ECO401 Quiz 5 MCQ's500 Solved

ECO401 Online Quiz#5 Current 500 MCQ’s Solved
Question # 1 of 15 ( Start time: 05:41:35 AM ) Total Marks: 1

Which of the following will happen if there is an increase in the long term economic
growth?
Select correct option:
The production possibilities curve will shift outward.

The production possibilities curve will shift inward.
There will be a movement from inside the production possibilities curve to a point on the
production possibilities curve.
There will be a movement from the production possibilities curve to a point inside the

A reason why some economists basically ignore the short run is because they believe that
the economy:
Has self-correcting mechanisms

Can only be graphed with a vertical curve
Can only be graphed with a horizontal curve
Never needs correction

In a production process, all inputs are increased by 10%; but output increases more than
10%. This means that the firm experiences:
Decreasing returns to scale.

Constant returns to scale.
Increasing returns to scale.
Negative returns to scale.

Diminishing marginal returns implies:
Decreasing marginal costs.

Increasing marginal costs.
Decreasing average variable costs.
Decreasing average fixed costs.
Suppose we find that the cross-price elasticity of demand for two products is a negative
number. We know that:
The two goods are normal goods.

The two goods are inferior goods.
The two goods are substitutes.
The two goods are complements.

Price elasticities are measured in percentage terms because:
It makes students’ lives more complicated.

The resulting measure is unit free.
It gives a more accurate answer.
The answer is always negative that way.

According to the classical economists, those who are not working:
Are unable to find a job at the current wage rate.

Are too productive to be hired at the current wage.
Have choosen not to work at the market wage.
Have given up looking for a job, but would accept a job at the current wage if one were
offered to them.

The law of diminishing marginal utility indicates that the demand curve is:
Vertical.
U shaped.
Upward sloping.
Downward sloping.

The war in Iraq sent oil prices spiraling upwards, resulting in an increase in the overall
price level. This is an example of which type of inflation?
Cost-pull.
Cost-push.
Demand-pull.
Demand-push.

A £1 increase in government spending will have a larger impact upon national income
than a £1 tax cut because:
The government prints the pound it spends.

Not all of a tax cut is spent.
When taxes are cut, so too is government spending.
Taxes are an injection into the system.

GDP is:
A stock
A flow.
Both a stock and a flow.
Neither a stock nor a flow.

If the prices of all goods and services rise during the year:
Real GDP may fall.

Nominal GDP must fall.
Nominal GDP may increase.
Real GDP must rise.

If the cross price elasticity of demand between two products is +3.5, then:
One of the products is expensive and one is relatively inexpensive.
One product is a normal good and the other is an inferior good.
The two products are complements.
The two products are substitutes.

For a monopolist, changes in demand will lead to changes in:
Price with no change in output.

Output with no change in price.
Both price and quantity.
Any of the above is possible.

If the demand curve for a good is downward sloping, then the good:
Must be normal.
Must be inferior.
Must be Giffen.
Can be normal or inferior.

A nation's production possibilities curve is "bowed out" from the origin because:
Resources are not perfectly shiftable between productions of the two goods.
Capital goods and consumer goods utilize the same production technology.
Resources are scarce relative to human wants.
Opportunity costs are decreasing.

At any given point on an indifference curve, the the slope is equal to:
Unity.
The marginal rate of substitution.
The consumer’s marginal utility.
None of the given options.
Which of the following is the Fisher Equation of Exchange?
MT=PV.
VT=PM.
MV=PQ.
MY=VP.

The figure that results when goods imports are subtracted from goods exports is:
The capital account balance.

The balance of trade.
Always greater than zero.
Always less than zero.

Marginal Cost is defined as:
The derivative of Variable Cost with respect to quantity produced.

The derivative of Average Cost with respect to quantity produced.
The derivative of Total Cost with respect to quantity produced.
The derivative of Average Variable Cost with respect to quantity produced.

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 is possible.

The extra value that consumers receive above what they pay for that good is called:
Producer surplus.
Utility.
Marginal utility.
Consumer surplus.

The total cost (TC) function is given as: TC = 200 + 5Q. What is the fixed cost?
200.
5Q.
5.
5 + (200/Q).

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.

A (n) __________ may start a price war in order to get a larger share of the market
Perfect competitor
Oligopolist
Monopolist
Economist

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 P, Q.
The law of diminishing returns assumes:
There are no fixed factors of production.

There are no variable factors of production.
Utility is maximised when marginal product falls.
Some factors of production are fixed.

Other things being equal, expected income can be used as a direct measure of well-being:
No matter what a person's preference to risk.

If and only if individuals are not risk-loving.
If and only if individuals are risk averse.
If and only if individuals are risk neutral.

Which of the following can be thought of as a barrier to entry?
Scale economies.
Patents.
Strategic actions by incumbent firms.
All of the given options are true.

If the demand curve for a good is downward sloping, then the good:
Must be normal.
Must be inferior.
Must be Giffen.
Can be normal or inferior.
Question # 1 of 15 ( Start time: 08:53:11 PM ) Total Marks: 1

Marginal Cost is defined as:
The derivative of Variable Cost with respect to quantity produced.
The derivative of Average Cost with respect to quantity produced.
The derivative of Total Cost with respect to quantity produced.
The derivative of Average Variable Cost with respect to quantity produced.

In Keynesian economics, an inflationary gap results if:
Aggregate expenditures are less than aggregate production.

Aggregate expenditures are greater than aggregate production.
Aggregate expenditures are equal to aggregate production.
There are no changes in inventories.

If your demand price for one unit of a good is Rs. 100 and the market price is Rs. 75,
your consumer's surplus will be:
Rs.25.
Rs.50.
Rs.75.
Rs.100.

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.

A government wishing to reduce a deficit on the current account of their balance of
payments through the use of fiscal policy would be most likely to:
Raise direct taxation.

Introduce an import quota.
Reduce the rate of value added tax on all goods and services.
Raise interest rates.

The total utility curve for a risk neutral person will be:
Straight line.
Convex.
Concave.

The good produced by a monopoly:
Has perfect substitutes

Has no substitutes at all
Has no close substitutes
Can be easily duplicated

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 increase in the demand for the good.
A decrease in the supply of the good.

Which of the following is true about the point on a nation's production-possibilities
curve?
It shows an undesirable combination of goods and services.

It shows the combinations of production that are unattainable, given current technology
and resources.
It shows the level of production that will cause both unemployment and inflation.
It shows that resources are fully employed in producing a particular combination of
goods and services.
The key to keep inflation low is to keep monetary growth aligned with expected real
output growth is The Real Business Cycles (RBC) School’s thought.
True
False

The burden of a tax is shifted toward buyers if:
Demand is perfectly elastic.

Demand is relatively more elastic than supply.
Demand is relatively more inelastic than supply.
Demand and supply have equal elasticities.

Personal income:
Is income received by individuals during a given year.

Is the income individuals have available for spending during a given year.
Equals national income minus indirect taxes.
Is the sum of wages plus interest received by individuals during a given year.

The demand curve faced by an individual firm in a competitive market is:
Upward sloping.
Downward sloping.
Horizontal.
Vertical.

''Capital widening'' means:
More capital and more labour, but with the same amount of capital per unit of labour.
More capital per unit of labour.
Increasing the usage of existing capital.
Importing capital from the developed world.

The kinked demand curve model is based on the assumption that each firm:
Considers its rival's output to be fixed

Considers its rival's price to be fixed
Believes rivals will match all price changes
None of the given options

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.

In which market structure do firms exist in very large numbers, each firm produces an
identical product and there is freedom of entry and exit?
Monopoly
Oligopoly
Perfect competition
Monopolistic competition

The classical economists thought that the economy would quickly overcome any short
run instability because:
Price level and quantity were flexible

Prices would get stuck at a low level
The long run aggregate supply would shift to the left
Prices and wages were flexible
The concave shape of the production possibilities curve for two goods X and Y
illustrates:
Increasing opportunity costs for both goods.

Increasing opportunity cost for good X but not for good Y.
Increasing opportunity cost for good Y but not for good X.
Constant opportunity costs for both goods.

Economists who are concerned about the behavior of individual households, firms and
industries are studying:
Microeconomics
Macroeconomics
Positive economics
Normative economics

Any shift in AD curve will cause only change in the price level but output will not
change.
True
False



In the classical model, given an initial aggregate equilibrium at full employment, the long
run effect of an increase in government spending is;
An increase in the price level

An upward shift of the aggregate demand curve
A constant level of output
All of the above

The trend of unemployment over the last forty years is:
A decrease in unemployment.
It has remained largely unchanged.
An increase in unemployment.
It is too difficult to tell so don't bother.

Production possibilities analysis assumes that:
Resources and technology increase with production.

Resources are used to produce thousands of goods.
Extra resources are saved for emergency use.
Resources are used in a technically efficient way.

The effect of a change in income on the quantity of the good consumed is called the:
Income effect.
Budget effect.
Substitution effect.
Real income effect.

The relationship between consumer spending and income is known as the:
45-degree line.
Consumption function.
Investment function.
Consumer price index.

Cartels are:
Organizations of independent firms, producing similar products, that work together to

raise prices and restrict output
Organizations of interdependent firms
Oligopolies
All of the above

A nation's production possibilities curve is "bowed out" from the origin because:
Resources are not perfectly shiftable between productions of the two goods.
Capital goods and consumer goods utilize the same production technology.
Resources are scarce relative to human wants.
Opportunity costs are decreasing.

What does the term "balance of payments deficit" refer to?
An increase in official international reserves.

A positive statistical discrepancy.
A negative statistical discrepancy.
A decline in official international reserves.

When oligopolists collude, they are able to:
Raise price, but not restrict output

Raise price and restrict output, but not attain the monopoly profit
Raise price and restrict output, and therefore attain the monopoly profit
Restrict output, but not raise price
What is the reason of leftward shift in the demand curve for product A?
A decrease in income if A is an inferior good.

An increase in income if A is a normal good.
An increase in the price of a product that is a close substitute for A.
An increase in the price of a product that is complementary to A.


All of the above

What would result from a depreciation of the pound on the foreign exchange market?
An increase in the price of imported computers.

A fall in the purchasing power of US tourists in London.
A fall in the price of imported computers.
An increase in the purchasing power of UK tourists overseas.

The opportunity cost of an action:
Will be the same for everyone.

Is the value of the next best alternative.
Measures the undesirable aspects of that action.
Is the average amount of unhappiness experienced by everyone involved.

illustrates:

If marginal product is above the average product:
The total product will fall

The average product will rise
Average variable costs will fall
Total revenue will fall

One explanation why the economy does not self correct quickly is
With less consumption and more savings the interest rate will drop
In the short run workers are fully employed and cannot produce enough to get to long
run equilibrium
Wages and prices are flexible
Wages and prices are sticky

Consider two commodities X and Y. If the cross-elasticity of demand is positive, it means
the goods are:
Independent.
Complements.
Substitutes.
Inferior.

Which of the following concepts apply to oligopoly more than to any other market
structure?
Advertising and product differentiation

Easy entry and more than one firm in the market
Homogeneous product and perfect information
Concentration and interdependence

Price with no change in output

Output with no change in price
Both price and quantity
Any of the above is possible

If we observe that the production possibilities curve becomes steeper as we move down
along the curve, then:
Opportunity costs are increasing.

Society's resources are limited.
Society's wants are unlimited.

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

Endogenous growth theory differs in what essential aspect from the Solow theory of
economic growth?
Endogenous growth theory is a monetary theory whereas the Solow theory is a real
theory.
Endogenous growth theory assumes diminishing returns to capital and the Solow theory
assumes constant returns.
In endogenous growth theory, economies with the same technology and saving rate need
not converge to the same steady state as in the Solow model.
All of the given options are correct.

When an industry's raw material costs decrease, other things remaining the same:
The supply curve shifts to the right.

The supply curve shifts to the left.
Output increases regardless of the market price and the supply curve shifts upward.
Output decreases and the market price also decrease.

In Keynesian economics, if aggregate expenditures are less than aggregate output then:
The price level rises.

Inventories decrease.
Employment decreases.
Aggregate output increases.

Average physical product is equal to:
TPPF
TPPF/QF
QF / TPPF
TPPF * QF

A person with a diminishing marginal utility of income:
Will be risk averse.

Will be risk neutral.
Will be risk loving.
Cannot decide without more information.
structure?


If injections are less than withdrawals at the full-employment level of income then there
arises:
A deflationary gap.
Hysteresis.
Hyperinflation.
An inflationary gap.

The substitution effect of a price decrease for a good with a normal indifference curve
pattern:
Is always inversely related to the price change.

Measures the change in consumption of the good that is due to the consumer’s feeling of
being richer.
Is measured by the horizontal distance between the original and the new indifference
curves.
Is sufficient information to plot an ordinary demand curve for the commodity being
considered.

Our economy is characterized by:
Unlimited wants and needs.

Unlimited material resources.
No energy resources.
Abundant productive labor.

If a firm pays cash to buy a building so as to have office space for its workers, the
monthly opportunity cost of the building is best measured as:
The price the firm paid divided by twelve.

Zero.
The rent the firm could earn if it rented the building to another firm.
The monthly mortgage payment the firm would have had to pay.

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 is possible.

A reason why some economists basically ignore the short run is because they believe that
the economy:
Has self-correcting mechanisms

Can only be graphed with a vertical curve
Can only be graphed with a horizontal curve
Never needs correction

Which of the following is not a reason why the aggregate demand curve slopes
downward?
The exchange-rate effect

The wealth effect.
The classical dichotomy/monetary neutrality effects.
The interest-rate effect
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.

When the price elasticity of demand for a good is greater than 1, we say that the demand
is:
Increasing.
Decreasing.
Elastic.
Inelastic.

Goods X and Y are complements while goods X and Z are substitutes. If the supply of
good X increases:
The demand for both Y and Z will increase

The demand for Y will increase while the demand for Z will decrease
The demand for Y will decrease while the demand for Z will increase
The demand for both Y and Z will decrease

The point at which AC intersects MC is where:
AC is decreasing.
MC is at its minimum.
AC is at its minimum.
AC is at its maximum.

International data suggest that economies of countries with different steady states will
converge to:
The same steady state.

Their own steady state.
The Golden Rule steady state.
Steady states below the Golden Rule level.

GDP is:
A stock
A flow.



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.

Which one of the following is true with a pure monopoly?
The monopoly's demand curve and the market demand curve are one and the same.
The market is dominated by just two firms.
The monopolist will always charge the highest possible price.
The monopolist will always charge a high price because it wants to maximize profits.

An economist will define the exchange rate between two currencies as the:
Amount of one currency that must be paid in order to obtain one unit of another
currency.
Difference between total exports and total imports within a country.
Price at which the sales and purchases of foreign goods takes place.
Ratio of import prices to export prices for a particular country.

is:
Increasing.
Decreasing.
Elastic.
Inelastic.

Which one of the following is most likely to lead to an increase in aggregate demand? An
increase in:
Government tax revenues

Household savings
Business capital investment
Demand for imports

If the quantity supplied of mangoes exceeds the quantity demanded of mangoes:
There is a shortage of mangoes.

Market forces will cause the price to fall.
Market forces will cause the price to rise.
The market is in equilibrium.

The slope of the saving function (or line) is the:
Average propensity to save.

Average propensity to consume.
Marginal propensity to save.
Marginal propensity to consume.

Which of the following would cause the short run aggregate supply curve to shift to the
left, but have no effect over the long run aggregate supply?
The amount of factors of production (such as labor and capital) increase

The amount of factors of production (such as labor and capital) decrease
Prices of inputs (such as wages or oil prices) increase
Prices of inputs (such as wages or oil prices) decrease

The demand for chicken is downward-sloping. Suddenly the price of chicken rises from
Rs. 130 per kg to Rs. 140 per kg. This will cause:
The demand curve of chicken to shift to the right.

The demand curve of chicken to shift to the left.
Quantity demanded of chicken to increase.
Quantity demanded of chicken to decrease.

economic growth?
theory.

A tax on the accounting profits of corporations is known as:
Sales tax.
Excise tax.
Corporate income tax.
Personal income tax.

Consumption spending, investment expenditures, government expenditures, and net
exports are:
The components of aggregate supply

The components of government revenue
The components of aggregate demand
The components of household income

According to Classical models, the level of employment is determined primarily by:
The level of aggregate demand for goods and services.

Prices and wages.
Government taxation.
Government spending.

Moving from left to right, the typical production possibilities curve:
Is horizontal.
Has a constant positive slope.
Illustrates increasing opportunity costs.
Illustrates decreasing opportunity costs.

Keynes advocated demand-side policies to lift the economy out of that equilibrium
towards full employment.
True
False

More output could be produced with available resources if:
Resources are allocated efficiently.

Resources are imperfectly shiftable among alternative uses.
Prices are reduced.
The economy is operating at a point inside the production possibilities curve.

To hire the next worker the firm pays $50. Fifty dollars is the:
Marginal input cost

Marginal cost
Marginal revenue product
Marginal revenue

The concept of a risk premium applies to a person that is:
Risk averse
Risk neutral
Risk loving
All of the given options

Cartels are:
Oligopolies
All of the above

The demand curve facing a perfectly competitive firm is:
The same as its average revenue curve but not the same as its marginal revenue curve.
The same as its average revenue curve and its marginal revenue curve.
The same as its marginal revenue curve but not its average revenue curve.
Not the same as either its marginal revenue curve or its average revenue curve.

An important difference between the approaches of the classical and Keynesian
economists use to achieve a macroeconomic equilibrium is that:
Keynesian economists actively promote the use of fiscal policy; the classical economists
do not
Keynesian economists actively promote the use of monetary policy to improve aggregate
economic performance; classical economists do not
classical economists believe that monetary policy will certainly affect the level of output;
Keynesians believe that money growth affects only prices
classical economists believe that fiscal policy is an effective tool for achieving economic
stability; Keynesians do not

The level of aggregate demand will decrease if the level of:
Consumption spending increases

Imports decreases
Investment spending decreases
Government spending increases

good X increases:





Vertical.
U shaped.
Upward sloping.
Downward sloping.

Which of the following events shifts the short-run aggregate supply curve to the right?
A decrease in the money supply

A drop in oil prices
An increase in government spending on military equipment
An increase in price expectations

Many economists and government analysts have investigated the effect of a minimum
wage on labour markets. The general conclusion reached by the investigators is that:
The overall effect of the minimum wage is an increase in the unemployment level.
Teenagers gain most of the beneficial employment effects of the minimum wage.
All industries are equally affected by the minimum wage laws.
Over a period of time, the minimum wage laws will increase employment in the
economy.

Cost-pull.
Cost-push.
Demand-pull.
Demand-push.

structure?


We know that the demand for a good or service is inelastic if:
When price rises, quantity demanded rises.

When price rises, quantity demanded falls.
When price rises, total revenue rises.
When price rises, total revenue falls.
A "Giffen good" is defined as one for which:
Marginal utility is zero.

The demand curve is perfectly elastic.
The substitution effect is positive.
The demand curve is positively sloped.

currency.



200.
5Q.
5.
5 + (200/Q).

Personal income:
Is income received by individuals during a given year.

Is the income individuals have available for spending during a given year.
Equals national income minus indirect taxes.
Is the sum of wages plus interest received by individuals during a given year.

When the demand curve is downward sloping, marginal revenue is:
Equal to price.
Equal to average cost.
Less than price.
More than price.

The same as the market demand curve.

Downward-sloping and less flat than the market demand curve.
Downward-sloping and more flat than the market demand curve.
Perfectly horizontal.

Demand is elastic when the elasticity of demand is:
Greater than 0.
Greater than 1.
Less than 1.
Less than 0.

A negatively sloped isoquant implies:
Products with negative marginal utilities.

Products with positive marginal utilities.
Inputs with negative marginal products.
Inputs with positive marginal products.

arises:
A deflationary gap.
Hysteresis.
Hyperinflation.

If there is a price ceiling, there will be:
Shortages.
Surpluses.
Equilibrium.

The government has a budget surplus if:
Its total revenues are equal to its total expenditures.

Its total revenues are less than its total expenditures.
Its total revenues are greater than its total expenditures.
The money supply is less than total expenditures.

If a profit-maximizing firm finds that, at its current level of production, MR < MC, it
will:
Increase output.
Operate at a loss.
Shut down.
Decrease output.

AD curve slopes downward for both Keynes and classicals.
True
False

Perfect competitor
Oligopolist
Monopolist
Economist

If diminishing marginal utility holds and a person consumes less of a good, then all else
being equal:
The price of the good will rise.

Marginal utility will rise.
Expenditure on the good will increase.
Marginal utility will decline.





The marginal rate of substitution is equal to the:
Magnitude of the slope of the indifference curve

Relative price
Marginal cost of each good
Slope of the budget line

Fiscal policy is the government program with respect to its:
Steel Mill Privatization.

Unemployment reduction.
Expenditure and tax revenue.
Increase in unemployment.

Real GDP is equal to:
Nominal GDP – Inflation.

Nominal GDP + Inflation.
Nominal GDP / Inflation.
Inflation / Nominal GDP.



Monopolistic competition and oligopoly share which characteristic?
Free entry and exit from the industry
Strategic behavior
Standardized products
Advertising

If marginal product is equal to average product:

The average product will not change

curve?

and resources.
goods and services.

The same as the market demand curve.

Downward-sloping and less flat than the market demand curve.
Downward-sloping and more flat than the market demand curve.
Perfectly horizontal.

Perfect competitor
Oligopolist
Monopolist
Economist

For a firm buying labor competitively, the marginal input cost is equal to the:
Wage
Interest rate
Price of output
cost of raw materials

In the kinked demand curve model, if one firm reduces its price:
Other firms will also reduce their price

Other firms will compete on a non-price basis
Other firms will raise their price
Both (a) and (b) are correct

What does the term "balance of payments deficit" refer to?
An increase in official international reserves.

A positive statistical discrepancy.
A negative statistical discrepancy.
A decline in official international reserves.


An exchange rate that varies according to the supply and demand for the currency in the
foreign exchange market is called a(n) _________ exchange rate.
Overvalued.
Undervalued.
Fixed.
Flexible.

Which of the following is not an assumption of ordinal utility analysis?
Consumers are consistent in their preference.

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 are necessary.

A price taker is:
A firm that accepts different prices from different customers.

A monopolistically competitive firm.
A firm that cannot influence the market price.
An oligopolistic firm.

GDP is:
A stock
A flow.
Both a stock and a flow

45-degree line.

According to classical economists, the:
Aggregate demand curve is downward sloping and the aggregate supply curve is vertical
Aggregate demand curve is downward sloping and the aggregate supply curve is upward
sloping
Aggregate demand curve is vertical and the aggregate supply curve is upward sloping
Aggregate demand curve is vertical and the aggregate supply curve is horizontal

If the investment demand curve is vertical then:
Both monetary and fiscal policy are ineffective.

Both monetary and fiscal policy are effective.
Monetary policy is effective but fiscal policy is ineffective.
Monetary policy is ineffective but fiscal policy is effective.

Which of the following shows the condition for consumer's equilibrium?
It can be expressed as marginal utility per dollar spent on each good being equalized
across all goods.
It can be expressed as the ratio of (marginal utility per unit of the good)/(price per unit of
the good) being equalized across all goods.
It can be expressed as the ratio of marginal utilities being equated to the ratio of prices
for all possible pairs of goods.
All of the given options.

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


Prices and wages.

When government sets the price of a good and that price is below the equilibrium price,
the result will be:


Investment expenditures are expenditures made by the __________ sector:
Foreign.
Business.
Household.
Government.

The total market value of all final goods and services produced within a given period by
factors of production located within a country is:
Gross national product.

Gross domestic product.
Net national product.
Net national income.
Average physical product is equal to:
TPPF
TPPF/QF
QF / TPPF
TPPF * QF

The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the
______________ model.
Cournot
Stackelberg
Dminant firm
kinked demand

Final goods are meant for:
Direct use by the consumers

further processing
The term do not exist
None

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 Costs.

Endogenous growth theory was developed in:
1980.
1965.
1970.
1950.

Suppose we find that the cross-price elasticity of demand for two products is a negative
number. We know that:
The two goods are normal goods.

The two goods are inferior goods.
The two goods are substitutes.
The two goods are complements.

Cost-pull.
Cost-push.
Demand-pull.
Demand-push.

A Natural Monopoly is most likely to exist when:
There are large barriers to entry.

There are long term patents.
There are large economies of scale.
There is government regulation of the industry.

The relationship between tax rates and total tax collections by government is known as:
Laffer curve.
Demand curve.
Supply curve.
Investment curve.

Real GDP may fall.

Real GDP must rise.

arises:
A deflationary gap.
Hysteresis.
Hyperinflation.

200.
5Q.
5.
5 + (200/Q).

Vertical.
U shaped.
Upward sloping.
Downward sloping.

A firm maximizes profit by operating at the level of output where:
Average revenue equals average cost.

Average revenue equals average variable cost.
Total costs are minimized.
Marginal revenue equals marginal cost.

Shortages.
Surpluses.
Equilibrium.

currency.

Each of the following is one of the four sets of factors that determine the level of total
spending EXCEPT:
Consumer's baseline spending, C0.

Foreign real GDP, Yf.
Government purchases, G.
Investor's baseline spending in the stock market.

A Natural Monopoly is most likely to exist when:
There are large barriers to entry.
There are long term patents.
There are large economies of scale.
There is government regulation of the industry.

is:
Increasing.
Decreasing.
Elastic.
Inelastic.


All are necessary.

The law of diminishing marginal utility states:
The supply curve slopes upward.

Your utility grows at a slower and slower rate as you consume more and more units of a
good.
The elasticity of demand is infinite.


Zero.

If the income elasticity of demand for boots is 0.2, a 10% increase in consumer income
will lead to a:
20% increase in the quantity of boots demanded.

20% decrease in the quantity of boots demanded.
0.2% increase in the quantity of boots demanded.

According to Keynesian economics, aggregate expenditures are the sum of desired or
planned spending undertaken by:
The household sector after taxes.

The business and government sectors.
All four sectors only when the economy is at full employment.
All four sectors at a specific aggregate production level.

MT=PV.
VT=PM.
MV=PQ.
MY=VP.

The slope of the consumption function (or line) is the:

run equilibrium

The unemployment rate is equal to :
Number of employed persons / labour force x 100.

Number of unemployed persons + labour force.
(Number of unemployed persons / labour force) x 100.


All are necessary.

In the complete classical model, a rightward shift of the labor supply curve will:
Decrease the price level and increase the nominal wage

Decrease the nominal wage and increase the price leve
Decrease both the price level and the nominal wage
Increase both the price level and the nominal wage

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.

In which case, total expenditure in an economy is not equal to total income?
If total saving is larger than total investment.

If net exports are not zero.
If inventory investment is negative.
None of the given options--they are always equal.

Profit is maximized when:
Marginal revenue product is greater than marginal input cost

Marginal revenue product equals marginal input cost
Marginal revenue product is less than marginal input cost
Output is maximized

Is horizontal.

Real GDP may fall.

Real GDP must rise.
Which one of the following is true with a pure monopoly?
The monopoly's demand curve and the market demand curve are one and the same.
The market is dominated by just two firms.
The monopolist will always charge the highest possible price.
The monopolist will always charge a high price because it wants to maximize profits.

Naima has just finished school and is waiting to report to his new job at the beginning of
the month. Naima is considered to be:
Structurally unemployed.
Frictionally unemployed.
Cyclically unemployed.
Employed.

If two goods were perfect complements, their indifference curves would be:
Straight lines
L-shaped
Rectangular hyperbolas
Parabolic


The demand curve faced by an individual firm in a competitive market is:
Upward sloping.
Downward sloping.
Horizontal.
Vertical.

Monopolistically competitive firms have monopoly power because they:
Face downward sloping demand curves.

Are great in number.
Have freedom of entry.
Are free to advertise.

In the Keynesian cross model, the 45-degree line has a slope of:
1.
0.
45.
Infinity.

Which of the following events shifts the short-run aggregate supply curve to the right?
A decrease in the money supply

A drop in oil prices
An increase in government spending on military equipment
An increase in price expectations

The percentage change in quantity demanded given a percentage change in consumer's
income is known as:
Price elasticity of demand.

Income elasticity of demand.
Supply price elasticity.
Cross price elasticity.
Marginal utility is best described as:
The additional satisfaction gained by consumption of the last good.

The per unit satisfaction of the good consumed.
The total satisfaction gained from the total consumption of the good.
The change in satisfaction from consuming one additional unit of the good.

To make the equation of exchange into the quantity theory of money:
V and Q are assumed to be constant.

The money supply is assumed to be produced by the banking system and not exclusively
in currency.
The quantity of money is assumed to determine the amount of Real GDP.
M and P are considered constant.



Cartels are:

Oligopolies
All of the above

According to economy is always at full employment level. Economy would automatically
find the new equilibrium in the short run.
True
False

Laffer curve.
Demand curve.
Supply curve.
Investment curve.

In a perfectly competitive market:
Firms can freely enter and exit.

Firms sell a differentiated product.
Transaction costs are high.

MT=PV.
VT=PM.
MV=PQ.
MY=VP.

True
False
Which of the following statements describes increasing returns to scale:
Doubling the inputs used leads to double the output.

Increasing the inputs by 50% leads to a 25% increase in output.
Increasing inputs by 1/4 leads to an increase in output of 1/3.

In Keynesian economics, if aggregate expenditures are less than aggregate output then:
The price level rises.

Inventories decrease.
Employment decreases.
Aggregate output increases.

A price taker is:
A firm that accepts different prices from different customers.

A monopolistically competitive firm.
A firm that cannot influence the market price.
An oligopolistic firm.

Deflation is:
An increase in the overall level of economic activity.

An increase in the overall price level.
A decrease in the overall level of economic activity.
A decrease in the overall price level.

The short run, as economists use the phrase, is characterised by:
All inputs being variable.

At least one fixed factor of production and firms neither leaving nor entering the
industry.
No variable inputs - that is, all of the factors of production are fixed.
A period where the law of diminishing returns does not hold.

While drawing a given market demand curve,---------------- is not considered constant.
Income.
The price of the good in question.
The prices of related goods.
Preferences.

The study of economics basically focuses on:
For whom resources are allocated to increase efficiency.

How society spends the income of individuals.
How scarce resources are allocated to fulfill society's goals.
What scarce resources are used to produce goods and services.

is:
Increasing.
Decreasing.
Elastic.
Inelastic.



The percentage change in quantity demanded of a given good, with respect to the
percentage change in the price of “another” good is called:

Cross price elasticity of demand.

There are __________________methods of measuring GDP:
Four
Three
Five
None

Revenue is equal to:
Price times quantity.

Price times quantity minus total cost.
Price times quantity minus average cost.
Price times quantity minus marginal cost.


Zero.

illustrates:


The upward-sloping aggregate supply curve indicates that:
As firms increase their level of output, the cost of producing an extra unit increases
An increase in aggregate demand causes little, if any increase in real output
The economy is operating in the long run
Any increase in aggregate demand causes the output of producers to fall because the
general price level rises

structure?


Is GDP an accurate measure of a country’s well being?
Yes, it is the best measure of national well being.

Yes, provided we use real GDP and not nominal GDP.
Uncertain, depending on whether GDP is rising or falling.
No, it is not.

The market structure in which there is interdependence among firms is:
Monopolistic competition.
Oligopoly.
Perfect competition.
Monopoly.

Laffer curve.
Demand curve.
Supply curve.
Investment curve.

According the law of diminishing returns:
The marginal product falls as more units of a variable factor are added to a fixed factor.
Marginal utility falls as more units of a product are consumed.
The total product falls as more units of a variable factor are added to a fixed factor.
The marginal product increases as more units of a variable factor are added to a fixed
factor.


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.

Which of the following will happen if there is an increase in the long term economic
growth?
The production possibilities curve will shift outward.

The production possibilities curve will shift inward.
There will be a movement from inside the production possibilities curve to a point on the
There will be a movement from the production possibilities curve to a point inside the

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.

Endogenous growth theory was developed in:
1980.
1965.
1970.
1950.




Which of the following might be considered to be a characteristic of a planned economy?
All income is completely evenly distributed.

Price is relatively unimportant as a means of allocating resources.
Goods and services produced reflect consumer sovereignty.
There is no incentive for people to work hard.

If marginal product is above the average product:

The average product will rise

Shortages.
Surpluses.
Equilibrium.

A new technology which reduces costs for firms:
Shifts the supply curve to the right.
Shifts the supply curve to the left.
Reduces the equilibrium quantity.
Raises the equilibrium price.

Unity.



good X increases:


Producer surplus.
Utility.
Marginal utility.
Consumer surplus.
“Each firm produces an identical product and there is freedom of entry and exit”. This is
TRUE for which of the following market structures?
For Monopoly.
For Oligopoly.
For Perfect competition.
For Monopolistic competition.






paribus.
demand.

The shape of production possibilities curve is:
Concave.
Convex.
Linear.
Positive.

We know that the demand for a product is elastic if:
When price rises, revenue rises.

When price rises, revenue falls.
When price rises, quantity demanded rises.
When price falls, quantity demanded rises.

Is horizontal.



illustrates:


Which of the following is not a stock variable?
Government debt
The labor force
The amount of money held by the public
Inventory investment

A £1 increase in government spending will have a larger impact upon national income
than a £1 tax cut because:
The government prints the pound it spends.

Not all of a tax cut is spent.
When taxes are cut, so too is government spending.
Taxes are an injection into the system.

the result will be:



The government has a budget surplus if:


Vertical.
U shaped.
Upward sloping.
Downward sloping.

Unemployment benefits may increase the unemployment rate because unemployment
benefits:
Reduce the cost of job search.

Encourage people to quit their jobs.
Reduce the benefits of additional job searching.
Enable people to quit searching for work.

run equilibrium

An indifference curve is:
A collection of market baskets that are equally desirable to the consumer.

A collection of market baskets that the consumer can buy.
A curve whose elasticity is constant for every price.
A curve which passes through the origin and includes all of the market baskets that the
consumer regards as being equivalent.

If the cost of computer components falls, then
The demand curve for computers shifts to the right.

The demand curve for computers shifts to the left.
The supply curve for computers shifts to the right.
The supply curve for computers shifts to the left.

Insurance companies operate under the principle of:
Law of large numbers.

Law of small numbers.
Law of zero numbers.

The short run, as economists use the phrase, is characterised by:
All inputs being variable.

At least one fixed factor of production and firms neither leaving nor entering the
industry.
No variable inputs - that is, all of the factors of production are fixed.
A period where the law of diminishing returns does not hold.

All other things equal, GDP will rise if:
Imports rise
Exports fall
Durable goods consumption rises
Military spending falls

An individual whose attitude towards risk is known as:
Risk averse.
Risk loving.
Risk neutral.
None of the given is necessarily correct.

When an industry's raw material costs increase, other things remaining the same:




Which of the following is a characteristic of a mixed economy?
In mixed economy, resources are governed by both government and individuals.

Mixed economy utilizes the characteristics of both market economy and planned
economy to allocate goods and services.
People are free to make their decisions and government controls the Defence.
Laffer curve.
Demand curve.
Supply curve.
Investment curve.



The numerical measurement of a consumer’s preference is called:
Satisfaction.
Use.
Pleasure.
Utility.

If a firm operates in a perfectly competitive market, then it will most likely:
Advertise its product on television.

Have difficult time obtaining information about the market price.
Settle for whatever price is offered.
Have an easy time keeping other firms out of the market.


A rational person does not act unless:
The action is ethical.

The action produces marginal costs that exceeds marginal benefits.
The action produces marginal benefits that exceeds marginal costs.
The action makes money for the person.

A group of modern economists who believe that markets clear very rapidly and that
expanding the money supply will always increase prices rather than employment are the:
Keynesians
Monetarists
New Classical school
Post-Keynesians

Assume that the government sets a ceiling on the interest rate that banks charge on loans.
If the ceiling is set below the market equilibrium interest rate, the result will be:
A surplus of credit.
A shortage of credit.
Greater profits for banks issuing credit.
A perfectly inelastic supply of credit in the market place.

If the quantity supplied of mangoes exceeds the quantity demanded of mangoes:
There is a shortage of mangoes.

Market forces will cause the price to fall.
Market forces will cause the price to rise.
The market is in equilibrium.

When the price of petrol rises by 8%, the quantity of petrol purchased falls by 6%. This
shows that the demand for petrol is:
Perfectly elastic.
Unit elastic.
Price elastic.
Price inelastic.

Foreign.
Business.
Household.
Government.






All are necessary.

good X increases:
The demand for both Y and Z will increase.

The demand for Y will increase while the demand for Z will decrease.
The demand for Y will decrease while the demand for Z will increase.
The demand for both Y and Z will decrease.


Is horizontal.

The traditional Phillips Curve shows the:
Inverse relationship between the rate of inflation and the unemployment rate.
Inverse relationship between the nominal and the real wage.
Direct relationship between unemployment and demand-pull inflation.
Tradeoff between the short run and the long run.


Prices are reduced.

If the equilibrium price of bread is Rs. 3 and the government imposes Rs. 2 price ceiling
on the price of bread then:
More bread will be produced to meet the increased demand.

There will be a shortage of bread.
The demand for bread will decrease because suppliers will reduce their supply.
A surplus of bread will emerge.

Profit is maximized when:
Marginal revenue product is greater than marginal input cost

Marginal revenue product equals marginal input cost
Marginal revenue product is less than marginal input cost
Output is maximized

The government has a balanced budget if:




Assume that the current market price is below the market clearing level. We would
expect:
A surplus to accumulate.
Downward pressure on the current market price.
Upward pressure on the current market price.
Lower production during the next time period.

Which one of the following is most likely to lead to an increase in aggregate demand? An
increase in:
Government tax revenues

Household savings
Business capital investment
Demand for imports


Sales tax.
Excise tax.

The point at which AC intersects MC is where:
AC is decreasing.
MC is at its minimum.
AC is at its minimum.
AC is at its maximum.

Deflation is:
An increase in the overall level of economic activity.

An increase in the overall price level.
A decrease in the overall level of economic activity.
A decrease in the overall price level.


paribus.
demand.

Assume that the government sets a ceiling on the interest rate that banks charge on loans.
If the ceiling is set below the market equilibrium interest rate, the result will be:
A surplus of credit.
A shortage of credit.
Greater profits for banks issuing credit.
A perfectly inelastic supply of credit in the market place.



The government has a balanced budget if:


For Monopoly.
For Oligopoly.






Which of the following is true about the market mechanism?
It is not a very efficient means of communicating consumer demand to the producers of

goods and services.
It works through central planning by government.
It eliminates market failures created by government.
It works because prices serve as a means of communication between consumers and
producers.

If the supply of a product decreases and supply curve shifts leftward, and the demand for
that product simultaneously increases and demand curve shifts rightward, then
equilibrium:
Price must rise.

Price must fall.
Quantity must rise.
Quantity must fall.

______________ model.
Cournot
Stackelberg
Dminant firm
kinked demand

Shortages.
Surpluses.
Equilibrium.

If firms in a competitive industry are experiencing losses in the short run, then:
The firms will try to raise prices.

Some firms will choose to shut down.
The industry will cease to exist.
New firms will enter the industry.

arises:
A deflationary gap.
Hysteresis.
Hyperinflation.
The market structure in which there is interdependence among firms is:
Monopolistic competition.
Oligopoly.
Perfect competition.
Monopoly.

In which market structure(s) will price exceed marginal revenue?
Differentiated oligopoly and monopoly only

Standardized oligopoly and pure competition only
Monopolistic competition and monopoly only
Monopolistic competition, oligopoly, and monopoly

Which of the following is a correct statement about the substitution effect?
The substitution effect is always negative.

The substitution effect is positive for an inferior good.
The substitution effect measures how demand changes when income changes.
The substitution effect is positive for a Giffen good.

In which market structure do firms exist in very large numbers, each firm produces an
identical product and there is freedom of entry and exit?
Monopoly
Oligopoly
Perfect competition
Monopolistic competition

The slope of the consumption function (or line) is the:

The price elasticity of demand measures the responsiveness of quantity demanded to:
Quantity demanded.
Quantity supplied.
Price.
Output.



exports are:




In the exogenous growth model, if investment exceeds depreciation, the capital stock
will______ and output will ______ until the steady state is attained.
Increase; increase.
Increase; decrease.
Decrease; decrease.
Decrease; increase.

The law of increasing opportunity costs states that:
The more one is willing to pay for resources, the larger will be the possible level of
production.
Increasing the production of a particular good will cause the price of the good to rise.
In order to produce additional units of a particular good, it is necessary for society to
sacrifice increasingly larger amounts of alternative goods.
Only by keeping production constant can rising prices be avoided.

International data suggest that economies of countries with different steady states will
converge to:
The same steady state.

Their own steady state.
The Golden Rule steady state.
Steady states below the Golden Rule level.

The law of diminishing marginal utility:
Refers to the decrease in total satisfaction as more units of the good are consumed.
Refers to the fall in additional satisfaction created by consumption of more and more.
Refers to the units of a good.
Refers to the idea that total utility is negative.
Other things being equal, expected income can be used as a direct measure of well-being:
No matter what a person's preference to risk.

If and only if individuals are not risk-loving.
If and only if individuals are risk averse.
If and only if individuals are risk neutral.



AD curve slopes upward for both Keynes and classical
True
False

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.

The classical economists thought that the economy would quickly overcome any short
run instability because:
Price level and quantity were flexible
Prices would get stuck at a low level
The long run aggregate supply would shift to the left
Prices and wages were flexible

It is expected that the sign of cross price elasticity of demand between two
complementary goods would be:
Positive.
Negative.
Zero.
Ambiguous.

If a decrease in price increases total revenue:
Demand is elastic.
Demand is inelastic.
Supply is elastic.
Supply is inelastic.

The firm's demand for labor is:
The marginal revenue product curve

The marginal input cost curve
The marginal cost curve
Undetermined

An exchange rate that varies according to the supply and demand for the currency in the
foreign exchange market is called a(n) _________ exchange rate.
Overvalued.
Undervalued.
Fixed.
Flexible.

True
False



Which school of thought holds that decreases in aggregate demand decrease real output
but leave the price level largely unaffected?
Monetarism
New Classical theory
Real Business Cycle theory
Keynesian

Suppose the price of railway ticket decreases, what will happen in the market for airline
travel?
The demand curve for airline travel shifts left.

The demand curve for airline travel shifts right.
The supply curve of airline travel shifts left.
The supply curve of airline travel shifts right.

The average propensity to consume is the ratio of:
A change in consumption to a change in disposable income.

A change in consumption to total disposable income at a specific income level.
Total consumption to total disposable income at a specific income level.
Total consumption to a change in disposable income.

Real GDP:
Is nominal GDP adjusted for changes in the price level.

Is also called nominal GDP.
Measures GDP minus depreciation of capital.
Will always change when prices change.

Which of the following is not a stock variable?
Government debt
The labor force
The amount of money held by the public
Inventory investment

A market is said to be in equilibrium when:
Supply equals Price.

There is downward pressure on price.
The amount consumers wish to buy at the current price equals the amount producers
wish to sell at that price.
All buyers are able to find sellers willing to sell to them at the current price.

Which of the following is NOT an account in the balance of payments?
Capital account.
Financial account.
Current account.
Future account.

Assume that the current market price is below the market clearing level. We would
expect:
A surplus to accumulate.
Downward pressure on the current market price.
Upward pressure on the current market price.
Lower production during the next time period.

Laffer curve.
Demand curve.
Supply curve.
Investment curve.


paribus.
demand.

Unity.

curve?

and resources.
goods and services.

When the marginal revenue product is greater than the marginal input cost of labor, the
profit maximizing firm will:
Hire more
Hire less
Maintain the same employment
Decrease output

Growth rate of per capita income is equal to:
Growth rate of total output - Growth rate of population.

Growth rate of total output / Growth rate of population.
Growth rate of population / Growth rate of total output.
Growth rate of total output + Growth rate of population.
If the investment demand curve is vertical then:
Both monetary and fiscal policy are ineffective.

Both monetary and fiscal policy are effective.
Monetary policy is effective but fiscal policy is ineffective.
Monetary policy is ineffective but fiscal policy is effective.

The numerical measurement of a consumer’s preference is called:
Satisfaction.
Use.
Pleasure.
Utility.

If utility remains the same for original and new combination of goods consumed, the
effect of a change in the price of a good on the quantities consumed will be called as:
Real income effect.
Income effect.
Budget effect.

This market situation is much like a pure monopoly except that its member firms tend to
cheat on agreed upon price and output strategies. What is it?
Duopol
Cartel
Market sharing monopoly
Natural monopoly

Foreign.
Business.
Household.
Government.

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.



Sales tax.
Excise tax.

The concept of a risk premium applies to a person that is:
Risk averse
Risk neutral
Risk loving
All of the given options


The law of diminishing marginal utility states:
The supply curve slopes upward.

Your utility grows at a slower and slower rate as you consume more and more units of a
good.
The elasticity of demand is infinite.

Monetarism
Keynesian

exports are:


Suppose price rises from Rs. 15 to Rs. 17 and quantity demanded decreases by 20%. We
can conclude:
The elasticity of demand is 2.
Total revenue will decrease.
Demand is unit elastic.

For Monopoly.
For Oligopoly.

If marginal product is equal to average product:

The average product will not change



The law of increasing opportunity costs states that:
The more one is willing to pay for resources, the larger will be the possible level of
production.
Increasing the production of a particular good will cause the price of the good to rise.
In order to produce additional units of a particular good, it is necessary for society to
sacrifice increasingly larger amounts of alternative goods.
Only by keeping production constant can rising prices be avoided.

The level of aggregate demand will decrease if the level of:
Consumption spending increases

Imports decreases
Investment spending decreases
Government spending increases



The total cost (TC) function is given as: TC = 200 + 5Q. What is the variable cost?
200.
5Q.
5.
5 + (200/Q).

An exchange rate system in which central banks are always ready to buy and sell their
currencies at predetermined prices is called:
A dirty floating exchange rate system.

A flexible exchange rate system.
A managed exchange rate system .
A fixed exchange rate system.

A new technology which reduces costs for firms:
Shifts the supply curve to the right.

Shifts the supply curve to the left.
Reduces the equilibrium quantity.
Raises the equilibrium price.

Fiscal policy is the government program with respect to its:
Steel Mill Privatization.

Unemployment reduction.
Expenditure and tax revenue.
Increase in unemployment.

Which of the following is the requirement of an industry to be perfectly competitive?
There are no restrictions on entry into or exit from the market.

There are multiple restrictions on entry into or exit from the market.
There are many firms selling different products.
Sellers and buyers have imperfect information about prices.

The shape of production possibilities curve is:
Concave.
Convex.
Linear.
Positive.

This market situation is much like a pure monopoly except that its member firms tend to
cheat on agreed upon price and output strategies. What is it?
Duopol
Cartel
Market sharing monopoly
Natural monopoly




In which case, total expenditure in an economy is not equal to total income?
If total saving is larger than total investment.

If net exports are not zero.
If inventory investment is negative.
None of the given options--they are always equal.

If a decrease in price increases total revenue:
Demand is elastic.
Supply is elastic.
Supply is inelastic.

Which of the following is true about the entrepreneur?
An entrepreneur is an innovator.
An entrepreneur is someone who brings resources together and produces a product.
An entrepreneur is a risk taker.

Current account deficit is equal to:
Private sector resource deficit.

Government budget deficit.
Private sector resource deficit + Government budget deficit.


Prices and wages.

According to classical economists, the:
Aggregate demand curve is downward sloping and the aggregate supply curve is vertical
Aggregate demand curve is downward sloping and the aggregate supply curve is upward
sloping
Aggregate demand curve is vertical and the aggregate supply curve is upward sloping
Aggregate demand curve is vertical and the aggregate supply curve is horizontal
Cartels are:

Oligopolies
All of the above

Price elasticities are measured in percentage terms because:
It makes students’ lives more complicated.

The resulting measure is unit free.
It gives a more accurate answer.
The answer is always negative that way.



Growth rate of per capita income is equal to:
Growth rate of total output - Growth rate of population.

Growth rate of total output / Growth rate of population.
Growth rate of population / Growth rate of total output.
Growth rate of total output + Growth rate of population.

Is horizontal.

Which of the following is true about the total cost curve?
It relates output with total cost.

It is usually upward sloping.
Gets steeper as output rises, due to diminishing marginal product of an input.

Which of the following would cause the short run aggregate supply curve to shift to the
left, but have no effect over the long run aggregate supply?
The amount of factors of production (such as labor and capital) increase

The amount of factors of production (such as labor and capital) decrease
Prices of inputs (such as wages or oil prices) increase
Prices of inputs (such as wages or oil prices) decrease

Real GDP is equal to:
Nominal GDP – Inflation.

Nominal GDP + Inflation.
Nominal GDP / Inflation.
Inflation / Nominal GDP.


All of the above


the result will be:


Under New Classical macroeconomics monetary policy:
Affects the level of equilibrium output

Affects the composition of equilibrium output
Affects both the level and composition of equilibrium output

Microeconomics
Macroeconomics
Positive economics
Normative economics
Income effect.
Budget effect.
Real income effect.

A government wishing to reduce a deficit on the current account of their balance of
payments through the use of fiscal policy would be most likely to:
Raise direct taxation.

Introduce an import quota.
Reduce the rate of value added tax on all goods and services.
Raise interest rates.

good X increases:




According to the law of diminishing marginal utility, as the consumption of particular
good increases:
Total utility increases.

Marginal utility increases.
Total utility decreases.
Marginal utility decreases.

The most important factor in determining the long-run profit potential in monopolistic
competition is:
Free entry and exit.

The elasticity of the market demand curve.
The elasticity of the firm's demand curve.
The reaction of rival firms to a change in price.



The principle economic difference between a competitive and a non-competitive market
is:
The number of firms in the market.

The extent to which any firm can influence the price of the product.
The size of the firms in the market.
The annual sales made by the largest firms in the market.






will lead to a:


Our economy is characterized by:
Unlimited wants and needs.

Unlimited material resources.
No energy resources.
Abundant productive labor.


When an industry's raw material costs decrease, other things remaining the same:



Prices are reduced.

Which of the following international accounts records the purchase and sale of financial
assets and real estate between Pakistan and other nations?
The savings account.

The current account.
The capital account.
The financial account.

Which of the following statements describes increasing returns to scale:
Doubling the inputs used leads to double the output.
Increasing the inputs by 50% leads to a 25% increase in output.
Increasing inputs by 1/4 leads to an increase in output of 1/3.

Disposable income is:
Total income plus transfer payments.

Total income minus saving.
Total income plus net taxes.
Total income minus net taxes.

Income effect.
Budget effect.
Real income effect.

45-degree line.

Producer surplus.
Utility.
Marginal utility.
Consumer surplus.
In the complete classical model, a rightward shift of the labor supply curve will:
Decrease the price level and increase the nominal wage

Decrease the nominal wage and increase the price leve
Decrease both the price level and the nominal wage
Increase both the price level and the nominal wage

Potential GDP is an estimate of the economy’s ability to produce goods and services if:
Labor force is fully employed.

Price level is stable.
Trade balance is zero.
Federal budget is balanced.

GDP is:
A stock
A flow.



is:
Increasing.
Decreasing.
Elastic.
Inelastic.





It is expected that the sign of cross price elasticity of demand between two
complementary goods would be:
Positive.
Negative.
Zero.
Ambiguous.

Which of the following can be thought of as a barrier to entry?
Scale economies.
Patents.
Strategic actions by incumbent firms.



If firms in a competitive industry are experiencing losses in the short run, then:
The firms will try to raise prices.

Some firms will choose to shut down.
The industry will cease to exist.
New firms will enter the industry.

A "Giffen good" is defined as one for which:
Marginal utility is zero.

The demand curve is perfectly elastic.
The substitution effect is positive.
The demand curve is positively sloped.

The long run aggregate supply will shift to the right whenever:
The price level increases

Factors of production (such as labor and capital) increase
Expenditures (such as consumption and net exports) increase
The prices of inputs used to produce goods and services (such as wages and the price of
oil) decrease

will lead to a:



--------------- is the rate at which a firm can substitute capital for labour and hold output
constant.
Diminishing marginal returns.

Marginal rate of substitution.
Marginal rate of factor substitution.
Marginal rate of production.

An exchange rate system in which central banks are always ready to buy and sell their
currencies at predetermined prices is called:
A dirty floating exchange rate system.

A flexible exchange rate system.
A managed exchange rate system .
A fixed exchange rate system.

The labour force is made up of:
The number of people employed minus the number of people unemployed.
The number of people employed plus the number of people unemployed.
Just the number of people employed.
The whole population.

When drawing demand and supply curves, economists are assuming that the primary
influence on production and purchasing decisions is:
Price.
Cost of production.
The overall state of the economy.
Consumer incomes.

Goods produced by oligopolistic industries are typically:
Standardized
Differentiated
Differentiated if industrial goods
Differentiated if consumer goods

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.



Suppose the price of railway ticket decreases, what will happen in the market for airline
travel?
The demand curve for airline travel shifts left.

The demand curve for airline travel shifts right.
The supply curve of airline travel shifts left.
The supply curve of airline travel shifts right.

Monetarism
Keynesian

To make the equation of exchange into the quantity theory of money:
V and Q are assumed to be constant.

The money supply is assumed to be produced by the banking system and not exclusively
in currency.
The quantity of money is assumed to determine the amount of Real GDP.
M and P are considered constant.

If marginal product is below average product:

The average product will fall



The slope of the saving function (or line) is the:


economic growth?
theory.

Foreign.
Business.
Household.
Government.
Potential GDP is an estimate of the economy’s ability to produce goods and services if:
Labor force is fully employed.

Price level is stable.
Trade balance is zero.
Federal budget is balanced.

Indifference curves that are convex to the origin reflect:
An increasing marginal rate of substitution.

A decreasing marginal rate of substitution.
A constant marginal rate of substitution.
A marginal rate of substitution that first decreases then increases.

Microeconomics
Macroeconomics
Positive economics
Normative economics

The cross elasticity of demand of complements goods is:
Less than 0.
Equal to 0.
Greater than 0.
Between 0 and 1.

A rational person does not act unless:
The action is ethical.
The action produces marginal costs that exceeds marginal benefits.
The action produces marginal benefits that exceeds marginal costs.
The action makes money for the person.

When the demand curve is downward sloping, marginal revenue is:
Equal to price.
Equal to average cost.
Less than price.
More than price.

Vertical.
U shaped.
Upward sloping.
Downward sloping.




All are necessary.


If a country has flexible exchange rates and has more rapid inflation than other countries,
its currency will:
Appreciate.
Depreciate.
Not change.
All of the given conditions may be possible.



______________ model.
Cournot
Stackelberg
Dminant firm
kinked demand

Graphically, marginal revenue is defined as:
The slope of a line from the origin to a point on the total revenue curve.
The slope of a line from the origin to the end of the total revenue curve.
The slope of the total revenue curve at a given point.
The vertical intercept of a line tangent to the total revenue curve at a given point.

ECO401 Quiz 5 MCQ's500 Solved

Uploaded by

Copyright:

Available Formats

ECO401 Quiz 5 MCQ's500 Solved

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ECO401 Quiz 5 MCQ's500 Solved

Uploaded by

Copyright:

Available Formats

ECO401 Online Quiz#5 Current 500 MCQ’s Solved

Question # 1 of 15 ( Start time: 05:41:35 AM ) Total Marks: 1

The production possibilities curve will shift outward.

Question # 2 of 15 ( Start time: 05:42:26 AM ) Total Marks: 1

Has self-correcting mechanisms

Question # 3 of 15 ( Start time: 05:42:34 AM ) Total Marks: 1

Decreasing returns to scale.

Question # 4 of 15 ( Start time: 05:42:45 AM ) Total Marks: 1

Decreasing marginal costs.

The two goods are normal goods.

Question # 6 of 15 ( Start time: 05:43:32 AM ) Total Marks: 1

It makes students’ lives more complicated.

Question # 7 of 15 ( Start time: 05:43:51 AM ) Total Marks: 1

Are unable to find a job at the current wage rate.

Question # 8 of 15 ( Start time: 05:44:27 AM ) Total Marks: 1

Question # 9 of 15 ( Start time: 05:44:45 AM ) Total Marks: 1

Question # 10 of 15 ( Start time: 05:45:29 AM ) Total Marks: 1

The government prints the pound it spends.

Question # 11 of 15 ( Start time: 05:45:45 AM ) Total Marks: 1

Question # 12 of 15 ( Start time: 05:46:54 AM ) Total Marks: 1

Real GDP may fall.

Question # 13 of 15 ( Start time: 05:47:33 AM ) Total Marks: 1

Question # 14 of 15 ( Start time: 05:47:58 AM ) Total Marks: 1

Price with no change in output.

Question # 15 of 15 ( Start time: 05:49:07 AM ) Total Marks: 1

Question # 1 of 15 ( Start time: 05:59:36 AM ) Total Marks: 1

Question # 2 of 15 ( Start time: 06:00:17 AM ) Total Marks: 1

Question # 4 of 15 ( Start time: 06:02:56 AM ) Total Marks: 1

The capital account balance.

Question # 5 of 15 ( Start time: 06:03:38 AM ) Total Marks: 1

The derivative of Variable Cost with respect to quantity produced.

Question # 6 of 15 ( Start time: 06:05:05 AM ) Total Marks: 1

Will make negative profit (lose money).

Question # 7 of 15 ( Start time: 06:06:31 AM ) Total Marks: 1

Question # 8 of 15 ( Start time: 06:06:41 AM ) Total Marks: 1

Question # 9 of 15 ( Start time: 06:06:48 AM ) Total Marks: 1

At the minimum of its average total cost curve.

Question # 10 of 15 ( Start time: 06:07:21 AM ) Total Marks: 1

Question # 11 of 15 ( Start time: 06:07:28 AM ) Total Marks: 1

A numerical tabulation of the quantity demanded of a good at different prices, ceteris

There are no fixed factors of production.

Question # 13 of 15 ( Start time: 06:09:20 AM ) Total Marks: 1

No matter what a person's preference to risk.

Question # 14 of 15 ( Start time: 06:10:45 AM ) Total Marks: 1

Question # 15 of 15 ( Start time: 06:10:54 AM ) Total Marks: 1

Question # 1 of 15 ( Start time: 08:53:11 PM ) Total Marks: 1

Question # 2 of 15 ( Start time: 08:53:49 PM ) Total Marks: 1

Aggregate expenditures are less than aggregate production.

Question # 3 of 15 ( Start time: 08:55:16 PM ) Total Marks: 1

Question # 4 of 15 ( Start time: 08:55:34 PM ) Total Marks: 1

Question # 5 of 15 ( Start time: 08:56:19 PM ) Total Marks: 1

Raise direct taxation.

Question # 6 of 15 ( Start time: 08:57:22 PM ) Total Marks: 1

Question # 7 of 15 ( Start time: 08:58:34 PM ) Total Marks: 1

Has perfect substitutes

Question # 8 of 15 ( Start time: 08:58:52 PM ) Total Marks: 1

A surplus of the good.

Question # 9 of 15 ( Start time: 08:59:34 PM ) Total Marks: 1

It shows an undesirable combination of goods and services.