All economic questions are about:
how to make money
what to produce
how to cope with scarcity
how to satisfy all our wants
Macroeconomics deals with:
the behaviour of firms
economic aggregates
the activities of individual units
the behaviour of the electronics industry
Microeconomics is not concerned with the behaviour of:
aggregate demand
consumers
industries
firms
The study of inflation is part of:
normative economics
macroeconomics
microeconomics
descriptive economics
The word that comes from Greek for "one who manages a household" is:
market
consumer
producer
economy
What are the two major functions of a managerial economist?
decision-making and profit management
decision-making and capital management
decision-making and forward planning
pricing decisions and policies & practices
Which of the following statements about factors of production is false?
The factor of production termed capital means the money which the owners of the firms need in order to set their firms up.
The term "factors of production" is another term for resources
The factor of production termed labour means human resources
The factor of production termed land means natural resources
Which of the following statements about the use of resources is not one of the key questions in economics?
How are resources used?
Where are resources used?
For what are resources used?
For whom are resources used?
What is meant by intermediate goods and services?
The same as capital goods, such as plant, buildings, vehicles, and machinery.
Products which one firm buys off another and then uses up in its own products
All inputs bought by the firms, including labour and raw materials
Imports
What is meant by the term final goods and services?
The same as the term intermediate goods and services
The same as the term consumer goods and services
All goods and services except those traded second hand
Goods and services which are finished as far as the economy is concerned
Which of the following statements is true?
Microeconomics is concerned with the economy as a whole
Macroeconomics is concerned with individual markets
Governments have no influence over market prices
When economists study the price in a market, their chief aims are to understand why the price is what it is and why it might change
Which of the following types of economy describes the economy of the UK?
A command economy
A market economy
A mixed economy
A planned economy
The supply and demand model applies when three of the following four conditions are met. Which condition is not required?
There must be many buyers
There must be many sellers
The buyers and sellers must trade an identical item
The item traded must be a product
Suppose a market is in equilibrium, and then the demand increases. Which of the following would be shown on a graph that illustrated the effects?
An excess demand at the initial equilibrium price.
An excess demand at the new equilibrium price.
An excess supply at the initial equilibrium price.
An excess supply at the new equilibrium price.
Suppose there is excess supply in a market and the price decreases. Which of the following combinations of events will occur?
There will be a fall in quantity supplied and a rise in quantity demanded.
There will be a fall in quantity supplied and a rise in demand.
There will be a fall in supply and a rise in quantity demanded.
There will be a fall in supply and a rise in demand.
Suppose there is a decrease in supply in a market where the supply curve slopes upwards and the demand curve slopes downwards. Which of the following would not occur?
An excess supply
A fall in price
A fall in supply
A fall in the equilibrium level of expenditure
Which of the following statements is false?
Price elasticity of demand is negative for most products
Price elasticity of supply is positive for most products
Income elasticity of demand is positive for normal goods
Cross elasticity of demand is positive between complements
If the demand curve shifts to the right, then we move up and to the right along our supply curve.
According to the Law of Demand, the demand curve for a good will
shift leftward when the price of a good increases
shift rightward when the price of a good increases
slope downward
slope upward
If government regulations prohibit the production of a particular good, the demand curve for that good will most likely...
shift leftward
shift rightward
remain unchanged
disappear
Suppose there are 100 identical firms in the rag industry, and each firm is willing to supply 10 rags at any price. The market supply curve will be a...
vertical line where Q = 10
vertical line where Q = 100
vertical line where Q = 1000
horizontal line where Q = 1000
Equilibrium is defined as a situation in which:
neither buyers or sellers want to change their behaviour
no government regulations exist
demand curves are perfectly horizontal
suppliers will supply any amount that buyers want to buy
A competitive equilibrium is described by
a price only
a quantity only
the excess supply minus the excess demand
a price and a quantity
When two goods are substitutes, a shock that raises the price of one good causes the price of the other good to...
decrease
increase
change in an unpredictable manner
The percentage change in the quantity demanded in response to a percentage change in the price is known as the:
slope of the demand curve
excess demand
price elasticity of demand
None of the examples
If the price elasticity of demand for a good is less than one in absolute terms, we say consumers of this good...
are not very sensitive to price
are not very sensitive to the quantity they demand
are very sensitive to price
are elastic
A market is considered imperfectly competitive whenever...
the government intervenes to set a price floor
supply and demand explain how prices are determined
a single buyer or seller has the power to affect the price of the product
supply and demand fail to establish an equilibrium
In a market system, prices are determined by:
Government bureaucrats
Supply and demand
Total market demand
Production costs
If buyers expect the price of a good to rise in the future, the result is...
a decrease in supply today
an increase in supply today
an increase in quantity demanded today
an increase in demand today
If the cross-price elasticity of demand between two goods is negative, then...
the two goods are complements
the two goods are substitutes
one of the goods must be inferior
the two goods are rarely used together by consumers
If the price elasticity of demand for a good is 0.75 , the demand for that good can be described as:
Normal
Elastic
Inferior
Inelastic
If the income elasticity of demand for a good is negative, then the good is:
a normal good
an inferior good
a luxury good
a Giffen good
What kind of relationship exists between the price of a good and demand of its complementary good?
Direct
Inverse
No effect
Can be direct or inverse
Law of Demand does not hold in case of:
Emergency
Expectation of price rise
Conspicuous goods
All of the answers
If value of Es < 1, it is called:
Elastic supply
Inelastic supply
Perfectly elastic supply
Perfectly inelastic supply
In the short-run, which of the following always gets smaller as output increases?
Average fixed cost
Average variable cost
Short-run average cost
Short-run marginal cost
Which of the following statements about a profit-maximising firm is false?
It might set its daily output at a higher level in the short-run than in the long-run.
It might set its daily output at a lower level in the short-run than in the long-run.
If it had a daily output of zero in the short-run, it would be sure to have a total cost of zero.
If it had a daily output of zero in the long-run, it would be sure to have a total cost of zero.
Implicit costs are:
equal to total fixed costs
comprised entirely of variable costs
"payments" for self-employed resource
always greater in the short-run than in the long-run
If a firm's revenues just cover all its opportunity costs, then;
normal profit is zero
economic profit is zero
total revenues equal its explicit costs
total revenues equal its implicit costs
The short-run is a time period in which...
all resources are fixed
the level of output is fixed
the size of the production plant is variable
some resources are fixed and others are variable
The law of diminishing returns only applies in cases where:
There is increasing scarcity of factors of production
The price of extra units of a factor is increasing
There is at least one fixed factor of production
Capital is a variable input
Variable costs are:
sunk costs
multiplied by fixed costs
costs that change with the level of production
defined as the change in total cost resulting from the production of an additional unit of output
If the short-run average variable costs of production for a firm are rising, then this indicates that:
average total costs are at a maximum
average fixed costs are constant
marginal costs are above average variable costs
average variable costs are below average fixed costs
When a firm doubles its inputs and finds that its output has more than doubled, this is known as:
economies of scale
constant returns to scale
diseconomies of scale
a violation of the law of diminishing returns
Economies and diseconomies of scale explain why the:
short-run average fixed cost curve declines so long as output increases
marginal cost curve must intersect the minimum point of the firm's average total cost curve
long-run average total cost curve is typically U-shaped
short-run average variable cost curve is U-shaped
The law of diminishing returns states that:
as a firm uses more of a variable resource, given the quantity of fixed resources, the average product of the firm will increase
as a firm uses more of a variable resource, given the quantity of fixed resources, marginal product of the firm will eventually decrease
in the short-run, the average total costs of the firm will eventually diminish
in the long-run, the average total costs of the firm will eventually diminish
Opportunity costs arise in production because:
resources are unlimited
resources must be shifted away from producing one good in order to produce another
wants are limited in a society
monetary costs of inputs usually outweigh non-monetary costs
Costs which increase with an increase in output are called:
Fixed costs
Changeable costs
Variable costs
Unchangeable costs
Costs which do not increase with an increase in output are called:
Marginal cost is:
The addition to cost associated with one additional unit of output
The per unit cost of production
The per unit variable cost of production
The per unit fixed cost of production
