#ince 10
MANAGEMENT ADVISORY SERVICES MAS.1 Economics
ABELEDA/BOBADILLA/URO OCTOBER 2013 MULTIPLE COICE
1. If both the supply and the demand for a good increase, the market price will a. Rise Rise only only in the the case case of an inel inelas asti tic c supply function. b. Fall Fall only only in the the case case of an inel inelas asti tic c supply function. c. Not be predictable with only these facts. d. Rise Rise only only in the the case case of an inel inelas astic tic demand function.
d. shif shiftt the the demand mand cur cure of the the -oi -oint commodity to the right . &emand &emand for a produ product ct tends to be price inelastic if a. the prod product uct is is consid considere ered d a lu/ury lu/ury item item b. few good good comple complemen ments ts for for the prod product uct are aailable c. the the popu popula lati tion on in the mark market et area area is large d. peop eople spen spend d a lar large sha share of thei theirr income on the product
2. A supply cure illustrates the relationship between a. !rice and "uantity supplied b. !rice and consumer tastes c. !ric !rice e and and "uan "uanti tity ty dem deman ande ded d d. #upp #upply ly and and dem deman and d
0. (hich of the following has the highest price elasticity coefficient) a . i lk b. a aca caro roni ni and and chee cheese se c. %read d. #ki boats
$. As a business owner you hae determined that the demand for your product is inelastic. %ased upon this assessment you understand that a. Increasing the price of your product will increase total reenue b. &ecr &ecrea easi sing ng the pric price e of your your prod produc uctt will increase total reenue c. Incr Increa easi sing ng the the pric price e of your your prod produc uctt will hae no effect on total reenue d. Incr Increa easi sing ng the the pric price e of your your prod produc uctt will increase competition
1. 3he local ideo store4s business increased by 125 125 after after the the moi moie e thea theate terr rais raised ed its its prices from !+* to !. 3hus, relatie relatie to moie moie theater admissions, ideos are a. subs substi titu tute te good goods s b. supe superi rior or good goods s c. comp comple leme ment ntar ary y good goods s d. publi ublic c goo ood ds
'. . (hich one of the following has an inerse inerse relationship with the demand for money) a. Aggregate income b. Interest rates c. Flow of funds d. !rice leels
11. An indiidual receies receies an income of !$, per per month month,, and and spen spends ds !2,* !2,* .. An incr increa ease se in inco income me of !* !* per per mont month h occurs, and the indiidual spends !2,. 3he indi indiidu idual4 al4s s margin marginal al prope propensi nsity ty to sae is a. .2 c. .+ b. .' d. .
*. An improement in technology that in turn leads leads to improe improed d worker worker producti productiity ity would would most likely result in a. A shift shift to the the right right in the the suppl supply y cure cure and and a lowe loweri ring ng of the the pric price e of the the output. b. A shift shift to the the left left in the sup suppl ply y cur cure e and and a lowe loweri ring ng of the the pric price e of the the output. c. An incr increas ease e in the the pric price e of the output output if demand is unchanged. d. (age age inc incre reas ases es..
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In any compe competi titi tie e mark market et,, an e"ual e"ual increase in both demand and supply can be e/pected to always a. increase both both price and market6clearing market6clearing "uantity b. decrease both price and market6 clearing "uantity c. increa increase se mark market et6cl 6clear earing ing "uan "uantit tity y d. incr increa ease se pric price e
1$. 1$. 7ie 7ien n the the foll follow owin ing g data data,, what what is the the marginal propensity to consume) 8eel of &isposable income 9onsumption !', !$, ', '', a. 1.$$ c. .0* b. 1.1+ d. .*
+. (hich (hich of the follow following ing marke markett featur features es is like likely ly to caus cause e a surp surplu lus s of a part partic icul ular ar product) a. A monopoly c. A price ceiling b. A price floor d. A perfect market . A decrease in the price of a complementary good will a. shi shift the the dem demand and cur ure of the the -oint oint commodity to the left b. increa increase se the the price price paid paid for for a substi substitut tute e good c. shift the supply cure of the -oint commodity to the right
1'. (hich of the following will cause a shift in the supply cure of a product) a. 9hang 9hanges es in the pri price ce of of the produc product. t. b. 9hang 9hanges es in produc productio tion n ta/e ta/es. s. c. 9han 9hange ges s in con consu sume merr ta/e ta/es. s. d. 9han 9hang ges in the numb number er of buye buyers rs in the market.
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1*. (hen the goernment imposes health and safety regulations on certain products, one of the most likely results is a. greater consumption of the product b. lower prices for the product c. greater ta/ reenues for the goernment d. higher prices for the product
a.
A rise in the price of a substitute product. b. A rise in aerage household income. c. A rise in the price of a complementary commodity. d. A rise in the population. 2$. !rice ceilings a. are illustrated by goernment price support programs in agriculture b. create prices greater than e"uilibrium prices c. create prices below e"uilibrium prices d. result in persistent surpluses
1+. In which of the following situations would there be inelastic demand) a. A *5 price increase results in $5 decrease in the "uantity demanded. b. A '5 price increase results in a +5 decrease in the "uantity demanded. c. A '5 price increase results in a '5 decrease in the "uantity demanded. d. A $5 price decrease results in *5 increase in the "uantity demanded.
2'. ; and < are substitute products. If the price of product < increases, the immediate impact on product ; is a. price will increase b. "uantity demanded will increase c. "uantity supplied will increase d. price, "uantity demanded, and supply will increase
1. In a competitie market for labor in which demand is stable, if workers try to increase their wage a. employment must fall b. goernment must set a ma/imum wage below the e"uilibrium wage c. firms in the industry must become smaller d. product supply must decrease
2*. (ilson 9orporation has a ma-or competitor that produces a product that is a close substitute for (ilson4s good. If the coefficient of cross6elasticity of demand for (ilson4s product with respect to the competitor4s product is 2. and the competitor decreases its price by *5, what is the e/pected effect on demand for (ilson4s product) a. A *5 increase in demand b. A 15 increase in demand c. A *5 decrease in demand d. A 15 decrease in demand
1. A polluting manufacturing firm tends, from the societal iewpoint, to a. price its products too low b. produce too little output c. report too little profitability d. employ too little e"uity financing 10. If the goernment regulates a product or serice in a competitie market by setting a ma/imum price below the e"uilibrium price, what is the long6run effect) a. A surplus b. A decrease in demand c. A shortage d. No effect on the market
2+. If a group of consumers decide to boycott a particular product, the e/pected result would be a. An increase in the product price to make up lost reenue b. A decrease in the demand for the product c. An increase in product supply because of increased aailability d. 3hat demand for the product would become completely inelastic
2. A alid reason for the goernment to interene in the wholesale electrical power market would include which one of the following) a. A price increase that is more than e/pected. b. :lectricity is an essential resource and the wholesale market is not competitie. c. 3he electricity distribution companies are losing money. d. Foreign power generators hae contracts with the local goernment at ery high prices.
2. (hich of the following is not likely to affect the supply of a particular good) a. 9hanges in goernment subsidies. b. 9hanges in technology c. 9hanges in consumer income d. 9hanges in production costs 2. If a product4s demand is elastic and there is a decrease in price, the effect will be a. a decrease in total reenue b. No change in total reenue c. A decrease in total reenue and the demand cure shifts to the left d. An increase in total reenue
21. If the income elasticity of demand coefficient for a particular product is $., the good is likely a. A lu/ury good b. An inferior good c. A complementary good d. A necessity 22.
20. All of the following are complementary goods e/cept a. margarine and butter b. 9ameras and rolls of film c. =9Rs and ideo cassettes d. Ra>ors and ra>or blades
(hich one of the following would cause the demand cure for a commodity to shift to the left)
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$. 3he law of diminishing marginal utility states that a. arginal utility will decline as a consumer ac"uires additional units of a specific product b. 3otal utility decline as a consumer ac"uires additional units of a specific product c. &eclining utilities causes the demand cure to slope upward d. 9onsumers4 wants will diminish with the passage of time
a. b. c. d.
Nothing, the two functions are identical 3he leel of technology 9hanges in goernment subsidies 3he nature of the costs
$. If consumer confidence falls, the impact upon the economy is a. A downturn b. No change c. An upturn d. 9onsumer confidence does not hae an impact upon the economy
$1. In the pharmaceutical industry where a diabetic must hae insulin no matter the cost and where there is no other substitute, the diabetic4s demand cure is best described as a. !erfectly elastic c. !erfectly inelastic b. :lastic d. Inelastic
$0. &uring the recessionary phase of a business cycle a. 3he purchasing power of money is likely to decline rapidly b. 3he natural rate of unemployment will increase dramatically c. !otential national income will e/ceed actual national income d. Actual national income will e/ceed potential national income
$2. %ecause of the e/istence of economies of scale, business firms may find that a. :ach additional unit of labor is less efficient than the preious unit b. As more labor is added to a factory, increases in output will diminish in the short run c. Increasing the si>e of a factory will result in lower aerage costs d. Increasing the si>e of a factory will result in lower total costs
'. For a gien leel of ta/ collections, prices, and interest rates, a decrease in goernmental purchases will result in a@n a. Increase in aggregate demand b. Increase in aggregate supply c. &ecrease in aggregate demand d. &ecrease in aggregate supply '1. In national income terms, aggregate demand is the a. &emand for money by the community in a period of full employment b. 3otal e/penditure on capital goods by entrepreneurs during a period of full employment c. &emand that is needed if a country4s economy is to operate at optimum leel and the leel of inestment is to be raised d. 3otal e/penditures on consumer goods and inestment, including goernment and foreign e/penditures, during a gien period
$$. In the long run, a firm may e/perience increasing returns due to a. 8aw of diminishing returns b. ?pportunity costs c. 9omparatie adantage d. :conomies of scale $'. 3he measurement of the benefit lost by using resources for a gien purpose is a. :conomic efficiency b. ?pportunity costs c. 9omparatie adantage d. Absolute adantage $*. arginal reenue is a. :"ual to price in monopolistic competition b. 3he change in total reenue associated with increasing prices c. 7reater than price in pure competition d. 3he change in total reenue associated with producing and selling one more unit
'2. (hich one of the following would not be included in the calculation of the gross domestic product) a. !urchase of a new home b. An automotie worker4s wages c. A doctor4s fee d. !urchase of common stock '$. An upturn in economic actiity is indicated by all of the following, e/cept a. Increased housing starts b. Reduction in the "uantity of unemployment claims c. Increase in personal trael d. Reduction in the amount of lu/ury purchases
$+. In microeconomics, the distinguishing characteristic of the long run on the supply side is that a. ?nly supply factors determine price and output b. ?nly demand factors determine price and output c. Firms are not allowed to enter or e/it the industry d. All inputs are ariable
''. (hich of the following may proide a leading indicator of a future increase in gross domestic product) a. A reduction in the money supply b. A decrease in the issuance of building permits c. An increase in the timeliness of
$. (hat is the main factor that differentiates the short6run cost function from the long6 run cost function)
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d.
deliery by endors An increase in the aerage hours worked per week of production workers
help reduce demand6pull inflation would be to a. &ecrease the rate of growth of the money supply b. Increase both ta/es and goernment spending c. &ecrease ta/es and increase goernment spending d. Increase ta/es and decrease goernment spending e. *2. 3he money supply in a nation4s economy will decrease following a. ?pen6market purchases by the nation4s central bank b. A decrease in the discount rate c. An increase in the resere ratio d. A decrease in the margin re"uirement
'*. (hich one of the following statements about leading economic indicators is not true) a. For forecasting purposes, seeral ariables are monitored and weighted6 aerage is referred to as the inde/ of leading indicators b. 3he inde/ of leading indicators has historically been ery accurate c. 3he use of the inde/ of leading indicators inoles monitoring the data on a monthly basis d. As the nature of the economy has changed, it has been necessary to reise the components of the inde/ of leading indicators
*$. According to fiscal policy principles, a ta/ increase will a. Increase spending and increase aggregate demand b. Increase spending and reduce aggregate demand c. Reduce spending and increase aggregate demand d. Reduce spending and reduce aggregate demand
'+. &isposable income is calculated as a. 7ross domestic product minus the capital cost allowance b. Net domestic product minus indirect business ta/es plus net income earned abroad c. !ersonal income minus transfer payments d. !ersonal income minus personal ta/es
*'. (hich of the following instruments of monetary policy is the most important means by which the money supply is controlled) a. 9hanging the resere ratio b. ?pen6market operations c. anipulation of goernment spending d. 9hanging the discount rate
'. 3he primary reason for allowing legal immigration into industrial nations is the immigrants4 potential for a. Reducing a trade deficit b. Fulfilling a trade agreement c. 9ontributing to economic growth d. Fulfilling a political agreement '. #ome economic indicators lead the economy into a recoery or recession, and some lag it. An e/ample of a lagging indicator is a. 9hronic unemployment b. Bousing starts c. ?rders for consumer and producer goods d. 9onsumer e/pectations
**. If a goernment were to use only fiscal policy to stimulate the economy from a recession, it would a. Raise consumer ta/es and increase goernment spending b. 8ower business ta/es and goernment spending c. Increase the money supply and increase goernment spending d. 8ower consumer ta/es and increase goernment spending
'0. 7oernment borrowing to finance large deficits increases the demand for lendable funds and a. Increases the supply of lendable funds b. Bas no impact on interests c. :/erts downward pressure on interest rates d. !uts upward pressure on interest rates
*+. 3he national budget deficit is the a. total accumulation of the national goernment4s surpluses and deficits b. :/cess national and local spending oer their reenues c. Amount by which the national goernment4s e/penditures e/ceed its reenues in a gien year d. Amount by which liabilities e/ceed assets on the national goernment4s balance sheet
*. A period of rising inflation a. Increases the price leel, which benefits those who are entitled to receie specific amounts of money b. :nhances the positie relationship between the price leel and the purchasing power of money c. (ill not be affected by contracts that include the inde/ing of payments d. Increases the price leel, which is negatiely related to the purchasing power of money
*. (hich of the following is a tool of monetary policy that a nation4s central bank could use to stabili>e the economy during an inflationary period) a. #elling goernment securities b. 8owering bank resere re"uirements c. 8owering bank discount rates d. :ncouraging higher ta/ rates
*1. 3he most effectie fiscal polity program to
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*. :conomists and economic policy makers are interested in the multiplier effect because the multiplier e/plains why a. A small change in inestment can hae a much larger impact on gross domestic product b. 9onsumption is always a multiple of saings c. 3he money supply increases when deposits in the banking system increase d. 3he elocity of money is less than one
+*. All of the following are true about international trade e/cept that a. the gains from international trade depend on speciali>ation with comparatie adantage b. absolute adantage without comparatie adantage does not result in gains from international trade c. absolute adantage is defined as the ability of one nation to produce a product a relatiely lower opportunity cost than other nation d. (here there is a reciprocal absolute adantage between two countries, speciali>ation will make it possible to produce more of each product
*0. Assume that the 9ongress passes a ta/ bill that proides for a CrebateD to ta/payers. ?ne the goals of the rebate is a. Increase consumer disposable income and e/pand the economy b. Increase consumer disposable and contract the economy c. &ecrease consumer disposable income and e/pand the economy d. Increase consumer disposable income and contract the economy +.
++. If the central bank of a country raises interest rates sharply, the country4s currency will most likely a. . increase in relatie alue b. remain unchanged in alue c. decrease in relatie alue d. decrease sharply in alue at first and then return to its initial alue
3he rate of unemployment caused by changes in the composition of unemployment opportunities oer time is referred to as the a. Frictional unemployment rate b. #tructural unemployment rate c. 9yclical unemployment rate d. Full6employment unemployment rate
+. (hich one of the following groups would be the primary beneficiary of a tariff) a. &omestic producers of e/port goods b. &omestic producers of goods protected by the tariff c. &omestic consumers of goods protected by the tariff d. Foreign producers of goods protected by the tariff
+1. 3he producer price inde/ measures a. 3he price of a basket of commodities at the point of the first commercial sale b. !rice changes for all products sold by domestic producers to foreigners c. !rice changes of goods purchased for other countries d. 3he price of a fi/ed market basket of goods and serices purchased by a typical urban consumers
+. In the law of comparatie adantage, the country which should produce a specific product is determined by a. ?pportunity costs b. !rofit margins c. :conomic order "uantities d. 3ariffs +0. Assuming e/change rates are allowed to fluctuate freely, which one of the following factors would likely cause a nation4s currency to appreciate on the foreign e/change market) a. A relatiely rapid rate of growth in income that stimulates imports b. A high rate of inflation relatie to other countries c. A slower rate of growth in income than in other countries, which causes imports to lag behind e/ports d. &omestic real interest rates that are lower than real interest rates abroad
+2. (hich of the following is true about deflation) a. It motiates consumers to borrow money b. It motiates businesses to make inestments c. It results in ery low interest rates d. It results in economic e/pansion +$. :conomies often e/perience inflation but seldom e/perience long period of deflation. (hich of the following is true about a deflationary economy) a. 9ompanies are hesitant to make inestments b. 3he lower prices encourage consumers to make ma-or purchases c. Interest rates tend to be high d. Actual 7&! is aboe potential 7&!
. a. b. c.
:/change rates are determined by :ach industrial country4s goernment 3he International onetary Fund #upply and demand in the foreign currency market d. :/porters and importers of manufactured goods
+'. (hat factors e/plains the difference between real and nominal interest rates) a. Inflation risk b. 9redit risk c. &efault risk d. arket risk
1. (hich of the following measures creates the most restrictie barrier to e/porting to a country) a. 3ariffs c. :mbargoes
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b. Euotas d. :/change controls
permit only one efficient supplier d. 3he goernment is the only supplier
2. (hen net e/ports are negatie, there is a net flow of a. 7oods from firms in foreign countries to the domestic country b. oney from foreign countries to the firms of the domestic country c. 7oods from the firms of the domestic country to foreign country d. 7oods and serices which result in a trade surplus $.
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1. (hich of the following is not a key assumption of perfect competition) a. Firms sell a homogeneous product b. 9ustomers are indifferent about which firm they buy from c. 3he leel of a firm4s output is small relatie to the industry4s total output d. :ach firm can price its product aboe the industry price
(hich of the following factors is least likely to affect a country4s foreign currency e/change rates) a. Interest rates in the country b. Inflation in the country c. !olitical stability in the country d. 3he ta/ rate in the country
2. 3he ultimate purpose of competitor analysis is to a. identify the competition b. determine the competition4s strength and weaknesses c. identify the competition4s ma-or customers d. understand and predict the behaior of the competition
'. !atents are granted in order to encourage firms to inest in the research and deelopment of new products. !atents are an e/ample of a. =ertical integration c. :ntry barriers b. market concentration d. 9ollusion *. 3he distinguishing characteristic of oligopolistic market is a. A single seller of a homogeneous product with no close substitutes b. A single seller of a heterogeneous product with no close substitutes c. 8ack of entry and e/it barriers in the industry d. utual interdependence of firm pricing and output decisions
$. (hich of the following is not an important aspect of supply chain management) a. Information technology b. Accurate forecasts c. 9ustomer relations d. 9ommunications '. (hich of the following types of organi>ations would more likely engage in public relations type adertising) a. An airline b. a toy manufacturer c. A hotel chain d. An electric utility company
+. :conomic markets that are characteri>ed by monopolistic competition hae all of the following characteristic e/cept a. ?ne seller of the product b. :conomies or diseconomies of scale c. Adertising d. Beterogeneous products
*. 3arget marketing analysis inoles a. Analy>ing the firm4s input markets b. nderstanding and segmenting the firm4s customer markets c. Analy>ing the firm4s market structure d. &eciding on whether to offer a new product line
. (hich type of economic market structure is characteri>ed by a few large sellers of a product or serice, engaging primarily in nonprice competition) a. onopoly b. ?ligopoly c. !erfect competition d. onopolistic competition
+. If a firm4s customers are businesses, market segmentation might be performed along all of the following dimensions, e/cept a. Industry c. 8ifestyle b. 8ocation d. #i>e
. (hich type of economic market structure is composed of a large number of sellers, each producing an identical product, and with no significant barriers to entry and e/it) a. onopoly b. !erfect competition c. ?ligopoly d. onopolistic competition 0. a. b. c.
A market with many independent firms, low barriers to entry, and product differentiation is best classified as a. a monopoly b. a natural monopoly c. onopolistic competition d. an oligopoly
. (hich of the following is a defining characteristic of supply chain management) a. Focuses on the sharing of information with suppliers and customers. b. Focuses on redesigning processes c. Focuses on improing "uality d. Focuses on strategic alliances
A natural monopoly e/ists because 3he firm owns natural resources 3he firms hold patents :conomic and technical conditions
. (hich of the following is not a likely strategy for a firm in a purely competitie
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market) a. 8ean manufacturing b. #upply chain management c. !rocess reengineering d. &eelopment of a brand name
02. An oligopolist faces a CkinkedD demand cure. 3his terminology indicates that a. (hen an oligopolist lowers its price, the other firms in the oligopoly will match the price reduction, but if the oligopolist raises its price, the other firms will ignore the price change b. An oligopolist faces a nonlinear demand for its product, and price changes will hae little effect on demand for that product c. An oligopolist can sell its product at any price, but after the Csaturation pointD another oligopolist will lower its price and, therefore, shift the demand cure to the left d. 9onsumers hae no effect on the demand cure, and an oligopolist can shape the cure to optimi>e its own efficiency
0. (hat is the purpose of a response profile in competitor analysis) a. 3o deelop an understanding of the firm4s industry b. 3o analy>e the firm4s strengths in relation to its competitors c. 3o identify possible actions by competitors d. 3o understand the nature of the firm4s ma-or markets 0.
01.
3he process of diiding all potential consumers into smaller groups of buyers with distinct needs, characteristics, or behaiors, who might re"uire a similar product or serice mi/, is called a. #trategic planning c. !roduct positioning b. arket segmentation d. ?b-ectie setting
0$. (hich of the following best describes the steps inoled in performing competitor analysis) a. 7athering information about the competitor and using it to predict the competitor4s behaior b. &etermining the type of market structure and the number of competitors c. Assessing the general enironment and determining how that affects competition d. Assessing the market structure to predict when new competitors will enter the market
(hich of the following measures of unemployment would be of least importance to management when trying to predict the future state of the economy) a. #tructural unemployment b. 9yclical unemployment c. Frictional unemployment d. ?erall unemployment
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