Basic Economics MCQs with Answers 1. The fundamental economic problem faced by all societies is: a. unemployment b. inequality c. poverty d. scarcity 2. “Capitalism” refers to: a. the use of markets b. government ownership of capital goods c. private ownership of capital goods d. private ownership of homes cars 3. There are three fundamental questions every society must answer. hich of the followin! is"are one of these questions# a. !hat goods and services are to be produced" b. #ow are the goods and services to be produced" c. !ho will get the goods and services that are produced" d. All of the above $. %f you were wor&in! full'time now( you could earn )2*(*** per year. %nstead( you are wor&in! part'time while !oin! to school. %n your current part'time +ob( you earn ),(*** per year. -t your school( the annual cost of tuition( boo&s( and other fees is )2(***. The opportunity cost of completin! your education is: a. $%&''' b. $(&''' c. $)*&''' d. $%'&''' e. $%%&''' ,. The bowed shape of the production possibilities curve illustrates: a. the law of increasing marginal cost b. that production is inefficient c. that production is unattainable d. the demand is relatively inelastic . /ou have ta&en this qui0 and received a !rade of 3 out of a possible 1* points . /ou are allowed to ta&e a second version of this qui0. %f you score 4 or more( you can raise your score to a 4 C. /ou will need to study for the second version. %n ma&in! a rational decision as to whether or not to reta&e the test( you should a. always retake the qui+
b. consider only the marginal benefits from of retaking the the qui+ ,four e-tra points c. consider only the marginal opportunity costs from taking the qui+ q ui+ ,the time spent studying and taking the qui+ d. consider both the marginal benefits and the marginal opportunity costs of retaking the qui+ 4. The law of demand states that: a. as the quantity demanded rises& the price rises b. as the price rises& the quantity demanded rises c. as the price rises& the quantity demanded falls d. as supply rises& the demand rises 5. The price elasticity of demand is the: a. percentage change in quantity demanded divided by the percentage change in price b. percentage change in price divided by the percentage change in quantity demanded c. dollar change in quantity demanded divided by the dollar change in price d. percentage change in quantity demanded divided by the percentage change in quantity supplied 6. Community Colle!es desired to increase revenues. They decided to raise fees paid by students with 7achelors de!rees to ),* per unit because they believed this would result in !reater revenues. 7ut in reality( total revenues fell. Therefore( the demand for Community Colle!e courses by people with 7achelors de!rees must have actually been: a. relatively inelastic b. unit elastic c. relatively elastic d. perfectly elastic 1*. The demand for a product would be more inelastic: a. the greater is the time under consideration b. the greater is the number of substitutes available to buyers c. the less e-pensive is the product in relation to incomes d. all of the above
-nswers: 8 C 8 C - 8 C - C C 1. %n the case of a!riculture( a. the demand has shifted to the right more than the supply has shifted to the right b. the demand has shifted to the right less than the supply has shifted to the right c. the demand has shifted to the left more than the supply has shifted to the left d. the demand has shifted to the left less than the supply has shifted to the left 2. The a!ricultural price support pro!ram is an e9ample of
b. consider only the marginal benefits from of retaking the the qui+ ,four e-tra points c. consider only the marginal opportunity costs from taking the qui+ q ui+ ,the time spent studying and taking the qui+ d. consider both the marginal benefits and the marginal opportunity costs of retaking the qui+ 4. The law of demand states that: a. as the quantity demanded rises& the price rises b. as the price rises& the quantity demanded rises c. as the price rises& the quantity demanded falls d. as supply rises& the demand rises 5. The price elasticity of demand is the: a. percentage change in quantity demanded divided by the percentage change in price b. percentage change in price divided by the percentage change in quantity demanded c. dollar change in quantity demanded divided by the dollar change in price d. percentage change in quantity demanded divided by the percentage change in quantity supplied 6. Community Colle!es desired to increase revenues. They decided to raise fees paid by students with 7achelors de!rees to ),* per unit because they believed this would result in !reater revenues. 7ut in reality( total revenues fell. Therefore( the demand for Community Colle!e courses by people with 7achelors de!rees must have actually been: a. relatively inelastic b. unit elastic c. relatively elastic d. perfectly elastic 1*. The demand for a product would be more inelastic: a. the greater is the time under consideration b. the greater is the number of substitutes available to buyers c. the less e-pensive is the product in relation to incomes d. all of the above
-nswers: 8 C 8 C - 8 C - C C 1. %n the case of a!riculture( a. the demand has shifted to the right more than the supply has shifted to the right b. the demand has shifted to the right less than the supply has shifted to the right c. the demand has shifted to the left more than the supply has shifted to the left d. the demand has shifted to the left less than the supply has shifted to the left 2. The a!ricultural price support pro!ram is an e9ample of
a. a price ceiling b. a price floor c. equilibrium pricing 3. %f there is a price floor( there will be a. shortages b. surpluses c. equilibrium $. %f there is a price ceilin!( there will be a. shortages b. surpluses c. equilibrium ,. %f there is a price ceilin!( which of the followin! is ;T li&ely to occur# a. rationing by first/come& first/served b. black markets c. gray markets d. sellers providing goods for free that were formerly not free . The !oal of a pure mar&et economy is to best meet the desires of a. consumers b. companies c. workers d. the government 4. %n a pure mar&et economy( which of the followin! is a function of the price# %. provide information to sellers and buyers ( %%. provide incentives to sellers and buyers a. 0 only b. 00 only c. both 0 and 00 d. neither 0 nor 00 5. %n a mar&et system( sellers act in <<<<<<<<<<<< interest ( but this leads to behaviors in <<<<<<<<<<<< <<<<<<<<<<<< interest. interest. a. self1 self b. self1 society2s c. society2s1 society2s d. society2s1 self 6. The law of diminishin! mar!inal returns states that as more of a variable factor is added to a certain amount of a fi9ed factor( beyond some point:
a. 3otal physical product begins to fall b. 3he marginal physical product rises c. 3he marginal physical product falls d. 3he average physical product falls 1*. hy is the law of diminishin! mar!inal returns true# a. speciali+ation and division of labor b. spreading the average fi-ed cost c. limited capital d. all factors being variable in the long/run
-nswers: 7 7 7 - 8 - C 7 C C 1. hich of the followin! concepts represents the e9tra revenue a firm receives from the services of an additional unit of a factor of production# a. total revenue b. marginal physical product c. marginal revenus product d. marginal revenue 2. or&ers =uantity >roduced 1 1, 2 25 3 36 $ $5 , ,, * This company is a profit'ma9imi0in! firm sellin! in a competitive product mar&et and hirin! in a competitive labor mar&et. %t uses semi's&illed labor to produce dampers used in office buildin! ventilation systems. -ssume that the current mar&et price per damper is ),* and that the prevailin! wee&ly salary per semi's&illed wor&er is ),,*. This company should employ <<<<<< wor&ers. a. % b. 4 c. 5 d. ( e. 6 3. The demand for labor is the same as the a. marginal revenue product b. marginal physical product
c. marginal cost d. wage $. The demand for labor slopes down and to the ri!ht because of a. the law of demand b. the iron law of wages c. the law of diminishing marginal returns d. economies of scale ,. The demand for labor will be more elastic if: a. there are few substitutes for labor b. there is a short time under consideration c. labor is a large percent of the total cost of production d. the demand for the product is relatively inelastic e. all of the above . ?&ills that can be transferred to other employers are called: a. general skills b. specific skills c. non/pecuniary skills d. all of the above 4. hich s&ills are most li&ely to be paid for by the employer# a. 7eneral skills b. 8pecific skills c. Educational skills 5. %f wor&er - earns more in wa!es than wor&er 7( it could be because: a. 3he product made by worker A sells for a higher price than that made by worker B b. !orker A uses more capital per worker than worker B c. !orker A has more natural ability than worker B d. All of the above 6. ?&ills that embodied in a person are called a. #uman capital b. Embodied skills c. 9hysical capital d. E-perience skills 1*. “Treatin! an individual as typical of a !roup” is the definition of a. pure discrimination b. statistical discrimination
c. human capital d. specific skills -nswers: C 7 - C C - 7 8 - 7
1. hich of the followin! is a characteristic of pure monopoly# a. one seller of the product b. low barriers to entry c. close substitute products d. perfect information 2. %n pure monopoly( what is the relation between the price and the mar!inal revenue# a. the price is greater than the marginal revenue b. the price is less than the marginal revenue c. there is no relation d. they are equal 3. %n order to ma9imi0e profits( a monopoly company will produce that quantity at which the: a. marginal revenue equals average total cost b. price equals marginal revenue c. marginal revenue equals marginal cost d. total revenue equals total cost $. =uantity >rice Total Cost 1 )1** ) * 2 6, 13* 3 6* 21* $ 5, 3** , 5* $** This monopolist should produce: a. ) b. % c. 4 d. 5 e. ( ,. Compared to the case of perfect competition( a monopolist is more li&ely to: a. charge a higher price b. produce a lower quantity of the product
c. make a greater amount of economic profit d. all of the above . hich of the followin! is necessary for a natural monopoly# a. economies of scale b. a high proportion of the total cost is the cost of capital goods c. the market is very small d. all of the above 4. hich of the followin! is true about the way by which ?8@AB has been re!ulated by the >C# a. 8:7E has been allowed to earn very high economic profits b. 3he profits of 8:7E are calculated as a percent of the value of the capital goods c. !hen the demand for electricity would fall& the price of electricity would also fall d. All of the above 5. hich of the followin! best defines price discrimination# a. charging different prices on the basis of race b. charging different prices for goods with different costs of production c. charging different prices based on cost/of/service differences d. selling a certain product of given quality and cost per unit at different prices to different buyers 6. %n order to practice price discrimination( which of the followin! is needed# a. some degree of monopoly power b. an ability to separate the market c. an ability to prevent reselling d. all of the above 1*. %n price discrimination( which section of the mar&et is char!ed the hi!her price# a. the section with the richest people b. the section with the oldest people c. the section with the most inelastic demand d. the section with the most elastic demand -nswers: - - C C 8 8 7 8 8 C
1. The lar!est source of ta9 revenue for the federal !overnment is: a. the personal income ta b. the social security ta-
c. the property tad. the sales ta2. hen my income was )1**(***( % paid )1*(*** in ta9es. hen my income became )2**(***( % paid )$*(*** in ta9es. Dy mar!inal ta9 rate is: a. )'; b. %'; c. 4'; d. 5'; 3. The ta9 is question E2 is: a. progressive b. regressive c. proportional $. hich of the followin! ta9es is re!ressive# a. the federal income ta b. the state income tac. the sales tad. the Medicare ta,. -ssume that there are two !oods( - and 7. %n 166( -mericans produced 1* units of - at a price of )1* and 2* units of 7 at a price of )2*. %n 2**2( -mericans produced 2* units of at a price of )2* and 3* units of 7 at a price of )3*. The ominal @8> for 2**2 is: a. $)'' b. $5'' c. $('' d. $<'' e. $)4'' . sin! the numbers in question ,( the Feal @8> for 2**2 is: a. $5'' b. $('' c. $='' d. $<'' e. $)&4'' 4. hich of the followin! statements is"are true# a. Business 0nvestment 8pending occurs when individuals buy stock in the stock market b. 9roductivity is the >nited 8tates grew very slowly between )<*4 and )<<6 c. Because of discouraged workers& the official unemployment rate is too high d. ?@ull employment occurs when there is no frictional unemployment 5. %mmediately after a trou!h( we would e9pect to have a"an a. peak b. recession
c. recovery d. another trough 6. Gast wee&( Dartha spent one day cleanin! a house. or this( she was paid ),*. The rest of the wee&( she spent loo&in! for a +ob. Dartha would be classified as a. employed b. unemployed c. not in the labor force 1*. Hohn lost his accountin! +ob when Dont!omery ards closed its stores in ?an 8ie!o. Ie loo&ed for a similar +ob for ten months before findin! an accountin! +ob at ?ears. 8urin! the month Hohn was unemployed( he was a. frictionally unemployed b. seasonally unemployed c. cyclically unemployed d. structurally unemployed -nswers: - C - C B C 7 C - 8
1. hich of the followin! %? a function of money# a. medium of e-change b. store of value c. unit of accounting d. all of the above 2. hich of the followin! is a component of D'1# a. savings deposits b. credit card c. checkable deposits d. gold 3. hich of the followin! is a ;T component of D'2# a. small time deposits b. money market mutual funds c. stocks d. checkable deposits $. hich of the followin! is true about the ederal Feserve ?ystem ed# a. it is a system of )% central banks b. its Board of 7overnors is elected by a vote of the people c. its main policy/making body is the @:0C
d. it accepts deposits from the public and makes loans to businesses e. all of the above ,. -n %; of the ederal Feserve 7an& of ?an rancisco to 7an& of -merica is called: a. discounts b. federal funds c. reserves d. collateral . hich of the followin! is the most liquid# a. a savings account b. a 6 month C: c. a home d. water 4. The monetary base is composed of: a. gold and silver b. currency only c. currency and reserves d. currency and checkable deposits 5. %f the monetary base is increased by )1(*** and the reserve requirement is 1*J 1"1*( by how much will the money supply be increased# a. $)'' b. $)&''' c. $(&''' d. $)'&''' 6. %f the ederal Feserve wishes to increase the money supply( it should: a. raise the reserve requirement b. raise the discount rate c. buy 3reasury securities in the open market d. all of the above 1*. -n increase in the money supply will cause interest rates to a. rise b. fall c. remain unchanged -nswers: 8 C C - C - C 8 C 7
). 3o determine the correct level of 79& it is necessary to. a. to add up the values of goods and services during one year. b. add up all savings c. to count all imports d. to add up the value of semi finished goods Answer is A %. 79 is always a. less then 9 b. 7rater then 9 c. Equal to 9 d. Any of a& b& c Answer is B 4. 3he four factor payment areD a. Money& capital& salaries and income b. !ages& rent& interest and profits c. Money& power& preset age& and wealth d. !ages& interest& salaries& and income. Answer is B 5. !e measure national income by this method a. E-penditure method b. income method c. product method d. all of the above Answer is : (. 3ransfer payment means a. Bank loans b. 3he payment without work c. 3e-t payments d. 9ayments made to all factors of production Answer is B 6. !hich statement is true a. ational e-penditure ational income b. ational E-penditure ational income ational production
C. ational E-penditure ational income ational 3a-es d. ational E-penditure ational income/ 3a-es Answer is A *. 0f we compare 7:9 and 79& then a. 79 7:9/ net income from abroad b. 79 7:9 net income from abroad c. 79 9/ net income from abroad d. 79 9 net income from abroad Answer is B =. A 3F set purchased from a retail store is an e-ample of a. 0ntermediate goods b. Capital goods c. 8urplus goods d. @inal goods Answer is : <. 79 is " a. 3otal sales in the economy b. 3otal monetary transactions in an economy c. 3he market values of all goods and services produced in an economy d. 3otal spending in an economy Answer is C )'. 79 includes a. A loan from bank b.A loan from one2s parents c. 7ifts and donations d. A broker2s commission Answer is : )). et 0nvestment is a. 7ross 0nvestment minus household 0nvesment b. 7ross 0nvestment minus govt. c. 7ross invesment minus capital consumption allowance d. one of the above Answer is C )%. Market value of all final goods and services produced in a country during a year is defination of a. 0 b 9
c. 79 d. Consumption Answer is C )4. Consumption spending does not include a. #ousehold2s purchases of food b. #ousehold2s purchases of a career c. #ousehold2s payment of rent for an apartment d. #ousehold2s purchases of stock in any GHI corporation Answer is : )5. !hich of the following would in crease national income a. 0ncreases in ta-ation b. 0ncrease in savings c. 0ncreases in govt spending d. :ecreases in consumption spending Answer is C )(. !hich of the following is a withdrawal from the circular flow income strem. a. 0nvestment b. 8ubsidies c. 3a-ation d. consumption Answer is C )6. 9akistan2s saving rate is a. ( ; b. )5.5 ; c. %( ; d. 4( ; Answer is B )*. 0n the world population/wise 9akistan is a. 4rd b. 5th c. 6th d. =th Answer is C )=. 9opulation growth rate in 9akistan is a. ) ; b. ).*4 ; c. ).< ;
d. 5 ; Answer is B )<. According to the Economic 8urvey of 9akistan %''=/'< 9akistan2s per capita income is >.8. dollars a. 4%' b. )'56 c. <(' d. )(%' Answer is B %'. !hich is most likely to cause a more even distribution of income a. An increases in indirect ta-es b. An increases in managers2 salaries c. An increases in progressive ta-ation d. An increases in an rate of inflation Answer is C %). !orking population is JJJJK percent of total population of 9akistan a. %' ; b. 4' ; c. 5' ; d. (' ; Answer is B %%. 9akistan started its first five/year plan in a. )<5* b. )<(' c.)<(( d. )<6' Answer is C %4. Contribution of agriculture in 9akistan2s national income is a. %' ; b. %5 ; c. %= ; d. %6 ; Answer is B %5. Contribution of industrial sector in 9akistan economy is a. %= ; b. )= ;
c. = ; d. K>ndetermined Answer is B %(. 8i+e of 9akistan2s =th plan was in JJJJJrupeesD a. *'' billion b. )*'' billion c. %*'' billion d. 4*'' billion Answer is B %6. 9akistan producesJJJJJof its oil requirements a. %( ; b 4( ; c. 5( ; d. (( ; Answer is A %*. Economic development a. it same is as economic growth b. Means improvement in lifestyle c. E-ists when there is equal distribution of income d. All of the above Answer is B %=. Economic development is measured on the basis of a. 0ncreases in nominal 79 b. 0ncreases in real 79 c. 0ncreases in personal incomes d. 0ncreases in government revenue Answer is B %<. 3he govt. can control inflation by a. 0ncreasing demand for goods b. 0ncreasing supply of goods c. 0ncreasing money supply d. :ecreasing ta-es Answer is B 4'. 7overnment of 9akistan issues currency on the basis ofD a. Availability of gold in the country b. Availability of dollar in the country c. :emand for money in the country
d. 3a- collection Answer is C 4). !hich property the paper money dose not possession a. Acceptability b. :ivisibility c. :urability d. 9ortability Answer is C 4%. Felocity of circulation of money means. a. the number of times a unit of money changes hand2s daily b. the number of times a unit of money changes hands monthly c. the number of times a unit of money changes hands annually d. the number of times a unit of money changes hands value Answer is C 44. !hen the nation2s money supply is Ls. )%'' billion and 7:9 is Ls. 5='' billion& velocity of money is a. '.%( b. 5 c. '.5 d. 5 billion rupees Answer is B 45. 0f quantity of money is doubled& than according to Quantity 3heory& value of money is a. Lemains constant b. :ouble c. #alf d. one of the above Answer is C 4(. According to eynes& demand for money is affected by a. 0ncome b. Late of interest c. Niteracy rate d. A and B of above Answer is : 46. !hich people of most likely to again during inflation" a. 3hose living on pension b. 3hose living on there saving
c. 3hose who are repaying borrowed money Answer is C 4*. 0f quantity of money increases )'' ; other things remaining constant& value of changes by a. 0ncreases by )'' ; b. :ecreases by )'' ; C.:ecreases by %'' ; d. :ose not changes Answer is B 4=. !hen banks prepare their balance sheets& they show the money lent in a. Niability b. Assets c. Both assets and liabilities d. one Answer is B 4<. 3he power of a bank to create credit is affected by a. 3he cash reserve requirements b. 3he amount of cash available c. 3he number of branches of a bank d. A and B of above Answer is : 5'. A bank has Ls. ( million in cash. 3he minimum reserve ratio is %' ;. !hat is ma-imum potential increases in total deposits" a. ' b. (m c. )'m d. %(m Answer is : 5). !hen a commercial bank creates credit& its immediate effect is that it raises A. 3he e-changes rate B. 3he insert rate C. 3he money supply :. 3he real national income Answer is C 5%. 8tate Bank of 9akistan was established in A. )<5=. B. )<(' C. )<(%
:.)<(5 Answer is A 54. )'/rupee note is issued by A. ational Bank B. 8tate Bank C. 7ovt of 9akistan :. 7overnor state Bank Answer is B 55. !hich is the most widely used tool of monetary policy" A. Clearing house B. open market operations C. discount rate :. issuing of notes Answer is B 5(. when the state bank wants to decrease money supply in the country& it A. buys govt securities in stock market B. sells govt. securities C. lowers discount rate :.B and C of above. Answer is B 56. Central bank2s rate of lending to commercial banks is called A. 0nterest rate B. discount rate C. money rate :. control rate Answer is B 5*. !hen a central bank wants to increase money supply in circulation it called" A. 9urchase govt. securities B. Nowers bank rate C. :irects banks to advance more loans :. A and B Answer is : 5=. Every country establishes central bank to A. 0ssue notes B. 8upervise commercial banks C. 7ive loans to businessmen
:. A and B Answer is : 5<. !hich is a monetary measure to increase employment" A. 0ncerease in 7ovt . e-penditure B. Leduce 7ovt. e-penditure C. 0ncrease in 0nterest rate :. Leducing interest rate Answer is : ('. 3reasury bill is used for A. 7etting short term loans B. 7etting long term loans C. 3reasury bill is not credit instrument :. 3reasury bill is a 7ovt. ta- bill Answer is A
1. The fundamental economic problem faced by all societies is: a. unemployment b. inequality c. poverty d. scarcity 2. KCapitalismK refers to: a. the use of markets b. government ownership of capital goods c. private ownership of capital goods d. private ownership of homes cars 3. There are three fundamental questions every society must answer. hich of the followin! is"are one of these questions# a. !hat goods and services are to be produced"
b. #ow are the goods and services to be produced" c. !ho will get the goods and services that are produced" d. All of the above $. %f you were wor&in! full'time now( you could earn )2*(*** per year. %nstead( you are wor&in! part'time while !oin! to school. %n your current part'time +ob( you earn ),(*** per year. -t your school( the annual cost of tuition( boo&s( and other fees is )2(***. The opportunity cost of completin! your education is: a. $%&''' b. $(&''' c. $)*&''' d. $%'&''' e. $%%&''' ,. The bowed shape of the production possibilities curve illustrates: a. the law of increasing marginal cost b. that production is inefficient c. that production is unattainable d. the demand is relatively inelastic . /ou have ta&en this qui0 and received a !rade of 3 out of a possible 1* points . /ou are allowed to ta&e a second version of this qui0. %f you score 4 or more( you can raise your score to a 4 C. /ou will need to study for the second version. %n ma&in! a rational decision as to whether or not to reta&e the test( you should a. always retake the qui+ b. consider only the marginal benefits from of retaking the qui+ ,four e-tra points c. consider only the marginal opportunity costs from taking the qui+ ,the time spent studying and taking the qui+ d. consider both the marginal benefits and the marginal opportunity costs of retaking the qui+ 4. The law of demand states that: a. as the quantity demanded rises& the price rises b. as the price rises& the quantity demanded rises c. as the price rises& the quantity demanded falls d. as supply rises& the demand rises
Bconomics 1** =ui0 E1( >a!e 2 5. The price elasticity of demand is the: a. percentage change in quantity demanded divided by the percentage change in price b. percentage change in price divided by the percentage change in quantity demanded c. dollar change in quantity demanded divided by the dollar change in price d. percentage change in quantity demanded divided by the percentage change in quantity supplied
6. Community Colle!es desired to increase revenues. They decided to raise fees paid by students with 7achelors de!rees to ),* per unit because they believed this would result in !reater revenues. 7ut in reality( total revenues fell. Therefore( the demand for Community Colle!e courses by people with 7achelors de!rees must have actually been: a. relatively inelastic b. unit elastic c. relatively elastic d. perfectly elastic 1*. The demand for a product would be more inelastic: a. the greater is the time under consideration b. the greater is the number of substitutes available to buyers c. the less e-pensive is the product in relation to incomes d. all of the above
-nswers: 8 C 8 C - 8 C - C C
Bconomics 1** =ui0 E3 riday( ?eptember 22( 2*** 1. %n the case of a!riculture( a. the demand has shifted to the right more than the supply has shifted to the right b. the demand has shifted to the right less than the supply has shifted to the right c. the demand has shifted to the left more than the supply has shifted to the left d. the demand has shifted to the left less than the supply has shifted to the left 2. The a!ricultural price support pro!ram is an e9ample of a. a price ceiling b. a price floor c. equilibrium pricing 3. %f there is a price floor( there will be a. shortages b. surpluses c. equilibrium $. %f there is a price ceilin!( there will be a. shortages b. surpluses c. equilibrium ,. %f there is a price ceilin!( which of the followin! is ;T li&ely to occur# a. rationing by first/come& first/served b. black markets c. gray markets
d. sellers providing goods for free that were formerly not free . The !oal of a pure mar&et economy is to best meet the desires of a. consumers b. companies c. workers d. the government 4. %n a pure mar&et economy( which of the followin! is a function of the price# %. provide information to sellers and buyers ( %%. provide incentives to sellers and buyers a. 0 only b. 00 only c. both 0 and 00 d. neither 0 nor 00 5. %n a mar&et system( sellers act in <<<<<<<<<<<< interest ( but this leads to behaviors in <<<<<<<<<<<< interest. a. self1 self b. self1 society2s c. society2s1 society2s d. society2s1 self 6. The law of diminishin! mar!inal returns states that as more of a variable factor is added to a certain amount of a fi9ed factor( beyond some point: a. 3otal physical product begins to fall b. 3he marginal physical product rises c. 3he marginal physical product falls d. 3he average physical product falls 1*. hy is the law of diminishin! mar!inal returns true# a. speciali+ation and division of labor b. spreading the average fi-ed cost c. limited capital d. all factors being variable in the long/run
-nswers: 7 7 7 - 8 - C 7 C C
Bconomics 1** D =ui0 E3 1. hich of the followin! is a characteristic of pure monopoly# a. one seller of the product b. low barriers to entry c. close substitute products
d. perfect information 2. %n pure monopoly( what is the relation between the price and the mar!inal revenue# a. the price is greater than the marginal revenue b. the price is less than the marginal revenue c. there is no relation d. they are equal 3. %n order to ma9imi0e profits( a monopoly company will produce that quantity at which the: a. marginal revenue equals average total cost b. price equals marginal revenue c. marginal revenue equals marginal cost d. total revenue equals total cost $. =uantity >rice Total Cost 1 )1** ) * 2 6, 13* 3 6* 21* $ 5, 3** , 5* $** This monopolist should produce: a. ) b. % c. 4 d. 5 e. ( ,. Compared to the case of perfect competition( a monopolist is more li&ely to: a. charge a higher price b. produce a lower quantity of the product c. make a greater amount of economic profit d. all of the above . hich of the followin! is necessary for a natural monopoly# a. economies of scale b. a high proportion of the total cost is the cost of capital goods c. the market is very small d. all of the above 4. hich of the followin! is true about the way by which ?8@AB has been re!ulated by the >C# a. 8:7E has been allowed to earn very high economic profits b. 3he profits of 8:7E are calculated as a percent of the value of the capital goods c. !hen the demand for electricity would fall& the price of electricity would also fall
d. All of the above 5. hich of the followin! best defines price discrimination# a. charging different prices on the basis of race b. charging different prices for goods with different costs of production c. charging different prices based on cost/of/service differences d. selling a certain product of given quality and cost per unit at different prices to different buyers 6. %n order to practice price discrimination( which of the followin! is needed# a. some degree of monopoly power b. an ability to separate the market c. an ability to prevent reselling d. all of the above 1*. %n price discrimination( which section of the mar&et is char!ed the hi!her price# a. the section with the richest people b. the section with the oldest people c. the section with the most inelastic demand d. the section with the most elastic demand
-nswers: - - C C 8 8 7 8 8 C
Bconomics 1** =ui0 E$( all 2**2 1. hich of the followin! concepts represents the e9tra revenue a firm receives from the services of an additional unit of a factor of production# a. total revenue b. marginal physical product c. marginal revenus product d. marginal revenue 2. or&ers =uantity >roduced 1 1, 2 25 3 36 $ $5 , ,, * This company is a profit'ma9imi0in! firm sellin! in a competitive product mar&et and hirin! in a competitive labor mar&et. %t uses semi's&illed labor to produce dampers used in office buildin! ventilation systems. -ssume that the current mar&et price per damper is ),* and that the prevailin! wee&ly salary per semi's&illed wor&er is ),,*. This
company should employ <<<<<< wor&ers. a. % b. 4 c. 5 d. ( e. 6 3. The demand for labor is the same as the a. marginal revenue product b. marginal physical product c. marginal cost d. wage $. The demand for labor slopes down and to the ri!ht because of a. the law of demand b. the iron law of wages c. the law of diminishing marginal returns d. economies of scale ,. The demand for labor will be more elastic if: a. there are few substitutes for labor b. there is a short time under consideration c. labor is a large percent of the total cost of production d. the demand for the product is relatively inelastic e. all of the above . ?&ills that can be transferred to other employers are called: a. general skills b. specific skills c. non/pecuniary skills d. all of the above 4. hich s&ills are most li&ely to be paid for by the employer# a. 7eneral skills b. 8pecific skills c. Educational skills 5. %f wor&er - earns more in wa!es than wor&er 7( it could be because: a. 3he product made by worker A sells for a higher price than that made by worker B b. !orker A uses more capital per worker than worker B c. !orker A has more natural ability than worker B d. All of the above 6. ?&ills that embodied in a person are called a. #uman capital b. Embodied skills
c. 9hysical capital d. E-perience skills 1*. “Treatin! an individual as typical of a !roup” is the definition of a. pure discrimination b. statistical discrimination c. human capital d. specific skills
-nswers: C 7 - C C - 7 8 - 7
Bconomics 1** =ui0 E,( all 2**1 1. %f there are ,* firms in a industry( each sellin! 2J of the total sales( the concentration ratio is: a. ('; b. %; O c. )''; d. =; 2. hen 8aimler 7en0( ma&er of the Dercedes( bou!ht Chrysler( the mer!er was a. hori+ontal b. vertical c. conglomerate Questions 3 through 10 involve the functions of the government in a world of laissez faire. The functions are the following: A. Create and Enforce the "ules" !. romote or #aintain Com$etition C. rovide %nformation &. rovide u'lic (oods E. educe )egative E*ternalities +E*ternal Costs, through regulations or through ta*es -. u'sidize ositive E*ternalities +E*ternal !enefits, (. rovide #erit (oods /. edistri'ute %ncome on the !asis of )eed -or each of the following choose the letter that 'est descri'es the function of government.
3. The !overnment provides anti'trust laws. $. The !overnment subsidi0es the buildin! of new stadiums and arenas. ,. The !overnment provides for military defense.
. The !overnment has a pro!ram of social security to provide a pension for the elderly. 4. The !overnment requires that all !asoline stations post their prices in si!ns lar!e enou!h to be seen by a reasonable person from the street. 5. The !overnment requires people to have a smo! control device in their cars. 6. The !overnment ma&es the beach free for everyone 1*. The !overnment ma&es laws that determine certain behaviors that a corporation must en!a!e in and other behaviors that a corporation cannot en!a!e in.
-nswers: 8 - 7 8 I C B @ -
Bconomics 1** =ui0 ( all 2**2 1. The lar!est source of ta9 revenue for the federal !overnment is: a. the personal income ta b. the social security tac. the property tad. the sales ta2. hen my income was )1**(***( % paid )1*(*** in ta9es. hen my income became )2**(***( % paid )$*(*** in ta9es. Dy mar!inal ta9 rate is: a. )'; b. %'; c. 4'; d. 5'; 3. The ta9 is question E2 is: a. progressive b. regressive c. proportional $. hich of the followin! ta9es is re!ressive# a. the federal income ta b. the state income tac. the sales tad. the Medicare ta,. -ssume that there are two !oods( - and 7. %n 166( -mericans produced 1* units of at a price of )1* and 2* units of 7 at a price of )2*. %n 2**2( -mericans produced 2* units of - at a price of )2* and 3* units of 7 at a price of )3*. The ominal @8> for 2**2 is:
a. $)'' b. $5'' c. $('' d. $<'' e. $)4'' . sin! the numbers in question ,( the Feal @8> for 2**2 is: a. $5'' b. $('' c. $='' d. $<'' e. $)&4'' 4. hich of the followin! statements is"are true# a. Business 0nvestment 8pending occurs when individuals buy stock in the stock market b. 9roductivity is the >nited 8tates grew very slowly between )<*4 and )<<6 c. Because of discouraged workers& the official unemployment rate is too high d. ?@ull employment occurs when there is no frictional unemployment 5. %mmediately after a trou!h( we would e9pect to have a"an a. peak b. recession c. recovery d. another trough 6. Gast wee&( Dartha spent one day cleanin! a house. or this( she was paid ),*. The rest of the wee&( she spent loo&in! for a +ob. Dartha would be classified as a. employed b. unemployed c. not in the labor force 1*. Hohn lost his accountin! +ob when Dont!omery ards closed its stores in ?an 8ie!o. Ie loo&ed for a similar +ob for ten months before findin! an accountin! +ob at ?ears. 8urin! the month Hohn was unemployed( he was a. frictionally unemployed b. seasonally unemployed c. cyclically unemployed d. structurally unemployed
-nswers: - C - C B C 7 C - 8
Bconomics 1** Da&eup for =ui0 1. 8efine avera!e ta9 rate 8efine mar!inal ta9 rate 2. 8efine pro!ressive ta9 8efine re!ressive ta9
8efine proportional ta9 3. 8efine inde9ation $. 8efine ominal @ross 8omestic >roduct @8> 8efine Feal @ross 8omestic >roduct @8> ,. 8efine business investment spendin! . 7riefly e9plain how the official unemployment rate is calculated. 4. 8efine frictional unemployment 8efine cyclical unemployment 8efine structural unemployment 8efine “full employment”
Bconomics 1** =ui0 E4( all 2**2 1. -ssume that there are only two !oods: - and 7 %n the base year( =uantity >rice - 1* )1 7 1* )$ %n the current year( =uantity >rice - 2* ) , 7 2, )2* The Consumer >rice %nde9 C>% for the current year is: a. (' b. )'' c. %'' d. ('' e. 6'' 2. hich of the followin! !roups is most hurt by une9pected inflation# a. workers with cost of living adPustments in their labor contracts b. homeowners c. people with large debts to pay for their homes and cars d. people with large retirement savings held in savings accounts 3. %f the nominal interest rate is ,J and the inflation rate is 2J( the real interest rate is: a. %; b. 4; c. (; d. *; e. % ;
$. or which of the followin! reasons mi!ht inflation cause Feal @8> to !row slower than it otherwise would# a. 0nflation makes everyone poorer b. 0nflation reduces the value of consumer debt c. 0nflation increases business investment spending d. 0nflation decreases savings in financial form ,. 8isposable %ncome is equal to: a. ational 0ncome c. ational 0ncome Minus 3a-es b. Leal 7:9 c. ational 0ncome Minus 3a-es d. ational 0ncome Minus 3a-es 9lus 3ransfers . -ssume that >otential Feal @8> equals )1*(***. ational %ncome is therefore )1*(***. ;f this( consumers will pay )2(*** in ta9es( save )1(***( and spend )4(*** on consumer !oods. 7usiness %nvestment spendin! is )2***. %n order to avoid recessions and inflation to have equilibrium( the !overnment should have a: a. balanced budget b. budget deficit of $)''' c. budget surplus of $)''' d. budget deficit of $%''' 4. -ccordin! to Leynes( when the @reat 8epression started( the !overnment should have: a. done nothing b. decreased the money supply c. had a large increase in government spending d. enacted high tariffs& such as the 8moot/#awley 3ariff 5. %f the !overnment lowers ta9es by )1* billion( the Feal @8> will rise by a. more than $)' billion b. less than $)' billion c. e-actly $)' billion 6. hich of the followin! is an automatic stabili0er# a. unemployment benefits b. spending on education c. defense spending d. net interest 1*. “Crowdin! out” means that a. a government budget deficit lowers interest rates and causes investment spending to rise b. an increase in marginal ta- rates lowers production c. a government budget deficit raises interest rates and causes investment spending to fall d. a government budget deficit raises American e-ports and lowers American imports
-nswers: 8 8 7 8 8 C C - - C
Bconomics 1** =ui0 5 1. hich of the followin! %? a function of money# a. medium of e-change b. store of value c. unit of accounting d. all of the above 2. hich of the followin! is a component of D'1# a. savings deposits b. credit card c. checkable deposits d. gold 3. hich of the followin! is a ;T component of D'2# a. small time deposits b. money market mutual funds c. stocks d. checkable deposits $. hich of the followin! is true about the ederal Feserve ?ystem ed# a. it is a system of )% central banks b. its Board of 7overnors is elected by a vote of the people c. its main policy/making body is the @:0C d. it accepts deposits from the public and makes loans to businesses e. all of the above ,. -n %; of the ederal Feserve 7an& of ?an rancisco to 7an& of -merica is called: a. discounts b. federal funds c. reserves d. collateral . hich of the followin! is the most liquid# a. a savings account b. a 6 month C: c. a home d. water 4. The monetary base is composed of: a. gold and silver b. currency only c. currency and reserves
