ECO401 Quiz 1 Set 3

Q1. If price of MP3 players rises and as a result, the demand for headphones decreases, then one can say that MP3 players and headphones are:

1. Inferior goods.
2. Complements.
3. Substitutes.
4. Normal goods.

Correct answer: Complements.

Q2. The slope of budget line –Px/PY is also called:

1. Output price ratio.
2. Output ratio.
3. Input price ratio.
4. Input ratio.

Correct answer: Input price ratio.

Q3. Which of the following is a normative statement?

1. When the Federal government sells bonds, interest rates rise and private investment is reduced.
2. Public should properly use their right to vote to elect the right person.
3. When the price of a good goes up, firms produce more of it.
4. When the price of a good goes up, consumers buy less of it.

Correct answer: Public should properly use their right to vote to elect the right person.

Q4. Subcategory of Inferior goods is:

1. Luxury goods.
2. Giffen goods.
3. Normal goods.
4. Expensive goods.

Correct answer: Giffen goods.

Q5. When the absolute value of price elasticity of demand is equal to one,it means that demand is:

1. Inelastic
2. Elastic
3. Perfectly inelastic
4. Unit elastic

Correct answer: Unit elastic

Q6. If price elasticity of supply is infinity,then the supply curve will be:

1. Rectangular hyperbola
2. Horizontal
3. Downward sloping
4. Upward sloping

Correct answer: Horizontal

Q7. What is the formula for calculating the price elasticity of demand?

1. Percentage change in quantity demanded / Percentage change in price
2. Percentage change in quantity supplied / Percentage change in price
3. Percentage change in consumer’s income / Percentage change in price
4. Percentage change in consumer’s taste / Percentage change in price

Correct answer: Percentage change in quantity demanded / Percentage change in price

Q8. Consumer will consume additional units of commodity until marginal utility becomes:

1. Equal to the income
2. Equal to one
3. Equal to the utility
4. Equal to the price

Correct answer: Equal to the price

Q9. When government sets the price of a good below the equilibrium price, the result will be:

1. An increase in the supply of the good.
2. A decrease in the demand for the good.
3. A shortage of the good.
4. A surplus of the good.

Correct answer: A shortage of the good.

Q10. What is barter trade in Economics?

1. Exchange of goods with goods
2. Exchange of goods with money
3. Exchange of goods with silver
4. Exchange of goods with gold

Correct answer: Exchange of goods with goods