ECO401 Final Term Paper 2010

FINALTERM  EXAMINATION

Spring 2010

ECO401- Economics (Session - 3)

Time: 90 min

Marks: 69

     

Question No: 1    ( Marks: 1 )    - Please choose one

 Land is best described as:

       ► Produced factors of production.

       ► "Organizational" resources.

       ► Physical and mental abilities of people.

       ► "Naturally" occurring resources.

   

Question No: 2    ( Marks: 1 )    - Please choose one

 The price elasticity of demand measures the responsiveness of quantity demanded to:

       ► Quantity demanded.

       ► Quantity supplied.

       ► Price.

       ► Output.

   

Question No: 3    ( Marks: 1 )    - Please choose one

 Suppose your local public golf course increases the greens fees for using the course. If the demand for golf is relatively inelastic, you would expect:

       ► A decrease in total revenue received by the course.

       ► An increase in total revenue received by the course.

       ► No change in total revenue received by the course.

       ► An increase in the amount of golf played on the course.

   

Question No: 4    ( Marks: 1 )    - Please choose one

  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.

   

Question No: 5    ( Marks: 1 )    - Please choose one

 At any given point on an indifference curve, the absolute value of the slope equals:

       ► Unity--otherwise there would be no indifference.

       ► The marginal rate of substitution.

       ► The consumer’s marginal utility.

       ► None of the given options.

   

Question No: 6    ( Marks: 1 )    - Please choose one

 Fixed costs are fixed with respect to changes in:

       ► Output.

       ► Capital expenditures.

       ► Wages.

       ► Time.

   

Question No: 7    ( 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: 8    ( Marks: 1 )    - Please choose one

 When a firm charges each customer the maximum price that the customer is willing to pay, the firm:

       ► Engages in a discrete pricing strategy.

       ► Charges the average reservation price.

       ► Engages in second-degree price discrimination.

       ► Engages in first-degree price discrimination.

   

Question No: 9    ( Marks: 1 )    - Please choose one

 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.

       ► The demand curve is tangent to average cost curve.

       ► The marginal cost curve is tangent to average cost curve.

       ► The demand curve is tangent to marginal revenue curve.

   

Question No: 10    ( Marks: 1 )    - Please choose one

 Which one of the following characteristics is common in monopolistic competition and oligopoly?

       ► Free entry and exit from the industry.

       ► Strategic behavior.

       ► Standardized products.

       ► Advertising.

   

Question No: 11    ( Marks: 1 )    - Please choose one

 Value of Marginal Product of Labor (VMP_L) is equal to:

       ► MPP_L/ P_i.

       ► MPP_L.

       ► P_i.

       ► MPP_L x P_i.

   

Question No: 12    ( Marks: 1 )    - Please choose one

 According to classical economics, the economy was unlikely to experience:

       ► Full employment.

       ► Flexible wages and prices.

       ► Equality between saving and investment.

       ► High rates of unemployment.

   

Question No: 13    ( Marks: 1 )    - Please choose one

 Say's Law is a proposition underlying classical economics stating that:

       ► Supply creates its own demand.

       ► Leakages are greater than injections.

       ► Unemployment is a common condition.

       ► Consumption expenditures are a function of disposable income.

    

Question No: 14    ( Marks: 1 )    - Please choose one

 An assumption of classical economics is:

       ► Prices and wages are inflexible.

       ► Self-correction takes a long time.

       ► Supply creates its own demand.

       ► Investment and saving are seldom equal.

   

Question No: 15    ( Marks: 1 )    - Please choose one

 Which of the following will result if there is a decrease in aggregate demand?

       ► Expansion; inflation.

       ► Recession; deflation.

       ► Expansion; deflation.

       ► Recession; inflation.

   

Question No: 16    ( Marks: 1 )    - Please choose one

 Real Gross Domestic Product (GDP) equals:   

       ► Nominal GDP minus net exports.

       ► Nominal GDP divided by the GDP deflator.

       ► Nominal GDP multiplied by the GDP deflator.

       ► GDP minus depreciation.

   

Question No: 17    ( Marks: 1 )    - Please choose one

 Which of the following statements is TRUE?

       ► Net National Product = Gross National Product – Depreciation.

       ► Net National Product  = National Income.

       ► Net National Product  = Disposable Personal Income.

       ► Net National Product  = Personal Income.

   

Question No: 18    ( Marks: 1 )    - Please choose one

 Which of the following shows the Fisher equation of exchange?

       ► MT=PV.

       ► VT=PM.

       ► MV=PQ.

       ► MY=VP.

   

Question No: 19    ( Marks: 1 )    - Please choose one

 In the Keynesian cross model, the 45-degree line has a slope of:

       ► 45.

       ► Infinity.

       ► 1.

       ► 0.

   

Question No: 20    ( Marks: 1 )    - Please choose one

 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.

   

Question No: 21    ( Marks: 1 )    - Please choose one

 An individual whose attitude towards risk is known as:

       ► Risk averse.

       ► Risk loving.

       ► Risk neutral.

       ► None of the given options.

   

Question No: 22    ( Marks: 1 )    - Please choose one

 Which of the following best describes the ''Capital widening''?

       ► More capital per unit of labour.

       ► More capital and more labour but with the same amount of capital per unit of labour.

       ► Increasing the usage of existing capital.

       ► Importing capital from the developed world.

   

Question No: 23    ( Marks: 1 )    - Please choose one

 Suppose there are two producers and two products. Which of the following is not TRUE in this situation?

       ► A producer has an absolute advantage on one product.

       ► A producer has the comparative advantage on both products.

       ► A producer has the comparative advantage on one product.

       ► A producer has an absolute advantage on both products.

   

Question No: 24    ( Marks: 1 )    - Please choose one

 Public education creates:

       ► Asymmetric information.

       ► External costs.

       ► Internal costs.

       ► External benefits.

   

Question No: 25    ( Marks: 1 )    - Please choose one

 A graph that depicts the relationship between the total quantity of goods and services demanded and the price level is known as:

       ► Aggregate demand curve.

       ► Average price level.

       ► Circular flow model.

       ► GDP curve.

   

Question No: 26    ( Marks: 1 )    - Please choose one

 

Refer to the above figure, if the real GDP is $7,000 billion and the implicit price deflator is 1.16, what is the value of nominal GDP?

       ► $6,034 billion.

       ► $8,120 billion.

       ► $9,120 billion.

       ► Cannot be determined from the given information.

   

Question No: 27    ( Marks: 1 )    - Please choose one

 Let L equal the size of the labor force, E the number of employed workers, and U the number of unemployed workers. The unemployment rate is equal to:

       ► (L + E)/L.

       ► U/L.

       ► 1 + (E/L).

       ► All of the given options.

   

Question No: 28    ( Marks: 1 )    - Please choose one

 The natural rate of unemployment is likely to fall if:

       ► Unemployment benefits increase.

       ► Income tax increases.

       ► More training is available for the unemployed.

       ► Geographical immobility increases.

   

Question No: 29    ( Marks: 1 )    - Please choose one

 Which of the following is NOT a determinant of net exports?

       ► Domestic and foreign incomes.

       ► Relative price levels.

       ► Domestic and foreign trade policies.

       ► Producers’ expectations about future prices.

   

Question No: 30    ( Marks: 1 )    - Please choose one

 Which of the following can happen in a boom period?

       ► Unemployment is likely to fall.

       ► Prices are likely to fall.

       ► Demand is likely to fall.

       ► Imports are likely to grow.

   

Question No: 31    ( Marks: 1 )    - Please choose one

 The taxes on alcohol, tobacco, and gasoline are categorized as:

       ► Sales tax.

       ► Excise tax.

       ► Corporate income tax.

       ► Personal income tax.

   

Question No: 32    ( Marks: 1 )    - Please choose one

 The item which serves as a medium of exchange is known as:

       ► Gold.

       ► Capital.

       ► Silver.

       ► Money.

   

Question No: 33    ( Marks: 1 )    - Please choose one

 A country has a comparative advantage:

       ► If it can produce a good at a higher opportunity cost than other nations.

       ► If it can produce a good at a lower opportunity cost than other nations.

       ► If it can produce a good by using less resources than other nations.

       ► If it can produce a good that lies outside its production possibilities curve.

   

Question No: 34    ( Marks: 1 )    - Please choose one

 A tariff is defined as:

       ► A restriction on exports.

       ► A tax placed on an imported product.

       ► A limit on the amount of a good or service that can be exported.

       ► A limit on the amount of a good or service that can be imported.

   

Question No: 35    ( Marks: 1 )    - Please choose one

 Countries that are not among the high income nations of the world are categorized as:

       ► Developed countries.

       ► Progressed countries.

       ► Developing countries.

       ► High income countries.

   

Question No: 36    ( Marks: 1 )    - Please choose one

 Which of the following is (are) the characteristic(s) of high income countries as compared to low income countries?

I.  Lower rates of population growth.

II.Greater income inequality.

III.               A large proportion of the labor force in agriculture.

IV.              Higher rates of investment.

       ► I only.

       ► I and II.

       ► II and IV.

       ► I and IV.

   

Question No: 37    ( Marks: 1 )    - Please choose one

 In which of the following conditions, a welfare loss occurs in monopoly?

       ► Where the price is greater than the marginal cost.

       ► Where the price is greater than the marginal benefit.

       ► Where the price is greater than the average revenue.

       ► Where the price is greater than the marginal revenue.

   

Question No: 38    ( Marks: 1 )    - Please choose one

 If average physical product (APP) is decreasing then which of the following must be true?

       ► Marginal physical product is more than the average physical product.

       ► Marginal physical product is less than the average physical product.

       ► Marginal physical product is decreasing.

       ► Marginal physical product is increasing.

   

Question No: 39    ( Marks: 1 )    - Please choose one

 When different prices are charged to customers who purchase different quantities, this is an example of

       ► Second-degree price discrimination.

       ► First-degree price discrimination.

       ► Monopoly.

       ► Perfect competition.

   

Question No: 40    ( Marks: 1 )    - Please choose one

 Which of the following may cause a decrease in national income?

       ► Increase imports.

       ► Decrease unemployment.

       ► Decreasing exports.

       ► None of the given options.

   

Question No: 41    ( Marks: 1 )    - Please choose one

 The relationship between interest rate and consumption is:

       ► Positive.

       ► Negative.

       ► Zero.

       ► Indeterminate.

   

Question No: 42    ( Marks: 1 )    - Please choose one

 The principle which states that a change in income causes a magnified change in investment is termed as the:

       ► None of the given.

       ► Paradox of thrift.

       ► Multiplier effect.

       ► Accelerator effect.

   

Question No: 43    ( Marks: 1 )    - Please choose one

 Hysteresis refers to the permanent effects of a:

       ► Temporary change.

       ► Structural change.

       ► Cyclical change.

       ► Political change.

   

Question No: 44    ( Marks: 1 )    - Please choose one

 Factor income from abroad like worker remittances, dividends and interest has positive impact on:

       ► Current account balance.

       ► Capital account balance.

       ► Trade balance.

       ► Unemployment.

   

Question No: 45    ( Marks: 1 )    - Please choose one

 The growth rate of any country’s real GDP can be:

       ► Negative or positive.

       ► positive or zero.

       ► Negative or zero.

       ► Negative or positive or zero.

   

Question No: 46    ( Marks: 1 )    - Please choose one

 Endogenous growth theory is also known as:

       ► Neo-classical growth theory.

       ► New growth theory.

       ► Classical growth model.

       ► Keynesian growth model.

   

Question No: 47    ( Marks: 1 )    - Please choose one

 Which of the following is not the World Bank’s structural reform policy?

       ► FDI liberalization.

       ► Trade liberalization.

       ► Financial liberalization.

       ► Same monetary policy for all countries.

   

Question No: 48    ( Marks: 1 )    - Please choose one

 The common characteristics of a developing country is:

       ► High growth rate.

       ► High literacy rate.

       ► Skilled labor.

       ► High unemployment rate.

   

Question No: 49    ( Marks: 3 )

 At what point, the equilibrium occurs in the foreign exchange market?

   

Question No: 50    ( Marks: 3 )

 What are the reasons that poor countries remained poor?

   

Question No: 51    ( Marks: 5 )

 If the government increase it’s spending e.g. increases the wages of the government servant, how it will affect on consumption, production and hiring of new employees?

   

Question No: 52    ( Marks: 5 )

 Explain the difference between appreciation and depreciation of currency.

   

Question No: 53    ( Marks: 5 )

 Differentiate among M₀, M₁ and M₂ components of money supply.