ECO401 - Economics - MIDTERM EXAMINATION - Paper 2010
Spring 2010 (Session - 2)by Mehreen Humayun
Time: 60 min
Marks = M = 47
ECO401 - Economics - Q.No. 1 ( M - 1 )
Which of the following is a positive statement?
When the price of a good goes up, consumers buy less of it.
When the price of a good goes up, firms produce more of it.
When the Federal government sells bonds, interest rates rise and private investment is reduced.
All of the given options.
ECO401 - Economics - Q.No. 2 ( M - 1 )
Our economy is characterized by:
Unlimited wants and needs.
Unlimited material resources.
No energy resources.
Abundant productive labor.
ECO401 - Economics - Q.No. 3 ( M - 1 )
The concave shape of the production possibilities curve for two goods X and Y illustrates:
Increasing opportunity cost for both goods.
Increasing opportunity cost for good X but not for good Y.
Increasing opportunity cost for good Y but not for good X.
Constant opportunity cost for both goods.
ECO401 - Economics - Q.No. 4 ( M - 1 )
If the equilibrium price of bread is $2 and the government imposes a $1.50 price ceiling on the price of bread:
The demand for bread will decrease because suppliers will reduce their supply.
A surplus of bread will emerge.
More bread will be produced to meet the increased demand.
There will be a shortage of bread.
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?
Price elasticity of demand.
Income elasticity of demand.
Cross price elasticity of demand.
Price elasticity of supply.
ECO401 - Economics - Q.No. 6 ( M - 1 )
Cross-price elasticity measures whether:
Goods are normal or inferior.
Two goods are substitutes or complements.
Demand is elastic or inelastic.
Supply is steeper than demand or vice versa.
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 )
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.
ECO401 - Economics - Q.No. 9 ( M - 1 )
Assume Leisure is a normal good. If income effect exceeds substitution effect then a wage decrease will lead a person to:
Decrease hours of work.
Increase hours of work.
Not change anything.
All of the given options. vuzs
ECO401 - Economics - Q.No. 10 ( M - 1 )
A normal good can be defined as one which consumers purchase more of as:
Prices fall.
Prices rise.
Incomes fall.
Incomes increase.
ECO401 - Economics - Q.No. 11 ( M - 1 )
Total costs are the sum of:
Marginal costs and variable costs.
Fixed costs and variable costs.
Fixed costs and marginal costs.
Average variable costs and marginal costs.
ECO401 - Economics - Q.No. 12 ( M - 1 )
As compared to existing firms, a new firm entering in monopolist market has:
High costs.
Low costs.
Equal costs.
None of the given options.
ECO401 - Economics - Q.No. 13 ( M - 1 )
Cartels are likely to fail when:
The members adhere to their output quotas.
The non-cartel members increase output.
The members charge identical prices.
None of the given options.
ECO401 - Economics - Q.No. 14 ( M - 1 )
If a sales tax on beer leads to reduced tax revenue, this means: www.vuzs.net
Elasticity of demand is < 1.
Elasticity of demand is > 1.
Demand is upward-sloping.
Demand is perfectly inelastic.
ECO401 - Economics - Q.No. 15 ( M - 1 )
Insurance companies operate under the principle of:
Law of large numbers.
Law of small numbers.
Law of zero numbers.
All of the given options.
ECO401 - Economics - Q.No. 16 ( M - 1 )
The correlation between an asset's real rate of return and its risk (as measured by its standard deviation) is usually:
Positive.
Strictly linear.
Flat.
Negative.
ECO401 - Economics - Q.No. 17 ( 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. 18 ( M - 1 )
The principle economic difference between a competitive and a non-competitive market is:
The number of firms in the market.
The extent to which any firm can influence the price of the product.
The size of the firms in the market.
The annual sales made by the largest firms in the market.
ECO401 - Economics - Q.No. 19 ( M - 1 )
Which of the following is NOT a factor of production?
Labour.
Land.
Capital.
Investment.
ECO401 - Economics - Q.No. 20 ( 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. 21 ( 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. 22 ( 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.
ECO401 - Economics - Q.No. 23 ( 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. 24 ( M - 1 )
Which of the following is TRUE about L-shaped isoquant?
It indicates that the firm could switch from one output to another costlessly. www.vuzs.net
It indicates that the firm could not switch from one output to another.
It indicates that capital and labor cannot be substituted for each other in production.
It is impossible.
ECO401 - Economics - Q.No. 25 ( M - 1 )
In which of the following conditions, a firm will never operate?
At the minimum of its average total cost curve.
At the minimum of its average variable cost curve.
On the downward-sloping portion of its average total cost curve.
On the downward-sloping portion of its average variable cost curve.
ECO401 - Economics - Q.No. 26 ( M - 1 )
Which of the following is TRUE for third-degree price discrimination?
Charging different prices to different groups based upon differences in elasticity of demand.
Charging each consumer the same two part tariff.
The use of increasing block rate pricing.
Charging lower prices the greater the quantity purchased.
ECO401 - Economics - Q.No. 27 ( M - 1 )
Which of the following is the basic difference between oligopoly and monopolistic competition?
Products are differentiated in oligopoly.
There are no barriers to entry in oligopoly.
There are barriers to entry in oligopoly.
An oligopoly includes downward sloping demand curves facing the firm.
ECO401 - Economics - Q.No. 28 ( M - 1 )
All the factors of production become variable in:
Law of increasing return.
Long run.
Law of decreasing cost.
Short run.
ECO401 - Economics - Q.No. 29 ( M - 1 )
Suppose there are two goods A and B. What will happen to the budget line if prices of both goods decrease by the same percentage?
It will shift parallel to the left.
It will shift parallel to the right.
It will pivot about the x axis.
It will pivot about the y axis.
ECO401 - Economics - Q.No. 30 ( 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. 31 ( M - 1 )
Which of the following is not included in the key ingredients of any market structure?
Number of firms in the market/industry
Extent of barriers to entry
Perfect knowledge
Degree of control over price
ECO401 - Economics - Q.No. 32 ( M - 1 )
In price discrimination price elasticity of demand for different customers should be
Same.
Unit elastic.
Infinite elastic.
Different.
ECO401 - Economics - Q.No. 33 ( M - 1 )
If the current market price is set above the market clearing level then which of the following will happen:
There will be downward pressure on the current market price.
There will be upward pressure on the current market price.
There will be lower production during the next time period.
There will be a surplus to accumulate.
ECO401 - Economics - Q.No. 34 ( M - 1 )
If the cross price elasticity of demand between two goods A and B is negative; it means that goods are
Independent.
Inferior.
Complements.
Substitutes.
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 )
A. Differentiate between isocost line and budget line
B. What is the slope of isocost line and budget line?
(M - 3+2)
ECO401 - Economics - Q.No. 37 ( M - 5 )
A. What are the effects of price discrimination on the profit and loss of a firm?
B. There are certain conditions for price discrimination to hold. Discuss those conditions.
(Marks - 2+3)
ECO401 - Economics - Q.No. 37 ( M - 5 )
A. What are the effects of price discrimination on the profit and loss of a firm?
B. There are certain conditions for price discrimination to hold. Discuss those conditions.
(Marks - 2+3)
