

b. 63.5

c. 85.5

d. 75

27. Using the demand function QD = 150 − 10P. What is the price where total revenue is

maximised?

a. $7.9

b. $7.5

c. $7

d. None of the above

28. The following question is based on the production function Q=80L0.7K0.3 where the cost of

labour is $6 and the cost of capital is $4. The total cost of production is $120. What is the level

of

output, given the optimal level of labour and capital?

a. 1000

b. 451

c. 981

d. 500
29. Using the demand function QD = 150 − 10P. What is the value of QD where total revenue is

maximised?

a. 5 units

b. 70 units

c. 75 units

d. 100 units

30. TC = 20 + 10Q + Q2

Q = 40 – P

Where TC is total cost, Q is the total product and P is price.

What is the profit maximizing quantity?

a. 15

b. 7.5

c. 10.25

d. 40