Eco401+Total+Mid+Paper

www.vunew.blogspot.com MIDTERM EXAMINATION Fall 2009 ECO401 - Economics Question No: 1 ( Marks: 1 ) - Please choose one If the quantity demanded of a product is greater than the quantity supplied of a product, then: Selected answer There is a shortage of the product. . There is a surplus of the product. . The product is a normal good. . The product is an inferior good. Question No: 2 ( Marks: 1 ) - Please choose one A good for which income and quantity demanded are inversely related is known as: Selected answer Inferior good. . Complementary good. . Normal good. . None of the given options. Question No: 3 ( 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. Selected answer The economy will move from a point inside to a point closer to its production possibilities curve. Question No: 4 ( Marks: 1 ) - Please choose one The supply curve is upward-sloping because: . As the price increases, consumers demand less. Selected answer As the price increases, suppliers can earn higher levels of profit or justify higher marginal costs to produce more. . None of the given options. . As the price increases, so do costs. Question No: 5 ( Marks: 1 ) - Please choose one An increase in supply is shown by: . Shifting the supply curve to the left. Selected answer Shifting the supply curve to the right. . Upward movement along the supply curve. . Downward movement along the supply curve. www.vunew.blogspot.com www.vunew.blogspot.com Question No: 6 ( Marks: 1 ) - Please choose one When constructing a typical production possibilities curve, economists assume that: . Economic resources are underutilized. . Resources are equally productive in many alternative uses. Selected answer All available resources are employed efficiently. . Production technology is allowed to vary. Question No: 7 ( Marks: 1 ) - Please choose one At the equilibrium price: . There will be a shortage. Selected answer There will be neither a shortage nor a surplus. . There will be a surplus. . There are forces that cause the price to change. Question No: 8 ( Marks: 1 ) - Please choose one Our economy is characterized by: Selected answer Unlimited wants and needs. . Unlimited material resources. . No energy resources. . Abundant productive labor. Question No: 9 ( Marks: 1 ) - Please choose one When an industry's raw material costs increase, other things remaining the same: Selected answer 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: 10 ( Marks: 1 ) - Please choose one The cross price elasticity of demand for complementary goods is: Selected answer Less than 0. . Equal to 0. . Greater than 0. . Between 0 and 1. Question No: 11 ( Marks: 1 ) - Please choose one If both supply and demand increase simultaneously, the equilibrium: . Price must rise and the equilibrium quantity must fall. Selected answer 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. www.vunew.blogspot.com www.vunew.blogspot.com Question No: 12 ( Marks: 1 ) - Please choose one A demand curve is price inelastic when: Selected answer Changes in demand are proportionately smaller than changes in price. . Changes in demand are proportionately greater than changes in price. . Changes in demand are equal to changes in price. . None of the given options. Question No: 13 ( 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. Selected answer The quantity supplied at two different prices, all else equal. Question No: 14 ( Marks: 1 ) - Please choose one If the income elasticity of demand for boots is 0.2, a 10% increase in consumer's income will lead to a: . 20 percent decrease in the quantity of boots demanded. Selected answer 2 percent increase in the quantity of boots demanded. . 0.2 percent increase in the quantity of boots demanded. . 20 percent increase in the quantity of boots demanded. Question No: 15 ( Marks: 1 ) - Please choose one Other things being equal, expected income can be used as a direct measure of well-being: Selected answer 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. Question No: 16 ( Marks: 1 ) - Please choose one Cross price elasticity between coffee and tea is 1.5. It means that: Selected answer Given a 1% increase in coffee price, we would expect a 1.5% increase in tea demand. . Given a 1% increase in coffee price, we would expect a 1.5% decrease in tea demand. . Given 1% increase in coffee price, there will be no change in tea demand. . None of the given options. Question No: 17 ( Marks: 1 ) - Please choose one "Utility" is most closely related to the term: . Useless. . Require. . Necessary. Selected answer Satisfaction. www.vunew.blogspot.com marginal revenue is: . Question No: 22 ( Marks: 1 ) . The difference between revenue and total cost. Not change hours of work.Please choose one Producer surplus in a perfectly competitive industry is: . . .Please choose one When the demand curve is downward sloping. Selected answer Equal to average cost. None of the given options. Above its average total cost curve. . The difference between profit at the profit-maximizing and profitminimizing level of output. . . .Please choose one Assume leisure is a normal good.blogspot. Question No: 19 ( Marks: 1 ) . Selected answer Total utility is also zero. A decrease in the slope of the budget line.Please choose one When the marginal utility of a good is zero.com . On the upward-sloping portion of its average total cost curve. an increase in money income results in: . . . Equal to price. .Please choose one In the short run. Selected answer The difference between revenue and variable cost. . this implies that: .com Question No: 18 ( Marks: 1 ) . An increase in the slope of the budget line. At the minimum of its average total cost curve. Less than price.vunew. . If income effect equals substitution effect then a wage rate increase will lead a person to: Selected answer Increase hours of work. The consumer would not spend any additional income to buy more of that good. . Consumption of additional units would have positive marginal utility. . a perfectly competitive firm earning negative economic profit is: Selected answer On the downward-sloping portion of its average total cost curve. Question No: 23 ( Marks: 1 ) . The difference between revenue and fixed cost.vunew.www. www. Question No: 20 ( Marks: 1 ) .blogspot. Decrease hours of work. More than price. Question No: 21 ( Marks: 1 ) . Total utility is minimized.Please choose one As long as all prices remain constant. Monopolistic competition. $50.Please choose one If a market basket is changed by adding more to at least one of the goods.vunew. Rank the market basket just as desirable after the change. Selected answer Perfect competition. . Question No: 24 ( Marks: 1 ) . Question No: 25 ( Marks: 1 ) . each firm produces an identical product and there is freedom of entry and exit? .Please choose one In which market structure.Please choose one If your demand price for one unit of a good is $100 and the market price is $75. . Firm's profitability. . .blogspot. .blogspot.Please choose one Which of the following is true for both perfectly competitive and monopolistically competitive firms in the long run? www. Question No: 29 ( Marks: 1 ) . . your consumer's surplus is: Selected answer $25. . . $100. Monopoly. Rank the market basket more highly before the change. . $75. Cost of inputs needed to produce along an expansion path. Output combinations that can be produced with a given outlay of funds. .www. then every consumer will: Selected answer Rank the market basket more highly after the change. How firms should expand? . Selected answer Firm's behaviour. . Question No: 27 ( Marks: 1 ) .com Selected answer An increase in the intercept of the budget line.com .Please choose one Costs determine all of the following EXCEPT: . Question No: 26 ( Marks: 1 ) .Please choose one An isocost line reveals the: .vunew. A decrease in the intercept of the budget line. Question No: 28 ( Marks: 1 ) . Oligopoly. Selected answer Input combinations that can be purchased with a given outlay of funds. Be unable to decide whether he prefers the first market basket to the second or the second to the first. Cost of inputs needed to produce along an isoquant. Demand for a product. . . Question No: 33 ( Marks: 1 ) . .Please choose one In monopoly. Selected answer The study of the economic behavior of individual decisionmaking units such as consumers. .blogspot. Selected answer It shift inward.blogspot.vunew. . Question No: 32 ( Marks: 1 ) . . The firm is a price maker. which of the following is NOT true? Selected answer Products are differentiated.com . . Selected answer The quantity of strawberries that will be available at various prices has increased. Decreasing average variable costs. . Selected answer Increasing marginal costs. Decreasing average fixed costs. The study of the cause of unemployment. Question No: 35 ( Marks: 1 ) . The equilibrium quantity of strawberries will fall.Please choose one Diminishing marginal returns implies: . Price = Marginal Cost.www. The study of the cause of inflation. . The demand for strawberries will necessarily rise. It shift farther away from the origin of the graph. There is one main seller. . It undergoes no change. resource owners. closer to the origin. Question No: 34 ( Marks: 1 ) . Selected answer Price > Marginal Revenue. Question No: 31 ( Marks: 1 ) .vunew. the supply of strawberries has substantially increased. This statement indicates that: . The study of the aggregate level of economic activity. The price of strawberries will fall.com . Marginal Cost = Average Total Cost. There is freedom of entry and exit into the industry in the long run. . .Please choose one Because of unusually warm weather. Question No: 30 ( Marks: 1 ) .Please choose one Which of the following does NOT refer to macroeconomics? . Profit equals zero. . .Please choose one What will happen to the isocost line if the price of both goods increases? . and business firms. Decreasing marginal costs.Please choose one The market structure in which strategic considerations are most important is: www. It vanishes. Oligopoly. . The assumption of a diminishing marginal rate of substitution is violated.www. Selected answer The assumption of transitivity is violated. Pure competition. None of the given options.com . ceteris paribus. The assumption of completeness is violated. A systematic listing of all the variables that might conceivably bring about a change in demand. Diminishes as income increases.vunew. Constant for all levels of income. A higher price reduces demand.Q and Q. Question No: 40 ( Marks: 1 ) . A lower price shifts the demand curve to the right. then: . Question No: 39 ( Marks: 1 ) . the marginal utility of income is: Selected answer Increasing as income increases.Please choose one Figure In figure given above. .blogspot. Selected answer Pure monopoly. . Selected answer A higher price reduces quantity demanded. . P. www.Please choose one Which of the following best expresses the law of demand? . . Consumers minimize their satisfaction. .com . A lower price reduces demand. marginal cost and average total cost are equal. . . .Please choose one If a monopolist sets his output such that marginal revenue. Monopolistic competition. Question No: 37 ( Marks: 1 ) . . . . A symbolic representation of the law of demand: P. . Negative.Please choose one If indifference curves cross.vunew. Zero. economic profit must be: . Selected answer Positive. A graphical representation of the law of demand. Question No: 36 ( Marks: 1 ) . . Question No: 38 ( Marks: 1 ) .blogspot.Please choose one A demand schedule is best described as: Selected answer A numerical tabulation of the quantity demanded of a good at different prices. Indeterminate from the given information. Economics (Session .blogspot. the result will be: ► A surplus of the good.Please choose one Land is best described as: ► Produced factors of production.Please choose one An increase in supply is shown by: ► Shifting the supply curve to the left. ► "Naturally" occurring resources. ► Less ink to be demanded at each price. ► Shifting the supply curve to the right. ► A shortage of the good.4) Time: 60 min Marks: 50 Question No: 1 ( Marks: 1 ) . ► None of the given options. Question No: 4 ( Marks: 1 ) . ► A decreasingly steep negative slope. then an increase in the price of pen will cause: ► An increase in the price of ink. Question No: 3 ( Marks: 1 ) . ► An increasingly steep positive slope.Please choose one If pen and ink are complements. Question No: 5 ( Marks: 1 ) . Question No: 2 ( Marks: 1 ) .Please choose one While moving from left to right. ► A constant and negative slope.com FALL 2009 NEW PAPER MIDTERM EXAMINATION Fall 2009 ECO401. ► Upward movement along the supply curve. ► Physical and mental abilities of people.Please choose one When government sets the price of a good and that price is above the equilibrium price.com . ► A rightward shift in the demand curve for ink.www.vunew.vunew. www.blogspot. ► An equilibrium. ► A decrease in the demand for pen. the typical production possibilities curve has: ► An increasingly steep negative slope. ► "Organizational" resources. you need to know: ► Two prices and two quantities supplied. ► Price. ► The supply curve for sugar would shift right.Please choose one In order to calculate the price elasticity of supply.blogspot.www. Question No: 6 ( Marks: 1 ) . www.com . Question No: 9 ( Marks: 1 ) .Please choose one Sugar can be refined from sugar beets.vunew.blogspot. all else equal. ► Output decreases and the market price also decrease. other things remaining the same: ► The supply curve shifts to the right. ► The daily supply curve for fish is perfectly elastic.com ► Downward movement along the supply curve. When the price of those beets falls: ► The demand curve for sugar would shift right. Question No: 8 ( Marks: 1 ) . ► The supply curve for sugar would shift left. ► The demand curve for sugar would shift left. ► The quantity supplied at two different prices. As a result. the daily catch will be offered for sale no matter what price it brings. ► The slope of the supply curve. ► Output. ► Quantity supplied. Question No: 7 ( Marks: 1 ) . ► Output increases regardless of the market price and the supply curve shifts upward. ► The daily supply curve for fish is perfectly inelastic. ► The equilibrium price and quantity in the market.Please choose one Since the fish that are caught each day go bad very quickly. Question No: 10 ( Marks: 1 ) .vunew. ► The daily supply curve for fish slopes upward.Please choose one The price elasticity of demand measures the responsiveness of quantity demanded to: ► Quantity demanded. we know that: ► None of the given options. ► The supply curve shifts to the left.Please choose one When an industry's raw material costs increase. Please choose one Assume that the total utilities for the fifth and sixth units of a good consumed are 83 and 97. ► 14.www. ► 83. The marginal utility for the sixth unit is: ► -14.blogspot. a consumer should: ► Buy more pizzas and fewer jeans. ► 100. ► Buy fewer pizzas and more jeans. 300. Question No: 12 ( Marks: 1 ) . www. and 500.com .Please choose one Suppose that the price of a pizza is $10 and price of a jeans is $30. ► Vertical. ► Spend more time consuming pizza. ► Positive.Please choose one Law of diminishing marginal utility indicates that the slope of the marginal utility curve is: ► Horizontal. Question No: 13 ( Marks: 1 ) . ► 200.Please choose one Suppose the first four units of an output produced incur corresponding total costs of 50. 150. Question No: 14 ( Marks: 1 ) . Question No: 15 ( Marks: 1 ) . The marginal cost of the second unit of output is: ► 50.blogspot. ► 97. ► Consumers are non-satiated with respect to the goods they confront. ► Consumers can measure the total utility received from any given basket of good.vunew. ► Continue to buy the same quantities of pizza and jeans.vunew. respectively.com Question No: 11 ( Marks: 1 ) . ► 150. If ratio of marginal utility of pizza to marginal utility of jeans is 1/4 then to maximize total utility. ► All of the given options are true.Please choose one Which of the following is NOT an assumption of ordinal utility analysis? ► Consumers are consistent in their preferences. ► Negative. Question No: 20 ( Marks: 1 ) . ► Isoquant.blogspot. If income effect equals substitution effect then a wage rate increase will lead a person to: ► Increase hours of work. Question No: 19 ( Marks: 1 ) An isoquant curve shows: .Please choose one A graph showing all the combinations of capital and labour available for a given total cost is the: ► Budget constraint. www. ► None of the given options.Please choose one L-shaped isoquant: ► Indicate that capital and labor cannot be substituted for each other in production. ► Not change hours of work.com Question No: 16 ( Marks: 1 ) . Question No: 17 ( Marks: 1 ) .Please choose one Assume leisure is a normal good.Please choose one Ali initially leased one-room space and started a small day care centre with only 4 children and one staff member. He wants to expand the centre.vunew. ► All the alternative combinations of two products among which a producer is indifferent because they yield the same profit.vunew. Which of the following will happen when Ali expand the centre? ► Economies of scale.www.com . ► 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. Question No: 18 ( Marks: 1 ) . ► Decrease hours of work. ► Expenditure set. ► Is impossible. ► Diseconomies of scale. ► Isocost.Please choose one ► All the alternative combinations of two inputs that yield the same maximum total product. ► Increasing returns to the labor inputs. But he found that the cost per child is very high.blogspot. ► None of the given options. ► Decreasing returns to the labor inputs. ► Average Total Cost = Marginal Cost. ► Has no close substitutes. ► Average variable costs and marginal costs.Please choose one The monopolist has no supply curve because: www. Question No: 25 ( Marks: 1 ) . ► None of the given options.Please choose one The good produced by a monopoly: ► Has perfect substitutes.com .www. Question No: 22 ( Marks: 1 ) . ► Firm's behaviour. ► Can be easily duplicated. a firm finds the output level where: ► Price equals marginal cost. ► Indicate that the firm could not switch from one output to another. ► Fixed costs and variable costs.Please choose one To find the profit maximizing level of output. ► Price equals marginal revenue. ► Has no substitutes at all.Please choose one A perfectly competitive firm maximizes profit by finding the level of production at which: ► Price = Marginal Cost. ► Price < Marginal Cost. Question No: 26 ( Marks: 1 ) . ► Fixed costs and marginal costs. ► Price = Average Total Cost.vunew.blogspot. Question No: 21 ( Marks: 1 ) .com ► Indicate that the firm could switch from one output to another costlessly. ► Marginal revenue and average total cost.Please choose one Costs determine all of the following EXCEPT: ► Demand for a product. Question No: 23 ( Marks: 1 ) .vunew.Please choose one Total costs are the sum of: ► Marginal costs and variable costs.blogspot. ► How firms should expand? ► Firm's profitability. Question No: 24 ( Marks: 1 ) . vunew. ► 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. ► The use of increasing block rate pricing. Question No: 29 ( Marks: 1 ) . ► The monopolist's marginal cost curve changes considerably over time. ► The monopolist is not maximizing profit and should decrease output. ► Charging different prices to different groups based upon differences in elasticity of demand. Question No: 28 ( Marks: 1 ) .com . ► Monopolists do not pay sufficient attention to increasing efficiency. the firm: ► Engages in a discrete pricing strategy.blogspot. Question No: 27 ( Marks: 1 ) . ► Monopolists produce high quality goods at higher prices. Question No: 30 ( Marks: 1 ) .Please choose one Third-degree price discrimination involves: ► Charging each consumer the same two part tariff. Question No: 31 ( Marks: 1 ) .Please choose one Following are the disadvantages of monopoly EXCEPT: ► Monopolists earn higher profits. ► Most of the “surplus” (producer + consumer surplus) accrues to monopolists. ► The monopolist is not maximizing profit and should increase output.com ► The quantity supplied at any particular price depends on the monopolist's demand curve. it is impossible to know how many sellers would be in the market at higher prices. ► Charges the average reservation price.vunew.blogspot. ► Engages in second-degree price discrimination.Please choose one www.Please choose one In monopoly. ► The monopolist is earning a positive profit. where price = marginal cost? ► The monopolist is maximizing profit.Please choose one When a firm charges each customer the maximum price that the customer is willing to pay. which of the following is TRUE at the output level. ► Charging lower prices the greater the quantity purchased. ► Engages in first-degree price discrimination.www. ► Higher price reduces the real incomes of buyers.com 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.www.vunew. ► The demand curve is tangent to marginal revenue curve. Question No: 35 ( Marks: 1 ) . ► A symbolic representation of the law of demand: P.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. Question No: 34 ( Marks: 1 ) .vunew. ceteris paribus. ► None of the given options. ► Concave. www. Question No: 33 ( Marks: 1 ) . ► A reduction in discrimination.com . ► A graphical representation of the law of demand. ► Higher price shifts the demand curve to the left. ► A systematic listing of all the variables that might conceivably bring about a change in demand. ► An increase in the production of capital goods.Please choose one Which of the following would most likely shift the production possibilities curve for a nation outward? ► A reduction in unemployment.blogspot. ► The marginal cost curve is tangent to average cost curve.blogspot.Please choose one The total utility curve for a risk neutral person will be: ► Straight line. ► An increase in the production of consumer goods. ► Lower price shifts the demand curve to the right. P. ► The demand curve is tangent to average cost curve.Please choose one A demand schedule is best described as: ► A numerical tabulation of the quantity demanded of a good at different prices.Q and Q. ► Convex. Question No: 32 ( Marks: 1 ) . blogspot.vunew. ► Constant for all levels of income. ► Land.com Question No: 36 ( Marks: 1 ) . ► Investment. Question No: 39 ( Marks: 1 ) .www. ► Diminishes as income increases.vunew. the marginal utility of income is: ► Increasing as income increases. Question No: 37 ( Marks: 1 ) .blogspot.Please choose one Which of the following does NOT refer to macroeconomics? ► The study of the aggregate level of economic activity. ► Capital. ► The price is greater than the marginal revenue. ► None of the given options. Question No: 38 ( Marks: 1 ) .Please choose one Figure In figure given above. ► The price is greater than the average revenue.Please choose one Which of the following is NOT a factor of production? ► Labour.com . www.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. then he will be indifferent o If Odds Ratio < 1. and business firms.www. 200. 200 and if tail comes. You toss a coin.com ► The study of the economic behavior of individual decision-making units such as consumers. resource owners. then he will definitely not buy www. B. then he might not buy as OR < 1 2) For risk averse person o If Odds Ratio > 1. Question No: 41 ( Marks: 10 ) A. Differentiate between risk and uncertainty.Please choose one Demand is elastic when the elasticity of demand is: ► Greater than 0 but less than 1.blogspot. Will you play this game or not? Give your answer with brief explanation. 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.blogspot. then he will definitely buy o If Odds Ratio = 1. ► Equal to 1.com . you are given Rs. then in this case as well he might decide not to buy.vunew. (Marks: 3+3+4) Answers : A) Risk and Uncertainty : Risk is when an outcome may or may not occur but its probability is known while uncertainty is when an outcome may or may not occur but its probability is not known. ► The study of the cause of inflation. What would the risk neutral person. then he will definitely not buy o If Odds Ratio < 1. ► Less than 0. ► Greater than 1. if head comes. Answers : B) 1) For risk neutral person o If Odds Ratio > 1. o If Odds Ratio = 1.vunew. ► The study of the cause of unemployment. Question No: 40 ( Marks: 1 ) . you have to pay Rs. www. So the option of OR < 1 and OR > 1 is not there.vunew. ► Quantity demanded of chiken to increase. The only possibility is OR = 1 which means that the chances are not that bad. So I will play this game as the amount of money involved is not that much and as far as my perception of it is concerned the marginal benefit of gaining 200 Rs is perceived by me as more than the marginal cost of losing the 200 Rs. ► The demand curve for chiken to shift to the right. Now it depends on the fact that whether I am a risk averse.com . This will cause: ► The demand curve for chiken to shift to the left. ► Resources are distributed freely to businesses.vunew. the odds of success are fair. Question No: 2 ( Marks: 1 ) . then he will definitely buy o If Odds Ratio = 1.130 per kg to Rs. risk neutral or risk loving person.com 3) For risk loving person o If Odds Ratio > 1. So I would definitely play this game. Suddenly the price of chicken rises from Rs. Answers : C) The tossing of a coin and the probability of a head appearing is 50% i. ► Government is free to direct the actions of businesses.2) Ref No: Time: 60 min Marks: 50 Question No: 1 ( Marks: 1 ) . then in this case as well he might decide to buy. In case of fair odds both risk loving and risk neutral person might decide to play. freedom of enterprise means that: ► Businesses are free to produce products that consumers want.blogspot.blogspot.e. www.140 per kg.Please choose one The demand curve for chicken is downward-sloping. then he will definitely buy o If Odds Ratio < 1.Please choose one In pure capitalism. ► Consumers are free to buy goods and services that they want. MIDTERM EXAMINATION Fall 2009 ECO401. Moreover the excitement of winning might overshadow my rational judgement and I would definitely decide to play by being carried away by excitement.Economics (Session . Please choose one In order to calculate the price elasticity of supply. ► Period of extraordinary large surpluses of farm goods.blogspot. ► Substantial increase in farm productivity due to applications of new technology in agriculture. the result will be: ► A surplus of credit. suppliers can earn higher levels of profit or justify higher marginal costs to produce more.www.Please choose one If the quantity supplied of oranges exceeds the quantity demanded then: ► There is a shortage of oranges.Please choose one A price ceiling might be an appropriate government response to a: ► Period of falling farm prices due to unusually good harvests. If the ceiling is set below the market equilibrium interest rate. consumers demand less. ► Market forces will cause the price to rise. ► The quantity supplied at two different prices.com . ► As the price increases. ► Market forces will cause the price to fall.vunew. ► None of the given options. Question No: 4 ( Marks: 1 ) . Question No: 5 ( Marks: 1 ) . Question No: 3 ( Marks: 1 ) .com ► Quantity demanded of chiken to decrease. ► A perfectly inelastic supply of credit in the market place. ► The slope of the supply curve. ► Greater profits for banks issuing credit. so do costs. ► The equilibrium price and quantity in the market.blogspot. ► The market is in equilibrium. ► A shortage of credit. you need to know: ► Two prices and two quantities supplied. www. all else equal.vunew.Please choose one Assume that the government sets a ceiling on the interest rate that banks charge on loans.Please choose one The supply curve is upward-sloping because: ► As the price increases. Question No: 7 (Marks: 1) . ► National security crisis leading to major shortages of essential goods. ► As the price increases. Question No: 6 ( Marks: 1 ) . the quantity of petrol purchased falls by 8%.Please choose one If your demand price for one unit of a good is $100 and the market price is $75. ► $75. Question No: 11 ( Marks: 1 ) . ► Unit elastic.vunew.com Question No: 8 ( Marks: 1 ) . for example. Question No: 10 ( Marks: 1 ) . ► Inelastic. Reference by salman Where Є = Epsilon. the price elasticity of demand will be: PЄd = . ► Utility.Please choose one When the price of petrol rises by 12%.10% = . This shows that the demand for petrol is: ► Perfectly elastic. a 20% increase in the price of a product causes a 10% fall in the Quantity demanded.5 20% Question No: 9 ( Marks: 1 ) .vunew. ► U-shaped. the law of diminishing marginal utility indicates that the demand curve is: ► Vertical. ► Pleasure.www.0.Please choose one Other things being equal. ► $50. ► Satisfaction.blogspot. your consumer's surplus is: ► $25. ► Elastic.blogspot. If. universal notation for elasticity.Please choose one The numerical measurement of a consumer’s preference is called: ► Use. expected income can be used as a direct measure of well-being: www. ► Upward-sloping. Question No: 12 ( Marks: 1 ) . ► Downward-sloping.com .Please choose one According to the utility model of consumer demand. ► $100. com ► No matter what a person's preference to risk.Please choose one ► A collection of market baskets that are equally desirable to the consumer. and if less of good B is always preferred to more.vunew. all else being equal? ► Marginal utility will decline. ► If and only if individuals are not risk-loving. Question No: 14 ( Marks: 1 ) . ► Indifference curves may cross. ► A curve which passes through the origin and includes all of the market baskets that the consumer regards as being equivalent.Please choose one If a consumer’s marginal rate of substitution equals 2 eggs for 1 hamburger then: ► The consumer’s indifference curve must be positively sloped.www. then: ► Indifference curves slope downwards. ► A collection of market baskets that the consumer can buy. ► All of the given options. ► The ratio of the consumer’s marginal utility of 1 egg to that of 1 hamburger must equal ½.blogspot. if more of good A is always preferred to less.Please choose one Suppose there are only two goods A and B. Question No: 16 ( Marks: 1 ) An indifference curve is: . ► Expenditure on the good will increase.blogspot. ► Indifference curves could take the form of ellipses. ► The price of the good will rise. ► A curve whose elasticity is constant for every price. Question No: 15 ( Marks: 1 ) . www. ► If and only if individuals are risk neutral.vunew. ► The consumer’s indifference curve must be convex with respect to the origin of the graph.Please choose one If diminishing marginal utility holds and a person consumes less of a good then which of the following will happen. ► If and only if individuals are risk averse. ► Marginal utility will rise.com . Question No: 13 ( Marks: 1 ) . ► Indifference curves slope upwards. vunew. ► A normal good. ► Is always negative.Please choose one The income effect of a price change: ► Is always positive.blogspot. ► An independent good. ► Encourage workers to work more hours.Please choose one When the substitution effect of a lowered price is counteracted by the income effect. ► Encourage workers to retire earlier.com Question No: 17 ( Marks: 1 ) . ► None of the given options. ► Two different indifference curves can intersect but only once. ► May be positive or negative. the good in question is: ► An inferior good. Question No: 19 ( Marks: 1 ) . Question No: 21 ( Marks: 1 ) . ► Two indifference curves cannot intersect unless they are identical throughout. ► Take more leisure.blogspot.Please choose one Which of the following statements about indifference curves is NOT correct? ► Indifference curves are generally negatively sloped.com . ► A substitute good.Please choose one www. ► Is associated with a change in nominal income. Question No: 20 ( Marks: 1 ) . ► Not change anything.Please choose one The substitution effect of a wage increase will lead a person to: ► Work more.Please choose one Increase in pension benefits leads to income and substitution effect which: ► Encourage workers to retire later.vunew. ► 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. Question No: 18 ( Marks: 1 ) . Question No: 22 ( Marks: 1 ) . ► Have no effect on incentive to retire.www. com .Please choose one Diminishing marginal returns implies: ► Decreasing marginal costs.com Which of the following statements describes the presence of diminishing returns holding at least one factor constant? ► The marginal product of a factor is positive and rising.Please choose one Costs determine all of the following EXCEPT: ► Demand for a product. ► Increasing marginal costs. ► Output combinations that can be produced with a given outlay of funds.blogspot.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.vunew. ► The marginal product of a factor is positive but falling. ► Input combinations that can be purchased with a given outlay of funds. Question No: 26 ( Marks: 1 ) . each firm produces an identical product and there is freedom of entry and exit? ► Monopoly.blogspot. ► Oligopoly. ► Perfect competition. Question No: 24 ( Marks: 1 ) . ► Marginal revenue is less than marginal cost. ► How firms should expand? ► Firm's profitability. Question No: 23 ( Marks: 1 ) . www. ► The marginal product of a factor is constant.Please choose one In which market structure.vunew. ► Decreasing average variable costs. ► Cost of inputs needed to produce along an expansion path.www. ► Average revenue is less than average cost. ► The marginal product of a factor is falling and negative. ► Decreasing average fixed costs.Please choose one An isocost line reveals the: ► Cost of inputs needed to produce along an isoquant. ► Firm's behaviour. Question No: 27 ( Marks: 1 ) . Question No: 25 ( Marks: 1 ) . ► Marginal revenue is greater than marginal cost. com ► Monopolistic competition. ► The fact that long-run average cost is not minimized.vunew. ► The demand curve for houses must be upward-sloping.Please choose one You observe that the price of houses and the number of houses purchased both rise over the course of the year. ► The market price.Please choose one Which of the following is NOT regarded as a source of inefficiency in monopolistic competition? ► The fact that price exceeds marginal cost. ► The supply of houses has increased. Question No: 32 ( Marks: 1 ) . ► An increase in the production of consumer goods. ► Output with no change in price. You conclude that: ► The demand for houses has increased.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.Please choose one For a monopolist.com . Question No: 31 ( Marks: 1 ) . www.www. ► Product diversity.blogspot. ► Both price and quantity.vunew. Question No: 30 ( Marks: 1 ) . ► The first-degree price. ► The block price.Please choose one The maximum price that a consumer is willing to pay for a good is called: ► The reservation price. ► Excess capacity. Question No: 28 ( Marks: 1 ) .blogspot. Question No: 29 ( Marks: 1 ) . changes in demand will lead to changes in: ► Price with no change in output. ► None of the given options. ► A reduction in discrimination. www.Please choose one The principle economic difference between a competitive and a noncompetitive market is: ► The number of firms in the market.blogspot. Question No: 37 ( Marks: 1 ) .Please choose one www. Question No: 36 ( Marks: 1 ) .Please choose one If the income elasticity of demand is 1/2. Question No: 34 ( Marks: 1 ) . Question No: 35 ( Marks: 1 ) . ► An inferior good. ► An oligopoly includes downward sloping demand curves facing the firm. ► The extent to which any firm can influence the price of the product. ► The firm is a price maker.vunew.com . ► There is one main seller. ► The annual sales made by the largest firms in the market. ► The short run market price is determined solely by the firm's technology.blogspot. ► A Giffen good. ► The firm's output is a small fraction of the entire industry's output.com ► Housing construction costs must be decreasing. which of the following is NOT true? ► Products are differentiated. ► Products are differentiated in oligopoly. ► The size of the firms in the market.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.Please choose one The basic difference between oligopoly and monopolistic competition is that. ► There is freedom of entry and exit into the industry in the long run.vunew. ► There are no barriers to entry in oligopoly. ► There are barriers to entry in oligopoly. Question No: 33 ( Marks: 1 ) . Question No: 38 ( Marks: 1 ) . the good is: ► A luxury.Please choose one In monopoly. ► A normal good (but not a luxury). ► The firm supplies a different good than its rival. com Because of unusually warm weather. ► The equilibrium quantity of strawberries will fall. Question No: 40 ( Marks: 1 ) .Please choose one Suppose the first four units of an output produced incur corresponding total costs of 100. ► Is described. ► The quantity of strawberries that will be available at various prices has increased. ► 300. by each of the given statements. ► 200. ► Reflects the relative values the consumer attaches to the two good.com .vunew.blogspot.blogspot.www. Question No: 41 ( Marks: 10 ) Following table shows the price and quantity demanded of a good.Please choose one The marginal rate of substitution between food and shelter for a given point on an indifference curve: ► Is equal to the absolute value of the slope of the indifference curve at that point.5 400 5 200 10 100 20 50 40 25 a) Calculate the total revenue from this table. in part. This statement indicates that: ► The demand for strawberries will necessarily rise. ► 150. Price Quantity demanded 2. b) Interpret whether the demand is elastic.300. (Marks: 5+2+3) MIDTERM EXAMINATION www.The marginal cost of the third unit of output is: ► 100. the supply of strawberries has substantially increased. ► The price of strawberries will fall. ► Is equal to the rate at which the consumer is willing to exchange the two goods in the market place. 1000.vunew. 600. inelastic or unitary elastic and why? c) What will be the shape of demand curve according to the above table? Draw the graph. Question No: 39 ( Marks: 1 ) . vunew. This best reflects: ► The rationing function of markets.Please choose one If the cost of computer components falls.Please choose one When movie ticket prices decrease.Please choose one The shape of production possibilities curve is: ► Concave. ► The income effect. ► A decreasingly steep negative slope. Question No: 5 ( Marks: 1 ) . www. ► Abundant productive labor. ► No energy resources. Question No: 2 ( Marks: 1 ) . ► The supply curve for computers shifts to the right. ► Positive.com .Economics (Session . ► The demand curve for computers shifts to the left. then: ► The demand curve for computers shifts to the right.com Fall 2009 ECO401.blogspot. ► Convex.www. ► Linear. families tend to spend more time at cinema for watching videos instead at home. ► A constant and negative slope. ► The substitution effect. Question No: 3 ( Marks: 1 ) . ► The supply curve for computers shifts to the left.vunew. ► Diminishing marginal utility. ► An increasingly steep positive slope.Please choose one While moving from left to right.blogspot.4) Ref No: 919350 Time: 60 min Marks: 50  Question No: 1 ( Marks: 1 ) . Question No: 4 ( Marks: 1 ) . ► Unlimited material resources.Please choose one Our economy is characterized by: ► Unlimited wants and needs. the typical production possibilities curve has: ► An increasingly steep negative slope. blogspot. ► Output. If the ceiling is set below the market equilibrium interest rate. Question No: 9 ( Marks: 1 ) .Please choose one If the quantity supplied of oranges exceeds the quantity demanded then: ► There is a shortage of oranges. ► Market forces will cause the price to rise. ► National security crisis leading to major shortages of essential goods. ► A shortage of credit.com Question No: 6 ( Marks: 1 ) . ► Quantity supplied.Please choose one A price ceiling might be an appropriate government response to a: ► Period of falling farm prices due to unusually good harvests.Please choose one The price elasticity of demand measures the responsiveness of quantity demanded to: ► Quantity demanded.www. ► Period of extraordinary large surpluses of farm goods. ► Greater profits for banks issuing credit.Please choose one If both supply and demand increase simultaneously. the result will be: ► A surplus of credit. ► Substantial increase in farm productivity due to applications of new technology in agriculture.blogspot. ► Market forces will cause the price to fall. ► Price must fall and the equilibrium quantity may either rise or fall.vunew. Question No: 7 ( Marks: 1 ) .com . Question No: 10 ( Marks: 1 ) . the equilibrium: ► Price must rise and the equilibrium quantity must fall. Question No: 11 ( Marks: 1 ) . ► Price must rise and the equilibrium quantity may either rise or fall. ► Quantity must rise and the equilibrium price may either rise or fall. Question No: 8 ( Marks: 1 ) . ► The market is in equilibrium.Please choose one www.Please choose one Assume that the government sets a ceiling on the interest rate that banks charge on loans. ► A perfectly inelastic supply of credit in the market place.vunew. ► Price. blogspot. ► Given a 1% increase in coffee price.www.5% increase in tea demand. Question No: 16 ( Marks: 1 ) . ► None of the given options. It means that: ► Given a 1% increase in coffee price.com The cross price elasticity of demand for complementary goods is: ► Less than 0. ► Equal to 0. ► Supply is elastic. all else being equal? ► Marginal utility will decline.Please choose one If diminishing marginal utility holds and a person consumes less of a good then which of the following will happen.blogspot.com . ► The percentage change in quantity demanded is same as the percentage change in the price. ► Supply is steeper than demand or vice versa. ► The price of the good will rise.vunew. ► None of the given options.Please choose one Cross-price elasticity measures whether: ► Goods are normal or inferior. we would expect a 1. Question No: 12 ( Marks: 1 ) .Please choose one Cross price elasticity between coffee and tea is 1. ► Demand is inelastic. ► Supply is inelastic. www. ► Demand is elastic or inelastic.vunew. Question No: 15 ( Marks: 1 ) . Question No: 13 ( Marks: 1 ) . ► Two goods are substitutes or complements.Please choose one If a decrease in price increases the total revenue then: ► Demand is elastic. we would expect a 1. there will be no change in tea demand.5. ► Greater than 0. ► An increase in price will increase total revenue. ► Given 1% increase in coffee price.Please choose one Which of the following will be TRUE if demand is inelastic? ► The coefficient of elasticity is greater than one. ► Marginal utility will rise. ► Between 0 and 1. Question No: 14 ( Marks: 1 ) .5% decrease in tea demand. Question No: 20 ( Marks: 1 ) . Question No: 17 ( Marks: 1 ) . If income effect exceeds substitution effect then a wage decrease will lead a person to: ► Decrease hours of work. then MP is also at maximum.vunew.com ► Expenditure on the good will increase. ► Shift parallel to the right. www. ► The ratio of the consumer’s marginal utility of 1 egg to that of 1 hamburger must equal ½. the budget line will: ► Shift parallel to the left. ► Increase hours of work.Please choose one Suppose you are a workaholic (like work a lot) and your friend is a leisure lover. ► Pivot about the x axis. ► Pivot about the y axis. ► The consumer’s indifference curve must be convex with respect to the origin of the graph.blogspot. ► None of the given options. Question No: 19 ( Marks: 1 ) . Compared to your friend your indifference curve will be: ► Flatter. ► All of the given options. ► If AP is at a maximum.Please choose one Assume Leisure is a normal good.Please choose one Which of the following is a correct statement about the relationship between Average Product (AP) and Marginal Product (MP)? ► If AP exceeds MP.vunew. Question No: 18 ( Marks: 1 ) . ► All of the given options.blogspot.com . ► Steeper.www. then AP is falling. Question No: 21 ( Marks: 1 ) .Please choose one If a consumer’s marginal rate of substitution equals 2 eggs for 1 hamburger then: ► The consumer’s indifference curve must be positively sloped. ► Not change anything.Please choose one If prices of both goods increase by the same percentage. ► Identical. ► Average fixed cost.blogspot. ► Marginal rate of substitution. ► One point on a budget line.Please choose one Which of the following costs always decline as output increases? ► Average cost.Please choose one The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. Question No: 24 ( Marks: 1 ) . ► Marginal rate of factor substitution.com . ► It undergoes no change. ► Isocost. ► Isoquant.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 production. Question No: 23 ( Marks: 1 ) . closer to the origin. then total product is at a maximum. ► It vanishes.com ► If AP = MP. Question No: 26 ( 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. Question No: 25 ( Marks: 1 ) .www.blogspot.Please choose one The budget line is the boundary between: ► Preferred and non preferred consumption combinations. ► If Total Product is declining. ► Affordable and unaffordable consumption combinations. then AP is negative.vunew. Question No: 22 ( Marks: 1 ) . Question No: 27 ( Marks: 1 ) . ► Income and expenditure. ► Expenditure set. ► Fixed cost. www. ► It shift inward.vunew.Please choose one A graph showing all the combinations of capital and labour available for a given total cost is the: ► Budget constraint. What is the average total cost? ► 5Q. ► Marginal cost. Question No: 33 ( Marks: 1 ) . Question No: 32 ( Marks: 1 ) . ► Marginal revenue plus marginal cost.Please choose one If at the profit-maximizing quantity. ► 5 + (200/Q). Question No: 30 ( Marks: 1 ) . Question No: 28 ( Marks: 1 ) .Please choose one Marginal profit is equal to: ► Marginal revenue minus marginal cost.com ► 5.www. ► An oligopolistic firm. ► Marginal revenue times marginal cost. ► Minimized when marginal product multiplied by input price is equal for all inputs. ► Minimized when the ratio of marginal product to input price is equal for all inputs. ► The slope of a line from the origin to the end of the total revenue curve. ► A monopolistically competitive firm.com .Please choose one A price taker is: ► A firm that accepts different prices from different customers.vunew. ► None of the given options. ► Marginal cost minus marginal revenue.Please choose one Graphically. ► Has no substitutes at all. ► The slope of the total revenue curve at a given point. Question No: 29 ( Marks: 1 ) .Please choose one The good produced by a monopoly: ► Has perfect substitutes.blogspot.Please choose one The total cost of producing a given level of output is: ► Maximized when a corner solution exists. ► Has no close substitutes. profits are positive. ► Minimized when the marginal products of all inputs are equal. Question No: 31 ( Marks: 1 ) .then: www. marginal revenue is defined as: ► The slope of a line from the origin to a point on the total revenue curve. ► A firm that cannot influence the market price.vunew. ► Can be easily duplicated. ► The vertical intercept of a line tangent to the total revenue curve at a given point.blogspot. changes in demand will lead to changes in: ► Price with no change in output.Please choose one If indifference curves cross. ► Both price and quantity. ► There is government regulation of the industry. ► Charging lower prices the greater the quantity purchased. ► Price > Average Total Cost. ► There are long term patents.Please choose one A natural monopoly is most likely to exist when: ► There are large barriers to entry. ► Output with no change in price. ► Charging different prices to different groups based upon differences in elasticity of demand.blogspot. Question No: 36 ( Marks: 1 ) . Question No: 38 ( Marks: 1 ) . ► Price = Marginal Cost. You conclude that: ► The demand for houses has increased. Question No: 34 ( Marks: 1 ) . then: ► The assumption of a diminishing marginal rate of substitution is violated. ► Housing construction costs must be decreasing. ► The demand curve for houses must be upward-sloping.com . ► Price < Average Variable Cost.com ► Price < Average Total Cost.Please choose one You observe that the price of houses and the number of houses purchased both rise over the course of the year.Please choose one Third-degree price discrimination involves: ► Charging each consumer the same two part tariff. Question No: 35 ( Marks: 1 ) . ► The assumption of transitivity is violated. Question No: 37 ( Marks: 1 ) . www.vunew.www.vunew.blogspot.Please choose one For a monopolist. ► The use of increasing block rate pricing. ► There are large economies of scale. ► The supply of houses has increased. ► None of the given options. negative. ► normative. Following are the factors affect P€D: 1. _____ questions have to do with what ought to be. demand will be sensitive to a change in price if there is no change in income. if the price of a can of Coke goes up from 0. the income that is available to spend on coke. ► Negative. is now enough for only two rather than four cans of Coke.the "response" to higher oil prices was modest in the immediate period after price www.blogspot. Question No: 41 ( Marks: 10 ) There are many factors which affect the price elasticity of demand of goods.50Rs to 1Rs and income stays the same.www. Explain all the major factors.Please choose one The principle economic difference between a competitive and a non-competitive market is: ► The number of firms in the market.com . Amount of income available to spend on the good This factor affecting demand elasticity refers to the total a person can spend on a particular good or service.blogspot. ► Positive. For example.vunew. Thus. Preferences are such that habitual consumers of certain products become desensitized to price changes. ► Positive. positive. 3.Please choose one _____ questions have to do with explanation and prediction. ► The size of the firms in the market. Habit forming goods Goods such as cigarettes and drugs tend to be inelastic in demand. ► Consumers minimize their satisfaction. after the two world oil price shocks of the 1970s . ► The annual sales made by the largest firms in the market. 2. Time period under consideration Demand tends to be more elastic in the long run rather than in the short run. In other words. Question No: 39 ( Marks: 1 ) . normative. there will be an elastic reaction in demand. which is $2.com ► The assumption of completeness is violated. normative. Thus if there is an increase in price and no change in the amount of income available to spend on the good.vunew. the consumer is forced to reduce his or her demand of Coke. ► The extent to which any firm can influence the price of the product. Question No: 40 ( Marks: 1 ) . This means that tobacco is inelastic because the change in price will not have a significant influence on the quantity demanded. ► The minimum wage should not be increased.blogspot. the price elasticity of cigarettes for that consumer becomes elastic in the long run. higher spending on insulation in homes and car pooling for commuters. www. Time The third influential factor is time. ► All of the given options. Question No: 1 ( Marks: 1 ) . ► Smoking should be restricted on all airline flights. consumers buy less of it.vunew. 4.www. Question No: 2 ( Marks: 1 ) . but as time passed. if that smoker finds that he or she cannot afford to spend the extra 2Rs. If the price of cigarettes goes up 2Rs per pack. because to do so would increase unemployment. per day and begins to kick the habit over a period of time. Number of close substitutes within the market The more (and closer) substitutes available in the market the more elastic demand will be in response to a change in price.com increases. In this case. people found ways to consume less petroleum and other oil products. the substitution effect will be quite strong.blogspot. The demand for oil became more elastic in the long-run. 5.com . However.Please choose one Which of the following is a positive statement? ► When the price of a good goes up.Please choose one Which of the following is a normative statement? ► Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory. a smoker with very few available substitutes will most likely continue buying his or her daily cigarettes.vunew. This included measures to get better mileage from their cars. ► The level of profits of firms.Please choose one When constructing a typical production possibilities curve. ► Unlimited material resources. ► Consumer preferences.Please choose one Our economy is characterized by: ► Unlimited wants and needs.vunew. ► When the Federal government sells bonds.Please choose one In a free-market economy. the allocation of resources is determined by: ► Votes taken by consumers. ► All of the given options. Question No: 4 ( Marks: 1 ) . ► Abundant productive labor.com ► When the price of a good goes up. ► A central planning authority. economists assume that: www. Question No: 5 ( Marks: 1 ) . Question No: 3 ( Marks: 1 ) .blogspot.com .www. ► No energy resources. interest rates rise and private investment is reduced. firms produce more of it.vunew.blogspot. www.blogspot. ► The economy's production possibilities curve will become steeper. ► Resources are equally productive in many alternative uses.com ► Economic resources are underutilized. Question No: 7 ( Marks: 1 ) . Question No: 6 ( Marks: 1 ) .Please choose one Government authorities have managed to reduce the unemployment rate from 8% to 4% in a hypothetical economy. ► All available resources are employed efficiently. www. ► The economy will move downward along its production possibilities curve.blogspot. ► A decrease in the size of the working-age population. As a result: ► The economy's production possibilities curve will shift outward. ► Production technology is allowed to vary.vunew. ► Increased production of capital goods.vunew.Please choose one Which of the following would lead to an inward shift of a nation's production possibilities curve? ► Immigration of skilled workers into the nation. ► The economy will move from a point inside to a point closer to its production possibilities curve.com . ► An increase in the size of the working-age population. ► The income effect. ► The substitution effect.www.vunew. Question No: 10 ( Marks: 1 ) .com Question No: 8 ( Marks: 1 ) . www.Please choose one If the quantity demanded of a product is greater than the quantity supplied of a product. ► Diminishing marginal utility.Please choose one What happens in the market for airline travel when the price of traveling by rail decreases? ► The demand curve for airline travel shifts left. Question No: 9 ( Marks: 1 ) .blogspot. families tend to spend more time at cinema for watching videos instead at home. ► There is a surplus of the product.blogspot. then: ► There is a shortage of the product. This best reflects: ► The rationing function of markets. ► The supply curve of airline travel shifts left. ► The demand curve for airline travel shifts right. ► The product is an inferior good.Please choose one When movie ticket prices decrease.com . ► The product is a normal good. ► The supply curve of airline travel shifts right.vunew. www. ► There is downward pressure on price.Please choose one A market is said to be in equilibrium when: ► Demand equals output. ► All buyers are able to find sellers willing to sell to them at the current price. ► The amount consumers wish to buy at the current price equals the amount producers wish to sell at that price.com . Question No: 12 ( Marks: 1 ) .blogspot. ► Changes in demand are proportionately greater than changes in price. www.Please choose one Since the fish that are caught each day go bad very quickly.vunew.blogspot. the daily catch will be offered for sale no matter what price it brings. ► The daily supply curve for fish is perfectly inelastic.com Question No: 11 ( Marks: 1 ) . ► The daily supply curve for fish is perfectly elastic. As a result. Question No: 13 ( Marks: 1 ) . ► The daily supply curve for fish slopes upward. ► None of the given options. ► Changes in demand are equal to changes in price. we know that: ► None of the given options.vunew.Please choose one A demand curve is price inelastic when: ► Changes in demand are proportionately smaller than changes in price. Question No: 15 ( Marks: 1 ) .blogspot.Please choose one Law of diminishing marginal utility indicates that the slope of the marginal utility curve is: ► Horizontal.vunew. 700.vunew.www.com Question No: 14 ( Marks: 1 ) . ► $100. ► $50. ► Vertical. ► $75.blogspot. ► Negative. The marginal cost of the fourth unit of output is: ► 50.Please choose one If your demand price for one unit of a good is $100 and the market price is $75. Question No: 16 ( Marks: 1 ) . your consumer's surplus is: ► $25. 900. ► Positive. and 1000.com . ► 100. www.Please choose one Suppose the first four units of an output produced incur corresponding total costs of 400. www. ► Indifference curves may cross.Please choose one Which of the following is a correct statement about the substitution effect? www. ► Indifference curves could take the form of ellipses. if more of good A is always preferred to less. ► Indifference curves slope upwards. and if less of good B is always preferred to more. Question No: 17 ( Marks: 1 ) . ► A decrease in the slope of the budget line. then: ► Indifference curves slope downwards. Question No: 19 ( Marks: 1 ) . Question No: 18 ( Marks: 1 ) . ► A decrease in the intercept of the budget line.Please choose one Suppose there are only two goods A and B.blogspot.com ► 150.vunew.Please choose one As long as all prices remain constant. ► 200.com .vunew.blogspot. ► An increase in the intercept of the budget line. an increase in money income results in: ► An increase in the slope of the budget line. Question No: 22 ( Marks: 1 ) .Please choose one In any production process.www.com . ► The substitution effect is positive for an inferior good.vunew. Question No: 20 ( Marks: 1 ) . the marginal product of labour equals: ► Total output divided by total labour inputs. ► Total output produced by labour inputs. Question No: 21 ( Marks: 1 ) .blogspot. ► Total output minus the total capital stock. ► Increasing inputs by 1/4 leads to an increase in output of 1/3.com ► The substitution effect is always negative.Please choose one 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.blogspot.vunew.Please choose one An isoquant curve shows: www. ► None of the given options. ► The substitution effect measures how demand changes when income changes. ► The change in total output resulting from a 'small' change on the labour input. ► The substitution effect is positive for a Giffen good. ► All the alternative combinations of two products among which a producer is indifferent because they yield the same profit. Question No: 23 ( Marks: 1 ) . ► Constant returns to scale.blogspot.blogspot. ► Increasing returns to scale.www.com . Question No: 24 ( Marks: 1 ) . ► None of the given options. but output increases less than 10%. all inputs are increased by 10%. www.vunew.com ► All the alternative combinations of two inputs that yield the same maximum total product.vunew. ► 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. This means that the firm experiences: ► Decreasing returns to scale.Please choose one In a production process.Please choose one A monopoly occurs when: ► Each firm produces a product that is slightly different from the other firms. ► One firm sells a good that has no close substitutes and a barrier blocks entry for other firms. ► None of the given options. com ► There are many firms producing the same product. ► All of the given options.Please choose one A perfectly competitive firm maximizes profit by finding the level of production at which: ► Price = Marginal Cost. ► Third-degree price discrimination. a firm should shut down when: ► Production losses are less than fixed costs. ► Fixed costs are zero.blogspot.vunew. Question No: 27 ( Marks: 1 ) . www. Question No: 26 ( Marks: 1 ) . ► Only normal profits are earned. Question No: 25 ( Marks: 1 ) .Please choose one Discrimination based upon the quantity consumed is referred to as: ► Second degree price discrimination.blogspot.Please choose one In the short run.com . ► Average Total Cost = Marginal Cost.www. ► Production losses exceed fixed costs.vunew. ► Price = Average Total Cost. ► Price < Marginal Cost. Question No: 28 ( Marks: 1 ) . Question No: 29 ( Marks: 1 ) . ► All of the given options.com ► First-degree price discrimination. ► The elasticity of the market demand curve. ► The reaction of rival firms to a change in price. ► The elasticity of the firm's demand curve.vunew.Please choose one The most important factor in determining the long-run profit potential in monopolistic competition is: ► Free entry and exit. ► Product diversity.blogspot.com .Please choose one Monopolistically competitive firms have monopoly power because they: www.Please choose one Which of the following is NOT regarded as a source of inefficiency in monopolistic competition? ► The fact that price exceeds marginal cost.blogspot.vunew.www. Question No: 30 ( Marks: 1 ) . ► Excess capacity. ► The fact that long-run average cost is not minimized. ► Average cost curve rises as output rises. www. ► An increase in income if E is a normal good.www.vunew. the firm's short run: ► Marginal cost curve rises as output rises.blogspot.vunew. ► Face downward sloping demand curves. Question No: 31 ( Marks: 1 ) . ► An increase in the price of a product that is a close substitute for E. ► An increase in the price of a product that is complementary to E.blogspot. ► Have freedom of entry.Please choose one Assume that a firm is a price taker in its input markets.com ► Are great in number. If the firm's technology is characterized by diminishing marginal physical product of its variable input in the short run.Please choose one A leftward shift in the demand curve for product E might be caused by: ► A decrease in income if E is an inferior good. Question No: 32 ( Marks: 1 ) .com . ► Are free to advertise. Please choose one If the demand curve for a good is downward sloping. it is similar to other social sciences because they are all concerned with the study of ________. www. ► Consumers know the prices available.www.blogspot. ► Can be normal or inferior. Question No: 35 ( Marks: 1 ) . ► Consumers can anticipate price changes.com ► Marginal cost curve falls as output rises. ► Consumers know their income levels.vunew. Question No: 34 ( Marks: 1 ) .blogspot. Question No: 33 ( Marks: 1 ) .com . ► Marginal cost curves and average cost curves rises as output rises.vunew.Please choose one The "perfect information" assumption of perfect competition includes all of the following EXCEPT: ► Consumers know their preferences.Please choose one Economics is different from other social sciences because it is primarily concerned with the study of ________. ► Must be normal. ► Must be giffen. then the good: ► Must be inferior. com . human behavior. ► Negative.Please choose one If consumer incomes increase.blogspot. ► normative. normative. ► Biological behavior. Question No: 37 ( Marks: 1 ) . limited resources.blogspot.vunew.Please choose one A normative economic statement: ► Is a statement of fact. ► Is a statement of what will occur if certain assumptions are true. ► Is a statement of what ought to be. _____ questions have to do with what ought to be.vunew. ► Positive.www. Question No: 38 ( Marks: 1 ) . normative. ► Scarcity.com ► Limited resources. positive. scarcity. ► Social behavior. ► Positive.Please choose one _____ questions have to do with explanation and prediction. the demand for product Y: www. ► Is a hypothesis used to test economic theory. market behavior. not what is. negative. Question No: 36 ( Marks: 1 ) . ► Risk loving.blogspot.com ► Will necessarily remain unchanged. ► Risk averse.vunew.com . ► The price of strawberries will fall. Question No: 39 ( Marks: 1 ) . www. ► The equilibrium quantity of strawberries will fall. ► Will shift to the right if Y is an inferior good. ► Will shift to the right if Y is a normal good.vunew. ► The quantity of strawberries that will be available at various prices has increased. ► Risk neutral.blogspot.Please choose one The concept of a risk premium applies to a person that is: ► All of the given options. the supply of strawberries has substantially increased.www. Question No: 40 ( Marks: 1 ) . ► Will shift to the right if Y is a complementary good.Please choose one Because of unusually warm weather. This statement indicates that: ► The demand for strawberries will necessarily rise. www. (Marks: 3. Question No: 2 ( Marks: 1 ) .com Question No: 41 ( Marks: 10 ) The following table shows the total utility that an individual receives from consuming various units of a commodity X.com .5) OLD PAPER MIDTERM EXAMINATION Spring 2009 ECO401.vunew. 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.Economics (Session .blogspot.5+3+3.vunew. ► Unemployment and interest rates. 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.Please choose one www.2) Ref No: Time: 60 min Marks: 50 Question No: 1 ( Marks: 1 ) .blogspot. ► The behavior of individual firms and investors.Please choose one Microeconomics is the branch of economics that deals with which of the following topics? ► The behavior of individual consumers. ► The behavior of individual consumers and behavior of individual firms and investors. Question No: 3 ( Marks: 1 ) . then an increase in the price of pen will cause: ► An increase in the price of ink. www. the demand for meals at the local restaurants decline. ► An increase in equilibrium price and quantity of meal. ► Total revenue will remain constant. ► A shortage of credit. ► Upward movement along the supply curve. ► Demand is perfectly elastic.com If pen and ink are complements.Please choose one Which of the following will be TRUE if demand is inelastic? ► The coefficient of elasticity is greater than one. Question No: 7 ( Marks: 1 ) . ► Downward movement along the supply curve. This results in: ► A decrease in equilibrium price and an increase in quantity of meal.com .www.blogspot. ► A decrease in the demand for pen.vunew.Please choose one An increase in supply is shown by: ► Shifting the supply curve to the left.vunew.Please choose one Assume that the government sets a ceiling on the interest rate that banks charge on loans.Please choose one If a 12% price reduction causes quantity demanded to rise by 12% then: ► Demand is inelastic. ► Shifting the supply curve to the right.blogspot. the result will be: ► A surplus of credit. ► An increase in equilibrium price and a decrease in quantity of meal. Question No: 4 ( Marks: 1 ) . Question No: 6 ( Marks: 1 ) . ► Greater profits for banks issuing credit.Please choose one When college students leave town for the summer. ► A decrease in equilibrium price and quantity of meal. If the ceiling is set below the market equilibrium interest rate. ► Less ink to be demanded at each price. Question No: 5 ( Marks: 1 ) . ► A perfectly inelastic supply of credit in the market place. ► A rightward shift in the demand curve for ink. ► Demand is elastic. Question No: 8 ( Marks: 1 ) . ► The per unit satisfaction of the good consumed. ► Utility. ► Goodness.Please choose one A person with a diminishing marginal utility of income will be: ► Risk averse.Please choose one Marginal utility is best described as: ► The total satisfaction gained from the total consumption of the good. Question No: 11 ( Marks: 1 ) . ► The additional satisfaction gained by consumption of the last good.com . ► Negative. ► Risk neutral.Please choose one Which of the following is the term that economists use to describe how consumers rank different goods and services? ► Satisfaction index. ► None of the given options.blogspot. ► Downward-sloping. Question No: 10 ( Marks: 1 ) . the law of diminishing marginal utility indicates that the demand curve is: ► Vertical. ► The change in satisfaction from consuming one additional unit of the good. ► An increase in price will increase total revenue. ► Positive.vunew. Question No: 9 ( Marks: 1 ) . ► U-shaped.www.com ► The percentage change in quantity demanded is same as the percentage change in the price. ► Upward-sloping. Question No: 12 ( Marks: 1 ) . ► None of the given options.Please choose one According to the utility model of consumer demand. ► Vertical.blogspot.vunew. www.Please choose one Law of diminishing marginal utility indicates that the slope of the marginal utility curve is: ► Horizontal. www.vunew.blogspot.com ► Risk loving. ► None of the given options. 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 Suppose you are a workaholic (like work a lot) and your friend is a leisure lover. Compared to your friend your indifference curve will be: ► Flatter. ► Steeper. ► Identical. ► None of the given options. Question No: 15 ( 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: 16 ( Marks: 1 ) - Please choose one 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. Question No: 17 ( Marks: 1 ) - Please choose one A normal good can be defined as one which consumers purchase more of as: www.vunew.blogspot.com www.vunew.blogspot.com ► Prices fall. ► Prices rise. ► Incomes fall. ► Incomes increase. Question No: 18 ( Marks: 1 ) - Please choose one The largest amount of output that a firm can produce with a given combination of inputs is determined by the: ► Marginal product of labor. ► Gains from specialization. ► Cost function. ► Production function. Question No: 19 ( 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: 20 ( 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: 21 ( Marks: 1 ) - Please choose one 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. Question No: 22 ( Marks: 1 ) - Please choose one 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. www.vunew.blogspot.com www.vunew.blogspot.com Question No: 23 ( Marks: 1 ) - Please choose one 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. Question No: 24 ( Marks: 1 ) - Please choose one Which of the following is an example of a natural monopoly? ► The trademark protecting Gatoraide. ► The talents of Tom Hanks. ► The local water company. ► The patent on an Intel processor. 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 If at the profit-maximizing quantity, profits are positive,then: ► Price < Average Total Cost. ► Price > Average Total Cost. ► Price < Average Variable Cost. ► Price = Marginal Cost. Question No: 27 ( Marks: 1 ) - Please choose one If a firm experiences economies of scale, then the: ► Long-run average total cost curve is equal to the economies of scope. ► Long-run average total cost curve is positively sloped. ► Long-run average total cost curve is horizontal. ► Long-run average total cost curve is negatively sloped. Question No: 28 ( Marks: 1 ) - Please choose one www.vunew.blogspot.com ► Most of the “surplus” (producer + consumer surplus) accrues to monopolists. ► The relationship between price and quantity depends on both marginal cost and average cost. ► Low costs.blogspot. ► Although there is only a single seller at the current price. Question No: 30 ( Marks: 1 ) .com The monopolist has no supply curve because: ► The quantity supplied at any particular price depends on the monopolist's demand curve.blogspot. ► Monopolists do not pay sufficient attention to increasing efficiency. it is impossible to know how many sellers would be in the market at higher prices. Question No: 31 ( Marks: 1 ) . ► On the downward-sloping portion of its average total cost curve. the firm: www.vunew. a new firm entering in monopolist market has: ► High costs. ► The monopolist's marginal cost curve changes considerably over time. ► At the minimum of its average variable cost curve.Please choose one As compared to existing firms.Please choose one When a firm charges each customer the maximum price that the customer is willing to pay.www. ► Monopolists produce high quality goods at higher prices.com . ► None of the given options. Question No: 32 ( Marks: 1 ) .Please choose one Following are the disadvantages of monopoly EXCEPT: ► Monopolists earn higher profits.Please choose one ► At the minimum of its average total cost curve. Question No: 29 ( Marks: 1 ) A firm never operates: . ► On the downward-sloping portion of its average variable cost curve.vunew. ► Equal costs. com www.vunew.www.vunew.blogspot.blogspot.com . blogspot.com www.blogspot.com .vunew.www.vunew. com .www.blogspot.blogspot.vunew.vunew.com www. www.com www.vunew.blogspot.com .vunew.blogspot. blogspot.vunew.com www.www.blogspot.vunew.com . www.blogspot.vunew.blogspot.vunew.com .com www. blogspot.www.vunew.com www.com .vunew.blogspot. com .blogspot.vunew.www.com www.blogspot.vunew. blogspot.www.com www.com .blogspot.vunew.vunew. blogspot.vunew.www.blogspot.com .com www.vunew. www.vunew.blogspot.com www.vunew.blogspot.com www.vunew.blogspot.com www.vunew.blogspot.com www.vunew.blogspot.com www.vunew.blogspot.com vunew.blogspot.www.com www.vunew.com .blogspot. vunew.vunew.blogspot.blogspot.com .www.com www. blogspot.vunew.blogspot.vunew.com www.www.com . blogspot. Refer to Scenario 1. horizontal B) horizontal.000. The time period this economist referred to is the A) market period.000. Answer: D 11. D) short run. B) industry run. An economist studying the pricing behavior of dog kennels tells you that she is limiting her analysis to a time period that does not allow for any new dog kennels to enter the industry or for any established dog kennels to leave the industry.vunew. Answer: B 9. B) the firm's products are not homogeneous.000. D) $30. C) firms spend a large amount of money on advertising.com Answer: B 8." B) The assumption that wool producers in the industry do not "differentiate" their products. A) downward sloping. D) There is free entry into the wool industry. Your economic profit last year was A) -$40. downward sloping Answer: A 12. Answer: D 10. Answer: B The Production Process www. C) The fact that the demand curve facing each wool producer is perfectly elastic.blogspot. There are 100 dog kennels in Atlanta.vunew. C) $10. The fast-food industry is not considered perfectly competitive because: A) entry and exit are strictly regulated by the government. horizontal D) downward sloping.com . downward sloping C) horizontal. D) there are a very large number of firms. The market demand curve for wool is __________ and each individual wool producer's demand curve is __________. B) -$10. C) long run.www. Assume the wool industry is perfectly competitive. Assume the wool industry is perfectly competitive. Why is it difficult for a wool producer to make excess profits? A) The fact that wool producers are "price takers.000. com . Refer to Table 7. The version of the law of diminishing returns that applies to production A) implies that as we add more workers our output decreases. Which technology is the most labor intensive? A) A B) B C) C D) D Answer: A 15. B) maximizes inputs. which production technology should be selected? A) A B) B C) C D) D Answer: C 16. Table 7.com 13.blogspot. D) minimizes the normal rate of return. C) is true only when all inputs are variable. C) minimizes cost. B) applies only in the short run. ceteris paribus. Refer to Table 7.vunew.vunew.www.1 below to answer the questions that follow. D) applies in the short and long run.1. with labor input in the following manner: After how many units of labor do diminishing returns set in? www. Answer: C Use the information provided in Table 7. Answer: B 17. Suppose output varies.blogspot. If the hourly wage rate is $7 and the hourly price of capital is $10.1 above.1 Inputs Required to Produce a Product Using Alternative Technologies 14. The optimal method of production is the one that A) maximizes output regardless of cost. B) isoquant. A graph showing all the combinations of capital and labor available for www. D) should increase the price paid to labor and decrease the price paid to capital to minimize costs. C) should use less labor and more capital to minimize costs. 16. A graph showing all the combinations of capital and labor that can be used to produce a given amount of output is a(n) A) indifference curve. C) is zero but average product is positive. If the product derived from the last dollar spent on labor is greater than the product derived from the last dollar spent on capital. and 10 dogs washed. Answer: B 23. B) 30. respectively. C) price of labor increases.www. When total product is maximized. second.vunew. B) price of capital decreases.blogspot. D) 138. D) and average product are positive. Answer: A 20. D) production function. At the Pampered Pet Salon the marginal products of the first. C) isocost line. marginal product A) and average product are zero. Firms have an incentive to substitute labor for capital as the A) price of capital increases.blogspot.vunew. Answer: C 21. then the firm A) is minimizing costs. C) 46.com A) 3 B) 4 C) 5 D) They do not set in Answer: D 18. B) should use more labor and less capital to minimize costs.33. Answer: B 22.com . and third workers are 20. Answer: C 19. The total product (number of dogs washed) of the three worker is A) 15. B) is positive but average product is zero. D) marginal product of labor decreases. The point of tangency between an isocost line and an isoquant is necessarily A) the profit-maximizing combination of inputs that should be hired to produce that output level. Answer: C MIDTERM EXAMINATION Spring 2009 ECO401.Economics (Session . The total cost curve for a firm can be derived from isoquants and isocost lines by A) varying the prices of capital and labor and keeping total expenditure constant. Answer: B 25.Please choose one www. D) varying the price of either capital or labor while keeping total expenditures and production technology constant. Question No: 2 ( Marks: 1 ) . but keeping input prices and expenditure levels constant. D) the minimum amount of output that can be attained for that level of expenditure. C) budget constraint.com a given total cost is the A) isocost line. B) isoquant.Please choose one An individual whose attitude towards risk is known as: ► Risk averse. B) varying production technologies.vunew.vunew.www. B) the least costly combination of inputs that can be hired to produce the output level. C) varying total expenditures while keeping input prices and production technology constant.com .2) Time: 60 min Question No: 1 ( Marks: 1 ) . ► Risk loving. ► Risk neutral. ► None of the given options. C) both the profit-maximizing and least costly combination of inputs that can be used to produce the output level.blogspot.blogspot. Answer: A 24. D) expenditure set. scarcity.com .Please choose one A normative economic statement: ► Is a statement of fact. it is similar to other social sciences because they are all concerned with the study of ________.vunew. ► The price is greater than the average revenue. Question No: 3 ( Marks: 1 ) . ► Limited resources. Question No: 6 ( Marks: 1 ) . ► AR = MR. ► Risk averse. market behavior. ► Is a hypothesis used to test economic theory. ► Scarcity. Question No: 7 ( Marks: 1 ) . ► The price is greater than the marginal revenue. ► Is a statement of what will occur if certain assumptions are true. ► Biological behavior.blogspot.Please choose one The "perfect information" assumption of perfect competition includes all of the www.blogspot. ► Risk neutral.www. limited resources. ► Risk loving. human behavior. ► The price is greater than the marginal benefit.Please choose one Economics is different from other social sciences because it is primarily concerned with the study of ________. not what is. ► Is a statement of what ought to be. ► P = MC.Please choose one A welfare loss occurs in monopoly where: ► The price is greater than the marginal cost.vunew. ► Social behavior. Question No: 4 ( Marks: 1 ) .Please choose one Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve. Question No: 5 ( Marks: 1 ) . ► P = AVC.com The concept of a risk premium applies to a person that is: ► All of the given options. the profit maximization condition for the firm can be written as: ► P = MR. vunew. ► The firm has increasing returns to scale but the law of diminishing marginal productivity may still apply to this firm. ► Constant for all levels of income. ► The firm has decreasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.blogspot.Please choose one www.Please choose one A consultant for Mattel (the producer of Barbie) reports that their long run average cost curve is decreasing. Question No: 8 ( Marks: 1 ) .vunew. ► Consumers know their income levels.com . ► The firm has decreasing returns to scale but nonetheless the law of diminishing marginal productivity may still apply to this firm.blogspot. In other words. the marginal utility of income is: ► Increasing as income increases. Question No: 9 ( Marks: 1 ) .Please choose one Figure In figure given above.com following EXCEPT: ► Consumers know their preferences. ► None of the given options. ► Consumers can anticipate price changes. Question No: 10 ( Marks: 1 ) . he is saying that: ► The firm has increasing returns to scale and the law of diminishing marginal productivity does not apply to this firm. ► Consumers know the prices available.www. ► Diminishes as income increases. ► A symbolic representation of the law of demand: P.blogspot. it means that goods are: ► Independent.Please choose one Which of the following would most likely shift the production possibilities curve for a nation outward? ► A reduction in unemployment.vunew. ► A lower price shifts the demand curve to the right. ceteris paribus. ► A reduction in discrimination.com .blogspot.Please choose one The primary use of the kinked-demand curve is to explain price rigidity in: ► Oligopoly. Question No: 14 ( Marks: 1 ) . ► Substitutes.vunew. ► Monopolistic competition. ► A graphical representation of the law of demand. ► A higher price reduces quantity demanded.Please choose one Which of the following best expresses the law of demand? ► A higher price reduces demand. Question No: 11 ( Marks: 1 ) . ► Complements. Question No: 12 ( Marks: 1 ) . ► An increase in the production of consumer goods.Q and Q. ► An increase in the production of capital goods. P.Please choose one A demand schedule is best described as: ► A numerical tabulation of the quantity demanded of a good at different prices. ► A systematic listing of all the variables that might conceivably bring about a change in demand. ► Inferior.www. ► Monopoly. www.com If the cross price elasticity of demand between two goods X and Y is positive. ► A lower price reduces demand. Question No: 13 ( Marks: 1 ) . ► Perfect competition. The tennis pro is practicing: ► First-degree price discrimination.blogspot.Please choose one www. ► The first-degree price. Question No: 16 ( Marks: 1 ) . ► Charging different prices to different groups based upon differences in elasticity of demand. ► Oligopolistic.www. ► Monopolistically competitive. ► Charging lower prices the greater the quantity purchased. Question No: 19 ( Marks: 1 ) .vunew.Please choose one A monopolistically competitive firm in short run equilibrium: ► Will make negative profit (lose money).vunew. ► A monopoly. ► The block price. ► Will make positive profit. ► All of the given options.Please choose one Third-degree price discrimination involves: ► Charging each consumer the same two part tariff.Please choose one The maximum price that a consumer is willing to pay for a good is called: ► The reservation price.Please choose one A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults. ► Any of the given are possible. Question No: 18 ( Marks: 1 ) . ► The use of increasing block rate pricing. ► Will make zero profit (break-even). Question No: 20 ( Marks: 1 ) .Please choose one A market with few entry barriers and with many firms that sell differentiated products is: ► Purely competitive. ► The market price.com Question No: 15 ( Marks: 1 ) .com . ► Second-degree price discrimination. Question No: 17 ( Marks: 1 ) . ► Third-degree price discrimination.blogspot. ► Marginal revenue times marginal cost.com An electric power company uses block pricing for electricity sales.Please choose one ► At the minimum of its average total cost curve. what is TRUE of the total revenue (TR) and total cost (TC) curves? ► They must intersect with TC cutting TR from below. ► At the minimum of its average variable cost curve.blogspot. ► 5.com . ► On the downward-sloping portion of its average variable cost curve.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. ► They must be tangent to each other. ► Second-degree price discrimination.www. ► They must have the same slope. Question No: 23 ( Marks: 1 ) .vunew. Block pricing is an example of: ► First-degree price discrimination. ► On the downward-sloping portion of its average total cost curve. Question No: 25 ( Marks: 1 ) . www. ► 5 + (200/Q). Question No: 22 ( Marks: 1 ) . ► Marginal revenue plus marginal cost. ► Marginal revenue is greater than marginal cost. What is the average total cost? ► 5Q. ► They must intersect with TC cutting TR from above. ► Third-degree price discrimination. Question No: 24 ( Marks: 1 ) .Please choose one The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q.blogspot. ► Marginal cost minus marginal revenue.Please choose one At the profit-maximizing level of output. Question No: 21 ( Marks: 1 ) A firm never operates: . ► Average revenue is less than average cost.Please choose one Marginal profit is equal to: ► Marginal revenue minus marginal cost.vunew. ► Block pricing is not a type of price discrimination. ► Marginal revenue is less than marginal cost. com .blogspot. ► Constant returns to scale. ► An implicit cost.Please choose one Costs determine all of the following EXCEPT: ► Demand for a product. Medallions are expensive but can be resold and are therefore an example of: ► A fixed cost. ► The consumer’s marginal utility.com ► None of the given options.www. ► Marginal rate of substitution. it must have a medallion on its hood. the absolute value of the slope equals: ► Unity--otherwise there would be no indifference. a firm’s production function is said to exhibit: ► Decreasing returns to scale. Question No: 27 ( Marks: 1 ) . ► Diseconomies of scale. ► Marginal rate of production. ► The marginal rate of substitution. ► Increasing returns to scale. ► None of the given options.vunew.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. Question No: 29 ( Marks: 1 ) . www.blogspot. ► A variable cost. Question No: 26 ( Marks: 1 ) . ► An opportunity cost.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. ► Firm's behaviour. Question No: 28 ( Marks: 1 ) . ► How firms should expand? ► Firm's profitability.vunew. Question No: 30 ( Marks: 1 ) .Please choose one In order for a taxicab to be operated in New York City. ► Marginal rate of factor substitution.Please choose one At any given point on an indifference curve. blogspot. ► An increase in the amount of golf played on the course.com .vunew. ► An increase in total revenue received by the course.www. What would happen to Aslam’s budget line if his income increased by 10 percent holding prices constant? ► It would shift inward.Please choose one Aslam decides to stay at home and study for his exam rather than going out with his friends to a movie. ► Two goods are substitutes or complements. ► Downward-sloping. Question No: 35 ( Marks: 1 ) . Question No: 33 ( Marks: 1 ) . ► U-shaped. Question No: 34 ( Marks: 1 ) . Question No: 32 ( Marks: 1 ) . ► It would shift outward.vunew.Please choose one Which of the following will be TRUE if demand is inelastic? ► The coefficient of elasticity is greater than one. ► Supply is steeper than demand or vice versa. Question No: 36 ( Marks: 1 ) .com Question No: 31 ( Marks: 1 ) . the law of diminishing marginal utility indicates that the demand curve is: ► Vertical. ► Demand is elastic or inelastic. ► An increase in price will increase total revenue.Please choose one Suppose your local public golf course increases the greens fees for using the course. ► No change in total revenue received by the course. ► It would rotate about the axis for food.Please choose one According to the utility model of consumer demand. ► Upward-sloping. you would expect: ► A decrease in total revenue received by the course. If the demand for golf is relatively inelastic. ► The percentage change in quantity demanded is same as the percentage change in the price. His dilemma is an example of: www.Please choose one Aslam spends all of his money on racquetballs and food.Please choose one Cross-price elasticity measures whether: ► Goods are normal or inferior. ► None of the given options.blogspot. ► It would rotate about the axis for racquetballs. blogspot. Question No: 39 ( Marks: 1 ) .vunew. ► Marginal analysis. ► Physical and mental abilities of people. ► Unemployment and interest rates.Please choose one Government authorities have managed to reduce the unemployment rate from 8% to 4% in a hypothetical economy. ► The economy will move from a point inside to a point closer to its production possibilities curve.Please choose one Land is best described as: ► Produced factors of production. Question No: 38 ( Marks: 1 ) . ► The behavior of individual consumers and behavior of individual firms and investors. the role of government is best described as: ► Significant. ► Opportunity cost.Please choose one Microeconomics is the branch of economics that deals with which of the following topics? ► The behavior of individual consumers. ► Limited.com ► The economic perspective.vunew. Question No: 40 ( Marks: 1 ) . Question No: 37 ( Marks: 1 ) .blogspot. ► Extensive.com . ► "Naturally" occurring resources. ► "Organizational" resources. ► Nonexistent. ► The behavior of individual firms and investors. Question No: 41 ( Marks: 10 ) www.Please choose one In pure capitalism. ► The economy's production possibilities curve will become steeper. ► The economy will move downward along its production possibilities curve. ► Allocative efficiency. As a result: ► The economy's production possibilities curve will shift outward.www. Define “Law of supply” and explain it with a schedule and diagram. What are the factors which cause the shift in market supply curve? (Marks: 6+4) Question No: 41 ( Marks: 10 ) C. D. B.blogspot. Schedule for Supply: Price (Rs.com A.vunew.www.vunew. What are the factors which cause the shift in market supply curve? (Marks: 6+4) ANSWER: LAW OF SUPPLY: It states that as the price goes up the quantity supplied also goes up and when price falls quantity supplied also falls.) Quantity supplied 5 100 4 95 3 80 2 60 1 40 Factors Causing Shift in Supply Curve: There are various factors causing shift in market supply curve which are as follows: Factors changing supply Increase in number of suppliers Decrease in number of suppliers Improved technology Declined technology Increase in future price Decrease in future price Increase in resources' price Decrease in Effect on supply Increase Decrease Increase Decrease Decrease Increase Decrease Increase Direction of Equilibrium Shift in supply Price Rightward shift Decrease Leftward shift Increase Equilibrium quantity Increase Decrease Increase Decrease Decrease Increase Decrease Increase Rightward shift Decrease Leftward shift Leftward shift Increase Increase Rightward shift Decrease Leftward shift Increase Rightward shift Decrease www.com . Define “Law of supply” and explain it with a schedule and diagram.blogspot. ► Social behavior.www. ► Consumers know the prices available.Please choose one Which of the following does NOT refer to macroeconomics? ► The study of the aggregate level of economic activity.Please choose one Economics is different from other social sciences because it is primarily concerned with the study of ________. ► Consumers can anticipate price changes. and firm's decisions have an impact on market price.blogspot.Economics (Session .Please choose one The "perfect information" assumption of perfect competition includes all of the following EXCEPT: ► Consumers know their preferences. ► The study of the cause of inflation.vunew. market behavior.4) Time: 60 min Marks: 50 Question No: 1 ( Marks: 1 ) . and business firms. ► Upper-division microeconomics texts are not all alike.Please choose one The textbook for your class was not produced in a perfectly competitive industry because: ► There are so few firms in the industry that market shares are not small. Question No: 3 ( Marks: 1 ) . resource owners. ► The study of the cause of unemployment. ► Consumers know their income levels. Question No: 2 ( Marks: 1 ) . www. it is similar to other social sciences because they are all concerned with the study of ________.com .com resources' price MIDTERM EXAMINATION Spring 2009 ECO401.vunew. limited resources. ► Biological behavior.blogspot. Question No: 4 ( Marks: 1 ) . ► Scarcity. scarcity. ► The study of the economic behavior of individual decision-making units such as consumers. ► Limited resources. human behavior. blogspot. ► The assumption of completeness is violated.Please choose one www.Please choose one Which of the following best expresses the law of demand? ► A higher price reduces demand. Question No: 9 ( Marks: 1 ) . ► Monopoly. ► All of the given options. ► A higher price reduces quantity demanded. ► Perfect competition. ► Consumers minimize their satisfaction. ► The market for aluminum. ► Housing construction costs must be decreasing. You conclude that: ► The demand for houses has increased. ► A lower price reduces demand. ► The supply of houses has increased. Question No: 5 ( Marks: 1 ) .vunew. Question No: 10 ( Marks: 1 ) . then: ► The assumption of a diminishing marginal rate of substitution is violated. ► Monopolistic competition.Please choose one If indifference curves cross. ► The assumption of transitivity is violated. Question No: 7 ( Marks: 1 ) .com . ► The market for colas. ► A lower price shifts the demand curve to the right.vunew. ► The market for ground coffees. Question No: 8 ( Marks: 1 ) .Please choose one Which of the following markets is most likely to be oligopolistic? ► The market for corn.Please choose one The primary use of the kinked-demand curve is to explain price rigidity in: ► Oligopoly.com ► It is not costless to enter or exit the textbook industry.blogspot. ► The demand curve for houses must be upward-sloping. Question No: 6 ( Marks: 1 ) .www.Please choose one You observe that the price of houses and the number of houses purchased both rise over the course of the year. Question No: 13 ( Marks: 1 ) .Please choose one If a monopolist sets his output such that marginal revenue. ► Engages in second-degree price discrimination. ► Charges the average reservation price. ► Q4.com When a firm charges each customer the maximum price that the customer is willing to pay. ► Indeterminate from the given information.vunew.vunew.blogspot. ► Zero. the profit maximizing level of output is: ► Q1. ► Monopolists produce high quality goods at higher prices.Please choose one For the monopolist shown below. ► Q3. ► Q2. www. marginal cost and average total cost are equal. Question No: 11 ( Marks: 1 ) . Question No: 12 ( Marks: 1 ) .www.com . the firm: ► Engages in a discrete pricing strategy.blogspot.Please choose one Following are the disadvantages of monopoly EXCEPT: ► Monopolists earn higher profits. ► Engages in first-degree price discrimination. ► Positive. economic profit must be: ► Negative. ► It shift inward. ► Less than twice as much of all inputs are required to double output. Question No: 15 ( Marks: 1 ) . ► Firm's behaviour.blogspot.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.vunew. ► Isoquants must be linear.vunew. ► How firms should expand? ► Firm's profitability. ► None of the given options. Question No: 16 ( Marks: 1 ) An isoquant curve shows: . www.Please choose one ► All the alternative combinations of two inputs that yield the same maximum total product.Please choose one Costs determine all of the following EXCEPT: ► Demand for a product.www. Question No: 17 ( Marks: 1 ) . ► 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. Question No: 18 ( Marks: 1 ) . ► It vanishes.blogspot. ► Monopolists do not pay sufficient attention to increasing efficiency. ► More than 10% as much of all inputs are required to increase output 10%.Please choose one A graph showing all the combinations of capital and labour available for a given total cost is the: ► Budget constraint.Please choose one Increasing returns to scale in production means: ► More than twice as much of only one input is required to double output. ► Expenditure set. closer to the origin. ► Isocost. ► It undergoes no change.com ► Most of the “surplus” (producer + consumer surplus) accrues to monopolists. ► All the alternative combinations of two products among which a producer is indifferent because they yield the same profit.com . ► Isoquant. Question No: 14 ( Marks: 1 ) . 150.blogspot. Question No: 22 ( Marks: 1 ) . ► 100. ► Marginal physical product is less than average physical product. 300.Please choose one Suppose the first four units of an output produced incur corresponding total costs of 50.vunew.com Question No: 19 ( Marks: 1 ) . ► Positive.Please choose one According to the utility model of consumer demand. ► Negative. and 500. Question No: 21 ( Marks: 1 ) . ► A decreasing marginal rate of substitution.vunew.Please choose one If Average Physical Product (APP) is increasing then which of the following must be true? ► Marginal physical product is greater than average physical product. ► A marginal rate of substitution that first decreases. ► 200. ► Marginal physical product is decreasing.Please choose one Law of diminishing marginal utility indicates that the slope of the marginal utility curve is: ► Horizontal. The marginal cost of the second unit of output is: ► 50. the law of diminishing marginal utility indicates that the demand curve is: www. ► 150.www.Please choose one Indifference curves that are convex to the origin reflect: ► An increasing marginal rate of substitution. Question No: 20 ( Marks: 1 ) . Question No: 23 ( Marks: 1 ) . then increases. ► Vertical. ► Marginal physical product is increasing. ► A constant marginal rate of substitution.com .blogspot. This shows that the demand for petrol is: ► Perfectly elastic. ► An increase in the amount of golf played on the course. ► When income rises. ► Upward-sloping. total revenue rises. Question No: 26 ( Marks: 1 ) . www. ► Consumer surplus. ► Downward-sloping. Question No: 27 ( Marks: 1 ) . you would expect: ► A decrease in total revenue received by the course. ► Marginal utility.blogspot.Please choose one Suppose your local public golf course increases the greens fees for using the course. ► The per unit satisfaction of the good consumed.blogspot.com ► Vertical. ► No change in total revenue received by the course. ► An increase in total revenue received by the course. ► When price rises. Question No: 25 ( Marks: 1 ) . the quantity of petrol purchased falls by 8%. ► The change in satisfaction from consuming one additional unit of the good. ► Unit elastic. quantity demanded rises.Please choose one When the price of petrol rises by 12%.com . ► U-shaped. Question No: 24 ( Marks: 1 ) . ► When income falls. ► Utility. If the demand for golf is relatively inelastic.Please choose one We know that the demand for a product is elastic: ► When price rises. ► The additional satisfaction gained by consumption of the last good. total revenue falls. quantity demanded rises.vunew.vunew.Please choose one Marginal utility is best described as: ► The total satisfaction gained from the total consumption of the good. ► Elastic.www.Please choose one The extra value that consumers receive above what they pay for that good is called: ► Producer surplus. Question No: 28 ( Marks: 1 ) . ► The slope of the supply curve. If the ceiling is set below the market equilibrium interest rate. Question No: 29 ( Marks: 1 ) . all else equal. you need to know: ► Two prices and two quantities supplied. ► Greater profits for banks issuing credit.Please choose one www. Question No: 33 ( Marks: 1 ) . the result will be: ► A surplus of credit.Please choose one Which of the following measures the percentage change in quantity demanded given a percentage change in consumer's income? ► Price elasticity of demand. Question No: 34 ( Marks: 1 ) . ► The equilibrium price and quantity in the market.Please choose one When college students leave town for the summer. ► A perfectly inelastic supply of credit in the market place.Please choose one Assume that the government sets a ceiling on the interest rate that banks charge on loans. ► An increase in equilibrium price and quantity of meal. ► Cross price elasticity.vunew. the equilibrium: ► Price must rise and the equilibrium quantity must fall. ► Quantity must rise and the equilibrium price may either rise or fall.www.Please choose one If both supply and demand increase simultaneously. the demand for meals at the local restaurants decline.com ► Inelastic.blogspot. ► Price must rise and the equilibrium quantity may either rise or fall. ► The quantity supplied at two different prices. ► A shortage of credit. ► A decrease in equilibrium price and quantity of meal.Please choose one In order to calculate the price elasticity of supply. ► Price must fall and the equilibrium quantity may either rise or fall. Question No: 31 ( Marks: 1 ) . This results in: ► A decrease in equilibrium price and an increase in quantity of meal. Question No: 32 ( Marks: 1 ) . ► An increase in equilibrium price and a decrease in quantity of meal.vunew.com . ► Supply price elasticity.blogspot. Question No: 30 ( Marks: 1 ) . ► Income elasticity of demand. www. ► There is a surplus of the product. Question No: 37 ( Marks: 1 ) .blogspot. then an increase in the price of pen will cause: ► An increase in the price of ink. Question No: 36 ( Marks: 1 ) .com A good for which income and quantity demanded are inversely related is known as: ► Inferior good. Question No: 38 ( Marks: 1 ) . ► The product is a normal good.vunew. ► None of the given options. ► Abundant productive labor. ► A decrease in the demand for pen. ► Unlimited material resources. ► All available resources are employed efficiently. ► Normal good. ► A rightward shift in the demand curve for ink.Please choose one When constructing a typical production possibilities curve. Question No: 39 ( Marks: 1 ) . ► Less ink to be demanded at each price.Please choose one Which of the following might be considered to be a characteristic of a planned economy? ► Price is relatively unimportant as a means of allocating resources. ► The product is an inferior good. economists assume that: ► Economic resources are underutilized. ► Production technology is allowed to vary.com .Please choose one Our economy is characterized by: ► Unlimited wants and needs.blogspot.vunew.Please choose one If the quantity demanded of a product is greater than the quantity supplied of a product. www. ► Resources are equally productive in many alternative uses. ► No energy resources. then: ► There is a shortage of the product. Question No: 35 ( Marks: 1 ) . ► Goods and services produced reflect consumer sovereignty. ► Complementary good.Please choose one If pen and ink are complements. Question No: 40 ( Marks: 1 ) .5+2.5) MIDTERM EXAMINATION Spring 2009 ECO401. At which point monopolist is able to get allocative efficiency as well as productive efficiency? (Marks: 2.vunew.5+2. Question No: 41 P 12 9 ( Marks: 10 ) MC AC Subsidy to the monopolist D = AR MR O 400 600 725 Q a.5+2. Is the productive efficiency is also attained at the point of allocative efficiency? why c. ► The minimum wage should not be increased. ► All of the given options. at which point allocative efficiency is achieved? b.vunew.www. ► Smoking should be restricted on all airline flights.blogspot.blogspot. According to the given graph. At which point economist might make a loss and what will be the role of Government in this regard? d. ► All income is completely evenly distributed.3) Ref No: 455187 Time: 60 min Marks: 50 Question No: 1 ( Marks: 1 ) .Please choose one Which of the following is a normative statement? ► Intermediate microeconomics should be required of all economics majors in order to build a solid foundation in economic theory.com ► There is no incentive for people to work hard.com .Please choose one The concept of a risk premium applies to a person that is: ► All of the given options. because to do so would increase unemployment.Economics (Session . www. ► Consumers know their income levels. ► Downward pressure on the current market price.blogspot. Question No: 5 ( Marks: 1 ) . ► A complementary good. ► Inferior good.vunew.Please choose one The correlation between an asset's real rate of return and its risk (as measured by its standard deviation) is usually: ► Positive.com ► Risk averse. ► Flat. Question No: 6 ( Marks: 1 ) . ► Law of small numbers. www. ► Strictly linear.blogspot.Please choose one The "perfect information" assumption of perfect competition includes all of the following EXCEPT: ► Consumers know their preferences.Please choose one If income elasticity is negative.www. ► Consumers can anticipate price changes.com . ► Law of zero numbers. Question No: 3 ( Marks: 1 ) . Question No: 4 ( Marks: 1 ) . ► A substitute good.vunew. We would expect: ► A surplus to accumulate.Please choose one Insurance companies operate under the principle of: ► Law of large numbers. the good is: ► Normal good. ► Risk neutral. ► Lower production during the next time period. Question No: 2 ( Marks: 1 ) . ► Upward pressure on the current market price. ► Negative.Please choose one Assume that the current market price is below the market clearing level. ► Risk loving. ► Consumers know the prices available. blogspot. Question No: 7 ( Marks: 1 ) . ► It produces at the minimum average cost. ► Excess capacity.www. ► A symbolic representation of the law of demand: P.Please choose one Which of the following is NOT regarded as a source of inefficiency in monopolistic competition? ► The fact that price exceeds marginal cost. P. ► Engages in first-degree price discrimination. ► The fact that long-run average cost is not minimized. ► Charges the average reservation price. ► It is operating on the downward-sloping part of the average cost curve. ► Engages in second-degree price discrimination. ► Product diversity.Please choose one A firm in monopolistic competition does not achieve minimum efficient scale because: ► It is not a monopoly. ► A systematic listing of all the variables that might conceivably bring about a change in demand. ceteris paribus.Q and Q. ► A graphical representation of the law of demand.Please choose one The break-even point occurs when: ► Price < Average Variable Cost. the firm: ► Engages in a discrete pricing strategy.vunew. www.com . Question No: 11 ( Marks: 1 ) . Question No: 8 ( Marks: 1 ) .blogspot.vunew. Question No: 9 ( Marks: 1 ) .Please choose one When a firm charges each customer the maximum price that the customer is willing to pay.com ► All of the given options. Question No: 10 ( Marks: 1 ) . ► It is in competition with other firms.Please choose one A demand schedule is best described as: ► A numerical tabulation of the quantity demanded of a good at different prices. vunew. ► Will increase revenue more than it increases cost. ► Long-run average total cost curve is negatively sloped. Question No: 16 ( Marks: 1 ) . ► Long-run average total cost curve is positively sloped. www.blogspot. Question No: 13 ( Marks: 1 ) .com . ► The patent on an Intel processor. ► The local water company.www.Please choose one If current output is less than the profit-maximizing output then the next unit produced: ► Will decrease profit. ► Will increase revenue without increasing cost.com ► Price < Average Total Cost.Please choose one A monopoly occurs when: ► Each firm produces a product that is slightly different from the other firms. ► There are many firms producing the same product. ► 5Q. ► Price > Average Variable Cost. then the: ► Long-run average total cost curve is equal to the economies of scope. ► Price = Average Total Cost. ► One firm sells a good that has no close substitutes and a barrier blocks entry for other firms. ► Long-run average total cost curve is horizontal. ► The talents of Tom Hanks. Question No: 12 ( Marks: 1 ) .Please choose one The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. Question No: 14 ( Marks: 1 ) .Please choose one Which of the following is an example of a natural monopoly? ► The trademark protecting Gatoraide. What is the variable cost? ► 200. ► All of the given options. Question No: 15 ( Marks: 1 ) .Please choose one If a firm experiences economies of scale. ► Will increase cost more than it increases revenue.vunew.blogspot. ► The two products are being produced at the medium input cost to the firm.www. ► Inputs with negative marginal products.com ► 5.Please choose one Fixed costs are fixed with respect to changes in: ► Output. ► Fixed cost. ► Marginal cost. Question No: 20 ( Marks: 1 ) . Question No: 22 ( Marks: 1 ) . ► Variable cost. ► Decreasing average variable costs. we know that: ► Output is being produced at minimum cost. ► Capital expenditures.blogspot. Question No: 19 ( Marks: 1 ) . ► Time.blogspot.Please choose one When an isocost line is just tangent to an isoquant. the “long run” is a time period in which: ► All inputs are variable.Please choose one A negatively sloped isoquant implies: ► Products with negative marginal utilities. ► Decreasing average fixed costs. ► 5 + (200/Q). ► Products with positive marginal utilities. ► Output is not being produced at minimum cost.Please choose one Diminishing marginal returns implies: ► Decreasing marginal costs. ► Inputs with positive marginal products. ► The two products are being produced at the highest input cost to the firm. ► All inputs are paid for. www. ► Increasing marginal costs.com .Please choose one Incremental cost is the same concept as: ► Average cost.Please choose one In economics. Question No: 21 ( Marks: 1 ) . ► Wages. Question No: 17 ( Marks: 1 ) . Question No: 18 ( Marks: 1 ) .vunew.vunew. Question No: 23 ( Marks: 1 ) .vunew. ► Marginal physical product is decreasing.Please choose one If a market basket is changed by adding more to at least one of the goods. Question No: 25 ( Marks: 1 ) . ► 220 units. ► All loans are repaid.com ► All outputs are determined. What is the Marginal Product of labor between 20 and 30 units of labor? Table Quantity of Labor 0 10 20 30 40 50 ► 340 units.www.Please choose one The following table shows a firm’s Total Product of labor.Please choose one Assume Leisure is a normal good. then every consumer will: ► Rank the market basket more highly after the change. ► 11 units. ► All of the given options. ► Marginal physical product is less than average physical product.Please choose one If Average Physical Product (APP) is increasing then which of the following must be true? ► Marginal physical product is greater than average physical product. ► 110 units.vunew. Question No: 26 ( Marks: 1 ) . ► Marginal physical product is increasing. Question No: 24 ( Marks: 1 ) .blogspot. Total Product 0 100 230 340 410 460 www.blogspot. If income effect exceeds substitution effect then a wage decrease will lead a person to: ► Decrease hours of work.com . ► Increase hours of work. ► Not change anything. ► Be unable to decide whether he prefers the first market basket to the second or the second to the first. ► 200. and 1000.Please choose one Aslam spends all of his money on racquetballs and food. then: ► Indifference curves slope downwards. Question No: 28 ( Marks: 1 ) . ► Rank the market basket just as desirable after the change.vunew.com ► Rank the market basket more highly before the change.blogspot. ► Indifference curves may cross. 700. www. Question No: 27 ( Marks: 1 ) . ► Indifference curves could take the form of ellipses.www.Please choose one Suppose there are only two goods A and B. 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. 900. ► Marginal utility is equal to average utility. and if less of good B is always preferred to more. Question No: 30 ( Marks: 1 ) .Please choose one Consumers will maximize satisfaction when: ► The price of each good is exactly equal to the price of every other good consumed. The marginal cost of the fourth unit of output is: ► 50.vunew. ► Indifference curves slope upwards. ► The marginal utility of the last dollar spent on each good is exactly equal to the marginal utility of the last dollar spent on any other good.blogspot. Question No: 29 ( Marks: 1 ) . ► The price of each good is exactly equal to the total utility derived from the consumption of every other good. ► 150. ► It would rotate about the axis for racquetballs. ► 100. ► It would shift outward.Please choose one Suppose the first four units of an output produced incur corresponding total costs of 400.com . if more of good A is always preferred to less. Please choose one When the price of petrol rises by 12%. we would expect a 1. It means that: ► Given a 1% increase in coffee price.5. ► Substantial increase in farm productivity due to applications of new technology in agriculture. ► Shifts to the right initially and then returns to its original position.blogspot. ► Period of extraordinary large surpluses of farm goods. ► Shifts to the right. When the price of steak goes up. ► The additional satisfaction gained by consumption of the last good.www.Please choose one Cross price elasticity between coffee and tea is 1. ► The per unit satisfaction of the good consumed. ► The change in satisfaction from consuming one additional unit of the good. Question No: 32 ( Marks: 1 ) . ► National security crisis leading to major shortages of essential goods.Please choose one A price ceiling might be an appropriate government response to a: ► Period of falling farm prices due to unusually good harvests.vunew. Question No: 35 ( Marks: 1 ) .Please choose one An increase in supply is shown by: www. the quantity of petrol purchased falls by 8%.blogspot. ► Inelastic. ► Given a 1% increase in coffee price. ► Given 1% increase in coffee price.Please choose one Assume that steak and potatoes are complements.vunew. there will be no change in tea demand. ► Unit elastic. ► Remains constant.com . This shows that the demand for petrol is: ► Perfectly elastic. ► Elastic. the demand curve for potatoes: ► Shifts to the left.Please choose one Marginal utility is best described as: ► The total satisfaction gained from the total consumption of the good.com Question No: 31 ( Marks: 1 ) . ► None of the given options. we would expect a 1. Question No: 34 ( Marks: 1 ) .5% increase in tea demand. Question No: 36 ( Marks: 1 ) .5% decrease in tea demand. Question No: 33 ( Marks: 1 ) . ► The behavior of individual consumers and behavior of individual firms and investors. Question No: 41 ( Marks: 10 ) a. ► Downward movement along the supply curve. interest rates rise and private investment is reduced. ► Goods and services produced reflect consumer sovereignty. ► Upward movement along the supply curve. consumers buy less of it. ► Shifting the supply curve to the right. Question No: 39 ( Marks: 1 ) .Please choose one In a free-market economy.blogspot.Please choose one Microeconomics is the branch of economics that deals with which of the following topics? ► The behavior of individual consumers. ► When the Federal government sells bonds. firms produce more of it. ► When the price of a good goes up. What is the relationship between average physical product and marginal physical product in three cases if: www. ► All of the given options.com ► Shifting the supply curve to the left.Please choose one Which of the following might be considered to be a characteristic of a planned economy? ► Price is relatively unimportant as a means of allocating resources.www.vunew. ► Consumer preferences. ► The behavior of individual firms and investors.Please choose one Which of the following is a positive statement? ► When the price of a good goes up. ► The level of profits of firms. ► A central planning authority. Question No: 37 ( Marks: 1 ) . ► Unemployment and interest rates. ► There is no incentive for people to work hard.vunew. ► All income is completely evenly distributed. Question No: 38 ( Marks: 1 ) .blogspot. the allocation of resources is determined by: ► Votes taken by consumers. Question No: 40 ( Marks: 1 ) .com . The average physical product will not change. ii. Marginal physical product is below the average physical product.blogspot. ► Higher levels of unemployment will lead to higher levels of inflation. ► Less than 0.vunew.com . iii.blogspot. ► Greater than 1. www. The Law of Diminishing Marginal Returns: The law of diminishing marginal returns states that as you increase the quantity of a variable factor together with a fixed factor. the returns (in terms of output) become less and less.Please choose oneDemand is elastic when the elasticity of demand is: ► Greater than 0 but less than 1. Thus if we are using labor in the production of some commodity having fixed quantity of land. ► Changing the level of interest rates is a better way of managing the economy than using taxation and government expenditure. calculate the average physical product of labor and marginal physical product of labor. The total physical product of labor is given in the following table. Labor input 0 1 2 3 4 5 (Marks: a = 3. Marginal physical product is above the average physical product.com i. Question No: 2 ( Marks: 1 ) . The average physical product will also increase.Please choose oneWhich of the following statements would you consider to be a normative one? ► Faster economic growth should result if an economy has a higher level of investment.vunew. ► Equal to 1. The average physical product will also fall b. after a certain point the increase in the output of wheat will become less and less until it starts reducing the total output of commodity. Define the law of diminishing marginal returns. Marginal physical product is equal to average physical product. b = 2+5) Total Physical Product (TPPL) 0 3 10 24 36 40 Question No: 1 ( Marks: 1 ) .www. www. the good is: ► Normal good. same. _____ questions have to do with what ought to be.Please choose oneWhich 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. ► Demand schedule. ► The price is greater than the marginal revenue. negative. Question No: 4 ( Marks: 1 ) .Please choose oneTo calculate the price elasticity of demand.www.blogspot. ► The price is greater than the marginal benefit. ► The demand curve is tangent to average cost curve.Please choose oneIn monopoly. ► The demand curve is tangent to marginal revenue curve. Question No: 9 ( Marks: 1 ) . Question No: 3 ( Marks: 1 ) . ► Inferior good. ► There is one main seller. ► Negative. ► Two.com ► The average level of growth in the economy was faster in the 1990s than the 1980s. ► One. ► Quantity demanded schedule. ► Positive. normative.Please choose oneA welfare loss occurs in monopoly where: ► The price is greater than the marginal cost.Please choose oneIf income elasticity is negative. ► The price is greater than the average revenue. Question No: 7 ( Marks: 1 ) . Question No: 8 ( Marks: 1 ) .Please choose oneA 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. ► A complementary good. normative. you need to know ____________________ point(s) on the ____________________ demand curve. Question No: 6 ( Marks: 1 ) . ► A substitute good. ► Two. ► There is freedom of entry and exit into the industry in the long run. ► The firm is a price maker. ► One.blogspot. opposite.Please choose one_____ questions have to do with explanation and prediction. ► Quantity supplied schedule. positive.com . ► Positive. which of the following is NOT true? ► Products are differentiated. Question No: 5 ( Marks: 1 ) . opposite. same. ► The marginal cost curve is tangent to average cost curve. ► normative.vunew.vunew. Question No: 13 ( Marks: 1 ) . Question No: 12 ( Marks: 1 ) .vunew. ► The difference between revenue and variable cost.Please choose oneA perfectly competitive firm maximizes profit by finding the level of production at which: ► Price = Marginal Cost. ► Price < Marginal Cost. ► The middle of the upward-sloping portion of the total cost curve. ► The talents of Tom Hanks. ► The highest point on the MC curve.www. Question No: 15 ( Marks: 1 ) . Question No: 11 ( Marks: 1 ) .com Question No: 10 ( Marks: 1 ) . Block pricing is an example of: ► First-degree price discrimination.Please choose oneWhich of the following is an example of a natural monopoly? ► The trademark protecting Gatoraide. the Marginal Cost curve cuts through the Average Total Cost curve at: ► The lowest point on the MC curve.blogspot. ► Upward shift of marginal cost and increases in output. ► The difference between revenue and fixed cost. ► Third-degree price discrimination. ► Has no close substitutes.blogspot. ► The lowest point on the ATC curve. ► Average Total Cost = Marginal Cost. ► Block pricing is not a type of price discrimination. www. ► Downward shift of marginal cost and increases in output. ► The difference between revenue and total cost.com .Please choose oneAn improvement in technology would result in: ► Upward shift of marginal cost and reductions in output. ► Price = Average Total Cost. Question No: 17 ( Marks: 1 ) .vunew. ► The local water company.Please choose oneGraphically.Please choose oneThe good produced by a monopoly: ► Has perfect substitutes. ► Downward shift of marginal cost and reductions in output.Please choose oneProducer surplus in a perfectly competitive industry is: ► The difference between profit at the profit-maximizing and profit-minimizing level of output. Question No: 14 ( Marks: 1 ) . ► Has no substitutes at all. marginal profit: ► Is positive. Question No: 16 ( Marks: 1 ) .Please choose oneAn electric power company uses block pricing for electricity sales. ► The patent on an Intel processor.Please choose oneAt the profit-maximizing level of output. ► Can be easily duplicated. ► Second-degree price discrimination. blogspot.► None of the given options. Question No: 21 ( Marks: 1 ) .Please choose oneIf current output is less than the profit-maximizing output then which of the following must be TRUE? ► Total revenue is less than total cost. ► Marginal revenue is less than marginal cost. the “long run” is a time period in which:► All inputs are variable.► Marginal cost.Please choose oneIn economics. ► Is zero.► All outputs are determined.► Transaction costs.www.► Generates a curve that is upward sloping.Please choose oneWhich of the following statements describes increasing returns to scale?► Doubling the inputs used leads to double the output.► Inputs with positive marginal products.► Shows diminishing marginal product of an input. www. Question No: 23 ( Marks: 1 ) . Question No: 25 ( Marks: 1 ) .► Fixed cost.Please choose oneA production function:► Relates inputs with output. ► Average revenue is less than average cost.► Marginal returns.Please choose oneA negatively sloped isoquant implies: ► Products with negative marginal utilities.► Increasing the inputs by 50% leads to a 25% increase in output. Question No: 19 ( Marks: 1 ) .► All inputs are paid for.com ► Is increasing. ► Marginal revenue is greater than marginal cost.► Average fixed cost.► Inputs with negative marginal products.► Products with positive marginal utilities.com . since it gets flatter as output rises. Question No: 24 ( Marks: 1 ) .► All loans are repaid.► Increasing inputs by 1/4 leads to an increase in output of 1/3.Please choose oneA self-employed accountant spends a lot of money identifying clients and advertising his services.► 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.► Fixed inputs. ► Is also maximized.► All of the given options.blogspot.Please choose oneAn isoquant curve shows: ► All the alternative combinations of two inputs that yield the same maximum total product. These activities are an example of:► External costs.► All the alternative combinations of two products among which a producer is indifferent because they yield the same profit.Please choose oneWhich of the following costs always decline as output increases? ► Average cost.vunew.► None of the given options. Question No: 22 ( Marks: 1 ) .vunew. Question No: 18 ( Marks: 1 ) . Question No: 20 ( Marks: 1 ) . Question No: 27 ( Marks: 1 ) .Please choose oneSuppose the first four units of an output produced incur corresponding total costs of 400. 900.Please choose oneIf you sum all of the marginal utilities for the consumption of units one through five.www. Question No: 29 ( Marks: 1 ) .► Satisfaction. and 1000. the marginal product of labour equals:► Total output divided by total labour inputs.► Pleasure.► Total output produced by labour inputs. Question No: 30 ( Marks: 1 ) .Please choose oneIf a market basket is changed by adding more to at least one of the goods.► The per unit satisfaction of the good consumed .► 100.Please choose oneIn any production process.► The ratio of the consumer’s marginal utility of 1 egg to that of 1 hamburger must equal ½.Please choose oneAs more of a good is consumed.► All of the given options.► Rank the market basket just as desirable after the change.► The average utility for the consumption of the first five units.► Utility. 700.Please choose oneThe numerical measurement of a consumer’s preference is called:► Use.► 150.► Be unable to decide whether he prefers the first market basket to the second or the second to the first.blogspot.► Total output minus the total capital stock.► The change in satisfaction from consuming one additional unit of the good.► The change in total output resulting from a 'small' change on the labour input.► Decreases as long as marginal utility is positive.► 200.► The total utility for the consumption of the first five units. The marginal cost of the fourth unit of output is:► 50.► Rank the market basket more highly before the change.com Question No: 26 ( Marks: 1 ) .► Decreases as long as marginal utility is negative.Question No: 32 ( Marks: 1 ) .► The marginal utility for the consumption of the sixth unit.► The consumer’s indifference curve must be convex with respect to the origin of the graph. Question No: 28 ( Marks: 1 ) . you will get:► The marginal utility for the consumption of the fifth unit. www. Question No: 31 ( Marks: 1 ) .blogspot.Please choose oneIf a consumer’s marginal rate of substitution equals 2 eggs for 1 hamburger then:► The consumer’s indifference curve must be positively sloped.com .vunew. then every consumer will:► Rank the market basket more highly after the change.vunew.► The additional satisfaction gained by consumption of the last good. Question No: 33 ( Marks: 1 ) .Please choose oneMarginal utility is best described as:► The total satisfaction gained from the total consumption of the good.► Is negative as long as marginal utility is decreasing. then total utility typically:► Increases at a decreasing rate. ► The slope of the supply curve.► "Naturally" occurring resources.com .► None of the given options.blogspot.► The equilibrium price and quantity in the market.► "Organizational" resources.Please choose oneCross-price elasticity measures whether:► Goods are normal or inferior.www.Please choose one A good for which income and quantity demanded are inversely related is known as:► Inferior good.► Physical and mental abilities of people.► Demand is inelastic. Question No: 40 ( Marks: 1 ) .► Supply is inelastic.Please choose one In pure capitalism.vunew. His dilemma is an example of:► The economic perspective. freedom of enterprise means that: ► Businesses are free to produce products that consumers want. all else equal.Please choose one In order to calculate the price elasticity of supply.► Opportunity cost. ► Resources are distributed freely to businesses.► Two goods are substitutes or complements. Question No: 37 ( Marks: 1 ) . ► Consumers are free to buy goods and services that they want.Please choose one Land is best described as:► Produced factors of production.vunew.com Question No: 34 ( Marks: 1 ) .► Marginal analysis.► Demand is elastic or inelastic.► The quantity supplied at two different prices.Please choose oneAslam decides to stay at home and study for his exam rather than going out with his friends to a movie. ► Government is free to direct the actions of businesses. Question No: 36 ( Marks: 1 ) . Question No: 38 ( Marks: 1 ) . you need to know:► Two prices and two quantities supplied.► Supply is steeper than demand or vice versa.► Supply is elastic. Question No: 35 ( Marks: 1 ) . Question No: 39 ( Marks: 1 ) . www.► Normal good.blogspot.► Allocative efficiency.► Complementary good.Please choose one If a decrease in price increases the total revenue then:► Demand is elastic.