eco402 collection of old papers

http://vujannat.ning.com BEST SITE TO HELP STUDENTS

FINALTERM EXAMINATION

FALL 2006

ECO402 - MICROECONOMICS (Session - 3 )

Marks: 60

Time: 120min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Thursday, February 01, 2007

INSTRUCTIONS: Please read the following instructions carefully before attempting any question:

• All questions are compulsory.

• This exam consists of 15 Multiple Choice Questions (MCQ’s) carrying 1 mark

each,5 fill in the blanks carrying 1 mark each,5 true false carrying 1 mark each, 5

Short questions carrying 3 marks each and 2 Descriptive questions carrying 10

marks each.

• For each Multiple Choice Question, read the options available and select which

you consider is correct option.

• You are required to show all the working of short questions as well as Descriptive

question.

• This examination is closed book, closed notes and closed neighbors.

• Do not ask any questions about the contents of this examination from anyone.

• You may wish to pace yourself with your own watch, but the Supervisor will be the

official timekeeper of the test.

• Failure to comply with the Supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant

event.

For Teacher's use only Question 1 2 3 4 5 6 7 8 9 10 Total

Marks Question 11 12 13 14 15 16 17 18 19 20

Marks Question 21 22 23 24 25 26 27 28 29 30

Marks Question 31 32

Marks Question No: 1 ( Marks: 1 ) - Please choose one Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ______________ price and sell a ______________ quantity.

►

Higher; larger

►

Lower; larger

►

Higher; smaller

►

All of the given options

Question No: 2 ( Marks: 1 ) - Please choose one The total cost (TC) of producing computer software diskettes (Q) is given as: TC = 200 + 5Q. What is the marginal cost?

►

200

►

5Q

►

5

►

5 + (200/Q)

Question No: 3 ( Marks: 1 ) - Please choose one Marginal profit is equal to:

►

Marginal revenue minus marginal cost.

►

Marginal revenue plus marginal cost.

►

Marginal cost minus marginal revenue.

►

Marginal revenue times marginal cost.

Question No: 4 ( Marks: 1 ) - Please choose one An improvement in technology would result in: ►

Upward shifts of MC and reductions in output.

►

Upward shifts of MC and increases in output.

►

Downward shifts of MC and reductions in output.

►

Downward shifts of MC and increases in output.

Question No: 5 ( Marks: 1 ) - Please choose one An increasing-cost industry is so named because of the positive slope of which curve?

►

Each firm's short-run average cost curve

►

Each firm's short-run marginal cost curve

►

Each firm's long-run average cost curve

►

The industry's long-run supply curve

Question No: 6 ( Marks: 1 ) - Please choose one

As the manager of a firm you calculate the marginal revenue is $152 and marginal cost is $200. You should:

►

Expand output.

►

Do nothing without information about your fixed costs.

►

Reduce output until marginal revenue equals marginal cost.

►

Expand output until marginal revenue equals zero.

Question No: 7 ( Marks: 1 ) - Please choose one The _____ elastic a firm's demand curve, the greater its _____:

►

Less; monopoly power

►

Less; output

►

More; monopoly power

►

More; costs

Question No: 8 ( Marks: 1 ) - Please choose one An electric power company uses block pricing for electricity sales. Block pricing is an example of: ►

First-degree price discrimination.

►

Second-degree price discrimination.

►

Third-degree price discrimination.

►

Block pricing is not a type of price discrimination.


The maximum price that a consumer is willing to pay for each unit bought is the ______________ price:

►

Market

►

Reservation

►

Consumer surplus

►

Auction

Question No: 10 ( Marks: 1 ) - Please choose one When a company introduces new audio products, it often initially sets the price high and about a year later it lowers the price. This is an example of:

►

A two-part tariff.

►

Second-degree price discrimination.

►

Intertemporal price discrimination.

►

First-degree price discrimination.

Question No: 11 ( Marks: 1 ) - Please choose one The market structure in which there is interdependence among firms is: ►

Monopolistic competition.

►

Oligopoly.

►

Perfect competition.

►

Monopoly.

Question No: 12 ( Marks: 1 ) - Please choose one In the long run, the monopolistically competitive firm earns zero economic profit because: ►

Of free entry and exit.

►

It has excess capacity.

►

It has the ability to set price.

►

Other firms produce a perfect substitute.

Question No: 13 ( Marks: 1 ) - Please choose one Indifference curves are convex to the origin because of:

►

Transitivity of consumer preferences.

►

The assumption of a diminishing marginal rate of substitution.

►

The assumption that more is preferred to less.

►

The assumption of completeness.

Question No: 14 ( Marks: 1 ) - Please choose one Which of the following is true regarding income along a price consumption curve?

►

Income is increasing.

►

Income is decreasing.

►

Income is constant.

►

The level of income depends on the level of utility.

Question No: 15 ( Marks: 1 ) - Please choose one A supply curve reveals:

►

The quantity of output consumers are willing to purchase at each possible market price.

►

The difference between quantity demanded and quantity supplied at each price.

►

The maximum level of output an industry can produce, regardless of price.

►

The quantity of output that producers are willing to produce and sell at each possible market price.

Question No: 16 ( Marks: 1 ) - Please choose one Discrimination based upon the quantity consumed is referred to as second degree price discrimination. ►

True

►

False

Question No: 17 ( Marks: 1 ) - Please choose one Restricted entry is another characteristic of monopolistic competition. ►

True

►

False

Question No: 18 ( Marks: 1 ) - Please choose one In a perfectly competitive labor market, a firm hires labor until the marginal revenue product of labor equal the wage rate. ►

True

►

False

Question No: 19 ( Marks: 1 ) - Please choose one According to kinked-demand-curve model, oligopolists match price cuts and price increases.

►

True

►

False

Question No: 20 ( Marks: 1 ) - Please choose one The shut down point for the firm is where price equals average cost. ►

True

►

False

Question No: 21 ( Marks: 1 ) Each seller has a very small share of the market in the ______________. Question No: 22 ( Marks: 1 ) Total revenue = ______________. Question No: 23 ( Marks: 1 ) In long-run equilibrium, economic profits are _____________. Question No: 24 ( Marks: 1 ) Many countries use ___________and ____________to keep the domestic price of a product above world levels. Question No: 25 ( Marks: 1 ) Government intervention without a market failure creates __________.

Question No: 26 ( Marks: 3 ) How oligopoly is different from perfect competition, monopoly and monopolistically competitive market? Question No: 27 ( Marks: 3 ) Differentiate between consumer surplus and producer surplus. Question No: 28 ( Marks: 3 )

If the elasticity of demand for the product is –2, find the marginal cost of the last unit produced.

Question No: 29 ( Marks: 3 ) When do competitive markets generate an inefficient allocation of resources or market failure? How can be the efficiency of these markets increased? Question No: 30 ( Marks: 3 ) How can monopoly power of a monopolist be measured? What is the basic incentive behind monopoly power? Question No: 31 ( Marks: 10 ) Examine this information for a monopoly product.

Price ($) Quantity 10 1,000 8 2,000 6 3,000 4 4,000 2 5,000 .50 6,000

(a) Calculate total revenue. (b) Calculate marginal revenue. (c) What is the maximum output that the producer of this product would ever produce? (d) Why would this firm never produce more than the output amount in part c? (3+3+2+2) Question No: 32 ( Marks: 10 )

a. Define demand curve. Briefly explain non price determining variables of demand. (2+4)

b. If the market price is above and below the equilibrium level how will market adjust to reach the equilibrium point? (2+2)

Question No. 1 Marks : 10

Total Marks: 60 Total Questions: 10

Failure to comply with the Supervisor's directions will result in your test being cancelled. Please comply with supervisor's directions to avoid any unpleasant event.

Remember not to spend too much time on any one MCQ. Since all MCQ's carry equal marks, it is important to manage your time and responses to test questions effectively.

A clock is given in the exam software. Software will automatically be closed at the end of 90 minutes.

Do not click the "Finish button" while solving your paper. Once you clicked the "Finish" button, you will not be able to access your paper again. Click it at the end of your paper. That means you have submitted your complete paper.

Save your answer before proceeding to the next question.

For each MCQ question, read the choices available and select the choice which you consider is the correct answer, by clicking on the appropriate check box.

You should try to complete MCQ's in 10 - 15 minutes in order to give yourself 135 - 140 minutes for descriptive questions.

Each MCQ carries 2 Marks each and Descriptive Questions carry 10 Marks each.

This exam consists of 5 Multiple Choice Questions (MCQ's) and 5 descriptive questions.

All questions are compulsory. INSTRUCTIONS:

Time Allowed: 150 Minutes

Final Term Examination – Spring 2005

ECO402 Microeconomics

www.vujannat.ning.com

shifts to the right if new firms enter the industry oo is the sum of all individual firms' average total cost curves

In the short run, the supply curve for a perfectly competitive industry:


Suppose that the market demand function of a perfectly competitive industry is given by QD = 4,750 – 50P and the market supply function is given by QS = 1,750 +50P, and P is expressed in dollars. Find the market equilibrium price.


o only a few buyers

many sellers with similar products oo only a few sellers with either standardized or differentiated

products

o only one seller When an industry is classified as oligopolistic, it consists of: Question No. 4 Marks : 02

Can perfectly competitive firms earn economic profit? Explain. Question No. 3 Marks : 10

o the products sold by each firm are different

o monopoly profits are being made by some firms but not by others

o entry into the industry is relatively easy o there is a sharp, abrupt change in the price elasticity of demand

The kink in the kinked demand curve arises because:


Suppose that you are the manager of watch making firm operating in a competitive market your cost of production is given by C = 100 +Q2 , where Q is the level of output and C is total cost. The marginal cost of production is 2Q .The fixed cost of production is $100. If the price of watches is $ 60, how many watches should you produce to maximize profit?

o tries to minimize the cost of producing a given level of output o usually produces in the inelastic range of the demand curve o tries to maximize total revenue

o is not concerned with the cost of production since higher cost can be passed on to consumers

The monopolistic producer:


(b)Will there be entry or exit? (a) How will this tax affect the cost curves for the firm?

A sales tax of $1 per unit of output is placed on one firm whose product sells for $5 in a competitive industry.


o all consumers are charged different prices for different goods o social welfare is improved

o different groups of consumers are charged different prices for the same good

o different prices are used to ration different goods among different consumers

When the monopolistic producer practices price discrimination: Question No. 8 Marks : 02

(b) Firms will never sells its product for less than it costs to produce it.

(a) Average fixed cost does not change as the output change.

Do you agree or disagree with each of the following statement. Explain your reasons.


is horizontal oo does not change if firms leave the industry

WWW.vujannat.ning.Com Connecting VU Students

G

overnment intervention without market failure creates________________.

Q

uestion No. 3 Marks : 1

C D

B A

Refer to the graph below. The marginal revenue curve is represented by curve:

Q


True False

Economies of scale and economies of scope are synonymous.

Q

uestion No. 1 Marks :1

Time Allowed: 150 Minutes

Final Term Examination – Spring 2006 ECO402 Microeconomics

The rising portion of the M The rising portion of the MC curve above AVC

C curve above AC,

The rising portion of the MC curve, ,

T

he short run supply curve of a monopolist is:

Q

True False

or the de

Monopoly can charge any price that it wishes regardless to the market trend

mand for the good.



Q

4th

th 5 nd 2 th 7

DD

iminishing returns to labor occur at the ______________ unit of input:

iminishing returns to labor occur at the ______________ unit of input:

QQ

oo

State the main consequence of product differentiation? Write down the characteristics f monopolistic competition.

State the main consequence of product differentiation? Write down the characteristics f monopolistic competition.

QQ

No effect All of the given options No effect All of the given options

Rise Rise Fall Fall

female efemale e

If the market supply of labor increased relative to demand (baby boomers or

ntry), a surplus of labor would exist and the wage rate would:

If the market supply of labor increased relative to demand (baby boomers or

ntry), a surplus of labor would exist and the wage rate would:




tion No. 4 Marks : 1



Q

Q

Economic profits are zero in t Marginal revenue equals price. Average total cost is minimized in

and monopolistic competition?

Which of the following characteri

Q

D 3

Qu M

MP x P MP x MR MP x W

The MRP for Q

b) Monopolistic a) Perfect competition?

oligopoly different from? competition and monopolistic com

Define oligopoly. How oligopoly market equi

1

Que M

A cost that cannot be avoided, regardless of what is done in th What we forgo, or give up, when we make a choice or a decision, The additional cost of producing an additional unit of output,

Opportunity cost, most broadly defined, is: Q

T Q

None of the given option.


otal profit= Total revenue ________________.


e future, The additional cost of buying an additional unit of a product,

stion No. 11 arks : 0

librium is different from perfect petition?

How is

competition? c) Monopoly?


firms with market power is equal to:

MP x MC

estion No. 13 arks :

efine price discrimination. Why 1st degree price discrimination is practically difficult?


stics is common to both perfect competition

the long run.

he long run. Price equals marginal cost.



Any of the given option

An increasing cost industry, A decreasing-cost industry, A constant-cost industry,

If factor prices rise as industry output expands in the long run, we have: Question No. 21 Marks : 1

False True

In an oligopoly, there are only a few firms and a firm can control price, regardless of the actions of other firms in the industry.


Total cost curve. Production function. Isocost line Isoquant line

Different combinations of labor and capital that have the same total costs can be shown by a(n):

Question No. 19 Marks : 1 What type of difference is shown by economic rent? Question No. 18 Marks : 3

Price rigidity. Low barriers to entry. Zero economic profit. Fluctuating prices.

One characteristic often seen in real world oligopolies is: Question No. 17 Marks : 1 Slope of total revenue is ________________. Question No. 16 Marks : 1

False True

The price of a good is $100, and the marginal cost of the good is $90. A competitive firm should produce that unit.

Incalculable from the information given in this question. 400 100 0

The total variable costs of producing no output are: Question No. 25 Marks : 1

b) At what point (number of workers) does the firm experience diminishing returns? Explain.

a) Fill in the table above.

22 6

24 5

22 4

18 3

10 2

4 1

0 0

Average Product

Marginal Product

Total Product

per day

# of Workers

Use the table below to answer the following questions.


A fall in the price of the product does not affect the firm's revenue. Total expenditures by consumers for the product increase when the product's price falls. The percentage change in quantity demanded equals the percentage change in price.

A fall in the price of the product causes total expenditures by consumers on the product to fall

Demand for a product is elastic when: Question No. 23 Marks : 1

The difference between what consumer is willing to pay for an item and what he actually pays is called ______________.

declines, rises rises, declines is horizontal, rises is horizontal, declines

The general shape of the marginal cost curve is that it ______________ and then ________________:

Question No. 32 Marks : 1 Differentiate between import tariff and import quotas? Question No. 31 Marks : 3

Competitor with a monopolist. Oligopoly. Single seller. Single buyer.

A monopsony is a situation where there is a (n): Question No. 30 Marks : 1

______________________measures the percentage change in quantity demanded resulting from a one percent change in income.


false True

OPEC is best example of cartel: Question No. 28 Marks : 1

Firms that hold import licenses. Producers of imported goods. Consumers of exported goods. Consumers of imported goods.

Who lose from import quotas? Question No. 27 Marks : 1 Differentiate between Natural monopoly and artificial monopoly?


WWW.vujannat.ning.comhttp://vujannat.ning.com

Largest Online Community of VU Students MIDTERM EXAMINATION

FALL 2006


Marks: 40

Time: 60min


Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Wednesday, November 22, 2006


• This exam consists of 10 Multiple Choice Questions (MCQ’s) carrying 1 mark

each,5 fill in the blanks carrying 1 mark each, 5 Short questions carrying 3 marks

each and 1 Descriptive questions carrying 10 marks.

• You are required to show all the working of short questions as well as Descriptive

question.

• This examination is closed book, closed notes, closed neighbors.

• Use of calculator is allowed in the examination.

• Do not ask any questions about the contents of this examination from anyone.

• You may wish to pace yourself with your own watch, but the Supervisor will be the


• Failure to comply with the Supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant

event.

http://www.vupages.com/

http://forum.vupages.com/


Marks Question 11 12 13 14 15 16 17 18 19 20

Marks Question 21

Marks Question No: 1 ( Marks: 1 ) - Please choose one Alvin's preferences for good X and good Y are shown in the diagram below.

Based on given Figure, it can be inferred that: ►

Alvin does not consider good X as "good."

►

Alvin will never purchase any of good Y.

►

Alvin regards good X and good Y as perfect substitutes.

►

Alvin regards good X and good Y as perfect complements.

Question No: 2 ( Marks: 1 ) - Please choose one An increase in income, holding prices constant, can be represented as:

►

A change in the slope of the budget line.

►

A parallel outward shift in the budget line.

►

An outward shift in the budget line with its slope becoming flatter.

►

A parallel inward shift in the budget line.

Question No: 3 ( Marks: 1 ) - Please choose one The short run, as economists use the phrase, is characterized by: ►

A period where the law of diminishing returns does not hold.

►

At least one fixed factor of production, and firms neither leaving nor entering the industry.

►

All inputs being variable.

►

No variable inputs - that is all of the factors of production are fixed.

Question No: 4 ( Marks: 1 ) - Please choose one Which of the following inputs are variable in the long run? ►

Labor.

►

Capital and equipment.

►

Plant size.

►

All of the given options.

Question No: 5 ( Marks: 1 ) - Please choose one An isoquant: ►

Must be linear.

►

Cannot have a negative slope.

►

Is a curve that shows all the combinations of inputs that yield the same total output.

►

Is a curve that shows the maximum total output as a function of the level of labor input.

Question No: 6 ( Marks: 1 ) - Please choose one Coffee and cream: ►

Are both luxury goods.

►

Are complements.

►

Are both more inelastic in demand in the long run than in the short run?

►

Have a positive cross price elasticity of demand.

Question No: 7 ( Marks: 1 ) - Please choose one Although there are many reasons why a market can be non-competitive, the principal economic difference between a competitive and a non-competitive market

is: ►

The number of firms in the market.

►

The extent to which any firm can influence the price of the product.

►

The size of the firms in the market.

►

The annual sales made by the largest firms in the market.

Question No: 8 ( Marks: 1 ) - Please choose one The theory of consumer behavior is based on certain assumptions. It includes at least the assumption(s) that preferences are: ►

Complete.

►

Transitive.

►

Intransitive.

►

Complete and Transitive.

Question No: 9 ( Marks: 1 ) - Please choose one Which of following is a key assumption of a perfectly competitive market? ►

Firms can influence market price

►

Commodities have few sellers

►

It is difficult for new sellers to enter the market.

►

Each seller has a very small share of the market.

Question No: 10 ( Marks: 1 ) - Please choose one What does it mean when the consumer price index CPI is higher this year than

last?

►

The rate of inflation has increased.

►

There has been inflation since last year.

►

Real prices have increased.

►

Real prices have decreased.

Question No: 11 ( Marks: 1 ) Two goods are considered ______________if an increase (decrease) in the price of one leads to an increase (decrease) in the quantity demanded of the other. Question No: 12 ( Marks: 1 ) Shape of isoquant is______________. Question No: 13 ( Marks: 1 ) _____________ = TFC/Q + TVC/Q. Question No: 14 ( Marks: 1 ) In _________________increase in output is greater than the increase in inputs.

Question No: 15 ( Marks: 1 ) The marginal rate of technical substitution (MRTS) is ___________at all points on the isoquant. Question No: 16 ( Marks: 3 ) What are the advantages of joint production? Question No: 17 ( Marks: 3 ) Define isocost line. What is the slope of isocost line?

Question No: 18 ( Marks: 3 ) Differentiate between increasing returns to cost and decreasing returns to cost. Question No: 19 ( Marks: 3 ) If there is 10% chance of a $10,000 loss from a home burglary, what will be the expected loss? Question No: 20 ( Marks: 3 ) Differentiate between positive and negative network externalities. Question No: 21 ( Marks: 10 )

a. Differentiate b/w elasticity of demand and supply with the help of formula.

b. Calculate income elasticity of demand with the help of example.

www.vujannat.ning.com

Which best expresses the law of demand? Question No. 1 Marks : 1

Failure to comply with the Supervisor’s directions will result in your test being cancelled. Please comply with supervisor’s directions to avoid any unpleasant

event.

• You may wish to pace yourself with your own watch, but the Supervisor will

be the official timekeeper of the test.

• Do not ask any questions about the contents of this examination from

anyone.

• This examination is closed book, closed notes, closed neighbors.

• You are required to show all the working of short questions as well as

Descriptive question.

• This exam consists of 10 Multiple Choice Questions (MCQ’s) carrying 1

mark each,5 fill in the blanks carrying 1 mark each, 5 Short questions

carrying 3 marks each and 1 Descriptive questions carrying 10 marks.


Please read the following instructions carefully before attempting any question: INSTRUCTIONS:

Time Allowed: 90 Minutes Mid Term Examination – Spring 2006 ECO402 Microeconomics

mailto:[email protected]



Find out the equilibrium quantity and price. Also find out the elasticity of demand and supply and show that elasticities are elastic or inelastic?

– QD = 3,550 - 266P – QS = 1,800 + 240P

b). If a). Define equilibrium. Question No. 5 Marks : 10

Its total sales revenue exceeds the sum of all its economic costs It is regulated by government It produces its output utilizing the least-cost production method Its total sales revenue equals the cost of labor and raw materials

A firm will earn an economic profit if: Question No. 4 Marks : 1

_____________is the additional utility gained from consuming one extra unit of a good or service.


If a consumer starts in equilibrium in their consumption of apples and chocolate bars, and the price of apples rises, what will happen to the quantity demanded of apples, and why?


A lower price shifts the demand curve to the right A higher price reduces quantity demanded A lower price reduces demand A higher price reduces demand

Pleasure Use Satisfaction

The numerical measurement of a consumer’s preference is called_______________: Question No. 10 Marks : 1 What does production possibility frontier show?


One increases when the other decreases One decreases when the other increases They move in the same direction They move in opposite directions

Two variables have a positive relationship if ___________________: Question No. 8 Marks : 1 The_________________shows how much firms wish to sell at different prices. Question No. 7 Marks : 1

Face-to-face contact between buyers and sellers Exchange between buyers and sellers The exchange of goods and services, but not resources Either down sloping demand or up sloping supply but not both

A market is characterized by: Question No. 6 Marks : 1

Income elasticity is negative and gadgets are a normal good Income elasticity is positive and gadgets are a normal good The supply of gadgets is elastic

Suppose that a 2% increase in income in the economy decreases the quantity demandedof gadgets by 1% at every possible price. This implies that:

Question No. 16 Marks : 1 Define elasticity. In which case elasticity is greater than 1? Question No. 15 Marks : 3

Quantity must fall Quantity must rise Price must fall Price must rise

If the supply of a product decreases and the demand for that product simultaneously increases, then equilibrium:

Question No. 14 Marks : 1 Profit is maximized at that point where total revenue is equal to--------------------_ Question No. 13 Marks : 1 The two main branches of economics are _____________ and____________. Question No. 12 Marks : 1 Does the Laspeyres index always overstate the true cost of living index? Question No. 11 Marks : 3

Utility

Define supply curve. What is the relationship between price and quantity supplied? Question No. 21 Marks : 3

The substitution effect The rationing function of markets The income effect Diminishing marginal utility

When movie ticket prices increase, families tend to spend more time at home watching videos instead. This best reflects:


Describes the aggregate flows of output and income Studies how supply and demand determine prices in individual markets Is concerned with the economy as a whole Is particularly subject to the "fallacy of composition"

Microeconomics: Question No. 19 Marks : 1

The price elasticity of demand measures the responsiveness of quantity demanded to_____________.


a constant and negative slope an increasingly steep positive slope a decreasingly steep negative slope an increasingly steep negative slope

Moving from left to right, the typical production possibilities curve has: Question No. 17 Marks : 1

Income elasticity is negative and gadgets are an inferior good

WWW.vujannat.ning.comhttp://vujannat.ning.com

Largest Online Community of VU Students MIDTERM EXAMINATION

SPRING 2007


Marks: 40

Time: 90min


Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Saturday, May 12, 2007

Please read the following instructions carefully before attempting any question: All questions are compulsory.

This exam consists of 10 Multiple Choice Questions (MCQs) of 1 mark each, 5 fill in

the blanks of 1 mark each, 3 Short questions of 5 marks each and one Descriptive

question of 10 marks.

For each Multiple Choice Question, read the options available and select which you

consider are the correct one.

You are required to show all the working of short as well as practical question.

Use of calculator is allowed.

This examination is closed book, closed notes and closed neighbors.

Do not ask question about the contents of this examination from anyone.

You may wish to pace yourself with your own watch, but the Supervisor will be the


Failure to comply with the Supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant event


Marks

http://www.vupages.com/

http://forum.vupages.com/

Question 11 12 13 14 15 16 17 18 19 Marks

Question Marks

Question No: 1 ( Marks: 1 ) - Please choose one What does it mean when the consumer price index (CPI) is higher this year than last? ►

The rate of inflation has increased.

►

There has been inflation since last year.

►

Real prices have increased.

►

Real prices have decreased.

Question No: 2 ( Marks: 1 ) - Please choose one Which of the following is NOT an assumption regarding people's preferences in the theory of consumer behavior? ►

Preferences are complete.

►

Preferences are transitive.

►

Consumers prefer more of a good to less.

►

None of the given options.

Question No: 3 ( Marks: 1 ) - Please choose one If indifference curves cross, then: ►

The assumption of a diminishing marginal rate of substitution is violated.

► The assumption of transitivity is violated.

►

The assumption of completeness is violated.

►

Consumers minimize their satisfaction.

Question No: 4 ( Marks: 1 ) - Please choose one Which of the following is true concerning the income effect of a decrease in price? ►

It will lead to an increase in consumption only for a normal good.

►

It always will lead to an increase in consumption.

►

It will lead to an increase in consumption only for an inferior good.

►

It will lead to an increase in consumption only for a Giffen good.

Question No: 5 ( Marks: 1 ) - Please choose one Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity ►

A because it has less risk.

►

A because it provides higher potential earnings.

►

B because it has less risk.

►

B because of its higher potential earnings.


When the average product is decreasing, marginal product ►

Equals average product.

►

Is increasing.

►

Is decreasing.

►

Is less than average product.

Question No: 7 ( Marks: 1 ) - Please choose one The law of diminishing returns applies to ►

The short run only.

►

The long run only.

►

Both the short and the long run.

►

Neither the short nor the long run.

Question No: 8 ( Marks: 1 ) - Please choose one The rate at which one input can be reduced per additional unit of the other input, while holding output constant, is measured by the ►

Marginal rate of substitution.

►

Marginal rate of technical substitution.

►

Slope of the isocost curve.

► Average product of the input.

Question No: 9 ( Marks: 1 ) - Please choose one Fixed costs are fixed with respect to changes in ►

Output.

►

Capital expenditure.

►

Wages.

►

Time.

Question No: 10 ( Marks: 1 ) - Please choose one The diagram below contains _____ cost curves.

►

short run

►

Intermediate run

►

long run

►

Both short run and long run.

Question No: 11 ( Marks: 1 ) The _____________shows the possible combination of goods and services available in an economy. Question No: 12 ( Marks: 1 ) Generally ________is a measure of the sensitivity of one variable to another. Question No: 13 ( Marks: 1 ) A ____________indicates all combinations of two commodities for which total money spent equals total income. Question No: 14 ( Marks: 1 ) The market demand will shift to the_______ as more consumers enter the market. Question No: 15 ( Marks: 1 ) Actual expenses plus depreciation charges for capital equipment is known as______________. Question No: 16 ( Marks: 5 ) Define utility. Differentiate between ordinal and cardinal utility function; which one is better? (1+3+1) Question No: 17 ( Marks: 5 ) (a) Differentiate between risk averse and risk loving people. (b) How consumer can attempt to reduce risk? (3+2) Question No: 18 ( Marks: 5 )

a. Define elasticity of demand. What are the two extreme case of elasticity of demand?

b. Define cross elasticity of demand; also write down its formula. What will be the cross elasticity of demand for substitutes and for complements. (2+3)

Question No: 19 ( Marks: 10 ) Define a market basket.Onwhich assumptions consumers preferences are based? Why an indifference curve is convex to origin.(2+6+2)

eco402 collection of old papers

Documents