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Economics MCQs for BBA AND MBA, Lecture notes of Economics

Punjab Technical UniversityEconomics

Economics MCQs for Commerce and Management

Typology: Lecture notes

2018/2019
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1.
The process by which resources are transformed into useful forms is
1.A. capitalisation.
1.B. consumption.
1.C. allocation.
1.D. production.
2. The concept of choice would become irrelevant if
1.E. capital were eliminated.
1.F. scarcity were eliminated.
1.G. we were dealing with a very simple, one-person economy.
1.H. poverty were eliminated.
3. Which of the following is not a resource as the term is used by economists?
1.I. money.
1.J. land.
1.K. buildings.
1.L. labour.
4. Capital, as economists use the term,
1.M. is the money the fir m spends to hire resources.
1.N. is money the firm raises from selling stock.
1.O. refers to the process by which resources are transformed into useful forms.
1.P. refers to things that have already been produced that are
in turn used to produce other goods and services.
5. Opportunity cost, most broadly define, is
1.Q. the additional cost of producing an additional unit of output.
1.R. what we forgo, or give up, when we make a choice or a decision.
1.S. a cost that cannot be avoided, regardless of what is done in the future.
1.T. the additional cost of buying an additional unit of a product.
A graph showing all the combinations of goods and services that can be produced if all of society's resources are used efficiently is a
1.U. demand curve.
1.V. supply curve
1.W. production possibility frontier .
1.X. circular-flow diagram.
7. Periods of “less than full employment” of resources correspond to
1.Y. points on the ppf.
1.Z. points outside the ppf.
1.AA. either points inside or outside the ppf.
1.BB. points inside the ppf.
8. What lies is at the heart of the allocation of goods and services in a free-market economy?
1.CC. Concerns of equity or equal distribution among individuals.
1.DD. The order or command of the ruling government or dictator.
1.EE. The wishes of consumers in the market.
1.FF. The price mechanism.
9. The phrase 'ceteris paribus' is best expressed as
1.GG. 'all else equal.'
1.HH. 'everything affects everything else.'
1.II. 'scarcity is a fact of life.'
1.JJ. 'there is no such thing as a free lunch.'
10. Laborator y (or controlled) experiments cannot be performed in economics because:
1.KK. of resource scarcity.
1.LL. economics is a natural science.
1.MM. of the difficulty of distinguishing between normative and positive statements.
1.NN. economics is a social science.
11. Positive statements are:
1.OO. value judgments
1.PP. verifiable or testable
1.QQ. statements in the affirmative
1.RR. good statements
12. The former Soviet Union was an example of:
ASSIGNMENT 1
INTRODUCTION TO ECONOMICS (LECT.
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The process by which resources are transformed into useful forms is 1.A. capitalisation. 1.B. consumption. 1.C. allocation. 1.D. production.

  1. The concept of choice would become irrelevant if 1.E. capital were eliminated. 1.F. scarcity were eliminated. 1.G. we were dealing with a very simple, one-person economy. 1.H. poverty were eliminated.
  2. Which of the following is not a resource as the term is used by economists? 1.I. money. 1.J. land. 1.K. buildings. 1.L. labour.
  3. Capital, as economists use the term, 1.M. is the money the fir m spends to hire resources. 1.N. is money the firm raises from selling stock. 1.O. refers to the process by which resources are transformed into useful forms. 1.P. refers to things that have already been produced that are in turn used to produce other goods and services.
  4. Opportunity cost, most broadly define, is 1.Q. the additional cost of producing an additional unit of output. 1.R. what we forgo, or give up, when we make a choice or a decision. 1.S. a cost that cannot be avoided, regardless of what is done in the future. 1.T. the additional cost of buying an additional unit of a product. ll the combinations of goods and services that can be produced if all of society's resources are used efficiently is a 1.U. demand curve. 1.V. supply curve 1.W. production possibility frontier. 1.X. circular-flow diagram.
  5. Periods of “less than full employment” of resources correspond to 1.Y. points on the ppf. 1.Z. points outside the ppf. 1.AA. either points inside or outside the ppf. 1.BB. points inside the ppf.
  6. What lies is at the heart of the allocation of goods and services in a free-market economy? 1.CC. Concerns of equity or equal distribution among individuals. 1.DD. The order or command of the ruling government or dictator. 1.EE. The wishes of consumers in the market. 1.FF. The price mechanism.
  7. The phrase 'ceteris paribus' is best expressed as 1.GG. 'all else equal.' 1.HH. 'everything affects everything else.' 1.II. (^) 'scarcity is a fact of life.' 1.JJ. 'there is no such thing as a free lunch.'
  8. Laborator y (or controlled) experiments cannot be performed in economics because: 1.KK. of resource scarcity. 1.LL. economics is a natural science. 1.MM. of the difficulty of distinguishing between normative and positive statements. 1.NN. economics is a social science.
  9. Positive statements are: 1.OO. value judgments 1.PP. verifiable or testable 1.QQ. (^) statements in the affirmative 1.RR. good statements
  10. The former Soviet Union was an example of:

ASSIGNMENT 1

INTRODUCTION TO ECONOMICS (LECT.

1.SS. a planned economy 1.TT. free-market/capitalism 1.UU. dictatorship 1.VV. a mixed economy

  1. Rational choice or rational decision-making involves 13.A. comparing the net benefit of a choice with the total net benefit foregone of all the alternatives combined 13.B. weighing up total costs and total benefits associated with a decision 13.C. weighing up m arginal costs and marginal benefits associated with a decision 13.D. all of the above.
  2. The PPF can be used to illustrate: 14.A. the principle of opportunity costs and increasing opportunity costs 14.B. the distinction between micro and macroeconomics 14.C. efficient, infeasible and inefficient production combinations 14.D. all of the above Note for students: Unless otherwise stated, you should assume that we are operating in P-Q space. an refer to the interdependence between: 14.E. two or more factor markets 14.F. (^) goods and factor markets 14.G. goods markets 14.H.all of the above
  3. The 'law of demand' implies that A. as prices fall, quantity dem anded increases. B. as prices fall, demand increases. C. as prices rise, quantity demanded increases. D. as prices rise, demand decreases.
  4. What effect is working when the price of a good falls and consumers tend to buy it instead of other goods? 1.A. the substitution effect. 1.B.the ceteris paribus effect. 1.C.the total price effect. 1.D. the income effect.
  5. The quantity demanded (Qd) of a soft drink brand A has decreased. This could be because: 1.E.A’s consumers have had an increase in income. 1.F. the price of A has increased. 1.G. A’s advertising is not as effective as in the past. 1.H. the price of rival brand B has increased.
  6. Demand curves in P-Q space are derived while holding constant 5.A. consumer tastes and the prices of other goods. 5.B. incomes, tastes, and the price of the good. 5.C. incomes and tastes. or good Z goes up when the price of good Y goes down. We can say that goods Z and Y are 5.D. perfect substitutes. 5.E. unrelated goods. 5.F. complements. 5.G. (^) substitutes.
  7. If the demand for coffee decreases as income decreases, coffee is 5.H. a normal good. 5.I. a complementary good. 5.J. an inferior good. 5.K. a substitute good.
  8. Which of the following will NOT cause a shift in the demand curve for compact discs? 5.L. a change in the price of pre-recorded cassette tapes. 5.M. a change in wealth. 5.N. a change in income. 5.O. a change in the price of compact discs.
  9. Which of the following is consistent with the law of supply? 5.P. As the price of calculators rises, the supply of calculators increases, ceteris paribus. 5.Q. As the price of calculators falls, the supply of calculators increases, ceteris paribus.

hat is the effect of imposing a fixed per unit tax on a good on its equilibrium price and quantity? 5.III. Price falls, quantity rises 5.JJJ. Price rises, quantity falls 5.KKK. Both price and quantity fall 5.LLL. Both price and quantity rise

  1. A price floor is 5.MMM. a maximum price usually set by government, that sellers may charge for a good or service. 5.NNN. a minimum price usually set by government, that sellers m ust charge for a good or service. 5.OOO. the difference between the initial equilibrium price and the equilibrium price after a decrease in supply. 5.PPP. the minimum price that consumers are willing to pay for a good or service. 23 The need for rationing a good arises when A. there is a perfectly inelastic demand for the good. B. supply exceeds demand. C. demand exceeds supply. D. a surplus exists. 24.If the “regulated-market” price is below the equilibrium (or “free-market” price) price, 24.A. the quantity demanded will be greater than quantity supplied. 24.B. demand will be less than supply. 24.C. quantity demanded will be less than quantity supplied. 24.D. quantity demanded will equal quantity supplied.

25.If a government were to fix a minimum wage for workers that was higher than the market- clearing equilibrium wage, economists would predict that 24.E. more workers would become employed. 24.F. there would be more unemployment. 24.G. the costs and prices of firms employing cheap labour would increase. 24.H. wages in general would fall as employers tried to hold down costs.

  1. Alpha Corporation produces chairs. An economist working for the firm predicts that 'if people's incomes rise next year, then the demand for our chairs will increase, ceteris paribus.' The accuracy of the economist's prediction depends on whether the chairs Alpha produce 1.A. are normal goods. 1.B. (^) have few complementary goods. 1.C. have many complementary goods. 1.D. have few substitutes. 2 When the decrease in the price of one good causes the demand for another good to decrease, the goods are A. complements. B. normal. C. inferior. D. substitutes. 3 The price elasticity of demand is the A. ratio of the percentage change in quantity demanded to the percentage change in price. B. ratio of the change in price to the change in quantity demanded. C. ratio of the change in quantity demanded to the change in price. D. ratio of the percentage change in price to the percentage change in quantity demanded. 4 The price of apples falls by 5% and quantity demanded increases by 6%.Demand for apples is: A. inelastic. B. perfectly inelastic. C. elastic. D. perfectly elastic. s by 22% and the quantity of bread demanded falls by 25%. This indicates that demand for bread is 5.A. elastic. 5.B. inelastic.

5.C. unitarily elastic 5.D. perfectly elastic

  1. If the cross-price elasticity of demand between two goods is negative, then the two goods are 5.E. unrelated goods. 5.F. substitutes. 5.G. complements. 5.H. normal goods. e of chicken increases by 20%, the cross-price elasticity of demand between beef and chicken is A. -4. B. 4. C. -0.25. D. 0.25. finance health- care projects. The demand for cigar ettes is price inelastic. Which of the following statements is TRUE? 5.I. This is a very good way to raise revenue both in the short term and in the long term because there are no substitutes for cigarettes. 5.J. (^) The tax on cigarettes will raise substantial revenue in the short term, but may not raise as much revenue as anticipated in the long term because the demand for cigarettes is likely to become more elastic over time. 5.K. This tax will not raise much revenue either in the short term or the long term since demand is price inelastic. 5.L. No tax revenue can be raised in this way because sellers of cigarettes will just lower their price by the amount of the tax and therefore the price of cigarettes to consumers will not change.
  2. The burden (incidence) of a tax will fall mainly on the producers if: 5.M. The producers are the ones legally obliged to pay the tax. 5.N. Supply is inelastic and dem and is elastic. 5.O. Demand is inelastic and supply is elastic. 5.P. There are many producers in the market. ivided by the % change in income. Which type of goods have negative income elasticity of demand? 5.Q. Inferior goods. 5.R. Normal goods. 5.S. Substitute goods. 5.T. Complementary goods.
  3. Each type of elasticity has its own set of determinants. You are given four determinants below. Match them with the three types of elasticity given: 11.A. The number and closeness of substitute goods: 11.B. Time: 11.C. The proportion of income spent on the goods : 11.D. The rate at which the desire for a good is satisfies as consumption increases: PES: price elasticity of supply IED: Income elasticity of demand PED: price elasticity of demand A. i = IED; ii = PES; iv: PED B. i = IED, ii, iii, iv = PED C. i, ii and iii = PED; iv = IED; ii = PES D. None of the above where “=” means “is a determinant of” 12 If total revenue rises by 10% when price increases by 5%, this means: A. demand is price inelastic D.B. (^) demand is price elastic D.C. demand is unit elastic D.D. demand is perfectly inelastic
  4. If a 5% increase in price causes no change in total revenue, this means: 13.A. demand is price inelastic 13.B. demand is price elastic 13.C. demand is unit elastic 13.D. demand is perfectly inelastic
  5. Which of the following statements is true: 13.E. Because a straight line demand curve has constant slope, price elasticity of demand will remain constant as we move along various points on the curve.

2.E. total satisfaction will decrease as more units of the good are consumed. 2.F. the satisfaction derived from each additional unit of a good consumed will decrease. 2.G. total utility will become negative. 2.H. Both the first and third option.

  1. By total consumer surplus economists mean (in P-Q space)

2.I. The area of t he triangle formed by the demand curve, the price axis and the equilibrium price line. 2.J. the area between the average revenue and marginal revenue curves. 2.K. (^) the difference between the maximum price the consumer is willing to pay for a good (vertical-intercept of demand curve) and the minimum price the producer is willing to sell at (vertical intercept of supply curve). 2.L. A and C. for bouquets of flowers is P = 40 - 2Q. If the price of a bouquet is Rs18, her consumer surplus will be 2.M. Rs 2.N. Rs121. 2.O. Rs11. 2.P. Rs242. ls to $1.25 and you still buy three ice cream cones per week, which of the following is (are) correct? 2.Q. The marginal utility of the fourth ice cream cone per week must be worth less than $1.25 to you. 2.R. The total utility of the four ice cream cones per week must be worth less than $5.75 (=3$1.50 +$1.25) to you. 2.S. The total utility of the four ice cream cones per week must be less than $5.00 (3$1.25+$1.25) to you. 2.T. (^) None of the above.

  1. Economists have used the idea of diminishing marginal utility to explain why

2.U. demand curves slope downwards. 2.V. demand curves become flatter at lower prices. 2.W. demand curves are inelastic. 2.X. Both the first and second option.

  1. A consumer will buy more units of a good if the value of the good's

2.Y. total utility is greater than price. 2.Z. marginal utility is less than price. 2.AA. marginal utility is greater than price. 2.BB. total utility is less than price. mond-water paradox can be explained by suggesting that the price of a product is determined by 2.CC. consumer incomes. 2.DD. its marginal utility. 2.EE. consumer surplus. 2.FF. (^) diminishing marginal utility.

  1. A utility-maximising consumer changes her spending on goods X and Y until

2.GG. MUx = MUy 2.HH. Px (MUx) = Py(MUy) 2.II. TUx/Px = TUy/Py 2.JJ. MUx (Py) = MUy (Px)

  1. The MUx/MUy ratio is 10 and the Px/Py ratio is 8, so the consumer should buy

2.KK. less X and more Y. 2.LL. more X and more Y. 2.MM. more X and less Y. 2.NN. less X and less Y.

  1. Economists define an indifference curve as the set of points 2.OO. at which the consumer is in equilibrium as the consumer's income changes. 2.PP. which yield the same marginal utility. 2.QQ. which yield the same total utility. 2.RR. At which the consumer is in equilibrium as prices change.
  2. Which of the following is a property of an indifference curve? 2.SS. the marginal rate of substitution is constant as you move along an indifference curve. 2.TT. marginal utility is constant as you move along an indifference curve. 2.UU. it is convex to the origin. 2.VV. total utility is greatest where the 45 degree line cuts the indifference curve.

imits imposed on household choices by income, wealth, and product prices are captured by the 2.WW. budget constraint. 2.XX. choice set. 2.YY. assumption of perfect knowledge. 2.ZZ. preference set. of clothing is Rs250. Which of the following pairs of food and clothing are in the Waris's choice set? 2.AAA. (^) 50 units of clothing and 50 units of food. 2.BBB. 20 units of clothing and 50 units of food. 2.CCC. 10 units of clothing and 25 units of food. 2.DDD. 0 units of clothing and 50 units of food.

  1. If a household's money income is doubled, 2.EEE. the budget constraint will shift in and parallel to the old one. 2.FFF. the budget constraint is not affected. 2.GGG. the budget constraint will swivel outward at the Y-intercept. 2.HHH. the budget constraint will shift out parallel to the old one. we keep indifference curves constant and move the budget line parallel to its original position is 2.III. the income-consumption curve. 2.JJJ. the Engel curve. 2.KKK. the demand curve. 2.LLL. the income-demand curve.

er does not buy the machine. What can you conclude about the consumer ’s attitude towards risk?

23.E. She is risk averse 23.F. She is risk neutral 23.G. She is risk loving 23.H.We do not have enough information to answer the question

  1. The concept of diminishing marginal utility of income (DMUy) helps explain: 23.I. (^) why a marginal dollar might have higher utility for a pauper than a millionaire 23.J. why the total utility curve (in Utility-Income space) is convex 23.K. why the average consumer is risk-averse 23.L. all of the above

oral hazard” and “adverse selection” are problems related to asymmetric information, that arise 23.M. in ex-ante and ex-post contexts, respectively 23.N. in ex-post and ex-ante contexts, respectively 23.O. in ex-ante contexts 23.P. in ex-post contexts 1 Profit- maximising fir ms want to maximize the difference between A. total revenue and total cost. B. marginal revenue and marginal cost. C. marginal revenue and average cost. D. total revenue and marginal cost.

  1. Which statement is FALSE? 2.A. Fixed costs do not depend on the fir m's level of output. 2.B. Fixed costs are zero if the firm is producing nothing. Fixed costs are the difference between total costs and total variable costs. 2.C. There are no fixed costs in the long run.
  2. Which of the following is most likely to be a variable cost for a fir m? 2.D. The monthly rent on office space that it leased for a year. 2.E. The franchiser's fee that a restaurant must pay to the national restaurant chain. 2.F. The interest payments made on loans. 2.G. Workers’ wages.
  3. The costs that depend on output in the short run are 2.H. total variable costs only. 2.I. both total variable costs and total costs. 2.J. total costs only.

2.K. total fixed cost only.

  1. The short run, as economists use the phrase, is characterized by

2.L. a period where the law of diminishing returns does not hold. 2.M. at least one fixed factor of production, and firms neither leaving nor entering the industr y. 2.N. all inputs being variable. 2.O. no variable inputs - that is all of the factors of production are fixed.

  1. Diminishing marginal returns implies

2.P. increasing average fixed costs. 2.Q. decreasing marginal costs. 2.R. decreasing average variable costs. 2.S. increasing marginal costs. s a correct statement about the relationship between average product (AP) and marginal product (MP)? 2.T. If AP is at a maximum, then MP is also. 2.U. If TP is declining then AP is negative. 2.V. If AP exceeds MP, then AP is falling. 2.W. If AP = MP, then total product is at a maximum. If the total product of two workers is 80 and the total product of 3 workers is 90, then the inal product of the third worker is and the average product of the third worker is . A. 270; 160 B. 3.33; 10 C. 10; 30 D. 30; 10 inputs will cause a 15% increase in output. Assuming that input prices remain constant, you correctly deduce that such a change will cause as output increases. 2.X. Long- run average costs to increase 2.Y. Long- run marginal costs to increase 2.Z. Long-run average costs to remain constant 2.AA. Long- run average costs to decrease nt and diseconomies of scale beyond that point. Its long-run average cost curve is most likely to be 2.BB. upward sloping to the right. 2.CC. U-shaped. 2.DD. horizontal. 2.EE. downward sloping to the right.

  1. The amount of profit a firm makes can be shown on a diagram using 2.DDD. the AC and AR curves. 2.EEE. the MR and AR curves. 2.FFF. the AC and MC curves. 2.GGG. the MR and MC curves.
  2. A firm’s choice of profit-maximising output can be shown on a diagram using 2.HHH. the AC and AR curves. 2.III. the MR and AR curves. 2.JJJ. the AC and MC curves. 2.KKK. the MR and MC curves.
  3. A firm will shut down in the short run if 2.LLL. total variable costs exceed total revenues. 2.MMM. average cost exceeds price. 2.NNN. total costs exceed total revenues. 2.OOO. it is suffering a loss.
  4. If you were running a fir m in a perfectly competitive industry you would be spending your time making decisions on 1.A. how much of each input to use. 1.B. how much to spend on advertising. 1.C. (^) what price to charge. 1.D. the design of the product.
  5. Market power is 1.E. a firm's ability to charge any price it likes. 1.F. a firm's ability to raise price without losing all demand f or its product. 1.G. a firm's ability to sell any amount of output it desir es at the market- determined price. 1.H. a firm's ability to monopolise a market completely.
  6. When substitutes exist, a monopolist has power to raise price. 1.I. more; more 1.J. fewer; less 1.K. no; infinite 1.L. more; less
  7. If a firm has some degree of market power, then output price 1.M. becomes a decision variable for the firm. 1.N. is determined by the actions of other firms in the industry. 1.O. no longer influences the amount demanded of the firm's product. 1.P. is guaranteed to be above a firm's average cost.
  8. Relative to a competitively organised industry, a monopoly

1.Q. produces less output, charges lower prices and earns economic profits. 1.R. produces more output, charges higher prices and earns economic profits. 1.S. produces less output, charges higher prices and earns economic profits. 1.T. produces less output, charges lower prices and earns only a normal profit.

  1. The cosmetics industr y is not considered by economists to be a good example of perfect competition because 1.U. firms spend a large amount of money on advertising. 1.V. profit margins are very high for both producers and retailers. 1.W. (^) there are a very large number of firms in the industry. 1.X. there are many government health controls on cosmetic products.
  2. If fir ms can neither enter nor leave an industr y, the relevant time period is the 1.Y. (^) long run. 1.Z. immediate run. 1.AA. intermediate run. 1.BB. short run.
  3. In the long run 1.CC. there are no fixed factors of production. 1.DD. all firms must make economic profits. 1.EE. a firm can vary all inputs, but it cannot change the mix of inputs it uses. 1.FF. a firm can shut down, but it cannot exit the industry.
  4. A normal rate of profit 1.GG. is the rate of return on investments over the interest rate on risk-free government bonds. 1.HH. is the rate that is just sufficient to keep owners or investors satisfied. 1.II. Means zero return for owners or investors. 1.JJ. is the difference between total revenue and total costs.
  5. If Wafa Enterprises is earning a rate of return greater than the return necessary for the business to continue operations, then 1.KK. total costs exceed normal profit. 1.LL. (^) the firm is earning an economic profit. 1.MM. normal profit is zero. 1.NN. total costs exceed total revenue.
  6. Economic profits are 1.OO. the difference between total revenue and total costs. 1.PP. anything greater than the normal opportunity cost of investing. 1.QQ. a rate of profit that is just sufficient to keep owners and investors satisfied. 1.RR. the opportunity costs of all inputs.
  7. The slope of the marginal revenue curve is

1.SSS. because of barriers to exit from the industry. 1.TTT. by virtue of size alone.

  1. A monopolistically competitive firm that is incurring a loss will produce as long as the price that the firm charges is sufficient to cover 1.UUU. advertising costs. 1.VVV. fixed costs. 1.WWW. marginal costs. 1.XXX. variable costs.
  2. A fir m in a monopolistically competitive industry 1.YYY. must lower price to sell more output. 1.ZZZ. sells a fixed amount of output regardless of price. 1.AAAA. can sell an infinite amount of output at the market-determined price. 1.BBBB. must raise price to sell more output.
  3. The “long-run” equilibrium outcomes in monopolistic competition and perfect competition are similar in the sense that under both market structures 1.CCCC. firms will only earn a normal profit. 1.DDDD. the efficient output level will be produced in the long run. 1.EEEE. fir ms will be producing at minimum average cost. 1.FFFF. (^) fir ms realise all economies of scale.
  4. A form of industry structure characterised by a few firms each large enough to influence market price is 1.GGGG. monopolistic competition. 1.HHHH. monopoly. 1.IIII. perfect competition. 1.JJJJ. oligopoly.
  5. When one fir m in the cooking oil market started an advertising campaign that stressed the nutritional value of its cooking oil, all other cooking oil manufacturers started similar advertising campaigns. This suggests that the cooking oil market is 1.KKKK. monopolistically competitive. 1.LLLL. oligopolistic. 1.MMMM. perfectly competitive. 1.NNNN. indeterminate from this information.
  6. An industry that has a relatively small number of firms that dominate the market is called 1.OOOO. a natural monopoly. 1.PPPP. a colluding industry. 1.QQQQ. a merged industry. 1.RRRR. a concentrated industry.
  7. Assume that firms in an oligopoly are currently colluding to set price and output to maximise total industry profit. If the oligopolists are forced to stop colluding, the price charged by the oligopolists will and the total output produced will.

1.SSSS. increase; decrease 1.TTTT. increase; increase 1.UUUU. decrease; decrease 1.VVVV. decrease; increase

  1. A group of fir ms that gets together to make price and output decisions is called 1.WWWW. a non-collusive oligopoly. 1.XXXX. price leadership. 1.YYYY. a cartel. 1.ZZZZ. (^) a concentrated industry.
  2. In which of the following circumstances would a cartel be most likely to work? 1.AAAAA. The coffee market, where the product is standardised and there are a large number of coffee growers. 1.BBBBB. The automobile industry, where there are few producers but there is great product differentiation. 1.CCCCC. The market for copper, where there are very few producers and the product is standardised. 1.DDDDD. The fast-food market, where there are a large number of producers but the demand for fast food is inelastic.
  3. A collusive oligopoly (with a dominant price leader) will produce a level of output 1.EEEEE. that would prevail under perfect competition. 1.FFFFF. between that which would prevail under perfect competition and that which a monopolistic competitor would choose in the same industry. 1.GGGGG. between that which would prevail under perfect competition and that which a monopolist would choose in the same industr y. 1.HHHHH. equal to what a m onopolist would choose in the same industry.
  4. The kinked demand curve model of oligopoly assumes that the price elasticity of demand 1.IIIII. in response to a price increase is more than the elasticity of demand in response to a price decrease. 1.JJJJJ. is constant regardless of whether price increases or decreases. 1.KKKKK. is infinite if price increases and zero if price decreases. 1.LLLLL. in response to a price increase is less than the elasticity of demand in response to a price decrease.
  5. Price discrimination involves 1.MMMMM. fir ms selling different products at different prices to different consumers. 1.NNNNN. firms selling the same product at different prices to different consumers. 1.OOOOO. consumers discriminating between different sellers on the basis of the different prices they quote for different products.

2.L. a decrease in the overall price level.

5. A recession is

2.M. a period of declining prices.

2.N. a period during which aggregate output declines.

2.O. a period of declining unemployment.

2.P. a period of falling trade volumes.

6. Involuntary unemployment means that

2.Q. people are not willing to work at the going wage rate.

at the going wage rate, there are people who want to work but

cannot B.

find work.

C. there are some people who will not work at the going wage rate.

D. there is excess demand in the labour market.

in the income tax rate designed to encourage household consumption is an example of

2.R. expansionary demand-side policy.

2.S. contractionary demand-side policy.

2.T. expansionary supply-side policy.

2.U. contractionary supply-side policy.

to reduce the cost of capital and hence encourage business investment is an example of

2.V. expansionary demand-side policy. 2.W. contractionary demand-side policy. 2.X. expansionary supply-side policy. 2.Y. contractionary supply-side policy.

  1. Macroeconomics is the branch of economics that deals with 2.Z. the economy as a whole. 2.AA. imperfectly competitive markets. 2.BB. only the long run adjustments to equilibrium in the economy. 2.CC. the functioning of individual industries and the behaviour of individual decision-making units - business firms and households. ities do not provide the only rationale for macroeconomic policy activism are called: 2.DD. New-Keynesians. 2.EE. Keynesians. 2.FF. Monetarists. 2.GG. The Classical school. and de- emphasised the Classical theory developed as the result of the failure of 2.HH. economic theory to explain the simultaneous increases in inflation and unemployment during the 1970s. 2.II. fine tuning during the 1960s. 2.JJ. the economy to grow at a rapid rate during the 1950s. the Classical model to explain the prolonged existence of high D. unemployment during the Great Depression. ed falling wages were not a solution to persistent unemployment because 2.KK. falling wages demoralised workers. 2.LL. this would reduce the purchasing power of labourers as consumers. This in turn would bleaken firms’ prospects of selling more goods, hence inducing them to cut their investment (and hence labour) demand. 2.MM. the unemployment was caused by frictional and structural factors. 2.NN. wages would fall more than required to clear the labour market.