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 ECO401 QUIZ NO 3 FALL 2010

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PostSubject: ECO401 QUIZ NO 3 FALL 2010   Thu Jan 06, 2011 12:18 pm

Question # 1 of 15 ( Start time: 02:34:04 AM ) Total Marks: 1
Which of the following is NOT regarded as a source of inefficiency in monopolistic competition?
Select correct option:

Product diversity.
Excess capacity.
The fact that price exceeds marginal cost.
The fact that long-run average cost is not minimized.

Question # 2 of 15 ( Start time: 02:34:25 AM ) Total Marks: 1
An important difference between the approaches of the classical and Keynesian economists use to achieve a macroeconomic equilibrium is that:
Select correct option:

Keynesian economists actively promote the use of fiscal policy; the classical economists do not
Keynesian economists actively promote the use of monetary policy to improve aggregate economic performance; classical economists do not
classical economists believe that monetary policy will certainly affect the level of output; Keynesians believe that money growth affects only prices
classical economists believe that fiscal policy is an effective tool for achieving economic stability; Keynesians do not

Question # 3 of 15 ( Start time: 02:34:43 AM ) Total Marks: 1
If one firm increases its price, in the kinked demand curve model then:
Select correct option:

Other firms will also reduce their price.
Other firms will compete on a non-price basis.
Other firms will not increase their price.
Other firms will not change their price.

Question # 4 of 15 ( Start time: 02:36:09 AM ) Total Marks: 1
The price elasticity of demand measures the responsiveness of quantity demanded to:
Select correct option:

Quantity demanded.
Quantity supplied.
Price.
Output.

Question # 5 of 15 ( Start time: 02:36:30 AM ) Total Marks: 1
What is the reason of leftward shift in the demand curve for product A?
Select correct option:

A decrease in income if A is an inferior good.
An increase in income if A is a normal good.
An increase in the price of a product that is a close substitute for A.
An increase in the price of a product that is complementary to A.

Question # 6 of 15 ( Start time: 02:36:50 AM ) Total Marks: 1
The law of diminishing marginal utility:
Select correct option:

Refers to the decrease in total satisfaction as more units of the good are consumed.
Refers to the fall in additional satisfaction created by consumption of more and more.
Refers to the units of a good.
Refers to the idea that total utility is negative.

Question # 7 of 15 ( Start time: 02:37:04 AM ) Total Marks: 1
Which of the following is TRUE about L-shaped isoquant?
Select correct option:

It is impossible.
It indicates that the firm could switch from one output to another costlessly.
It indicates that the firm could not switch from one output to another.
It indicates that capital and labor cannot be substituted for each other in production.

Question # 8 of 15 ( Start time: 02:37:31 AM ) Total Marks: 1
A nation's production possibilities curve is "bowed out" from the origin because:
Select correct option:

Resources are not perfectly shiftable between productions of the two goods.
Capital goods and consumer goods utilize the same production technology.
Resources are scarce relative to human wants.
Opportunity costs are decreasing.

Question # 9 of 15 ( Start time: 02:37:51 AM ) Total Marks: 1
Which of the following might be considered to be a characteristic of a planned economy?
Select correct option:

All income is completely evenly distributed.
Price is relatively unimportant as a means of allocating resources.
Goods and services produced reflect consumer sovereignty.
There is no incentive for people to work hard.

Question # 10 of 15 ( Start time: 02:38:11 AM ) Total Marks: 1
Which of the following statements describes the presence of diminishing returns.
Select correct option:

The marginal product of a factor is positive and rising.
The marginal product of a factor is positive but falling.
The marginal product of a factor is falling and negative.
The marginal product of a factor is constant.

Question # 11 of 15 ( Start time: 02:38:39 AM ) Total Marks: 1
The opportunity cost of an action:
Select correct option:

Will be the same for everyone.
Is the value of the next best alternative.
Measures the undesirable aspects of that action.
Is the average amount of unhappiness experienced by everyone involved.

Question # 12 of 15 ( Start time: 02:38:59 AM ) Total Marks: 1
When oligopolists collude, they are able to:
Select correct option:

Raise price, but not restrict output
Raise price and restrict output, but not attain the monopoly profit
Raise price and restrict output, and therefore attain the monopoly profit
Restrict output, but not raise price

Question # 13 of 15 ( Start time: 02:39:23 AM ) Total Marks: 1
The study of economics basically focuses on:
Select correct option:

For whom resources are allocated to increase efficiency.
How society spends the income of individuals.
How scarce resources are allocated to fulfill society's goals.
What scarce resources are used to produce goods and services.

Question # 14 of 15 ( Start time: 02:39:36 AM ) Total Marks: 1
A demand schedule is best described as:
Select correct option:

A numerical tabulation of the quantity demanded of a good at different prices, ceteris paribus.
A graphical representation of the law of demand.
A systematic listing of all the variables that might conceivably bring about a change in demand.
A symbolic representation of the law of demand: P, Q and P, Q.

Question # 15 of 15 ( Start time: 02:39:50 AM ) Total Marks: 1
At any given point on an indifference curve, the the slope is equal to:
Select correct option:

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

Question # 1 of 15 ( Start time: 04:33:03 AM ) Total Marks: 1
In the classical model, given an initial aggregate equilibrium at full employment, the long run effect of an increase in government spending is;
Select correct option:

An increase in the price level
An upward shift of the aggregate demand curve
A constant level of output
All of the above

Question # 2 of 15 ( Start time: 04:33:19 AM ) Total Marks: 1
Graphically, marginal revenue is defined as:
Select correct option:

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 # 3 of 15 ( Start time: 04:33:45 AM ) Total Marks: 1
Which of the following shows the condition for consumer's equilibrium?
Select correct option:

It can be expressed as marginal utility per dollar spent on each good being equalized across all goods.
It can be expressed as the ratio of (marginal utility per unit of the good)/(price per unit of the good) being equalized across all goods.
It can be expressed as the ratio of marginal utilities being equated to the ratio of prices for all possible pairs of goods.
All of the given options.

Question # 4 of 15 ( Start time: 04:34:09 AM ) Total Marks: 1
The demand curve facing a perfectly competitive firm is:
Select correct option:

The same as its average revenue curve but not the same as its marginal revenue curve.
The same as its average revenue curve and its marginal revenue curve.
The same as its marginal revenue curve but not its average revenue curve.
Not the same as either its marginal revenue curve or its average revenue curve.

Question # 5 of 15 ( Start time: 04:34:36 AM ) Total Marks: 1
According to Classical Economists, Economy always remains:
Select correct option:

At full employment level.
Below full employment level.
Above full employment level.
None of the given options.

Question # 6 of 15 ( Start time: 04:35:58 AM ) Total Marks: 1
A market with few entry barriers and with many firms that sell differentiated products is known as:
Select correct option:

Purely competitive
A monopoly
Monopolistically competitive
Oligopolistic

Question # 7 of 15 ( Start time: 04:36:11 AM ) Total Marks: 1
A market is said to be in equilibrium when:
Select correct option:

Supply equals Price.
There is downward pressure on price.
The amount consumers wish to buy at the current price equals the amount producers wish to sell at that price.
All buyers are able to find sellers willing to sell to them at the current price.

Question # 8 of 15 ( Start time: 04:36:28 AM ) Total Marks: 1
Oligopoly differs from monopolistic competition in that an oligopoly includes:
Select correct option:

Product differentiation.
No barriers to entry.
Barriers to entry.
Downward sloping demand curves facing the firm.

Question # 9 of 15 ( Start time: 04:36:49 AM ) Total Marks: 1
Assume that the current market price is below the market clearing level. We would expect:
Select correct option:

A surplus to accumulate.
Downward pressure on the current market price.
Upward pressure on the current market price.
Lower production during the next time period.

Question # 10 of 15 ( Start time: 04:37:04 AM ) Total Marks: 1
Demand is elastic when the elasticity of demand is:
Select correct option:

Greater than 0.
Greater than 1.
Less than 1.
Less than 0.

Question # 11 of 15 ( Start time: 04:37:16 AM ) Total Marks: 1
Business-cycle instability is best corrected through government policies is a primary implication of:
Select correct option:

Classical Economists.
Monetarist.
J.M. Keynes.
New Classical Economists.

Question # 12 of 15 ( Start time: 04:38:41 AM ) Total Marks: 1
The numerical measurement of a consumer’s preference is called:
Select correct option:

Satisfaction.
Use.
Pleasure.
Utility.

Question # 13 of 15 ( Start time: 04:38:57 AM ) Total Marks: 1
If Competitive markets do not achieve equitable outcomes, then it is called:
Select correct option:

Imperfect market structure.
Market failure.
Not rational consumers.
None of the given options.

Question # 14 of 15 ( Start time: 04:40:13 AM ) Total Marks: 1
Aggregate demand curve slopes downward for both Keynes and classicals.
Select correct option:

True.
False.

Question # 15 of 15 ( Start time: 04:41:38 AM ) Total Marks: 1
The law of diminishing returns assumes:
Select correct option:

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.

Question # 1 of 15 ( Start time: 04:49:33 AM ) Total Marks: 1
Revenue is equal to:
Select correct option:

Price times quantity.
Price times quantity minus total cost.
Price times quantity minus average cost.
Price times quantity minus marginal cost.

Question # 2 of 15 ( Start time: 04:39:40 AM ) Total Marks: 1
Which of the following is TRUE about L-shaped isoquant?
Select correct option:

It is impossible.
It indicates that the firm could switch from one output to another costlessly.
It indicates that the firm could not switch from one output to another.
It indicates that capital and labor cannot be substituted for each other in production.

Question # 3 of 15 ( Start time: 04:50:04 AM ) Total Marks: 1
The correlation between an asset's real rate of return and its risk (as measured by its standard deviation) is usually:
Select correct option:

Positive.
Strictly linear.
Flat.
Negative.

Question # 4 of 15 ( Start time: 04:50:32 AM ) Total Marks: 1
When the demand curve is downward sloping, marginal revenue is:
Select correct option:

Equal to price.
Equal to average cost.
Less than price.
More than price.

Question # 5 of 15 ( Start time: 04:50:45 AM ) Total Marks: 1
The classical economists thought that the economy would quickly overcome any short run instability because:
Select correct option:

Price level and quantity were flexible
Prices would get stuck at a low level
The long run aggregate supply would shift to the left
Prices and wages were flexible

Question # 6 of 15 ( Start time: 04:51:01 AM ) Total Marks: 1
Suppose we find that the cross-price elasticity of demand for two products is a negative number. We know that:
Select correct option:

The two goods are normal goods.
The two goods are inferior goods.
The two goods are substitutes.
The two goods are complements.

Question # 7 of 15 ( Start time: 04:51:19 AM ) Total Marks: 1
In the long run, profits will equal zero in a competitive market because of:
Select correct option:

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

Question # 8 of 15 ( Start time: 04:51:36 AM ) Total Marks: 1
Which of the following is a correct statement about the substitution effect?
Select correct option:

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.

Question # 9 of 15 ( Start time: 04:51:54 AM ) Total Marks: 1
A price taker is:
Select correct option:

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

Question # 10 of 15 ( Start time: 04:52:17 AM ) Total Marks: 1
If the demand curve for a good is downward sloping, then the good:
Select correct option:

Must be normal.
Must be inferior.
Must be Giffen.
Can be normal or inferior.

Question # 11 of 15 ( Start time: 04:52:33 AM ) Total Marks: 1
If the equilibrium price of bread is Rs. 3 and the government imposes Rs. 2 price ceiling on the price of bread then:
Select correct option:

More bread will be produced to meet the increased demand.
There will be a shortage of bread.
The demand for bread will decrease because suppliers will reduce their supply.
A surplus of bread will emerge.

Question # 12 of 15 ( Start time: 04:52:47 AM ) Total Marks: 1
At the equilibrium price:
Select correct option:

There will be a shortage.
There will be neither a shortage nor a surplus.
There will be a surplus.
There are forces that cause the price to change.

Question # 13 of 15 ( Start time: 04:53:03 AM ) Total Marks: 1
The point at which AC intersects MC is where:
Select correct option:

AC is decreasing.
MC is at its minimum.
AC is at its minimum.
AC is at its maximum.

Question # 14 of 15 ( Start time: 04:53:19 AM ) Total Marks: 1
Microeconomics is the branch of economics that deals with which of the following topics?
Select correct option:

The behavior of individual consumers
Unemployment and interest rates
The behavior of individual firms and investors
The behavior of individual consumers and behavior of individual firms and investors.

Question # 15 of 15 ( Start time: 04:53:37 AM ) Total Marks: 1
Which one of the following is most likely to lead to an increase in aggregate demand? If there is increase in:
Select correct option:

Government tax revenues
Household savings
Business capital investment
Demand for imports

Question # 1 of 15 ( Start time: 04:58:12 AM ) Total Marks: 1
If two goods were perfect complements, their indifference curves would be:
Select correct option:

Straight lines
L-shaped
Rectangular hyperbolas
Parabolic

Question # 2 of 15 ( Start time: 04:58:26 AM ) Total Marks: 1
A group of modern economists who believe that markets clear very rapidly and that expanding the money supply will always increase prices rather than employment are the:
Select correct option:

Keynesians
Monetarists
New Classical school
Post-Keynesians

Question # 3 of 15 ( Start time: 04:58:39 AM ) Total Marks: 1
The cross elasticity of demand of complements goods is:
Select correct option:

Less than 0.
Equal to 0.
Greater than 0.
Between 0 and 1.

Question # 4 of 15 ( Start time: 04:58:52 AM ) Total Marks: 1
In the complete classical model, a rightward shift of the labor supply curve will:
Select correct option:

Decrease the price level and increase the nominal wage
Decrease the nominal wage and increase the price leve
Decrease both the price level and the nominal wage
Increase both the price level and the nominal wage

Question # 5 of 15 ( Start time: 04:59:19 AM ) Total Marks: 1
In economics, the “long run” is a time period in which:
Select correct option:

All inputs are variable.
All inputs are paid for.
All outputs are determined.
All loans are repaid.

Question # 6 of 15 ( Start time: 04:59:46 AM ) Total Marks: 1
If a firm operates in a perfectly competitive market, then it will most likely:
Select correct option:

Advertise its product on television.
Have difficult time obtaining information about the market price.
Settle for whatever price is offered.
Have an easy time keeping other firms out of the market.

Question # 7 of 15 ( Start time: 05:00:04 AM ) Total Marks: 1
Which of the following is considered to be a variable cost in the long run?
Select correct option:

Expenditures for wages.
Expenditures for research and development.
Expenditures for raw materials.
All of the given Costs.

Question # 8 of 15 ( Start time: 05:00:21 AM ) Total Marks: 1
The law of diminishing returns assumes:
Select correct option:

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.

Question # 9 of 15 ( Start time: 05:00:29 AM ) Total Marks: 1
According to the law of diminishing marginal utility, as the consumption of particular good increases:
Select correct option:

Total utility increases.
Marginal utility increases.
Total utility decreases.
Marginal utility decreases.

Question # 10 of 15 ( Start time: 05:00:45 AM ) Total Marks: 1
If the equilibrium price of bread is Rs. 3 and the government imposes Rs. 2 price ceiling on the price of bread then:
Select correct option:

More bread will be produced to meet the increased demand.
There will be a shortage of bread.
The demand for bread will decrease because suppliers will reduce their supply.
A surplus of bread will emerge.

Question # 11 of 15 ( Start time: 05:00:52 AM ) Total Marks: 1
If there is a price ceiling, there will be:
Select correct option:

Shortages.
Surpluses.
Equilibrium.
None of the given options.

Question # 12 of 15 ( Start time: 05:01:05 AM ) Total Marks: 1
The demand curve faced by an individual firm in a competitive market is:
Select correct option:

Upward sloping.
Downward sloping.
Horizontal.
Vertical.

Question # 13 of 15 ( Start time: 05:01:25 AM ) Total Marks: 1
The market structure in which there is interdependence among firms is:
Select correct option:

Monopolistic competition.
Oligopoly.
Perfect competition.
Monopoly.

Question # 14 of 15 ( Start time: 05:01:41 AM ) Total Marks: 1
A rational person does not act unless:
Select correct option:

The action is ethical.
The action produces marginal costs that exceeds marginal benefits.
The action produces marginal benefits that exceeds marginal costs.
The action makes money for the person.

Question # 15 of 15 ( Start time: 05:02:06 AM ) Total Marks: 1
The percentage change in quantity demanded given a percentage change in consumer's income is known as:
Select correct option:

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

Question # 1 of 15 ( Start time: 05:07:44 AM ) Total Marks: 1
What is the reason of leftward shift in the demand curve for product A?
Select correct option:

A decrease in income if A is an inferior good.
An increase in income if A is a normal good.
An increase in the price of a product that is a close substitute for A.
An increase in the price of a product that is complementary to A.

Question # 2 of 15 ( Start time: 05:07:59 AM ) Total Marks: 1
If utility remains the same for original and new combination of goods consumed, the effect of a change in the price of a good on the quantities consumed will be called as:
Select correct option:

Substitution effect.
Real income effect.
Income effect.
Budget effect.

Question # 3 of 15 ( Start time: 05:08:13 AM ) Total Marks: 1
The aggregate supply curve is the relationship between the:
Select correct option:

Price level and the real domestic output purchased
Price level and the real domestic output produced
Price level which producers are willing to accept and the price level purchasers are willing to pay
Real domestic output purchased and the real domestic output produced

Question # 4 of 15 ( Start time: 05:08:28 AM ) Total Marks: 1
A Natural Monopoly is most likely to exist when:
Select correct option:

There are large barriers to entry.
There are long term patents.
There are large economies of scale.
There is government regulation of the industry.

Question # 5 of 15 ( Start time: 05:08:44 AM ) Total Marks: 1
This market situation is much like a pure monopoly except that its member firms tend to cheat on agreed price and output strategies. What is it?
Select correct option:

Duopoly.
Cartel.
Market sharing monopoly.
Natural monopoly

Question # 6 of 15 ( Start time: 05:09:03 AM ) Total Marks: 1
The price elasticity of demand measures the responsiveness of quantity demanded to:
Select correct option:

Quantity demanded.
Quantity supplied.
Price.
Output.

Question # 7 of 15 ( Start time: 05:09:17 AM ) Total Marks: 1
If there is a price ceiling, there will be:
Select correct option:

Shortages.
Surpluses.
Equilibrium.
None of the given options.

Question # 8 of 15 ( Start time: 05:09:29 AM ) Total Marks: 1
Which of the following is TRUE about L-shaped isoquant?
Select correct option:

It is impossible.
It indicates that the firm could switch from one output to another costlessly.
It indicates that the firm could not switch from one output to another.
It indicates that capital and labor cannot be substituted for each other in production.

Question # 9 of 15 ( Start time: 05:09:36 AM ) Total Marks: 1
When government sets the price of a good and that price is below the equilibrium price, the result will be:
Select correct option:

A surplus of the good.
A shortage of the good.
An increase in the demand for the good.
A decrease in the supply of the good.

Question # 10 of 15 ( Start time: 05:10:07 AM ) Total Marks: 1
Which of the following would cause the short run aggregate supply curve to shift to the left, but have no effect over the long run aggregate supply?
Select correct option:

The amount of factors of production (such as labor and capital) increase
The amount of factors of production (such as labor and capital) decrease
Prices of inputs (such as wages or oil prices) increase
Prices of inputs (such as wages or oil prices) decrease

Question # 11 of 15 ( Start time: 05:10:37 AM ) Total Marks: 1
The long run aggregate supply will shift to the right whenever:
Select correct option:

The price level increases
Factors of production (such as labor and capital) increase
Expenditures (such as consumption and net exports) increase
The prices of inputs used to produce goods and services (such as wages and the price of oil) decrease

Question # 12 of 15 ( Start time: 05:10:52 AM ) Total Marks: 1
unlike the classical economists, Keynes believed that the economy could get stuck in the short run for a significant period of time because:
Select correct option:

There was insufficient aggregate supply
There was insufficient aggregate demand
The self correcting mechanisms worked too quickly
The government purchased too many goods and services

Question # 13 of 15 ( Start time: 05:11:43 AM ) Total Marks: 1
The principle economic difference between a competitive and a non-competitive market is:
Select correct option:

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 # 14 of 15 ( Start time: 05:11:58 AM ) Total Marks: 1
The law of diminishing marginal utility indicates that the demand curve is:
Select correct option:

Vertical.
U shaped.
Upward sloping.
Downward sloping.

Question # 15 of 15 ( Start time: 05:12:12 AM ) Total Marks: 1
The total utility curve for a risk neutral person will be:
Select correct option:

Straight line.
Convex.
Concave.
None of the given options.




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