ECO232 Microeconomic Theory II Quiz (With Full Explanations) – Practice Questions for NOUN Students
If you are preparing for the ECO232: Microeconomic Theory II examination at the National Open University of Nigeria (NOUN), one of the most effective ways to improve your performance is through practice questions combined with clear conceptual understanding.
This article provides carefully selected multiple-choice questions, detailed explanations, and exam tips to help you understand how to approach Microeconomic Theory II questions effectively.
📘 Why This ECO232 Practice Quiz Matters
Microeconomic Theory II focuses on how individuals and firms make decisions in markets. Many students struggle not because they lack effort, but because they rely only on memorization instead of understanding concepts.
This quiz will help you:
- Understand how microeconomic models work
- Improve your CBT exam performance
- Learn how to interpret exam questions correctly
- Avoid common mistakes in microeconomics
- Build confidence before exams
🧠 SECTION A: MARKET THEORY AND DEMAND ANALYSIS
1. Demand and Revenue
When a firm has a perfectly elastic demand curve, its marginal revenue equals:
A. Zero
B. Market price
C. Average cost
D. Total revenue
✔ Correct Answer: B. Market price
📖 Explanation:
In perfect competition, firms are price takers. This means the market determines the price, not the firm.
Because each additional unit is sold at the same price:
- Price = Average Revenue = Marginal Revenue
So, MR always equals market price.
2. Market Structure
Few sellers selling similar or identical commodities is known as:
A. Monopoly
B. Perfect competition
C. Oligopoly market
D. Monopolistic competition
✔ Correct Answer: C. Oligopoly market
📖 Explanation:
An oligopoly is a market structure where:
- A few firms dominate the market
- Each firm’s decision affects others
- Products may be identical or differentiated
Examples include telecom companies and cement industries.
📊 SECTION B: COST AND REVENUE THEORY
3. Cost Concept
Change in total cost divided by change in quantity is known as:
A. Average cost
B. Marginal cost
C. Total cost
D. Fixed cost
✔ Correct Answer: B. Marginal cost
📖 Explanation:
Marginal cost is the additional cost of producing one more unit.
MC = ∆ TC / ∆ Q
It helps firms decide the optimal level of production.
4. Elasticity and Marginal Revenue
When demand is inelastic, marginal revenue is:
A. Positive
B. Zero
C. Negative
D. Equal to price
✔ Correct Answer: C. Negative
📖 Explanation:
When demand is inelastic:
- Price reduction leads to a small increase in quantity demanded
- Total revenue falls
- Therefore, marginal revenue becomes negative
📌 Exam Tip:
Inelastic demand → MR is negative
5. Total Revenue and Marginal Revenue
When total revenue is increasing, marginal revenue will be:
A. Positive
B. Negative
C. Zero
D. Constant
✔ Correct Answer: A. Positive
📖 Explanation:
Marginal revenue is the change in total revenue from selling one extra unit.
So:
- If TR is increasing → MR is positive
- If TR is decreasing → MR is negative
🏛️ SECTION C: MARKET THEORY AND ECONOMIC HISTORY
6. Diamond-Water Paradox
The diamond-water paradox was propounded by:
A. Alfred Marshall
B. Adam Smith
C. John Maynard Keynes
D. David Ricardo
✔ Correct Answer: B. Adam Smith
📖 Explanation:
Adam Smith observed that:
- Water is essential but cheap
- Diamonds are non-essential but expensive
This raised the question of value versus utility, leading to later developments in marginal utility theory.
📦 SECTION D: COST STRUCTURE AND PRODUCTION
7. Cost Components
A combination of Fixed Cost and Variable Cost gives:
A. Average cost
B. Marginal cost
C. Total cost
D. Opportunity cost
✔ Correct Answer: C. Total cost
📖 Explanation:
[ TC = TFC + TVC ]
Where:
- TFC = Fixed costs (rent, salaries)
- TVC = Variable costs (raw materials, labour changes)
8. Factors of Production
Which of these is NOT a factor of production?
A. Land
B. Labour
C. Capital
D. Public services
✔ Correct Answer: D. Public services
📖 Explanation:
The four main factors of production are:
- Land
- Labour
- Capital
- Entrepreneurship
Public services are outputs, not inputs.
📈 SECTION E: CALCULATION AND UTILITY
9. Calculation Question
If Q = 75 – 25P, find P when Q = 0.
A. ₦1.80
B. ₦3.00
C. ₦2.40
D. ₦1.50
✔ Correct Answer: B. ₦3.00
📖 Solution:
0 = 75 − 25P
25P = 75
P = 3
10. Utility
Utility means:
A. Price
B. Satisfaction
C. Cost
D. Demand
✔ Correct Answer: B. Satisfaction
📖 Explanation:
Utility refers to the satisfaction a consumer gets from consuming a good or service.
🎯 FINAL EXAM SUCCESS STRATEGY FOR ECO232
To perform well in Microeconomic Theory II:
✔ Understand concepts, don’t memorize answers
✔ Practice past questions daily
✔ Learn formulas and their meaning
✔ Focus on elasticity and market structures
✔ Always read questions carefully in CBT exams
🚀 TAKE THE FULL QUIZ
Now test your understanding with the full 20-question quiz:
👉 https://docs.google.com/forms/d/e/1FAIpQLSfNG5U0fPRzLjWcwJHHRZjLSzU0ApDZOvn326sTZj1vRPYTkA/viewform?usp=header
💬 Final Note
If you found this helpful, bookmark this page and check back for more ECO232 revision materials, NOUN past questions, and economics tutorials.
Consistency is the key to passing economics exams successfully.