Quizcb2 – Actuators Education Institute

CB2000317

Question 1
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Which of the following statements below is always TRUE?

Opportunity cost is equal to total revenue minus total variable cost.
Opportunity cost is constant.
Opportunity cost is the cost in terms of the best foregone alternative.
Opportunity cost is equal to a firm's supernormal profits.

CB2000318

Question 2
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In a free-market economy the basic function of the price mechanism is to:

provide a means of allocating resources.
ensure that consumer wants are satisfied.
enable the government to control prices.
ensure the goods that society needs are produced.

CB2000358

Question 3
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Which one of the following accurately describes the opportunity cost of producing Good X?

the cost of producing Good X in money terms
the next best alternative use to which the factors of production used to produce Good X could be put
the stream of services provided by Good X over its entire lifetime
the production of Good X foregone in the previous year to enable Good X to be produced this year

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Question 4
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The main categories of economic resources are:

natural resources, labour and money.
labour, money and factories.
natural resources, capital and factories
natural resources, labour and capital.

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Question 5
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In economics the concept of scarcity means:

all resources will eventually be exhausted.
there are unlimited resources, we just have an allocation problem.
there are unlimited wants and limited resources.
all of the above.

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Question 6
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A student studying a one-year Masters degree in Actuarial Science has course fees of £12,000 and could otherwise have had a job paying an after-tax income of £20,000. The cost of her accommodation is £7,000 whether she studies or works and the food bill is £3,000 Whether she studies or works. The opportunity cost of studying for the Masters degree is:

£12,000.
£20,000.
£32,000.
£42,000.

CB2000403

Question 7
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The solution to the economic problem of deciding which goods to produce requires:

a choice between the production of consumer goods and the sacrifice of alternatives.
the establishment of freedom of entry and exit.
the establishment of a system of market prices.
a decision to be made on the degree to which capital will be used in the production process rather than labour.

CB2000423

Question 8
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A company makes economic profits of 10%. The risk premium for the company’s line of business is 5%. If the banks offer a rate of interest on savings accounts of 3%, the opportunity cost to the owners of the company is:

5%.
7%.
8%.
10%.

CB2000427

Question 9
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Scarcity exists if:

prices are too high.
human wants cannot be satisfied.
there are shortages of some goods.
markets are not perfectly competitive.

CB2000435

Question 10
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The solution to the economic problem of deciding which goods to produce requires:

the establishment of freedom of entry and exit.
the establishment of a system of market prices.
a choice between the production of consumer goods and the sacrifice of alternatives.
a decision to be made on the degree to which capital will be used in the production process rather than labour.

CB2000439

Question 11
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Opportunity cost is always:

constant.
equal to a firm's supernormal profits.
equal to total revenue minus total variable cost.
the cost in terms of the best foregone alternative.

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Question 12
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The problem of scarcity in economics:

exists only in economies which rely on the market mechanism.
could be eliminated if prices are forced to fall.
means that there are shortages of some goods.
exists because there are insufficient resources to satisfy human wants.

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Question 13
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If the government chooses to use resources to build a hospital instead of a school, this illustrates the concept of:

a market system.
macroeconomics.
competition.
opportunity cost.

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Question 14
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If an economy moves from producing 10 units of Good X and 5 units of Good Y to producing 8 units of Good X and 6 units of Good Y, the opportunity cost of the 6th unit of Good Y is:

1.33 units of Good X.
2 units of Good X.
8 units of Good X.
10 units of Good X.

CB2000474

Question 15
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The solution to the economic problem of deciding which goods to produce requires:

choice between the production of consumer goods and the sacrifice of alternatives.
the establishment of freedom of entry and exit.
the establishment of a system of market prices.
a decision to be made on the degree to which capital will be used in the production process rather than labour.

CB2000475

Question 16
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In a free-market economy, the basic function of the price mechanism is to:

provide a means of allocating resources.
ensure that all consumer wants are satisfied.
enable the government to control prices.
ensure that all the goods that society needs are produced.

CB2000477

Question 17
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A production possibility frontier illustrates the limits on output of finished goods, as imposed by a limited supply of productive inputs. On the axes of the production possibility frontier, we place the:

quantity of productive inputs.
quantity of inputs on one axis and quantity of outputs on the other axis.
quantities of finished goods.
prices of productive inputs.

CB2000478

Question 18
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If the demand and supply for a commodity both increase at each price, the market price will tend to:

rise.
be indeterminate.
fall.
remain unchanged.

CB2000479

Question 19
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Which of the following would NOT explain why, when the price of a good rises, the quantity supplied will also rise?

Firms expect future prices to rise.
At higher levels of output firms will incur higher costs.
The higher the price the more profitable it becomes to produce.
The price of a good remains high over a given time period.

CB2000482

Question 20
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Which of the following statements explains how price, demand and supply respond to a shortage?

Price rises, quantity demanded falls and quantity supplied rises.
Price rises, quantity demanded falls and quantity supplied falls.
Price rises, quantity demanded rises and quantity supplied falls.
Price rises, quantity demanded rises and quantity supplied rises.

CB2000489

Question 21
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If Goods X and Y are substitutes, an increase in the price of Good X causes the:

demand curve for Good X to shift to the left, and the demand curve for Good Y to shift to the left.
demand curve for Good X to shift to the left, and the demand curve for Good Y to shift to the right.
quantity demanded of Good X to fall, and the demand curve for Good Y to shift to the right.
quantity demanded of Good X to fall, and the demand curve for Good Y to shift to the left.

CB2000490

Question 22
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If rail travel is an inferior good, which one of the following will lead to a shift of its demand curve to the left?

an increase in incomes
a rise in car prices
an increase in petrol prices
a rise in the price of rail travel

CB2000494

Question 23
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The demand equation for Good X is $Q_d$ = 15 – 0.5P and the supply equation for Good X is $Q_s$ = 3 + 2P, where P is the price in pounds. When the price is £6 there will be a:

surplus of Good X and the price will rise.
shortage of Good X and the price will fall.
surplus of Good X and the price will fall.
shortage of Good X and the price will rise.

CB2000496

Question 24
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The demand curve for Good X, which is a normal good, will shift to the right if:

its price decreases.
the price of a substitute rises.
the price of a complement rises.
consumers' incomes fall.

CB2000499

Question 25
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Which of the following best describes an annual supply curve?

the quantity that producers would like to sell annually
the quantity that producers are willing and able to sell at each income over the next year
the quantity that producers are willing and able to produce over the next year
the quantity that producers are willing and able to sell at each price annually

CB2000501

Question 26
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Which of the following will NOT cause a shift in the demand curve for Good X?

a change in the price of Good X
a change in the price of other goods
a change in consumer incomes
a change in consumer tastes

CB2000505

Question 27
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What is the combined effect of an increase in the cost of production and a rise in consumer income on the equilibrium price and quantity of an inferior good?

the effect on price is indeterminate but quantity will fall
the effect on price is indeterminate but quantity will rise
the effect on quantity is indeterminate but price will rise
the effect on quantity is indeterminate but price will fall

CB2000511

Question 28
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Good X is an inferior good. A rise in consumer income when the supply curve for Good X is positively sloped will cause which one of the following?

the demand for Good X to fall and the price of Good X to fall
the demand for Good X to fall and the price of Good X to rise
the demand for Good X to rise and the price of Good X to fall
the demand for Good X to rise and the price of Good X to rise

CB2000523

Question 29
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What is the combined effect of a decrease in the cost of production and a rise in consumer income on the equilibrium price and quantity of a normal good?

The effect on price is indeterminate but quantity will fall.
The effect on price is indeterminate but quantity will rise.
The effect on quantity is indeterminate but price will rise.
The effect on quantity is indeterminate but price will fall.

CB2000524

Question 30
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Which of the following will NOT cause a shift in the demand curve for Good X?

a change in consumer tastes
a change in consumer incomes
a change in the price of Good X
a change in the price of other goods

CB2000526

Question 31
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If public transport is an inferior good, which of the following will cause its demand curve to shift to the left?

a rise in the price of cars
an increase in the price of petrol
an increase in consumers· incomes
an increase in the price charged to use public transport

CB2000527

Question 32
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Which of the following statements explains how price, demand and supply for a good respond to an increase in the price of a substitute good?

price rises, quantity demanded falls and quantity supplied rises
price rises, quantity demanded falls and quantity supplied falls
price falls, quantity demanded rises and quantity supplied falls
price rises, quantity demanded rises and quantity supplied rises

CB2000530

Question 33
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If the demand for Good X increases (due to a rise in income of consumers) and the supply of Good X increases (due to increased worker productivity) then the equilibrium price of Good X:

will fall and the equilibrium quantity may rise or fall.
will fall and the equilibrium quantity will rise.
may rise or fall or remain the same and the equilibrium quantity will fall.
may rise or fall or remain the same and the equilibrium quantity will rise.

CB2000531

Question 34
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Which of the following statements explains how price, demand and supply respond to a surplus?

Price rises, quantity demanded falls and quantity supplied rises.
Price rises, quantity demanded falls and quantity supplied falls.
Price falls, quantity demanded rises and quantity supplied falls.
Price falls, quantity demanded rises and quantity supplied rises.

CB2000533

Question 35
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Which one of the following will shift the supply curve for Good X to the left?

a decrease in labour productivity in Industry X
a fall in the price of raw materials used to produce Good X
a decrease in wages in Industry X
a government subsidy on the production of Good X

CB2000534

Question 36
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Good X is an inferior good. A fall in consumer income when the supply curve for Good X is positively sloped will cause which one of the following?

the demand for Good X to fall and price of Good X to fall
the demand for Good X to fall and price of Good X to rise
the demand for Good X to rise and price of Good X to fall
the demand for Good X to rise and price of Good X to rise

CB2000535

Question 37
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If public transport is an inferior good, which of the following will cause its demand curve to shift to the left?

an increase in consumers' incomes
a rise in the price of cars
an increase in the price of petroJ
an increase in the price charged to use public transport

CB2000536

Question 38
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If ice cream is a substitute for fruit sorbet and strawberries are a complement to ice-cream but not fruit sorbet then a fall in the price of ice cream will:

increase the demand for fruit sorbet and strawberries.
decrease the demand for fruit sorbet and increase the demand for strawberries.
decrease the demand for fruit sorbet and strawberries.
increase the demand for fruit sorbet and decrease the demand for strawberries.

CB2000537

Question 39
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Which one of the following will NOT shift the supply curve for Good X to the right?

an increase in labour productivity in Industry X
a fall in the price of raw materials used to produce Good X
an increase in wages in Industry X
a government subsidy on the production of Good X

CB2000538

Question 40
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If the price of Good X has risen and the quantity sold has increased, then there must have been a:

rightward shift of the supply curve for Good X.
leftward shift of the supply curve for Good X.
rightward shift of the demand curve for Good X.
leftward shift of the demand curve for Good X.

CB2000545

Question 41
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If the cost of production increases and consumer income rises, the combined effect on the equilibrium price and quantity of an inferior good is:

indeterminate on price but quantity will fall.
indeterminate on price but quantity will rise.
indeterminate on quantity but price will rise.
indeterminate on quantity but price will fall.

CB2000546

Question 42
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Wheat is an essential input in the production of pasta. An increase in the price of wheat would have an impact on the demand and supply of pasta by shifting the:

demand curve to the left.
supply curve to the left.
supply curve to the right.
demand curve to the right.

CB2000550

Question 43
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A consumer’s demand curve for Good X is represented by the equation:

$Q_{dx}$ = ${50 – 0.2P}_x$

where $Q_{dx}$ is the quantity of Good X demanded and $P_x$ is the price of Good X.

A producer’s supply curve for Good X is represented by the equation:

$O_{sx}$ = ${10 + 0.6P}_x$

where $O_{sx}$ is the quantity of Good X supplied and $P_x$ is the price of Good X. Demand and supply are in equilibrium when:

quantity is 20 and price is 150.
quantity is 30 and price is 100.
quantity is 35 and price is 75.
quantity is 40 and price is 50.

CB2000555

Question 44
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An ‘inferior good’ is defined as a good:

that will be bought by consumers only at a low price.
whose quantity purchased will decline if consumers' income rises.
that is of poor quality compared to more expensive versions of the good.
that is bought only by people on low incomes.

CB2000832

Question 45
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Despite an increase in the minimum price of admission from £15.00 to £18.00, a football club finds that attendance at home matches increased by 20%. Which of the following could most effectively explain this situation?

Demand to watch football has a high price elasticity.
Consumer preference has changed in favour of watching football.
Demand to watch football has a very low price elasticity.
The prices of alternative attractions have fallen.

CB2000833

Question 46
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If the government fixed a minimum price of bread above the equilibrium price and there was no further government intervention in the market for bread, which of the following would result?

There would be a surplus on the market and bread producers' income would fall.
There would be an equilibrium in the market but the change in bread producers' income would be uncertain.
There would be a shortage on the market and bread producers' income would rise.
There would be a surplus on the market but the change in bread producers' income would be uncertain.

CB2000834

Question 47
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If a firm increases its output and this results in an equal proportionate increase in its revenue, which of the following can be deduced about the price elasticity of demand for the firm’s product?

It is -1.
It is infinite elasticity.
It is +1.
It is zero elasticity.

CB2000835

Question 48
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A firm’s decision to reduce its expenditure on advertising is most likely to have the following impact on its demand curve:

The curve will shift to the left and become more inelastic.
The curve will shift to the right and become less elastic.
The curve will shift to the left and become more elastic.
The curve will shift to the right and become less inelastic.

CB2000836

Question 49
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Following an increase in the price of fuel there is a 20% increase in the price of air travel tickets which results in a 20% decrease in total revenue. Which of following statements is TRUE about the demand for air travel?

The demand for air travel is price-inelastic.
The demand for air travel is price-elastic.
The demand for air travel is infinitely price-elastic.
The demand for air travel has zero price inelasticity.

CB2000837

Question 50
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The demand for Good X has a price elasticity of minus unity while the supply curve has a positive slope. If the government decided to impose a tax of £10 per unit on Good X this would:

shift the supply curve for Good X up by less than £10 and increase the price by less than £10.
shift the supply curve for Good X up by less than £10 and increase the price by more than £ 1 O.
shift the supply curve for Good X up by £10 and increase the price by £10.
shift the supply curve for Good X up by £10 and increase the price by less than £10.

CB2000845

Question 51
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The demand equatron for Good Xis $Q_d$ = 15-0.5P and the supply equation for Good X is $Q_s$ = 3 + 2P , where P is the price. When the price is £6 there will be:

a surplus of Good X and price will rise.
a shortage of Good X and price will fall.
a surplus of Good X and price will fall.
a shortage of Good X and price will rise.

CB2000847

Question 52
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A demand curve which has price elasticity of minus one throughout its length will be:

vertical.
horizontal.
upward-sloping.
downward-sloping.

CB2000848

Question 53
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If the demand for Good X is price-elastic then the burden of a sales tax on Good X will be borne:

equally by buyers and sellers.
more heavily by buyers.
more heavily by sellers.
by neither buyers nor sellers.

CB2000849

Question 54
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Which of the following will result from the imposition of a 9 per cent sales tax on household fuel, the demand for which has an absolute price elasticity of demand equal to 1.5?

a rise in the price of fuel by 10.5 per cent
a rise in the price of fuel by 9 per cent
a rise in the price of fuel by 12 per cent
a rise in the price of fuel by less than 9 per cent

CB2000850

Question 55
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A minimum price is set for Good X at £10 which happens to coincide with the free-market price. An increase in the demand for Good X keeping the minimum price fixed at £10 will lead to:

no change in price and a shortage.
a rise in price and quantity sold.
a rise in price and a shortage.
a rise in price and a surplus.

CB2000851

Question 56
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If the price of a product rises from £3 to £4 and demand falls from 100 to 80 units, then using the average price elasticity of demand method the price elasticity of demand is:

-0.60
- 0.78
-1
- 0.05

CB2000852

Question 57
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Which of the following is NOT a motive for advertising by an existing firm in an industry?

to make the demand for the product more price-elastic
to shift the demand for the firm's product to the right
to increase barriers to entry
to increase sales and so help the firm exploit economies of scale

CB2000853

Question 58
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Given a linear downward-sloping demand curve, higher prices along the demand curve are associated with a:

higher absolute price elasticity.
lower absolute price elasticity.
constant price elasticity.
unitary price elasticity.

CB2000854

Question 59
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If a maximum price for Good X is fixed above the market equilibrium price there will be:

an excess supply of Good X.
an excess supply of Good X.
no tendency for the market price of Good X to change.
an upward pressure on the price of Good X.

CB2000855

Question 60
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A maximum price is set for Good X at £30 which happens to coincide with the free-market price. A downward shift in the supply of Good X keeping the maximum price fixed at £30 will lead to:

no change in price and a surplus.
no change in price and a shortage.
a fall in price and a fall in the quantity sold.
a fall in price and a rise in the quantity sold.

CB2000856

Question 61
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If the own price elasticity of demand for Good X is – 0.8 and the income elasticity of Good X is -0.3, which of the following is correct?

Demand for Good X is price-elastic.
A cut in the price of Good X will increase revenue for a firm producing Good X.
Good X is a luxury good.
Good X is an inferior good.

CB2000857

Question 62
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The demand for Good X has a price elasticity of -1. If the government decided to impose a sales tax of £3 per unit on Good X this would:

shift the supply curve for Good X up by less than £3 and increase the price by less than £3.
shift the supply curve for Good X up by less than £3 and increase the price by more than £3.
shift the supply curve for Good X up by £3 and increase the price by £3.
shift the supply curve for Good X up by £3 and increase the price by less than £3.

CB2000858

Question 63
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If the income elasticity of demand for Good X is 2, a rise in all consumers’ disposable incomes from £50 million to £52 million will increase the quantity demanded of Good X by:

2%.
4%.
6%.
8%.

CB2000860

Question 64
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If an 8% rise in the price of Good X results in a 4% fall in the quantity of Good X demanded then the approximate price elasticity of demand for Good X is:

-12
- 0.5
-2
-4

CB2000861

Question 65
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Which one of the following statements concerning advertising is FALSE?

Advertising is intended to shift the demand curve for a firm's product upwards to the right.
Advertising is intended to make the demand for a firm's product more price-elastic.
A potential feature of a successful advertising campaign is that it increases a firm's total revenue by more than it increases the firm's total costs.
Advertising can enable a firm to gain economies of scale.

CB2000862

Question 66
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Despite an increase in the price of admission from £15.00 to £18.00, a football club finds that attendance at matches increased by 20%. Which of the following could most effectively explain this situation?

The prices of alternative attractions have fallen.
Demand to watch football has a high price elasticity.
Demand to watch football has a low price elasticity.
Consumer preference has changed in favour of watching football.

CB2000864

Question 67
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Good X has a cross elasticity of demand with respect to Good Y which is equal to minus unity (ie-1). Good X is which of the following with respect to Good Y?

a perfect substitute
an imperfect substitute
a perfect complement
an imperfect complement

CB2000875

Question 68
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Which of the following is NOT a characteristic of an inferior good?

The income elasticity of demand is negative.
The income elasticity of demand is between zero and one.
The demand for the good increases as income falls.
The demand will rise if its price falls.

CB2000876

Question 69
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Which of the following is NOT a motive for advertising by an existing firm in an industry?

to make the demand for the product more price-elastic
to shift the demand for the firm's product to the right
to increase barriers to entry
to increase sales and so help the firm exploit economies of scale

CB2000885

Question 70
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Which one of the following results in a decrease in total consumer expenditure?

price elasticity of demand is minus one and price falls
demand is price elastic and price falls
demand is price inelastic and price falls
demand is price inelastic and price rises

CB2000886

Question 71
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Good X has a price elasticity of demand equal to -1 .5. In such circumstances, a per unit sales tax on Good X of £5 will lead to which of the following?

a rise in the price charged to consumers of more than £7 .50
a rise in the price charged to consumers of £7 .50
a rise in the price charged to consumers of between £5 and £7 .50
a rise in the price charged to consumers of less than £5

CB2000887

Question 72
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Good Y has a cross elasticity of demand with respect to Good X calculated using the average method of-1. Initially 100 units of Good Y are demanded
when Good X costs 20 pence. A rise in the price of Good X to 25 pence will result in a new level of demand for Good Y of:

125 units.
95 units.
80 units.
70 units

CB2000888

Question 73
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A firm’s decision to reduce its expenditure on advertising is most likely to have the following impact on its demand curve:

The curve will shift to the left and become less elastic.
The curve will shift to the right and become less elastic.
The curve will shift to the left and become more elastic.
The curve will shift to the right and become more elastic.

CB2000889

Question 74
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The total revenue from the sale of a good will fall if:

the price of the good rises and demand for the good is price-elastic.
the price of the good rises and demand for the good is price-inelastic.
consumer income falls and the good is an inferior good.
consumer income rises and the good is a normal good.

CB2000890

Question 75
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A firm’s decision to reduce its expenditure on advertising is most likely to have the following impact on its demand curve:

The curve will shift to the left and become less elastic.
The curve will shift to the right and become less elastic.
The curve will shift to the left and become more elastic.
The curve will shift to the right and become more elastic.

CB2000891

Question 76
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Following an increase in the price of fuel, there is a 20% increase in the price of air travel tickets that results in a 20% decrease in total revenue. Which of the following statements is TRUE about the demand for air travel?

It is price-inelastic.
It is price-elastic.
It is infinitely price-elastic.
It has zero price elasticity.

CB2000892

Question 77
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The demand for Good X has a price elasticity of -3 while the supply curve has a positive slope. If the government decided to impose a tax of £10 per unit on Good X, this would shift the supply curve for Good X up by:

less than £10 and increase the price by less than £10.
less than £10 and increase the price by more than £10.
£10 and increase the price by £10.
£10 and increase the price by less than £10.

CB2000893

Question 78
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If an 8% rise in the price of Good X results in a 4% fall in the quantity demanded of Good Y, then the cross elasticity of demand for Good Y is approximately:

-2 and the two goods are complements.
-0.5 and the two goods are complements.
-2 and the two goods are substitutes.
-0.5 and the two goods are substitutes.

CB2000896

Question 79
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Diminishing marginal utility of income implies:

people are risk-lovers.
people are risk-averse.
people are risk-diversifiers.
people are risk-neutral.

CB2000897

Question 80
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Which one of the following illustrates the problem of adverse selection?

A bank, by raising its interest rates, will tend to increase the proportion of borrowers in its loan portfolio who do not intend to repay their loans.
An insurance company by inserting extra clauses into an insurance contract will tend to reduce its customer base.
Bank directors will tend to act in their own interests rather than that of their shareholders.
An insurance policy with a 2-year time horizon is more likely to have a claim made against it than an insurance policy with a 1-year time horizon.

CB2000898

Question 81
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Which of the following statements defines moral hazard in relation to insurance?

Statement I: Moral hazard describes the fact that people who know that they are a particularly bad risk are more inclined to take out insurance.
Statement II: Moral hazard describes the fact that a policyholder may act in a way which makes the insured event more likely to occur.
Statement III: Moral hazard describes the fact that people who know that they are a particularly bad risk are less inclined to take out insurance.
Statement IV: Moral hazard describes the risk that an insurance company will face false insurance claims.

Only Statement II is correct
Both Statement II and IV are correct
Only Statement IV is correct
All the statements are correct

CB2000899

Question 82
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According to the law of diminishing marginal utility, the total satisfaction that a consumer gets from consuming Good X will:

rise at an increasing rate as consumption of Good X increases.
rise at a decreasing rate as consumption of Good X increases.
rise at a decreasing rate as consumption of Good X decreases.
fall at a decreasing rate as consumption of Good X increases.

CB2000901

Question 83
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Which of the following is a measure of total consumer surplus?

marginal utility minus the price of the good
the total utility consumers get from the consumption of the good
the total utility consumers get from consumption of the good less the total expenditure on the good
marginal utility times the price of the good

CB2000902

Question 84
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Which of the following is implied by the principle of diminishing marginal utility of income:

Total utility increases at a decreasing rate as income increases.
Marginal utility increases at a decreasing rate as income increases.
Marginal utility decreases at an increasing rate as income falls.
Total utility decreases at an increasing rate as income increases.

CB2000906

Question 85
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Adverse selection refers to a situation where:

having insurance makes an individual less careful.
having insurance makes an individual more careful.
the people taking out the insurance are those who have the highest risk.
the people taking out the insurance are those who have the highest risk aversion.

CB2000907

Question 86
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Consumer X has a higher income than Consumer Y but they have identical preferences and pay the same prices for the goods which they consume. If they both maximise utility then:

the marginal utility from each good consumed will be higher for X than for Y and X will have a higher total utility.
the marginal utility from each good consumed will be higher for X than for Y and X will have a lower total utility.
the marginal utility from each good consumed will be lower for X than for Y and X will have a higher total utility.
the marginal utility from each good consumed will be lower for X than for Y and X will have a lower total utility.

CB2000910

Question 87
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Consumer A has a higher income than Consumer B but they have identical preferences and pay the same prices for the goods which they consume. If they both maximise utility then the marginal utility from each good consumed will be:

higher for A than for Band A will have a higher total utility.
higher for A than for Band A will have a lower total utility.
lower for A than for Band A will have a higher total utility.
lower for A than for B and A will have a lower total utility.

CB2000912

Question 88
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Diminishing marginal utility of income implies that individuals are:

risk-lovers.
risk-averse.
risk-neutral.
risk-diversifiers.

CB2000916

Question 89
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In relation to insurance, moral hazard describes the fact that:

people who know that they are a particularly high risk are more inclined to take out insurance.
a policyholder may act in a way which makes the insured event more likely to occur.
people who know that they are a particularly high risk are less inclined to take out insurance.
an insurance company will face false insurance claims.

CB2000918

Question 90
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Which of the following statements defines adverse selection in relation to insurance?

Adverse selection describes the fact that people who know that they are a particularly bad risk are more inclined to take out insurance.
Adverse selection describes the fact that a policyholder may act in a way which makes the insured event more likely to occur.
Adverse selection describes the fact that people who know that they are a particularly bad risk are less inclined to take out insurance.
Adverse selection describes the risk that an insurance company will face false insurance claims.

CB2000921

Question 91
Flag

In relation to insurance, the term moral hazard suggests:

people who know they are a bad risk are more inclined to take out insurance.
people who know they are a bad risk are less inclined to take out insurance.
a policyholder may act in a way which makes an insured event less likely to occur.
a policyholder may act in a way which makes an insured event more likely to occur.

CB2000922

Question 92
Flag

Diminishing marginal utility of income implies that individuals are:

risk neutral.
risk lovers.
risk seekers.
None of the above

CB2000923

Question 93
Flag

Which of the following statements defines moral hazard in relation to insurance?

Moral hazard describes the fact that people who know that they are a particularly bad risk are more inclined to take out insurance.
Moral hazard describes the fact that a policyholder may act in a way which makes the insured event more likely to occur.
Moral hazard describes the fact that people who know that they are a particularly bad risk are less inclined to take out insurance.
Moral hazard describes the risk that an insurance company will face false insurance claims.

CB2000925

Question 94
Flag

A consumer uses only two goods, X and Y. Currently the marginal utility of the last unit of Good X consumed is, six times as great as the marginal utility of the last unit of Good Y consumed. The price of Good X is three times that of Good Y. To maximise utility, the consumer should:

consume more of Good X and less of Good Y.
consume more of Good Y and less of Good X.
increase consumption of both Goods X and Y.
decrease consumption of both Goods X and Y.

CB2000926

Question 95
Flag

When a consumer with a given income chooses between two goods with fixed prices, the slope of the budget line is equal to the:

ratio of the prices of the two goods.
income of the consumer divided by the price of each good.
ratio of the total utility of each good divided by the price of each good.
ratio of the total utilities of both goods.

CB2000927

Question 96
Flag

Water is generally cheaper than diamonds when consumers are in equilibrium because the:

total utility of water is less than the total utility of diamonds.
total utility of water is greater than the total utility of diamonds.
marginal utility of water is less than the marginal utility of diamonds.
marginal utility of water divided by the marginal utility of diamonds, is greater than the price of water divided by the price of diamonds.

CB2000931

Question 97
Flag

Consider the following table:

The table illustrates which one of the following:

economies of scale
constant returns to scale
diseconomies of scale
None of the above

CB2000933

Question 98
Flag

In which situation will a firm cease production in the short run?

Total revenue is less than total costs.
Total revenue is less than total fixed costs.
Average revenue is less than average fixed cost.
Average revenue is less than average variable cost.

CB2000935

Question 99
Flag

Given that a firm’s fixed costs are £1,000, the average total cost of its output is £4 and its average variable cost is £3.50, which one of the following will represent its total output per period?

2,000 units
1,750 units
250 units
None of the above

CB2000937

Question 100
Flag

Global Airways, which is a profit-maximising firm, has to decide whether or not to run an extra daily flight between London and Paris. The total daily fixed costs of the airline are £3,000, the total variable costs of the extra flight are £2,000 and the expected revenue from the extra flight is £2,500. In such circumstances Global Airways will:

not run the extra flight as it will expect to lose £2,500 from its profits.
not run the extra flight as its expected profit of £500 is insufficient to cover its fixed costs.
run the extra flight as it will add £500 to its profits.
not run the extra flight as the expected revenue of £2,500 is less than its fixed costs.

CB2000938

Question 101
Flag

Which one of the following is TRUE when economies of scale are present?

The short-run average cost declines.
The short-run average cost declines.
An increase in the variable factor of production holding the fixed factor of production constant leads to a higher increase in output.
The long-run average cost curve declines.

CB2000940

Question 102
Flag

Which of the following statements is TRUE?

Marginal physical product is equal to total physical product divided by average product.
Average physical product is always greater than marginal physical product.
Marginal physical product can never become negative.
Average physical product can never become negative.

CB2000942

Question 103
Flag

The range of output over which average variable cost falls will be the same as the range over which:

average physical product falls.
average physical product rises.
average physical product is constant.
marginal physical product rises.

CB2000943

Question 104
Flag

Which of the following statements about short-run costs of production is incorrect?

Marginal cost is equal to average variable cost when average variable cost is at a minimum.
Average fixed cost always falls as output rises.
Marginal cost cannot exceed average total cost.
Average total cost exceeds average variable cost by an amount that declines with increasing output.

CB2000945

Question 105
Flag

A profit-maximising monopolist with positive marginal costs and a downward-sloping demand curve will be able to make most profit if demand is:

price-inelastic.
price-elastic.
of unit price elasticity.
of infinite price elasticity.

CB2000946

Question 106
Flag

The following data is for a perfectly competitive firm producing Good X in the short run:

Which one of the following statements is correct?

The marginal physical product of the 8th worker is lower than the marginal physical product of the 10th worker.
The marginal physical product of the 8th worker is higher than the marginal physical product of the 9th worker.
The marginal physical product of the 9th worker is lower than that of the 10th worker.
The marginal physical product of the 10th worker is negative.

CB2000948

Question 107
Flag

Which one of the following is TRUE?

The long-run average total cost curve is derived by joining all the minimum points of the short-run average total cost curves.
The minimum efficient scale is the point at which long-run average costs must begin to fall.
In the long run a firm cannot alter its fixed costs of production.
If a firm trebles all its inputs and its output doubles then this is indicative of diseconomies of scale.

CB2000949

Question 108
Flag

Total costs of production for a firm producing 100 units of output are dollars 5,000 and fixed costs are dollars 2,000. If output is increased by 1 unit in the short run, the total costs of production are dollars 5,030. Which one of the following statements is TRUE with respect to the extra unit of output?

The marginal cost of production is less than the average fixed cost of production.
The average cost of production is rising.
The average fixed cost of production is rising.
The average cost of production exceeds the marginal cost of production.

CB2000951

Question 109
Flag

Which of the following is an example of economies of scope?

A firm doubles its inputs of capital and labour and its output more than doubles.
A firm doubles the number of products it produces and also doubles its research budget.
A firm produces a new product and in so doing lowers the average cost of producing its existing products.
A firm produces a new product and in so doing lowers the price it charges on its existing products.

CB2000952

Question 110
Flag

Which of the following is NOT a feature of the short-run average variable cost curve according to the law of diminishing returns?

The average variable cost curve is U-shaped.
The average variable cost curve cuts the marginal cost curve at the minimum of the marginal cost curve.
The average variable cost curve is an increasing proportion of average total costs as output rises.
The average variable cost curve lies below the average fixed costs of production.

CB2000953

Question 111
Flag

During the winter season, a hotel has fixed costs of £4,000 per week, total variable costs of £5,000 per week and prospective total revenue of £4,500 per week. In such circumstances a profit-maximising hotel will:

close down during the winter season since it would make a loss of £500 during the winter season.
close down during the winter season since its revenue is insufficient to cover its fixed costs.
stay open during the winter season as it will add £500 per week to its profits.
stay open during the winter season as it will add £500 per week to its profits.

CB2000954

Question 112
Flag

Consider the following table:

The price of labour is £100 per unit; the price of capital is £200 per unit.

The table illustrates which one of the following?

increasing returns to scale
constant returns to scale
decreasing returns to scale
maximizing returns to scale

CB2000956

Question 113
Flag

A perfectly competitive firm is producing at a level of output for which short-run marginal cost exceeds marginal revenue. What should the firm do to maximise its short-run profits?

raise its price
reduce its price
raise its output
reduce its output

CB2000957

Question 114
Flag

A firm’s total costs are £150 when 10 units are produced and the marginal cost of the 10th unit is £40. The marginal cost of the 11th unit is £15. Which of the following is TRUE?

The average cost for 11 units is greater than that for 10 units.
The total fixed costs for 11 units are £165.
The average fixed cost for 11 units is the same as the marginal cost of the 11th unit.
The average fixed cost for 11 units is less than the marginal cost of the 11th unit.

CB2000958

Question 115
Flag

The total output and the average physical product of the variable factor of production both always increase as long as the marginal physical product of the variable factor is:

positive.
above its average physical product.
negative.
falling.

CB2000961

Question 116
Flag

Which of the following statements regarding the productivity of labour is correct?

Average physical product is maximised when average physical product equals marginal physical product.
Average physical product is maximised when marginal physical product is maximised.
Marginal physical product increases when average physical product is above marginal physical product.
Average physical product increases when marginal physical product is below average physical product.

CB2000963

Question 117
Flag

Increasing long-run average costs are associated with:

constant returns to scale.
increasing returns to scale.
decreasing returns to scale.
the law of diminishing returns.

CB2000964

Question 118
Flag

In the short run, the range of output over which average total cost falls will be the same as the range over which:

average physical product falls.
average physical product rises.
marginal physical product falls.
marginal physical product rises.

CB2000965

Question 119
Flag

Which one of the following reveals constant returns to scale?

If more labour is added to a given amount of capital, the marginal product of labour remains unchanged.
If both the input of capital and labour doubles, output remains constant.
If the input of capital and labour doubles, the ratio of output to inputs is unchanged.
None of the above

CB2000968

Question 120
Flag

Which of the following is an example of economies of scope?

A firm doubles its inputs of capital and labour and its output more than doubles.
A firm doubles the number of products it produces and also doubles its research budget.
A firm produces a new product and in so doing lowers the average cost of producing its existing products.
A firm produces a new product and in so doing lowers the price it charges on its existing products.

CB2000970

Question 121
Flag

In which situation will a firm cease production in the short run?

Total revenue is less than total costs.
Total revenue is less than total fixed costs.
Average revenue is less than average fixed cost.
Average revenue is less than average variable cost.

CB2000971

Question 122
Flag

Which of the following statements about short-run costs of production is FALSE?

Marginal cost cannot exceed average total cost.
Marginal cost is equal to average variable cost when average variable cost is at a minimum.
Average fixed cost always falls as output rises.
Average total cost exceeds average variable cost by an amount that declines with increasing output.

CB2000973

Question 123
Flag

Diseconomies of scale means:

short-run average total cost falls as output rises.
long-run average total cost falls as output rises.
long-run average total cost rises as output rises.
long-run average total cost rises as output rises.

CB2000975

Question 124
Flag

Which one of the following is TRUE?

The long-run average total cost curve passes through the minimum point of all the short-run average total cost curves.
The minimum efficient scale is the point at which long-run average costs must begin to fall.
In the long run a firm cannot alter its fixed costs of production.
If a firm doubles all its inputs and its output rises by 50 per cent then this is indicative of diseconomies of scale.

CB2000976

Question 125
Flag

A firm with fixed costs of £400 per week and constant average variable costs of £8 per unit of output, has the following information about its weekly sales:

Which of the following levels of output yields the highest profit?

20
30
40
50

CB2000977

Question 126
Flag

Which of the following does NOT contribute to economies of scale?

spreading of indivisibilities
spreading of overheads
dilution of ownership
specialisation

CB2000978

Question 127
Flag

Assume that a firm has a fixed capital stock and variable units of labour as the only inputs into its production process. If increasing amounts of the variable labour input are added to the fixed factor, then according to the law of diminishing returns which of the following is FALSE?

The marginal physical product of labour reaches a maximum before the total physical product of labour.
The average physical product of labour continues rising as long as the marginal physical product is greater than the average physical product of labour.
The total physical product of labour is at a minimum when the marginal physical product of labour is zero.
The average physical product of labour is at a maximum when the marginal physical product of labour is zero.

CB2000981

Question 128
Flag

In the short run, a loss-making firm that seeks to maximise profits will continue to produce if:

its marginal revenue is greater than its marginal cost of production.
its marginal revenue is greater than its average fixed cost.
it can charge a price greater than its average fixed cost.
it can charge a price greater than its average variable cost.

CB2000982

Question 129
Flag

In the short run, a firm’s average fixed costs of production will:

increase as its output increases.
decrease as its output increases.
remain constant as its output increases.
always be greater than its average variable costs of production.

CB2000983

Question 130
Flag

What will be the impact of an increase in a firm’s fixed costs of production on the firm’s marginal cost?

Marginal cost will increase by more than fixed cost.
Marginal cost will increase by the same amount as fixed cost.
Marginal cost will increase but by less than fixed cost.
Marginal cost will remain unchanged.

CB2000984

Question 131
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A perfectly competitive firm is currently producing 2,000 units of Good X per week that are sold at £3 per unit. The firm’s total cost is currently £12,000 per week of which £4,000 is the fixed cost per week. The marginal cost of production is £3 per unit. To maximise profits or minimise losses, the firm should:

expand its output in order to increase its total revenue.
shutdown and produce no units of Good X in order to minimise its losses.
reduce its output to 1,000 units of Good X in order to reduce its total cost of production by £6,000.
continue producing 2,000 units of Good X in the short run but not in the long run.

CB2000985

Question 132
Flag

Which of the following is an example of economies of scope?

A firm doubles its inputs of capital and labour and its output more than doubles.
A firm doubles the number of products it produces and also doubles its research budget.
A firm produces a new product and in so doing lowers the average cost of producing its existing products.
A firm produces a new product and lowers the price it charges on its existing products.

CB2000988

Question 133
Flag

Which one of the following reveals decreasing returns to scale?

If more labour is added to a given amount of capital, the marginal product of labour falls.
If the ratio of labour to capital increases by 100%, the output of the firm increases by less than 100%.
If the input of both capital and labour increases by 120%, the output of the firm increases by 100%.
If more labour is added to a given amount of capital, the marginal product of labour rises.

CB2000989

Question 134
Flag

Which assumption is essential for a market to be contestable?

Firms are free to enter and leave the market.
Firms produce differentiated products.
Firms cannot earn abnormal profits in the short run.
There must be a large number of small firms.

CB2000990

Question 135
Flag

If firms in a perfectly competitive industry are making a loss in the short run then in the long run firms will:

increase their price and increase output.
lower their price and increase output.
increase their price and lower output.
lower their price and lower output.

CB2000991

Question 136
Flag

Which one of the following is NOT a barrier to entry into a monopoly market?

significant economies of scale
heavy potential advertising costs
large capital requirements
constant returns to scale

CB2000992

Question 137
Flag

The managing director of a monopoly firm is given the following data:

Marginal revenue = £9, Marginal cost = £10
Average cost = £11, Average revenue = £15

To maximise profits the firm should:

reduce price and increase output.
reduce price and reduce output.
increase price and increase output.
increase price and reduce output.

CB2000993

Question 138
Flag

A perfectly contestable market is a market where the:

costs of entry and exit are zero and potential entrants can enter the market quickly.
existing companies charge identical prices.
the barriers to entry are substantial but the existing firms compete so hard that industry profits are kept to the normal level over both the short and long run.
existing firms compete on price and quality so as to maximise industry abnormal profits in the long run.

CB2000994

Question 139
Flag

A monopolist facing a downward-sloping demand curve for its product will set its price in the region of the demand curve where the demand:

has price elasticity equal to minus unity.
is price inelastic.
is price elastic.
has price elasticity equal to zero.

CB2000995

Question 140
Flag

A perfectly competitive firm is producing at a level of output where short-run marginal cost is rising and exceeds marginal revenue. What should the firm do to maximise its short-run profits?

reduce its output
raise its output
raise its price
reduce its price

CB2000997

Question 141
Flag

For a monopoly, price exceeds marginal revenue because:

the firm has to charge a price higher than the marginal cost of producing the last unit.
any decision by the monopolist to sell an additional unit of output does not affect price.
the firm has to reduce price on all units sold in order to sell an additional unit.
of the law of diminishing returns.

CB2001000

Question 142
Flag

For a monopoly, price exceeds marginal revenue because:

the firm has to charge a price higher than the marginal cost of producing the last unit.
any decision by the monopolist to sell an additional unit of output does not affect product price.
the firm has to reduce the price on all units sold in order to sell an additional unit.
of the law of diminishing returns.

CB2001003

Question 143
Flag

Which of the following does NOT necessarily apply to a perfectly competitive firm producing in both the short run and the long run?

The firm will equate its marginal costs to its average revenue.
The firm will equate its marginal costs to its marginal revenue.
The firm's average revenue exceeds its average variable costs of production.
The firm will make only normal profits.

CB2001006

Question 144
Flag

Under perfect competition:

short-run excess profits are competed away by firms leaving the industry.
short-run excess profits are competed away by new firms entering the industry.
short-run excess profits lead to price rises.
short-run excess profits are caused by barriers to entry and exit.

CB2001010

Question 145
Flag

The short-run supply curve for a firm in a perfectly competitive industry is its:

average total cost curve.
average variable cost curve.
marginal cost curve above the lowest point of the average variable cost curve.
marginal cost curve above the lowest point of the average total cost curve.

CB2001011

Question 146
Flag

A market is defined as perfectly contestable if entry to it:

and exit from it are both costless.
is costly, but exit from it is costless.
is costless, but exit from it is costly.
and exit from it are both costly.

CB2001012

Question 147
Flag

The managing director of a monopoly firm is given the following data:

Marginal revenue = £11, Marginal cost = £10
Average cost = £13, Average revenue = £15

To maximise profits the firm should:

reduce price and increase output.
reduce price and reduce output.
increase price and increase output.
increase price and reduce output.

CB2001013

Question 148
Flag

The short-run supply curve for a firm in a perfectly competitive industry is its:

average total cost curve.
average variable cost curve.
marginal cost curve above the lowest point of the average total cost curve.
marginal cost curve above the lowest point of the average variable cost curve.

CB2001014

Question 149
Flag

A perfectly competitive firm has fixed and variable costs of production. It produces output at the long-run profit-maximizing leveI. Which of the following statements is correct?

Marginal cost exceeds average total cost.
Marginal cost equals average variable cost.
Marginal cost exceeds average variable cost.
Marginal cost is less than average variable cost.

CB2001015

Question 150
Flag

Which one of the following characteristics does NOT apply to a firm in an industry characterised by perfect competition?

The firm can make only normal profits in the long run.
There are no barriers to entry into the market.
The firm can make only normal profits in the short run.
Marginal revenue is equal to average revenue.

CB2001016

Question 151
Flag

A monopoly firm faces a linear demand schedule and has positive but constant marginal costs which are currently below its marginal revenue. If the firm wishes to maximise profits then it should:

lower its price and increase output.
raise its price and increase output.
lower its price and decrease output.
raise its price and decrease output.

CB2001017

Question 152
Flag

A perfectly contestable market is a market where the:

costs of entry and exit are zero and potential entrants can enter the market quickly.
existing companies charge identical prices.
the barriers to entry are substantial but the existing firms compete so hard that industry profits are kept to the normal level over both the short and long run.
existing firms compete on price and quality so as to maximise industry supernormal profits in the long run.

CB2001018

Question 153
Flag

When a monopolist maximises profits, price exceeds marginal revenue. The difference between price and marginal revenue occurs because:

the firm has to charge a price higher than the marginal cost of producing the last unit.
any decision by the monopolist to sell an additional unit of output does not affect price.
the firm has to reduce the price on all units sold in order to sell the additional unit.
the law of diminishing returns directly affects the price of an imperfectly competitive firm's product.

CB2001019

Question 154
Flag

Assumi·ng that the marginal and average cost curves are unchanged then, following a shift in the demand curve to the right, firms in a perfectly competitive industry will:

raise their price in the short run but restore the price back to its original level in the long run.
keep their price constant in both the short run and the long run.
raise their price in both the short run and the long run.
keep their price constant in the short run but raise their price in the long run.

CB2001020

Question 155
Flag

The profit-maximising output for a monopoly is at the point where the:

marginal cost curve cuts the demand curve.
marginal cost curve cuts the marginal revenue curve.
average cost curve cuts the marginal revenue curve.
average cost curve cuts the demand curve.

CB2001021

Question 156
Flag

Which one of the following is NOT a barrier to entry into a monopoly market?

significant economies of scale
heavy potential advertising costs
large capital requirements
constant returns to scale

CB2001022

Question 157
Flag

A perfectly competitive firm has fixed and variable costs of production. It produces at the long-run profit-maximising level. Which of the following statements is correct?

Marginal cost exceeds average variable cost.
Marginal cost equals average variable cost.
Marginal cost is less than average variable cost.
Marginal cost exceeds average total cost.

CB2001023

Question 158
Flag

When a monopolist maximises profits, price exceeds marginal revenue. The difference between price and marginal revenue occurs because:

the firm has to charge a price higher than the marginal cost of producing the last unit.
any decision by the monopolist to sell an additional unit of output does not affect price.
the firm has to reduce the price on all previous units sold in order to sell the addiUonal unit.
the law of diminishing returns directly affects the price of an imperfectly competitive firm's product.

CB2001024

Question 159
Flag

A profit-maximising monopoly facing a linear demand schedule and having positive marginal costs will s.et its price in the region of the demand curve where the absolute price elasticity of demand is:

greater than one.
equal to zero.
between zero and one.
one.

CB2001025

Question 160
Flag

Which one of the following is NOT a feature of perfect competition?

Equilibrium price will be equal to marginal cost.
There are no barriers to entry.
The average revenue curve is greater than the marginal revenue curve.
Only normal profits are made in the long run.

CB2001026

Question 161
Flag

A managing director of a monopoly firm with constant marginal costs has the following data:

\begin{array}{ll}
Average \,revenue & £ 15 \\
Marginal \,revenue & £ 10 \\
Marginal \,cost & £ 11 \\
Average \,variable \,cost & £ 11 \\
Average \,total \,cost & £ 13
\end{array}

To maximise profits / minimise losses in the short run the firm should:

increase price and reduce output.
reduce price and reduce output.
increase price and increase output.
cl:ose down.

CB2001027

Question 162
Flag

Which one of the following conditions indicates that a firm is operating in a perfectly competitive industry rather than a monopolistic industry?

Output of the firm is where marginal revenue equals marginal cost.
The cost curves of the firm are U-shaped.
Marginal revenue equals average revenue.
The marginal cost curve cuts the average cost curve at its minimum point.

CB2001028

Question 163
Flag

A profit maximising monopoly facing a linear demand schedule and with positive marginal costs will set its price in the region of the demand curve where the absolute price elasticity of demand is:

greater than unity.
equal to zero.
between zero and unity.
unity.

CB2001029

Question 164
Flag

Which one of the following characteristics does NOT apply to a firm in an industry characterised by perfect competition?

The firm can make losses in the short run.
There are barriers to entry into the market.
The firm can make only normal profits in the long run.
Marginal revenue is equal to average revenue.

CB2001030

Question 165
Flag

The short-run supply curve for a firm in a perfectly competitive industry is its:

average cost curve.
average variable cost curve.
marginal cost curve above the lowest point of the average total cost curve.
marginal cost curve above the lowest point of the average variable cost curve.

CB2001031

Question 166
Flag

In an industry characterised by perfect competition:

the average revenue is equal to marginal cost.
the average revenue is equal to marginal cost.
there may be difficulty for some firms in exiting the industry.
there are no supernormal profits in the short run.

CB2001032

Question 167
Flag

A monopoly firm faces a linear demand schedule, has positive but constant marginal costs and is currently producing why its marginal cost is below its marginal revenue. If the firm wishes to maximise profits then it should:

raise its price and increase output.
lower its price and decrease output.
lower its price and increase output.
raise its price and decrease output.

CB2001033

Question 168
Flag

Other things being equal, a fall in a monopolist’s fixed costs of production, which does not lead to new entrants, causes:

the market price to fall and the quantity supplied to rise.
the market price to fall and the quantity supplied to fall.
both market price and quantity supplied to fall.
no change to the market price or output.

CB2001038

Question 169
Flag

A profit-maximising oligopolistic firm has marginal cost of £3 at all levels of output and operates under the belief that the demand curve for its output is kinked at a price of £10. Provided its marginal costs are between £2 and £4, it sells its commodity at a price of £10. If new technology reduces its marginal cost to £1 .50 at all levels of output the firm should:

lower the price and raise output.
maintain the existing price and output.
lower the price but maintain existing output.
maintain the existing price and raise output.

CB2001040

Question 170
Flag

Which of the following is NOT a feature of an industry characterised by monopolistic competition?

There are many firms.
Firms sell differentiated products
In the long run monopolistic powers enable firms to make excess profits.
A firm can raise its price without losing all its customers.

CB2001042

Question 171
Flag

The idea that an oligopolistic firm faces a kinked demand curve is based upon the assumption that:

a firm's competitors match both its price increases and price decreases.
one firm in the industry sets the price for all other firms.
a firm's competitors match its price decreases but ignore its price increases.
prices can either rise or fall; it depends on what happens to a firm's competitors' prices.

CB2001043

Question 172
Flag

Which of the following statements regarding the productivity of labour is correct?

Average physical product is maximised when average physical product equals marginal physical product.
Average physical product is maximised when marginal physical product is maximised.
Marginal physical product increases when average physical product is above marginal physical product.
Average physical product increases when marginal physical product is below average physical product.

CB2001044

Question 173
Flag

The profit payoffs to Firm X from various strategies 1 to 4 and the presumed responses of the other firm in a duopoly industry is given below:

Which one of the following represents the maximin strategy of Firm X?

Strategy 1
Strategy 2
Strategy 3
Strategy 4

CB2001045

Question 174
Flag

Which of the following is NOT a prediction of the theory of monopolistic competition?

When the monopolistically competitive industry achieves a long-run equilibrium, price is greater than marginal cost.
Monopolistically competitive firms offer differentiated products and face a downward-sloping demand curve.
Under monopolistic competition, the price charged to the consumer is equal to the average revenue of the firm.
Monopolistically competitive firms can earn supernormal profits in the long run.

CB2001046

Question 175
Flag

The kinked demand curve model of oligopoly is based upon the assumption that:

a firm's competitors match both its price increases and price reductions.
one firm in the industry sets the price for all other firms.
a firm's competitors match its price reductions but not its price increases.
the price charged by a firm can either rise or fall depending on what happens to its competitors' prices.

CB2001047

Question 176
Flag

The profit payoffs to Firm X from combining the various strategies of X (1,2,3,4) and the presumed response of the other firm (S,P,Q,R) in a duopoly industry is given below:

Which one of the following represents the maximin strategy of Firm X?

Strategy 1
Strategy 2
Strategy 3
Strategy 4

CB2001048

Question 177
Flag

The prisoners’ dilemma, applied to a situation involving the only two firms in an oligopoly industry, illustrates that:

each firm will not take account of its rival's reactions when making its decision.
the price set by one firm will not influence the price of the other firm.
in avoiding the worst possible outcome the firms will fail to reach the best possible outcome.
in avoiding the worst possible outcome the firms will succeed in reaching the best possible outcome.

CB2001049

Question 178
Flag

Which of the following is NOT a prediction of the theory of monopolistic competition?

When the monopolistically competitive industry achieves a long-run equilibrium, price is greater than marginal cost.
Monopolistically competitive firms offer differentiated products and face a downward-sloping demand curve.
Under monopolistic competition, the price charged to the consumer is equal to the average revenue of the firm.
Monopolistically competitive firms can earn supernormal profits in the long run.

CB2001050

Question 179
Flag

In the long run, profit-maximising firms operating under conditions of monopolistic competition will produce at a level of output where price equals:

marginal cost.
average total cost.
average fixed cost.
average variable cost.

CB2001051

Question 180
Flag

Which one of the following is NOT a feature of an industry characterised by monopolistic competition?

Some degree of monopoly power ensures that in the long run firms can make supernormal profits.
There is freedom of entry and exit into the industry in the long run
Firms in the industry produce differentiated products.
Firms in the industry charge prices above their marginal costs of production.

CB2001052

Question 181
Flag

Which of the following is NOT a barrier to entry in an oligopolistic industry?

product proliferation
constant returns to scale
investment in spare capacity
high advertising expenditure

CB2001053

Question 182
Flag

Which one of the following characteristics applies to an oligopolistic market structure?

There is a large number of firms.
There is an absence of barriers to entry into the market.
There is an absence of barriers to entry into the market.
The output decisions of one firm may exert a significant influence on other firms in the industry.

CB2001054

Question 183
Flag

An implicit or explicit agreement amongst firms in an industry NOT to compete with each other is known as:

the dominant firm hypothesis.
collusion.
non-cooperative oligopoly.
product differentiation.

CB2001055

Question 184
Flag

Under the Cournot model of duopoly, a firm:

attempts to maximise sales after assuming that the other firm will attempt to maximise sales.
assumes the other firm will produce a given output and then chooses its profit-maximising output.
assumes the other firm's price is given and then chooses its profit-maximising price.
will attempt to collude with the other firm so as to set a price and output level which will maximise industry level profits.

CB2001056

Question 185
Flag

Which one of the following statements about market structure is FALSE?

Under perfect competition, in the long run all firms make only normal profits.
Firms under monopolistic competition produce homogeneous products.
Under oligopoly, firms make decisions taking into account the possible reactions of their competitors.
A profit-maximising monopoly wm equate its marginal costs to its marginal revenue.

CB2001057

Question 186
Flag

In the kinked-demand curve theory of oligopoly the:

marginal revenue curve and the average revenue curve both have a vertical section (discontinuity).
marginal revenue curve has a vertical section (discontinuity).
average revenue curve has a vertical section (discontinuity).
marginal cost curve has a vertical section (discontinuity).

CB2001058

Question 187
Flag

In the long run, a firm in a monopolistic competition market structure will produce at:

the lowest point on its average total cost curve.
a point where average total cost is rising.
a point where average total cost is falling.
a point where average total cost is equal to marginal cost.

CB2001060

Question 188
Flag

Which of the following is NOT a feature of monopolistic competition?

Equilibrium price will be equal to marginal cost.
There are no barriers to entry.
There are no barriers to entry.
Only normal profits are made in the long run.

CB2001061

Question 189
Flag

Which of the following features is NOT a typical characteristic of oligopoly?

a firm's fear that if it raises its price then the rise will be matched by competitors, but if iit cuts its price then the cut will not be matched by competitors
supernormal profits
a belief that one firm's actions has an influence on the actions of other firms
advertising and other non-price competition

CB2001062

Question 190
Flag

In the Cournot model of duopoly, when the two firms are at the equilibrium level of output, the:

joint output of the two firms is greater than the monopoly output, but less than the perfect competition output.
joint output of the two firms is identical to the monopoly output.
joint output of the two firms is identical to the perfect competition output.
output of the two firms will always be identical.

CB2001063

Question 191
Flag

Two firms operate in a duopoly but do not collude. Given the profit pay-off matrix of output options to firms A and B below, what is the dominant strategy for the firms?

Note: Profit pay-offs are (Profit A, Profit B) and ‘high’ and ‘low’ refer to the output decision.

Firm A - High; Firm B - Low
Firm A - High; Firm B - High
Firm A - Low; Firm B - Low
Firm A - Low; Firm B - High

CB2001081

Question 192
Flag

First-degree price discrimination refers to the situation where:

a firm charges customers different prices according to how much they purchase.
consumers are grouped into independent markets and a separate price is charged in each market.
a firm charges each customer the maximum price he/she is prepared to pay.
different firms charge different prices for the same product.

CB2001083

Question 193
Flag

Second-degree price discrimination refers to a situation where:

A firm charges customers different prices according to how much they purchase.
Consumers are grouped into independent markets and a separate price is charged in each market.
A firm charges each customer the maximum price he/she is prepared to pay.
Different firms charge different prices for the same product.

CB2001084

Question 194
Flag

Third-degree price discrimination refers to the situation where:

a firm charges customers different prices according to how much they purchase.
consumers are grouped into independent markets and a separate price is charged in each market.
a firm charges each customer the maximum price he/she is prepared to pay.
different firms charge different prices for the -same product.

CB2001085

Question 195
Flag

A necessary condition for a firm being able to engage in price discrimination is that:

it faces a perfectly elastic demand curve.
it faces a perfectly inelastic demand curve.
it faces a downward-sloping demand curve.
it is a price taker.

CB2001087

Question 196
Flag

A firm that produces a main product and a by-product will maximise profits if it

uses cost-based pricing for the main and the by-product.
selects the combined output where the combined marginal cost equals the combined marginal revenue.
decides on the viability of producing the by-product after it has made the decision to produce the main product.
selects the level of output of the by-product where the marginal cost of the by-product equals its marginal revenue.

CB2001089

Question 197
Flag

A firm that produces a main product and a by-product will maximise profits if it:

decides on the viability of producing the by-product after it has made the decision to produce the main product.
selects the level of output of the by-product where marginal cost of the by-product equals its marginal revenue.
selects the combined output where the combined marginal cost equals the combined marginal revenue.
uses cost-based pricing for the main product and the by-product.

CB2001090

Question 198
Flag

Which one of the following is NOT one of the four phases associated with the product life cycle theory?

the launch phase
the growth phase
the innovation phase
the decline phase

CB2001091

Question 199
Flag

In the circular flow of income model which of the following is TRUE?

Savings, taxes and investment are withdrawals.
Exports, imports and government expenditure are withdrawals.
Investment, government expenditure and exports are injections.
Investment, exports and consumption are injections.

CB2001099

Question 200
Flag

Which of the fonowing could explain why a country’s aggregate demand curve might shift inwards to the left?

a decrease in interest rates
a rise in exchange rates
a rise in government expenditure
an increase in business confidence

CB2001100

Question 201
Flag

Given the following macroeconomic data:

What is the value of the gross domestic product?

£150 million
£130 million
£120 million
£110 million

CB2001101

Question 202
Flag

In the circular flow of income model:

savings, taxes and investment are withdrawals.
savings, imports and taxes are withdrawals.
investment, government expenditure and imports are injections.
investment, exports and consumption are injections.

CB2001102

Question 203
Flag

Which of the following does NOT form part of a country’s gross domestic product?

salaries of school teachers
net income from abroad
company profits
investment expenditure

CB2001103

Question 204
Flag

Which one of the following statements about real variables in the economy is FALSE?

If nominal gross domestic product (GDP) rises by 5 per cent then the real GDP may have risen, fallen or remained unchanged.
A nominal depreciation of a country's exchange rate represents a real depreciation if the domestic inflation rate is less than the foreign inflation rate.
An increase in real income will lead to a rise in the demand for real money balances.
Real interest rates are positive if the expected rate of inflation is greater than the nominal rate of interest.

CB2001104

Question 205
Flag

The aggregate demand schedule slopes downwards because at higher price levels the real money supply:

decreases and national income is lower.
decreases and national income is higher.
increases and national income is lower.
increases and national income is higher.

CB2001105

Question 206
Flag

To obtain a measure of net national income from gross domestic product it is necessary to:

add net income from abroad and deduct transfer payments.
deduct net income from abroad and add capital depreciation.
add net income from abroad.
add net income from abroad and deduct capital depreciation.

CB2001107

Question 207
Flag

Which of the following is a possible explanation for an increase in the average price level and a decrease in real national income?

an increase in short-run aggregate supply
a decrease in short-run aggregate supply
an increase in aggregate demand
a decrease in aggregate demand

CB2001108

Question 208
Flag

In a country with a population of 25 million people there are 16 million in the total workforce and 2 million unemployed. What is the rate of unemployment?

8%
11.1%
12.5%
44%

CB2001109

Question 209
Flag

If a country has a negative net income from abroad then:

gross domestic product is greater than gross national income.
gross domestic product is less than gross national income.
gross domestic product is the same as gross national income.
we cannot say whether gross domestic product differs from gross national income from this information.

CB2001110

Question 210
Flag

Which of the following are the three injections into the circular flow of income?

investment, government expenditure and exports
consumption, government expenditure and investment
consumption, investment and exports
investment, government expenditure and imports

CB2001111

Question 211
Flag

Which of the following will result in a decrease in aggregate demand, other things being equal?

a rise in imports
a fall in savings
a fall in interest rates
a fall in economic and business uncertainty

CB2001112

Question 212
Flag

The unemployment rate is given by:

the number of unemployed divided by the population expressed as a percentage.
the number of unemployed divided by the total labour force expressed as a percentage.
the number of unemployed divided by the number of employed expressed as a percentage.
the number of unemployed divided by all in the population of working age expressed as a percentage.

CB2001113

Question 213
Flag

Which ONE of the following is NOT part of the calculation for the gross national income?

net income from abroad
gross capital formation
capital depreciation
imports of goods and services

CB2001114

Question 214
Flag

The short-run aggregate supply curves tell us that an increase in the average price level will encourage firms to:

reduce output and increase employment.
reduce output and employment.
increase output and reduce employment.
increase output and employment.

CB2001115

Question 215
Flag

In the circular flow of income model of an economy with no government and no international trade, the flow of money is from:

firms to households in return for goods and services provided and from households to firms in return for the factor services provided.
households to firms in return for the factor services provided.
firms to households in return for the factor services provided and from households to firms in return for the goods and services provided.
firms to households in return for goods and services provided.

CB2001116

Question 216
Flag

In Country A the level of government expenditure is £275 billion, tax revenue is £310 billion, aggregate investment is £180 billion and aggregate savings is £150 billion. The level of net exports in Country A is a:

deficit of £5 billion.
surplus of £5 billion.
deficit of £35 billion.
surplus of £35 billion.

CB2001117

Question 217
Flag

Which one of the following would count as investment in the national income accounts for Country X?

The purchase of a £1 ,000 Country X Government bond.
A museum purchases an 18th century work of art.
A firm increases the quantity of cars it holds as stock.
A firm places £1 million of its surplus funds with a Country X bank in a high interest account.

CB2001118

Question 218
Flag

Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left?

a decrease in interest rates
a rise in exchange rates
a rise in government expenditure
an increase in business confidence

CB2001119

Question 219
Flag

Which of the following statements about real variables in the economy is FALSE?

If nominal gross domestic product (GDP) rises by 5 per cent with no inflation then the real GDP will have risen by 5 per cent.
A nominal depreciation of a country's exchange rate represents a real depreciation if the domestic inflation rate is less than the foreign inflation rate.
An increase in real income will lead to a rise in the demand for real money balances.
Real interest rates are positive if the expected rate of inflation is greater than the nominal rate of interest.

CB2001121

Question 220
Flag

If a country has a positive balance of net income from abroad then:

gross domestic product is greater than gross national income.
gross domestic product is less than gross national income.
gross domestic product is the same as gross national income.
we cannot say whether gross domestic product differs from gross national income from this information.

CB2001123

Question 221
Flag

You are given the following information for an economy:

What is the value of this economy’s gross domestic product?

£130 million
£140 million
£150 million
£160 million

CB2001125

Question 222
Flag

Assuming all other variables remain constant, a decrease in the average price level will result in a:

rise in the real wage rate.
fall in the real wage rate.
rise in the nominal wage rate.
rise in the nominal interest rate.

CB2001126

Question 223
Flag

Which one of the following will have net exports directly measured in the method used to calculate gross domestic product (GDP)?

the income method
the expenditure method
value added method
the investment method

CB2001127

Question 224
Flag

You are given the following data for an economy:

The value of the economy’s gross national income at market prices is:

£250 million.
£260 million.
£270 million.
£280 million.

CB2001128

Question 225
Flag

To obtain a measure of net national income from gross domestic product it is necessary to:

add net income from abroad and add capital depreciation.
add net income from abroad and deduct capital depreciation.
add net income from abroad and deduct capital depreciation.
deduct net income from abroad and deduct capital depreciation.

CB2001129

Question 226
Flag

If the gross domestic product (GDP) in an economy rises and the unemployment rate falls then:

the GDP per capita must rise.
the GDP per capita must fall.
the GDP per capita remains constant.
there is insufficient information to determine what has happened to GDP per capita.

CB2001130

Question 227
Flag

Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left?

an appreciation of the domestic currency
a decrease in interest rates
a rise in government expenditure
an increase in business confidence

CB2001131

Question 228
Flag

The short-run aggregate supply curves show that an increase in the average price level will encourage firms to:

reduce both output and employment.
increase both output and employment.
increase output and reduce employment.
reduce output and increase employment.

CB2001133

Question 229
Flag

The aggregate demand curve slopes downwards because at higher price levels the real money supply:

decreases and national income is lower.
decreases and national income is higher.
increases and national income is lower.
increases and national income is lower.

CB2001134

Question 230
Flag

If the total output of goods and services increases and the price index falls then the nominal gross domestic product (GDP):

may rise or fall and real GDP will fall.
will stay the same and real GDP will rise.
will rise and real GDP will rise.
may rise or fall and real GDP will rise.

CB2001135

Question 231
Flag

If a country has a current account deficit then:

gross domestic product is greater than gross national income.
gross domestic product is less than gross national income.
gross domestic product is the same as gross national income.
we cannot say whether gross domestic product differs from gross national income.

CB2001136

Question 232
Flag

The nominal rate of interest is 2% and the rate of inflation is negative at -3%. Which one of the following is TRUE?

The real rate of interest is greater than the nominal rate of interest.
The reai rate of interest is negative.
The rate of inflation is greater than the real rate of interest.
The real rate of interest is -1 %.

CB2001137

Question 233
Flag

The nominal rate of interest is 2% and the expected rate of inflation is positive at 3%. Which one of the following is TRUE?

The real rate of interest is positive.
The expected rate of inflation is less than the real rate of interest.
The real rate of interest is greater than the nominal rate of interest.
The real rate of interest is -1 %.

CB2001138

Question 234
Flag

The unemployment rate, expressed as a percentage, is given by the number of unemployed divided by:

the total population.
the total labour force.
the number of employed.
the number in the population who are of working age.

CB2001140

Question 235
Flag

If a country has a current account surplus then:

gross domestic product is greater than gross national income.
gross domestic product is less than gross national income.
gross domestic product is the same as gross national income.
we cannot say whether gross domestic product differs from gross national income from this information.

CB2001141

Question 236
Flag

A country with a population of 20 million has 15 million in employment and 1 million unemployed. What is the unemployment rate?

4.76%
5.0%
6.25%
6.67%

CB2001142

Question 237
Flag

A country with a population of 38 million has 32 million in employment and 2 million unemployed. What is the unemployment rate rounded up to one decimal point?

5.9%
5.3%
5.0%
6.3%

CB2001143

Question 238
Flag

To calculate gross national income, you need to know all of the following EXCEPT:

investment expenditure.
gross fixed capital formation.
consumption expenditure.
net income from abroad.

CB2001144

Question 239
Flag

The following data is available on an economy:

What is the value of its gross national income?

£110 million
£130 million
£170 million
£120 million

CB2001147

Question 240
Flag

Which of the following might explain why a country’s aggregate demand curve might shift inwards to the left?

a decrease in interest rates
an appreciation of the domestic currency
a fall in government expenditure
a rise in government expenditure

CB2001148

Question 241
Flag

The short-run aggregate supply curve shows that an increase in the average price level will encourage firms to:

reduce output and increase employment.
reduce both output and employment.
increase output and reduce employment.
increase both output and employment.

CB2001149

Question 242
Flag

Which of the following statements helps explain why the aggregate demand curve has a negative slope? As the price level falls:

an increase in shareholders' dividends causes them to increase their expenditure.
the central bank will have to increase the supply of money, which will lead to an increase in the amount purchased.
the government will have to reduce taxes, which will lead to an increase in the amount purchased.
the real income of people earning a fixed quantity of money increases causing them to expand their purchases.

CB2001151

Question 243
Flag

Given the gross domestic product (GDP) at basic prices cost we can calculate the GDP at market prices by:

adding indirect taxes and adding subsidies.
adding indirect taxes and subtracting subsidies.
subtracting indirect taxes and subtracting subsidies.
subtracting indirect taxes and subtracting subsidies.

CB2001152

Question 244
Flag

The nominal rate of interest is 7% and the expected rate of inflation is 4%. Which one of the following is TRUE?

The real rate of interest is negative.
The rate of inflation is less than the real rate of interest.
The real rate of interest is 11 %.
The real rate of interest is 3 %.

CB2001153

Question 245
Flag

If planned injections are less than planned withdrawals:

unemployment will fall.
the balance of trade will tend to improve.
the balance of trade will tend to deteriorate.
inflation will tend to rise.

CB2001154

Question 246
Flag

In a simple economy, consumption is given by the relationship:

C = 0.8Y

where: C is consumption expenditure
Y is gross domestic product.
If government expenditure is £150 million, investment is £50 million and there is no taxation or international trade, what will be the equilibrium value of gross domestic product of the economy?

$£ 200$ million
$£ 312.5$ million
$£ 800$ million
$£ 1,000$ million

CB2001155

Question 247
Flag

In a closed economy with no taxation, the marginal propensity to save is 0.25 and the level of income is €800m. What is the likely level of consumption expenditure resulting from a rise in government expenditure of €100 million?

€700 million
€800 million
€900 million
€1,000 million

CB2001156

Question 248
Flag

The accelerator theory states that:

investment is increased when interest rates fall.
an increase in consumer demand leads to a more than proportionate increase in the level of investment.
an increase in consumer demand leads to a less than proportionate increase in the level of investment.
an increase in investment will lead to a more than proportionate increase in output.

CB2001157

Question 249
Flag

Which of the following will increase the size of the multiplier?

an increase in government expenditure
a decrease in the marginal propensity to save
an increase in the marginal propensity to save
an increase in autonomous investment

CB2001158

Question 250
Flag

In a closed economy with no government sector, if the amount people plan to save exceeds the amount they plan to invest then there will be:

a rise in national income.
an unplanned rise in stocks.
inflationary pressures.
a rise in the amount people plan to invest.

CB2001159

Question 251
Flag

The quantity theory of money in its simplest form assumes that the:

velocity of circulation and nominal output are both fixed.
ratio of the velocity of circulation to the price level is fixed.
ratio of the money supply to the velocity of circulation is fixed.
velocity of circulation and real output are both fixed.

CB2001160

Question 252
Flag

In the Keynesian 45° line diagram showing the equilibrium level of GDP in a country, the marginal propensity to consume domestically produced goods is:

the intercept of the line representing the part of income spent on goods produced in the country.
the proportion of any rise in GDP withdrawn from the circular flow of income.
the slope of the aggregate expenditure line.
the slope of the line representing the part of income spent on goods produced in the country.

CB2001161

Question 253
Flag

According to the accelerator theory the level of investment depends on the:

level of national income.
rate of change of national income.
rate of change of the level of investment.
level of the interest rate.

CB2001163

Question 254
Flag

According to the equation of exchange, an increase in the money supply is most likely to lead to inflation if the:

velocity of circulation decreases.
real national income increases.
velocity of circulation and nominal national income are constant.
velocity of circulation and the real national income are constant.

CB2001164

Question 255
Flag

If private savings exceed private investment by £300 million and government expenditure on goods and services exceeds government tax revenue by £200 million then net exports will be:

zero.
£100 million.
-£100 million.
£500 million.

CB2001165

Question 256
Flag

The following data on an economy is provided for 2005 and 2013:

According to the equation of exchange, what would be the value of the price level in 2013 assuming that the velocity of circulation remains unchanged?

50
15
10
none of the above

CB2001166

Question 257
Flag

In the model of the circular flow of income if injections are greater than withdrawals:

national income will tend to increase.
national income will tend to decrease.
unemployment and production will tend to fall.
the general level of prices will tend to fall.

CB2001167

Question 258
Flag

Assume that the marginal propensity to consume domestically produced goods is 0.7 and there are no taxes. The government decides to increase public spending by £100 million. According to simple Keynesian multiplier analysis, what is likely to be the total change in national income resulting from this increase in government expenditure (to the nearest million)?

£70 million
£143 million
£170 million
£333 million

CB2001169

Question 259
Flag

In Country A, government expenditure is £250 billion, tax revenue is £275 billion, aggregate saving is £300 billion and aggregate investment is £250 billion. The net exports of Country A are equal to a:

surplus of £25 billion.
deficit of £75 billion.
surplus of £75 billion.
deficit of £25 billion.

CB2001174

Question 260
Flag

If an increase in the level of the money supply results in no change in either the nominal or real value of national income, then which of the following is TRUE?

Interest rates must have risen.
The velocity of circulation must have fallen.
The price level must have risen by the same proportion as the increase in the money supply.
Taxes must have risen.

CB2001175

Question 261
Flag

‘Supply creates its own demand’ is also known as:

Gold's law.
Austrian law.
Say's law.
Quantity law.

CB2001176

Question 262
Flag

According to the quantity theory of money, a 10 per cent increase in the nominal money supply will lead to an increase in the real output level of the economy of:

0 per cent.
10 per cent.
10 per cent multiplied by the velocity of circulation.
10 per cent divided by the velocity of circulation.

CB2001177

Question 263
Flag

‘Crowding out’ describes the:

extent to which government expansionary policy is counteracted by lower private spending resulting from higher interest rates.
extent to which government contractionary policy is counteracted by lower private spending resulting from lower interest rates.
increase in interest rates caused by contractionary monetary policy.
increase in consumption expenditure caused by lower taxes.

CB2001178

Question 264
Flag

The accelerator principle· states that:

investment is increased when interest rates fall.
an increase in national income can lead to a more than proportionate increase in the level of investment.
an increase in investment can lead to a more than proportionate increase in national income.
the rate of change of investment affects the rate of change of output.

CB2001179

Question 265
Flag

According to Keynesian analysis, once a closed economy is in macroeconomic equilibrium such that planned savings equals planned investment, then:

there will be no unemployment in the economy.
the marginal propensity to consume must be greater than the marginal propensity to save.
consumption will be equal to or greater than income.
there may or may not be unemployment.

CB2001181

Question 266
Flag

In Country A, government expenditure is £350 billion, tax revenue is £275 bUlion, aggregate saving is £300 billion and aggregate investment is £250 billlion. The net exports of Country A are equal to a:

surplus of £125 billion.
deficit of £125 billion.
surplus of £25 billion.
deficit of £25 billion.

CB2001182

Question 267
Flag

Which of the following statements is NOT correct in relation to Say’s Law?

There will be demand-deficient unemployment.
The production of goods will generate sufficient demand to ensure they are sold.
There may be structural unemployment or frictional unemployment if markets do not work efficiently.
Aggregate demand and aggregate supply will always be equal.

CB2001183

Question 268
Flag

If the rate of income tax is cut from 30% to 25% while the marginal propensity to import falls from 20% to 15%, the effect on the open economy fiscal multiplier will be:

a rise.
a fall.
no change.
uncertain.

CB2001184

Question 269
Flag

A short-run fall in real gross domestic product (GDP) would result from an increase in all of the following with the exception of:

autonomous saving.
the marginal propensity to consume.
the marginal propensity to import.
the marginal rate of taxation.

CB2001185

Question 270
Flag

Assume that the actual rate of unemployment is above the natural rate of unemployment because the expected rate of inflation is above the actual rate of inflation. If the expected rate of inflation falls to equal the actual rate of inflation then real wage growth will:

fall and real output will rise.
fall and real output will fall.
rise and real output will rise.
rise and real output will fall.

CB2001186

Question 271
Flag

If unemployment is above the natural level, the long-run Phillips curve would suggest that, other things remaining the same, real wages would:

fall and unemployment would rise.
fall and unemployment would fall.
rise and unemployment would fall.
rise and unemployment would rise.

CB2001187

Question 272
Flag

An increase in the natural rate of unemployment will cause the long-run Phillips curve to:

shift to the right.
shift to the left.
remain unchanged.
become upward sloping.

CB2001188

Question 273
Flag

Other things being equal, if there is an unexpected fall in money supply, there is no change in the expected rate of inflation and the unemployment rate is above the natural rate of unemployment, then the long-run Phillips curve would suggest that the inflation rate will eventually:

fall and the unemployment rate would rise.
fall and the unemployment rate would fall.
rise and the unemployment rate would fall.
rise and the unemployment rate would rise.

CB2001189

Question 274
Flag

The use of debit cards and cash withdrawal machines will have the following effect on a bank:

lower the bank's liquidity ratio and increase the bank deposits multiplier
increase the bank's liquidity ratio and lower the bank deposits multiplier
lower the bank's liquidity ratio and leave the bank deposits multiplier unchanged
the effect on the bank's liquidity ratio and the bank deposits multiplier will be uncertain

CB2001191

Question 275
Flag

The overall money multiplier effect might be smaller than the full bank deposits multiplier because:

governments are pursuing an expansionary monetary policy.
high rates of interest are discouraging borrowing.
banks are not holding excess cash reserves.
all proceeds of loans are re-deposited with banks

CB2001192

Question 276
Flag

Which one of the following definitions is most compatible with the Basel Ill definition of capital adequacy?

Tier 1 plus Tier 2 capital divided by total assets
Tier 1 plus Tier 2 capital divided by risk weighted assets
Tier 1 capital divided by total assets
Tier 1 capital divided by risk weighted assets

CB2001193

Question 277
Flag

Which of the following policies undertaken by the central bank will have an expansionary effect on the broad money supply measure other things being equal?

the sale of treasury bills in the financial markets
a demand for special deposits from the commercial banks to be placed with the central bank
a rise in the central bank lending rate
a lowering of the reserve requirements on commercial banks

CB2001194

Question 278
Flag

Capital adequacy for banks is a measure of a bank’s:

liquidity relative to its assets.
liquidity relative to its capital.
assets relative to its capital.
capital relative to its assets.

CB2001195

Question 279
Flag

The proportion of deposits held by the public as cash is 0.5 and the proportion of deposits held by the banks for reserves is 0.5. If the broad money supply is £300 million, what is the value of the narrow money supply?

£150 million
£200 million
£450 million
none of the above

CB2001196

Question 280
Flag

Which of the following would cause the demand for money curve to shift inwards to the left?

an increase in the frequency of payments to individuals
an increase in real gross domestic product
a decrease in the rate of interest
an increase in prices

CB2001197

Question 281
Flag

If the money supply increases due to an expansionary open market operation by the central bank then the price of Treasury bills will:

rise as the short-term interest rate rises.
rise as the short-term interest rate falls.
fall as the short-term interest rate rises.
fall as the short-term interest rate falls.

CB2001198

Question 282
Flag

Which of the following statements about the demand for money is FALSE?

The demand for money is negatively related to the interest rate.
The demand for money is positively related to the level of national income.
The demand for money is negatively related to the price level.
The demand for money can be divided into speculative, precautionary and transactions motives.

CB2001200

Question 283
Flag

Which of the following wm increase the demand to hold money?

a fall in the national income
a rise in the rate of interest
a rise in the expectation of a stock market crash
an increase in the frequency with which people are paid, for example, a switch from monthly to weekly payments

CB2001201

Question 284
Flag

Which ONE of the following would be observed following a contractionary open market operation by the central bank?

a fall in the money supply, a fall in the short-term rate of interest and a fall in the price of Treasury bills
a fall in the money supply, a fall in the short-term rate of interest and a rise in the price of Treasury bills
a fall in the money supply, a rise in the short-term rate of interest and a fall in the price of Treasury bills
a fall in the money supply, a rise in the short-term rate of interest and a rise in the price of Treasury bills

CB2001203

Question 285
Flag

Other things being equal, an increase in the level of real output in an economy will result in:

an increase in the money supply.
a decrease in the demand for money.
a rise in the rate of interest.
an increase in the speculative demand for money.

CB2001204

Question 286
Flag

The monetary base is increased when:

the government spends more money.
the government buys Treasury bills from the public.
a citizen buys a newly issued corporate bond.
a firm obtains an overdraft from a bank.

CB2001206

Question 287
Flag

The direct impact of open market operations, where the central bank purchases government securities, is to:

reduce the cash reserves of commercial banks and reduce the monetary base.
reduce the cash reserves of commercial banks and increase the monetary base.
increase the cash reserves of commercial banks and reduce the monetary base.
increase the cash reserves of commercial banks and increase the monetary base.

CB2001207

Question 288
Flag

Which of the following would cause the demand for money curve to shift inwards to the left?

an increase in prices
a decrease in the rate of interest
an increase in real gross domestic product
an increase in the frequency of payments to individuals

CB2001208

Question 289
Flag

Which one of the following will have a negative impact upon money demand?

a fall in the rate of interest
a rise in the real gross dome.stic product
the rise in the frequency with which people are paid
a higher expectation that stock prices will fall

CB2001209

Question 290
Flag

Which one of the following statements about the demand for money is TRUE?

The demand for money is positively related to the interest rate.
The demand for money is negatively related to wealth.
The demand for money is negatively related to the general price level.
The demand for money is positively related to real income.

CB2001210

Question 291
Flag

Which one of the following statements about the demand for money is TRUE?

The demand for money is negatively related to the interest rate.
The demand for money is negatively related to wealth.
The demand for money is negatively related to the general price level.
The demand for money is negatively related to real income.

CB2001211

Question 292
Flag

The direct impact of open market operations, where the central bank purchases government securities, is to:

reduce the cash reserves of commercial banks and reduce the monetary base.
reduce the cash reserves of commercial banks and increase the monetary base.
increase the cash reserves of commercial banks and reduce the monetary base.
increase the cash reserves of commercial banks and increase the monetary base.

CB2001212

Question 293
Flag

A government’s attempts to increase the monetary base (narrow money supply) through open market operations are likely to cause short-term interest rates to:

fall and reduce money demand.
fall and raise money demand.
rise and reduce money demand.
rise and raise money demand.

CB2001213

Question 294
Flag

Other things being equal, an increase in the level of real output in an economy will result in:

a rise in the value of the fiscal multiplier.
a decrease in the transactions demand for money.
a rise in the rate of interest.
an increase in the speculative demand for money.

CB2001214

Question 295
Flag

Money that is held because of possible unforeseen events is held because of the:

speculative motive for holding money.
transactions motive for holding money.
precautionary motive for holding money.
asset motive for holding money.

CB2001215

Question 296
Flag

If the money supply increases due to an expansionary open market operation by the central bank, then the price of treasury bill.swill:

rise as the short-term interest rate falls.
rise as the short-term interest rate rises.
fall as the short-term interest rate rises.
fall as the short-term interest rate falls.

CB2001216

Question 297
Flag

The narrow money supply (monetary base) is increased when:

the government spends more money.
the government buys treasury bills from the public.
a citizen buys a newly issued corporate bond.
a firm obtains an overdraft from a bank.

CB2001217

Question 298
Flag

Other things being equal, an increase in the level of real output in an economy will result in:

an increase in the money supply.
a decrease in the money demand.
a rise in the rate of interest.
an increase in the speculative demand for money.

CB2001219

Question 299
Flag

An increase in the general price level with no change in the money supply will:

increase the demand for money and increase aggregate demand.
decrease the demand for money and increase aggregate demand.
increase the demand for money and decrease aggregate demand.
decrease the demand for money and decrease aggregate demand.

CB2001222

Question 300
Flag

Which of the following statements about the demand for money is FALSE?

The demand for money is negatively related to the interest rate.
The demand for money is positively related to nominal income.
The demand for money is negatively related to the general price level.
The demand to hold money is positively related to real income.

CB2001223

Question 301
Flag

A tightening of monetary policy in an open economy operating with a flexible exchange rate would most likely lead to:

higher domestic interest rates and an exchange rate appreciation.
higher domestic interest rates and an exchange rate depreciation.
lower domestic interest rates and an exchange rate appreciation.
lower domestic interest rates and an exchange rate depreciation.

CB2001224

Question 302
Flag

An increase in the money supply will have a bigger impact on real output the more:

interest-elastic is the demand for money and the more interest-elastic is the level of investment.
interest-inelastic is the demand for money and the less interest-elastic is the level of investment.
interest-elastic is the demand for money and the less interest-elastic is the level of investment.
interest-inelastic is the demand for money and the more interest-elastic is the level of investment.

CB2001225

Question 303
Flag

Other things remaining the same, the effect of an increase in the budget deficit is to:

lower short-term interest rates because the aggregate demand curve shifts to the left.
raise short-term interest rates because the aggregate demand curve shifts to the left.
lower short-term interest rates because the aggregate demand curve shifts to the right.
raise short-term interest rates because the aggregate demand curve shifts to the right.

CB2001226

Question 304
Flag

As a result of an economic policy change, interest rates and consumption rise but investment falls. The new policy was:

an expansionary fiscal policy.
an expansionary monetary policy.
a contractionary fiscal policy.
a contractionary monetary policy.

CB2001227

Question 305
Flag

Consider an economy where the demand for real money balances is interest-elastic and the demand for investment is interest-inelastic. A change in the money supply will result in a relatively:

small change in the rate of interest and the level of investment.
large change in the rate of interest and the level of investment.
small change in the rate of interest and a relatively large change in the level of investment.
large change in the rate of interest and a relatively small change in the level of investment.

CB2001228

Question 306
Flag

The introduction of a restrictive monetary policy in an open economy operating with a flexible exchange rate would most likely lead to:

lower domestic interest rates and an exchange rate appreciation.
lower domestic interest rates and an exchange rate depreciation.
higher domestic interest rates and an exchange rate appreciation.
higher domestic interest rates and an exchange rate depreciation.

CB2001229

Question 307
Flag

‘Crowding out’ describes the:

increase in consumption expenditure caused by lower taxes.
increase in interest rates caused by contractionary monetary policy.
extent to which government expansionary policy is counteracted by lower private spending resulting from higher interest rates.
extent to which government contractionary policy is counteracted by lower private spending resulting from lower interest rates.

CB2001230

Question 308
Flag

If the money supply rises as a result of central bank policy, this will normally result in:

a depreciation of the domestic currency as the short-term domestic interest rate falls.
a depreciation of the domestic currency as the short-term domestic interest rate rises.
an appreciation of the domestic currency as the short-term domestic interest rate rises.
an appreciation of the domestic currency as the short-term domestic interest rate falls.

CB2001232

Question 309
Flag

An increase in government expenditure financed by government borrowing from the non-bank private sector is most likely to:

reduce the demand for money, reduce interest rates and cause investment to rise.
increase the demand for money, reduce interest rates and cause investment to rise.
reduce the demand for money, increase interest rates and cause investment to fall.
increase the demand for money, increase interest rates and cause investment to fall.

CB2001236

Question 310
Flag

A government’s attempts to increase the monetary base (narrow money supply) through open market operations are likely to cause short-term interest rates to:

rise and reduce money demand.
rise and raise money demand.
fall and reduce money demand.
fall and raise money demand.

CB2001238

Question 311
Flag

Which one of the following statements about real variables in the economy is FALSE?

If nominal gross domestic product (GDP) rises by 5%, then the real GDP may have risen, fallen or remained unchanged.
If the money supply falls by 20% and the price level falls by less than 20%, then the real money supply falls.
An increase in real income will lead to a rise in the demand for real money balances.
Real interest rates are positive if the expected rate of inflation is greater than the nominal rate of interest.

CB2001241

Question 312
Flag

If both government spending and the money supply are increased, and the economy has a high degree of unemployment, then:

the national income and interest rates will both rise.
the national income and interest rates will both fall.
the effect on both national income and interest rates is uncertain.
the national income will rise but the effect on interest rates is uncertain.

CB2001242

Question 313
Flag

The ‘crowding out’ effect associated with an increase in government borrowing could be reduced or eliminated by an accommodating increase in:

government expenditure.
taxation.
money supply.
none of the above.

CB2001243

Question 314
Flag

If the average price of exports has risen by 50% since the base year and the average price of imports has risen by 25% since the base year, what is the current figure for the terms of trade?

75
120
125
150

CB2001245

Question 315
Flag

Where would interest payments on short-term foreign deposits in banks be entered on the balance of payments account?

visible payments
income flows
portfolio investment
direct investment

CB2001246

Question 316
Flag

Given the following labour hours required to produce 1 unit of each of Goods X and Y, which one of the statements below is TRUE?

Country A has a comparative advantage and an absolute advantage in producing Good Y.
Country B has a comparative advantage in producing Good X and an absolute advantage in producing Good Y.
Country A has a comparative advantage in producing Good X and an absolute advantage in producing Good Y.
Country B has a comparative advantage in producing Good Y and an absolute advantage in producing Good X.

CB2001248

Question 317
Flag

Given the following labour hours to produce 1 unit of Goods X and Y, which of the statements below is TRUE?

Country A has a comparative advantage and an absolute advantage in producing Good Y.
Country B has a comparative advantage in producing Good X and an absolute advantage in producing Good Y.
Country A has a comparative advantage in producing Good Y and an absolute advantage in producing Good X.
Country B has a comparative advantage in producing Good Y and an absolute advantage in producing Good X.

CB2001249

Question 318
Flag

Country A exports Good X and imports Good Y from Country 8. The price of Good X rises by 20 per cent and the price of Good Y falls by 40 per cent.
Which of the following statements is correct about Country A’s terms of trade?

It has improved by 100 per cent.
It has improved by 60 per cent.
It has deteriorated by 100 per cent.
It has deteriorated by 60 per cent.

CB2001250

Question 319
Flag

Which of the following would NOT be included in the current account of a country’s balance of payments?

migrant remittances
interest, profits and dividends paid to the rest of the world
exports of services
the purchase of foreign shares by a domestic pension fund

CB2001251

Question 320
Flag

The law of comparative advantage states that countries should specialise in producing and exporting the goods that they produce at a lower:

marginal cost than other countries.
labour cost than other countries.
absolute cost than other countries.
opportunity cost than other countries.

CB2001254

Question 321
Flag

For a small open economy the imposition of a tariff on its imports of a good will normally:

reduce the domestic price of the imported good.
increase domestic consumption of the imported good.
increase domestic production of the imported good.
increase the quantity imported of the good.

CB2001255

Question 322
Flag

Which one of the following will result in an improvement in a country’s terms of trade?

a fall in the price of its imports combined with a rise in the price of its exports
a fall in the price of its imports combined with a fall in the price of its exports
a rise in the price of its imports combined with a rise in the price of its exports
a rise in the price of its imports combined with a fall in the price of its exports

CB2001256

Question 323
Flag

Given an initial terms of trade price index of 100, if the average price of exports has risen by 50% since the base year and the average price of imports has risen by 25% since the base year, what is the current figure for the terms of trade?

75
120
125
150

CB2001257

Question 324
Flag

Firms can benefit through specialisation and international trade due to:

comparative advantage.
absolute advantage.
different factor endowments.
all of the above.

CB2001258

Question 325
Flag

Assume two countries, with the same level of technology and resources, do not presently trade. In Country X one unit of labour and one unit of capital can produce 20 units of Good A or 15 units of Good B. In Country Y one unit of labour and one unit of capital can produce 50 units of Good A or 25 units of Good B.

Which of the following is TRUE?

Country X has an absolute advantage in the production of Good A.
Country X has an absolute advantage in the production of Good B.
Country Y has a comparative advantage in the production of Good A.
Country Y has a comparative advantage in the production of Good B.

CB2001260

Question 326
Flag

If a resident of a country purchases a foreign company’s shares, the value of the transaction is entered in which of the domestic country’s balance of payments accounts?

trade account
current account
capital account
financial account

CB2001261

Question 327
Flag

The terms of trade index is initially set at 100. If the average price of exports has risen by 50% since the base year and the average price of imports has risen by 2:0% since the base year, what is the current figure for the terms of trade index to the nearest whole number?

83
125
250
80

CB2001263

Question 328
Flag

All other things being equal, which of the following events would cause the value of Country A’s currency to appreciate against the value of Country B’s currency?

a fall in the interest rate of Country A with an even bigger fall in Country B's interest rate
a fall in the interest rate of Country A with constant interest rate iin Country B
a rise in the interest rate of Country A with an even bigger rise in Country B's interest rate
a fall in the interest rate of Country A with a rise in the interest rate of Country B

CB2001264

Question 329
Flag

Which of the following will result in a deterioration in the domestic country’s terms of trade?

a rise in the average price of exports relative to the average price of imports
a rise in the average price of imports relative to the average price of exports
an appreciation of the domestic currency
a rise in the domestic country's terms of trade index from 100 to 120

CB2001266

Question 330
Flag

The US has been running a large current account deficit, and China has a large current account surplus. If thetr exchange rates were both flexible, how could such imbalances be eliminated?

The US dollar could appreciate and the Chinese renminbi depreciate.
The US dollar could depreciate and the Chinese renminbi depreciate.
The US dollar could appreciate and the Chinese renminbi appreciate.
The US dollar could depreciate and the Chinese renminbi appreciate.

CB2001267

Question 331
Flag

If the central bank has to intervene in the foreign exchange market to prevent the home currency from depreciating, then its foreign exchange reserves will:

increase and the domestic money supply will fall.
increase and the domestic money supply will rise.
decrease and the domestic money supply will rise.
decrease and the domestic money supply will fall.

CB2001268

Question 332
Flag

Which of the following will result in an improvement in the domestic country’s terms of trade?

a rise in the average price of imports relative to the average price of exports
a fall in the quantity of imports relative to the quantity of exports
a rise in the quantity of exports while imports remain the same
a rise in the average price of exports relative to the average price of imports

CB2001269

Question 333
Flag

An economy with a floating exchange rate has a deficit on the current account of its balance of payments. Which policy combination would be most likely to solve this problem?

decrease interest rates and increase income tax rates
increase interest rates and leave income tax rates unchanged
decrease interest rates and decrease income tax rates
increase interest rates and increase income tax rates

CB2001270

Question 334
Flag

If the central bank has to intervene in the foreign exchange markets to prevent the home currency from appreciating, then its foreign exchange reserves will:

decrease and the domestic money supply will rise.
decrease and the domestic money supply will fall.
increase and the domestic money supply will rise.
increase and the domestic money supply will fall.

CB2001271

Question 335
Flag

If a central bank decides to reduce the money supply to fight inflation, then if the country has a floating exchange rate this will assist in the process because the exchange rate of the domestic currency will tend to:

appreciate and reduce the price of exports.
appreciate and reduce the price of imports.
depreciate and reduce the price of exports.
depreciate and reduce the price of imports.

CB2001272

Question 336
Flag

With a floating exchange rate system, monetary policy is:

very effective.
not effective.
equally effective as fiscal policy.
less effective than fiscal policy.

CB2001274

Question 337
Flag

To prevent the value of the euro from depreciating against the US dollar, the European Central Bank might:

buy the euro in the foreign exchange market and increase its foreign exchange reserves.
buy the euro in the foreign exchange market and decrease its foreign exchange reserves.
sell the euro in the foreign exchange market and increase its foreign exchange reserves.
sell the euro in the foreign exchange market and decrease its foreign exchange reserves.

CB2001275

Question 338
Flag

Under a floating exchange rate system:

domestic inflation rates are unavoidably linked across national boundaries.
domestic inflation in one country can lead to inflation in another.
domestic inflation is dictated outside the bounds that would have constrained prices in a fixed rate regime.
none of the above.

CB2001276

Question 339
Flag

Under a fixed exchange rate system, the following approaches might be considered by governments to correct a balance of payments deficit:
I discouraging imports

II support for exporters

III increasing the level of aggregate demand

Which of the following is most likely to achieve this objective?

I only
II only
I and II only
I, II and Ill

CB2001277

Question 340
Flag

If a country with a fixed exchange rate experiences high domestic inflation compared to its trading partners then the effect of the inflation will be to:

decrease the country's imports.
increase the country's exports.
shift the country's currency supply curve in the foreign exchange market to the right requiring central bank purchases of the domestic currency to maintain the fixed exchange rate.
shift the demand curve for the country's foreign exchange to the right requiring central bank purchases of the domestic currency to maintain the fixed exchange rate.

CB2001278

Question 341
Flag

The introduction of a restrictive monetary policy in an open economy operating with a flexible exchange rate would most likely lead to:

higher domestic interest rates and an exchange rate appreciation.
higher domestic interest rates and an exchange rate depreciation.
lower domestic interest rates and an exchange rate appreciation.
lower domestic interest rates and an exchange rate depreciation.

CB2001279

Question 342
Flag

Which one of the following will NOT happen following a devaluation of the domestic currency on the foreign exchange market?

Import volumes will increase.
Export volumes will increase.
Exports become less expensive when measured in the foreign currency.
Imports become more expensive when measured in the domestic currency.

CB2001280

Question 343
Flag

If the central bank has to intervene in the foreign exchange markets to prevent the home currency from appreciating, then its foreign exchange reserves will:

increase and the domestic money supply fall.
increase and the domestic money supply rise.
decrease and the domestic money supply fall.
decrease and the domestic money supply rise.

CB2001281

Question 344
Flag

Devaluation of a country’s currency will lead to the greatest improvement in the current account of a country’s balance of payments when the demand for:

imports is price-elastic and the demand for exports is price-inelastic.
imports is price-inelastic and the demand for exports is price-elastic.
both imports and exports is price-inelastic.
both imports and exports is price-elastic.

CB2001282

Question 345
Flag

All other things being equal, which one of the following statements is always TRUE?

An appreciation of a country's exchange rate will increase its import expenditure and decrease its export revenues.
An appreciation of a country's exchange rate will increase its import volumes and decrease its export volumes.
A depreciation of a country's exchange rate will decrease its import volumes and decrease its export volumes.
A depreciation of a country's exchange rate will decrease its import expenditure and increase its export revenues.

CB2001285

Question 346
Flag

Which one of the following will NOT happen following a devaluation of the domestic currency on the foreign exchange market?

Exports become cheaper when measured in the foreign currency.
Imports become more expensive when measured in the domestic currency.
Export volumes will decrease.
Import volumes will decrease.

CB2001290

Question 347
Flag

The socially efficient output for a monopoly is at the point where the:

marginal cost curve cuts the marginal revenue curve.
marginal cost curve Guts the demand curve.
average cost curve cuts the marginal revenue curve.
average cost curve cuts the demand curve.

CB2001291

Question 348
Flag

A welfare loss occurs in a monopoly industry because the price is greater than the:

marginal cost of production.
marginal benefit to consumers.
average revenue of the monopolist.
average cost of the monopolist.

CB2001292

Question 349
Flag

The socially efficient output for a monopoly is at the point where:

the marginal cost curve cuts the marginal revenue curve.
the marginal cost curve cuts the demand curve.
the average cost curve cuts the marginal revenue curve.
the average cost curve cuts the demand curve.

CB2001293

Question 350
Flag

The socially efficient output for a monopoly is at the point where:

the marginal cost curve cuts the marginal revenue curve.
the marginal cost curve cuts the demand curve.
the average cost curve cuts the marginal revenue curve.
the average cost curve cuts the demand curve.

CB2001294

Question 351
Flag

Which of the following is an example of disequilibrium unemployment?

frictional unemployment
cyclical unemployment
seasonal unemployment
structural unemployment

CB2001296

Question 352
Flag

Which of the following is least likely to lead to an increase in long-run economic growth?

an increase in the money supply
an increase in capital investment expenditure
an increase in education expenditure
an increase in research and development expenditure

CB2001297

Question 353
Flag

If the rate of inflation is lower than the anticipated rate used for negotiating interest rates and wages:

lenders will gain at the expense of borrowers and employers will gain at the expense of workers.
borrowers will gain at the expense of lenders and employers will gain at the expense of workers.
borrowers will gain at the expense of lenders and workers will gain at the expense of employers.
lenders will gain at the expense of borrowers and workers will gain at the expense of employers.

CB2001298

Question 354
Flag

Which of the following is best suited to reducing the level of .structural unemployment?

lowering the rate of interest
raising the rate of unemp.loyment benefit
higher voluntary redundancy payments for workers in declining industries
more government funds for retraining of the unemployed

CB2001301

Question 355
Flag

Which one of the following is NOT a cause of cost-push inflation?

an increase in the price of raw materials
an increase in wages above increases in labour productivity
an increase in profit margins applied by firms
an appreciation of the exchange rate

CB2001302

Question 356
Flag

Which one of the following is likely to lead to cost-push inflation?

a decrease in trade union powers
an appreciation of the domestic currency's exchange rate
a fall in labour productivity
a decrease in the profit margins applied by firms

CB2001303

Question 357
Flag

Structural unemployment is unemployment that:

increases in a recession and falls in a boom.
arises when the unemployed lack the skills needed by existing and newly created jobs.
arises when those seeking work give up hope of finding a job.
occurs as the result of a transition from one job to another.

CB2001305

Question 358
Flag

Which of the following is likely to be the most effective method of reducing the natural rate of unemployment?

increase unemployment benefit
increase government expenditure
increase the money supply
increase information flows on job availability

CB2001306

Question 359
Flag

If, due to pollution concerns, consumers switch from travelling to work by car to travelling by public transport, the resulting unemployment in the car
industry is:

frictional unemployment.
seasonal unemployment.
structural unemployment.
technical unemployment.

CB2001307

Question 360
Flag

Which one of the following is NOT likely to lead to cost-push inflation?

an increase in trade union powers
an appreciation of the domestic currency's exchange rate
an increased budget deficit which causes interest rates to rise
an increase in the profit margins applied by firms

CB2001310

Question 361
Flag

Which one of the following is NOT a cause of cost-push inflation?

an appreciation of the exchange rate
an increase in the price of raw materials
an increase in profit margins applied by firms
an increase in wages above increases in labour productivity

CB2001312

Question 362
Flag

The need to employ workers with certain skills may decline even if the industry as a whole is not in decline. This form of unemployment is called:

regional.
structural.
technological.
demand-deficient.

CB2001314

Question 363
Flag

The business cycle is defined as:

the long-run trend path of output after removing short-run variations.
the periodic fluctuations of output around the long-run trend.
the annual cycle of output.
none of the above.

CB2001317

Question 364
Flag

Which of the following is least likely to lead to an increase in long-run economic growth?

an increase in the money supply
an increase in capital investment expenditure
an increase in education expenditure
an increase in research and development expenditure

CB2001318

Question 365
Flag

Unanticipated inflation:

increases the opportunity cost of holding money and redistributes wealth from fixed-rate borrowers to lenders.
increases the opportunity cost of holding money and redistributes wealth from fixed-rate lenders to borrowers.
reduces the opportunity cost of holding money and redistributes wealth from fixed-rate borrowers to lenders.
reduces the opportunity cost of holding money and redistributes wealth from fixed-rate lenders to borrowers.

CB2001320

Question 366
Flag

Which one of the following is most likely to be the best method of reducing long-term structural unemployment?

expansionary fiscal policy
expansionary monetary policy
better education and training
a reduction in trade union powers

CB2001321

Question 367
Flag

Which of the following could explain why a country’s aggregate demand curve might shift outwards to the right?

an increase in interest rates
a depreciation in its exchange rate
a fall in government expenditure
a decrease in business confidence

CB2001322

Question 368
Flag

The business cycle is defined as:

the annual cycle of output.
the long-run trend path of output after removing short-run variations.
the periodic fluctuations of output around the long-run trend.
none of the above.

CB2001323

Question 369
Flag

If the rate of inflation is higher than the anticipated rate used for negotiating interest rates and wages:

lenders will gain at the expense of borrowers and employers Will gain at the expense of workers.
lenders will gain at the expense of borrowers and workers will gain at the expense of employers.
borrowers will gain at the expense of lenders and employers will gain at the expense of workers.
borrowers will gain at the expense of lenders and workers will gain at the expense of employers.

CB2001324

Question 370
Flag

An unexpected fall in the price level which causes a temporary rise in the real wage rate may:

give an actual rate of unemployment which is temporarily greater than the natural rate.
give an actual rate of unemployment which is temporarily lower than the natural rate.
increase the natural rate of unemployment.
decrease the natural rate of unemployment.

CB2001325

Question 371
Flag

Structural unemployment is unemployment that:

increases in a recession and falls in a boom.
arises when the unemployed lack the skills needed by newly created jobs.
arises when those seeking work give up hope of finding a job.
occurs as the result of a transition from one job to another.

CB2001326

Question 372
Flag

The aggregate demand curve slopes downwards because at higher price levels the real money supply:

decreases and national income is lower.
decreases and national income is higher.
increases and national income is lower.
increases and national income is higher.

CB2001327

Question 373
Flag

Which of the following is NOT a cost of inflation?

menu costs
cost of employing extra resources
arbitrary redistribution of wealth from lenders to borrowers
arbitrary redistribution of wealth from borrowers to lenders

CB2001328

Question 374
Flag

The short-run Phillips curve shows:

the influence of fiscal policy on the level of inflation and unemployment.
the influence of monetary policy on the level of inflation and unemployment.
a negative relationship between inflation and unemployment.
a positive relationship between inflation and unemployment.

CB2001329

Question 375
Flag

If the government imposes a minimum wage that is above the market equilibrium wage we would expect:

an increase in the quantity of labour demanded.
the labour supply curve to shift to the left.
an increase in the quantity of labour supplied.
the demand for the labour curve to shift to the left.

CB2001330

Question 376
Flag

One way of reducing the natural rate of unemployment would be to increase:

unemployment benefit.
government expenditure.
information on job availability.
the money supply.

CB2001331

Question 377
Flag

Which of the following is an example of disequilibrium unemployment?

frictional unemployment
cyclical unemployment
seasonal unemployment
structural unemployment

CB2001332

Question 378
Flag

Which of the following is a potential source of cost push inflation?

a depreciation of the domestic currency
a decrease in imported commodity prices
an increase in consumer expenditure
a decrease in direct taxes

CB2001333

Question 379
Flag

Unanticipated inflation:

increases the opportunity cost of holding money and redistributes wealth from fixed-rate borrowers to lenders.
increases the opportunity cost of holding money and redistributes wealth from fixed-rate lenders to borrowers.
reduces the opportunity cost of holding money and redistributes wealth from fixed-rate borrowers to lenders.
reduces the opportunity cost of holding money and redistributes wealth from fixed-rate lenders to borrowers.

CB2001334

Question 380
Flag

Which of the following types of unemployment would exist even in a well- functioning free-market economy?

classical (real-wage)
frictional
technological
structural

CB2001335

Question 381
Flag

The business cycle is defined as:

the annual cycle of output.
the long-run trend path of output after removing short run variations.
the periodic fluctuations of output around the long-run trend.
none of the above.

CB2001336

Question 382
Flag

Which of the following is a potential source of demand-pull inflation?

a fall in wages
an increase in imported commodity prices
an increase in consumer expenditure
an increase in direct taxes

CB2001340

Question 383
Flag

Which of the following costs of inflation occurs because of the possibility of unanticipated extra-high inflation?

fixed interest rate borrowers lose
menu costs
shoe-leather costs
fixed interest rate lenders lose

CB2001341

Question 384
Flag

An unexpected increase in the price level, which causes a temporary reduction in the real wage rate, may:

lead to an actual rate of unemployment that is temporarily greater than the natural rate.
lead to an actual rate of unemployment that is temporarily lower than the natural rate.
increase the natural rate of unemployment.
decrease the natural rate of unemployment.

CB2001342

Question 385
Flag

Which of the following is NOT a supply-side economic policy aimed at promoting economic growth?

cuts in social security benefits designed to encourage more workers to take work
measures designed to reduce trade union pow
deregulation
tariffs designed to increase production of domestic goods

CB2001344

Question 386
Flag

Which of the following would constitute a supply-side economic policy for raising employment?

decreasing social security benefits
decreasing the money supply
increasing corporate and personal taxation
increasing government expenditure aimed at exploiting the multiplier effect

CB2001346

Question 387
Flag

Which of the following is a supply-side economic policy aimed at promoting economic growth?

increases in social security benefits designed to increase expenditures of unemployed workers
measures designed to increase trade union powers so that real wage rises can increase expenditures of employed workers
increases in tariffs designed to increase production of domestic goods
reduction in corporate taxation

CB2001348

Question 388
Flag

Which of the following is least likely to lead to an increase in long-run economic growth?

an increase in the money supply
an increase in capital investment expenditure
an increase in education expenditure
an increase in research and development expenditure

CB2001349

Question 389
Flag

Which one of the following is likely to be the most effective method of reducing the natural rate of unemployment?

increase unemployment benefit
increase taxes
increase the money supply
increase information flows on job availability

CB2001351

Question 390
Flag

The Bank of England’s use of the ‘Taylor Rule’ attempts to take which of the following two macroeconomic objectives into account?

inflation and the exchange rate
economic growth and unemployment
inflation and economic growth
unemployment and the exchange rate

CB2001352

Question 391
Flag

Which one of the following would NOT constitute a demand-side economic policy for reducing unemployment?

increased government expenditure on domestically produced goods
increased money supply
reduced corporate and personal taxation
a privatisation programme

CB2001353

Question 392
Flag

The adoption of a policy to reduce the government’s budget deficit will involve:

an increase in aggregate demand and a reduction in real output.
an increase in aggregate demand and an increase in real output.
a reduction in aggregate demand and a reduction in real output.
a reduction in aggregate demand and an increase in real output.

CB2001354

Question 393
Flag

According to Keynesian analysis, the adoption of an expansionary fiscal policy will result in:

an increase in aggregate demand and a reduction in real output and unemployment.
an increase in aggregate demand, real output and unemployment.
an increase in aggregate demand and real output and a reduction in unemployment.
a reduction in aggregate demand and real output and an increase in unemployment.

CB2001357

Question 394
Flag

Which of the following are the correct responses for the missing words (i) and (ii) in the following statement?
Automatic stabilisers act to _____(i)_____ government expenditures and _____(ii)_____ government revenues during an expansionary period.

(i) increase, (ii) decrease
(i) increase, (ii) increase
(i) decrease, (ii) increase
(i) decrease, (ii) decrease

CB2001358

Question 395
Flag

The budget deficit tends to decrease when:

national income falls.
national income rises.
governments decrease the personal income tax rate.
government expenditure increases.

CB2001360

Question 396
Flag

The ‘Taylor Rule’ attempts to take which of the following two macroeconomic objectives into account?

inflation and the exchange rate
economic growth and unemployment
inflation and economic growth
unemployment and the exchange rate

CB2001363

Question 397
Flag

As a result of a change in economic policy, interest rates and consumption rise but investment falls. The new policy is most likely to have been:

an expansionary fiscal policy.
an expansionary monetary policy.
a contractionary fiscal policy.
a contractionary monetary policy.

CB2001370

Question 398
Flag

In the event of a recession in the economy, automatic fiscal stabilisers:

raise government expenditure and reduce tax revenue.
raise government expenditure and raise tax revenue.
reduce government expenditure and raise tax revenue.
reduce government expenditure and reduce tax revenue.

CB2001679

Question 399
Flag

According to the Classical model, Disequilibrium Unemployment……

Could not persist because wages would fall to eliminate the excess supply of labour.
Could persist for long periods of time because wages are not flexible.
Could be eliminated only through Government intervention.
Could never exist.

CB2001680

Question 400
Flag

Say’s law states that:

Supply creates its own demand.
Demand creates its own supply.
There is no such thing as a free lunch
Macroeconomic policy activism is essential to ensure full-employment.

CB2001681

Question 401
Flag

In the equation C = a + bY, which describes the aggregate consumption function, ‘a’ stands for

The amount of consumption when income is zero.
The marginal propensity to consume.
The amount of consumption when income is Maximum.
The average consumption level.

CB2001682

Question 402
Flag

Assuming there is no foreign sector, if the multiplier is 3, and the net income tax rate is 20%, the MPC is

3/4
4/5
5/6
6/7

CB2001683

Question 403
Flag

If injections are less than withdrawals at the full-employment level of national income, there is

An inflationary gap.
Equilibrium.
A deflationary gap.
Hyperinflation.

CB2001684

Question 404
Flag

Which of the following is likely to result from a rapid rise in aggregate demand?

Increased unemployment
Static living standards
Rising prices.
Surplus on the balance of payments

CB2001685

Question 405
Flag

Consider the following statements with respect to WTO :
I. The current set of governing rules stems from the Geneva Round of GATT negotiations
II. It has its headquarters in Uruguay.
III. It was formed in 1995
IV. Highest Level decision making body is the WTO General Council
Which of the above statements are true?

I & II
III & IV
I,II & IV
All of the above

CB2001686

Question 406
Flag

As per the accelerationist hypothesis of inflation, which of the following statements is FALSE?

A decrease in the aggregate demand in the short run will cause a rightward movement along the expectations -augmented Phillips Curve.
If the actual rate of unemployment is lower than the natural rate of unemployment because the Government has increased the rate of growth of money supply, then the expectations -augmented Phillips Curve will shift downwards.
If inflation is temporarily above its expected level, then unemployment will be below its natural level.
None of the above.

CB2001687

Question 407
Flag

Which of the following best describes the distinction between real GDP and nominal GDP?

Nominal GDP is calculated by deflating real GDP; real GDP is unadjusted for inflation
Nominal GDP is adjusted for changes in prices; real GDP is not adjusted for changes in prices
Nominal GDP is calculated every year; real GDP is calculated only occasionally
Nominal GDP uses current prices; real GDP uses constant prices

CB2001688

Question 408
Flag

What does the term “crowding out” refer to?

When there is an increase in unemployment, spending on automatic stabilizers increases
When private sector borrowing increases, Government borrowing decreases
When there is a decrease in tax revenue, revenue from automatic stabilizers decrease
When Government borrowing increases, private sector investment spending decreases

CB2001689

Question 409
Flag

Which of the following does not constitute investment in the economic sense?
I. Depositing money in bank account
II. The purchase of new debentures issued by a company
III. The purchase of house by a person previously owned by the other person
IV. Production of stocks which will be sold next year

II, III and IV
I, II and III
II and III only
IV only

CB2001690

Question 410
Flag

The problem of scarcity in economies:

Means there are shortages of some goods
Could be tackled if we produce more goods and services
Exits in command economies
Could be tackled if full potential output is achieved

CB2001691

Question 411
Flag

Following an increase in the price of flour, there is a 10% increase in price of bread which results in a 5% decrease in total revenue. How would you describe the demand for bread?

The demand for bread is price inelastic
The demand for bread is price elastic
The demand for bread is perfectly price inelastic
The demand for bread is perfectly price elastic

CB2001692

Question 412
Flag

Which of the following is NOT a feature of monopolistic competition?

The firm faces a downward sloping demand curve
The marginal revenue curve (MR) is a straight line that is above the average revenue curve (AR)
Only normal profits are made in long run
A firm can raise its price without losing all its customers

CB2001693

Question 413
Flag

The business cycle is defined as:

the annual cycle of output.
the long run trend path of output after removing short run variations.
the periodic fluctuations of output around the long run trend.
none of the above

CB2001694

Question 414
Flag

If bus travel is an inferior good, which of the following will cause its demand curve to shift to the left?

A rise in price of petrol
A rise in income of consumer
A rise in price of a car
An increase in bus fare

CB2001695

Question 415
Flag

Third degree price discrimination refers to the situation where:
I. Consumers are grouped into independent markets and a separate price is charged in each market.
II. The firm charges different prices in foreign and domestic markets
III. The firm charges each customer the maximum price he / she is prepared to pay
IV. The firm offers different pricing options in same market

Option I and IV
Option IV
Option I and II
Option III

CB2001696

Question 416
Flag

Which of the following schools of thought believes that supply – side shocks are a key influence on economic growth

Classical
New classical
Austrian
Keynesian

CB2001697

Question 417
Flag

Consider two goods X and Y. The shape of a consumer’s indifference curves are convex to the origin in the following circumstances:

X and Y are perfect complements
X and Y are perfect substitutes
The consumer exhibits higher marginal utility for Y than X
The consumer exhibits diminishing marginal utility for X and Y

CB2001698

Question 418
Flag

A merit good:

Provides benefits that are fully appreciated by user.
Has strong negative externalities
Is rival and excludable.
Cannot be supplied by the market.

CB2001699

Question 419
Flag

Country X has a comparative advantage over country Y in producing a good when:

Country X has a lower opportunity cost of producing the good than country Y
Country X has a lower labour cost of producing the good than country Y
Country X has a lower marginal cost of producing the good than country Y
Country X has a lower absolute cost of producing the good than country Y

CB2001703

Question 420
Flag

The kinked demand theory of oligopolists assume that

Relatively elastic demand curve at prices higher than current price
Relatively elastic demand curve at prices lower than current price
One firm in the industry sets price for all other firms
Prices can either rise or fall depends upon on what happens to firm’s competitor’s prices

CB2001706

Question 421
Flag

Rational Decision making requires that:

One’s choice be arrived at logically and without error
One’s choice be consistent with one’s goals
One’s choices never vary
One makes choices that do not involve trade-offs

CB2001707

Question 422
Flag

Which of the following would not result in a rightward shift of the Production Possibility curve?

An increase in investment in Capital Stock.
A reduction in the labour unemployment rate.
The discovery of new oil deposits in India.
An increase in the number of people taking management training courses.

CB2001709

Question 423
Flag

Which of the following issue relates to micro-economics?

Impact of crude price hike on inflation
Impact of change in bank rate on bank saving and investment
Impact of shortage of wheat production on wheat prices
Impact of Information technology on economic growth

CB2001710

Question 424
Flag

What is the difference between the term ‘customer’ and the term ‘consumer’?

There is no difference.
The term consumer refers only to people who buy food and drink products.
Customers buy products but it is consumers who use them.
Customers make organisational rather than personal purchases.

CB2001714

Question 425
Flag

The classical economists believed that

The Government should intervene in order to reach full employment.
Wages and salaries suffer from certain rigidities and would thus not move in a direction that would ensure full employment.
A competitive economy free of Government intervention would result in full employment.
An economy in equilibrium could also be an economy with high unemployment.

CB2001716

Question 426
Flag

Which of the following is not an argument against Government intervention in a market?

If the Government reduces output below the free market level, consumer surplus will fall.
If the Government reduces output below the free market level, producer surplus will fall.
If the Government raises output above the free market level, consumers will get no benefit from the extra units of output.
If the Government raises output above the free market level, some units of output will cost more to produce than the value placed on them by consumers.

CB2001717

Question 427
Flag

Suppose the Government introduces a specific tax of Rs 5 a unit on a product which has sloping supply and demand curves. Which of the following statements about the resulting curve S+tax is true?

The gap between S+tax and S will be higher at high quantities than at low quantities.
The gap between S+tax and S will be higher at low quantities than at high quantities.
The gap between S+tax and S will be Rs 5 at each quantity.
The gap between S+tax and S will be whatever is needed to show that the equilibrium price for consumers increases by Rs 5.

CB2001719

Question 428
Flag

Which of the following is NOT TRUE of a risk averse person?

risk averse person chooses a course of action designed to maximise expected utility.
A risk averse person will tend to reject a fair gamble.
A risk averse person will be unwilling to pay more for insurance than the long run average value of claims which will be made.
A risk averse person will be willing to pay more for insurance than the long run average value of claims which will be made.

CB2001720

Question 429
Flag

According to the Phillips curve, unemployment will return to the natural rate when:

Nominal wages are equal to expected wages
Real wages are back at long-run equilibrium level
Nominal wages are growing faster than inflation
Inflation is higher than growth of nominal wages

CB2001721

Question 430
Flag

Overshooting models of the exchange rate are an attempt to explain:

Why purchasing power parity plays no role in determining the value of a currency
Difference in inflation rates between the countries
Why foreign exchange market is never in equilibrium
Why exchange rates are so volatile

CB2001722

Question 431
Flag

If the exchange rate is below the equilibrium level then in a floating exchange rate system:

There is excess demand and the exchange rate should fall.
There is excess supply and the exchange rate should fall.
There is excess demand and the exchange rate should rise.
There is excess supply and the exchange rate should rise.

CB2001723

Question 432
Flag

In the European Union:

All member countries have a single exchange rate
All member countries have set their own tariff
There is a common tariff against non-members
All taxes are set the same

CB2001725

Question 433
Flag

Suppose a central bank is concerned about inflation and wishes to raise interest rates. Which of the following instruments would it be inappropriate to use?

Open market operations
Interest rate control
Reserve ratio controls
Quantitative easing

CB2001726

Question 434
Flag

What is the main reason that led classical economists to believe that the Government need not respond to a demand shock which led to unemployment?

Government always act very late
Demand shocks are always very small
Real wages are highly flexible
Economies never displayed demand-deficient unemployment

CB2001727

Question 435
Flag

If private investment increased by $150 billion while GDP remained the same, which of the following could have occurred, all else being the same?

Consumption spending decreased by $150 billion
Exports increased by $150 billion
Imports decreased by $150 billion
Net exports increased by $150 billion

CB2001728

Question 436
Flag

When there is unemployment caused by a lack of consumer spending, we classify this type of unemployment as?

Seasonal
Structural
Cyclical
Regional

CB2001729

Question 437
Flag

An example of an automatic stabilizers within the economy is

Changes in Government spending
Tariff on imports
A subsidiary approved by the Government
Changes in spending for unemployment compensation

CB2001730

Question 438
Flag

The trough of a business cycle occurs when _____ hits its lowest point.

Aggregate economic activity
Inflation
The unemployment rate
National income

CB2001732

Question 439
Flag

An increase in (i) the price level and (ii) the rate of inflation:

Cause the demand for money (i) to rise; (ii) to fall
Cause the demand for money (i) to fall; (ii) to rise
Both cause demand of money to fall
Both cause demand of money to rise

CB2001736

Question 440
Flag

Which of the following statements is correct in relation to the Classical Approach?
Economists following the classical approach of thought:
I. Believe in an automatic self-regulating mechanism that would return the economy to a full
employment level of output
II. Focus on consumers’ wants and needs for determining prices
III. Believe in a centrally planned economic system

(I) only
(I) and (II) only
(I) and (III) only
(I), (II) and (III) only

CB2001739

Question 441
Flag

Which of the following statements about market structure is False?

Oligopoly always show collusive behaviour
Monopolistic firm show a downward sloping demand curve
A perfectly competitive firm show optimum output level
Monopoly competition show steeper demand curve

CB2001740

Question 442
Flag

Mrs. X runs a bookshop. She would have earned Rs. 62,000/- as a teacher’s salary if she had not
been running a book shop. She put Rs. 50,000/- from her own money into the business. The
money would have earned Rs. 2,500/- in interest if she had left it in the bank account. What is
the opportunity cost of Mrs. X for running a bookshop?

Rs. 114, 500/-
Rs. 64,500/-
Rs. 62,000/-
Rs. 1,12,000/-

CB2001742

Question 443
Flag

Which of the following would be included in the social costs of the industry?
I. The cost of raising capital for the investment purpose of the business
II. The cost of premium for Mediclaim insurance borne by employees
III. The traffic congestion caused by employees of the industry

(I) only
(I) and (II) only
(I) and (III) only
(I), (II) and (III) only

CB2001743

Question 444
Flag

A business practice that limits or restricts effective competition from either actual or potential
rivals represents:

Exploitative abuse
Restrictive Practices
Exclusionary abuses
Bid rigging

CB2001746

Question 445
Flag

There are more substitutes available for XYZ Ltd. in the market:

The larger is its price elasticity of demand
The smaller is its price elasticity of demand
The larger is its income elasticity of demand
The smaller is its income elasticity of demand

CB2001748

Question 446
Flag

When the marginal product of labour is greater than the average product of labour

The marginal product of labour is increasing
The average product of labour is increasing
The firm is experiencing diminishing marginal returns
The firm is experiencing increasing returns to scale

CB2001751

Question 447
Flag

Which of the following statements is correct in relation to the third degree of price
discrimination?
I. The firm must face a downward sloping demand curve.
II. The elasticity of demand for the good must differ within a group of consumers.
III. The firm charges different price to consumers within a group.

(II) only
(II) and (III) only
(I) only
(I), (II) and (III) only

CB2001754

Question 448
Flag

Which of the following statements is true about an inferior good?

The substitution effect will increase the quantity of an inferior good demanded if its price increases
The income effect always acts in the opposite direction to substitution effect
They are related to positive income elasticity
The quantity consumed falls when economy contracts

CB2001755

Question 449
Flag

A supermarket sells three different versions of television sets. The versions are “premium brand”
with highest price, “domestic brand” with a range of prices and “own brand” with lowest price.
This is an example of:

Price discrimination
Advertising
Market segmentation
Perfect Competition

CB2001756

Question 450
Flag

In the long run, a perfectly competitive firm will produce at an output at which:

Average total cost is less than average total revenue
Average total cost is at its minimum
Marginal cost is equal to average total cost
Average total cost equals to average total revenue

CB2001758

Question 451
Flag

The diagram below indicates the market for a product which generates negative externalities:

To achieve an optimum allocation of resources from society’s point of view requires-

A subsidy of RT and quantity of 0V.
A subsidy of RT and quantity of 0U.
A tax of ST and quantity of 0V.
A tax of RT and quantity of 0U.

CB2001760

Question 452
Flag

Which one of the following represents a withdrawal from the circular flow of income?

Private funding for a national arts center.
The extension, by the Government, of the existing highway network.
The commissioning of a domestic firm of consultant engineers by a foreign oil company to investigate suspected defects in some pipelines.
The purchase by a domestic department store of designer clothes produced abroad.

CB2001763

Question 453
Flag

The diagram below shows two aggregate demand curves:

Which one of the following is most likely to have caused the shift from AD1 to AD2?

A reduction in interest rates.
An increase in taxes.
Lower Government spending.
Increased unemployment.

CB2001765

Question 454
Flag

“C” is a consumption function in the diagram given below:

Which one of the following statements is correct?

The average propensity to consume is zero at point X.
The marginal propensity to consume rises as GNP rises.
The average propensity to save is equal to 1 at point X.
The marginal propensity to save rises as GNP rises.

CB2001768

Question 455
Flag

The Keynesian approach to fiscal policy calls for

A balanced budget despite the state of the economy.
Budget surpluses during periods of high unemployment.
Tax cuts during recession.
Spending increases during inflation.

CB2001771

Question 456
Flag

The diagram below shows a Philips curve

A diagram like this is generally used to show that

It is impossible to reduce unemployment in long run.
There is a “trade-off” between inflation and unemployment in the short run.
Unemployment may be negative, but inflation is always positive.
Higher levels of unemployment result in higher level of inflation.

CB2001773

Question 457
Flag

Which one of the following transactions would be recorded in the balance of payments accounts
as a positive item of Alpha, but a negative item for Beta?

An oil company from Alpha develops an oil field in Beta.
Oil executives from Alpha stay in hotels in Beta.
Petrol (Gasoline) from a refinery in Alpha is sold in Beta.
Petrol (Gasoline) from Alpha is taxed by the Beta Government.

CB2001777

Question 458
Flag

A deterioration in the terms of trade means

a fall in the average price of exports relative to the average price of imports.
a fall in the average price of raw materials relative to the average price of manufactured goods.
a higher volume of imports relative to the volume of exports.
a fall in the average price of imports relative to the average price of exports.

CB2001779

Question 459
Flag

The following diagram shows two production possibility frontiers for the same country at
different points in time

Which one of the four lines shows that growth and development have occurred over time?

1
2
3
4

CB2001782

Question 460
Flag

Sustainable development is concerned with development which

meets the needs of present and future generations.
sustains existing growth and consumption patterns.
favours “appropriate technology” methods of production.
promotes agriculture growth so as to sustain food production.

CB2001783

Question 461
Flag

Which of the following would cause a rightward shift in the long run aggregate supply curve?

An increase in consumption
An increase in imports
An increase in investment
An increase in exports

CB2001784

Question 462
Flag

Due to increase in prices of petrol what will be the effect on demand curve of cars which run on
diesel?

Demand curve will shift to right
Demand curve will shift to left
There will be movement along the demand curve from left to right
No change in demand

CB2001785

Question 463
Flag

Oligopolist face kinked demand curve because:

A single firm in a industry sets price for all other firms to follow
A firm’s competitors match its price reduction but ignores its price increase
A firm’s competitors match both price increase and decrease
A firm’s competitors match its price increase but ignores its price reduction

CB2001787

Question 464
Flag

Other things being equal, an increase in the fiscal surplus will lead to a:

rise in long term interest rates.
increase in the money supply.
rise in bond prices.
none of the above.

CB2001788

Question 465
Flag

The need to employ workers with certain skills may decline even if the industry as a whole is not in
decline. This form of unemployment is called:

structural
demand-deficient
regional
technological

CB2001789

Question 466
Flag

If consumption expenditure increases from INR18,000 to INR19,500 when disposable income
increases from INR20,000 to INR26,000, then:

the marginal propensity to consume is 0.25 and the multiplier is 1.33.
the marginal propensity to consume is 0.25 and the multiplier is 4.
the marginal propensity to consume is 0.75 and the multiplier is 4.
the marginal propensity to consume is 0.75 and the multiplier is 1.33.

CB2001791

Question 467
Flag

Which of the following would NOT cause a shift in Aggregate Demand (AD) curve?

A reduction in income tax
A reduction in interest rates
An increase in Government spending
A fall in the cost of production

CB2001792

Question 468
Flag

Which of the following is not a phase of the trade cycle?

Boom
Recession
Recovery
Inflation

CB2001793

Question 469
Flag

According to the analysis of the British Economist John Maynard Keynes

Government demand could be used to smooth fluctuations in aggregate output and income.
Markets coordinate supply and demand so that a policy of laissez-faire would prevent recessions.
Economic fluctuations were the cumulative result of mistakes made by businesses and households in an uncertain world.
Supply creates its own demand through the circular flow of economic activity.

CB2001794

Question 470
Flag

If an economy is on its long run aggregate supply curve:

It is operating on its Production Possibility Frontier
There is a low rate of unemployment
The output gap is at its highest.
Aggregate demand has increased

CB2001795

Question 471
Flag

Which of the following is an economic definition of improvement in productivity?

An increase in output per unit of input
An increase in the total amount a firm can produce
An increase in the rate of growth of marginal product
An increase in economies of scale over time

CB2001796

Question 472
Flag

Cuts in the rate of corporation tax are designed to do each of the following except:

Boost employment
Encourage Investment
Reduce the budget deficit
Encourage Foreign Direct Investment

CB2001797

Question 473
Flag

The opportunity cost of holding cash is the:

Interest rate on short term deposits of 5% p.a.
Interest rate of bonds
Inflation rate of the market
Interest rate of 5% foregone by not holding short term deposits

CB2001798

Question 474
Flag

In the following graph minimum efficient scale occurs at

Q1
Q2
Q3
Q4

CB2001799

Question 475
Flag

The short run supply curve in perfectly competitive market is its:

Average cost curve
Vertical sum of the individual firms’ average variable cost curves
horizontal sum of the individual firms’ marginal cost curves
marginal cost curve above the lowest point of the average total cost curve

CB2001801

Question 476
Flag

Bus travel is considered as an inferior good. A rise in income level of consumer when the supply
curve of the good is positively sloped will cause which one of the following?

The demand for bus travel to fall and the price for bus travel to rise.
The demand for bus travel to fall and the price for bus travel to fall.
The demand for bus travel to rise and the price for bus travel to rise.
The demand for bus travel to rise and the price for bus travel to fall.

CB2001802

Question 477
Flag

Which of the following assumption about Perfect Competition market structure is false?

The firm has some control over price that it sets.
In the long run, each firm will find that its marginal cost is equal to its average cost of production.
The firm exhibits demand curve parallel to horizontal axis.
The firm produce homogeneous products.

CB2001804

Question 478
Flag

Which of the following is not an example of economies of scope?

Shared marketing
A firm introduces new products and in so doing reduces average cost of producing its existing products
A firm doubles its inputs of capital and labour and its output more than doubles
A firm doubles number of products and can spread overheads across the range

CB2001805

Question 479
Flag

Goods A and B are complementary goods. An increase in price of A will cause:

Shifting of demand curve of B to the left and equilibrium price and quantity both Decrease
Shifting of demand curve of B to the right and equilibrium price and quantity both Decrease
Shifting of demand curve of B to the left and equilibrium price and quantity both Increase
Shifting of demand curve of B to the right and equilibrium price and quantity both Increase

CB2001806

Question 480
Flag

Which of the following statements is FALSE about a risk averse person?

He values the possible monetary loss from an outcome higher than an equal possible gain
He will be willing to take risk if expected return from it is sufficiently high
He will avail insurance to reduce risk
He will value an incremental gain in wealth more than the same incremental decrease in wealth.

CB2001808

Question 481
Flag

Which one is included in National Income?

winning from lottery
milk purchase by a dairy shop
national debt interest
none of these

CB2001809

Question 482
Flag

A temporary unemployment which exists during the period of the transfer of labor from one occupation to another is called

Voluntary Unemployment
Involuntary Unemployment
Cyclical Unemployment
Frictional Unemployment

CB2001810

Question 483
Flag

The school of thought that emphasizes the natural tendency for an economy to move toward equilibrium full employment without inflation is known as the:

Keynesian school.
Non-interventionist school.
Rational expectations school.
Classical school.

CB2001811

Question 484
Flag

According to Keynes, what is the most important determinant of households’ spending on goods and services?

The price level.
The interest rate.
Autonomous consumption.
Disposable income.

CB2001812

Question 485
Flag

Which of the following will occur if there is an increase in taxes?

The IS curve shifts and the economy moves along the LM curve.
The LM curve shifts and the economy moves along the IS curve.
Output will change causing a change in money demand and a shift of the LM curve.
Both the IS and LM curves shift.

CB2001813

Question 486
Flag

The change in investment due to change in income is known as

Consumption
Multiplier
Accelerator
IS curve

CB2001814

Question 487
Flag

In trade/ business cycle, the cycles follow these sequence

Prosperity or boom → recession → depression or slump and then → Recovery
Prosperity or boom → depression or slump → recession and then → Recovery
Recession → depression or slump → Recovery and then → Prosperity or boom
Recovery → recession → depression or slump and then → Prosperity or boom

CB2001815

Question 488
Flag

Demand pull inflation may be caused by

An increase in cost
A decrease in interest rate
A reduction in Government spending
An outward shift of aggregate supply

CB2001816

Question 489
Flag

Which of the following pairs is not correctly matched with regard to balance of payment accounts?

Import of goods and services – Debit in the current account
Receipts of transfer payments – Credit in the current account
Direct investment receipt – Credit in the capital account
Portfolio investment payments – Debit in the current account

CB2001817

Question 490
Flag

What happens when central bank reduces repo rate?

Money supply increases
Money supply decreases
No effect on money supply
None of the above

CB2001818

Question 491
Flag

Governments have several functions, but which is certainly not an economic one?

Provision of public goods.
Redistribution of income.
Regulation of socially undesirable goods.
Macroeconomic stabilisation.

CB2001820

Question 492
Flag

Economic policymakers find supply-side policies attractive because

supply-side policies eliminate dead-weight loss from taxation.
supply-side policies do not imply a short-run trade-off between unemployment and inflation.
supply-side policies will reduce output gaps by increasing total factor productivity.
supply-side policies help to shift the Beveridge curve away from the origin.

CB2001821

Question 493
Flag

At the profit maximising equilibrium of monopolistically competitive firm, the absolute value of the price elasticity of demand is always:

Zero
Between zero and one
One
Greater than one

CB2001823

Question 494
Flag

The monopoly produces socially optimal level of output at the level where

The average cost curve cuts the marginal revenue curve
The average cost curve cuts the demand curve
The marginal cost curve cuts the demand curve
The marginal cost curve cuts the marginal revenue curve

CB2001824

Question 495
Flag

Which of the following describes a merit good?
I. It provides benefits that are not fully appreciated by the user
II. It is a private good
III. It could be provided by the Government at subsidised price
IV. It cannot be supplied by the market

Only I
I , II & III
I & III
I & IV

CB2001825

Question 496
Flag

A change in consumer tastes would change

The slope of the indifference curve
The position of the indifference curve
The slope of the budget
The position of the budget line

CB2001826

Question 497
Flag

Which of the following is one of the four possible strategies in a growth vector matrix?

Niche marketing.
Diversified marketing.
Aggressive marketing.
Strategic alliance.

CB2001827

Question 498
Flag

Which of the following statements describes bygones principle?

The opportunity costs should be ignored when deciding how much of a good to produce in the short run
The fixed costs should be ignored when deciding how much of a good to produce in the short run
The total costs should be considered when deciding how much of a good to produce in the short run
The average costs should be considered when deciding how much of a good to produce in the short run

CB2001828

Question 499
Flag

Which of the following statements is not correct?

Dominant equilibrium is a special case of a Nash equilibrium.
It is not possible to have a Nash equilibrium that is not a dominant equilibrium.
In dominant equilibrium all participants have dominant strategy.
The Nash equilibrium assumes there is no collusion between the participants.

CB2001829

Question 500
Flag

Rekha owns an online store. She had sold a part of her stake in the business to another investor and received proceeds of INR 100 Crores. She wanted to invest the proceeds of stake sale in her business and she expects to earn a return of 20% p.a. on this investment. However due to pandemic, she could not invest this money in her business for next 6 months and had to park the entire money in her bank account which gave her an interest rate of 6% p.a. What is the opportunity cost of her new investment due to the delay?

20 Crores
6 Crores
14 Crores
7 Crores

CB2001830

Question 501
Flag

Which one of the following is a FALSE statement about economic school of thoughts?

Marxian: Concept of surplus value.
Keynesian: Government to increase expenses to boost demand.
Austrian: Primarily emphasized on money supply controls to steer economic growth.
New Classical: Customers use all available information to form rational expectations.

CB2001831

Question 502
Flag

In the diagram below, points X and Y represent the equilibrium price and quantity traded of a good in two successive periods.

Which of the following is NOT a possible explanation?

An input in the production process became cheaper.
The price of a close substitute for the good decreased.
An input in the production process became cheaper and the price of a close substitute for the good increased.
An input in the production process became cheaper and the price of a complement good decreased.

CB2001832

Question 503
Flag

Consumer A uses its entire income to purchase Good X and Good Y. If consumer A’s income is held constant and prices of Good X fall and price of Good Y rises, then Consumer A’s budget line, with the quantity of Good X represented horizontal axis and quantity of Good Y on vertical axis would:

Shift the entire budget line to the left.
Shift the entire budget line to the right.
Make the budget line steeper.
Make the budget line less steeper.

CB2001833

Question 504
Flag

Which of the following is TRUE for the short-run cost curves?

CC1 = Average Variable Cost; CC2= Average Cost; CC3 = Average Fixed Cost; CC4= Marginal Cost
CC1 = Marginal Cost; CC2= Average Cost; CC3 = Average Fixed Cost; CC4= Average Variable Cost
CC1 = Marginal Cost; CC2= Average Cost; CC3 = Average Variable Cost; CC4= Average Fixed Cost
CC1 = Average Cost; CC2= Marginal Cost; CC3 = Average Variable Cost; CC4= Average Fixed Cost

CB2001835

Question 505
Flag

In the long run, a firm operating under conditions of monopolistic competition will produce an output at which:

Average total cost equals average revenue
Average total cost is less than average revenue
Average total cost is at minimum
Marginal cost is equal to average total cost

CB2001836

Question 506
Flag

Which of the following statement(s) is TRUE?
I. Limit pricing is where firm sets price below its average cost.
II. Predatory price is where firm deliberately keeps its price below the short run profit maximising level.
III. First Degree Price Discrimination is where firm adds a mark-up to average cost

I and II
II and III
II Only
III Only.

CB2001837

Question 507
Flag

Which of the following statement is TRUE?

Socially efficient level of output occurs when marginal social benefit exceeds marginal social cost.
Exploitative abuse is a business practice that limits or prevents effective competition.
A merit good provides benefits that are not fully appreciated by the prospective user.
All of the above.

CB2001840

Question 508
Flag

Which of the following statement(s) is TRUE?
I. Investment, consumer spending and imports are injections in the circular flow of income model.
II. A rise in Government expenditure is likely to shift country’s demand curve outward to the right, other things being equal.
III. A rise in imports will result in decrease in aggregate demand, other things being equal.

I and II
II and III
I Only
All of the above.

CB2001843

Question 509
Flag

The World Trade Organization aims to reduce barriers to trade between countries. Which of these measures does not support this aim?

Reducing tariffs on imports
Lifting restrictions on the amount of goods a nation can import
Excessive paperwork for importing goods to promote local goods
All of the above

CB2001846

Question 510
Flag

Country A has a consultancy that provides advisory services to a company in Country B. The payments from Country A to B would figure in the Balance of Payment under

The trade in goods account
The trade in service account
Income flows
Current transfers

CB2001848

Question 511
Flag

Which of the following statements about the Austrian school of economists is NOT true

The Austrian school believes that supply side shocks are the key drivers of economic growth
They believe that businesses pursue a number of ventures to deal with uncertainty
The Austrian school believes markets regulate themselves
Followers of this school of thought believe that competitive markets cope with changing customer preferences

CB2001850

Question 512
Flag

Which of the following statements about exchange rate policies is correct?
I. A system implies the Government allows a gradual adjustment of exchange rates is called an exchange rate band.
II. A crawling peg system where a fixed exchange rate prevails for some time and then it is revalued/ devalued in line with BOP surplus/ deficit.
III. A system where currency exchange rate can float between upper and lower limit is an adjustable peg system.

I and II
I and III
I only
None of these

CB2001852

Question 513
Flag

Quantitative easing is likely to cause

An increase in exchange rates and decrease in inflation
A fall in asset prices and an increase in money supply
An increase in money supply and fall in inflation
A fall in interest rates and an increase in asset prices

CB2001855

Question 514
Flag

Which of these statements about cost-push inflation is true?

For cost push inflation to occur the demand for goods must be static or inelastic.
Supply of goods and services increases due to cheaper raw materials and labour.
Exchange rate appreciation benefits imports and could cause cost-push inflation.
An increase in supply of goods due to benefit from increased prices causes cost-push inflation.

CB2001858

Question 515
Flag

If the central bank of a country wants to prevent its currency appreciating, then its

foreign exchange reserves will have to decrease and domestic money supply will rise
foreign exchange reserves will have to decrease and domestic money supply will fall
foreign exchange reserves will have to increase and domestic money supply will rise
foreign exchange reserves will have to increase and domestic money supply will fall

CB2001860

Question 516
Flag

A bank holds its liquid assets constant, but reduces its advances to customers and increases its reserve at the central bank. Then,

It’s liquidity ratio remains unchanged but maturity gap increases
It’s liquidity ratio remains unchanged but maturity gap decreases
It’s liquidity ratio increases and maturity gap decreases
It’s liquidity ratio increases and maturity gap increases

CB2001862

Question 517
Flag

A country’s population is 505 million out of these 374 million are actively employed. 29 million are unemployed or actively looking for work. What is the unemployment rate?

25.94%
5.74%
7.20%
7.75%

CB2001865

Question 518
Flag

Which of the following is TRUE?
I. First degree of price discrimination refers to the situation where a firm charges each customer the maximum price that customer is prepared to pay.
II. “buy-one-get-one-free” is an example of second degree of price discrimination.
III. Limit pricing refers to the situation where a firm sets its price below its average cost in order to drive competitors out of business.

Only I
Only III
I & II
II & III

CB2001867

Question 519
Flag

Which one of the following is a FALSE statement?

Stagflation can be explained in terms of Phillips loop.
If inflation is falling, the adaptive expectations hypothesis suggests that inflation will be consistently over-estimated.
The vertical long-run Phillips curve suggests that inflation can be reduced without a long-term increase in unemployment.
A fall in structural unemployment will shift the Phillips curve to the right.

CB2001869

Question 520
Flag

Shadow markets are most likely to be associated with:

Price floors which cause excess demand.
Price floors which cause excess supply.
Price ceilings which cause excess demand.
Price ceilings which cause excess supply.

CB2001871

Question 521
Flag

An increase in the average riskiness of a bank’s assets, assuming that nothing else changes, will result in:

A decrease in the capital adequacy ratio.
An increase in the capital adequacy ratio.
An increase in the liquidity ratio.
A decrease in the liquidity ratio.

CB2001873

Question 522
Flag

The central bank is concerned about rising domestic inflation. Which of the following monetary measures would NOT be suitable as a mean to try and reduce inflation?

Increasing cash reserve ratios for banks
Reducing its lending to banks
Funding the PSNCR with more Government bonds and fewer Treasury bills
Buying Government bonds from banks

CB2001875

Question 523
Flag

Which of the following is recorded as a plus in the balance of payments accounts of Country A?

The export of goods by Country A to the rest of the world
Short-term lending by Country A to the rest of the world
The purchase of foreign shares by residents of Country A
The payment of interest by residents of Country A to residents of other countries

CB2001878

Question 524
Flag

Refer to the figure below. Which of the following would be an efficient level of production for Amit?

I. 8 cups of tea and 0 doughnuts
II. 5 cups of tea and 6 doughnuts
III. 4 cups of tea and 12 doughnuts

I only
II only
III only
I and II only
II and III only

CB2001881

Question 525
Flag

Because of which of the following, perfect competition is said to lead to consumer sovereignty-
I. The combination of (long-run) production being at minimum average cost and the firm making only normal profit keeps prices at a minimum.
II. Long-run equilibrium is at the bottom of the firm’s long- run AC (Average Cost) curve. That is, for any given technology, the firm, in the long run, will produce at the least-cost output.
III. Perfect competition is a case of ‘survival of the fittest’. Inefficient firms will be driven out of business, since they will not be able to make even normal profits.
IV. If consumer taste changes, the resulting price change will lead firms to respond (purely out of self-interest). An increased consumer demand will result in extra supply with only a short-run increase in profit.

I only
II only
II and III
I and IV

CB2001884

Question 526
Flag

Good X has an income elasticity of demand of (-0.5) and a cross-price elasticity of demand with respect to Good Y of (+0.6) . Good X is:

A normal good and substitute for Good Y
An inferior good and a substitute for Good Y
An inferior good and a complement for Good Y
A normal good and a complement of Good Y

CB2001886

Question 527
Flag

A market in which firms produce differentiated products and enjoy normal profits could be described as:

Monopolistically competitive
A monopoly
An oligopoly
Perfectly competitive

CB2001888

Question 528
Flag

Which of the following statements is/are TRUE?
I. The effect of a shift in the IS curve on national income is greater if the MP curve is flatter.
II. If both aggregate demand and potential national income increase, national income can rise without the central bank having to raise interest rates to curb inflationary pressure.
III. An increase in inflationary expectations will cause a greater increase in interest rates if the IS curve is flatter.

I and II
II and III
II Only
III Only.

CB2001890

Question 529
Flag

Which of the following statements about free-floating exchange rates is NOT true?

They enhance the effectiveness of fiscal policy.
The associated uncertainty can be reduced using forward contracts.
Speculation can make them extremely volatile.
There is no need to hold reserves of foreign currency.

CB2001894

Question 530
Flag

Which of the following statements is/are FALSE?

When the economy is growing, public sector net borrowing is likely to be falling.
When the economy is growing, net taxes are likely to be increasing.
When the economy is contracting, investment by firms is likely to be low.
When the economy is growing, the structural deficit is likely to be falling.

CB2001896

Question 531
Flag

Which of the following will reduce the effectiveness of pure fiscal expansion?
I. Crowding out
II. Injections multiplier
III. A lack of confidence on behalf of businesses and banks

I only
I and II only
I and III only
I, II and III

CB2001901

Question 532
Flag

Which of the following approaches would NOT be used by a central bank that wishes to avoid increasing the money supply?

Selling Government bonds to bank
Reducing its willingness to lend to the banks
Funding Government borrowings by selling Treasury bills instead of Government bonds
Raising the reserves ratio which banks are required to hold.

CB2001906

Question 533
Flag

Match the different stages of the business cycle with the corresponding symptoms in the economy following:

1-c, 2-a, 3-b, 4-d
1-b, 2-d, 3-c, 4-a
1-d, 2-a, 3-b, 4-c
1-d, 2-b, 3-a, 4-c

CB2001907

Question 534
Flag

Which is likely to increase the amount of research performed in the country?

Introduction of Patent system
Increase in tax on profits generated by royalties
Tax on research spending
None of the above

CB2001908

Question 535
Flag

Which of the following is a reason of real wages might been remaining above the equilibrium rate in a recession?
I. Workers resist a wage cut (maybe due to unions)
II. Firms are worried about not finding right replacement
III. Wages are fixed for a period of time

I and II only
I only
III only
I, II and III

CB2001909

Question 536
Flag

Unemployment and inflation can co-exist because of:
I. Structural unemployment
II. Cost-push inflation
III. Firms operating with different degree of slack

I only
I and II
I and III
I, II and III

CB2001910

Question 537
Flag

The principal of non-rivalry applied to public goods means that:

The production of public goods involves marginal costs.
Public goods must be financed by income tax.
The opportunity cost of provision is a positive and constant value.
No extra resources will be consumed when marginal consumption takes place

CB2001911

Question 538
Flag

What does the Austrian Economic school says about Government intervention?

Government regulation is critical in financial institutions
Given what has happened in the past successful regulations can be framed in advance
Government should only provide a framework of law
Regulation never evolve in the market

CB2001912

Question 539
Flag

A loss leader may be used as part of which of the following pricing strategies?

Predatory pricing
Full-range pricing
Peak-load pricing
First-degree price discrimination

CB2001913

Question 540
Flag

Which of the following policies will NOT help to address the problem of regional imbalance?

Reduced employers' national insurance contributions for firms in depressed areas
Grants to unemployed workers in depressed areas to relocate in more prosperous areas
Provision of factories in depressed areas
Shifting of Government offices in depressed areas

CB2001914

Question 541
Flag

Which of the following is true for Asset bubbles?
I. Asset bubbles can be caused by excessive bank lending
II. Government intervenes and stops the asset bubbles by regulating the prices
III. Asset bubbles give rise to speculators deriving market prices

I and III only
III only
II and III only
I, II and III

CB2001916

Question 542
Flag

Suppose we have the following information about an economy
Y=100, Cd=35+0.9Y, J=14

Where
Y = National Income
Cd = Consumption on domestically produced goods
J = Capital Injection
What would be the aggregate demand function E?

49+0.9Y
50Y
-65+0.9Y
135+0.9Y

CB2001917

Question 543
Flag

Which of the following is TRUE?
I. A merit good is provided free of charge by the Government.
II. Bid rigging is an abuse of market power used by a monopoly.
III. If the marginal social benefit exceeds the marginal social cost then an increase in output will increase welfare.

I & II
II & III
II only
III only

CB2001918

Question 544
Flag

Suppose we have the following information about an economy
Y=100, Cd=35+0.9Y, J=24 ;
Where, Y = National Income
Cd = Consumption on domestically produced goods
J = Capital Injection.
If the National Income rises to 110 what would be the aggregate demand?

70.6
125
148
158

CB2001919

Question 545
Flag

Select the correct CODE regarding ‘carry trade’:
I. Promoting foreign trade on the basis of bilateral terms
II. Borrowing in one currency and investing in another
III. A situation of zero trade balance
CODE:

I and II
II and III
I, II and III
None of these

CB2001920

Question 546
Flag

What would be the most appropriate monetary policy measure for a developed economy to come out of a recession?

Reduction in Interest rates to stimulate demand
Reduction in taxes
Increased Government spending
Quantitative easing

CB2001921

Question 547
Flag

All else being equal, the real exchange rate will increase if:

Export prices fall by less than import prices
Export prices rise by less than import prices
The nominal exchange rate falls
Export prices fall while import prices are unchanged

CB2001923

Question 548
Flag

Which of the following is NOT likely to lead to an increase in investment?

A fall in interest rates
A rise in consumption
A fall in profits
Improved confidence in the economy

CB2001924

Question 549
Flag

Which of the following conditions produces normal profits?

Average revenue = marginal revenue
Average revenue = average cost
Marginal cost = marginal revenue
Average cost = marginal cost

CB2001925

Question 550
Flag

Which one of the following is a FALSE statement?

A perfectly competitive market naturally maximises welfare.
Potential competitors are those that are actually entering and leaving the industry.
Inefficient monopolists may face competition for corporate control.
A credible threat is one that rivals expect a firm to carry out.

CB2001926

Question 551
Flag

Which of the following best illustrates the problems of adverse selection?

A woman becomes less concerned about locking her garage after increasing her buildings and contents insurance.
A man chooses not to insure his life because he has no dependants.
A person affects a long-term disability policy, shortly before taking a course of flying lessons and not informing the insurer about it.
A company offers cheaper life insurance to women than to men.

CB2001927

Question 552
Flag

The price elasticity of demand for table salt is:

Relatively inelastic
Unit elastic
Relatively elastic
Highly elastic

CB2001928

Question 553
Flag

In the diagram below, points X and Y represent the equilibrium price and quantity traded of a good in two successive periods.

Which of the following is a possible explanation?

A technological improvement making the good easier to produce.
The price of a close substitute for the good decreased.
An input in the production process became cheaper.
The price of a complement good decreased.

CB2001929

Question 554
Flag

If the demand of Good X is price-inelastic and the supply of Good X is price-elastic. Then the burden of goods and services tax will be borne by:

Equally by buyers and sellers
More heavily by buyers
More heavily by sellers
By neither buyers nor sellers

CB2001930

Question 555
Flag

Which of the following is NOT true?
I. Uncertainty is a measure of the variability of an outcome.
II. Cross price-elasticity of demand is negative for complementary goods.
III. ‘Third Way’ supply-side policies are based on the concept of helping people to help themselves.

I and II
II and III
I Only
III Only

CB2001931

Question 556
Flag

Which of the following are complementary good?

Car Insurance and Car
Tea and Coffee
Keyboard and LED Monitor
All of the Above

CB2001932

Question 557
Flag

Two firms operate in a duopoly, but do not collude. Given the pay-off matrix of output options to Firms A and B below, what is the dominant strategy for the firms?

Firm A- High; Firm B- Low
Firm A- Low; Firm B- High
Firm A- Low; Firm B- Low
Firm A- High; Firm B- High

CB2001933

Question 558
Flag

A monopolist in a perfectly contestable market will:
I. Produce as efficiently as possible and will only make normal profits.
II. Keep prices down, but produce supernormal profits.
III. Produce as efficiently as possible and make supernormal profits.

I and II
II and III
I only
III only

CB2001934

Question 559
Flag

The endowment effect suggests that

Present payoffs are endowed with more appeal relative to future payoffs.
The value of a product is higher when it is owned than when it is being considered for ownership.
The utility from a product increases if other people buy it.
The value of a product increases if it is presented in an optimistic rather than pessimistic way.

CB2001935

Question 560
Flag

A subsidy for car production will lead to?

Shifting of demand curve to the left
Shifting of demand curve to the right
Shifting of supply curve to the right
Shifting of supply curve to the left

CB2001937

Question 561
Flag

The diagram below shows the market for some gadgets.

Where
MSC is the Marginal Social Cost;
MSB is the Marginal Social Benefit;
MPC is the Marginal Private Cost;
MPB is the Marginal Private Benefit;
Based on the above diagram, complete the following sentence choosing the correct option given below:
A _________ exists in this market because at the market output, _________.

Negative externality; MSC > MPC
Positive externality; MSC > MSB
Negative externality; MSB > MSC
Positive externality; MSC > MPC

CB2001938

Question 562
Flag

Which of the following statements is FALSE?
I. A credible threat is one that rivals expect a firm to carry out.
II. A short seller is exposed to the risk that the asset they have short sold will rise in price leading them to make loss.
III. The bygones principle states that sunk costs should be ignored when deciding whether to produce or sell more or less of a product.

I and II
II and III
All of the above
None of the above

CB2001939

Question 563
Flag

Refer to the table below:

If the market price of this price-taking firm’s output is ₹7, economic profit will be:

₹10
₹2
₹40
₹1

CB2001955

Question 564
Flag

A product’s demand curve QD is 100-2P. Calculate the Price elasticity (point elasticity) of demand at price of INR 10.

-0.125
0.25
-0.25
8

CB2001958

Question 565
Flag

The Cross-price elasticity of demand is 1.20 for Good X with respect to Good Y. Which of the following is true?

Good X and Good Y are likely to be close substitutes
Increase in Price of Good Y will lead to a proportionate increase in price of Good X
Good X and Good Y are complementary goods
None of the Above

CB2001961

Question 566
Flag

Which is not true about a risk averse investor?

He or she will reject a fair gamble
He or she will avoid all risk
The marginal utility of wealth decreases as wealth increases
The insurance premium can be greater than the long run average value of claims

CB2001962

Question 567
Flag

Which of the following factors of production are variable?
I. Raw Materials
II. Electricity
III. Manager employed on a contract

I and II
I, II and III
I only
II only

CB2001963

Question 568
Flag

In a perfectly competitive market

The Products are identical
The consumers have perfect knowledge and behave rationally so always buy the cheapest good
Demand is perfectly in-elastic
Both A and B

CB2001964

Question 569
Flag

Which of the following is second degree Price discrimination?

A street vendor of fruit charging a maximum price that the customer wants to pay
An Insurance company grouping potential customers in segments of high net worth, medium and mass market and charging them differential rates
A supermarket charging different price for different products
A wholesaler of flowers charging lower rates from a consumer buying in higher quantities

CB2001965

Question 570
Flag

Which of the following is NOT a social cost of plastic industry?

Cost of treating illness from consumption of plastic in food
Environmental hazard caused by microplastics in the environment
Both A and B
None of the Above

CB2001966

Question 571
Flag

Which of the following was primary reason Keynes came up with his theory known as Keynesian school of thought?

The classical approach couldn’t explain the persistent unemployment during the great recession.
Free market theory couldn’t explain the inequalities between rich and the poor.
The classical theory of free markets would bring about maximum social benefit.
The classical approach suggested that intervention by the state would reduce nations’ wealth.

CB2001968

Question 572
Flag

Which of the following is TRUE for New Classical school of thought?

Government management of demand
Targets for money supply growth
Surplus value
Rational expectations

CB2001970

Question 573
Flag

The marginal utility for an individual is measured as the maximum amount (in Rs.) that they are willing to pay for consuming a unit of Good A.
The table below shows the marginal utility for consuming various units of Good A priced at Rs. 12 per unit.

Individual’s marginal consumer surplus from consuming a third unit of Good A is:

Rs. 16
Rs. 39
Rs. 8
Rs. 24

CB2001973

Question 574
Flag

Assume that the production of the street- food leads to pollution of the surrounding land area, but this pollution is an external cost to the street- food vendor.
Following diagram represents a profit-maximising street-food vendor operating in perfect competition, where MPC is the Marginal Private Cost curve and AR is the Average Revenue curve for the vendor.
Note: P denotes Price.

If the vendor decides not to take any account of the damage to the surrounding land area, the level of output the vendor will produce and the corresponding marginal external cost are given by:

Q1, P3-P4
Q2, P2-P3
Q2, P3-P5
Q3, P1-P3

CB2001975

Question 575
Flag

The Pareto optimum level of output is the level of output at which

It is impossible to make anyone better off without making someone else worse off
This occurs where Marginal Social Benefit (MSB) is greater than Marginal Social Cost (MSC)
The MSB is equal to marginal private benefit plus the marginal external benefit
A and C are true

CB2001977

Question 576
Flag

Which of the following should decrease the money supply?

RBI buys Government bonds from the market
RBI sends a circular to all major banks to reduce their cash reserve ratio
RBI sells Government bonds in the market
Through the voluntary disclosure scheme the Government extracts from the private sector an additional tax revenue of Rs. 5000 crores

CB2001979

Question 577
Flag

Suppose the Indian Rupee is undervalued, then

India is hurting exporters
India will have a balance of payments deficit
India will accumulate reserves of foreign currency
India will experience downward pressure on its exchange rate

CB2001980

Question 578
Flag

Assume that the Government imposes minimum wages regulations and bans child labour. This would lead to:

Demand-pull inflation
Cost-push inflation
Both
Neither

CB2001981

Question 579
Flag

Consider a simple Keynesian model for an open economy. Suppose that a ban is imposed on imports. Following this, GDP

Will decline
Will increase
Will remain unchanged
Nothing can be predicted without knowing the nature of the import function

CB2001982

Question 580
Flag

An increase in CRR (Cash Reserve Ratio)

squeezes credit supply and keeps money supply unchanged
squeezes money supply and keeps credit supply unchanged
squeezes credit supply and may keep money supply unchanged
squeezes credit supply by the commercial banks and also money supply

CB2001983

Question 581
Flag

One possible explanation for involuntary unemployment is:

The wage rate does not adjust immediately to changes in the labour demand.
The labour market is perfectly competitive.
The firms, knowing the supply and demand curve for labour, implement the equilibrium wage, which happens to be so low that many people prefer to stay at home.
Maximum wages which are implemented.

CB2001984

Question 582
Flag

Select the correct statement/statements which are correct as per the famous ‘Say’s Law’
using the code given below:
I. Economic systems are ‘supply−led’
II. All accruing income is to be spent
III. Aggregate supply creates its own aggregate demand in an economy

All of the above
II and III
I and II
I and III

CB2001985

Question 583
Flag

In the context of balance of payments, ‘portfolio investment’ relates to:

Takeover of foreign companies
Purchase of shares in foreign companies
Purchase of real estate in foreign companies
Private remittances to foreign countries

CB2001986

Question 584
Flag

Consider the below statements:
I. Saving is an injection and Investment is a leakage in the circular flow of income
II. Imports are a leakage and exports are an injection in the circular flow of income
Which of the below is correct?

I is false and II is true
Both I and II are false
I is true and II is false
Bothe I and II are true

CB2001987

Question 585
Flag

The recession phase of the trade cycle

Is often caused by excessive consumer expenditure
Is normally characterised by accelerating inflation
Is most prolonged when the country has high levels of imports
Is usually caused by falling aggregate monetary demand

CB2004516

Question 586
Flag

When do Shadow markets tend to develop?

when there is a scarcity
when the price of a good is below the equilibrium price
when the Government has set a price ceiling above the equilibrium
when the price of a good is determined by supply and demand

CB2004612

Question 587
Flag

Which of the following best describes the relationship between the change in the monetary
base and the change in the money supply that occurs when a central bank buys bonds?

The change in the money supply is equal to the change in the monetary base
The change in the money supply is unrelated to the change in the monetary base
The change in the money supply is greater than the change in the monetary base
The change in the money supply is always less than the change in the monetary base

CB2004614

Question 588
Flag

The natural rate of unemployment in a country is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly. Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

Increase Government spending; sell bonds
Decreasing taxes; buy bonds
Increasing taxes; increasing Government spending
Increasing taxes; open market sales

CB2005309

Question 589
Flag

Rational Decision making requires that:

One’s choice be arrived at logically and without error
One’s choice be consistent with one’s goals
One’s choices never vary
One makes choices that do not involve trade-offs

CB2005310

Question 590
Flag

Which of the following would not result in a rightward shift of the Production Possibility
curve?

An increase in investment in Capital Stock.
A reduction in the labor unemployment rate.
The discovery of new oil deposits in India.
An increase in the number of people taking management training courses

CB2005311

Question 591
Flag

If the marginal product of labour is below the average product of labour, it must be true that:

The marginal product of labour is negative.
The marginal product of labour is zero.
The average product of labour is falling
The average product of labour is negative

CB2005312

Question 592
Flag

Which of the following issue relates to micro-economics?

Impact of crude price hike on inflation
Impact of change in bank rate on bank saving and investment
Impact of shortage of wheat production on wheat prices
Impact of Information technology on economic growth

CB2005314

Question 593
Flag

Price discrimination in which seller charges less to customers, who buy in large volumes is
classified as

Second-degree price discrimination
First-degree price discrimination
Third-degree discrimination
Fourth-degree discrimination

CB2005315

Question 594
Flag

The classical economists believed that

The Government should intervene in order to reach full employment.
Wages and salaries suffer from certain rigidities and would thus not move in a direction that would ensure full employment.
A competitive economy free of Government intervention would result in full employment.
An economy in equilibrium could also be an economy with high unemployment

CB2005316

Question 595
Flag

Which of the following is the correct definition of the law of diminishing returns?

If extra units of one variable input are added to a fixed amount of all other inputs, then sooner or later the marginal returns will get smaller.
If extra units of one variable input are added to a fixed amount of all other inputs, then the marginal returns will always get smaller.
If extra units of all variable inputs are added to a fixed amount of all fixed inputs, then the marginal returns will always get smaller.
If extra units of all variable inputs are added to a fixed amount of all fixed inputs, then sooner or later the marginal returns will get smaller.

CB2005317

Question 596
Flag

Which of the following is not an argument against Government intervention in a market?

If the Government reduces output below the free market level, consumer surplus will fall
If the Government reduces output below the free market level, producer surplus will fall
If the Government raises output above the free market level, consumers will get no benefit from the extra units of output.
If the Government raises output above the free market level, some units of output will cost more to produce than the value placed on them by consumers.

CB2005322

Question 597
Flag

Suppose the Government introduces a specific tax of Rs 5 a unit on a product which has
sloping supply and demand curves. Which of the following statements about the resulting
curve S+tax is true?

The gap between S+tax and S will be higher at high quantities than at low quantities.
The gap between S+tax and S will be higher at low quantities than at high quantities.
The gap between S+tax and S will be Rs 5 at each quantity.
The gap between S+tax and S will be whatever is needed to show that the equilibrium price for consumers increases by Rs 5.

CB2005323

Question 598
Flag

A consumer finds that for product A, the price is Rs 5 and the consumer’s marginal utility is
100 utils, while for product B, the price is Rs 10 and the consumer’s marginal utility is 160
utils. Which of the following statements is true?

The consumer is maximizing utility from A and B.
The consumer would gain more utility from A and B by consuming more A and less B.
The consumer would gain more utility from A and B by consuming less A and more B.
The consumer could only gain more utility from A and B by consuming more of both products.

CB2005324

Question 599
Flag

Suppose you give up a job and use some savings to buy a small bus which you drive on a
remote rural route. Which of the following costs of your firm is an explicit cost?

The depreciation on the bus.
The wage of the job you gave up.
The fuel you buy for the bus
The interest you earned on your savings before you used them to buy the bus.

CB2005388

Question 600
Flag

The effect of an increase in the Cash Reserve Ratio (CRR) will be reduced/ nullified if:

Bank rate is reduced.
Securities are sold in the open market
Statutory Liquidity Ratio (SLR) is increased
People do not borrow from non-banking institutions.

CB2005624

Question 601
Flag

An increase in the central bank’s target rate of inflation is represented by a

Movement up the Dynamic Aggregate Demand curve
Movement down the Dynamic Aggregate Demand curve.
Rightward shift in the Dynamic Aggregate Demand curve.
Leftward shift in the Dynamic Aggregate Demand curve

CB2005625

Question 602
Flag

According to the Phillips curve, unemployment will return to the natural rate when:

Nominal wages are equal to expected wages
Real wages are back at long-run equilibrium level
Nominal wages are growing faster than inflation
Inflation is higher than growth of nominal wages

CB2005626

Question 603
Flag

If the exchange rate is below the equilibrium level then in a floating exchange rate system:

There is excess demand of domestic currency and the exchange rate should fall.
There is excess supply of foreign currency and the exchange rate should fall
There is excess demand of domestic currency and the exchange rate should rise
There is excess supply of domestic currency and the exchange rate should rise.

CB2006702

Question 604
Flag

A country produces Good $\mathrm{X}$ and Good $\mathrm{Y}$ only. The table gives maximum production possibilities for Goods $X$ and $Y$.
$\begin{array}{|c|c|c|}
\hline \mathbf{Point} & \mathbf{Units \,of \,Good \,X} & \mathbf{Units \,of \,Good \,Y} \\
\hline \mathrm{A} & 0 & 15 \\
\hline \mathrm{B} & 1 & 13 \\
\hline \mathrm{C} & 2 & 10 \\
\hline \mathrm{D} & 3 & 6 \\
\hline \mathrm{E} & 4 & 0 \\
\hline
\end{array}$

Calculate the opportunity cost of increasing the output of Good X from 2 to 3 units.

10 units
6 units
4 units
None of the above

CB2006704

Question 605
Flag

An economy can produce either Good X or Good Y. The opportunity cost of producing an extra unit of Good X is:

the value of the capital and labour used to produce Good X
the number of units of Good Y that must be given up in order to produce an extra unit of Good X.
the cost of producing Good X less the cost of producing Good Y.
the amount of Good X that would have been produced in the following year.

CB2006705

Question 606
Flag

In a free-market economy, allocation decisions are made by:

the government and suppliers only
consumers and suppliers only
consumers, suppliers and the government.
consumers only

CB2006706

Question 607
Flag

Which of the following statements relating to the distinction between a command economy and a free-market economy is/are true?
I. In a free-market economy, the state is free to plan the allocation of resources based on an estimation of people’s wants and needs, the availability of resources and the state’s priorities.
II In a command economy, resource allocation is commanded by the price mechanism, which reflects the wishes of consumers and producers through the forces of supply and demand.
Ill The notion that an increase in demand for a good or service leads to an increase in the price of that good or service is most relevant to a free-market economy.

I only
II only
Ill only
1,ll and lll

CB2006722

Question 608
Flag

Considering the market for bicycles, which of the demand curves for bicycles would shift left in response to the following scenarios:

Consumer incomes increase and some people will buy a mountain bike as well as a racer
Consumer incomes increase and some people may now be able to afford a car and so may no longer need to buy a bicycle.
The price of cars increases and there is increased provision of cycle lanes on busy roads.
People may increasingly believe that cycling is a fun, trendy and healthy thing to do.

CB2006724

Question 609
Flag

If a fall in the price of Good X causes the demand curve for Good Y to shift to the right, then:

Good X and Good Y are complements
Good X and Good Y are substitutes.
Good X is a normal good and Good Y is an inferior good.
Good X is an inferior good and Good Y is a normal good.

CB2006725

Question 610
Flag

lf Good X is an inferior good, then an increase in income will cause a:

rightward shift of the demand curve for Good X.
leftward shift of the demand curve for Good X
movement along the demand curve for Good X from left to right.
movement along the demand curve for Good X from right to left.

CB2006726

Question 611
Flag

Demand and supply conditions in a market are given by the following equations:
$$
\begin{aligned}
& Q_d=1300-4 P \\
& Q_s=100+2 P
\end{aligned}
$$
where $P$ is the price in $\$$.
Calculate the equilibrium price and quantity sold.

500
250
600
800

CB2006728

Question 612
Flag

Which of the following occurs when technological improvements occur, making a good easier to produce?
I a movement along a demand curve
II a shift of the supply curve
III a movement along a supply curve

I and II
II and III
I only
III only

CB2006730

Question 613
Flag

Demand and supply conditions in a market are given by the following equations:
$
\begin{aligned}
& Q_d=200-3 P \\
& Q_s=2 P
\end{aligned}
$
where $P$ is the price in $£$.

Calculate the equilibrium quantity sold.

90
70
80
60

CB2006733

Question 614
Flag

Demand and supply conditions in a market are given by the following equations:
$$
\begin{aligned}
& Q_d=200-3 P \\
& Q_s=2 P
\end{aligned}
$$
where $P$ is the price in $£$.

Calculate the equilibrium price and quantity sold if a tax of £5 per unit is imposed on suppliers.

80
74
60
None of the above

CB2006750

Question 615
Flag

lf at all positive quantities, the upward-sloping supply curve lies above the downward sloping demand curve, then:

the quantity traded will be zero.
the quantity traded will be infinite.
the market mechanism has failed and quantity must be determined by a central agency.
it is impossible to say what quantity will be traded in a free market.

CB2006752

Question 616
Flag

Which of the following situations best represent the following shock on the equilibrium price and quantity sold of cars:

a decrease in consumer’s incomes
a rise in the wages of car workers
a government subsidy for car production.
None of the above

CB2006753

Question 617
Flag

Which of the following situations best represent the following shock on the equilibrium price and quantity sold of cars:

A rise in car insurances premiums
a rise in the wages of car workers
a government subsidy for car production.
None of the above

CB2006755

Question 618
Flag

Which of the following situations best represent the following shock on the equilibrium price and quantity sold of cars:

A rise in car insurances premiums
a rise in the wages of car workers
a government subsidy for car production.
None of the above

CB2006758

Question 619
Flag

Which of the following situations best represent the following shock on the equilibrium price and quantity sold of cars:

A rise in car insurances premiums
a rise in the wages of car workers
a government subsidy for car production.
None of the above

CB2006760

Question 620
Flag

A movement along a demand curve is best described as:

A change in demand
An increase in demand
A decrease in demand
A change in quantity demanded

CB2006762

Question 621
Flag

Which one of the following events would shift the demand curve for Good X to the left?

a decrease in the price of Good X
a decrease in the price of a substitute good
a decrease in the price of a complementary good
an increase in the cost of supplying Good X

CB2006766

Question 622
Flag

Which one of the following will shift the supply curve for Good X to the right?

a decrease in labour productivity in Industry X
a fall in the price of raw materials used to produce Good X
an increase in real wages in Industry X
a government sales tax on the production of Good X

CB2006767

Question 623
Flag

A consumer’s demand curve for Good $\mathrm{X}$ is represented by the equation:
$$
Q d=50-0.2 p
$$
where $Q d$ is the quantity of Good $\mathrm{X}$ demanded and $p$ is the price of Good $\mathrm{X}$.
A producer’s supply curve for Good $\mathrm{X}$ is represented by the equation:
$$
Q s=10+0.6 p
$$
where Qs is the quantity of Good $X$ supplied and $p$ is the price of Good $X$.
Demand and supply are in equilibrium when:

Q is 20 and p is 150
Q is 30 and p is 100
Q is 35 and p is 75
Q is 40 and p is 50

CB2006768

Question 624
Flag

If the price of a substitute good decreases and the cost of production decreases the price:

will fall and the equilibrium quantity may rise or fall.
will fall and the equilibrium quantity will rise.
may rise or fall and the equilibrium quantity may rise or fall.
may rise or fall and the equilibrium quantity will fall.

CB2006771

Question 625
Flag

In the diagram below, points X and Y represent the equilibrium price and quantity traded of a good in two successive time periods.

Which of the following is NOT a possible explanation?

An input in the production process became more expensive.
The price of a close substitute for the good increased
An input in the production process became more expensive and the price of a close substitute increased.
An input in the production process became more expensive and the price of a close substitute decreased.

CB2006864

Question 626
Flag

The price of Good X increases by 5% and the quantity demanded decreases by 10%. Which of the following statements is FALSE?

The price elasticity of demand for Good X is – 2.
Demand for Good X is relatively elastic.
Good X has a downward-sloping demand curve.
Good X is likely to have very few substitutes.

CB2006866

Question 627
Flag

The monthly premium for pet insurance increases from $10 to $12 and the number of policies sold reduces from 800 to 700. Calculate the price elasticity of demand (PED) between these two points (ie arc elasticity) using the original method.

-0.625
0.625
0.548
-0.548

CB2006868

Question 628
Flag

The monthly premium for pet insurance increases from $10 to $12 and the number of policies sold reduces from 800 to 700. Calculate the price elasticity of demand (PED) between these two points (ie arc elasticity) using the average method.

-0.7333
0.7333
0.625
-0.625

CB2006869

Question 629
Flag

Consider the demand equation:
$$
Q D=\frac{1,000,000}{P} .
$$

Calculate the price demanded at a price of 500.

5000
2000
6000
9000

CB2006870

Question 630
Flag

Consider the demand equation:
$$
Q D=\frac{1,000,000}{P} .
$$

Calculate $\frac{d Q D}{d P}$ at a price of 500.

-0.008
0.008
-4
4

CB2006874

Question 631
Flag

The demand curve for car insurance is QD = 1000000 – 250P
Calculate the PED (arc elasticity) when price rises from 500 to 505 using the original method.

-0.1429
0.1429
0.1569
-0.1569

CB2006875

Question 632
Flag

Along a straight-line demand curve which of the following is FALSE?

Demand is perfectly elastic where the quantity demanded is zero.
Demand is unit elastic at the midpoint of the curve.
Elasticity increases as the price falls and the quantity demanded rises
Elasticity decreases as the price falls and the quantity demanded rises.

CB2006876

Question 633
Flag

The price of Good Y increases by 8% and the demand for Good X increases by 10%, calculate the cross-price elasticity of demand (CPED) of Good X with respect to Good Y.

0.8
-0.8
1.25
-1.25

CB2006877

Question 634
Flag

When Peter’s income increases by 10%, his demand for Good A increases by 2%.
Calculate Peter’s income elasticity of demand for good A.

0.2
1.5
-0.5
None of the above

CB2006879

Question 635
Flag

When Peter’s income increases by 10%, , his demand for Good B increases by 15%.
Calculate Peter’s income elasticity of demand for good B.

0.2
1.5
-0.5
None of the above

CB2006880

Question 636
Flag

Which of the following statements is TRUE?

Cross-price elasticity of demand is positive for complementary goods.
Elasticity of supply is zero along a horizontal supply curve.
Price elasticity of demand varies along a straight-line demand curve.
Income elasticity of demand is positive for inferior goods.

CB2006883

Question 637
Flag

Which of the following statements is FALSE?

Uncertainty is a measure of the variability of an outcome.
Risk is when the outcome of an action may or may not occur, but the probability of it occurring is known.
Uncertainty is when an outcome may or may not occur and its probability of occurring is unknown.
A short seller is exposed to the risk that the asset they have short sold will rise in price, leading them to make a loss.

CB2006884

Question 638
Flag

A maximum price (ceiling) set below the free-market price results in:

excess demand and shortages.
excess supply and surpluses.
excess demand and surpluses.
excess supply and shortages.

CB2006885

Question 639
Flag

A maximum price for widgets set above the free-market price will lead to:

a surplus of widgets.
a shortage of widgets.
no effect.
a fall in the supply of widgets.

CB2006886

Question 640
Flag

The market demand and supply functions for Good $\mathrm{X}$ are as follows:
$$
\begin{aligned}
& Q_d=1400-P \\
& Q_s=200+P
\end{aligned}
$$

Calculate the current equilibrium market price and quantity of Good X.

P = 650 and Q = 800
P = 600 and Q = 800
P = 800 and Q = 700
None of the above

CB2006887

Question 641
Flag

The market demand and supply functions for Good $\mathrm{X}$ are as follows:
$$
\begin{aligned}
& Q_d=1400-P \\
& Q_s=200+P
\end{aligned}
$$

Suppose that the government introduces a subsidy of 100 on Good X. Calculate the revised equilibrium market price and quantity.

P = 600 and Q = 800
P = 850 and Q = 550
P = 550 and Q = 850
None of the above

CB2006888

Question 642
Flag

The quantity demanded of Good X falls from 500 units per week to 400 units per week when the price rises from £20 to £21. Calculate the price elasticity of demand for Good X between these two points, ie the arc elasticity.

-4
4
5.8
5

CB2006889

Question 643
Flag

What is the intended effect of an advertising campaign on the demand curve:

Shift the curve to the left and make it more elastic.
Shift the curve to the right and make it more elastic.
Shift the curve to the left and make it more inelastic.
Shift the curve to the right and make it more inelastic.

CB2006890

Question 644
Flag

This question is based on the following three supply curves, where P is price and Q is the quantity supplied.
I P = 2Q
II P=Q
Ill P =O.SQ
Which of the following statements is TRUE?

All three curves have a supply elasticity of 1 at all levels of output.
Only II has a supply elasticity of 1 at all levels of output
None of them ever has a supply elasticity of 1.
All three have a supply elasticity of 1 at only one output level.

CB2006892

Question 645
Flag

If the income elasticity of demand for Good X is 1.5, a 4% increase in consumer income will increase the quantity demanded of Good X by:

2.50%
2.67%
5.50%
6.00%

CB2006895

Question 646
Flag

The total revenue from the sale of a good will fall if:

price rises and demand for the good is price-elastic.
price rises and demand for the good is price-inelastic.
consumer income falls and the good is inferior.
consumer income rises and the good is a normal good.

CB2006896

Question 647
Flag

Good Y has a cross-price elasticity of demand with respect to Good X of 0.5. 100 units of Good Y are demanded when Good X costs dollars 50. Using the ‘original’ formula for cross-price elasticity of demand between two points (ie arc elasticity), a rise in the price of Good X to dollars 75 will lead to a change in the demand for Good Y to:

150 units
125 units
75 units
50 units

CB2006897

Question 648
Flag

The income elasticity of demand for a normal good:

Must be less than 1
Must be greater than 1
Must be positive
Could be anything

CB2006898

Question 649
Flag

Shadow markets are most likely to be associated with:

price ceilings which cause excess demand.
price ceilings which cause excess supply
price floors which cause excess demand.
price floors which cause excess supply.

CB2006899

Question 650
Flag

A price floor set above the market equilibrium price is likely to cause:

excess supply
excess demand.
a decrease in price and a decrease in the quantity traded.
an increase in price and an increase in the quantity traded.

CB2006910

Question 651
Flag

A consumer is considering buying a new car. It will cost £10,000 at the outset, it will last for 10 years, it will cost £500 per year to run and will yield £1,600 of utility each year of its life. Should the consumer buy the car?

Yes, because the car costs £10,000 but will yield £11,000 of benefits over its life.
Yes, because the present value of the car's benefits exceeds the present value of its costs.
No, because the car costs £10,000 now and the benefits are received later
We haven't been given sufficient information to make this decision.

CB2006911

Question 652
Flag

Consider two goods, X and Y. Which of these options illustrates to the shape of a consumer’s indifference curves:

The consumer's preferences satisfy the law of diminishing marginal utility
X and Yare perfect complements, eg left shoe and right shoe.
X and Yare perfect substitutes, eg two brands of the same product that are identical.
The consumer dislikes X, which yields her only disutility.

CB2006914

Question 653
Flag

Consider two goods, X and Y. Which of these options illustrates to the shape of a consumer’s indifference curves:

The consumer's preferences satisfy the law of diminishing marginal utility
X and Yare perfect complements, eg left shoe and right shoe.
X and Yare perfect substitutes, eg two brands of the same product that are identical.
The consumer dislikes X, which yields her only disutility.

CB2006916

Question 654
Flag

Consider two goods, X and Y. Which of these options illustrates to the shape of a consumer’s indifference curves:

The consumer's preferences satisfy the law of diminishing marginal utility
The consumer's preferences satisfy the law of diminishing marginal utility
X and Yare perfect substitutes, eg two brands of the same product that are identical
The consumer dislikes X, which yields her only disutility.

CB2006919

Question 655
Flag

Consider two goods, X and Y. Which of these options illustrates to the shape of a consumer’s indifference curves:

The consumer's preferences satisfy the law of diminishing marginal utility
X and Yare perfect complements, eg left shoe and right shoe.
X and Yare perfect substitutes, eg two brands of the same product that are identical
The consumer dislikes X, which yields her only disutility.

CB2006921

Question 656
Flag

Consider the budget line of a consumer who consumes only two goods, X and Y, with the quantity of Good X represented on the horizontal axis and the quantity of Good Y represented on the vertical axis. If money income is held constant, a rise in the price of Good X and a fall in the price of Good Y will:

shift the entire budget line to the left
shift the entire budget line to the right.
make the budget line steeper.
make the budget line less steep

CB2006922

Question 657
Flag

Which of the following statements is TRUE?

For a good with a price elasticity of demand equal to-1, the substitution and income effects will be equal and will act in opposite directions.
The income effect for an inferior good always acts in the opposite direction to the substitution effect.
The income effect will increase the quantity of a normal good demanded if its price increases.
The substitution effect will increase the quantity of a Giffen good demanded if its price increases

CB2006924

Question 658
Flag

Suppose there are two investment alternatives that an investor can afford, A and B. Investment A will generate a revenue of £1,000 per year for certain and B will generate a revenue of either £500, £1,000 or £1,500 per year with equal probability of one-third. Assuming that the acquisition cost of each investment is equal, which one of the following statements is always TRUE?

A risk-loving investor will choose Investment A.
The expected rate of return for Investment B is lower than for Investment A
A risk-averse investor will choose Investment A.
A risk-neutral investor will choose Investment B.

CB2006925

Question 659
Flag

Which of the following is NOT true about a risk-averse investor?

He or she will reject a fair gamble
He or she will avoid all risk.
The marginal utility of wealth decreases as wealth increases.
The insurance premium can be greater than the long-run average value of claims.

CB2006927

Question 660
Flag

Which of the following is TRUE?

The risk premium is the difference between the expected value of a gamble and the certain payoff of not taking the gamble.
The risk premium is negative for risk-loving people
For risk-averse people, the expected value of a fair gamble is less than the certainty equivalent of the gamble.
The certainty equivalent of the gamble is the initial amount of wealth held.

CB2006929

Question 661
Flag

Behavioural economics differs from traditional economics in all of the following ways except one. Which is the exception?

It uses experiments to test its theories
It assumes that people act rationally.
It is interested in the way in which people behave in groups.
It is concerned with the ways in which people cope with imperfect information.

CB2006931

Question 662
Flag

The law of diminishing marginal utility applied to consumption of Good X implies that the:

more one consumes of Good X, the less utility one derives from the first unit of consumption of Good X.
total utility derived from the consumption of Good X increases by smaller amounts for each extra unit of Good X consumed.
marginal utility derived from the consumption of an extra unit of Good X falls if the price of Good x falls.
marginal utility derived from the consumption of an extra unit of Good X falls if the price of Good X rises.

CB2006933

Question 663
Flag

Which of the following is a measure of total consumer surplus?

Marginal utility minus the price of the good.
The total utility consumers get from the consumption of the good.
The total utility consumers get from consumption of the good less the total expenditure on the good.
Marginal utility times the price of the good.

CB2006934

Question 664
Flag

A change in consumer tastes would change:

the marginal rate of substitution.
the slope of the budget line
the position of the budget line.
none of the above.

CB2006937

Question 665
Flag

Consumer A purchases Good X and Good Y. If Consumer A’s income and the prices of Good X and Good Y double Consumer A’s budget line will:

remain unchanged.
shift to the right but not change slope.
shift to the right and become steeper.
shift to the right and become less steep.

CB2006940

Question 666
Flag

The budget line for a particular consumer is given as:
$$
3 Q_x+2 Q_y=30
$$
where $Q_{\mathrm{x}}$ is the quantity of Good $\mathrm{X}$ and $Q_{\mathrm{Y}}$ is the quantity of Good $\mathrm{Y}$.
Goods $X$ and $Y$ can only be consumed in whole units.
Which of the following is TRUE?

The price of Good X is 2.
The consumption bundle consisting of 3 units of Good X and 10 units of Good Y is on the consumer's budget line.
If the consumer decides to buy as many units as possible of Good X, he will still have enough income left over to buy one unit of Good Y.
A rational consumer will choose a consumption bundle such that his marginal rate of substitution of Good X for Good Y is equal to-1.5.

CB2006941

Question 667
Flag

A Giffen good has an income elasticity of demand that is:

Negative
Positive
Zero
Indeterminate

CB2006942

Question 668
Flag

Which one of the following provides an economic explanation of risk aversion?

The marginal utility of an extra pound of income increases as more income is earned.
There will always be some individuals willing to take risks while others will be unwilling to assume risks regardless of the payoff.
The marginal utility of an extra pound of income decreases as more income is received.
The marginal rate of substitution between winning and risk is constant.

CB2006944

Question 669
Flag

Adverse selection describes the fact that people who know that they are particularly:

bad risks are more inclined to take out insurance than those who know that they are good risks. High premiums should be charged to all policyholders.
good risks are more inclined to take out insurance than those who know that they are bad risks. Appropriate premiums should be charged to all policyholders.
bad risks are more inclined to take out insurance than those who know that they are good risks. Appropriate premiums should be charged to all policyholders.
good risks are more inclined to take out insurance than those who know that they are bad risks. Low premiums should be charged to all policyholders.

CB2007029

Question 670
Flag

Which of the following factors of production are classes as fixed:

A manager employed on a contract requiring one year’s notice of dismissal
A shop floor worker employed on a contract requiring one week’s notice
Electricity
Raw materials

CB2007032

Question 671
Flag

Which of the following statements is FALSE?

The bygones principle states that opportunity costs should be ignored when deciding whether to produce or sell more or less of a product.
Opportunity costs are implicit costs when the firm already owns the factors of production it has used to incur the cost.
The bygones principle states that sunk costs should be ignored when deciding whether to produce or sell more or less of a product
Opportunity costs are explicit costs when the firm has to buy the factors of production from a third party.

CB2007034

Question 672
Flag

The area below the firm’s marginal cost curve represents:

the firm’s total costs
The firm’s total variable costs.
The firm’s fixed costs
The firm’s total profit.

CB2007035

Question 673
Flag

Which of the following is NOT a source of economies of scale?

Indivisible inputs
Multistage production
Industrial relations
The container principle

CB2007037

Question 674
Flag

What is normally regarded as the main reason for diseconomies of scale?

Indivisible inputs
Managerial factors
Increasing pollution
The opportunity cost of production

CB2007040

Question 675
Flag

A monopolist can sell 25 units of output per day for a price of £11.50 each and 26 units of output per day for a price of £11.25 each. The marginal revenue earned from the 26th unit sold is:

£11.50
£11.25
£5
£0.25

CB2007043

Question 676
Flag

If labour is a variable factor, and capital a fixed factor, which of the following statements describes the law of diminishing returns?
I The relative shortage of capital will eventually cause increases in total product to become progressively smaller.
II The cost of the product will eventually rise as increasingly scarce labour forces the wage rate upwards.
III The marginal revenue obtained from each additional unit produced will decline.

I and II
II and III
I only
III only

CB2007044

Question 677
Flag

Which of the following best describes the economic concept of normal profit?

the level of profit a firm makes by setting marginal cost equal to marginal revenue
the level of profit that firms would tend to make under normal conditions of trade
the level of profit needed to persuade a firm to stay in its current business in the long run
the level of profit made by a typical firm in an industry

CB2007048

Question 678
Flag

Which of the following statements is/are TRUE?
I Whether marginal revenue falls or rises with output depends upon the balance of the gain from selling extra units against the loss from reducing the selling price of existing units.
II Whether marginal cost increases or decreases with output depends upon the balance of the gain from the further spreading of fixed costs against the loss from increasing capacity constraints.
III Whether profits increase as output falls depends upon the balance between the gain from a positive level of marginal costs against the loss from a positive level of marginal revenue.

I and II
II and III
I only
III only

CB2007050

Question 679
Flag

A firm’s total fixed costs are $1,200. If at a certain output level, its average costs per unit are $12 and the average variable cost per unit is $8, then the level of output is:

100 units
150 units
300 units
600 units

CB2007051

Question 680
Flag

Which of the following statements relating to physical product of labour curves is/are TRUE?
I A marginal physical product of labour curve initially slopes upwards then downwards because of increasing returns to labour then then diminishing returns to labour.
II The marginal physical product of labour curve intersects with the average physical product of labour curve at its minimum point.
III The total physical product of labour curve cannot slope downwards

I only
II only
I and II only
III only

CB2007053

Question 681
Flag

The short run marginal cost curve will eventually slope upwards because of the law of:

Diminishing marginal utility
Diminishing marginal returns
Increasing marginal utility
Increasing marginal returns

CB2007055

Question 682
Flag

If MC > AC:

AC is rising faster than MC
AC is falling slower than MC
AC is falling
AC is rising

CB2007056

Question 683
Flag

Decreasing returns to scale occur when:

short-run marginal cost exceeds short-run average cost
short-run average cost exceeds short-run marginal cost
long-run marginal cost exceeds long-run average cost.
long-run average cost exceeds long-run marginal cost.

CB2007057

Question 684
Flag

Diminishing marginal productivity:

suggests that the marginal product of labour must eventually become negative.
is relevant in both the long run and the short run
suggests that doubling both labour and capital inputs will lead a less than proportionate increase in output.
suggests that adding additional workers to fixed capital inputs will lead to smaller increases in output.

CB2007058

Question 685
Flag

45
54
63
72

CB2007064

Question 686
Flag

Imperfect competition is the collective name for:

perfect competition and monopolistic competition
perfect competition and monopoly.
oligopoly and monopoly.
oligopoly and monopolistic competition.

CB2007066

Question 687
Flag

Which of the following is NOT an assumption underlying perfect competition?

There is a large number of firms in the industry.
The industry demand curve is horizontal.
Buyers have perfect information.
Firms are free to enter or leave the industry.

CB2007067

Question 688
Flag

The short-run industry supply curve in a perfectly competitive market is the:

vertical sum of the individual firms' average variable cost curves.
horizontal sum of the individual firms' average variable cost curves.
vertical sum of the individual firms' marginal cost curves.
horizontal sum of the individual firms' marginal cost curves.

CB2007068

Question 689
Flag

Which one of the following is NOT a barrier to entry?

the cost to consumers of learning how to use a particular product
low minimum efficient scale
exploiting the benefits of large-scale production
obtaining control over the raw materials

CB2007069

Question 690
Flag

A monopolist in a perfectly contestable market will:
I produce as efficiently as possible and only make normal profits
II keep prices down, but produce supernormal profits
Ill produce as efficiently as possible and make supernormal profits

I and II
II and III
I only
III only

CB2007070

Question 691
Flag

Which of the following CANNOT be true for a profit-maximising monopolist?

Profits are equal to normal profits in the long run.
An economic profit is made in the short run.
An economic loss is made in the short run.
Marginal revenue is negative.

CB2007071

Question 692
Flag

Which one of the following is NOT a feature of monopolistic competition?

Equilibrium price will be equal to marginal cost.
There are no barriers to entry.
Each firm produces a differentiated product.
Only normal profits are made in the long run.

CB2007072

Question 693
Flag

What is oligopoly?

the takeover of many firms
a special form of perfect competition
competition among the few
collusive behaviour

CB2007073

Question 694
Flag

Cartels are best described as:

government regulators pursuing antitrust policies.
formal collusive agreements.
rules of thumb.
small horse-drawn wagons.

CB2007075

Question 695
Flag

‘Once a firm observes that its rival has broken some agreed behaviour it will never co-operate with them ever again.’
This is a description of which type of strategy?

Trigger strategy
dominant strategy
hit and run strategy
maximin strategy

CB2007076

Question 696
Flag

A market in which firms produce differentiated products and enjoy normal profits could be described as:

a monopoly
an oligopoly
monopolistically competitive
perfectly competitive.

CB2007077

Question 697
Flag

An industry has the following characteristics:
• large numbers of buyers and sellers
• slightly differentiated products
• no entry barriers
• supernormal profits made by all firms.
The market conditions of this industry are those of:

perfect competition in the short run
monopolistic competition in the short run.
oligopoly in the short run.
monopolistic competition in the long run.

CB2007078

Question 698
Flag

The market structure in which price is likely to be furthest from marginal cost is known as:

monopoly
perfect competition
oligopoly
monopolistic competition

CB2007079

Question 699
Flag

In the long run, a firm operating under conditions of monopolistic competition will produce at an output at which:

average total cost equals average revenue
average total cost is less than average revenue.
average total cost is at a minimum
marginal cost is equal to average total cost.

CB2007080

Question 700
Flag

Limit pricing describes the strategy under which a monopolist (or oligopolist) charges a price that may be below what level in order to deter new entrants?
I the short-run profit-maximising price
II the minimum average cost for a new entrant
Ill its own minimum average cost

I and II
II and III
I only
III only

CB2007084

Question 701
Flag

Which of the following statements relating to limit pricing is/are TRUE?
I Limit pricing is a pricing strategy where a firm deliberately keeps its prices below its average cost to deter new entrants to the market.
II Limit pricing relies on the existing firm having lower average costs than potential new entrants.
Ill Limit pricing may result in reduced profits in the short run.

I and II only
I, II and III
II and III only
I and III only

CB2007085

Question 702
Flag

A firm that produces a main product and a by-product will maximise profits if it:

decides on the viability of producing the by-product after it has made the decision to produce the main product.
selects the level of output of the by-product where marginal cost of the by-product equals its marginal revenue.
selects the combined output where the combined marginal cost equals the combined marginal revenue.
uses cost-based pricing for the main product and the by-product.

CB2007086

Question 703
Flag

If the marginal social benefit exceeds the marginal social cost then:

an increase in output will increase welfare.
a decrease in output will increase welfare.
welfare cannot be increased.
it is impossible to say what will happen to welfare without further information.

CB2007087

Question 704
Flag

Which of these would NOT be included in the social costs of the petroleum industry?

the cost of treating illnesses caused by car exhaust fumes
surplus profits of oil suppliers during a fuel shortage
the cost of raising capital for investment in oil exploration
traffic hazards caused by transporting inflammable materials in petrol tankers

CB2007088

Question 705
Flag

The principle of non-rivalry applied to public goods means that:

the production of public goods involves increasing marginal costs.
public goods must be financed by income tax
the opportunity cost of provision is a positive and constant value
no extra resources will be consumed when marginal consumption takes place.

CB2007089

Question 706
Flag

The production of a good results in a negative externality. It is likely that there will be an improvement in economic welfare if the government:

gives the producer a subsidy that reflects the marginal benefit derived from the consumption of the good.
gives the producer a subsidy that reflects the marginal cost of the externality.
eliminates any restrictions on output to allow market forces to work
imposes a tax on the producer that reflects the marginal cost of the externality.

CB2007090

Question 707
Flag

Which of the following is NOT an advantage of the free market?

automatic adjustments are made to changes in demand and supply
competition between firms prevents high profits being earned
competition between firms prevents high profits being earned
material incentives encourage risk-taking and innovation

CB2007091

Question 708
Flag

Which of the following is the definition of exploitative abuse?

a business practice that directly harms the customer
a business practice that limits or prevents effective competition from either actual or potential rivals
a practice where two or more firms agree to adopt common practices to restrict competition
a practice where two or more firms secretly agree on the prices they will tender for a contract

CB2007092

Question 709
Flag

Which of the following is NOT an example of an abuse of market power performed by a monopoly?

paying unfairly low prices to suppliers
discriminatory pricing to exclude competitors
predatory pricing to drive competitors out of business
bid rigging

CB2007093

Question 710
Flag

Which of the following is NOT an approach to the environment and sustainability?

the conservationist approach
the Gaia approach
the free-market approach
the green approach

CB2007094

Question 711
Flag

A merit good:

is provided free of charge by the government.
provides benefits that are not fully appreciated by the prospective user.
has strong negative externalities.
cannot be supplied by the market.

CB2007095

Question 712
Flag

In the diagram below, 51 is the supply curve for cigarettes before an indirect tax is imposed and 52 is the supply curve after the indirect tax has been imposed.

The annual revenue collected by the government in taxation is:

BCDK
ACDF
ABKJ
BCDE

CB2007124

Question 713
Flag

Which of these statements is FALSE?

The key accounts are compiled for the three main sectors of the economy (the household sector, the corporate sector and the government sector) and for the nation as a whole.
The three key accounts are: the income account, the capital account and the financial account.
The capital account records the stock of financial assets and liabilities.
Net worth is the market value of a sector's or a country's stock of financial and non- financial assets over its financial liabilities

CB2007125

Question 714
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Which of the following does not constitute investment in the economic sense?

The building of a new factory
The building of a new school
The purchase by Lidl of a supermarket previously owned by Morrisons
The production of stocks which will be sold next year.

CB2007126

Question 715
Flag

Which of the following constitute investment in the economic sense?

The production of stocks which will be sold next year.
Depositing money in a bank account
The purchase of shares from another investor
The purchase of new shares issued by a company

CB2007127

Question 716
Flag

You are given the following national accounting data for Country A:
\begin{array}{lc}
& £ billions \\
Consumers’ \, expenditure \,(excluding \,indirect \,taxes\, and \,subsidies) & 80 \\
Government \,expenditure \,on \,goods \,and \,services & 50 \\
Transfer \,payments & 20 \\
Investment \,expenditure & 30 \\
Import \,expenditure & 40 \\
Exports \,expenditure & 25 \\
Subsidies & 15 \\
Indirect \,taxes & 20 \\
Capital \,depreciation & 5 \\
Net \,income \,from \,abroad & 20
\end{array}

Calculate the gross domestic product (GDP) at basic prices.

145bn
150bn
170bn
165bn

CB2007128

Question 717
Flag

You are given the following national accounting data for Country A:
\begin{array}{lc}
& £ billions \\
Consumers’ \, expenditure \,(excluding \,indirect \,taxes\, and \,subsidies) & 80 \\
Government \,expenditure \,on \,goods \,and \,services & 50 \\
Transfer \,payments & 20 \\
Investment \,expenditure & 30 \\
Import \,expenditure & 40 \\
Exports \,expenditure & 25 \\
Subsidies & 15 \\
Indirect \,taxes & 20 \\
Capital \,depreciation & 5 \\
Net \,income \,from \,abroad & 20
\end{array}

Calculate the gross domestic product (GDP) at market prices.

145bn
150bn
170bn
165bn

CB2007129

Question 718
Flag

You are given the following national accounting data for Country A:
\begin{array}{lc}
& £ billions \\
Consumers’ \, expenditure \,(excluding \,indirect \,taxes\, and \,subsidies) & 80 \\
Government \,expenditure \,on \,goods \,and \,services & 50 \\
Transfer \,payments & 20 \\
Investment \,expenditure & 30 \\
Import \,expenditure & 40 \\
Exports \,expenditure & 25 \\
Subsidies & 15 \\
Indirect \,taxes & 20 \\
Capital \,depreciation & 5 \\
Net \,income \,from \,abroad & 20
\end{array}

Calculate the gross national income (GNY) at market prices.

145bn
150bn
170bn
165bn

CB2007131

Question 719
Flag

You are given the following national accounting data for Country A:
\begin{array}{lc}
& £ billions \\
Consumers’ \, expenditure \,(excluding \,indirect \,taxes\, and \,subsidies) & 80 \\
Government \,expenditure \,on \,goods \,and \,services & 50 \\
Transfer \,payments & 20 \\
Investment \,expenditure & 30 \\
Import \,expenditure & 40 \\
Exports \,expenditure & 25 \\
Subsidies & 15 \\
Indirect \,taxes & 20 \\
Capital \,depreciation & 5 \\
Net \,income \,from \,abroad & 20
\end{array}

Calculate the net national income (NNY) at market prices.

145bn
150bn
170bn
165bn

CB2007132

Question 720
Flag

If a country has negative net income from abroad then

gross domestic product is greater than gross national income
gross domestic product is less than gross national income.
gross domestic product is the same as gross national income.
we cannot say whether gross domestic product differs from gross national income from this information.

CB2007133

Question 721
Flag

Which of the following will result in a decrease in aggregate demand, other things being equal?

a rise in imports
a fall in savings
a fall in interest rates
a fall in economic and business uncertainty

CB2007134

Question 722
Flag

In the short run, a decrease in exports is likely to lead to:

a decrease in the price level and an increase in output
a decrease in the price level and an increase in output
a decrease in the price level and a decrease in output.
an increase in the price level and a decrease in output.

CB2007136

Question 723
Flag

Which of the following is a possible explanation for an increase in the average price level and a decrease in real national income?

an increase in short-run aggregate supply
a decrease in short-run aggregate supply
an increase in aggregate demand
a decrease in aggregate demand

CB2007137

Question 724
Flag

In the circular flow of income model of an economy, which of the following are injections?

investment, government spending and imports
investment, government spending and exports
savings, taxes and imports
investment, consumer spending and exports

CB2007139

Question 725
Flag

To obtain a measure of gross domestic product at market prices from gross value added at basic prices, it is necessary to:

deduct any transfer payments made by the government to households.
add any indirect taxes and deduct subsidies on products.
deduct any indirect taxes and add subsidies on products.
add net income from abroad.

CB2007141

Question 726
Flag

The following table contains output and expenditure data for an economy:
\begin{array}{|l|c|}
\hline & £ billions \\
\hline Consumption \,(at\, market \,prices) & 300 \\
\hline Investment \,(at \,market \,prices) & 90 \\
\hline Government \,spending \,(at \,market \,prices) & 100 \\
\hline Net \,exports \,(at \,market \,prices) & -10 \\
\hline Net \,income \,from \,abroad & 15 \\
\hline Indirect \,taxes & 60 \\
\hline
\end{array}

Gross domestic product at basic prices and gross national income at market prices are respectively:

420 , 495
480, 435
420, 435
480, 495

CB2007142

Question 727
Flag

The following information is extracted from a country’s National Statistical Bureau:

Calculate the gross domestic product at market prices:

480bn
481bn
490bn
None of the above

CB2007143

Question 728
Flag

Assume that the total output of goods and services is held constant and the price level increases. Which of the following observations concerning gross domestic product (GDP) is TRUE?

Nominal GDP rises and real GDP falls
Nominal GDP falls and real GDP rises
Nominal GDP rises and real GDP stays the same.
Nominal GDP stays the same and real GDP rises.

CB2007145

Question 729
Flag

In 2010, the nominal gross domestic product (GDP) per capita is £20,000 and the price index is 100. In 2020, the nominal GDP per capita is £30,000 and the price index is 120. Real GDP per capita for 2020 at 2010 prices is:

£24,000
£25,000.
£36,000
none of the above.

CB2007146

Question 730
Flag

Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left?

a decrease in interest rates
a rise in exchange rates
a rise in government expenditure
an increase in business confidence

CB2007147

Question 731
Flag

The standardised unemployment rate:

Is generally higher than claimant rate.
Is generally lower than claimant rate
Is generally equal to claimant rate
Measures only those in receipt of unemployment benefits.

CB2007148

Question 732
Flag

Which of the following could be a potential source of demand-pull inflation?

an increase in income and corporation tax rates
an increase in imported commodity prices, independent of aggregate demand
an increase in imports
an increase in consumer expenditure

CB2007150

Question 733
Flag

The (original) Phillips curve shows:

a positive relationship between inflation and unemployment.
the influence of supply-side policies on the level of inflation and unemployment.
the influence of monetary policy on the level of inflation and unemployment.
an inverse relationship between inflation and unemployment.

CB2007151

Question 734
Flag

Assertion: Demand-side policies can enable a government to reduce the occurrence and severity of issues such as unemployment and excessive inflation.
Reason: Such policies aim to increase directly the quantity and/or productivity of factors of production.

1 true, 2 true, 2 is a valid explanation to support 1
1 true, 2 true, 2 is NOT a valid explanation to support 1
1 true, 2 false
1 false, 2 true
1 false, 2 false

CB2007152

Question 735
Flag

Which of the following would be LEAST likely to increase the rate of economic growth?

an increase in the availability of land
an increase in marginal rates of taxes
an increase in the provision of nursery education
an increase in investment

CB2007156

Question 736
Flag

One way of reducing the equilibrium (or natural) rate of unemployment would be:

to increase income taxes.
to increase information on job availability
to reduce government expenditure
to increase interest rates.

CB2007157

Question 737
Flag

Which one of the following is NOT a cause of cost-push inflation?

an increase in the price of raw materials
an increase in wages above increases in labour productivity
an increase in profit margins applied by firms
an increase in consumer spending

CB2007159

Question 738
Flag

When a country has a comparative advantage in the production of a good it means that the country:

can produce the good in fewer labour hours than other countries.
has a lower opportunity cost in the production of the good than other countries.
can produce a better quality good than other countries.
uses more technology to produce the good than other countries.

CB2007160

Question 739
Flag

The table below shows the quantities of cars and bicycles that one unit of input can produce in the UK and the USA. Assume that these are the only two goods that the countries produce.

Given the table above, which of the following is true?

The USA is likely to export bicycles to the UK.
The UK has an absolute advantage in the production of bicycles.
The USA has a comparative advantage in the production of bicycles.
The USA has an absolute advantage in the production of bicycles.

CB2007161

Question 740
Flag

Which of the following are barriers to trade designed to protect a nation’s domestic industries?
I $\quad$ tariffs on imports
II $\quad$ restrictions on the amount of goods that the nation can export
III $\quad$ excessive

I and III
I, II and III
I only
III only

CB2007163

Question 741
Flag

Which of the following is NOT a reason to restrict international trade?

To protect infant industries
to reduce reliance on goods with little dynamic potential
to prevent the dumping of goods at artificially low prices
to increase the speed at which outdated industries decline

CB2007164

Question 742
Flag

$P_{\mathrm{x}} / P_{\mathrm{m}}$ is the terms of trade and $M C_{\mathrm{x}} / M C_{\mathrm{m}}$ is the opportunity cost ratio for a country. The country will have maximised the gain from specialisation and trade when:

$\quad P_{\mathrm{x}} / P_{\mathrm{m}}<M C_{\mathrm{x}} / M C_{\mathrm{m}}$
$\quad P_{\mathrm{x}} / P_{\mathrm{m}}>M C_{\mathrm{x}} / M C_{\mathrm{m}}$
$\quad P_{\mathrm{x}} / P_{\mathrm{m}}=M C_{\mathrm{x}} / M C_{\mathrm{m}}$
$\quad P_{\mathrm{x}} / P_{\mathrm{m}}=1$

CB2007165

Question 743
Flag

Following the imposition of a tariff:

the consumer surplus increases, the producer surplus increases and the government surplus increases.
the consumer surplus increases, the producer surplus increases and the government surplus decreases.
the consumer surplus decreases, the producer surplus increases and the government surplus increases.
the consumer surplus decreases, the producer surplus decreases and the government surplus increases.

CB2007168

Question 744
Flag

According to the Classical model, Disequilibrium Unemployment……

Could not persist because wages would fall to eliminate the excess supply of labour.
Could persist for long periods of time because wages are not flexible.
Could be eliminated only through Government intervention.
Could never exist.

CB2007169

Question 745
Flag

Say’s law states that:

Supply creates its own demand.
Demand creates its own supply.
There is no such thing as a free lunch
Macroeconomic policy activism is essential to ensure full-employment.

CB2007170

Question 746
Flag

In the equation C = a + bY, which describes the aggregate consumption function, ‘a’ stands for

The amount of consumption when income is zero.
The marginal propensity to consume.
The amount of consumption when income is Maximum.
The average consumption level.

CB2007171

Question 747
Flag

Assuming there is no foreign sector, if the multiplier is 3, and the net income tax rate is 20%, the MPC is

3/4
4/5
5/6
6/7

CB2007172

Question 748
Flag

If injections are less than withdrawals at the full-employment level of national income, there is

An inflationary gap.
Equilibrium.
A deflationary gap.
Hyperinflation.

CB2007173

Question 749
Flag

Which of the following is likely to result from a rapid rise in aggregate demand?

Increased unemployment
Static living standards
Rising prices.
Surplus on the balance of payments

CB2007174

Question 750
Flag

Consider the following statements with respect to WTO :

I. The current set of governing rules stems from the Geneva Round of GATT negotiations
II. It has its headquarters in Uruguay.
III. It was formed in 1995
IV. Highest Level decision making body is the WTO General Council

Which of the above statements are true?

I & II
III & IV
I,II & IV
All of the above

CB2007175

Question 751
Flag

As per the accelerationist hypothesis of inflation, which of the following statements is FALSE?

A decrease in the aggregate demand in the short run will cause a rightward movement along the expectations -augmented Phillips Curve.
If the actual rate of unemployment is lower than the natural rate of unemployment because the Government has increased the rate of growth of money supply, then the expectations -augmented Phillips Curve will shift downwards.
If inflation is temporarily above its expected level, then unemployment will be below its natural level.
None of the above.

CB2007176

Question 752
Flag

Which of the following best describes the distinction between real GDP and nominal GDP?

Nominal GDP is calculated by deflating real GDP; real GDP is unadjusted for inflation
Nominal GDP is adjusted for changes in prices; real GDP is not adjusted for changes in prices
Nominal GDP is calculated every year; real GDP is calculated only occasionally
Nominal GDP uses current prices; real GDP uses constant prices

CB2007177

Question 753
Flag

Which of the following best describes the relationship between the change in the monetary
base and the change in the money supply that occurs when a central bank buys bonds?

The change in the money supply is equal to the change in the monetary base
The change in the money supply is unrelated to the change in the monetary base
The change in the money supply is greater than the change in the monetary base
The change in the money supply is always less than the change in the monetary base

CB2007178

Question 754
Flag

The natural rate of unemployment in a country is 5%, and the current rate of unemployment is 2%. Also, the consumer price index (CPI) has been increasing rapidly.

Which of the following combinations of monetary and fiscal policy would be appropriate to return this economy to full employment?

Increase Government spending; sell bonds
Decreasing taxes; buy bonds
Increasing taxes; increasing Government spending
Increasing taxes; open market sales

CB2007179

Question 755
Flag

What does the term “crowding out” refer to?

When there is an increase in unemployment, spending on automatic stabilizers increases
When private sector borrowing increases, Government borrowing decreases
When there is a decrease in tax revenue, revenue from automatic stabilizers decrease
When Government borrowing increases, private sector investment spending decreases

CB2007181

Question 756
Flag

The problem of scarcity in economies:

Means there are surplus of some goods
Could be tackled if we produce more goods and services
Exits in command economies
Could be tackled to some extent if full potential output is achieved

CB2007182

Question 757
Flag

Following an increase in the price of flour, there is a 10% increase in price of bread which results in a 5% decrease in total revenue. How would you describe the demand for bread?

The demand for bread is price inelastic
The demand for bread is price elastic
The demand for bread is perfectly price inelastic
The demand for bread is perfectly price elastic

CB2007183

Question 758
Flag

Which of the following is NOT a feature of monopolistic competition?

The firm faces a downward sloping demand curve
The marginal revenue curve (MR) is a straight line that is above the average revenue curve (AR)
Only normal profits are made in long run
A firm can raise its price without losing all its customers

CB2007184

Question 759
Flag

The business cycle is defined as:

the annual cycle of output.
the long run trend path of output after removing short run variations.
the periodic fluctuations of output around the long run trend.
none of the above

CB2007186

Question 760
Flag

Third degree price discrimination refers to the situation where:

I. Consumers are grouped into independent markets and a separate price is charged in each market.
II. The firm charges different prices in foreign and domestic markets
III. The firm charges each customer the maximum price he / she is prepared to pay
IV. The firm offers different pricing options in same market

Option I and IV
Option IV
Option I and II
Option III

CB2007187

Question 761
Flag

Which of the following schools of thought believes that supply – side shocks are a key
influence on economic growth

Classical
New classical
Austrian
Keynesian

CB2007188

Question 762
Flag

Consider two goods X and Y. The shape of a consumer’s indifference curves are convex to
the origin in the following circumstances:

X and Y are perfect complements
X and Y are perfect substitutes
The consumer exhibits higher marginal utility for Y than X
The consumer exhibits diminishing marginal utility for X and Y

CB2007189

Question 763
Flag

A merit good:

Provides benefits that are fully appreciated by user.
Has strong negative externalities
Is rival and excludable.
Cannot be supplied by the market.

CB2007190

Question 764
Flag

Country X has a comparative advantage over country Y in producing a good when:

Country X has a lower opportunity cost of producing the good than country Y
Country X has a lower labour cost of producing the good than country Y
Country X has a lower marginal cost of producing the good than country Y
Country X has a lower absolute cost of producing the good than country Y

CB2007192

Question 765
Flag

If the demand for Good X is price-inelastic and supply for Good X is price-elastic, then the
burden of the sales tax on Good X will be borne by:

Equally by buyers and sellers
More heavily by buyers
More heavily by sellers
By neither buyers and sellers

CB2007193

Question 766
Flag

The kinked demand theory of oligopolists assume that

Relatively elastic demand curve at prices higher than current price
Relatively elastic demand curve at prices lower than current price
One firm in the industry sets price for all other firms
Prices can either rise or fall depends upon on what happens to firm’s competitor’s prices

CB2007214

Question 767
Flag

Characterise the good by taking the following elasticity into account:

I. Price elasticity of demand = – 0.5
II. Income elasticity of demand = – 0.3
III.Cross-price elasticity of demand = -0.6

Price - inelastic, inferior good, complementary good
Price inelastic, normal good, supplementary good
Price inelastic, inferior good, supplementary good
Price inelastic, normal good, complementary good

CB2007215

Question 768
Flag

The demand and supply function of Good A are:
Qd= 40-P
Qs= 2P-20
What is the amount of Producer Surplus when the market is in equilibrium?

200
300
100
150

CB2007216

Question 769
Flag

Which of the following statements below is true?
I. Dumping occurs when exports are sold at prices below marginal cost
II. Dumping is as a result of government promoting free trade
III.Dumping is as a result of restricting subsidy by government
IV.Dumping of subsidised exports is unfair trade practice

I &II
I only
II & III
I & IV

CB2007217

Question 770
Flag

Diminishing marginal utility of income can be represented by a utility curve:
I. Which is upward sloping and concave
II. Which has gradient equal to marginal utility of income
III.Which is downward sloping and concave
IV.Which has gradient equal to total utility of income

I &II
I only
II & III
I & IV

CB2007218

Question 771
Flag

Which of the following statements is false about firms operating in monopolistic
competition?

Produce lower quantities than firms operating in perfect competition
Produce at a higher price than firms in perfect competition
Have excess capacity than firms in perfect competition
Leads to a more allocation of resources than under perfect competition

CB2007219

Question 772
Flag

The price discrimination can occur only if:

The firm faces a downward sloping demand curve
The elasticity of demand remains same between consumers at a given price
The firm can buy in one market and resell at higher price in another market
The firm does not have a degree of market power

CB2007220

Question 773
Flag

The price elasticity of demand for cigarettes is about -0.4. Suppose the current price per
cigarette is 2. The Government is considering taxing cigarettes to reduce smoking. If the
Government wants to reduce smoking by 20% how much should it increase the price?

50%
8%
20%
25%

CB2007221

Question 774
Flag

Which one of the following will shift supply curve of a Good to right?

The opportunity cost of using skilled labors to make Good increases
The Government makes it illegal to use one of the raw materials previously used to make Good
The cost of producing Good increases due to increase in cost of raw materials
A new process is developed such that the amount of electricity needed to produce the Good is reduced

CB2007222

Question 775
Flag

The intended effect of advertising is-

To shift product’s demand curve to right and to make product’s demand price elastic
To shift product’s demand curve to right and to make product’s demand less price elastic
To shift product’s demand curve to left and to make product’s demand price elastic
To shift product’s demand curve to left and to make product’s demand less price elastic

CB2007223

Question 776
Flag

Which of the following are assumptions of marginal costing?
I. All elements of cost can be divided into fixed and variable components
II. Total fixed cost remains constant at all levels of output
III.Total variable costs vary in proportion to volume of output
IV.Per unit selling price remain unchanged at all levels of activity

I and II
I , II and III
II and III
I, II, III and IV

CB2007224

Question 777
Flag

Which of the following is not a feature of the theory of contestable markets?

The prices are determined by threat of competition
Free and costless entry and exit in the market
Firms make supernormal profits
Firms produce efficiently

CB2007225

Question 778
Flag

Economic profit equals:

Total revenue plus opportunity cost
Accounting profit less implicit cost
Accounting profit plus implicit cost
Total revenue less opportunity cost

CB2007226

Question 779
Flag

Which of the following measures protect insurance company against problem associated with
self-selection?

Operating a no claim discount system
Capping the claim amount
Screening
Operating deductible for claims

CB2007227

Question 780
Flag

Which of the following will occur if a tax of 5% is imposed on suppliers?

I. A movement along a demand curve
II. Supply curve shifts to left
III.A movement along a supply curve
IV.Supply curve shifts to right

I and II
I and IV
III only
II only

CB2007237

Question 781
Flag

Which one of the following is not true of kinked demand theory of oligopolies?

The demand curve is relatively elastic above equilibrium price
The demand curve is less elastic below equilibrium price
Marginal cost curve moves within discontinuous section of marginal revenue curve
Marginal cost curve moves within discontinuous section of average revenue curve

CB2007239

Question 782
Flag

What refers to the portion of total deposits of commercial bank which it has to keep with itself
in the form of liquid assets?

CRR
SLR
Bank Rate
Repo Rate

CB2007240

Question 783
Flag

In order to control credit

CRR should be increased and Bank rate should be decreased
CRR should be decreased and Bank Rate should be increased
CRR should be increased and Bank Rate should be increased
CRR should be decreased and Bank Rate should be decreased

CB2007241

Question 784
Flag

The Phillips Curve is a graphical depiction of the

Positive relationship between inflation and output
Negative relationship between inflation and the output
Negative relationship between inflation and unemployment
Negative relationship between unemployment and output

CB2007242

Question 785
Flag

India has run a trade deficit with Japan for some time. To eliminate this gap, it is necessary
for the Rupee to _______ against the yen.

Strengthen
Weaken
Compete
None of the above

CB2007244

Question 786
Flag

What is GDP Deflator?

Nominal GDP – Real GDP
Nominal GDP – Depreciation
Nominal GDP / Real GDP
Real GDP / Nominal GDP

CB2007245

Question 787
Flag

Other things being equal, which one of the following statements is always TRUE?

An appreciation of a country’s exchange rate will increase its import volumes and decrease its export volumes
An appreciation of a country’s exchange rate will increase its import expenditure and decrease its export revenues
A depreciation of country’s exchange rate will decrease its import volumes and decrease its export volumes
A depreciation of a country’s exchange rate will decrease its import expenditure and decrease its export revenues

CB2007246

Question 788
Flag

The following data on the relationship between national income (Y) and consumer expenditure
(C) in a closed economy with no taxes:

Y 500 600 700
C 400 480 560
What is the value of the simple Keynesian multiplier?

0.8
1.25
4
None of the above

CB2007247

Question 789
Flag

One way of reducing the natural level of unemployment would be to increase:

Unemployment benefit
Government consumption expenditure
Information on job availability
The money supply

CB2007248

Question 790
Flag

If an increase in the level of the money supply results in no change in either the nominal or
real value of national income, then which of the following is TRUE?

Interest rates must have risen
The velocity of circulation must have fallen
The price level must have risen by the same proportion as the increase in the money supply
Taxes must have risen

CB2007249

Question 791
Flag

If a country can produce 10 units of product A or 4 units of product B the opportunity cost of
1 unit of B is:

0.4A
10A
2.5A
1B

CB2007250

Question 792
Flag

If an Indian firm wishes to avoid the risk of exchange rate movements, and is due to receive
US Dollars in 90 days, it could-

Purchase US dollars 90 days from now at the spot rate
Enter into a 90-day forward purchase of US dollars for Rupee
Enter into a 90-day forward sale of US dollars for Rupee
Sell US dollars 90 days from now at the spot rate

CB2007251

Question 793
Flag

Which among these is a cost-push Inflation factor?

Increase in public spending
Increased velocity of circulation
Income Tax reduction
Imposition of Indirect Tax

CB2007252

Question 794
Flag

Foreign investment entails __________ change in the capital account of the country making
the investment.

Negative
Positive
No
Uncertain

CB2007253

Question 795
Flag

Consider the following demand and supply curve of a company producing tennis balls:
Qd = 200 – P
Qs = P – 35
Where;
Qd = Quantity demanded
Qs = Quantity supplied
P is the price of tennis ball
What is the equilibrium price of the tennis ball and what happens if the price of tennis ball
rises above that equilibrium price?

Equilibrium Price is 117.5 and if the price rises above equilibrium price then a surplus of supply over demand will arise. This will lead to drop in price which will increase the quantity demanded and reduce the quantity supplied
Equilibrium Price is 82.5 and if the price rises above equilibrium price then a deficit of supply over demand will arise. This will lead to drop in price which will increase the quantity demanded and reduce the quantity supplied.
Equilibrium Price is 117.5 and if the price rises above equilibrium price then a surplus of supply over demand will arise. This will lead to rise in price which will increase the quantity demanded and reduce the quantity supplied.
Equilibrium Price is 82.5 and if the price rises above equilibrium price then a surplus of supply over demand will arise. This will lead to drop in price which will increase the quantity demanded and reduce the quantity supplied.

CB2007254

Question 796
Flag

The price of steel per ton increased from Rs. 100 to Rs. 120 and the quantity demanded (in
tons) reduced from 1000 to 900. What is the Price Elasticity of Demand using ‘average’
method (rounded to two decimal place):

-0.50
-0.58
-0.67
+0.58

CB2007256

Question 797
Flag

The price elasticity of demand and supply for a good is relatively inelastic. Which one of the
following is true if the Government increases the tax rate from 10% to 15%:

Tax revenue of the Government will fall
Tax revenue of the Government will increase
Level of subsidy will increase
None of the above

CB2007258

Question 798
Flag

A Private Equity firm ABC Ltd. is faced with two investment options. Option A can generate revenue to Rs 10 million each year for certain. Option B can generate revenue of Rs 5 million, Rs 10 million or Rs. 20 million with probability of 0.6, 0.1 and 0.3 respectively. Assuming that the initial capital investment for both the option is same, which of the following statement is TRUE?

ABC ltd. is a risk averse if it chooses Option A
ABC ltd. is a risk averse if it chooses Option B
ABC ltd. is a risk loving if it chooses Option A
The expected return of Option A is higher than Option B

CB2007259

Question 799
Flag

Which of the following factors affect the demand for a good:

Consumer Income
Distribution of Income
Number and price of substitute goods
All of the above

CB2007264

Question 800
Flag

Which of the following is a non zero-sum game?

Chess
Prisoner’s Dilemma
Competition among oligopolists
None of the above

CB2007265

Question 801
Flag

Which of the following is an example of strategic behavior?

In order to avoid losing market share firms usually increase their advertising expenditure
A firm adopts the pricing behavior of a dominant firm under the assumption that other firms will do likewise
Excess capacity building is used as a measure to deter competitors from entering the market
All of the above

CB2007266

Question 802
Flag

Which of the following statements is TRUE about perfect competition:

Productive efficiency is achieved in the short run and the long run
Productive efficiency is achieved in the long run but not in the short run
Allocative efficiency is achieved in the short run and the long run
Allocative efficiency is achieved in the long run but not in the short run

CB2007268

Question 803
Flag

The statement that average variable cost equals marginal cost is:

False
Always True
True if marginal cost are constant at all output levels
True if fixed costs are zero

CB2007270

Question 804
Flag

Average physical product (APP) rises as long as

The marginal physical product (MPP) is less than APP
MPP is greater than APP
MPP is equal to APP
Total physical product is rising

CB2007273

Question 805
Flag

Which of the following are assets of a bank?
I cash
II repos
III mortgages

I and II only
I and III only
II and III only
I, II and III

CB2007275

Question 806
Flag

Which of the following are functions of money?
I a means of measuring future payments
II a unit of account
III a means of saving

I and II
I and III
II and III
I, II and III

CB2007277

Question 807
Flag

Which of the following statements is NOT true?

Money can be used to compare the values of shares and bonds.
Only notes and coins are included in the definition of money.
A medium of exchange is anything that is widely acceptable in exchange for goods and services.
In the absence of money, people will barter goods and services.

CB2007278

Question 808
Flag

A bank’s decision to reduce loans and advances to customers and increase its reserve balances at the central bank whilst holdings of other liquid assets are held constant will:

increase the liquidity ratio and increase the maturity gap.
increase the liquidity ratio and decrease the maturity gap.
decrease the liquidity ratio and increase the maturity gap.
decrease the liquidity ratio and decrease the maturity gap.

CB2007279

Question 809
Flag

Which of the following is NOT a tool that the Bank of England uses to provide liquidity insurance for the banking system?

discount window facilities
quantitative easing
contingent term repo facilities
index long-term repos

CB2007280

Question 810
Flag

Which of the following ratios is the ratio of a company’s borrowed capital to shares?

Capital adequacy
Gearing
Liquidity
Net stable funding

CB2007281

Question 811
Flag

Which of the following is NOT one of the main functions of the central bank?

banker to the government
banker to the general public
operates the government's exchange rate policy
issues notes

CB2007282

Question 812
Flag

The Bank of England has a number of functions including operating the government’s monetary policy, providing liquidity to banks and operating the government’s exchange rate policy. Following are either true or false statements:
I The Bank of England’s operational standing facility deposit rate is set above the bank rate to encourage banks to make use of the facility.
II Repo arrangements occur when the Bank of England buys back Treasury bills from the banks before maturity (and therefore at a price below the face value).
III The management of foreign currency reserves is done through the exchange equalisation account.
Which of the statements is/are TRUE?

I only
III only
I and III only
II and III only

CB2007284

Question 813
Flag

Assertion: Securitisation reduces the systemic risk of a banking collapse
Reason: Securitisation enables banks to manage their exposures to default risk (by selling on risky assets) and liquidity risk (by selling illiquid assets for cash).

1 true, 2 true, 2 is a valid explanation to support 1
1 true, 2 true, 2 is NOT a valid explanation to support 1
1 true, 2 false
1 false, 2 true
1 false, 2 false

CB2007312

Question 814
Flag

A coffee shop offers discounts to customers based on their cumulative spend at the shop i.e. customers spending more get a larger discount. This is an example of:

First degree price discrimination
Second degree price discrimination
Third degree price discrimination
Transfer pricing

CB2007314

Question 815
Flag

Which one of the following is an advantage for a country adopting a flexible exchange rate system regime?

It provides certainty for organizations engaged in international trade
It eliminates transaction costs
Monetary policy can be used to manage exchange rate
It reduces the need for central banks to keep reserves of foreign exchange

CB2007316

Question 816
Flag

An insurance contract is considered feasible if:

The insurer is more risk-averse with respect to the insured event than the policyholder.
The insurer is less risk-averse with respect to the insured event than the policyholder.
The insurer is risk-neutral with respect to the insured event
The policyholder is risk-neutral with respect to the insured event

CB2007319

Question 817
Flag

Which of the following is not a possible cause of the depreciation of the currency?

A rise in demand for import
A rise in inflation rate in domestic economy
A rise in domestic interest rate
A rise in investment prospects abroad

CB2007322

Question 818
Flag

Which of the following is an aim of supply side policy

I. To shift the aggregate supply curve upwards
II. To shift the aggregate supply curve to the right
III.To reduce cost push inflation

I & II
I only
II & III
I & III

CB2007324

Question 819
Flag

Which of the following is recorded as a plus in the balance of payments accounts of the country?

A fall in country’s foreign exchange reserves
The purchase of foreign shares by residents of the country
Lending by the country to the rest of the world
A grant to an overseas country for investment

CB2007326

Question 820
Flag

In order to solve the Prisoner’s dilemma type of problem for a firm, which of the following legal restrictions would help:

Ban on advertisement of products
Making collusion illegal for oligopolists
A law that prevents a cartel from enforcing rules against cheating
All of the above

CB2007328

Question 821
Flag

The Government in a country named Newland has proposed to provide subsidy of $5 per unit to producers of Battery Operated Cars, in order to boost the consumption of such cars, thereby reducing the level of pollution

The demand and supply function for Battery Operated Cars is as below:
Qd = 120 – 3P
Qs = ¾ P
Where;
Qd is the quantity demanded
Qs is the quantity supplied
P is the price per car
As a result of above what is the expected cost of the subsidy :

135
120
100
165

CB2007333

Question 822
Flag

Which of the following statement is false?

First degree price discrimination may enable the firm to produce at socially efficient output level
At socially efficient output level , price is lower than marginal cost
At socially efficient output level, tax is equal to marginal external cost
Perfect markets are socially efficient

CB2007335

Question 823
Flag

A Government wishing to increase aggregate demand might use which of the following
measures to increase aggregate demand:

Selling Government securities in open market
Allowing interest rates to fall
Increasing tax on consumer goods
Reducing social security benefits

CB2007337

Question 824
Flag

The only market structure in which there is significant interdependence among the firms with regard to their pricing and output decision is:

Monopoly
Monopolistic Competition
Perfect Competition
Oligopoly

CB2007339

Question 825
Flag

A Phillips curve shows trade-off between:

Higher inflation and lower unemployment
Lower inflation and lower employment
Influence of supply side policy on inflation and unemployment
Influence of fiscal policy on inflation and unemployment

CB2007340

Question 826
Flag

Which of the following statement is true?

Collusion is more likely if:

There are many firms
The firms have similar average costs
All firms are equal in market participation
The firms different production methods

CB2007341

Question 827
Flag

The following table gives country A’s import and export position for following years:

What can be said about country’s terms of trade index?

It has increased by 100%
It has decreased by 100%
It has increased by 200%
It has increased by 20%

CB2007343

Question 828
Flag

The government of Greenland following a policy change has decided to privatize the LPG market and hence had opened the market for private players to produce and sell LPG cylinders to households. The government has decided to put a price ceiling of dollars 10 per LPG cylinder. The equilibrium price through demand and supply for each LPG cylinder however is dollars 12.
Which of this following event could occur following the government decision?

There will be excess supply of LPG cylinders in the market
There will be no demand for LPG cylinders in the market
This could lead to ‘black’ market where the cylinders are sold at more than ceiling price
Both A and C

CB2007344

Question 829
Flag

Following are NOT the determinants of price elasticity of demand:

Availability of substitute goods
Time period
Proportion of income spent
Marginal utility of consumer

CB2007346

Question 830
Flag

A steel manufacturing company has a total fixed cost of Rs. 10000. The average variable cost and average cost per unit at certain level of output is Rs. 20 and Rs. 40, respectively, then what is the level of output:

250 units
500 units
177 units
800 units

CB2007347

Question 831
Flag

Assuming the income elasticity of demand for Good X is 1.75, then a 2% increase in consumer income will increase the quantity demanded of Good X by:

3.5%
4.5%
8%
1%

CB2007349

Question 832
Flag

Which of the following statement is TRUE

Stabilising Speculation is a speculation that increases price fluctuations
A natural monopoly arises when long run average costs would be higher if an industry were under monopoly than if it were shared between two or more competitors.
Risk refers to a situation in which the probabilities of the different possible outcomes are not known.
Speculators use futures and forwards to try and make money based on their expectations of what the actual spot prices are likely to be in the future. They try to make profits by incurring additional risk.

CB2007350

Question 833
Flag

The price of Good X was recently increased from Rs. 10 to 12, following which the demand for the good reduced by 12%. The price elasticity of demand using the ‘original’ method for Good X is

-0.70213
-0.6
-1.67
-0.81818

CB2007351

Question 834
Flag

What does Price Elasticity of Demand (PED) > 1 (in absolute terms) denote:

Increase in price leads to a larger percentage fall in quantity demanded
Increase in price leads to a smaller percentage fall in quantity demanded
Quantity demanded increases without any change in price
Quantity demanded is unchanged with change in price

CB2007352

Question 835
Flag

Which of the following is NOT applicable to collusive oligopoly

Setting output quotas
Agreeing to poach each other's market
Fixing product / services price
Limiting product promotion or development

CB2007353

Question 836
Flag

Company X and Company Y are the only two steel manufacturing companies in Country ABC. Company X has been making its price and output decision on the assumption that Company Y will produce a particular quantity of steel. Such rival behaviour of Company X is an example of:

Cournot Model
Bertrand Model
Nash Equilibrium
None of the above

CB2007354

Question 837
Flag

If firms under perfect competition are making supernormal profit in the short run, then in the long run

No new firms will enter the industry
They will continue to make supernormal profit
There will be government intervention by imposing higher taxes
New firms will enter the industry until firms are making normal profit again.

CB2007357

Question 838
Flag

The firm should continue to produce in the short run provided

Average revenue exceeds average variable cost
Average revenue is equal to average variable cost
Average revenue is equal to average fixed cost
Both (B) and (C)

CB2007358

Question 839
Flag

Causes of Deadweight loss includes

Monopoly pricing
Taxes or subsidies
Price ceilings or floors
All of the above

CB2007360

Question 840
Flag

As a result of an economic policy change interest rates and consumption rise but investment falls. The new policy was:

An expansionary fiscal policy.
An expansionary monetary policy.
A contractionary fiscal policy.
A contractionary monetary policy.

CB2007361

Question 841
Flag

Which one of the following is most likely to be the best method of reducing long term structural unemployment?

Expansionary fiscal policy.
Expansionary monetary policy.
A reduction in trade union powers.
Better education and training.

CB2007364

Question 842
Flag

Which of the following would NOT be included in the current account of a country’s balance of payments?

Property income from abroad.
The purchase of shares in an Indian company by foreign investors.
Interest and dividends paid to the rest of the world.
Exports of services.

CB2007366

Question 843
Flag

According to the accelerator principle investment expenditure will:

Fluctuate more than consumer expenditure.
Rise when the long term rate of interest falls.
Accelerate if business confidence picks up.
Accelerate if the government increases its capital expenditure.

CB2007374

Question 844
Flag

Given the following macroeconomic data:

What is the value of the Gross Domestic Product?

Rs. 150 Cr
Rs. 130 Cr
Rs. 120 Cr
Rs. 110 Cr

CB2007376

Question 845
Flag

The overall money multiplier effect might be smaller than the full bank deposits multiplier because:

Governments are pursuing an expansionary monetary policy.
High rates of interest are discouraging borrowing.
Banks are not holding excess cash reserves.
All proceeds of loans are re-deposited with banks.

CB2007379

Question 846
Flag

TASIA is running a current account surplus. In relation to the rest of the world TASIA’s Liabilities and / or Net assets will:

Increase and increase respectively.
Decrease and increase respectively
Increase and decreasing respectively.
Decrease and decrease respectively.

CB2007383

Question 847
Flag

The Government recently hiked the price of domestic LPG Gas. As a result of which a lot of consumers have switched to Kerosene oil for their domestic cooking. Mention the effect that has resulted in reduced demand for LPG gas.

Income Effect
Substitution effect
Supply effect
Both (A) and (B)

CB2007385

Question 848
Flag

Demand and Supply function for a cotton industry are given by the following equations:
Qd = 300 – 12P
Qs = 6P
Where P is the price in rupees (Rs).
In order to boost the cotton industry recently the Government announced a reduction in taxes imposed on supplier by Rs. 10 per unit. Following this announcement the new equilibrium market price is:

16.66
13.33
20
17.22

CB2007386

Question 849
Flag

The price of Good X was recently increased from Rs. 8 to 10, following which the demand for the good reduced by 6% from its original demand of 100 units of good. The price elasticity of demand using the ‘average’ method for Good X is

-0.27835
-0.24
-0.31915
0.31915

CB2007387

Question 850
Flag

Following goods tend to have negative cross-price elasticity of demand:

Substitute goods
Complimentary goods
Luxury goods
Inferior goods

CB2007388

Question 851
Flag

Following are NOT the possible causes of Diseconomies of scale

The container principle
Co-ordination and communication
Industrial relations
Alienation and poor motivation of workforce

CB2007389

Question 852
Flag

The CEO of a monopoly firm engaged in telecom business is provided with the following information about the company:

Marginal revenue = Rs. 15
Marginal Cost = Rs. 18
Average Cost = Rs 20
Average Revenue = Rs 25
In order to maximize the profit, the firm should:

Reduce price and increase output
Reduce price and reduce output
Increase price and increase output
Increase price and reduce output.

CB2007390

Question 853
Flag

Which of the following statements is FALSE?

Rational decision making for firms involves weighing up the benefits of total revenue against the additional cost of production.
Speculators use futures and forward contracts to try and make money based on their expectation of what the actual spot prices are likely to be in the future.
Stabilising speculation occurs when speculators believe that the price change that has occurred is temporary.
Both (A) and (C)

CB2007391

Question 854
Flag

Profit maximising level for a Cartel is when:

MC > MR
MC = MR
MC < MR
MC > AR

CB2007392

Question 855
Flag

Mr X is an owner of a private equity firm. He is presented with two investment options both of which requires same initial capital investment.
Option 1: This project will generate revenue of Rs 1,00,000 per year for the firm
Option 2: This project can generate revenue of Rs 33,000 or Rs 1,00,000 or Rs 2,00,500 per year with probability of 0.3, 0.5, 0.2 respectively.
Which of the following statements is TRUE:

If Mr X is risk-loving he will chose Option 1
The expected return for Option 2 is lower than Option 1
If Mr X is risk averse he will chose Option 1 over Option 2
If Mr X is risk averse he will chose Option 2 over Option 1

CB2007393

Question 856
Flag

Below data related to a firm is given to you:

What is the supernormal profit at the profit-maximising output?

252
174
243
-504

CB2007394

Question 857
Flag

Following are NOT the key assumptions of long-run average cost curves

Factor prices are given
Firms choose the cost-minimising combination of factors for each output level
Land and labour resources are given
Technology and factor quality are given

CB2007395

Question 858
Flag

In which market structure firms are price takers?

Perfect competition
Oligopoly
Monopoly
Duopoly

CB2007396

Question 859
Flag

The following pay-off matrix shows the profit resulting from various combination of low-price and high-price strategies of two firms, Alpha and Beta respectively:

Considering above, the dominant strategy for each firm, Alpha and Beta would be:

Alpha adopts High Price strategy and Beta adopts Low price strategy
Alpha adopts High Price strategy and Beta adopts High price strategy
Alpha adopts Low Price strategy and Beta adopts High price strategy
Alpha adopts Low Price strategy and Beta adopts Low price strategy

CB2007397

Question 860
Flag

A Cola Company recently ran a huge advertisement campaign for its flagship cola brand, as a result of which it has created huge brand loyalty among the consumers. The effect of this has led to:

Making the product's demand highly price-elastic
Reduced price and reduced demand for cola
Making the product's demand less price-elastic
Increasing the number of perceived substitute goods

CB2007399

Question 861
Flag

In a Country named Freeland the marginal propensity to consume domestically produced goods is 0.7 and the exchange rate of local currency to US dollar is 70. The local currency of Freeland is called Zeta. Socialist Government of Freeland decides to increase the public spending by 100 million Zeta. As per Keynesian analysis, the total change in national income due to the above policy of the Government will be.

70 million Zeta
1 million US Dollar
333.33 million Zeta
142.86 million Zeta

CB2007400

Question 862
Flag

Which of the following is NOT a market-orientated supply-side policy?

Measures to reduce the power of trade unions
Introduction of public-private partnerships
Removal of barriers to trade and capital movements
Provision of infrastructure

CB2007401

Question 863
Flag

Country A has decided to nationalise all banks to safeguard banking industry from increasing Non-Performing Assets. This is an example of

Interventionist supply-side Policy
Market-orientated supply-side Policy.
Merger Policy
Competition Policy

CB2007402

Question 864
Flag

Which of the following could explain why a country’s aggregate demand curve might shift inwards to the left?

An appreciation of the domestic currency
A decrease in interest rates
A rise in Government expenditure
An increase in business confidence

CB2007404

Question 865
Flag

You are given the following data for an economy:

The value of the economy’s Gross National Income at market prices is:

250 million.
260 million.
270 million.
280 million.

CB2007407

Question 866
Flag

The monetary base is increased when:

The central bank prints more money.
The Government buys Treasury bills from the public.
A citizen buys a newly issued corporate bond
A firm obtains an overdraft from a bank.

CB2007408

Question 867
Flag

Which one of the following is most likely to be the best method of reducing long term structural unemployment?

Expansionary fiscal policy.
Increasing the money supply.
A reduction in trade union powers.
Better education and training.

CB2007415

Question 868
Flag

Which of the following does NOT form part of a country’s Gross Domestic Product?

Company profits
Investment expenditure
Net income from abroad
Salaries of Parliamentarians.

CB2007416

Question 869
Flag

In a certain economy in order to correct externalities, Government has decided to introduce a subsidy equal to the marginal external benefit in order to increase production. Which of the below will be true for this Economy.

Marginal Social Cost > Marginal Cost
Marginal Social Cost < Marginal Cost
Marginal Social Benefit < Marginal Benefit
Marginal Social Benefit > Marginal Benefit

CB2007417

Question 870
Flag

In a Country named Greenland, the total population is 200 million. The recent census data shows that there are 126 million actively employed and 15 million people are either out of work or looking for employment. Assuming no other data is available, the unemployment rate (rounded to two decimal place) of Greenland is:

10.64%
7.50%
11.90%
None of the above

CB2007418

Question 871
Flag

Assume two countries, with the same level of technology and resources, do not presently trade. In Country X one unit of labour and one unit of capital can produce 20 units of Computers or 15 units of Bikes. In Country Y one unit of labour and one unit of capital can produce 50 units of Computers or 25 units of Bikes

Which of the following is TRUE?

Country Y has a comparative advantage in the production of Computers.
Country X has an absolute advantage in the production of Bikes
Country X has an absolute advantage in the production of Computers.
Country Y has a comparative advantage in the production of Bikes.

CB2007420

Question 872
Flag

The adoption of a policy to reduce the Government’s budget deficit will involve:

An increase in aggregate demand and a reduction in real output.
An increase in aggregate demand and an increase in real output.
A reduction in aggregate demand and a reduction in real output.
A reduction in aggregate demand and an increase in real output.

CB2007422

Question 873
Flag

The Central Bank conducts an open market sale of bonds equivalent to 20 million. The commercial banks hold reserves equivalent to 5 per cent of their deposits. What is the maximum that the broad money supply may fall as a result of the open market operation? Assume that there is no currency in circulation.

1 million
20 million
200 million
400 million

CB2007427

Question 874
Flag

A company has the following cost function:

Where C represents the total cost and q is the quantity produced. If the company produces at an output level of 20 units, which of the following is correct?

Average cost is 20 and marginal cost is 30
Average cost is 30 and marginal cost is 30
Average cost is 30 and marginal cost is 20
Average cost is 20 and marginal cost is 20

CB2007428

Question 875
Flag

X is a risk averse individual. Which of the following is NOT true about X?

I. He will accept a fair gamble.
II. He will avoid all risk.
III. The marginal utility of wealth decreases as wealth increases.
IV. The insurance premium can be greater than the long-run average value of claims

I
I & II
I & III
III & IV

CB2007430

Question 876
Flag

Consider three supply curves, where P is price and Q is the quantity supplied.
I. P = 5Q
II. P = Q
III. P = 15Q
Which of the following statements is TRUE?

Only option II has supply elasticity of 1 at all levels of output
Supply elasticity of option III is 3 times that of option I
None of them ever has a supply elasticity of 1
All three curves have a supply elasticity of 1 at all levels of output

CB2007431

Question 877
Flag

Consider the following data which shows demand and supply at various prices for a good.
The quantity supplied is reduced by 20 at each level of price.

What is the new equilibrium price?

200
300
400
500

CB2007433

Question 878
Flag

Which of the following is NOT an example of demand-side policy to influence aggregate demand?

Cutting taxes
Increasing government spending
Reducing interest rates
Introducing tax incentives for investment

CB2007435

Question 879
Flag

X decides to move to the city ABC. He has two options- either work in the city of ABC or take up a course in ABC and increase his prospects of better job after one year.
The costs are as follows:

If X works in ABC, he can earn 10,000. If X decides to take up the course, what is the opportunity cost of a year in college?

10,000
12,000
16,000
20,000

CB2007437

Question 880
Flag

Given that a firm’s fixed costs are 2,000, the average total cost of its output is 6 and its average variable cost is 5.50, which one of the following will represent its total output per period?

3800 units
3900 units
4000 units
4100 units

CB2007440

Question 881
Flag

Let $Q=2K^{1/2} L^{1/2} \,$ be the Production function and let $P_{K}=2$ and $P_L=4$ be the prices of factors K and L.
Which of the following is true about the cost minimising combination of K and L?

L=K
2L=K
L=2K
None of the above

CB2007441

Question 882
Flag

Which of the following would give rise to a ‘+’ in the USA’s balance of payments?

The US Federal Reserve Bank increases its gold reserves.
The dollar exchange rate moves from $1.70/£1 to $1.50/£1
A Japanese car manufacturer buys all the shares in a American car manufacturer.
The price of exports rises.

CB2007442

Question 883
Flag

Which of the following has the least impact on the degree of competition in a market?

Number of firms in the industry
Freedom of entry into the industry
Nature of the product
Size of the industry

CB2007443

Question 884
Flag

Which of the following would NOT appear in the UK’s balance of trade?

exports of cars from the UK
spending by UK tourists in Portugal
insurance premiums paid to Lloyds of London by Panamanian ship owners
debt forgiveness by the UK government

CB2007444

Question 885
Flag

Which of the following are collectively known as “imperfect competition”?

Monopoly and Monopolistic competition
Monopoly and Oligopoly
Monopolistic competition and Oligopoly
None of the above

CB2007445

Question 886
Flag

Which of the following does NOT help in collusion?

Small number of firms
Existence of a dominant firm
Barriers to entry
Different production methods

CB2007446

Question 887
Flag

A superstore sells two types of milk; Pasteurised and non-pasteurised. The pasteurised milk is sold at higher price. What type of strategy is this?

Horizontal differentiation
Vertical differentiation
Diversification
None of the above

CB2007447

Question 888
Flag

A firm determines the prices for all of its products collectively (rather than individually) so as to maximise total profits. This is an example of

Inter-temporal pricing
Predatory pricing
Full range pricing
Transfer pricing

CB2007448

Question 889
Flag

In the absence of externalities, which of the following conditions characterises the socially optimal output level?

Marginal revenue = average cost
Average revenue = average cost
Marginal revenue = marginal cost
Average revenue = marginal cost

CB2007449

Question 890
Flag

Which of the following are not the reason why market forces might fail to generate the required technological progress?

R&D free riders
Monopolistic and oligopolistic structures
Diffusion
Duplication

CB2007450

Question 891
Flag

All of the following are features of globalisation EXCEPT which ONE?

Rising trade ratios for countries.
Increased international capital flows.
Improved terms of trade for all countries
Reduced barriers to international factor movements.

CB2007451

Question 892
Flag

The following table contains figures extracted from a country’s balance of payments for 201X:
$\begin{array}{lr}
\text {Exports of economics courses paid for in 201X} & \$ 5 \mathrm{~m} \\
\text {Imports of paper} & \$ 3 \mathrm{~m} \\
\text {Exports of courses on credit (payment due on 30 June 201X+1)} & \$ 1.5 \mathrm{~m} \\
\text {Spending by economics tutors on trips abroad} & \$ 0.3 \mathrm{~m} \\
\text {Spending by economics students visiting the country} & \$ 1.2 \mathrm{~m} \\
\text {Repayment of loan from domestic tuition provider to foreign bank} & \$ 1 \mathrm{~m} \\
\text {Purchases of shares in overseas economics tuition providers} & \$ 0.8 \mathrm{~m} \\
\text {Net errors and omissions item} & \$+0.04 \mathrm{~m}
\end{array}$

Calculate the balance of trade for the country:

4.4m
-3.3m
-4.44m
-1.14m

CB2007452

Question 893
Flag

Supply side policy is designed to

Raise the level of aggregate monetary demand in the economy
Manage the money supply in the economy.
Improve the ability of the economy to produce goods and services.
Reduce unemployment by limiting the supply of labour.

CB2007453

Question 894
Flag

Assume two countries with the same level of technology and resources do not presently trade. In country X one unit of labour and one unit of capital can produce 5 mobiles or 2 laptops. In country Y one unit of labour and one unit of capital can produce 6 mobiles or 4 laptops. Which of the following statements is FALSE?

Country Y has an absolute advantage in the production of both goods
Country Y has a comparative advantage in the production of mobiles
Country X has a comparative advantage in the production of mobiles
Country Y has a comparative advantage in the production of laptops

CB2007455

Question 895
Flag

If the total output of goods and services increases and the price index remains constant nominal Gross Domestic Product (GDP) will:

Rise and real GDP will fall
Stay the same and real GDP will rise
Rise and real GDP will rise
Fall and real GDP will rise

CB2007456

Question 896
Flag

Country X will have a comparative advantage over Country Y in producing Good A when Country X:

Can produce Good A using less labour than Country Y
Has a higher opportunity cost of producing Good A than Country Y
Has a lower opportunity cost of producing Good A than Country Y
Is in a free trade area

CB2007458

Question 897
Flag

All of the following would tend to raise the exchange rate (appreciate) for a country’s currency except one. Which ONE is the EXCEPTION?

A fall in the volume of imports
A rise in foreign investment in the country
A fall in domestic interest rates
A rise in the country’s invisible earnings

CB2007459

Question 898
Flag

Assuming that the economy is not at full capacity, then an increase in injections or a decrease in withdrawals will NOT:

Increase national income (or output) and therefore cause economic growth
Decrease employment
Tend to increase prices and therefore cause inflation (the closer to full capacity, the greater the likelihood)
Increase the demand for imports (as incomes grow) and reduce the demand for exports (as domestic inflation makes exports less competitive), so causing a deterioration in the balance of payments.

CB2007460

Question 899
Flag

The following table contains figures extracted from a country’s balance of payments for 201X:
$\begin{array}{lr}
\text {Exports of economics courses paid for in 201X} & \$ 5 \mathrm{~m} \\
\text {Imports of paper} & \$ 3 \mathrm{~m} \\
\text {Exports of courses on credit (payment due on 30 June 201X+1)} & \$ 1.5 \mathrm{~m} \\
\text {Spending by economics tutors on trips abroad} & \$ 0.3 \mathrm{~m} \\
\text {Spending by economics students visiting the country} & \$ 1.2 \mathrm{~m} \\
\text {Repayment of loan from domestic tuition provider to foreign bank} & \$ 1 \mathrm{~m} \\
\text {Purchases of shares in overseas economics tuition providers} & \$ 0.8 \mathrm{~m} \\
\text {Net errors and omissions item} & \$+0.04 \mathrm{~m}
\end{array}$

Calculate the current account balance for the country.

4.4m
-3.3m
-4.44m
-1.14m

CB2007463

Question 900
Flag

In the circular flow model of the economy, the level of national income will always reach equilibrium because:

Injections and withdrawals are always equal
Withdrawals are a function of the level of income.
Governments will change taxes and expenditure to ensure equilibrium.
Expenditure equals income.

CB2007464

Question 901
Flag

The following table contains figures extracted from a country’s balance of payments for 201X:
$\begin{array}{lr}
\text {Exports of economics courses paid for in 201X} & \$ 5 \mathrm{~m} \\
\text {Imports of paper} & \$ 3 \mathrm{~m} \\
\text {Exports of courses on credit (payment due on 30 June 201X+1)} & \$ 1.5 \mathrm{~m} \\
\text {Spending by economics tutors on trips abroad} & \$ 0.3 \mathrm{~m} \\
\text {Spending by economics students visiting the country} & \$ 1.2 \mathrm{~m} \\
\text {Repayment of loan from domestic tuition provider to foreign bank} & \$ 1 \mathrm{~m} \\
\text {Purchases of shares in overseas economics tuition providers} & \$ 0.8 \mathrm{~m} \\
\text {Net errors and omissions item} & \$+0.04 \mathrm{~m}
\end{array}$

Calculate the financial account balance (investment and other financial flows only) for the country.

4.4m
-3.3m
-4.44m
-1.14m

CB2007465

Question 902
Flag

The deadweight welfare loss is defined as

The loss of consumer and producer surplus in perfect Competition
The loss of consumer and producer surplus under monopoly
The loss of consumer and producer surplus in imperfect markets when compared with perfect competition.
None of the above

CB2007467

Question 903
Flag

The following table contains figures extracted from a country’s balance of payments for 201X:
$\begin{array}{lr}
\text {Exports of economics courses paid for in 201X} & \$ 5 \mathrm{~m} \\
\text {Imports of paper} & \$ 3 \mathrm{~m} \\
\text {Exports of courses on credit (payment due on 30 June 201X+1)} & \$ 1.5 \mathrm{~m} \\
\text {Spending by economics tutors on trips abroad} & \$ 0.3 \mathrm{~m} \\
\text {Spending by economics students visiting the country} & \$ 1.2 \mathrm{~m} \\
\text {Repayment of loan from domestic tuition provider to foreign bank} & \$ 1 \mathrm{~m} \\
\text {Purchases of shares in overseas economics tuition providers} & \$ 0.8 \mathrm{~m} \\
\text {Net errors and omissions item} & \$+0.04 \mathrm{~m}
\end{array}$

Calculate the financial account balance (investment and other financial flows only) for the country.

4.4m
-3.3m
-4.44m
-1.14m

CB2007468

Question 904
Flag

Given the following data on Country A’s balance of payments:

135
60
25
85

CB2007469

Question 905
Flag

Which of the following is most likely to result from the depreciation of a country’s exchange rate?

Exports will become less competitive
Imports will become cheaper.
Inflation will rise
Import volumes will rise.

CB2007470

Question 906
Flag

Which of the following statement is FALSE?

In a free market, firms only consider their private costs and benefits and therefore social efficiency is unlikely to be achieved
If Marginal Social Benefit > Marginal Social Cost , then total welfare will increase by producing more of the product
The free market usually fails to achieve social efficiency
Social efficiency is achieved when Marginal Social Benefit > Marginal Social Cost

CB2007472

Question 907
Flag

All of the following government policies would tend to raise national income over time EXCEPT which ONE?

Increased expenditure on the economic infrastructure.
Tax cuts to encourage higher demand from consumers.
Policies to encourage the training of labour.
Financial incentives to encourage personal and corporate saving.

CB2007473

Question 908
Flag

The following transactions occurred in respect of Country $\mathrm{X}$ ‘s trade with the rest of the world during one year. Figures are given in € 000 s:
– Cars worth € 10,000 were exported.
– Perfume worth € 5,000 was imported.
– Oil worth € 700 was exported.
– Foreign tourists spent € 3,000 in Country X.
– Dividends from overseas companies totalling € 500were received.
– Country $\mathrm{X}$ donated € 1,000 to developing countries for current expenditure.
– Overseas shares and bonds worth € 700 and € 150respectively were purchased.
– Hot money worth € 70 was deposited into Country X.
– Reserves of gold and foreign currency were increased by € 7,600.
– Net errors and omissions were +€ 20.

5700
8700
8200
8380

CB2007475

Question 909
Flag

The following transactions occurred in respect of Country $\mathrm{X}$ ‘s trade with the rest of the world during one year. Figures are given in € 000 s:
– Cars worth € 10,000 were exported.
– Perfume worth € 5,000 was imported.
– Oil worth € 700 was exported.
– Foreign tourists spent € 3,000 in Country X.
– Dividends from overseas companies totalling € 500were received.
– Country $\mathrm{X}$ donated € 1,000 to developing countries for current expenditure.
– Overseas shares and bonds worth € 700 and € 150respectively were purchased.
– Hot money worth € 70 was deposited into Country X.
– Reserves of gold and foreign currency were increased by € 7,600.
– Net errors and omissions were +€ 20.

Assuming that there were no other transactions, calculate (in euro terms) the country’s balance of trade.

5700
8700
8200
8380

CB2007481

Question 910
Flag

The monetary base is £300 billion and the broad money supply is £1,500 billion. Assuming that the money multiplier and the bank deposits multiplier are equal in value, what is the liquidity ratio of the banking system?

5
0.5
0.33
0.2

CB2007483

Question 911
Flag

In which of the following cases, the money supply is likely to be unaffected:

an increase in the public sector deficit financed by borrowing from the non-bank private sector
a decrease in the non-bank private sector's holdings of cash
an increase in the commercial banks' liquidity ratios
the sale of exports paid for in the domestic currency

CB2007486

Question 912
Flag

The opportunity cost of holding money is the:

interest rate on shares and bonds.
interest rate on bank deposits.
inflation rate.
additional return foregone by not holding shares and bonds.

CB2007487

Question 913
Flag

Which of the following approaches would NOT be used by a central bank that wishes to avoid increasing the money supply?

selling government bonds to banks
reducing its willingness to lend to banks
funding government borrowing by selling Treasury bills instead of government bonds
raising the reserve ratio banks are required to hold

CB2007488

Question 914
Flag

Government attempts to increase the monetary base are likely to cause short-term interest rates to:

rise and reduce the quantity of money demanded.
rise and raise the quantity of money demanded
fall and reduce the quantity of money demanded.
fall and raise the quantity of money demanded.

CB2007489

Question 915
Flag

Suppose that a 10,000 increase in monetary base results in a 40,000 increase in M4. If the public hold all their money in bank accounts, then the banks’ reserve ratio is equal to:

0.10
0.175
0.20
0.25

CB2007491

Question 916
Flag

Which of the following statements is NOT true?

The increase in the use of credit cards leads to a decrease in the demand for active money balances.
A switch from predominantly weekly to monthly wage payments leads to an increase in the demand for active money balances
An expectation that the domestic currency is likely to depreciate leads to a decrease in the demand for idle money balances
An expectation that share prices will rise leads to an increase in the demand for idle money balances

CB2007493

Question 917
Flag

Consider an economy where the demand for money balances is interest-elastic and the demand for investment is interest-inelastic. A change in the money supply will result in a relatively:

small change in the rate of interest and the level of investment
large change in the rate of interest and the level of investment.
small change in the rate of interest and a relatively large change in the level of investment.
large change in the rate of interest and a relatively small change in the level of investment.

CB2007495

Question 918
Flag

Funding and minimum reserve requirements are techniques that the monetary authorities of a country can use to expand or contract the money supply. Following are either true or false statements:
I Funding is concerned with the structure of government debt, ie the mix of short-term liquid Treasury bills and long-term illiquid government bonds used to fund a given level of public sector borrowing.
II If the central bank wishes to create credit, it will issue a higher proportion of Treasury bills and a lower proportion of government bonds.
Ill A decrease in the minimum reserve requirement is likely to expand the money supply.

Which of the statements is/are TRUE?

I only
I and II only
II and III only
I, II and III

CB2007497

Question 919
Flag

Prices are most volatile when:

Supply is elastic and demand inelastic.
Supply is inelastic and demand elastic.
Both supply and demand are elastic.
Both supply and demand are inelastic

CB2007498

Question 920
Flag

Which of the following statement is incorrect?

The historic cost of a factor is the amount originally paid for it.
Sunk costs are costs that cannot be recouped.
Payments to the external suppliers of the factors are implicit costs.
For factors already owned by the firm, the opportunity cost of producing a good is the earnings foregone by using the factors to produce this good.

CB2007499

Question 921
Flag

According to classical theory, withdrawals should equal injections because:

the equation of exchange says that prices will adjust so that savings will equal investment.
Say's law says that demand creates its own supply.
a flexible exchange rate ensures that exports equals imports.
none of the above.

CB2007501

Question 922
Flag

A managing director of a monopoly firm is given the following data:

Marginal revenue = Rs. 54
Marginal cost = Rs. 60
Average cost = Rs. 66
Average revenue = Rs. 90
To maximise profits the firm should:

Reduce price and increase output.
Reduce price and reduce output
Increase price and increase output.
Increase price and reduce output.

CB2007502

Question 923
Flag

In the quantity theory of money, which of the following is assumed?

Real output is assumed to be constant and the velocity of circulation of money is assumed to be falling
Real output is assumed to be rising and the velocity of circulation of money is assumed to be constant.
Real output is assumed to be constant and the velocity of circulation of money is assumed to be constant
Real output is assumed to be falling and the velocity of circulation of money is assumed to be rising.

CB2007503

Question 924
Flag

Suppose that the price of an orange and a banana is INR 30 and 15 respectively. If Rahul currently obtains a marginal utility of 6 from his last orange and 4 from his last banana, then he should:

Buy more oranges and fewer bananas.
Buy fewer oranges and fewer bananas.
Buy fewer orange and more bananas.
None of the above.

CB2007506

Question 925
Flag

Following a decrease in the price of printers, there would be:

Movement along the demand curve for printer cartridge from left to right.
Rightward shift of the demand curve for printer cartridge.
Movement along the demand curve for printer cartridge from right to left.
Leftward shift of the demand curve for printer cartridge.

CB2007507

Question 926
Flag

Under the gold standard, a balance of payments deficit would lead to:

an outflow of gold, an increase in the money supply, an increase in prices, a decrease in imports and an increase in exports.
an outflow of gold, a decrease in the money supply, a decrease in prices, a decrease in imports and an increase in exports.
an inflow of gold, an increase in the money supply, an increase in prices, an increase in imports and a decrease in exports.
an inflow of gold, an increase in the money supply, an increase in prices, an increase in imports and a decrease in exports.

CB2007508

Question 927
Flag

Which of the following is an example of moral hazard?

Mr. X who is a bad driver applies for insurance.
A smoker having term insurance policy continues smoking.
A person not installing a smoke alarm because he has fire insurance.
While applying for a health insurance policy a person hides his past health records.

CB2007510

Question 928
Flag

Which of the following statement is incorrect?

When Marginal physical Product starts decreasing, Total Physical product will also decrease.
When Marginal physical Product is greater than Average Physical Product then Average Physical Product is increasing.
Average Physical Product is maximum when Average Physical Product equals Marginal Physical Product.
None of the above

CB2007511

Question 929
Flag

The statement that “average variable costs equals marginal costs” is:

Always true.
Never true.
True if fixed costs are zero.
True if marginal costs are constant at all output levels.

CB2007512

Question 930
Flag

According to the classical view of the labour market, an increase in aggregate demand causes:

an increase in real wages in the long run.
a decrease in real wages in the short run.
no change in real wages in the short run.
a decrease in real wages in the long run.

CB2007514

Question 931
Flag

Competition policy doesn’t focus on:

Diffusion Policy.
Merger Policy.
Monopoly Policy
Restrictive practices Policy.

CB2007516

Question 932
Flag

Which of the following would give rise to a “+” in the India’s balance of payments?

The RBI increases its gold reserves.
A loan made by an Indian bank to an overseas resident.
The price of exports rises.
A French company buying shares of an Indian company.

CB2007517

Question 933
Flag

According to the classical view:

the short-run AS curve is vertical and the long-run AS curve is vertical.
the short-run AS curve slopes upwards and the long-run AS curve slopes upwards.
the short-run AS curve slopes upwards and the long-run AS curve is vertical.
the short-run AS curve is horizontal and the long-run AS curve is vertical.

CB2007519

Question 934
Flag

Which of the following is NOT an advantage of fixed exchange rates?

International trade and investment are less risky
More stable economic conditions, as the government is unable to pursue "irresponsible" macroeconomic policies.
A reduction in speculation on exchange rate movements if everyone believes that exchange rates will not change.
Countries are not tied to the inflation rates of others.

CB2007521

Question 935
Flag

Keynes rejected the classical view that in a recession real wages would fall to clear the labour market because:
I $\quad$ wages are sticky downwards.
II $\quad$ a fall in real wages would decrease consumption and further decrease the demand for labour.
Ill $\quad$ a fall in wages cuts costs, reduces prices and increases export demand.
Which of the above are correct?

I only
I and II only
I , II and III
III only

CB2007522

Question 936
Flag

The table below shows the quantities of X and Y that one unit of input can produce in the Country A and the Country B. Assume that these are the only two goods that the countries produce.

Given the table above, which of the following is true?

The Country B is likely to export X to the Country A.
The Country A has an absolute advantage in the production of X.
The Country B has an absolute advantage in the production of Y.
The Country B has a comparative advantage in the production of X.

CB2007523

Question 937
Flag

Keynesian theory predicts that:

an increase in exports increases unemployment
a decrease in withdrawals increases real national income.
an increase in taxation increases real national income
a decrease in interest rates decreases employment.

CB2007525

Question 938
Flag

Which of the following is NOT a withdrawal from the circular flow of Income?

Investments
Imports
Net Savings
Net Taxes

CB2007526

Question 939
Flag

Which of the following is NOT likely to lead to an increase in investment?

a fall in interest rates
a rise in consumption
a fall in profits
improved confidence in the economy

CB2007529

Question 940
Flag

Country A exports Good X and imports Good Y from Country B. The price of Good X falls by 30 per cent and the price of Good Y rises by 40 per cent. Which of the following statements is correct about Country A’s terms of trade?

It has improved by 100 per cent.
It has improved by 50 per cent.
It has deteriorated by 100 per cent
It has deteriorated by 50 per cent

CB2007530

Question 941
Flag

Equilibrium in the Keynesian model occurs where:
I $\quad$ withdrawals
II $\quad$aggregate demand GDP
III $\quad$$C_d+J=Y$

I and II
II and III
III only
I , II and III

CB2007531

Question 942
Flag

Collusion will be UNLIKELY if:

The firms know each other well
The firms produce similar products
There are no significant barriers to entry
The firms have similar production methods and average costs

CB2007532

Question 943
Flag

Possible motives for growth via vertical integration does not include

Ability to adapt to changing market conditions
More scope to create barriers to entry by new firms
Development of productivity-improving innovations
Greater control over the production process and reduces uncertainty

CB2007534

Question 944
Flag

The multiplier is:
I the ratio of the change in equilibrium output to the original change in injections that caused the change in output.
II the inverse of the marginal propensity to withdraw.
Ill the ratio of aggregate demand to investment demand.

I and II
II and III
I only
III only

CB2007535

Question 945
Flag

Which one of the following is NOT an example of Cartel

Association of tour operators deciding minimum price for services offered by their members
Association of Life Insurers liaising with Regulators on cap on minimum charges
Organization of the Petroleum Exporting Countries (OPEC) setting crude oil production targets for members company
None of the above

CB2007536

Question 946
Flag

Which of these is NOT an example of a vertical strategic alliance?

Outsourcing
Franchise
Licensing agreements
Consortium

CB2007537

Question 947
Flag

Price discrimination will NOT occur if:

The firm faces a downward-sloping demand curve
It is possible to resell the product for a higher price
Different markets have different elasticity of demand
The firms can discriminate between consumers by charging them different prices

CB2007538

Question 948
Flag

The merger of large Property developer and a life insurance company would be an example of a:

Horizontal merger
Vertical merger
Conglomerate merger
Network

CB2007539

Question 949
Flag

The marginal propensity to consume domestically produced goods is 0.8 and the government decides to increase public spending by £100 million. According to Keynesian analysis, what is likely to be the total change in national income resulting from this increased government expenditure?

£80 million
£125 million
£400 million
£500 million

CB2007540

Question 950
Flag

Which of the following is NOT allowed under WTO trade rules

If a trade concession is made to one WTO member it must be given to all members
If a nation benefits from a tariff reduction it should reduce its own tariffs
A country can ask for permission to retaliate against any trade barriers erected against it
A country is allowed to raise existing tariffs without negotiation with their trading partners.

CB2007541

Question 951
Flag

The monetary base is INR 50,000 billion and the broad money supply is INR 200,000 billion. If the public puts all its cash into the banks, what is the liquidity ratio of the banking system?

4
2.5
0.5
0.25

CB2007542

Question 952
Flag

Unemployment and inflation can co-exist because of:
I structural unemployment.
II cost-push inflation.
Ill firms operating with different degrees of slack.

I only
I and II
I and III
I, II and III

CB2007543

Question 953
Flag

Over last one year, Country X is net exporter of the oil. The recent decrease in the price of oil
will have following impact

Increase in Current Account deficit
Appreciation of the domestic currency
Surplus in Balance of payments
None of the above

CB2007544

Question 954
Flag

An increase in injections will:

increase national income, unemployment, inflation and imports.
decrease national income, unemployment, inflation and imports.
increase national income, inflation and imports, and decrease unemployment.
increase national income and inflation and decrease unemployment and imports.

CB2007545

Question 955
Flag

The Phillips curve shows

An inverse relationship between unemployment and inflation
A direct relationship between unemployment and inflation
An inverse relationship between interest rate and inflation
A direct relationship between interest rate and inflation

CB2007546

Question 956
Flag

Which of the following is NOT a function of central bank

Banker to the government
Provider of liquidity to the banks
Operator of the country’s exchange rate policy
Operator of the country’s fiscal policy

CB2007549

Question 957
Flag

Calculate household’s disposable income given the following data

4200
4600
3800
3700

CB2007551

Question 958
Flag

Which of the following is NOT a Public Good

Street lighting
National defence forces
Healthcare
Public fireworks

CB2007554

Question 959
Flag

The demand for X-pencils is 600 units when its price is £4. Assume that as a result of a price fall, the demand for the X-pencils increases to 900 units and the sales revenue decreases by £195

The price of the X after the fall and the price elasticity of demand are, respectively:

2.38 and -1.25
2.45 and -1.33
2.45 and -1.29
2.52 and -1.40

CB2007556

Question 960
Flag

Which of the following is NOT one of the key decisions made in Microeconomics?

What goods and services will be produced and in what quantities?
What resources and production methods are going to be used?
How is the total national income going to be distributed?
For whom should the good be produced

CB2007558

Question 961
Flag

The demand function of a good is
QD = 47 – p
And the supply function is
$QS = p^{2}-25$
Which of the following pairs is the correct equilibrium price and quantity respectively?

6 & 41
7 & 40
8 & 39
9 & 43

CB2007560

Question 962
Flag

Which of the following statements about fixed factor of production is TRUE?
I. Its input level cannot be varied in short run
II. Its input level can only be varied in long run
III. Its input level can be varied in the very long run
IV. Its input level cannot be changed in a day

All of the above
I
I and IV
I, III & IV

CB2007561

Question 963
Flag

Under which type of market the firms will produce at socially optimum level of output?

Perfect competition
Monopoly
Monopolistic competition
Oligopoly

CB2007563

Question 964
Flag

An existing firm deliberately keeps its prices low so as to deter new entrants to the market. This type of pricing is called

Loss leader
Limit pricing
Absorption pricing
Predatory pricing

CB2007564

Question 965
Flag

Which of the following is NOT true about Merit goods?

They confer undervalued private benefits
They confer large external benefits
They are underprovided in a free economy
They are always provided by government

CB2007565

Question 966
Flag

The following diagram shows production for a monopolistic competition.

If a and c represent the areas of triangles ADE and EGH respectively, b and d represent the areas of DEGF and FGIB respectively and e represents the area of GHI, the deadweight welfare loss is

a + c
b + d
c + e
a + d + e

CB2007567

Question 967
Flag

Two large insurance companies operating in a country decide to merge. Which type of merger is this?

Horizontal merger
Vertical merger
Conglomerate merger
None of the above

CB2007568

Question 968
Flag

Which of the following is NOT one of possible choices of product/growth strategy in growth vector matrix?

Market penetration
Market development
Product development
Product promotion

CB2007569

Question 969
Flag

Which of the following is FALSE?

In short run monopolistically competitive firm makes supernormal profits
Monopolists may benefit from economies of scale
Most Oligopolists sell differentiated products
Oligopolists always collude

CB2007571

Question 970
Flag

A firm is in a perfectly competitive market and is facing losses (MC>MR) in the short run. What should it do in order to maximise profits?

Increase output
Reduce output
Increase price
Reduce price

CB2007572

Question 971
Flag

XYZ is a large life insurance company. Its policy administration system is provided by a firm called ABC technologies. XYZ decides to purchase ABC technologies. It is an example of

Horizontal merger
Vertical integration
Strategic alliance
Diversification

CB2007574

Question 972
Flag

In country X, the price paid for entry to museums by foreigners are five times higher than the entry price paid by the citizens of country X. Which type of price discrimination is this?

First degree of price discrimination
Second degree of price discrimination
Third degree of price discrimination
None of the above

CB2007575

Question 973
Flag

Which of the following is FALSE?

Every dominant equilibrium is Nash equilibrium
Cartel is an example of Oligopoly
Advertising aims to shift the demand curve to the right
Cournot model is an example of monopolistic competition

CB2007577

Question 974
Flag

The profit-maximising output will always be where:

Average cost = marginal revenue.
Marginal cost = marginal revenue.
Average cost = average revenue.
Marginal cost = average revenue.

CB2007579

Question 975
Flag

A government may prevent horizontal mergers in an industry because:

By controlling sources of supply, the merged firms can prevent the entry of new firms into the industry
There will be a lack of synergy between the merging companies
The merged firms will be unable to reduce costs
Consumers may suffer if the merged firm achieve market dominant

CB2007580

Question 976
Flag

Starting from equal indices for export and import prices, the index of export prices rises by 10% and the index of import prices rises by 5% over a given period. The terms of trade at the end of the period are:

110.0
105.0
104.8
95.45

CB2007593

Question 977
Flag

Examples of Market-orientated supply-side policies include

I. Tax cuts
II. Privatisation
III. Nationalisation
IV. Assistance to small firms
V. Reducing the power of labour

I, II and III
I, II and V
I, IV and V
I, III and V

CB2007595

Question 978
Flag

In order to finance an excess of expenditure over taxation receipts, a government could:

Reduce its current consumption expenditure
Issue government bonds
Raise direct taxes
Run an overdraft on its account at the World Bank

CB2007596

Question 979
Flag

The recession phase of the trade cycle

Is often caused by excessive consumer expenditure.
Is normally characterised by accelerating inflation
Is most prolonged when the country has high levels of imports.
Is usually caused by falling aggregate monetary demand.

CB2007598

Question 980
Flag

Which of the following is NOT one of the main drivers for the potential globalisation of an industry?

market drivers
government drivers
strategic drivers
cost drivers

CB2007600

Question 981
Flag

Using all the productive resources at its disposal Country A can produce 10,000 units of Good X per year or 12,000 units of Good Y. Country B can produce 7,000 units of Good X per year or 10,000 units of Good Y.

Country A should specialise in the production of Good X and Country B specialise in the production of Good Y
Country A has an absolute advantage in the production of Good X and Y
Country B has a comparative advantage in the production of Good Y
All of the above

CB2007601

Question 982
Flag

Which ONE of the following would lead a country’s balance of payments current account to move towards a surplus?

A rise in commodity imports.
An inflow of foreign capital into the economy.
An increase in foreign tourism into the country.
An increase in government tax receipts.

CB2007602

Question 983
Flag

Given following information, what is the marginal propensity to withdraw (in savings, taxes and imports)?

Y=100, Cd = 0.8Y, J = 20

0.5
0.2
0.8
None of the above

CB2007603

Question 984
Flag

You are given the following data on an economy:

The effect on the current account of the balance of payments of a rise in government expenditure of 30 is

current account balance would deteriorate by 5
current account balance would deteriorate by 6
current account balance would deteriorate by 30
current account balance would deteriorate by 25

CB2007605

Question 985
Flag

If the production of a good involves an external social cost, the appropriate policy for the government is to:

Take the industry into state ownership
Impose an indirect tax on the good
Impose a higher rate tax on the profits of the producers
Provide a subsidy for the consumers of the product

CB2007611

Question 986
Flag

If the demand curves for Good A shifts to the left when the price of Good B rises, we may conclude that:

The goods are substitutes.
Good A is an inferior good.
The goods are complements.
The demand for Good A is price elastic.

CB2007615

Question 987
Flag

According to the accelerator theory, investment expenditure will:

fluctuate more than consumer expenditure.
rise when the long-term rate of interest falls.
accelerate if business confidence picks up.
accelerate if the government increases its capital expenditure.

CB2007617

Question 988
Flag

Which of the following explains the way in which borrowing amplifies the business cycle?

Banks help customers to engage in consumption smoothing by allowing them to borrow against expected future incomes.
Banks are more willing to lend in a boom and less willing to lend in a slump.
A fall in the value of financial and non-financial assets encourages households to increase savings and debt repayments and decrease spending.
An increase in the rate at which income is rising will lead to an increase in investment.

CB2007619

Question 989
Flag

The accelerator effect will not be as great as that predicted by the accelerator theory for all of the following reasons except:

Firms that produce consumer goods will have some slack.
Firms that produce capital goods will have some slack.
Firms might have anticipated a change in demand.
Firms are unable to change their long-term plans.

CB2007621

Question 990
Flag

A recession will tend to come to an end when:

firms are reaching full capacity.
the government adopts contractionary economic policies.
investment falls.
consumer durables and capital equipment need replacing.

CB2007622

Question 991
Flag

The quantity theory of money assumes that the:

velocity of circulation and nominal output are reasonably stable
ratio of the velocity of circulation to the price level is reasonably stable.
ratio of the money supply to the velocity of circulation is reasonably stable.
velocity of circulation and real output are reasonably stable.

CB2007624

Question 992
Flag

Keynes rejected the classical view that people should be encouraged to save to get out of recession because increased savings will:

be channelled into investment.
reduce interest rates and hence the currency.
reduce consumption and hence investment.
improve confidence and increase investment.

CB2007625

Question 993
Flag

Which of the following are indicated by this consumption function?

a diminishing marginal propensity to consume domestically produced goods and services
positive savings and taxes at all income levels
a constant proportion of income being spent on domestically produced goods and services
consumption on domestically produced goods and services being greater than income at some income levels.

CB2007627

Question 994
Flag

Consumption on domestically produced goods and services (Cd) is given by:
Cd =£100m+0.8(Y – T)
where Y = income
T = tax revenue
If both government expenditure and taxes are raised by £10 million each, the equilibrium level of national income will:

remain unchanged
rise by £8 million.
rise by £10 million.
rise by £50 million.

CB2007629

Question 995
Flag

When national income is less than full-employment national income, by how much must aggregate demand be increased to achieve full employment?

the amount by which the equilibrium level of national income falls short of the full employment level
the amount by which injections exceed withdrawals at the full-employment level of output
the amount by which national income exceeds aggregate demand at the full-employment level of national income
the size of the balance of payments deficit at the full-employment level of national income

CB2007630

Question 996
Flag

Which of the following is inconsistent with the co-existence of unemployment and inflation?

structural unemployment
a downward-sloping Phillips curve
a smaller multiplier effect than in an economy with no inflation
a horizontal AS curve

CB2007631

Question 997
Flag

The accelerator principle states that:

investment is increased when interest rates fall.
an increase in investment will lead to a more than proportionate increase in output.
the level of investment expenditure is determined by the rate of change of national income.
investment is increased when interest rates rise.

CB2007632

Question 998
Flag

Which TWO of the following are correct in relation to the role that consumption plays in the business cycle?

Consumption is typically the largest component of aggregate demand, so any changes in consumption are likely to cause a significant shift in aggregate demand and output.
Consumption is always more volatile than disposable income.
Consumption smoothing is limited by the reduced demand for loans by consumers when incomes are high and the economy is in a boom.
Spending patterns on consumer durables can prolong a recession since consumers will wait for a boom before replacement those items.

CB2007633

Question 999
Flag

A liquidity trap occurs when:

An increase in government borrowing diverts funds from the private sector.
There is too much money in circulation
interest rates are at their floor so that any additional money will be held as idle balances.
interest rates are so low that people do not wish to borrow.

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