MIDTERM EXAMINATION
Fall
2009
ECO401-
Economics (Session - 4)
Time:
60 min Marks:
50
Question No:
1 ( Marks: 1 ) - Please choose one
Land
is best described as:
► Produced factors of production.► "Organizational" resources.
► Physical and mental abilities of people.
► "Naturally" occurring resources.
Question No: 2 ( Marks: 1 ) - Please choose one
While
moving from left to right, the typical production possibilities curve has:
► An increasingly steep negative slope. ► A decreasingly steep negative slope.
► An increasingly steep positive slope.
► A constant and negative slope.
Question No: 3 ( Marks: 1 ) - Please choose one
When
government sets the price of a good and that price is above the equilibrium
price, the result will be:
► A surplus of the good.► A shortage of the good.
► An equilibrium.
► None of the given options.
Question No: 4 ( Marks: 1 ) - Please choose one
If
pen and ink are complements, then an increase in the price of pen will cause:
► An increase in the price of ink.
► Less ink to be demanded at each price.► A decrease in the demand for pen.
► A rightward shift in the demand curve for ink.
Question No: 5 ( Marks: 1 ) - Please choose one
An increase in supply is shown by:
► Shifting the supply curve to the left.
► Shifting the supply curve to the right.
► Upward movement along the supply curve.
► Downward movement along the supply curve.
Question No: 6 ( Marks: 1 ) - Please choose one
When
an industry's raw material costs increase, other things remaining the same:
► The supply curve shifts to the right.► Output increases regardless of the market price and the supply curve shifts upward.
► Output decreases and the market price also decrease.
► The supply curve shifts to the left.
Question No: 7 ( Marks: 1 ) - Please choose one
Sugar can be refined from sugar
beets. When the price of those beets falls:
► The demand curve for sugar would shift right.► The demand curve for sugar would shift left.
► The supply curve for sugar would shift right.
► The supply curve for sugar would shift left.
Question No: 8 ( Marks: 1 ) - Please choose one
The price elasticity of demand measures the responsiveness of quantity demanded to:
► Quantity demanded.
► Quantity supplied.
► Price.
► Output.
Question No: 9 ( Marks: 1 ) - Please choose one
Since
the fish that are caught each day go bad very quickly, the daily catch will be
offered for sale no matter what price it brings. As a result, we know that:
► None of the given options.► The daily supply curve for fish slopes upward.
► The daily supply curve for fish is perfectly inelastic.
► The daily supply curve for fish is perfectly elastic.
Question No: 10 ( Marks: 1 ) - Please choose one
In
order to calculate the price elasticity of supply, you need to know:
► Two prices and two quantities supplied.► The slope of the supply curve.
► The equilibrium price and quantity in the market.
► The quantity supplied at two different prices, all else equal.
Question No: 11 ( Marks: 1 ) - Please choose one
Suppose
the first four units of an output produced incur corresponding total costs of
50, 150, 300, and 500. The marginal cost of the second unit of output is:
► 50.► 100.
► 150.
► 200.
Question No: 12 ( Marks: 1 ) - Please choose one
Law
of diminishing marginal utility indicates that the slope of the marginal
utility curve is:
► Horizontal.► Vertical.
► Negative.
► Positive.
Question No: 13 ( Marks: 1 ) - Please choose one
Assume
that the total utilities for the fifth and sixth units of a good consumed are
83 and 97, respectively. The marginal utility for the sixth unit is:
► -14.► 14.
► 83.
► 97.
Question No: 14 ( Marks: 1 ) - Please choose one
Suppose
that the price of a pizza is $10 and price of a jeans is $30. If ratio of
marginal utility of pizza to marginal utility of jeans is 1/4 then to maximize
total utility, a consumer should:
► Buy more pizzas and fewer jeans.
► Buy fewer pizzas and more jeans.
► Continue to buy the same quantities of pizza and jeans.
► Spend more time consuming pizza.
Question No:
15 ( Marks: 1 ) - Please choose one
Which
of the following is NOT an assumption of ordinal utility analysis?
► Consumers are consistent in their preferences.
► Consumers can measure the total utility received from any given basket of
good.
► Consumers are non-satiated with respect to the goods they confront.
► All of the given options are true.
Question No:
16 ( Marks: 1 ) - Please choose one
Assume
leisure is a normal good. If income effect equals substitution effect then a
wage rate increase will lead a person to:
► Increase hours of work.
► Decrease hours of work.
► Not change hours of work.
► None of the given options.
Question No:
17 ( Marks: 1 ) - Please choose one
Ali
initially leased one-room space and started a small day care centre with only 4
children and one staff member. But he found that the cost per child is very
high. He wants to expand the centre. Which of the following will happen when
Ali expand the centre?
► Economies of scale.
► Diseconomies of scale.
► Decreasing returns to the labor inputs.
► Increasing returns to the labor inputs.
Question No:
18 ( Marks: 1 ) - Please choose one
A
graph showing all the combinations of capital and labour available for a given
total cost is the:
► Budget constraint.► Expenditure set.
► Isoquant.
► Isocost.
Question No: 19 ( Marks: 1 ) - Please choose one
An
isoquant curve shows:
► All the alternative combinations of two
inputs that yield the same maximum total product.
► All the alternative combinations of two products that can be produced by
using a given set of inputs fully and in the best possible way.
► All the alternative combinations of two products among which a producer is
indifferent because they yield the same profit.
► None of the given options.
Question No:
20 ( Marks: 1 ) - Please choose oneL-shaped isoquant:
► Indicate that capital and labor cannot be substituted for each other in production.
► Is impossible.
► Indicate that the firm could switch from one output to another costlessly.
► Indicate that the firm could not switch from one output to another.
Question No: 21 ( Marks: 1 ) - Please choose one
Costs determine all of the following EXCEPT:
► Demand for a product.
► Firm's behaviour.
► How firms should expand?
► Firm's profitability.
Question No: 22 ( Marks: 1 ) - Please choose one
Total costs are the sum of:
► Marginal costs and variable costs.
► Fixed costs and variable costs.
► Fixed costs and marginal costs.
► Average variable costs and marginal costs.
Question No: 23 ( Marks: 1 ) - Please choose one
To find the profit maximizing level of output, a firm finds the output level where:
► Price equals marginal cost.
► Marginal revenue and average total cost.
► Price equals marginal revenue.
► None of the given options.
Question No: 24 ( Marks: 1 ) - Please choose one
The good produced by a monopoly:
► Has perfect substitutes.
► Has no substitutes at all.
► Has no close substitutes.
► Can be easily duplicated.
Question No: 25 ( Marks: 1 ) - Please choose one
A
perfectly competitive firm maximizes profit by finding the level of production
at which:
► Price = Marginal Cost.► Price = Average Total Cost.
► Average Total Cost = Marginal Cost.
► Price < Marginal Cost.
Question No: 26 ( Marks: 1 ) - Please choose one
The monopolist has no supply curve because:
► The
quantity supplied at any particular price depends on the monopolist's demand
curve.
► The monopolist's marginal cost curve changes considerably over time.
► The relationship between price and quantity depends on both marginal cost and
average cost.
► Although there is only a single seller at the current price, it is impossible
to know how many sellers would be in the market at higher prices.Question No: 27 ( Marks: 1 ) - Please choose one
In
monopoly, which of the following is TRUE at the output level, where price =
marginal cost?
► The monopolist is maximizing profit.► The monopolist is not maximizing profit and should increase output.
► The monopolist is not maximizing profit and should decrease output.
► The monopolist is earning a positive profit.
Question No: 28 ( Marks: 1 ) - Please choose one
Following are the disadvantages of monopoly EXCEPT:
► Monopolists earn higher profits.
► Monopolists produce high quality goods at higher prices.
► Most of the “surplus” (producer + consumer surplus) accrues to monopolists.
► Monopolists do not pay sufficient attention to increasing efficiency.
Question No: 29 ( Marks: 1 ) - Please choose one
When a firm charges each customer the maximum price
that the customer is willing to pay, the firm:
► Engages in a discrete pricing strategy.
► Charges the average reservation price.
► Engages in second-degree price discrimination.
► Engages in first-degree price
discrimination.
Question No:
30 ( Marks: 1 ) - Please choose one
Third-degree
price discrimination involves:
► Charging each consumer the same two part tariff.
► Charging lower prices the greater the quantity purchased.
► The use of increasing block rate pricing.
►
Charging different prices to different groups based upon differences in
elasticity of demand.
Question No:
31 ( Marks: 1 ) - Please choose one
Which of the following is true in long run
equilibrium for a firm in a monopolistic competitive industry?
► The demand curve is tangent to marginal cost curve.
► The demand curve is tangent to average cost curve.
► The marginal cost curve is tangent to
average cost curve.
► The demand curve is tangent to marginal revenue curve.
Question No:
32 ( Marks: 1 ) - Please choose one
Which
of the following would most likely shift the production possibilities curve for
a nation outward?
► A reduction in unemployment.
► An increase in the production of capital goods.
► A reduction in discrimination.
► An increase in the production of consumer goods.
Question No: 33 ( Marks: 1 ) - Please choose one
A demand schedule is best described as:
► A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
► A graphical representation of the law of demand.
► A systematic listing of all the variables that might conceivably bring about a change in demand.
► A symbolic representation of the law of demand: P,Q and Q, P.
Question No: 34 ( Marks: 1 ) - Please choose one
A
partial explanation for the inverse relationship between price and quantity
demanded is that a:
► Lower price shifts the supply curve to the left.
► Higher price shifts the demand curve to the left.
► Lower price shifts the demand curve to the
right.
► Higher price reduces the real incomes of buyers.
Question No:
35 ( Marks: 1 ) - Please choose one
The
total utility curve for a risk neutral person will be:
► Straight line.
► Convex.
► Concave.
► None of the given options.
Question No:
36 ( Marks: 1 ) - Please choose one
Figure
In figure given above, the
marginal utility of income is:► Increasing as income increases.
► Constant for all levels of income.
► Diminishes as income increases.
► None of the given options.
Question No: 37 ( Marks: 1 ) - Please choose one
A welfare loss occurs in monopoly where:
► The price is greater than the marginal cost.
► The price is greater than the marginal benefit.
► The price is greater than the average revenue.
► The price is greater than the marginal revenue.
Question No: 38 ( Marks: 1 ) - Please choose one
Which of the following is NOT a factor of production?
► Labour.
► Land.
► Capital.
► Investment.
Question No: 39 ( Marks: 1 ) - Please choose one
Which of the following does NOT refer to macroeconomics?
► The study of the aggregate level of economic activity.
► The study of the economic behavior of
individual decision-making units such as consumers, resource owners, and
business firms.
► The study of the cause of unemployment.
► The study of the cause of inflation.
Question No:
40 ( Marks: 1 ) - Please choose oneDemand is elastic when the elasticity of demand is:
► Greater than 0 but less than 1.
► Greater than 1.
► Less than 0.
► Equal to 1.
Question No: 41 ( Marks: 10 )
A.
Differentiate between risk and uncertainty.
B.
What would the risk neutral person, risk averse person and risk loving person
do in the following cases?
o
If Odds Ratio > 1
o
If Odds Ratio = 1
o
If Odds Ratio < 1
C.
You toss a coin, if head comes, you are given Rs. 200 and if tail comes, you
have to pay Rs. 200. Will you play this game or not? Give your answer with
brief explanation.
(Marks:
3+3+4)
MIDTERM EXAMINATION
Fall 2009
ECO401- Economics (Session - 3)
Time: 60 min
Marks: 50
Question No: 1 (
Marks: 1 ) - Please choose one
Which of the following is a positive
statement?
► When the price of a good goes up,
consumers buy less of it.
► When the price of a good goes up,
firms produce more of it.
► When the Federal government sells bonds, interest rates
rise and private investment is reduced.
► All of the given options.
Question No: 2 (
Marks: 1 ) - Please choose one
In a free-market economy, the allocation of
resources is determined by:
► Votes taken by
consumers.
► A central
planning authority.
► Consumer preferences.
► The level of
profits of firms.
Question No: 3 (
Marks: 1 ) - Please choose one
If both supply and demand increase
simultaneously, the equilibrium:
► Price must rise and the equilibrium
quantity must fall.
► Price must rise and the equilibrium
quantity may either rise or fall.
► Quantity must rise and the equilibrium
price may either rise or fall.
► Price must fall and the equilibrium
quantity may either rise or fall.
Question No: 4 (
Marks: 1 ) - Please choose one
The price elasticity of demand measures the
responsiveness of quantity demanded to:
► Quantity
demanded.
► Quantity
supplied.
► Price.
► Output.
Question No: 5 (
Marks: 1 ) - Please choose one
Since the fish that are caught each day go bad
very quickly, the daily catch will be offered for sale no matter what price it
brings. As a result, we know that:
► None of the given options.
► The daily supply curve for fish slopes
upward.
► The daily supply curve for fish is perfectly inelastic.
► The daily supply curve for fish is
perfectly elastic.
Question No: 6 (
Marks: 1 ) - Please choose one
There are several close substitutes for Bayer
aspirin but fewer substitutes for a complete medical examination. Therefore,
you would expect the demand for:
► Both to be equally elastic.
► Both to be
equally inelastic.
► Medical exams to be more elastic.
► Medical exams
to be more inelastic.
Question No: 7 (
Marks: 1 ) - Please choose one
Suppose your local public golf course
increases the greens fees for using the course. If the demand for golf is relatively
inelastic, you would expect:
► A decrease in total revenue received
by the course.
► An increase in
total revenue received by the course.
► No change in
total revenue received by the course.
► An increase in the amount of golf
played on the course.
Question No: 8 (
Marks: 1 ) - Please choose one
Which of the following will be TRUE if demand
is inelastic?
► The
coefficient of elasticity is greater than one.
► The percentage
change in quantity demanded is same as the percentage change in the price.
► An increase in price will increase
total revenue.
► None of the
given options.
Question No: 9 (
Marks: 1 ) - Please choose one
Which of the following is regarded as a general
determinant of price elasticity of demand?
► Nature of the
good (luxury versus necessity).
► Availability of close substitutes.
► Share of
consumer's budget and passage of time.
► All of the
given options.
Question No: 10 (
Marks: 1 ) - Please choose one
As more of a good is consumed, then total utility typically:
► Increases at a decreasing rate.
► Decreases as long as marginal utility
is negative.
► Decreases as long as marginal utility
is positive.
► Is negative as long as marginal
utility is decreasing.
Question No: 11 (
Marks: 1 ) - Please choose one
When the marginal utility of a good is zero,
this implies that:
► The consumer would not spend any additional income to
buy more of that good.
► Consumption of additional units would
have positive marginal utility.
► Total utility
is minimized.
► Total utility is
also zero.
Question No: 12 (
Marks: 1 ) - Please choose one
Law of diminishing marginal utility indicates
that the slope of the marginal utility curve is:
► Horizontal.
► Vertical.
► Negative.
► Positive.
Question No: 13 (
Marks: 1 ) - Please choose one
Aslam spends all of his money on racquetballs
and food. What would happen to Aslam’s budget line if his income increased by
10 percent holding prices constant?
► It would shift inward.
► It would rotate about the axis for
food.
► It would rotate about the axis for
racquetballs.
► It would shift outward.
Question No: 14 (
Marks: 1 ) - Please choose one
As long as all prices remain constant, an
increase in money income results in:
► An increase in the slope of the budget line.
►
A decrease in the slope of the budget line.
► An increase in the intercept of the
budget line.
► A decrease in the intercept of the
budget line.
Question No: 15 (
Marks: 1 ) - Please choose one
The substitution effect of a wage increase
will lead a person to:
► Work more.
► Take more leisure.
► Not change anything.
► None of the given options.
Question No: 16 (
Marks: 1 ) - Please choose one
Assume Leisure is a normal good. If income effect
exceeds substitution effect then a wage decrease will lead a person to:
► Decrease hours of work.
► Increase hours of work.
► Not change anything.
► All of the given options.
Question No: 17 (
Marks: 1 ) - Please choose one
Which of the following statements about
indifference curves is NOT correct?
► Indifference curves are generally
negatively sloped.
► Without utility being quantifiable we
can say that one indifference curve is higher than (or preferred to) another
but we cannot say by how much.
► Two indifference curves cannot
intersect unless they are identical throughout.
► Two different indifference curves can intersect but only once.
Question No: 18 (
Marks: 1 ) - Please choose one
A normal good can be defined as one which
consumers purchase more of as:
► Prices fall.
► Prices rise.
► Incomes fall.
► Incomes increase.
Question No: 19 (
Marks: 1 ) - Please choose one
When the substitution effect of a lowered
price is counteracted by the income effect, the good in question is:
► An inferior good.
► A substitute good.
► An independent good.
► A normal good.
Question No: 20 (
Marks: 1 ) - Please choose one
Which of the following is most likely to be a
fixed input in the short run for a Garage owner?
► The grease used to lubricate cars.
► The part-time labor employed to repair
cars.
► The electricity used to heat and light
the garage.
► The garage used to repair cars.
Question No: 21 (
Marks: 1 ) - Please choose one
Ali initially leased one-room space and
started a small day care centre with only 4 children and one staff member. But
he found that the cost per child is very high. He wants to expand the centre.
Which of the following will happen when Ali expand the centre?
► Economies of scale.
► Diseconomies of scale.
► Decreasing returns to the labor
inputs.
► Increasing returns to the labor inputs.
Question No: 22 (
Marks: 1 ) - Please choose one
Which of the following is considered to be a
variable cost in the long run?
► Expenditures for wages.
► Expenditures for research and
development.
► Expenditures for raw materials.
► All of the given options.
Question No: 23 (
Marks: 1 ) - Please choose one
What will happen to the isocost line if the
price of both goods increases?
► It shift farther away from the origin
of the graph.
► It shift inward, closer to the origin.
► It vanishes.
► It undergoes no change.
Question No: 24 (
Marks: 1 ) - Please choose one
Total costs are the sum of:
► Marginal costs
and variable costs.
► Fixed costs and variable costs.
► Fixed costs
and marginal costs.
► Average
variable costs and marginal costs.
Question No: 25 (
Marks: 1 ) - Please choose one
The total cost of producing a given level of
output is:
► Maximized when
a corner solution exists.
► Minimized when
the ratio of marginal product to input price is equal for all inputs.
► Minimized when
the marginal products of all inputs are equal.
► Minimized when marginal product
multiplied by input price is equal for all inputs.
Question No: 26 (
Marks: 1 ) - Please choose one
The long-run average total cost curve:
► Traces out the points on the lowest
short-run average total cost curve for each level of production.
► Is inversely
related to the depth of the short-run marginal cost curve.
► Traces out the
midpoints on an average of several short-run average total cost curves.
► Is
downward-sloping under decreasing returns to scale.
Question No: 27 (
Marks: 1 ) - Please choose one
To find the profit maximizing level of output,
a firm finds the output level where:
► Price equals
marginal cost.
► Marginal revenue and average total
cost.
► Price equals
marginal revenue.
► None of the
given options.
Question No: 28 (
Marks: 1 ) - Please choose one
In which market structure, each firm produces
an identical product and there is freedom of entry and exit?
► Monopoly.
► Oligopoly.
► Perfect competition.
► Monopolistic
competition.
Question No: 29 (
Marks: 1 ) - Please choose one
The monopoly supply curve is the:
► Same as the competitive market supply
curve.
► Portion of
marginal costs curve where marginal costs exceed the minimum value of average
variable costs.
► Result of
market power and production costs.
► None of the
given options.
Question No: 30 (
Marks: 1 ) - Please choose one
Compared to the equilibrium price and quantity
sold in a competitive market, a monopolist will charge a ______________ price
and sell a ______________ quantity.
► Higher; larger.
► Lower; larger.
► Higher; smaller.
► Lower; smaller.
Question No: 31 (
Marks: 1 ) - Please choose one
In monopolist market, a new entrant firm
should produce where:
► Marginal Cost
< Marginal Revenue.
► Marginal Cost
> Marginal Revenue.
► Marginal Cost = Marginal Revenue.
► Marginal Cost = Average Revenue.
Question No: 32 (
Marks: 1 ) - Please choose one
A market with few entry barriers and with many
firms that sell differentiated products is:
► Purely
competitive.
► A monopoly.
► Monopolistically
competitive.
► Oligopolistic.
Question No: 33 (
Marks: 1 ) - Please choose one
Which of the following is true in long run
equilibrium for a firm in a monopolistic competitive industry?
► The demand
curve is tangent to marginal cost curve.
► The demand
curve is tangent to average cost curve.
► The marginal
cost curve is tangent to average cost curve.
► The demand curve is tangent to
marginal revenue curve.
Question No: 34 (
Marks: 1 ) - Please choose one
Cartels are likely to fail when:
► The members
adhere to their output quotas.
► The non-cartel members increase output.
► The members charge identical prices.
► None of the given options.
Question No: 35 (
Marks: 1 ) - Please choose one
A schedule which shows the various amounts of
a product consumers are willing and able to purchase at each price in a series
of possible prices during a specified period of time is called:
► Supply schedule.
► Demand schedule.
► Quantity supplied schedule.
► Quantity demanded schedule.
Question No: 36 (
Marks: 1 ) - Please choose one
Which of the following best expresses the law
of demand?
► A higher price reduces demand.
► A lower price reduces demand.
► A higher price reduces quantity
demanded.
► A lower price shifts the demand curve
to the right.
Question No: 37 (
Marks: 1 ) - Please choose one
Which of the following is considered a market
structure?
► Monopoly.
► Perfect
competition.
► Oligopoly.
► All of the given are considered
market structures.
Question No: 38 (
Marks: 1 ) - Please choose one
If income
elasticity is negative, the good is:
► Normal good.
► A substitute good.
► A complementary
good.
► Inferior good.
Question No: 39 (
Marks: 1 ) - Please choose one
Figure
In figure given
above, the marginal utility of income is:
► Increasing as income increases.
► Constant for
all levels of income.
► Diminishes as income increases.
► None of the
given options.
Question No: 40 (
Marks: 1 ) - Please choose one
The amount of output that a firm decides to
sell has no effect on the market price in a competitive industry because:
► The market
price is determined (through regulation) by the government.
► The firm
supplies a different good than its rivals.
► The firm's
output is a small fraction of the entire industry's output.
► The short run market price is
determined solely by the firm's technology.
Question No: 41 (
Marks: 10 )
The following table shows the total utility
that an individual receives from consuming various units of a commodity X.
Qx
|
TUx
|
1
|
56
|
2
|
104
|
3
|
144
|
4
|
176
|
5
|
200
|
6
|
216
|
7
|
224
|
8
|
224
|
a)
Calculate Marginal Utility (MU) at each level.
b)
What is the individual’s saturation point for commodity X?
c)
If the price of commodity X is $8 then calculate the consumer
surplus at each level.
(Marks: 3.5+3+3.5)
MIDTERM EXAMINATION
Spring 2009
ECO401- Economics (Session - 2)
Time: 60 min
Question No: 1 (
Marks: 1 ) - Please choose one
An individual whose attitude towards risk is
known as:
► Risk averse.
► Risk loving.
► Risk neutral.
► None of the
given options.
Question No: 2 (
Marks: 1 ) - Please choose one
The concept of a risk premium applies to a
person that is:
► All of the
given options.
► Risk averse.
► Risk neutral.
► Risk loving.
Question No: 3 (
Marks: 1 ) - Please choose one
A normative economic statement:
► Is a statement
of fact.
► Is a
hypothesis used to test economic theory.
► Is a statement of what ought to be,
not what is.
► Is a statement
of what will occur if certain assumptions are true.
Question No: 4 (
Marks: 1 ) - Please choose one
Economics is different from other social
sciences because it is primarily concerned with the study of ________, it is
similar to other social sciences because they are all concerned with the study
of ________.
► Limited
resources, market behavior.
► Scarcity, human behavior.
► Social
behavior, limited resources.
► Biological
behavior, scarcity.
Question No: 5 (
Marks: 1 ) - Please choose one
Because of the relationship between a
perfectly competitive firm's demand curve and its marginal revenue curve, the
profit maximization condition for the firm can be written as:
► P = MR.
► P = AVC.
► AR = MR.
► P = MC.
Question No: 6 (
Marks: 1 ) - Please choose one
A welfare loss occurs in monopoly where:
► The price is greater than the marginal
cost.
► The price is greater than the marginal
benefit.
► The price is greater than the average revenue.
► The price is greater than the marginal
revenue.
Question No: 7 (
Marks: 1 ) - Please choose one
The "perfect information" assumption
of perfect competition includes all of the following EXCEPT:
► Consumers know
their preferences.
► Consumers know
their income levels.
► Consumers know
the prices available.
► Consumers can anticipate price changes.
Question No: 8 (
Marks: 1 ) - Please choose one
Figure
In figure given
above, the marginal utility of income is:
► Increasing as income increases.
► Constant for
all levels of income.
► Diminishes as
income increases.
► None of the
given options.
Question No: 9 (
Marks: 1 ) - Please choose one
A consultant for Mattel (the producer of
Barbie) reports that their long run average cost curve is decreasing. In other
words, he is saying that:
►
The firm has increasing returns to scale and the law of diminishing marginal
productivity does not apply to this firm.
► The firm has
decreasing returns to scale and the law of diminishing marginal productivity
does not apply to this firm.
► The firm has increasing returns to scale but the law of
diminishing marginal productivity may still apply to this firm.
► The firm has
decreasing returns to scale but nonetheless the law of diminishing marginal
productivity may still apply to this firm.
Question No: 10 (
Marks: 1 ) - Please choose one
If the cross price elasticity of demand
between two goods X and Y is positive; it means that goods are:
► Independent.
► Complements.
► Substitutes.
► Inferior.
Question No: 11 (
Marks: 1 ) - Please choose one
A demand schedule is best described as:
► A numerical tabulation of the quantity
demanded of a good at different prices, ceteris paribus.
► A graphical representation of the law of demand.
► A systematic listing of all the variables that might
conceivably bring about a change in demand.
► A symbolic representation of the law
of demand: P,Q and Q, P.
Question No: 12 (
Marks: 1 ) - Please choose one
Which of the following best expresses the law
of demand?
► A higher price reduces demand.
► A lower price reduces demand.
► A higher price reduces quantity demanded.
► A lower price shifts the demand curve
to the right.
Question No: 13 (
Marks: 1 ) - Please choose one
Which of the following would most likely shift
the production possibilities curve for a nation outward?
► A reduction in
unemployment.
► An increase in
the production of capital goods.
► A reduction in
discrimination.
► An increase in the production of
consumer goods.
Question No: 14 (
Marks: 1 ) - Please choose one
The primary use of the kinked-demand curve is
to explain price rigidity in:
► Oligopoly.
► Monopoly.
► Perfect competition.
► Monopolistic competition.
Question No: 15 (
Marks: 1 ) - Please choose one
A monopolistically competitive firm
in short run equilibrium:
► Will make
negative profit (lose money).
► Will make zero
profit (break-even).
► Will make positive profit.
► Any of the
given are possible.
Question No: 16 (
Marks: 1 ) - Please choose one
A market with few entry barriers and with many
firms that sell differentiated products is:
► Purely
competitive.
► A monopoly.
►
Monopolistically competitive.
► Oligopolistic.
Question No: 17 (
Marks: 1 ) - Please choose one
The maximum price that a consumer is willing
to pay for a good is called:
► The reservation price.
► The market price.
► The first-degree price.
► The block price.
Question No: 18 (
Marks: 1 ) - Please choose one
Third-degree price discrimination involves:
► Charging each
consumer the same two part tariff.
► Charging lower
prices the greater the quantity purchased.
► The use of
increasing block rate pricing.
► Charging different prices to
different groups based upon differences in elasticity of demand.
Question No: 19 (
Marks: 1 ) - Please choose one
A tennis pro charges $15 per hour for tennis
lessons for children and $30 per hour for tennis lessons for adults. The tennis pro is practicing:
► First-degree
price discrimination.
► Second-degree
price discrimination.
► Third-degree price discrimination.
► All of the
given options.
Question No: 20 (
Marks: 1 ) - Please choose one
An electric power company uses block pricing
for electricity sales. Block pricing is
an example of:
► First-degree
price discrimination.
► Second-degree
price discrimination.
► Third-degree
price discrimination.
► Block pricing is not a type of price
discrimination.
Question No: 21 (
Marks: 1 ) - Please choose one
A firm never operates:
► At the minimum of its average total
cost curve.
► At the minimum of its average variable
cost curve.
► On the downward-sloping portion of its average total
cost curve.
►
On the downward-sloping portion of its average variable cost curve.
Question No: 22 (
Marks: 1 ) - Please choose one
Marginal profit is equal to:
► Marginal revenue minus marginal cost.
► Marginal
revenue plus marginal cost.
► Marginal cost
minus marginal revenue.
► Marginal
revenue times marginal cost.
Question No: 23 (
Marks: 1 ) - Please choose one
If current output is less than the
profit-maximizing output then which of the following must be TRUE?
► Total revenue
is less than total cost.
► Average
revenue is less than average cost.
► Marginal
revenue is less than marginal cost.
► Marginal revenue is greater than
marginal cost.
Question No: 24 (
Marks: 1 ) - Please choose one
At the profit-maximizing level of output, what
is TRUE of the total revenue (TR) and total cost (TC) curves?
► They must intersect with TC cutting
TR from below.
► They must
intersect with TC cutting TR from above.
► They must be tangent to each other.
► They must have
the same slope.
Question No: 25 (
Marks: 1 ) - Please choose one
The total cost (TC) of producing computer
software diskettes (Q) is given as: TC = 200 + 5Q. What is the average total
cost?
► 5Q.
► 5.
► 5 + (200/Q).
► None of the given options.
Question No: 26 (
Marks: 1 ) - Please choose one
In order for a taxicab to be operated in New
York City, it must have a medallion on its hood. Medallions are expensive but
can be resold and are therefore an example of:
► A fixed cost.
► A variable
cost.
► An implicit
cost.
► An opportunity cost.
Question No: 27 (
Marks: 1 ) - Please choose one
Costs determine all of the following EXCEPT:
► Demand for a product.
► Firm's
behaviour.
► How firms
should expand?
► Firm's
profitability.
Question No: 28 (
Marks: 1 ) - Please choose one
The rate at which a firm can substitute capital
for labour and hold output constant is the:
► Law of diminishing marginal returns.
► Marginal rate of substitution.
► Marginal rate of factor substitution.
► Marginal rate of production.
Question No: 29 (
Marks: 1 ) - Please choose one
If a simultaneous and equal percentage
decrease in the use of all physical inputs leads to a larger percentage
decrease in physical output, a firm’s production function is said to exhibit:
► Decreasing returns to scale.
► Constant returns to scale.
► Increasing returns to scale.
► Diseconomies of scale.
Question No: 30 (
Marks: 1 ) - Please choose one
At any given point on an indifference curve,
the absolute value of the slope equals:
►
Unity--otherwise there would be no indifference.
► The marginal rate of substitution.
► The consumer’s marginal utility.
► None of the given options.
Question No: 31 (
Marks: 1 ) - Please choose one
Aslam spends all of his money on racquetballs
and food. What would happen to Aslam’s budget line if his income increased by
10 percent holding prices constant?
► It would shift inward.
► It would rotate about the axis for
food.
► It would rotate about the axis for
racquetballs.
► It would shift outward.
Question No: 32 (
Marks: 1 ) - Please choose one
According to the utility model of consumer
demand, the law of diminishing marginal utility indicates that the demand curve
is:
► Vertical.
► U-shaped.
►
Upward-sloping.
► Downward-sloping.
Question No: 33 (
Marks: 1 ) - Please choose one
Cross-price elasticity measures whether:
► Goods are
normal or inferior.
► Two goods are substitutes or
complements.
► Demand is
elastic or inelastic.
► Supply is
steeper than demand or vice versa.
Question No: 34 (
Marks: 1 ) - Please choose one
Which of the following will be TRUE if demand
is inelastic?
► The coefficient of elasticity is
greater than one.
► The percentage
change in quantity demanded is same as the percentage change in the price.
► An increase in
price will increase total revenue.
► None of the
given options.
Question No: 35 (
Marks: 1 ) - Please choose one
Suppose your local public golf course
increases the greens fees for using the course. If the demand for golf is
relatively inelastic, you would expect:
► A decrease in total revenue received by the course.
► An increase in
total revenue received by the course.
► No change in
total revenue received by the course.
► An increase in
the amount of golf played on the course.
Question No: 36 (
Marks: 1 ) - Please choose one
Aslam decides to stay at home and study for
his exam rather than going out with his friends to a movie. His dilemma is an
example of:
► The economic
perspective.
► Marginal
analysis.
► Allocative efficiency.
► Opportunity
cost.
Question No: 37 (
Marks: 1 ) - Please choose one
Government authorities have managed to reduce
the unemployment rate from 8% to 4% in a hypothetical economy. As a result:
► The economy's production
possibilities curve will shift outward.
► The economy's
production possibilities curve will become steeper.
► The economy
will move downward along its production possibilities curve.
► The economy
will move from a point inside to a point closer to its production possibilities
curve.
Question No: 38 (
Marks: 1 ) - Please choose one
Land is best described as:
► Produced factors
of production.
► "Organizational"
resources.
► Physical and
mental abilities of people.
► "Naturally" occurring
resources.
Question No: 39 (
Marks: 1 ) - Please choose one
In pure capitalism, the role of government is
best described as:
► Significant.
► Extensive.
► Nonexistent.
► Limited.
Question No: 40 ( Marks:
1 ) - Please choose one
Microeconomics is the branch of economics that
deals with which of the following topics?
► The behavior of individual consumers.
► Unemployment and interest rates.
► The behavior of individual firms and
investors.
► The behavior of individual consumers and behavior of
individual firms and investors.
Question No: 41 (
Marks: 10 )
A.
Define “Law of supply” and explain it with a
schedule and diagram.
Define “Law of supply” and explain it with a
schedule and diagram.
B.
What are the factors which cause the shift in market supply
curve?
(Marks: 6+4)
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