FINALTERM EXAMINATION
Spring 2010
ECO401- Economics (Session - 3)
Time: 90 min
M a r k s: 69
Question No: 1 ( M a r k s: 1 ) http://vuzs.net
Land is best described as:
► Produced factors of production.
► "Organizational" resources.
► Physical and mental abilities of people.
► "Naturally" occurring resources.
Question No: 2 ( M a r k s: 1 ) http://vuzs.net
The price elasticity of demand measures the responsiveness of quantity demanded to:
► Quantity demanded.
► Quantity supplied.
► Price.
► Output.
Question No: 3 ( M a r k s: 1 ) http://vuzs.net
Suppose your local public golf course increases the greens fees for using the course. If the demand for golf is relatively inelastic, you would expect:
► A decrease in total revenue received by the course.
► An increase in total revenue received by the course.
► No change in total revenue received by the course.
► An increase in the amount of golf played on the course.
Question No: 4 ( M a r k s: 1 ) http://vuzs.net
As more of a good is consumed, then total utility typically:
► Increases at a decreasing rate.
► Decreases as long as marginal utility is negative.
► Decreases as long as marginal utility is positive.
► Is negative as long as marginal utility is decreasing.
Question No: 5 ( M a r k s: 1 ) - Please choose vu zs one
At any given point on an indifference curve, the absolute value of the slope equals:
► Unity--otherwise there would be no indifference.
► The marginal rate of substitution.
► The consumer’s marginal utility.
► None of the given options.
Question No: 6 ( M a r k s: 1 ) http://vuzs.net
Fixed costs are fixed with respect to changes in:
► Output.
► Capital expenditures.
► Wages.
► Time.
Question No: 7 ( M a r k s: 1 ) http://vuzs.net
If a firm experiences economies of scale, then the:
► Long-run average total cost curve is equal to the economies of scope.
► Long-run average total cost curve is positively sloped.
► Long-run average total cost curve is horizontal.
► Long-run average total cost curve is negatively sloped.
Question No: 8 ( M a r k s: 1 ) http://vuzs.net
When a firm charges each customer the maximum price that the customer is willing to pay, the firm:
► Engages in a discrete pricing strategy.
► Charges the average reservation price.
► Engages in second-degree price discrimination.
► Engages in first-degree price discrimination.
Question No: 9 ( M a r k s: 1 ) http://vuzs.net
Which of the following is true in long run equilibrium for a firm in a monopolistic competitive industry?
► The demand curve is tangent to marginal cost curve.
► The demand curve is tangent to average cost curve.
► The marginal cost curve is tangent to average cost curve.
► The demand curve is tangent to marginal revenue curve.
Question No: 10 ( M a r k s: 1 ) http://vuzs.net
Which one of the following characteristics is common in monopolistic competition and oligopoly?
► Free entry and exit from the industry.
► Strategic behavior.
► Standardized products.
► Advertising.
Question No: 11 ( M a r k s: 1 ) http://vuzs.net
Value of Marginal Product of Labor (VMPL) is equal to:
► MPPL/ Pi.
► MPPL.
► Pi.
► MPPL x Pi.
Question No: 12 ( M a r k s: 1 ) http://vuzs.net
According to classical economics, the economy was unlikely to experience:
► Full employment.
► Flexible wages and prices.
► Equality between saving and investment.
► High rates of unemployment.
Question No: 13 ( M a r k s: 1 ) http://vuzs.net
Say's Law is a proposition underlying classical economics stating that:
► Supply creates its own demand.
► Leakages are greater than injections.
► Unemployment is a common condition.
► Consumption expenditures are a function of disposable income.
Question No: 14 ( M a r k s: 1 ) http://vuzs.net
An assumption of classical economics is:
► Prices and wages are inflexible.
► Self-correction takes a long time.
► Supply creates its own demand.
► Investment and saving are seldom equal.
Question No: 15 ( M a r k s: 1 ) http://vuzs.net
Which of the following will result if there is a decrease in aggregate demand?
► Expansion; inflation.
► Recession; deflation.
► Expansion; deflation.
► Recession; inflation.
Question No: 16 ( M a r k s: 1 ) http://vuzs.net
Real Gross Domestic Product (GDP) equals:
► Nominal GDP minus net exports.
► Nominal GDP divided by the GDP deflator.
► Nominal GDP multiplied by the GDP deflator.
► GDP minus depreciation.
Question No: 17 ( M a r k s: 1 ) http://vuzs.net
Which of the following statements is TRUE?
► Net National Product = Gross National Product – Depreciation.
► Net National Product = National Income.
► Net National Product = Disposable Personal Income.
► Net National Product = Personal Income.
Question No: 18 ( M a r k s: 1 ) http://vuzs.net
Which of the following shows the Fisher equation of exchange?
► MT=PV.
► VT=PM.
► MV=PQ.
► MY=VP.
Question No: 19 ( M a r k s: 1 ) http://vuzs.net
In the Keynesian cross model, the 45-degree line has a slope of:
► 45.
► Infinity.
► 1.
► 0.
Question No: 20 ( M a r k s: 1 ) http://vuzs.net
The principle economic difference between a competitive and a non-competitive market is:
► The number of firms in the market.
► The extent to which any firm can influence the price of the product.
► The size of the firms in the market.
► The annual sales made by the largest firms in the market.
Question No: 21 ( M a r k s: 1 ) http://vuzs.net
An individual whose attitude towards risk is known as:
► Risk averse.
► Risk loving.
► Risk neutral.
► None of the given options.
Question No: 22 ( M a r k s: 1 ) http://vuzs.net
Which of the following best describes the ''Capital widening''?
► More capital per unit of labour.
► More capital and more labour but with the same amount of capital per unit of labour.
► Increasing the usage of existing capital.
► Importing capital from the developed world.
Question No: 23 ( M a r k s: 1 ) http://vuzs.net
Suppose there are two producers and two products. Which of the following is not TRUE in this situation?
► A producer has an absolute advantage on one product.
► A producer has the comparative advantage on both products.
► A producer has the comparative advantage on one product.
► A producer has an absolute advantage on both products.
Question No: 24 ( M a r k s: 1 ) http://vuzs.net
Public education creates:
► Asymmetric information.
► External costs.
► Internal costs.
► External benefits.
Question No: 25 ( M a r k s: 1 ) http://vuzs.net
A graph that depicts the relationship between the total quantity of goods and services demanded and the price level is known as:
► Aggregate demand curve.
► Average price level.
► Circular flow model.
► GDP curve.
Question No: 26 ( M a r k s: 1 ) http://vuzs.net
Refer to the above figure, if the real GDP is $7,000 billion and the implicit price deflator is 1.16, what is the value of nominal GDP?
► $6,034 billion.
► $8,120 billion.
► $9,120 billion.
► Cannot be determined from the given information.
Question No: 27 ( M a r k s: 1 ) http://vuzs.net
Let L equal the size of the labor force, E the number of employed workers, and U the number of unemployed workers. The unemployment rate is equal to:
► (L + E)/L.
► U/L.
► 1 + (E/L).
► All of the given options.
Question No: 28 ( M a r k s: 1 ) http://vuzs.net
The natural rate of unemployment is likely to fall if:
► Unemployment benefits increase.
► Income tax increases.
► More training is available for the unemployed.
► Geographical immobility increases.
Question No: 29 ( M a r k s: 1 ) http://vuzs.net
Which of the following is NOT a determinant of net exports?
► Domestic and foreign incomes.
► Relative price levels.
► Domestic and foreign trade policies.
► Producers’ expectations about future prices.
Question No: 30 ( M a r k s: 1 ) http://vuzs.net
Which of the following can happen in a boom period?
► Unemployment is likely to fall.
► Prices are likely to fall.
► Demand is likely to fall.
► Imports are likely to grow.
Question No: 31 ( M a r k s: 1 ) http://vuzs.net
The taxes on alcohol, tobacco, and gasoline are categorized as:
► Sales tax.
► Excise tax.
► Corporate income tax.
► Personal income tax.
Question No: 32 ( M a r k s: 1 ) http://vuzs.net
The item which serves as a medium of exchange is known as:
► Gold.
► Capital.
► Silver.
► Money.
Question No: 33 ( M a r k s: 1 ) http://vuzs.net
A country has a comparative advantage:
► If it can produce a good at a higher opportunity cost than other nations.
► If it can produce a good at a lower opportunity cost than other nations.
► If it can produce a good by using less resources than other nations.
► If it can produce a good that lies outside its production possibilities curve.
Question No: 34 ( M a r k s: 1 ) http://vuzs.net
A tariff is defined as:
► A restriction on exports.
► A tax placed on an imported product.
► A limit on the amount of a good or service that can be exported.
► A limit on the amount of a good or service that can be imported.
Question No: 35 ( M a r k s: 1 ) http://vuzs.net
Countries that are not among the high income nations of the world are categorized as:
► Developed countries.
► Progressed countries.
► Developing countries.
► High income countries.
Question No: 36 ( M a r k s: 1 ) http://vuzs.net
Which of the following is (are) the characteristic(s) of high income countries as compared to low income countries?
I. Lower rates of population growth.
II.Greater income inequality.
III. A large proportion of the labor force in agriculture.
IV. Higher rates of investment.
► I only.
► I and II.
► II and IV.
► I and IV.
Question No: 37 ( M a r k s: 1 ) http://vuzs.net
In which of the following conditions, a welfare loss occurs in monopoly?
► Where the price is greater than the marginal cost.
► Where the price is greater than the marginal benefit.
► Where the price is greater than the average revenue.
► Where the price is greater than the marginal revenue.
Question No: 38 ( M a r k s: 1 ) http://vuzs.net
If average physical product (APP) is decreasing then which of the following must be true?
► Marginal physical product is more than the average physical product.
► Marginal physical product is less than the average physical product.
► Marginal physical product is decreasing.
► Marginal physical product is increasing.
Question No: 39 ( M a r k s: 1 ) http://vuzs.net
When different prices are charged to customers who purchase different quantities, this is an example of
► Second-degree price discrimination.
► First-degree price discrimination.
► Monopoly.
► Perfect competition.
Question No: 40 ( M a r k s: 1 ) http://vuzs.net
Which of the following may cause a decrease in national income?
► Increase imports.
► Decrease unemployment.
► Decreasing exports.
► None of the given options.
Question No: 41 ( M a r k s: 1 ) http://vuzs.net
The relationship between interest rate and consumption is:
► Positive.
► Negative.
► Zero.
► Indeterminate.
Question No: 42 ( M a r k s: 1 ) http://vuzs.net
The principle which states that a change in income causes a magnified change in investment is termed as the:
► None of the given.
► Paradox of thrift.
► Multiplier effect.
► Accelerator effect.
Question No: 43 ( M a r k s: 1 ) http://vuzs.net
Hysteresis refers to the permanent effects of a:
► Temporary change.
► Structural change.
► Cyclical change.
► Political change.
Question No: 44 ( M a r k s: 1 ) http://vuzs.net
Factor income from abroad like worker remittances, dividends and interest has positive impact on:
► Current account balance.
► Capital account balance.
► Trade balance.
► Unemployment.
Question No: 45 ( M a r k s: 1 ) http://vuzs.net
The growth rate of any country’s real GDP can be:
► Negative or positive.
► positive or zero.
► Negative or zero.
► Negative or positive or zero.
Question No: 46 ( M a r k s: 1 ) http://vuzs.net
Endogenous growth theory is also known as:
► Neo-classical growth theory.
► New growth theory.
► Classical growth model.
► Keynesian growth model.
Question No: 47 ( M a r k s: 1 ) http://vuzs.net
Which of the following is not the World Bank’s structural reform policy?
► FDI liberalization.
► Trade liberalization.
► Financial liberalization.
► Same monetary policy for all countries.
Question No: 48 ( M a r k s: 1 ) http://vuzs.net
The common characteristics of a developing country is:
► High growth rate.
► High literacy rate.
► Skilled labor.
► High unemployment rate.
Question No: 49 ( M a r k s: 3 )
At what point, the equilibrium occurs in the foreign exchange market?
Question No: 50 ( M a r k s: 3 )
What are the reasons that poor countries remained poor?
Question No: 51 ( M a r k s: 5 )
If the government increase it’s spending e.g. increases the wages of the government servant, how it will affect on consumption, production and hiring of new employees?
Question No: 52 ( M a r k s: 5 )
Explain the difference between appreciation and depreciation of currency.
Question No: 53 ( M a r k s: 5 )
Differentiate among M0, M1 and M2 components of money supply.
