ECO401 Midterm Solved MCQs with References

Solved Papers of ECONOMIC ECO401 More Than 10 Papers BY

MIDTERM EXAMINATION

Q1. An individual whose attitude towards risk is known as: (1 marks)

1. Risk averse.
2. Risk loving.
3. Risk neutral.
4. None of the given options.

Correct answer: Risk averse.

Q2. The concept of a risk premium applies to a person that is: (1 marks)

1. Risk averse.
2. Risk neutral.
3. Risk loving.
4. All of the given options

Correct answer: Risk averse.

Q3. A normative economic statement: (1 marks)

1. Is a statement of fact.
2. Is a hypothesis used to test economic theory.
3. Is a statement of what ought to be, not what is.
4. Is a statement of what will occur if certain assumptions are true.

Correct answer: Is a statement of what ought to be, not what is.

Q4. 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 ________. (1 marks)

1. Limited resources, market behavior.
2. Scarcity, human behavior.
3. Social behavior, limited resources.
4. Biological behavior, scarcity.

Correct answer: Social behavior, limited resources.

Q5. 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: (1 marks)

1. P = MR.
2. P = AVC.
3. AR = MR.
4. P = MC.

Correct answer: P = MC.

Q6. A welfare loss occurs in monopoly where: (1 marks)

1. The price is greater than the marginal cost.
2. The price is greater than the marginal benefit.
3. The price is greater than the average revenue.
4. The price is greater than the marginal revenue.

Correct answer: The price is greater than the marginal cost.

Q7. The "perfect information" assumption of perfect competition includes all of the following EXCEPT: (1 marks)

1. Consumers know their preferences.
2. Consumers know their income levels.
3. Consumers know the prices available.
4. Consumers can anticipate price changes.

Correct answer: Consumers can anticipate price changes.

Q8. Figure (1 marks)

In figure given above, the marginal utility of income is:

1. Increasing as income increases.
2. Constant for all levels of income.
3. Diminishes as income increases.
4. None of the given options.

Correct answer: Diminishes as income increases.

Q9. 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: (1 marks)

1. The firm has increasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
2. The firm has decreasing returns to scale and the law of diminishing marginal productivity does not apply to this firm.
3. The firm has increasing returns to scale but the law of diminishing marginal productivity may still apply to this firm.
4. The firm has decreasing returns to scale but nonetheless the law of diminishing marginal productivity may still apply to this firm.

Correct answer: The firm has increasing returns to scale but the law of diminishing marginal productivity may still apply to this firm.

Q10. If the cross price elasticity of demand between two goods X and Y is positive; it means that goods are: (1 marks)

1. Independent.
2. Complements.
3. Substitutes.
4. Inferior.

Correct answer: Substitutes.

Q11. A demand schedule is best described as: (1 marks)

1. A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
2. A graphical representation of the law of demand.
3. A systematic listing of all the variables that might conceivably bring about a change in demand.
4. A symbolic representation of the law of demand: P,Q and Q, P.

Correct answer: A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.

Q12. Which of the following best expresses the law of demand? (1 marks)

1. A higher price reduces demand.
2. A lower price reduces demand.
3. A higher price reduces quantity demanded.
4. A lower price shifts the demand curve to the right.

Correct answer: A higher price reduces quantity demanded.