ECO401 Final Term Past Papers 6

FINALTERM EXAMINATION Spring 2010

ECO401- Economics (Session - 1)

Q1. A good for which income and quantity demanded are inversely related is known as: (1 marks)

1. Inferior good.
2. Complementary good.
3. Normal good.
4. None of the given options.

Correct answer: Inferior good.

Q2. At the equilibrium price: (1 marks)

1. There will be a shortage.
2. There will be neither a shortage nor a surplus.
3. There will be a surplus.
4. There are forces that cause the price to change.

Correct answer: There will be neither a shortage nor a surplus.

Q3. A graph showing all the combinations of capital and labour available for a given total cost is the: (1 marks)

1. Budget constraint.
2. Expenditure set.
3. Isoquant.
4. Isocost.

Correct answer: Isocost.

Q4. The supply curve for a competitive firm is: (1 marks)

1. Its entire marginal cost curve.
2. The upward-sloping portion of its marginal cost curve.
3. Its marginal cost curve above the minimum point of the average variable cost curve.
4. Its marginal cost curve above the minimum point of the average total cost curve.

Correct answer: Its marginal cost curve above the minimum point of the average variable cost curve.

Q5. A perfectly competitive firm maximizes profit by finding the level of production at which: (1 marks)

1. Price = Marginal Cost.
2. Price = Average Total Cost.
3. Average Total Cost = Marginal Cost.
4. Price < Marginal Cost.

Correct answer: Price < Marginal Cost.

Q6. Which of the following is true in long run equilibrium for a firm in a monopolistic competitive industry? (1 marks)

1. The demand curve is tangent to marginal cost curve.
2. The demand curve is tangent to average cost curve.
3. The marginal cost curve is tangent to average cost curve.
4. The demand curve is tangent to marginal revenue curve.

Correct answer: The demand curve is tangent to marginal cost curve.

Q7. Value of Marginal Product of Labor (VMPL) is equal to: (1 marks)

1. MPPL/ Pi.
2. MPPL.
3. Pi.
4. MPPL x Pi.

Correct answer: MPPL x Pi.

Q8. The marginal revenue product is: (1 marks)

1. Upward sloping due to the law of demand.
2. Upward sloping due to the law of marginal utility.
3. Downward sloping due to the law of diminishing returns.
4. Downward sloping due to the law of supply.

Correct answer: Downward sloping due to the law of diminishing returns.

Q9. The classical economists thought that the economy would quickly overcome any short run instability because: (1 marks)

1. Price level and quantity are flexible.
2. Prices would get stuck at a low level.
3. The long run aggregate supply would shift to the left.
4. Prices and wages are flexible.

Correct answer: Prices and wages are flexible.

Q10. An assumption of classical economics is: (1 marks)

1. Investment and saving are seldom equal.
2. Self-correction takes a long time.
3. Demand creates its own supply.
4. Prices and wages are flexible.

Correct answer: Prices and wages are flexible.

Q11. Gross Domestic Product is: (1 marks)

1. A stock variable.
2. A flow variable.
3. Both a stock and a flow variable.
4. Neither a stock nor a flow variable.

Correct answer: A flow variable.

Q12. The labour force is made up of: (1 marks)

1. The number of people employed minus the number of people unemployed.
2. The number of people employed plus the number of people unemployed.
3. Just the number of people employed.
4. The whole population.

Correct answer: The number of people employed plus the number of people unemployed.

Q13. A government wishing to reduce a deficit on the current account of their balance of payments through the use of fiscal policy would be most likely to: (1 marks)

1. Raise direct taxation.
2. Introduce an import quota.
3. Raise interest rates.
4. Reduce the rate of value added tax on all goods and services.

Correct answer: Reduce the rate of value added tax on all goods and services.

Q14. If imports = exports, then we have: (1 marks)

1. Current account balance.
2. Capital account balance.
3. Statistical discrepancy.
4. Balanced Budget.

Correct answer: Balanced Budget.

Q15. The principle economic difference between (1 marks)

a · competitive · and

a non-competitive market is:

1. The number of firms in the market.