School of Distance Education

UNIVERSITY OF CALICUT

SCHOOL OF DISTANCE EDUCATION

MATHEMATICAL ECONOMICS

V SEMESTER CORE COURSE

B.A. ECONOMICS (2019 ADMISSIONS ONWARDS)

OBJECTIVE MULTIPLE CHOICE QUESTIONS

1. ----------- is a simplified description of reality, designed to yield hypotheses about

economic behaviour that can be tested:
(a) An economic model (b) An assumption (c) A hypothesis (d)
None ofthese
2. --------------- is the best criteria to judge the validity of a model:
(a) Assumptions (b) Information it provides (c) Its simplicity (d) predictive power
3. The given function f (x) = ax + b, is an example of function:
(a) quadratic (b) polynomial (c) linear (d) rational
4. The given function f (x) = ax2 + bx + c, is an example of function:
(a) quadratic (b) polynomial (c) linear (d) rational
5. For a utility function u = xy + 3x + 4y, marginal utility of
good x is:
(a) xy + 3x + 4y (b) y + 3 (c) x + 4 (d) y + 3x
6. Given a consumption function C = 250 + 0.75Yd, autonomous consumption
is
(a) 0.75 (b) 0 (c) 250 (d) -0.75
7. Given a saving function S = 100 + 0.8Y, MPC is:
(a) 100 (b) 0.8 (c) −100 (d) 0.2
8. A--------------- function provides an abstract mathematical representation of the
relation betweenthe production of a good or service and the inputs used.
(a) consumption (b) production (c) revenue (d) technology
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9. For a total cost function TC = 1.5Q2 + 4Q + 46, AC is:

46
(a) 1.5Q+4+ 𝑄 (b) 1.5Q + 4 (c) 1.5Q (d) 4Q + 46

10. ---------------- function shows the functional relation between investment and rate
of interest orincome:
(a) consumption (b) production (c) investment (d) income
11. Abstraction from reality is made based on:
(a) assumptions (b) prediction (c) theory (d) hypothesis
12.---------------- is a simplified description of reality, designed to yield hypothesis
about economicbehaviour that can be tested.
(a) theory (b) postulate (c) proposition (d)economic model
13. ----------------- models are simply pictures of an abstract economy; graphs with lines
and curves thattell an economic story.
(a) Empirical (b) Visual (c) Mathematical (d)Simulation
14. ------------- models are mathematical models designed to be used with data.
(a) Empirical (b) Visual (c) Mathematical (d)Simulation
15.----------- function expresses the relationship between price of the good and quantity of
thegood demanded.
(a) Supply (b) Consumption (c) Demand (d)Income
16. ----------------- function expresses the relationship between price of the good and
quantity of thegood supplied.
(a) Supply (b) Consumption (c) Demand (d)Income
17. Function which map the relation between the physical measure of money and the
perceivedvalue of money is ----------------
(a) Income (b) Investment (c) Demand (d)Utility
18. -------------- function was designed by J M Keynes to show the relationship
between realdisposable income and consumer spending.
(a) Consumption (b) Investment (c) Demand (d)Utility
19. Given the consumption function C = a + bY, where ‘a’, the intercept, represents ---------
(a) Income (b) autonomous consumption (c) Demand (d)Saving
20. Given the consumption function C = a + bY, the slope ‘b’ represents:
(a) MPS (b) autonomous consumption (c) MPC (d)Saving
21. Given the total cost function TC = 1.5Q2 + 4Q + 46, marginal cost is:
(a) 3Q + 4 (b) 1.5Q2 + 4Q (c) 1.5Q + 4 + 46/Q (d)1.5Q2 + 46
22. When total cost in a production is given by C = 4x + 500 then fixed cost is -----------
(a) 0 (b) 500 (c) 504 (d) 4
23. For equilibrium market, the condition is ------------

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(a) Demand > supply (b) demand <supply (c) demand = supply (d) None of these
24. Given TR = 10x, TC = 5x+2, profit function is:
(a) 10x–5x – 2 (b) 5x (c) 10x – 5x (d) 5x + 2

25. Demand function for a commodity is D = 44 – 7P and supply function S = 2P –10,

then theequilibrium price is:
(a) 4 (b) 6 (c) 8 (d) 10
26. If u = xn is total utility, the functions of marginal utility u will be:
𝑥 𝑛+1
(a) 𝑛𝑥 𝑛+1 (b) )𝑛𝑥 𝑛−1 (c) )𝑥 𝑛+1 (d) 𝑛

27. Utility is maximized when the second order conditions of utility function is:
(a) Negative (b) positive (c) zero (d) None of these
28. For the demand function Q = f(p), elasticity of demand is given by:
𝑑𝑞 𝑑𝑝 𝑑𝑝 𝑝 𝑑𝑞 𝑝
(a)𝑑𝑝 (b) 𝑑𝑞 (c) 𝑑𝑞 × 𝑞 (d) ) 𝑑𝑝 × 𝑞
𝐴𝑅
29. gives the:
𝐴𝑅−𝑀𝑅

(b) Elasticity of demand (b) elasticity of cost (c) iso revenue line (d) elasticity of
supply

30. When the total revenue functions is R = 100−X2, the marginal

revenue is:(a) 100 – 2X (b) 100 (c)
−2X (d) −X2
31. The cost function of a firm is given by C =3x2 - 2x +3. Then the marginal cost when x
= 3 is:
(a) 19 (b) 18 (c)16 (d) 17
32. Given the utility functions u = f (q1, q2). The functions will be maximized at;
𝑑𝑢 𝑑2 𝑢
a. =0 (b) 𝑑𝑞1 < 0 (c) Both a and b (d) None of the
𝑑𝑞1

above

33. When elasticity of demand is 2, the demand will be:

(a) Perfectly elastic (b) Perfectly inelastic

(c) Relatively elastic (d) Unit elastic
34. The Price elasticity of demand for a product is 1.5 and its MR = 8, find its price:
(a) 12 (b) 24 (c) 53 (d) 16
35. The elasticity of demand for the demand curve of a firm under perfect competition is
(a) 1 (b) 0 (c) -1 (d) α
36. Given a total utility function, Marginal utility is obtained by finding -----
(a) First derivative (b) Second derivative (c) Integral (d)Coefficient

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37. Mathematically----------- is the first derivative of the consumption function.

(a) MPS (b) MPC (c) MPI (d) GDP
38. ----------- indicates what proportion of the increased income will be saved.
(a) MPS (b) MPC (c) MPI (d) GDP
39. ------------ measures the change in TP due to a one unit change in the quantity of
labour used:
(a) MPC (b) MPS (c) MPI (d) MPPL
40. ---------------- refers to the change in total cost (TC) due to the production of an
additional unit ofoutput.
(a) MPC (b) MC (c) MPI (d) MPPL
𝑀𝑃𝐿
41. = ------
𝑀𝑃𝑘
(a) MPC (b) MC (c) MRTSLK (d) MPPL
42. The slope of -------------- curve will be positive if and only if the marginal cost
curve lies above theAC curve.
(a) AC (b) MC (c) ATC (d) MP
43. At a price of Rs11.00, quantity demanded is 90; and at a price of Rs.9.00, quantity
demandedis 110. The price elasticity of demand is:
(a) 0.8 (b) 1 (c) 1.5 (d) 1.22
44. The government wants to reduce the consumption of electricity by 5%. The price
elasticity ofdemand for electricity is 00.4. The government should:
(a) raise the price of electricity by 2% (b) lower the price of electricity by
0.4% (c)raise the price of electricity by 12.5% (d) raise the price of electricity by
0.8%
45. Total utility will be a maximum when -----------
(a) marginal utility equals total utility (b) marginal utility is zero (c) marginal utility
equalsaverage utility (d) marginal utility is positive
46. For complementary goods the cross elasticity of demand will be -------------
(a) negative (b) zero (c) positive (d) any of these
47. Necessities have ---------- elasticity of demand of between 0 and +1.
(a)cross (b) price (c) income (d) any of these
48. If your income doubles and the prices of the goods you buy double, then your
demand forthese goods will likely ----------------
(a) increase (b) not change (c) decrease (d) shift
49. In the short run, a monopolist will shut down if it is producing a level of
output wheremarginal revenue is equal to short-run marginal cost and price is:
(a) less than average variable cost (b) greater than average variable cost.
(c)less than average total cost (d)greater than average total cost

50. The market demand curve for a perfectly competitive industry is QD = 12 - 2P. The
marketsupply curve is QS = 3 + P. The market will be in equilibrium if:
(a) P = 6 and Q = 9 (b) P = 3 and Q = 6 (c)P = 4 and Q = 4 (d)P = 5 and
Q=2
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51. The process of finding relative maximum or minimum of a function is known as:
(a) optimization (b) minimisation (c) maximisation (d) any of these

52. A ----------- is a point at which a function is at a relative maximum or minimum:

(a) plateau (b) relative extremum (c) inflection (d) critical value
53. The value of Lagrange multiplier λ gives the approximate change in the objective
functioncaused by a small change in the:

(a) constant of the constraint (b) objective function

(c) variables in the constraint (d) any of these
54. If TR is 75Q – 4Q2, MR is:
(a) 75 (b) 75 – 8Q (c)75 Q – 4 (d) None of these
55. Given TC = Q2 + 7Q + 23, what is 2Q + 7:
(a) AC (b) minimum TC (c) maximum TC (d) MC
𝑀𝑃𝑘
56. If MRTSLK = 2, then is
𝑀𝑃𝑙

(a) 2 (b) 1 (c) ½ (d) 4

57. The first derivative measures the rate of change or ----------

(a) intercept (b) convexity (c) slope (d) concavity
58. For a cost function TC = 3Q2 + 7Q +12, MC is:
(a) 6Q (b) 6Q + 7 (c) 3Q + 7 (d) undefined
59. For a cost function TC = 3Q2 + 7Q +12, AC is:
12
(a) 3Q + 7 (b) 6Q + 7 (c) 3𝑄 + 7 + 𝑄 (d) undefined

60. MR is:
(a) the second order derivative of TR (b) the first order derivative of TC
(c) the first order derivative of TR (d) the second order derivative of TC
61. In optimisation, with the first order derivative equal to --------------- and the second
order derivative ---------------the function is at a maximum.
(a) 0, 0 (b) 0, < 0 (c) 0, > 0 (d) > 0, 0
62. When we optimise a function, with the first order derivative equal to -------------
and the secondorder derivative --------- the function is at a relative minimum.
(a) 0, 0 (b) 0, < 0 (c) 0, > 0 (d) > 0, 0
63. The Cobb Douglas Production Function Q = ALαKβ represents:

(a) Diminishing returns to scale (b) Increasing returns to scale

(c) Constant returns to scale (d) None of the above

64. Let Q = f(L, K) be a production function. Its marginal productivity of capital is given
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by:

𝜕𝑄 𝜕𝑄 𝜕𝑄 𝐿 𝜕𝑄 𝐾
(a) 𝜕𝐾 (b) (c) . (d) 𝜕𝐾 . 𝐿
𝜕𝐿 𝜕𝐾 𝐾

65. consumer has a money income of Rs. 100. He purchases 2 commodities X1 and X2
atprices Rs. 2 and Rs. 5 respectively. His budget constraint is:

2𝑞1 5𝑞2
(a) 2q1 + 5q2 = 100 (b) 2q1 - 5q2 < 100 (c) 5𝑞2 = 100 (d) 5𝑞2 =100

66. In Cobb Douglas Production of functions, the elasticity of Substitutions is:

(a) greater than one (b) equal to one

(c) less than one (d) None of these

67. The output elasticity of labour measure which of the following, if Q stands for output
and Lrefers to labour:
𝑑𝑄 𝑑𝐿 𝜕𝑄 𝐾
(a) (b) (c) . (d) any of these
𝑑𝐿 𝑑𝑄 𝜕𝐾 𝑄

68. Given L = 4 and K = 4, the marginal product of labor is 2 and the marginal product of
capital is 3. What is the marginal rate of technical substitution (MRTS) equal to?

(a) 0.67 (b) 1 (c) 1.5 (d) 6

69. Where α = 3/4 and β =,1/4, the returns to scale for the Cob Douglas Productions
functionsis:
(a) Increasing (b) Decreasing
(c) constant (d) cannot say without additional data
70. Feasible solution to an LPP problem:
(a) Must satisfy all of the problem’s constraints simultaneously
(b) Need not satisfy all of the constraints, only some of them
(c) Must be corner point of the feasible region
(d) Must optimize the value of the objective function
71. In linear programming, the dual of maximization is equal to:
(a) minimization (b) Shadow Pricing (c) Maximisation (d) None of these
72. Linear Programming deals with:
(a) Constraints (b) Inequalities (c) Objective functions (d) All the above

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73. A production function is said to be ----------, if, when each input factor is
multiplied by apositive real constant k, the constant can be completely factored out:
(a) Homogenous (b) non homogenous (c) additive (d) heterogonous
74.------------ functions are a special class of homogeneous function in which the
marginal rate of technical substitution is constant along the function.
(a) Hypothetic (b) Homothetic (c) Objective (d) Value
75. In linear programming, the number of technical constraints will be --------- the
number of the factors of production:
(a) same as (b) smaller than (c) greater than (d) none of the above
76. In linear programming, the restrictions or limitations under which the objective
function is to be optimized are called

(a) Constraints (b)Objective function (c) Decision variables (d) None of the above

77. In linear programming, --------- are expressed as inequalities, rather than equalities.
(a) the technical constraints (b) objective functions (c) dual (d) primal
78. In linear programming, --------- expresses the necessity that the levels of
production of thecommodity cannot be negative, that is, it should be either positive or
zero.
(a) the technical constraints (b) objective functions (c) non negativity
constrains (d) primal
79. In input-output analysis, --------- shows the transactions of the whole economy in
the form of output of each industry as distributed among the other industries as
intermediate products and thefinal demand sector.
(a) the transaction matrix (b) objective functions (c) non negativity constrains
(d) the technology matrix

80. In input-output analysis, ----------- represents in monetary terms or quantitative terms all
thetransactions of the economic system.
(a) the transaction matrix (b)objective functions (c) non negativity
constrains (d) the technology matrix
81. In input-output analysis, ----------- shows the input requirements (amounts of
commodities) per unit of output (for each commodity)
(a) the transaction matrix (b) The technical coefficients (c) non negativity
constrains (d) thetechnology matrix
82. In input-output analysis, ----------- is obtained by dividing the input of the desired
sector by the total output of the same sector.
(a) the transaction matrix (b) a technical coefficient (c) non negativity
constrains (d) the technology matrix
83. In input-output analysis, when the technical coefficients are put in the form of a

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matrix, we get the -------

(a) the transaction matrix (b) a technology coefficient (c) non negativity
constrains (d) thetechnology matrix
84. In input-output analysis, when the conventional model of IOA assumed that there are
‘n’ productive sectors and prepared an input output table of order n×n. If we add an open
sector to it,we get the ------------
(a) the transaction matrix (b) a technology coefficient (c) Leontief open model
(d) the technology matrix
85. In input-output analysis, if the exogenous sectors of the open input output model is
absorbed into the system as just another sector -----------
(a) the transaction matrix (b) a technology coefficient (c) Leontief
closed model (d) the technology matrix
86. In an input-output matrix, the element ------------ shows the input industry II takes from
industry I.
(a) a12 (b) a21 (c) a11 (d) a22
87. In an input-output matrix, the principal diagonal of this matrix represents the amount
of inputeach industry takes from ------------- output.
(a) other industry’s (b) government sector’s (c) household sector’s (d)
its own output
88. For effective price discrimination in monopoly the demand elasticity in different
marketsshould be:
(a) Same (b) different (c) Zero (d) None of these
89. A monopolist faces a downward sloping demand curve because -------------
(a) AR & MR are equal (b)He has to reduce the price to increase sales (c) the
price is lower than the MR (d) all the above

90. R = R (Q) and C = C(Q) are the revenue and cost functions of a firm. The first
orderconditions for firm’s short run equilibrium is:
(a) R (Q)= C(Q) (b) R (Q) < C (Q) (c) R (Q) >C(Q) (d) None of the
above
91. The best or optimum level of output for a perfectly competitive firm is given by the
point:
(a) MR = AC (b) MR = MC (c)MR exceeds MC by the greater
amount
(d) MR = MC and MC is rising
92. In a monopoly, marginal revenue is:
(a) equal to AR (b) less than AR (c) more than AR (d) initially less
than AR then more than AR

93. In monopoly, when the demand curve is elastic, MR is:

(a) 1 (b) 0 (c) positive (d) negative

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94. The strength of a monopolist may be assessed by ------

(a)the size of his total revenue (b)the gap between AR and MR (c)the size
of consumer’s surplus accruing to him (d)the long-term price of his product
95. The marginal revenue of the monopolist is --------------
(a) Larger than price (b) Equal to price (c) Smaller than price
(d)Any of the above
96. The profit maximizing price of the monopolist is ----------
(a) equal to the height of the supply curve at the profit-maximizing quantity.
(b) equal to the height of the demand curve at the profit-maximizing quantity
(c) equal to the marginal revenue at the profit-maximizing quantity
(d) equal to the marginal cost at the profit-maximizing quantity.
97. Which of the following is a barrier to entry that typically results in monopoly:
(a) A firm controls the entire supply of the raw material (b) the production of the industry’s
product is subject to economies of scale over a broad range of output (c) the production
of the industry’s product requires a large initial capital investment (d) the firm holds an
exclusive government franchise
98. A price discriminating Monopolist is considered more efficient than a single
pricesmonopolist because:
(a) a price discriminating Monopolist knows its consumers better
(b) a price discriminating Monopolist can set prices more efficiently

(c) a price discriminating Monopolist produces a higher level of output

(d)a price discriminating Monopolist can produce its output at a lower cost
99. One difference between perfect competition and monopolistic competition is that:
(a) In perfect competition, the products are slightly differentiated between firms
(b) There are a larger number of firms in monopolistic competition
(c)There are a smaller number of firms in perfectly competitive
industries(d)Firms in monopolistic competition have some degree of
market power
100. A perfectly competitive firm should reduce output or shut down in the short run if
marketprice is equal to marginal cost and price is:
(a) greater than average total cost (b) less than average total cost
(c)greater than average variable cost (d)less than average variable cost

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Answer Key

1. A 2.D 3.C 4. A 5.B 6.C 7.B 8. B 9. A 10. C

11.A 12.D 13. B 14.A 15.C 16.A 17.D 18.A 19.B 20.C
21.A 22.B 23.C 24.A 25.B 26.B 27.A 28.D 29.A 30.C
31.C 32.C 33.C 34.B 35.D 36.A 37.B 38.A 39.D 40.B
41.C 42.A 43.D 44.C 45.B 46.A 47.C 48.B 49.A 50.B
51. A 52. B 53.A 54.B 55. D 56.C 57.C 58.B 59.C 60.C
61. B 62.C 63.C 64.A 65.A 66.B 67.C 68.A 69.C 70.A
71.A 72.D 73.A 74.B 75.A 76.A 77.A 78.C 79.A 80.A
81.B 82.B 83.D 84.C 85.C 86.A 87.D 88.B 89.B 90.A
91.D 92.B 93.C 94.B 95.C 96.B 97.C 98.C 99.D 100.D

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