FINAL TERM EXAMINATION
Spring 2010
ECO401- Economics (Session - 4)
Time: 90 min
Marks: 69
Question No: 1 ( Marks: 1 ) - Please choose one
When the price of petrol rises by 12%, the quantity of petrol purchased falls by 8%. This shows that the demand for petrol is:
► Perfectly elastic.
► Unit elastic.
► Elastic.
► Inelastic.
Question No: 2 ( Marks: 1 ) - Please choose one
Law of diminishing marginal utility indicates that the slope of the marginal utility curve is:
► Horizontal.
► Vertical.
► Negative.
► Positive.
Question No: 3 ( Marks: 1 ) - Please choose one
Suppose that the price of a pizza is $10 and price of a jeans is $30. If ratio of marginal utility of pizza to marginal utility of jeans is 1/4 then to maximize total utility, a consumer should:
► Buy more pizzas and fewer jeans.
► Buy fewer pizzas and more jeans.
► Continue to buy the same quantities of pizza and jeans.
► Spend more time consuming pizza.
Question No: 4 ( Marks: 1 ) - Please choose one
If a consumer’s marginal rate of substitution equals 2 eggs for 1 hamburger then:
► The consumer’s indifference curve must be positively sloped.
► The consumer’s indifference curve must be convex with respect to the origin of the graph.
► The ratio of the consumer’s marginal utility of 1 egg to that of 1 hamburger must equal ½.
► All of the given options.
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following is TRUE about price-consumption curve for good X?
► Nominal income falls as the price of X falls.
► The absolute price of X falls, but the relative price between X and the composite good Y stays the same.
► It is always downward sloping for a normal good.
► It represents only those market baskets that are optimal for the given price ratio and preference pattern and therefore a demand curve can be plotted from it.
Question No: 6 ( Marks: 1 ) - Please choose one
The following table shows a firm’s Total Product of labor. What is the Marginal Product of labor between 20 and 30 units of labor?
| Table | |
| Quantity of Labor | Total Product |
| 0 | 0 |
| 10 | 100 |
| 20 | 230 |
| 30 | 340 |
| 40 | 410 |
| 50 | 460 |
► 340 units.
► 220 units.
► 11 units.
► 110 units.
Question No: 7 ( Marks: 1 ) - Please choose one
Graphically, marginal revenue is defined as:
► The slope of a line from the origin to a point on the total revenue curve.
► The slope of a line from the origin to the end of the total revenue curve.
► The slope of the total revenue curve at a given point.
► The vertical intercept of a line tangent to the total revenue curve at a given point.
Question No: 8 ( Marks: 1 ) - Please choose one
If income elasticity is negative, the good is:
► Normal good.
► A substitute good.
► A complementary good.
► Inferior good.
Question No: 9 ( Marks: 1 ) - Please choose one
The textbook for your class was not produced in a perfectly competitive industry because:
► There are so few firms in the industry that market shares are not small, and firm's decisions have an impact on market price.
► Upper-division microeconomics texts are not all alike.
► It is not costless to enter or exit the textbook industry.
► All of the given options.
Question No: 10 ( Marks: 1 ) - Please choose one
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 ( Marks: 1 ) - Please choose one
Which of the following will lead to an increase in aggregate demand?
► An increase in government tax revenues.
► An increase in household savings.
► An increase in business capital investment.
► An increase in demand for imports.
Question No: 12 ( Marks: 1 ) - Please choose one
The economic analysis most closely related to Say's Law is:
► Short-run aggregate market.
► Production possibilities.
► Imperfect competition.
► Circular flow.
Question No: 13 ( Marks: 1 ) - Please choose one
The trend of unemployment over the last forty years is:
► A decrease in unemployment.
► It has remained largely unchanged.
► An increase in unemployment.
► It is too difficult to tell so don't bother.
Question No: 14 ( Marks: 1 ) - Please choose one
Naima has just finished her school job and is waiting to report to new job at the beginning of the month. Naima is considered to be:
► Cyclically unemployed.
► Employed.
► Structurally unemployed.
► Frictionally unemployed.
Question No: 15 ( Marks: 1 ) - Please choose one
Which one of the following can lead to a rise in inflation?
► An increase in costs of production.
► An increase in productive capacity.
► An increase in the level of direct taxation.
► An increase in the exchange rate.
Question No: 16 ( Marks: 1 ) - Please choose one
An exchange rate system in which central banks are always ready to buy and sell their currencies at predetermined prices is called:
► A flexible exchange rate system.
► A managed exchange rate system.
► A fixed exchange rate system.
► None of the given options.
Question No: 17 ( Marks: 1 ) - Please choose one
How should fiscal policy be used during inflation?
► Increase Government expenditure and decrease taxes to decrease aggregate demand.
► Increase Government expenditure and decrease taxes to increase aggregate demand.
► Decrease Government expenditure and increase taxes to increase aggregate demand.
► Decrease Government expenditure and increase taxes to decrease aggregate demand.
Question No: 18 ( Marks: 1 ) - Please choose one
Per capita income is obtained by dividing national income by:
► Total labor force in the country.
► Unemployed youth in the country.
► None of the given options.
► Total population of that country.
Question No: 19 ( Marks: 1 ) - Please choose one
What would result from a depreciation of the pound on the foreign exchange market?
► An increase in the price of imported computers.
► A fall in the purchasing power of US tourists in London.
► A fall in the price of imported computers.
► An increase in the purchasing power of UK tourists overseas.
Question No: 20 ( Marks: 1 ) - Please choose one
Which of the following is NOT a factor of production?
► Labour.
► Land.
► Capital.
► Investment.
Question No: 21 ( Marks: 1 ) - Please choose one
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.
Question No: 22 ( Marks: 1 ) - Please choose one
All of the following are the reasons of downward sloping curve of aggregate demand EXCEPT:
► The exchange-rate effect.
► The wealth effect.
► The classical dichotomy / monetary neutrality effects.
► The interest-rate effect.
Question No: 23 ( Marks: 1 ) - Please choose one
Is Gross Domestic Product (GDP) an accurate measure of a country’s well being?
► Yes, it is the best measure of national well being.
► Yes, provided we use real GDP and not nominal GDP.
► Uncertain, depending on whether GDP is rising or falling.
► No, it is not.
