MCQS ECO601 midterm preparation file ZB

In the name of God , Most

Gracious, Most merciful

ECO601
MCQS Midterm preparation file ZB

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MCQS

1. Which of the following is a characteristic of a perfectly competitive market?

a) Single seller

b) Barriers to entry

c) Homogeneous products

d) Limited information
Answer: c) Homogeneous products

2. What is the main objective of monetary policy?

a) Control inflation

b) Increase government spending

c) Decrease the interest rates

d) Encourage private investment

Answer: a) Control inflation

3. Which of the following is an example of a public good?

a) National defense

b) Education

c) Healthcare

d) Private insurance
Answer: a) National defense

4. In economics, the opportunity cost refers to:

a) The value of the next best alternative forgone

b) The cost of production

c) The total cost of a decision

d) The amount of money spent on a product

Answer: a) The value of the next best alternative forgone
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Midterm preparation file

5. A shift in the demand curve is caused by:

a) Change in the price of the good

b) Change in income of consumers

c) A change in the price of related goods

d) All of the above

Answer: d) All of the above

6. Which of the following is a feature of a monopoly?

a) Many sellers

b) Barriers to entry

c) Homogeneous products

d) Perfect knowledge
Answer: b) Barriers to entry

7. The law of diminishing marginal utility states that:

a) Utility decreases with the increase in income

b) Total utility increases with additional consumption

c) Marginal utility decreases as more of a good is consumed

d) Utility is constant for all consumers

Answer: c) Marginal utility decreases as more of a good is consumed

8. What is the effect of a price floor set above equilibrium price?

a) Surplus

b) Shortage

c) No change

d) Increased demand
Answer: a) Surplus
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9. Which of the following is an example of a factor of production?

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a) Rent

b) Labor

c) Taxation

d) Government
Answer: b) Labor

10. If the price of a good decreases, the quantity demanded will:

a) Increase

b) Decrease

c) Stay the same

d) Be unaffected by income changes

Answer: a) Increase

11. In perfect competition, firms produce at the point where:

a) Marginal cost equals average total cost

b) Marginal revenue equals marginal cost

c) Average revenue equals marginal revenue

d) Average fixed cost is minimized

Answer: b) Marginal revenue equals marginal cost

12. The income elasticity of demand for a normal good is:

a) Greater than 1

b) Less than 1

c) Equal to 0

d) Positive
Answer: d) Positive
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13. Which of the following is an example of a negative externality?

a) Education

b) Vaccination

c) Pollution

d) Public parks
Answer: c) Pollution

14. The market demand curve is derived from:

a) The supply curves of firms

b) The individual demand curves of all consumers

c) The total costs of production

d) Government intervention in the market

Answer: b) The individual demand curves of all consumers

15. What is the main goal of fiscal policy?

a) Control inflation

b) Control government spending

c) Manage the money supply

d) Influence the economy through government spending and taxation

Answer: d) Influence the economy through government spending and taxation

16. Which of the following is an example of a merit good?

a) Cigarettes

b) Alcohol

c) Education

d) Fast food
Answer: c) Education
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17. The marginal cost curve intersects the average total cost curve at:

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a) The minimum of average variable cost

b) The minimum of average total cost

c) The maximum of average fixed cost

d) The point where total cost equals total revenue

Answer: b) The minimum of average total cost

18. Which of the following is true about monopolistic competition?

a) There is only one firm in the market

b) Firms sell identical products

c) There are barriers to entry

d) Firms sell differentiated products

Answer: d) Firms sell differentiated products

19. In the short run, firms in a perfectly competitive market:

a) Earn profits equal to zero

b) Earn normal profits

c) May earn economic profits or incur losses

d) Always earn economic profits

Answer: c) May earn economic profits or incur losses

20. Which of the following is true for a Giffen good?

a) It is a type of inferior good with an upward-sloping demand curve

b) It has a positive income elasticity of demand

c) It is a luxury good

d) It is highly elastic in demand

Answer: a) It is a type of inferior good with an upward-sloping demand curve
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21. The substitution effect occurs when:

a) A price change makes the good less desirable

b) Consumers buy more of a good when its price falls, due to the effect of a change in relative
prices

c) The income of consumers changes

d) Government subsidies change the price of the good

Answer: b) Consumers buy more of a good when its price falls, due to the effect of a change in
relative prices

22. Which of the following is an example of a price ceiling?

a) Minimum wage

b) Rent control

c) Tax on luxury goods

d) Import tariffs
Answer: b) Rent control

23. Which of the following is an effect of an increase in the supply of money?

a) A decrease in interest rates

b) An increase in the price of goods

c) A decrease in demand

d) A decrease in government spending

Answer: a) A decrease in interest rates

24. Which type of market structure has the highest degree of market power?

a) Perfect competition

b) Monopolistic competition

c) Oligopoly

d) Monopoly
Answer: d) Monopoly
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25. In the long run, firms in a perfectly competitive market:

a) Earn economic profits

b) Earn zero economic profits

c) Have no supply curve

d) Can collude to fix prices

Answer: b) Earn zero economic profits

26. Which of the following is an example of a price taker?

a) A monopolist

b) A firm in monopolistic competition

c) A perfectly competitive firm

d) A firm in an oligopoly
Answer: c) A perfectly competitive firm

27. The main difference between fixed costs and variable costs is that:

a) Fixed costs change with output levels, while variable costs do not

b) Variable costs change with output levels, while fixed costs do not

c) Fixed costs are incurred only in the long run, while variable costs are incurred in the
short run

d) Fixed costs include wages, while variable costs include rent

Answer: b) Variable costs change with output levels, while fixed costs do not

28. What is the price elasticity of demand if a 10% decrease in price leads to a 20%
increase in quantity demanded?

a) 2

b) 0.5

c) 1

d) 0
Answer: a) 2
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29. The concept of "diminishing returns" refers to:

a) The total cost of production

b) The point at which additional input results in less additional output

c) The decrease in marginal utility

d) The decrease in fixed costs over time

Answer: b) The point at which additional input results in less additional output

30. Which of the following describes a natural monopoly?

a) A monopoly created by government regulation

b) A monopoly that arises because one firm can supply the entire market at a lower cost than multiple

firms

c) A monopoly that charges high prices for its goods

d) A monopoly in the healthcare industry

Answer: b) A
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33. Which of the following is an example of a price maker?

a) Perfectly competitive firm

b) Monopolistic competition firm
c) Monopoly firm
d) Price-taking firm
Answer: c) Monopoly firm

34. In a competitive market, firms earn a profit in the short run when:

a) Price equals average total cost

b) Price is greater than average total cost
c) Price is less than average total cost
d) Price equals marginal cost
Answer: b) Price is greater than average total cost

35. The long-run supply curve in a perfectly competitive market is:

a) Upward sloping
b) Downward sloping
c) Horizontal
d) Vertical
Answer: a) Upward sloping

36. Which of the following is a determinant of price elasticity of

demand?

a) The availability of substitutes

b) The size of the market
c) The level of government intervention
d) The level of income
Answer: a) The availability of substitutes
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37. What is the primary function of the central bank?

a) Provide loans to consumers

b) Issue currency

c) Set wages for government employees

d) Regulate stock markets

Answer: b) Issue currency

38. Which of the following happens when a country engages in trade and specializes in the production
of a good in which it has a comparative advantage?

a) The country's production possibility curve shifts inward

b) The country will consume less than it produces

c) The country can consume beyond its production possibility curve

d) The country's total welfare declines

Answer: c) The country can consume beyond its production possibility curve

39. Which of the following would cause a shift in the supply curve for a good?

a) A change in the price of the good

b) A change in the price of a related good

c) A change in technology

d) A change in consumer income

Answer: c) A change in technology

40. What is the primary cause of inflation?

a) Decreased government spending

b) Excess demand in the economy

c) Increased taxes on businesses

d) A decrease in the money supply

Answer: b) Excess demand in the economy
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41. If the income elasticity of demand is greater than 1, the good is

considered:

a) A necessity
b) A luxury good
c) An inferior good
d) A complementary good
Answer: b) A luxury good

42. Which of the following will lead to an increase in demand for a

product?

a) A decrease in consumer income for a normal good

b) A decrease in the price of a substitute good
c) An increase in consumer income for an inferior good
d) A decrease in consumer income for an inferior good
Answer: d) A decrease in consumer income for an inferior good

43. Which of the following is true of a Giffen good?

a) It is a type of inferior good with a downward-sloping demand curve

b) It has a positive income elasticity of demand
c) It violates the law of demand
d) It is a luxury good
Answer: c) It violates the law of demand

44. The marginal revenue product of labor (MRP) is the:

a) Additional revenue generated from hiring an additional worker

b) Total revenue divided by the number of workers
c) Average revenue generated by each worker
d) Wage rate paid to workers
Answer: a) Additional revenue generated from hiring an additional
worker
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45. A decrease in the price of a good will lead to:

a) An increase in quantity demanded

b) A decrease in quantity demanded

c) No change in quantity demanded

d) An increase in quantity supplied

Answer: a) An increase in quantity demanded

46. Which of the following is an example of a negative externality?

a) A company's pollution affecting local residents

b) A worker receiving additional training

c) A homeowner increasing the value of their property

d) A firm providing free health insurance

Answer: a) A company's pollution affecting local residents

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MCQS Midterm preparation file

Passing criteria of this course

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Passing Criteria for a Course:

The passing criteria is defined in such a way that it ensures the

student shall be consistent in his studies
throughout the semester.
Therefore, for passing a course/subject, student shall fulfill the
following:
a) Secure minimum 20% score in Formative Assessments/Mid
terms
b) Secure minimum 20% score in Final Term Examinations.
c) Secure at least 40% marks in aggregate while fulfilling the
above requirements
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MCQS Midterm preparation file

Course Selection and Credit Hours

Q: How do I select courses when the course selection is open?

A: Follow these steps:
1. Check the credit hours allowed by your university (e.g., 21, 18, or 15
credit hours).
2. Each subject typically has 3 credit hours.
3. Divide the total allowed credit hours by 3 to determine how many
subjects you can select.
Examples:
21 credit hours = 7 su18 credit hours = 6 subjects
15 credit hours = 5 subjects
Remember, the university may allow different credit hours for each
student, so check your specific allowance.
By following these steps, you can make informed decisions during
course selection and manage your credit hours
effectively.

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Advice
Hmaesha relax ho ke parha kryn panic mat hua kryn apky
parents ky bohat khawab hoty hn wo pura krny ki puri koshish
kea kryn kbi b ksi pe depend na kea kryn apko bs ak insan
success kr saqta ha or wo insan ap khud hn apky elawa koi nahe
ap bs koshish kryn Allah pak pe strong yakeen rakha kryn or
mehnat krke sb Allah ke hawaly kr dea kryn everything is
possible be brave be strong stay blessed
Hum insan hamesha moat se darty or bhagty hn or moat se
bachny ki koshish krty hn jabke moat ny ana hi ana ha hum
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moat se nahe bach saqty humy jahanam se bachny ki koshish
krni chaheay hum jahanam se bach saqty hn
Insan ko 3 chezo se dar lagta ha Moat Risk/Dolat Ezat Shohrat
Fame

Moat
Humy pta hona chaheay Moat tab ani ha jab Allah
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Risk/Dolat
Risk Dolat sb Allah pak ke hath m ha puri dunya ak
taraf b ho jay na apsy apka risk cheen saqti ha na de
saqti ha Ye sirf ALLAh pak ky hath m ha

Izat Zilat shohrat Fame

Izat Zilat Sirf Allah de saqty hn puri dunya mel ke b
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Apko izat dena chahay to puri dunya ak tararf ho ke
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Phr Dar ks bat ka ???????????????
Be brave be strong Just put your trust To ALLAH
Hamesha Confident or himat se raho kbi ksi k samne
mat jhuko puri dunya mel k b apka kuch b nahe
beggar saqti
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