ECO401- Economics - Midterm Examination Paper
(Session - 5) - Spring 2010
ExamDate: 5/29/2010 12:00:00 AM
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.
► A central planning authority.
► Consumer preferences.
► The level of profits of firms.
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ECO401 - Economics - Q.No. 2 ( M - 1 )
Ceteris paribus means:
Ceteris paribus means:
► Equal access to public transportation.
► Other things being equal.
► Other things not being equal.
► All things considered.
► Other things being equal.
► Other things not being equal.
► All things considered.
ECO401 - Economics - Q.No. 3 ( M - 1 )
If pen and ink are complements, then an increase in the price of pen will cause:
If pen and ink are complements, then an increase in the price of pen will cause:
► An increase in the price of ink.
► Less ink to be demanded at each price.
► A decrease in the demand for pen.
► A rightward shift in the demand curve for ink.
► Less ink to be demanded at each price.
► A decrease in the demand for pen.
► A rightward shift in the demand curve for ink.
ECO401 - Economics - Q.No. 4 ( M - 1 )
A good for which income and quantity demanded are inversely related is known as:
A good for which income and quantity demanded are inversely related is known as:
► Inferior good.
► Complementary good.
► Normal good.
► None of the given options.
► Complementary good.
► Normal good.
► None of the given options.
ECO401 - Economics - Q.No. 5 ( M - 1 )
Which of the following is calculated as the percentage change in quantity demanded of a given good with respect to the percentage change in the price of another good?
Which of the following is calculated as the percentage change in quantity demanded of a given good with respect to the percentage change in the price of another good?
► Price elasticity of demand.
► Income elasticity of demand.
► Cross price elasticity of demand.
► Price elasticity of supply.
► Income elasticity of demand.
► Cross price elasticity of demand.
► Price elasticity of supply.
ECO401 - Economics - Q.No. 6 ( M - 1 )
In order to calculate the price elasticity of supply, you need to know:
In order to calculate the price elasticity of supply, you need to know:
► Two prices and two quantities supplied.
► The slope of the supply curve.
► The equilibrium price and quantity in the market.
► The quantity supplied at two different prices, all else equal.
► The slope of the supply curve.
► The equilibrium price and quantity in the market.
► The quantity supplied at two different prices, all else equal.
ECO401 - Economics - Q.No. 7 ( M - 1 )
A demand curve is price elastic when:
A demand curve is price elastic when:
► Changes in demand are proportionately greater than changes in price.
► Changes in demand are equal to changes in price.
► None of the given options.
► Changes in demand are proportionately smaller than changes in price.
► Changes in demand are equal to changes in price.
► None of the given options.
► Changes in demand are proportionately smaller than changes in price.
ECO401 - Economics - Q.No. 8 ( M - 1 )
As more of a good is consumed, then total utility typically:
► Increases at a decreasing rate.
► Decreases as long as marginal utility is negative.
► Decreases as long as marginal utility is positive.
► Is negative as long as marginal utility is decreasing.
As more of a good is consumed, then total utility typically:
► Increases at a decreasing rate.
► Decreases as long as marginal utility is negative.
► Decreases as long as marginal utility is positive.
► Is negative as long as marginal utility is decreasing.
ECO401 - Economics - Q.No. 9 ( M - 1 )
Which of the following is the term that economists use to describe how consumers rank different goods and services?
Which of the following is the term that economists use to describe how consumers rank different goods and services?
► Satisfaction index.
► Goodness.
► Utility.
► None of the given options.
► Goodness.
► Utility.
► None of the given options.
ECO401 - Economics - Q.No. 10 ( M - 1 )
If your demand price for one unit of a good is $100 and the market price is $75, your consumer's surplus is:
If your demand price for one unit of a good is $100 and the market price is $75, your consumer's surplus is:
► $25.
► $50.
► $75.
► $100.
► $50.
► $75.
► $100.
ECO401 - Economics - Q.No. 11 ( M - 1 )
Assume leisure is a normal good. If income effect equals substitution effect then a wage rate increase will lead a person to:
Assume leisure is a normal good. If income effect equals substitution effect then a wage rate increase will lead a person to:
► Increase hours of work.
► Decrease hours of work.
► Not change hours of work.
► None of the given options.
► Decrease hours of work.
► Not change hours of work.
► None of the given options.
ECO401 - Economics - Q.No. 12 ( M - 1 )
A normal good can be defined as one which consumers purchase more of as:
A normal good can be defined as one which consumers purchase more of as:
► Prices fall.
► Prices rise.
► Incomes fall.
► Incomes increase.
► Prices rise.
► Incomes fall.
► Incomes increase.
ECO401 - Economics - Q.No. 13 ( M - 1 )
Diminishing marginal returns implies:
Diminishing marginal returns implies:
► Decreasing marginal costs.
► Increasing marginal costs.
► Decreasing average variable costs.
► Decreasing average fixed costs.
► Increasing marginal costs.
► Decreasing average variable costs.
► Decreasing average fixed costs.
ECO401 - Economics - Q.No. 14 ( 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.
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. 15 ( M - 1 )
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.
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.
ECO401 - Economics - Q.No. 16 ( M - 1 )
Producer surplus in a perfectly competitive industry is:
► The difference between profit at the profit-maximizing and profit-minimizing level of output.
► The difference between revenue and total cost.
► The difference between revenue and variable cost.
► The difference between revenue and fixed cost.
Producer surplus in a perfectly competitive industry is:
► The difference between profit at the profit-maximizing and profit-minimizing level of output.
► The difference between revenue and total cost.
► The difference between revenue and variable cost.
► The difference between revenue and fixed cost.
ECO401 - Economics - Q.No. 17 ( M - 1 )
Monopolistically competitive firms have monopoly power because they:
Monopolistically competitive firms have monopoly power because they:
► Are great in number.
► Have freedom of entry.
► Are free to advertise.
► Face downward sloping demand curves.
ECO401 - Economics - Q.No. 18 ( M - 1 )
Which of the following can be thought of as a barrier to entry?
► Scale economies.
► Patents.
► Strategic actions by incumbent firms.
► All of the given options.
► Patents.
► Strategic actions by incumbent firms.
► All of the given options.
ECO401 - Economics - Q.No. 19 ( M - 1 )
The price elasticity of demand for any good must be less than or equal to zero unless:
The price elasticity of demand for any good must be less than or equal to zero unless:
► The good is a necessity.
► The good is a luxury.
► The good is a Giffen good.
► None of the given options.
► The good is a luxury.
► The good is a Giffen good.
► None of the given options.
ECO401 - Economics - Q.No. 20 ( M - 1 )
The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:
► The market price is determined (through regulation) by the government.
► The firm supplies a different good than its rivals.
► The firm's output is a small fraction of the entire industry's output.
► The short run market price is determined solely by the firm's technology.
The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:
► The market price is determined (through regulation) by the government.
► The firm supplies a different good than its rivals.
► The firm's output is a small fraction of the entire industry's output.
► The short run market price is determined solely by the firm's technology.
ECO401 - Economics - Q.No. 21 ( M - 1 )
Because of unusual warm weather, the supply of strawberries has substantially increased. This statement indicates that:
Because of unusual warm weather, the supply of strawberries has substantially increased. This statement indicates that:
► The demand for strawberries will necessarily rise.
► The equilibrium quantity of strawberries will fall.
► The quantity of strawberries that will be available at various prices has increased.
► The price of strawberries will fall.
► The equilibrium quantity of strawberries will fall.
► The quantity of strawberries that will be available at various prices has increased.
► The price of strawberries will fall.
ECO401 - Economics - Q.No. 22 ( M - 1 )
Under monopoly, when the demand curve is downward sloping, marginal revenue is:
Under monopoly, when the demand curve is downward sloping, marginal revenue is:
► Equal to price.
► Equal to average cost.
► Less than price.
► More than price.
► Equal to average cost.
► Less than price.
► More than price.
ECO401 - Economics - Q.No. 23 ( 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.
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. 24 ( M - 1 )
Which of the following will happen if two indifference curves cross each other?
► The assumption of a diminishing marginal rate of substitution will be violated.
► The assumption of transitivity will be violated.
► The assumption of completeness will be violated.
► Consumers will minimize their satisfaction.
Which of the following will happen if two indifference curves cross each other?
► The assumption of a diminishing marginal rate of substitution will be violated.
► The assumption of transitivity will be violated.
► The assumption of completeness will be violated.
► Consumers will minimize their satisfaction.
ECO401 - Economics - Q.No. 25 ( M - 1 )
Which of the following determines the largest amount of output that a firm can produce with a given combination of inputs?
► Marginal product of labor.
► Gains from specialization.
► Cost function.
► Production function.
Which of the following determines the largest amount of output that a firm can produce with a given combination of inputs?
► Marginal product of labor.
► Gains from specialization.
► Cost function.
► Production function.
ECO401 - Economics - Q.No. 26 ( M - 1 )
Which of the following is TRUE about an isocost line?
► It shows the cost of inputs needed to produce along an isoquant.
► It shows the cost of inputs needed to produce along an expansion path.
► It shows the input combinations that can be purchased with a given outlay of funds.
► It shows the output combinations that can be produced with a given outlay of funds.
Which of the following is TRUE about an isocost line?
► It shows the cost of inputs needed to produce along an isoquant.
► It shows the cost of inputs needed to produce along an expansion path.
► It shows the input combinations that can be purchased with a given outlay of funds.
► It shows the output combinations that can be produced with a given outlay of funds.
ECO401 - Economics - Q.No. 27 ( M - 1 )
Which of the following is TRUE for the total cost of producing a given level of output?
► It is maximized when a corner solution exists.
► It is minimized when the ratio of marginal product to input price is equal for all inputs.
► It is minimized when the marginal products of all inputs are equal.
► It is minimized when marginal product multiplied by input price is equal for all inputs.
Which of the following is TRUE for the total cost of producing a given level of output?
► It is maximized when a corner solution exists.
► It is minimized when the ratio of marginal product to input price is equal for all inputs.
► It is minimized when the marginal products of all inputs are equal.
► It is minimized when marginal product multiplied by input price is equal for all inputs.
ECO401 - Economics - Q.No. 28 ( M - 1 )
In which of the following situations, a monopoly occurs?
► When each firm produces a product that is slightly different from the other firms.
► When one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
► When there are many firms producing the same product.
► In all of the given situations.
In which of the following situations, a monopoly occurs?
► When each firm produces a product that is slightly different from the other firms.
► When one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
► When there are many firms producing the same product.
► In all of the given situations.
ECO401 - Economics - Q.No. 29 ( M - 1 )
The shape of isoquant which indicates capital and labor cannot be substituted for each other in production is
► Concave.
► Convex.
► L-shaped.
► None of the given options.
The shape of isoquant which indicates capital and labor cannot be substituted for each other in production is
► Concave.
► Convex.
► L-shaped.
► None of the given options.
ECO401 - Economics - Q.No. 30 ( 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
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. 31 ( M - 1 )
Monopolistic competition is also characterized by a large number of buyers and sellers and absence of
► Competition.
► Entry barriers.
► Price discrimination.
► All of the given options.
Monopolistic competition is also characterized by a large number of buyers and sellers and absence of
► Competition.
► Entry barriers.
► Price discrimination.
► All of the given options.
ECO401 - Economics - Q.No. 32 ( 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.
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. 33 ( M - 1 )
Since bread and butter are complements. When the price of bread goes down, the demand curve for butter:
► Shifts to the left.
► Shifts to the right.
► Remains constant.
► Shifts to the right initially and then returns to its original position.
Since bread and butter are complements. When the price of bread goes down, the demand curve for butter:
► Shifts to the left.
► Shifts to the right.
► Remains constant.
► Shifts to the right initially and then returns to its original position.
ECO401 - Economics - Q.No. 34 ( M - 1 )
Slope and elasticity of demand have
Slope and elasticity of demand have
► A direct relation.
► An inverse relationship.
► No relation between slope and elasticity.
► None of the given options.
► An inverse relationship.
► No relation between slope and elasticity.
► None of the given options.
ECO401 - Economics - Q.No. 35 ( M - 3 )
Why economists believe that when firms earn zero accounting profits, they actually earn normal economic profits?
ECO401 - Economics - Q.No. 36 ( M - 5 )
What are the two main theories of production regarding time?
What are the two main theories of production regarding time?
