ECO401 Solved MCQs Lectures 1-18 by ZS Team

Q1. Which of the following is a correct statement about the substitution effect?

The substitution effect is always negative. The substitution effect is positive for an inferior good. The substitution effect measures how demand changes when income changes. The substitution effect is positive for a Giffen good.

Q2. In the long run, profits will equal zero in a competitive market because of:

The availability of information. Identical products being produced by all firms. Constant returns to scale. Free entry and exit

Q3. While drawing a given market demand curve,-------------- is not considered constant.

Income. The price of the good in question. The prices of related goods. Preferences.

Q4. If diminishing marginal utility holds and a person consumes less of a good, then all else being equal:

Select correct option: The price of the good will rise. Marginal utility will rise. Expenditure on the good will increase. Marginal utility will decline.

Q5. Our economy is characterized by:

Select correct option: Unlimited wants and needs. Unlimited material resources. No energy resources. Abundant productive labor.

Q6. If consumer incomes increase, the demand for product Y:

Will necessarily remain unchanged. Will shift to the right if Y is a complementary good. Will shift to the right if Y is a normal good. Will shift to the right if Y is an inferior good.

Q7. The law of diminishing returns assumes:

There are no fixed factors of production. There are no variable factors of production. Utility is maximised when marginal product falls. Some factors of production are fixed.

Q8. A price taker is:

A firm that accepts different prices from different customers. A monopolistically competitive firm. A firm that cannot influence the market price. An oligopolistic firm.

Q9. The correlation between an asset's real rate of return and its risk (as measured by its standard deviation) is usually: Positive.

Strictly linear. Flat. Negative.

Q10. The percentage change in quantity demanded of a given good, with respect to the percentage change in the price of “another” good is called:

Price elasticity of demand. Income elasticity of demand. Cross price elasticity of demand Supply price elasticity.

Q11. Moving from left to right, the typical production possibilities curve:

Is horizontal. Has a constant positive slope. Illustrates increasing opportunity costs. Illustrates decreasing opportunity costs.

Q12. Which of the following does NOT refer to macroeconomics?

The study of the aggregate level of economic activity. The study of the economic behavior of individual decision-making units such as consumers, resource owners, and business firms. The study of the cause of unemployment. The study of the cause of inflation.

Q13. In pure capitalism, freedom of enterprise means that:

Businesses are free to produce products that consumers want. Consumers are free to buy goods and services that they want. Resources are distributed freely to businesses that want them. Government is free to direct the actions of businesses.

Q14. At any given point on an indifference curve, the the slope is equal to:

Unity. The marginal rate of substitution. The consumer’s marginal utility. None of the given options.

Q15. The concept of a risk premium applies to a person that is:

Risk averse Risk neutral Risk loving All of the given options