Which of the following statements is incorrect?

If marginal revenue exceeds marginal cost the firm should increase output.
If marginal cost exceeds marginal revenue the firm should decrease output.
Economic profits are maximized when total costs are equal to total revenue.
Profits are maximized when marginal revenue equals marginal cost.

decreasing returns to scale.
constant returns to scale.
increasing returns to scale.
positive fixed costs.

Which of the following is correct?

Firms that earn accounting profits are economically profitable.
Opportunity cost plus accounting cost equals economic cost.
When a firm’s demand curve slopes down marginal revenue will rise as output rises.
Firms increase profits by selling more output than their rivals.

The law of diminishing returns implies that:

for each extra unit of X consumed, holding constant consumption of other goods, total utility increases.
total utility remains unchanged regardless of how many units of X are consumed.
marginal utility will increase at a constant rate as more units of X are consumed.
each extra unit of X consumed, holding constant consumption of other goods, adds successively less to total utility.

If a good has price elasticity greater than one then:

demand is unit elastic and a change in price does not affect sellers’ revenue.
demand is elastic and a change in price causes sellers’ revenue to change in the opposite direction.
demand is inelastic and a change in price causes sellers’ revenue to change in the same direction.
None of the above is correct.

If the elasticity of demand for a commodity is perfectly inelastic then which of the following is incorrect?

The commodity must be essential to those who purchase it.
The commodity must have many substitutes.
The commodity will be purchased regardless of increase in its price.
The elasticity of demand for this commodity must equal zero.

A drought in India leads to unusually low level of wheat production. This would lead to a rise in the price of wheat and fall in the quantity of wheat demanded due to:

excess demand at the original price.
excess supply at the original price.
the supply curve shifting to the right.
the demand curve shifting to the left

1 goat.
3 horses.
3 goats.
18 goats.

Which of the following is correct?

The production possibilities frontier shows the maximum combination of outputs that the economy can produce using all the resources available.
Increasing opportunity cost implies a production possibility frontier concave to the origin.
Free markets are the markets in which the governments do not intervene.
All of the above are correct.

Which of the following statements is incorrect?

Unlike normative economics, positive economics is based on objective analysis of economic issues.
The opportunity cost of a good is the quantity of other goods sacrificed to get another unit of that good.
Microeconomics emphasizes interactions in the economy as a whole.
None of the above.

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