ECO401- Economics MIDTERM Unsolved Papers

[Sadia0786]

MIDTERM  EXAMINATION
Spring 2009
ECO401- Economics (Session - 2)
Time: 60 min

     
Question No: 1    ( 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: 2    ( Marks: 1 )    - Please choose one
  The concept of a risk premium applies to a person that is:

       ? All of the given options.
       ? Risk averse.
       ? Risk neutral.
       ? Risk loving.
   
Question No: 3    ( Marks: 1 )    - Please choose one
  A normative economic statement:

       ? Is a statement of fact.
       ? Is a hypothesis used to test economic theory.
       ? Is a statement of what ought to be, not what is.
       ? Is a statement of what will occur if certain assumptions are true.
   
Question No: 4    ( Marks: 1 )    - Please choose one
  Economics is different from other social sciences because it is primarily concerned with the study of ________, it is similar to other social sciences because they are all concerned with the study of ________.


       ? Limited resources, market behavior.
       ? Scarcity, human behavior.
       ? Social behavior, limited resources.
       ? Biological behavior, scarcity.
   
Question No: 5    ( Marks: 1 )    - Please choose one
  Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as:
       ? P = MR.
       ? P = AVC.
       ? AR = MR.
       ? P = MC.
   
Question No: 6    ( Marks: 1 )    - 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.
       ? The price is greater than the average revenue.
       ? The price is greater than the marginal revenue.
   
Question No: 7    ( Marks: 1 )    - Please choose one
  The "perfect information" assumption of perfect competition includes all of the following EXCEPT:
       ? Consumers know their preferences.
       ? Consumers know their income levels.
       ? Consumers know the prices available.
       ? Consumers can anticipate price changes.
   
Question No: 8    ( Marks: 1 )    - Please choose one
   
Figure
In figure given above, 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.
   
Question No: 9    ( Marks: 1 )    - Please choose one
  A consultant for Mattel (the producer of Barbie) reports that their long run average cost curve is decreasing. In other words, he is saying that:


       ? The firm has increasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
       ? The firm has decreasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
       ? The firm has increasing returns to scale but the law of diminishing marginal productivity may still apply to this firm.
       ? The firm has decreasing returns to scale but nonetheless the law of diminishing marginal productivity may still apply to this firm.
   
Question No: 10    ( Marks: 1 )    - Please choose one
  If the cross price elasticity of demand between two goods X and Y is positive; it means that goods are:
 

       ? Independent.
       ? Complements.
       ? Substitutes.
       ? Inferior.
   
Question No: 11    ( Marks: 1 )    - Please choose one
  A demand schedule is best described as:

       ? A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
       ? A graphical representation of the law of demand.
       ? A systematic listing of all the variables that might conceivably bring about a change in demand.
       ? A symbolic representation of the law of demand: P,Q and Q, P.
   
Question No: 12    ( Marks: 1 )    - Please choose one
  Which of the following best expresses the law of demand?

       ? A higher price reduces demand.
       ? A lower price reduces demand.
       ? A higher price reduces quantity demanded.
       ? A lower price shifts the demand curve to the right.
   
Question No: 13    ( Marks: 1 )    - 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.
       ? A reduction in discrimination.
       ? An increase in the production of consumer goods.
   
Question No: 14    ( Marks: 1 )    - Please choose one
  The primary use of the kinked-demand curve is to explain price rigidity in:

       ? Oligopoly.
       ? Monopoly.
       ? Perfect competition.
       ? Monopolistic competition.
   
Question No: 15    ( Marks: 1 )    - Please choose one
  A monopolistically competitive firm in short run equilibrium:

       ? Will make negative profit (lose money).
       ? Will make zero profit (break-even).
       ? Will make positive profit.
       ? Any of the given are possible.
   
Question No: 16    ( Marks: 1 )    - Please choose one
  A market with few entry barriers and with many firms that sell differentiated products is:

       ? Purely competitive.   
       ? A monopoly.
       ? Monopolistically competitive.
       ? Oligopolistic.
   
Question No: 17    ( Marks: 1 )    - Please choose one
  The maximum price that a consumer is willing to pay for a good is called:

       ? The reservation price.
       ? The market price.
       ? The first-degree price.
       ? The block price.
   
Question No: 18    ( Marks: 1 )    - Please choose one
  Third-degree price discrimination involves:

       ? Charging each consumer the same two part tariff.
       ? Charging lower prices the greater the quantity purchased.
       ? The use of increasing block rate pricing.
       ? Charging different prices to different groups based upon differences in elasticity of demand.
   
Question No: 19    ( Marks: 1 )    - Please choose one
  A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults.  The tennis pro is practicing:

       ? First-degree price discrimination.
       ? Second-degree price discrimination.
       ? Third-degree price discrimination.
       ? All of the given options.
   
Question No: 20    ( Marks: 1 )    - Please choose one
  An electric power company uses block pricing for electricity sales.  Block pricing is an example of:

       ? First-degree price discrimination.
       ? Second-degree price discrimination.
       ? Third-degree price discrimination.
       ? Block pricing is not a type of price discrimination.
   
Question No: 21    ( Marks: 1 )    - Please choose one
  A firm never operates:

       ? 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.
   
Question No: 22    ( Marks: 1 )    - Please choose one
  Marginal profit is equal to:
       ? Marginal revenue minus marginal cost.
       ? Marginal revenue plus marginal cost.
       ? Marginal cost minus marginal revenue.
       ? Marginal revenue times marginal cost.
   
Question No: 23    ( Marks: 1 )    - 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.
       ? Average revenue is less than average cost.
       ? Marginal revenue is less than marginal cost.
       ? Marginal revenue is greater than marginal cost.
   
Question No: 24    ( Marks: 1 )    - Please choose one
  At the profit-maximizing level of output, what is TRUE of the total revenue (TR) and total cost (TC) curves?
       ? They must intersect with TC cutting TR from below.
       ? They must intersect with TC cutting TR from above.
       ? They must be tangent to each other.
       ? They must have the same slope.
   
Question No: 25    ( 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: 26    ( Marks: 1 )    - Please choose one
  In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive but can be resold and are therefore an example of:
       ? A fixed cost.
       ? A variable cost.
       ? An implicit cost.
       ? An opportunity cost.
   
Question No: 27    ( Marks: 1 )    - Please choose one
  Costs determine all of the following EXCEPT:

       ? Demand for a product.
       ? Firm's behaviour.
       ? How firms should expand?
       ? Firm's profitability.
   
Question No: 28    ( Marks: 1 )    - 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 substitution.
       ? Marginal rate of factor substitution.
       ? Marginal rate of production.
   
Question No: 29    ( Marks: 1 )    - 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, a firm’s production function is said to exhibit:

       ? Decreasing returns to scale.
       ? Constant returns to scale.
       ? Increasing returns to scale.
       ? Diseconomies of scale.
   
Question No: 30    ( 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: 31    ( 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: 32    ( Marks: 1 )    - Please choose one
  According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:
       ? Vertical.
       ? U-shaped.
       ? Upward-sloping.
       ? Downward-sloping.
   
Question No: 33    ( Marks: 1 )    - Please choose one
  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.
   
Question No: 34    ( Marks: 1 )    - Please choose one
  Which of the following will be TRUE if demand is inelastic?
       ? The coefficient of elasticity is greater than one.
       ? The percentage change in quantity demanded is same as the percentage change in the price.
       ? An increase in price will increase total revenue.
       ? None of the given options.
   
Question No: 35    ( 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: 36    ( Marks: 1 )    - Please choose one
  Aslam decides to stay at home and study for his exam rather than going out with his friends to a movie. His dilemma is an example of:
 

       ? The economic perspective.
       ? Marginal analysis.
       ? Allocative efficiency.
       ? Opportunity cost.
   
Question No: 37    ( 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.
       ? The economy will move from a point inside to a point closer to its production possibilities curve.
   
Question No: 38    ( 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: 39    ( Marks: 1 )    - Please choose one
  In pure capitalism, the role of government is best described as:

       ? Significant.
       ? Extensive.
       ? Nonexistent.
       ? Limited.
   
Question No: 40    ( Marks: 1 )    - Please choose one
  Microeconomics is the branch of economics that deals with which of the following topics?

       ? The behavior of individual consumers.
       ? Unemployment and interest rates.
       ? The behavior of individual firms and investors.
       ? The behavior of individual consumers and behavior of individual firms and investors.
   
Question No: 41    ( Marks: 10 )
A.     Define “Law of supply” and explain it with a schedule and diagram.
B.   What are the factors which cause the shift in market supply curve?
(Marks: 6+4)

[Sadia0786]

MIDTERM  EXAMINATION
Spring 2009
ECO401- Economics 
Time: 60 min

     
Question No: 1    ( 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: 2    ( Marks: 1 )    - Please choose one
  The concept of a risk premium applies to a person that is:

       ? All of the given options.
       ? Risk averse.
       ? Risk neutral.
       ? Risk loving.
   
Question No: 3    ( Marks: 1 )    - Please choose one
  A normative economic statement:

       ? Is a statement of fact.
       ? Is a hypothesis used to test economic theory.
       ? Is a statement of what ought to be, not what is.
       ? Is a statement of what will occur if certain assumptions are true.
   
Question No: 4    ( Marks: 1 )    - Please choose one
  Economics is different from other social sciences because it is primarily concerned with the study of ________, it is similar to other social sciences because they are all concerned with the study of ________.


       ? Limited resources, market behavior.
       ? Scarcity, human behavior.
       ? Social behavior, limited resources.
       ? Biological behavior, scarcity.
   
Question No: 5    ( Marks: 1 )    - Please choose one
  Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as:
       ? P = MR.
       ? P = AVC.
       ? AR = MR.
       ? P = MC.
   
Question No: 6    ( Marks: 1 )    - 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.
       ? The price is greater than the average revenue.
       ? The price is greater than the marginal revenue.
   
Question No: 7    ( Marks: 1 )    - Please choose one
  The "perfect information" assumption of perfect competition includes all of the following EXCEPT:
       ? Consumers know their preferences.
       ? Consumers know their income levels.
       ? Consumers know the prices available.
       ? Consumers can anticipate price changes.
   
Question No: 8    ( Marks: 1 )    - Please choose one
   
Figure
In figure given above, 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.
   
Question No: 9    ( Marks: 1 )    - Please choose one
  A consultant for Mattel (the producer of Barbie) reports that their long run average cost curve is decreasing. In other words, he is saying that:


       ? The firm has increasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
       ? The firm has decreasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
       ? The firm has increasing returns to scale but the law of diminishing marginal productivity may still apply to this firm.
       ? The firm has decreasing returns to scale but nonetheless the law of diminishing marginal productivity may still apply to this firm.
   
Question No: 10    ( Marks: 1 )    - Please choose one
  If the cross price elasticity of demand between two goods X and Y is positive; it means that goods are:
 

       ? Independent.
       ? Complements.
       ? Substitutes.
       ? Inferior.
   
Question No: 11    ( Marks: 1 )    - Please choose one
  A demand schedule is best described as:

       ? A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
       ? A graphical representation of the law of demand.
       ? A systematic listing of all the variables that might conceivably bring about a change in demand.
       ? A symbolic representation of the law of demand: P,Q and Q, P.
   
Question No: 12    ( Marks: 1 )    - Please choose one
  Which of the following best expresses the law of demand?

       ? A higher price reduces demand.
       ? A lower price reduces demand.
       ? A higher price reduces quantity demanded.
       ? A lower price shifts the demand curve to the right.
   
Question No: 13    ( Marks: 1 )    - 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.
       ? A reduction in discrimination.
       ? An increase in the production of consumer goods.
   
Question No: 14    ( Marks: 1 )    - Please choose one
  The primary use of the kinked-demand curve is to explain price rigidity in:

       ? Oligopoly.
       ? Monopoly.
       ? Perfect competition.
       ? Monopolistic competition.
   
Question No: 15    ( Marks: 1 )    - Please choose one
  A monopolistically competitive firm in short run equilibrium:

       ? Will make negative profit (lose money).
       ? Will make zero profit (break-even).
       ? Will make positive profit.
       ? Any of the given are possible.
   
Question No: 16    ( Marks: 1 )    - Please choose one
  A market with few entry barriers and with many firms that sell differentiated products is:

       ? Purely competitive.
       ? A monopoly.
       ? Monopolistically competitive.
       ? Oligopolistic.
   
Question No: 17    ( Marks: 1 )    - Please choose one
  The maximum price that a consumer is willing to pay for a good is called:

       ? The reservation price.
       ? The market price.
       ? The first-degree price.
       ? The block price.
   
Question No: 18    ( Marks: 1 )    - Please choose one
  Third-degree price discrimination involves:

       ? Charging each consumer the same two part tariff.
       ? Charging lower prices the greater the quantity purchased.
       ? The use of increasing block rate pricing.
       ? Charging different prices to different groups based upon differences in elasticity of demand.
   
Question No: 19    ( Marks: 1 )    - Please choose one
  A tennis pro charges $15 per hour for tennis lessons for children and $30 per hour for tennis lessons for adults.  The tennis pro is practicing:

       ? First-degree price discrimination.
       ? Second-degree price discrimination.
       ? Third-degree price discrimination.
       ? All of the given options.
   
Question No: 20    ( Marks: 1 )    - Please choose one
  An electric power company uses block pricing for electricity sales.  Block pricing is an example of:

       ? First-degree price discrimination.
       ? Second-degree price discrimination.
       ? Third-degree price discrimination.
       ? Block pricing is not a type of price discrimination.
   
Question No: 21    ( Marks: 1 )    - Please choose one
  A firm never operates:

       ? 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.
   
Question No: 22    ( Marks: 1 )    - Please choose one
  Marginal profit is equal to:
       ? Marginal revenue minus marginal cost.
       ? Marginal revenue plus marginal cost.
       ? Marginal cost minus marginal revenue.
       ? Marginal revenue times marginal cost.
   
Question No: 23    ( Marks: 1 )    - 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.
       ? Average revenue is less than average cost.
       ? Marginal revenue is less than marginal cost.
       ? Marginal revenue is greater than marginal cost.
   
Question No: 24    ( Marks: 1 )    - Please choose one
  At the profit-maximizing level of output, what is TRUE of the total revenue (TR) and total cost (TC) curves?
       ? They must intersect with TC cutting TR from below.
       ? They must intersect with TC cutting TR from above.
       ? They must be tangent to each other.
       ? They must have the same slope.
   
Question No: 25    ( 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: 26    ( Marks: 1 )    - Please choose one
  In order for a taxicab to be operated in New York City, it must have a medallion on its hood. Medallions are expensive but can be resold and are therefore an example of:
       ? A fixed cost.
       ? A variable cost.
       ? An implicit cost.
       ? An opportunity cost.
   
Question No: 27    ( Marks: 1 )    - Please choose one
  Costs determine all of the following EXCEPT:

       ? Demand for a product.
       ? Firm's behaviour.
       ? How firms should expand?
       ? Firm's profitability.
   
Question No: 28    ( Marks: 1 )    - 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 substitution.
       ? Marginal rate of factor substitution.
       ? Marginal rate of production.
   
Question No: 29    ( Marks: 1 )    - 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, a firm’s production function is said to exhibit:

       ? Decreasing returns to scale.
       ? Constant returns to scale.
       ? Increasing returns to scale.
       ? Diseconomies of scale.
   
Question No: 30    ( 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: 31    ( 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: 32    ( Marks: 1 )    - Please choose one
  According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:
       ? Vertical.
       ? U-shaped.
       ? Upward-sloping.
       ? Downward-sloping.
   
Question No: 33    ( Marks: 1 )    - Please choose one
  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.
   
Question No: 34    ( Marks: 1 )    - Please choose one
  Which of the following will be TRUE if demand is inelastic?
       ? The coefficient of elasticity is greater than one.
       ? The percentage change in quantity demanded is same as the percentage change in the price.
       ? An increase in price will increase total revenue.
       ? None of the given options.
   
Question No: 35    ( 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: 36    ( Marks: 1 )    - Please choose one
  Aslam decides to stay at home and study for his exam rather than going out with his friends to a movie. His dilemma is an example of:
 

       ? The economic perspective.
       ? Marginal analysis.
       ? Allocative efficiency.
       ? Opportunity cost.
   
Question No: 37    ( 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.
       ? The economy will move from a point inside to a point closer to its production possibilities curve.
   
Question No: 38    ( 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: 39    ( Marks: 1 )    - Please choose one
  In pure capitalism, the role of government is best described as:

       ? Significant.
       ? Extensive.
       ? Nonexistent.
       ? Limited.
   
Question No: 40    ( Marks: 1 )    - Please choose one
  Microeconomics is the branch of economics that deals with which of the following topics?

       ? The behavior of individual consumers.
       ? Unemployment and interest rates.
       ? The behavior of individual firms and investors.
       ? The behavior of individual consumers and behavior of individual firms and investors.
   
Question No: 41    ( Marks: 10 )
A.     Define “Law of supply” and explain it with a schedule and diagram.
B.   What are the factors which cause the shift in market supply curve?
(Marks: 6+4)