ECO401- Economics - Midterm Examination Paper
(Session - 5) - Spring 2010
ExamDate: 5/29/2010 12:00:00 AM
ECO401 - Economics - Q.No. 1 ( M - 1 )
In a free-market economy, the allocation of resources is determined by:
► Votes taken by consumers.
► A central planning authority.
► Consumer preferences.
► The level of profits of firms.
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ECO401 - Economics - Q.No. 2 ( M - 1 )
Ceteris paribus means:
► Equal access to public transportation.
► Other things being equal.
► Other things not being equal.
► All things considered.
ECO401 - Economics - Q.No. 3 ( M - 1 )
If pen and ink are complements, then an increase in the price of pen will cause:
► An increase in the price of ink.
► Less ink to be demanded at each price.
► A decrease in the demand for pen.
► A rightward shift in the demand curve for ink.
ECO401 - Economics - Q.No. 4 ( M - 1 )
A good for which income and quantity demanded are inversely related is known as:
► Inferior good.
► Complementary good.
► Normal good.
► None of the given options.
ECO401 - Economics - Q.No. 5 ( M - 1 )
Which of the following is calculated as the percentage change in quantity demanded of a given good with respect to the percentage change in the price of another good?
► Price elasticity of demand.
► Income elasticity of demand.
► Cross price elasticity of demand.
► Price elasticity of supply.
ECO401 - Economics - Q.No. 6 ( M - 1 )
In order to calculate the price elasticity of supply, you need to know:
► Two prices and two quantities supplied.
► The slope of the supply curve.
► The equilibrium price and quantity in the market.
► The quantity supplied at two different prices, all else equal.
ECO401 - Economics - Q.No. 7 ( M - 1 )
A demand curve is price elastic when:
► Changes in demand are proportionately greater than changes in price.
► Changes in demand are equal to changes in price.
► None of the given options.
► Changes in demand are proportionately smaller than changes in price.
ECO401 - Economics - Q.No. 8 ( M - 1 )
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.
ECO401 - Economics - Q.No. 9 ( M - 1 )
Which of the following is the term that economists use to describe how consumers rank different goods and services?
► Satisfaction index.
► Goodness.
► Utility.
► None of the given options.
ECO401 - Economics - Q.No. 10 ( M - 1 )
If your demand price for one unit of a good is $100 and the market price is $75, your consumer's surplus is:
► $25.
► $50.
► $75.
► $100.
ECO401 - Economics - Q.No. 11 ( M - 1 )
Assume leisure is a normal good. If income effect equals substitution effect then a wage rate increase will lead a person to:
► Increase hours of work.
► Decrease hours of work.
► Not change hours of work.
► None of the given options.
ECO401 - Economics - Q.No. 12 ( M - 1 )
A normal good can be defined as one which consumers purchase more of as:
► Prices fall.
► Prices rise.
► Incomes fall.
► Incomes increase.
ECO401 - Economics - Q.No. 13 ( M - 1 )
Diminishing marginal returns implies:
► Decreasing marginal costs.
► Increasing marginal costs.
► Decreasing average variable costs.
► Decreasing average fixed costs.
ECO401 - Economics - Q.No. 14 ( M - 1 )
If isoquants are straight lines, it means that:
► Only one combination of inputs is possible.
► There is constant returns to scale.
► Inputs have fixed costs at all use rates.
► The marginal rate of technical substitution of inputs is constant.
ECO401 - Economics - Q.No. 15 ( M - 1 )
A firm maximizes profit by operating at the level of output where:
► Average revenue equals average cost.
► Average revenue equals average variable cost.
► Total costs are minimized.
► Marginal revenue equals marginal cost.
ECO401 - Economics - Q.No. 16 ( M - 1 )
Producer surplus in a perfectly competitive industry is:
► The difference between profit at the profit-maximizing and profit-minimizing level of output.
► The difference between revenue and total cost.
► The difference between revenue and variable cost.
► The difference between revenue and fixed cost.
ECO401 - Economics - Q.No. 17 ( M - 1 )
Monopolistically competitive firms have monopoly power because they:
► Are great in number.
► Have freedom of entry.
► Are free to advertise.
► Face downward sloping demand curves.
ECO401 - Economics - Q.No. 18 ( M - 1 )
Which of the following can be thought of as a barrier to entry?
► Scale economies.
► Patents.
► Strategic actions by incumbent firms.
► All of the given options.
ECO401 - Economics - Q.No. 19 ( M - 1 )
The price elasticity of demand for any good must be less than or equal to zero unless:
► The good is a necessity.
► The good is a luxury.
► The good is a Giffen good.
► None of the given options.
ECO401 - Economics - Q.No. 20 ( M - 1 )
The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because:
► The market price is determined (through regulation) by the government.
► The firm supplies a different good than its rivals.
► The firm's output is a small fraction of the entire industry's output.
► The short run market price is determined solely by the firm's technology.
ECO401 - Economics - Q.No. 21 ( M - 1 )
Because of unusual warm weather, the supply of strawberries has substantially increased. This statement indicates that:
► The demand for strawberries will necessarily rise.
► The equilibrium quantity of strawberries will fall.
► The quantity of strawberries that will be available at various prices has increased.
► The price of strawberries will fall.
ECO401 - Economics - Q.No. 22 ( M - 1 )
Under monopoly, when the demand curve is downward sloping, marginal revenue is:
► Equal to price.
► Equal to average cost.
► Less than price.
► More than price.
ECO401 - Economics - Q.No. 23 ( M - 1 )
Suppose the price of rail tickets decreases, what will happen to the demand for airline travel?
► The demand curve for airline travel shifts left.
► The demand curve for airline travel shifts right.
► The supply curve of airline travel shifts left.
► The supply curve of airline travel shifts right.
ECO401 - Economics - Q.No. 24 ( M - 1 )
Which of the following will happen if two indifference curves cross each other?
► The assumption of a diminishing marginal rate of substitution will be violated.
► The assumption of transitivity will be violated.
► The assumption of completeness will be violated.
► Consumers will minimize their satisfaction.
ECO401 - Economics - Q.No. 25 ( M - 1 )
Which of the following determines the largest amount of output that a firm can produce with a given combination of inputs?
► Marginal product of labor.
► Gains from specialization.
► Cost function.
► Production function.
ECO401 - Economics - Q.No. 26 ( M - 1 )
Which of the following is TRUE about an isocost line?
► It shows the cost of inputs needed to produce along an isoquant.
► It shows the cost of inputs needed to produce along an expansion path.
► It shows the input combinations that can be purchased with a given outlay of funds.
► It shows the output combinations that can be produced with a given outlay of funds.
ECO401 - Economics - Q.No. 27 ( M - 1 )
Which of the following is TRUE for the total cost of producing a given level of output?
► It is maximized when a corner solution exists.
► It is minimized when the ratio of marginal product to input price is equal for all inputs.
► It is minimized when the marginal products of all inputs are equal.
► It is minimized when marginal product multiplied by input price is equal for all inputs.
ECO401 - Economics - Q.No. 28 ( M - 1 )
In which of the following situations, a monopoly occurs?
► When each firm produces a product that is slightly different from the other firms.
► When one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
► When there are many firms producing the same product.
► In all of the given situations.
ECO401 - Economics - Q.No. 29 ( M - 1 )
The shape of isoquant which indicates capital and labor cannot be substituted for each other in production is
► Concave.
► Convex.
► L-shaped.
► None of the given options.
ECO401 - Economics - Q.No. 30 ( M - 1 )
At the profit-maximizing level of output, the marginal cost is equal to:
► Average revenue
► Total revenue
► Marginal revenue
► None of the given options
ECO401 - Economics - Q.No. 31 ( M - 1 )
Monopolistic competition is also characterized by a large number of buyers and sellers and absence of
► Competition.
► Entry barriers.
► Price discrimination.
► All of the given options.
ECO401 - Economics - Q.No. 32 ( M - 1 )
An increase in quantity demand is shown by:
► Shifting the demand curve to the left.
► Shifting the demand curve to the right.
► Upward movement along the demand curve.
► Downward movement along the demand curve.
ECO401 - Economics - Q.No. 33 ( M - 1 )
Since bread and butter are complements. When the price of bread goes down, the demand curve for butter:
► Shifts to the left.
► Shifts to the right.
► Remains constant.
► Shifts to the right initially and then returns to its original position.
ECO401 - Economics - Q.No. 34 ( M - 1 )
Slope and elasticity of demand have
► A direct relation.
► An inverse relationship.
► No relation between slope and elasticity.
► None of the given options.
ECO401 - Economics - Q.No. 35 ( M - 3 )
Why economists believe that when firms earn zero accounting profits, they actually earn normal economic profits?
ECO401 - Economics - Q.No. 36 ( M - 5 )
What are the two main theories of production regarding time?
