ECO401- Economics - Midterm Examination Paper 

Time: 60 min
M - 47
ECO401 - Economics - Q.No. 1 ( M - 1 )
In a free-market economy, the allocation of resources is determined by:
► Votes taken by consumers.
► A central planning authority.
► Consumer preferences.
► The level of profits of firms.
ECO401 - Economics - Q.No. 2 ( M - 1 )
Land is best described as:
► Produced factors of production.
► "Organizational" resources.
► Physical and mental abilities of people.
► "Naturally" occurring resources.
ECO401 - Economics - Q.No. 3 ( M - 1 )
Our economy is characterized by:
► Unlimited wants and needs.
► Unlimited material resources.
► No energy resources.
► Abundant productive labor.
ECO401 - Economics - Q.No. 4 ( M - 1 )
A market is said to be in equilibrium when:
► Demand equals output.
► There is downward pressure on price.
► The amount consumers wish to buy at the current price equals the amount producers wish to sell at that price.
► All buyers are able to find sellers willing to sell to them at the current price.
ECO401 - Economics - Q.No. 5 ( M - 1 )
We know that the demand for a product is elastic:
► When price rises, total revenue rises.
► When price rises, total revenue falls.
► When income rises, quantity demanded rises.
► When income falls, quantity demanded rises.  http://vuzs.net
ECO401 - Economics - Q.No. 6 ( M - 1 )
The extra value that consumers receive above what they pay for that good is called:
► Producer surplus.
► Utility.
► Marginal utility.
► Consumer surplus.
ECO401 - Economics - Q.No. 7 ( M - 1 )
Law of diminishing marginal utility indicates that the slope of the marginal utility curve is:
► Horizontal.
► Vertical.
► Negative.
► Positive.
ECO401 - Economics - Q.No. 8 ( M - 1 )
As long as all prices remain constant, an increase in money income results in:
► An increase in the slope of the budget line.
► A decrease in the slope of the budget line.
► An increase in the intercept of the budget line.
► A decrease in the intercept of the budget line.
ECO401 - Economics - Q.No. 9 ( M - 1 )
If isoquants are straight lines, it means that:
► Only one combination of inputs is possible.
► There is constant returns to scale.
► Inputs have fixed costs at all use rates.
► The marginal rate of technical substitution of inputs is constant.
ECO401 - Economics - Q.No. 10 ( M - 1 )
At the profit-maximizing level of output, marginal profit:
► Is positive.
► Is increasing.
► Is zero.
► Is also maximized.
ECO401 - Economics - Q.No. 11 ( M - 1 )
In monopoly, which of the following is TRUE at the output level, where price = marginal cost?
► The monopolist is maximizing profit.
► The monopolist is not maximizing profit and should increase output.
► The monopolist is not maximizing profit and should decrease output.
► The monopolist is earning a positive profit.
ECO401 - Economics - Q.No. 12 ( M - 1 )
A firm is charging a different price for each unit purchased by a consumer. This is called:
► First-degree price discrimination.
► Second-degree price discrimination.
► Third-degree price discrimination.
► None of the given options.
ECO401 - Economics - Q.No. 13 ( M - 1 )
If a sales tax on beer leads to reduced tax revenue, this means:
► Elasticity of demand is < 1.
► Elasticity of demand is > 1.
► Demand is upward-sloping.
► Demand is perfectly inelastic.     vuzs.net
ECO401 - Economics - Q.No. 14 ( M - 1 )
Which of the following is considered a market structure?
► Monopoly.
► Perfect competition.
► Oligopoly.
► All of the given are considered market structures.
ECO401 - Economics - Q.No. 15 ( M - 1 )
A natural monopoly is most likely to exist when:
► There are large barriers to entry.
► There are long term patents.
► There are large economies of scale.
► There is government regulation of the industry.
ECO401 - Economics - Q.No. 16 ( M - 1 )
An individual whose attitude towards risk is known as:
► Risk averse.
► Risk loving.
► Risk neutral.
► None of the given options.
ECO401 - Economics - Q.No. 17 ( M - 1 )
In the above figure, the marginal utility of income is:
► Increasing as income increases.
► Constant for all levels of income.
► Diminishes as income increases.
► None of the given options.
ECO401 - Economics - Q.No. 18 ( M - 1 )
Suppose the price of rail tickets decreases, what will happen to the demand for airline travel?
► The demand curve for airline travel shifts left.
► The demand curve for airline travel shifts right.
► The supply curve of airline travel shifts left.
► The supply curve of airline travel shifts right.
ECO401 - Economics - Q.No. 19 ( M - 1 )
What is the assumption of constructing a production possibilities curve?
► Economic resources are underutilized.
► Resources are equally productive in many alternative uses.
► All available resources are employed efficiently.
► Production technology is allowed to vary.
ECO401 - Economics - Q.No. 20 ( M - 1 )
Production possibilities curve will shift downward if there is:
► Immigration of skilled workers into the nation.
► An increase in the size of the working-age population.
► A decrease in the size of the working-age population.
► Increased production of capital goods.
ECO401 - Economics - Q.No. 21 ( M - 1 )
Suppose the total utilities for the first four units of a good consumed are 13, 23, 33, and 43 respectively. What is the marginal utility of the third unit?
► 10.
► 13.
► 20.
► 33.
ECO401 - Economics - Q.No. 22 ( M - 1 )
Which of the following is TRUE about an indifference curve?
► It is a collection of market baskets that are equally desirable to the consumer.
► It is a collection of market baskets that the consumer can buy.
► It is a curve whose elasticity is constant for every price.
► It is a curve which passes through the origin and includes all of the market baskets that the consumer regards as being equivalent.
ECO401 - Economics - Q.No. 23 ( M - 1 )
Which of the following is TRUE for a Giffen good?
► Its marginal utility is zero.
► Its demand curve is perfectly elastic.
► Its substitution effect is positive.
► Its demand curve is positively sloped.
ECO401 - Economics - Q.No. 24 ( M - 1 )
What is TRUE about the relationship between average product (AP) and marginal product (MP)?
► If AP exceeds MP, then AP is falling.
► If AP is at a maximum, then MP is also at maximum.
► If AP = MP, then total product is at a maximum.
► If Total Product is declining, then AP is negative.
ECO401 - Economics - Q.No. 25 ( M - 1 )  vuzs
The total cost (TC) function is given as: TC = 200 + 5Q. What is the fixed cost?
► 5Q.
► 5.
► 5 + (200/Q).
► 200.
ECO401 - Economics - Q.No. 26 ( M - 1 )
Which of the following is NOT included in the perfect information assumption of perfect competition?
► Consumers know their preferences.
► Consumers know their income levels.
► Consumers know the prices available.
► Consumers can anticipate price changes.
ECO401 - Economics - Q.No. 27 ( M - 1 )
What is the reason that monopolist has no supply curve?
► Because the quantity supplied at any particular price depends on the monopolist's demand curve.
► Because the monopolist's marginal cost curve changes considerably over time.
► Because the relationship between price and quantity depends on both marginal cost and average cost.
► Because although there is only a single seller at the current price, it is impossible to know how many sellers would be in the market at higher prices.
ECO401 - Economics - Q.No. 28 ( M - 1 )
What will happen to the isocost line if the price of both goods decreases proportionality?
► It shifts farther away from the origin of the graph.
► It shift inward.
► It shifts outward.
► None of the given options.

ECO401 - Economics - Q.No. 29 ( M - 1 )
The total cost (TC) function is given as TC = 500 + 30Q. What is the average total cost?
► 500
► 30+ (500/Q)
► 30Q2+500Q
► 30
ECO401 - Economics - Q.No. 30 ( M - 1 )
Average total costs are the sum of:
► Fixed costs and marginal costs
► Average variable costs and marginal costs
► Average fixed costs and average variable costs
► Average marginal costs and average variable costs
ECO401 - Economics - Q.No. 31 ( M - 1 )
What will happen if current output is more than the profit-maximizing output?
► The next unit produced will increase profit.
► The next unit produced will decrease revenue more than it increases cost.
► The next unit produced will decrease cost more than it increases revenue.
► The next unit produced will increase revenue without increasing cost.
ECO401 - Economics - Q.No. 32 ( M - 1 )
At the profit-maximizing level of output, the marginal cost is equal to:
► Average revenue
► Total revenue
► Marginal revenue
► None of the given options
ECO401 - Economics - Q.No. 33 ( M - 1 )
An increase in quantity demand is shown by:
► Shifting the demand curve to the left.
► Shifting the demand curve to the right.
► Upward movement along the demand curve.
► Downward movement along the demand curve.
ECO401 - Economics - Q.No. 34 ( M - 1 )
Slope and elasticity of demand have
► A direct relation.
► An inverse relationship.
► No relation between slope and elasticity.
► None of the given options.

ECO401 - Economics - Q.No. 35 ( M - 3 )
What is the key difference between the short run and the long run for the profit-maximizing firm?
ECO401 - Economics - Q.No. 36 ( M - 5 )
Compare the characteristics of perfect competition and monopolistic competition with examples.

ECO401 - Economics - Q.No. 37 ( M - 5 )
What are the two main theories of production regarding time?