Quiz
Economics Unit-1 (Jan10/Jun 11/Jan 11/Jun12/Jan12)
Questions in this quiz (74)
1Which one of the following is a positive economic statement?
- AResources are best allocated via the market mechanism
- BGovernment spending on health care should be increased.
- CAn increase in interest rates will reduce house prices.
- DPollution is the most serious of all economic problems.
2two products are in joint supply when
- Aa fall in the output of one product is accompanied by a decrease in the output of the other products.
- Ban increase in the demand for one product reduces the supply of the other products.
- Ca rise in the quantity supplied of one product reduces the supply of the other product.
- Da fall in the price of one product reduces the cost of supplying the other product.
3Government failure always occurs when
- Agovernment intervention leads to a net welfare loss compared to the free market solution.
- Bsocial costs in a market are greater than social benefits.
- Cthe government fails to intervene in the market.
- Dexternalities exist in a market.
4the marketing department of a company manufacturing and selling washing machines has found that its product has a price elasticity of demand equal to -0.75. This suggests that if the company raises the price of washing machines
- Athe quantity demanded will fall by 75%.
- Bthe amount consumers spend on the product will increase.
- Cthe quantity demanded will increase by 75%.
- Dthe amount consumers spend on the product will fall.
5 A market is defined as being in equilibrium when
- Athere is maximum output at minimum cost.
- Bprices are at their lowest possible level.
- Cthere is no tendency for the market price to change.
- Dconsumer satisfaction is maximised.
6The abolition of betting tax led to an estimated 37% increase in sales during the last quarter at Stanley's, a chain of betting shops. Betting tax was an indirect tax on each bet placed by customers. The abolition pf betting tax can be shown by the
- Asupply curve of bets shifting to the left.
- Bsupply curve of bets shifting to the right.
- Cdemand curve for bets shifting to the left.
- Ddemand curve for bets shifting to the right.
7a government grants producers a subsidy for a product. Which one of the following is likely to result in the largest increase in its sales?
- Asupply is price elastic
- Bsupply is price inelastic
- Cdemand is price inelastic
- Ddemand is price elastic
8For monopoly to persist over time in a market, it is most likely that
- Athe good produced is a necessity
- Bthe firm is charging high prices
- Cthere are barriers to entry
- Dthe firm is productively efficient
9An economic good is one which
- Ahas an opportunity cost in production
- Bdoes not use up resources
- Cis supplied competitively
- Dmakes a profit
10When money is used as a medium of exchange
- Abarter or swapping of goods is likely to become more common
- Btrade is likely to increase
- Cthe relative prices of goods never change
- Dspecialization and the division of labour are made more difficult
11Which one of the following is most likely to lead to greater labour productivity in an industry?
- Aan increase in market demand
- Ba fall in wages
- Can increase in the number of firms in the industry
- Dan increase in capital investment
12Assuming the price elasticity of demand for a product is zero, any tax placed on the product will
- Aleave the position of the supply curve unchanged
- Bbe paid entirely by the producer
- Cshift the demand curve to the left
- Draise the price of the product by the full amount of the tax
13Market failure arises when
- Aprices rise in response to excess demand.
- Bpositive externalities exist in consumption
- Cfirms make zero profits
- Dcosts increases as firms expand production.
14Cross elasticity of demand is defined as the
- Aresponsiveness of the price of one good to a change in demand for another.
- Bresponsiveness of demand for one good to a change in demand for another
- Cresponsiveness of demand for one good to a change in the price of another
- Dresponsiveness of the price of one good to a change in the price of another
15Merit goods are likely to be under-provided in a free market economy because their
- Aprivate benefits exceeds their social benefits
- Bsocial benefits exceed their social costs.
- Cprivate costs exceed their private benefits.
- Dsocial benefits exceed their private benefits.
16The central purpose of economic activity is
- Ato create maximum profit.
- Bthe satisfaction of needs and wants.
- Cto achieve economic efficiency.
- Dto save scarce resources.
17To calculate the percentage change in the quantity supplied of a good following a change in its price, the price elasticity of supply should be
- Adivided by the percentage change in price.
- Bdivided by the percentage change in quantity.
- Cmultiplied by the percentage change in price.
- Dmultiplied by the percentage change in quantity.
18An economy in which average incomes have fallen by 5% has also seen the demand for holidays overseas fall by 20%. It can be concluded from this that the income elasticity of demand for holidays overseas is
- A+ 4.0
- B– 4.0
- C+ 0.25
- D– 0.25
19A monopoly market will be less economically efficient than a competitive market if, under monopoly,
- Athe market demand curve is inelastic.
- Bthe main objective of the firm is maximum profit.
- Cthere are both economies of scale and diseconomies of scale.
- Dprices are higher and output is lower.
20An economy is always productively efficient if it
- Acontinually increases its average standard of living.
- Bmaximises investment in capital goods.
- Cis operating with full employment of labour.
- Dcan produce more of one good only by producing less of another.
21The equilibrium price in a market
- Ais the market-clearing price.
- Bchanges when demand equals supply.
- Calways increases when demand rises.
- Dis the balance of excess demand and excess supply.
22Which one of the following would be classified by an economist under the factor of production known as land?
- AA tractor
- BChemical fertiliser
- CFish in the ocean
- DA farmer
23Government failure may result directly from
- Athe high cost of administering government policy.
- Bunderconsumption of merit goods by the public.
- Ca failure of market prices to reflect social costs.
- Dgoods being provided through the market mechanism.
24Which one of the following is an example of composite demand?
- AThe demand for labour increases as the demand for the good which that labour produces
increases. - BThe demand for petrol increases because car travel increases in popularity.
- CThe demand for strawberries increases following a series of price reductions.
- DThe demand for bricks increases for use in both house building and factory building.
- AThe demand for labour increases as the demand for the good which that labour produces
25Positive externalities exist when
- Aproduction creates private benefits.
- Bprivate benefits are less than social benefits.
- Cprivate benefits are greater than private costs.
- Dsocial costs exceed private costs.
26Market failure arises whenever firms
- Amake a loss.
- Breplace machines with workers.
- Ccreate externalities.
- Dreduce expenditure on research and development.
27All other things being equal, supply curves slope upwards from left to right because
- Ahigher prices lead to higher costs.
- Blower prices lead to higher output.
- Clower prices lead to higher demand.
- Dhigher prices lead to higher profits.
28One reason why UK governments provide education is because
- Athe private benefit from education is less than the social benefit.
- Beducation cannot be provided by the free market.
- Call education is both a merit good and a public good.
- Dthis ensures that the provision of education is maximised.
29An increase in the price of petrol will often result in consumers economising in their use of fuel by reducing the number of journeys they make in their cars. This
- Ais because petrol and car journeys are in joint supply.
- Bshows that there is a positive cross elasticity of demand between the price of petrol and
the demand for car journeys. - Cillustrates the operation of the rationing function of the price mechanism.
- Dis because the price elasticity of demand for petrol is positive.
30A firm will always reduce its unit cost of production as it expands its output if it
- Abenefits from specialisation.
- Breduces its price.
- Cmoves down the economy’s production possibility frontier.
- Dexpands its use of capital and labour.
31Market failure results in a misallocation of resources. In some cases, this can be corrected by the government
- Arestricting the manufacture of goods that generate positive externalities.
- Bproviding public goods.
- Csubsidising all loss-making firms.
- Dplacing a tax on merit goods.
32Which one of the following is classified as an economic resource?
- AConsumption
- BProductivity
- CProduction
- DEnterprise
33‘OPEC is expected to cut output of crude oil by more than 1 million barrels per day when it
meets in Vienna this week. The cut is intended to maintain the high world price for oil.’
Source: news reports, 2008
All other things being equal, if output of crude oil was cut in a such a way, which one of the following would happen in the world market for crude oil? There would be a- Amovement along the supply curve
- Bshift to the right of the supply curve
- Cmovement along the demand curve.
- Dshift to the left of the demand curve.
34Price elasticity of supply measures the responsiveness of the quantity supplied to a change in
- Ademand
- Bprice
- Ccosts of production
- Dthe size of firms
35Complete market failure always exists when
- Athere are negative externalities in production.
- Bthe free market fails to provide sufficient merit goods
- Cthe free market underprices demerit goods
- Dthere is a missing market in the provision of public goods
36Specialisation requires the existence of
- Aeconomies of scale.
- Beconomic efficiency
- Ca system of exchange
- Drising productivity
37In an economy, some industries are dominated by a few large firms. Which one of the following is most likely to explain this situation?
In the economy- Asmall producers are likely to suffer from diseconomies of scale
- Bas industries increase their output, firms are likely to be able to charge a higher price for
their products - Cas firms increase their size, the employment of specialist managers may result in a fall in
the average cost of running a business - Dsmall firms find it hard to compete because, as firms increase their output, the rise in
employment is likely to reduce labour productivity.
38Which one of the following situations would lead to an increase in equilibrium price?
- ADemand is perfectly inelastic and labour costs rise
- BDemand is perfectly elastic and labour costs rise
- CSupply is perfectly elastic and the price of a substitute good falls
- DDemand is perfectly inelastic and labour costs fall
39Which one of the following measures of elasticity indicates that two goods are substitutes?
- AA negative income elasticity of demand
- BA positive price elasticity of demand
- CA positive cross elasticity of demand
- DA negative price elasticity of demand
40The income elasticity of demand for a good is −3. Which one of the following statements is correct?
- AA 20% increase in income leads to a 60% fall in quantity demanded.
- BA 10% increase in price leads to a 30% fall in quantity demanded.
- CThe good is a normal good
- DDemand for the good is income inelastic
41‘Electricity suppliers are required to buy a growing amount of electricity from renewable energy generators. Green energy generators are paid more for their electricity because there is a scarcity of supply of electricity generated from renewable resources.’
It can be deduced from the data above that- Athe government pays a subsidy to generators of renewable energy.
- Bthe social cost of electricity generated from renewable resources is greater than the
private cost. - Cthe government is subsidising the negative externalities arising from the generation of
‘green energy’ - Delectricity suppliers are paying higher average prices for their electricity because some of
the electricity is generated from ‘green sources'.
42Government intervention to correct market failure may make the situation worse because
- Athe information needed to make sound economic decisions is widely dispersed amongst
individuals and firms. - Bthe government is unable to provide private goods since they are both rival and
excludable. - Cpositive externalities resulting from the consumption of merit goods means that they will
be underprovided by the state - Dcompetition amongst firms in the private sector will inevitably result in an optimum
allocation of resources
- Athe information needed to make sound economic decisions is widely dispersed amongst
43Government intervention to correct market failure may make the situation worse because
- Athe information needed to make sound economic decisions is widely dispersed amongst
individuals and firms. - Bthe government is unable to provide private goods since they are both rival and
excludable. - Cpositive externalities resulting from the consumption of merit goods means that they will
be underprovided by the state - Dcompetition amongst firms in the private sector will inevitably result in an optimum
allocation of resources
- Athe information needed to make sound economic decisions is widely dispersed amongst
44A positive statement in economics is always
- Acapable of being tested
- Bbased upon an opinion.
- Cbased upon numerical data
- Dcorrect
45 Government provision of a merit good can be justified because
- Awithout government intervention there would be a missing market.
- Bmerit goods are non-rival and non-excludable
- Cwithout government intervention partial market failure would result
- Dthe provision of merit goods has an opportunity cost
46At all points on a country’s production possibility frontier
- Aall firms are benefiting from economies of scale
- Bproductive efficiency is achieved
- Ceach point is equally socially desirable because output is at its maximum
- Dthere is an equal distribution of income in the economy
47A good is excludable if
- Ait is possible to prevent someone from enjoying its benefits.
- Bit is supplied by the government rather than through the free market.
- Cone person’s use has no effect on the quantity available for someone else.
- Dit is supplied at a zero price.
48In a typical demand schedule, quantity demanded
- Avaries directly with price.
- Bvaries proportionately with price.
- C is determined by the elasticity of demand.
- D varies inversely with price.
49Which one of the following is a normative statement?
- AEconomic theory assumes that firms will maximise profits
- BLabour is the human contribution to production
- CProducers and consumers may have to consider opportunity cost when making
decisions. - DGovernments must intervene in markets
50The essential feature of an inferior good is that its
- Aprice elasticity of demand is positive.
- Bincome elasticity of demand is positive
- Cprice elasticity of demand is negative.
- Dincome elasticity of demand is negative
51The use of money as a medium of exchange enables an economy to
- Aoperate outside its production possibility boundary.
- Bincrease production of public goods.
- Cprevent market failure.
- Dbenefit from specialisation and the division of labour.
52An industry’s supply curve is more likely to be price elastic in the short term if
- Athe industry uses scarce factor inputs.
- Bits firms are operating below their full capacity.
- Cits firms hold relatively low levels of stock.
- Dthere are many substitutes for its output.
53Left to the free market, Good X would not be produced at all. Yet the production and consumption of at least some of Good X increases the welfare of society. The government therefore has an incentive to intervene to ensure its provision. Good X is most likely to be a
- Apublic good.
- Bfree good.
- Cmerit good.
- Ddemerit good.
54An indirect tax on the production of a good will have no effect on price if demand is
- Ainversely related to price.
- Bof unitary elasticity
- Cperfectly elastic
- Dperfectly inelastic
55If increased economies of scale are experienced by firms in an industry, this is likely to result in
- Aa competitive market replacing a monopoly.
- Brising unit costs of production.
- Cthe demand curve for the good shifting to the right.
- Dthe supply curve of the good shifting to the right.
56The government was recently advised that a 40% increase in the price of beer would reduce beer consumption by the rich by 6% and beer consumption by the poor by 20%. It can be concluded from this that
- Ademand for beer is price inelastic for both rich and poor.
- Bfor the rich, beer is an inferior good.
- Cthe rich consume less beer than the poor.
- Dthe demand of the poor for beer is price elastic while that of the rich is price inelastic
57Features of the fundamental economic problem include
- Aboth unlimited resources and many wants.
- Bboth trade-offs and conflicting objectives.
- Cthe provision of goods with no opportunity cost.
- Dboth scarce resources and limited wants.
58Which one of the following is a reason for government intervention to correct a market failure?
The existence of- Ainferior goods
- Bdiseconomies of scale
- Cexternalities in consumption and production
- Dgoods in composite demand
59Which one of the following statements referring to a market economy is correct?
- AMonopolists take no account of consumer preferences.
- BPrices do not always reflect social costs
- CEfficiency is always indicated by high profits
- DLarge firms are more efficient than small firms.
60A small firm is able to buy any amount of a raw material on world markets at the same price. This means that it faces a perfectly
- Aelastic demand curve for the raw material.
- Binelastic demand curve for the raw material.
- Celastic supply curve for the raw material.
- Dinelastic supply curve for the raw material.
61The fundamental economic problem facing all societies is
- Awhat, how and for whom goods and services should be produced.
- Bthe existence of unemployed resources.
- Ca significant divergence between social and private costs of production and consumption.
- Dinequalities in the distribution of income and wealth.
62Which one of the following is an example of an economy of scale?
- AA firm using its existing capacity more efficiently
- BA company using its factory to produce more than one product
- CA car firm increasing its range of models
- DA firm employing specialist managers as its size increases
63Which one of the following statements about a merit good is true?
- AIt may be provided by the free market but not in sufficient quantities
- BOnce the good has been supplied to one consumer, there is no extra cost in supplying it
to others. - CIt is always provided free to consumers.
- DIt tends to be provided by the government because it is non-excludable.
64The demand for capital goods such as plant and machinery is said to be an example of derived demand because it depends on
- Athe productivity of capital goods.
- Bthe quantity of consumer goods purchased.
- Cthe price of capital goods.
- Dthe amount of labour employed by a firm.
65A free good has which one of the following characteristics?
- AIt has no opportunity cost in supply.
- BIt is generally supplied by the government because its consumption is considered to be
socially desirable. - CIt has no externalities associated with its consumption or production.
- DIt is in perfectly inelastic supply.
66Which one of the following statements involves a value judgement?
- AThe supply of beef is likely to be inelastic in the short run.
- BEconomies of scale can lead to lower prices
- CInferior goods have a negative income elasticity of demand.
- DThe government was wrong to increase spending on roads.
67In August 2000, the World Health Organisation said that a 10 % increase in cigarette prices worldwide would reduce consumption of cigarettes by 4 % in high-income countries and by 8 % in low-income countries.
The above statement suggests that- Asmokers in high-income countries are twice as addicted to cigarettes as those in
low-income countries. - Bdemand for cigarettes is price elastic in both low-income and high-income countries.
- Cincome elasticity of demand for cigarettes is higher in low-income countries than in
high-income countries. - Dprice elasticity of demand for cigarettes is negative in both high-income and low-income
countries.
- Asmokers in high-income countries are twice as addicted to cigarettes as those in
68At current levels of output, the marginal social cost of making a good is greater than its marginal private cost. Also, the marginal social benefit of the good is greater than its marginal private benefit. As a result, there will probably be
- Aa misallocation of resources.
- Bpositive externalities in production.
- Cnegative externalities in consumption.
- Deconomies of scale.
69A tradeable pollution permit
- Ais needed to equalise positive and negative externalities in production.
- Bwill be bought by a firm if its price is less than the social cost of the pollution it creates
- Cis designed to reduce the negative externalities arising from pollution
- Dcan be used only by the firm to which it is issued.
70In July 2007, smoking in enclosed public places in England became illegal.
Such a policy would inevitably lead to government failure if- Athe government’s tax revenue from cigarette sales fell.
- Bthe economic benefits arising from the ban were outweighed by its costs.
- Csome people continued to smoke cigarettes in their own homes.
- Djobs were lost in the tobacco industry.
71Specialisation and the division of labour require
- Aa means of exchanging goods and services.
- Bthat the economy is operating on its production possibility frontier.
- Can absence of negative externalities.
- Dcompetitive markets.
72One reason why the free market fails to achieve an optimal allocation of scarce resources is
because- Apublic goods are provided free of charge to users.
- Bpositive externalities lead to overproduction of a good.
- Cthere is underproduction of goods with positive externalities.
- Dindividuals’ incomes and wealth are not identical
73Labour productivity in an economy is likely to improve if there is
- Aa reduction in the number of firms in an industry
- Ban improvement in allocative efficiency.
- Can increase in the quantity of capital per worker.
- Da reduction in negative externalities in production.
74A pure public good (or service) is always
- Aprovided by the government for all consumers.
- Bprovided free of charge for all consumers.
- Cavailable for consumption by others when consumed by an additional person.
- Dheavily subsidised by the government
Information
- Description
- Quiz on Economics Unit-1 (Jan10/Jun 11/Jan 11/Jun12/Jan12), created by magrayrai on 19/09/2013.
- Author
- magrayrai
- Language
- English
- Views
- 170
- Rating
- No ratings yet Rate this quiz