ECO401 Final Term Past Papers 7

FINALTERM EXAMINATION Spring 2010

ECO401- Economics (Session – 5)

Q1. As more of a good is consumed, then total utility typically: (1 marks)

1. Increases at a decreasing rate.
2. Decreases as long as marginal utility is negative.
3. Decreases as long as marginal utility is positive.
4. Is negative as long as marginal utility is decreasing.

Q2. A production function: (1 marks)

1. Relates inputs with output.
2. Generates a curve that is upward sloping.
3. Shows diminishing marginal product of an input, since it gets flatter as output rises.
4. All of the given options.

Q3. _______________ arises when an increase in all inputs leads to a more-than- proportional increase in the level of output. _____________ means that as inputs are added to the production process, output increases proportionally. (1 marks)

1. Economies of scale; constant returns to scale.
2. Constant returns to scale; decreasing returns to scale.
3. Decreasing returns to scale; economies of scale.
4. Economies of scale; decreasing returns to scale.

Q4. Total costs are the sum of: (1 marks)

1. Marginal costs and variable costs.
2. Fixed costs and variable costs.
3. Fixed costs and marginal costs.
4. Average variable costs and marginal costs.

Q5. As compared to existing firms, a new firm entering in monopolist market has: (1 marks)

1. High costs.
2. Low costs.
3. Equal costs.
4. None of the given options.

Q6. The maximum price that a consumer is willing to pay for a good is called: (1 marks)

1. The reservation price.
2. The market price.
3. The first-degree price.
4. The block price.

Q7. The market structure in which strategic considerations are most important is: (1 marks)

1. Monopolistic competition.
2. Oligopoly.
3. Pure competition.
4. Pure monopoly.

Q8. Price exceeds marginal revenue in which of the following market structure(s)? (1 marks)

1. Differentiated oligopoly and monopoly only.
2. Standardized oligopoly and pure competition only.
3. Monopolistic competition and monopoly only.
4. Monopolistic competition, oligopoly and monopoly.

Q9. For a firm buying labor competitively, the marginal input cost is equal to the: (1 marks)

1. Wage.
2. Interest rate.
3. Price of output.
4. Cost of raw materials.

Q10. Unlike the classical economists, Keynes believed that the economy could get stuck in the short run for a significant period of time because of: (1 marks)

1. Insufficient aggregate supply.
2. Insufficient aggregate demand.
3. Quick self correcting mechanism.
4. Government purchases of too many goods and services.

Q11. According to Keynes, the economy does not self correct quickly because: (1 marks)

1. With less consumption and more savings the interest rate will drop.
2. In the short run workers are fully employed and cannot produce enough to get to long run equilibrium.
3. Wages and prices are flexible in the short run.
4. Wages and prices are sticky in the short run.

Q12. An assumption of classical economics is: (1 marks)

1. Prices and wages are inflexible.
2. Self-correction takes a long time.
3. Supply creates its own demand.
4. Investment and saving are seldom equal.

Q13. The real interest rate will increase: (1 marks)

1. If there is an excess supply of loanable funds in the financial markets.
2. If there is an excess demand for loanable funds in the financial markets.
3. If there is an excess supply of loanable funds in the foreign exchange markets.
4. If there is an excess demand for loanable funds in the foreign exchange markets.

Q14. Which of the following is a less important component of the balance of payments? (1 marks)

1. The capital account.
2. The current account.
3. The financial account.
4. All three components are equally important.