ECO401
ECO401
ECO401
Question No: 5 ( M - 1 ) .
FINALTERM EXAMINATION Graphically, marginal revenue is defined as:
Spring 2010 ► The slope of a line from the origin to a
ECO401- Economics point on the total revenue curve.
Solved & Shared by vuZs Team ► The slope of a line from the origin to the
Mehreen , zubair hussain end of the total revenue curve.
http://www.vuzs.info/ ► The slope of the total revenue curve at a
given point.
Solution is provided by vuZs Solution Team. ► The vertical intercept of a line tangent to
You are free to distribute and use it. In case you the total revenue curve at a given point.
wanted to host or re-distribute it. Please don’t
remove the links of group and website. Question No: 6 ( M - 1 ) .
A firm is charging a different price for each
M - 58 unit purchased by a consumer. This is
Time: 90 min called:
► First-degree price discrimination.
Question No: 1 ( M - 1 ) . ► Second-degree price discrimination.
In pure capitalism, the role of government is ► Third-degree price discrimination.
best described as: ► None of the given options.
► Significant.
► Extensive. Question No: 7 ( M - 1 ) .
► Nonexistent. Which of the following is true in long run
► Limited. equilibrium for a firm in a monopolistic
competitive industry?
Question No: 2 ( M - 1 ) . ► The demand curve is tangent to marginal
If both supply and demand increase cost curve.
simultaneously, the equilibrium: ► The demand curve is tangent to average
► Price must rise and the equilibrium cost curve.
quantity must fall. ► The marginal cost curve is tangent to
► Price must rise and the equilibrium average cost curve.
quantity may either rise or fall. ► The demand curve is tangent to marginal
► Quantity must rise and the equilibrium revenue curve.
price may either rise or fall.
► Price must fall and the equilibrium Question No: 8 ( M - 1 ) .
quantity may either rise or fall. A firm in monopolistic competition does not
achieve minimum efficient scale because:
Question No: 3 ( M - 1 ) . http://www.vuzs.info/
If the quantity supplied of oranges exceeds ► It is not a monopoly.
the quantity demanded then: ► It is in competition with other firms.
► There is a shortage of oranges. ► It is operating on the downward-sloping
► Market forces will cause the price to fall. part of the average cost curve.
► Market forces will cause the price to rise. ► It produces at the minimum average cost.
► The market is in equilibrium.
http://www.vuzs.info/ Question No: 9 ( M - 1 ) .
Question No: 4 ( M - 1 ) . If the income elasticity of demand is 1/2, the
Aslam spends all of his money on good is:
racquetballs and food. What would happen
to Aslam’s budget line if his income ► A luxury.
increased by 10 percent holding prices ► A normal good (but not a luxury).
constant? ► An inferior good.
► It would shift inward. ► A Giffen good.
► It would rotate about the axis for food.
► It would rotate about the axis for Question No: 10 ( M - 1 ) .
racquetballs. In the complete classical model, a rightward
► It would shift outward. shift of the labor supply curve will:
All of the following are the reasons of
► Decrease the price level and increase downward sloping curve of aggregate
the nominal wage. demand EXCEPT:
► Decrease the nominal wage and ► The exchange-rate effect.
increase the price level. ► The wealth effect.
► Decrease both the price level and the ► The classical dichotomy / monetary
nominal wage. neutrality effects.
► Increase both the price level and the ► The interest-rate effect.
nominal wage. http://www.vuzs.info/
Question No: 17 ( M - 1 ) .
Question No: 11 ( M - 1 ) . Those who hold the classical view of the
The aggregate demand will decrease if: labour market are likely to believe that:
► Investment spending decreases. ► Monetary but not fiscal policy will have
► Government spending increases. an effect on output and employment.
► Consumption spending increases. ► Fiscal but not monetary policy will have
► Imports decreases. an effect on output and employment.
http://www.vuzs.info/ ► Both monetary and fiscal policy will have
Question No: 12 ( M - 1 ) . an effect on output and employment.
Which of the following is NOT a stock ► Neither monetary nor fiscal policy will
variable? have an effect on output and employment.
Question No: 2 ( M - 1 ) .
Which of the following is the term that
economists use to describe how consumers
rank different goods and services?
► Satisfaction index.
► Goodness.
► Utility.
► None of the given options.
What actually the Keynesian paradox of thrift
states? In the above figure, economy is in Question No: 3 ( M - 1 ) .
equilibrium at point E where withdrawls are An individual with a constant marginal utility
equal to leakages. Keeping Keynes’s paradox of income will be:
of thrift arguments in mind, what will happen
► Risk loving.
► Risk neutral. www.vuzs.info
► Risk averse.
► Insufficient information for a decision. Question No: 8 ( M - 1 ) .
www.vuzs.info In monopoly, which of the following is NOT
true?
Question No: 4 ( M - 1 ) .
Which of the following is a correct statement ► Products are differentiated.
about the substitution effect? ► There is freedom of entry and exit into
the industry in the long run.
► The substitution effect is always ► The firm is a price maker.
negative. ► There is one main seller.
► The substitution effect is positive for an
inferior good. Question No: 9 ( M - 1 ) .
► The substitution effect measures how Welfare economics is the branch of
demand changes when income changes. economics which deals with:
► The substitution effect is positive for a
Giffen good. ► Positive issues.
► Normative issues.
Question No: 5 ( M - 1 ) . ► Micro issues.
Producer surplus in a perfectly competitive ► Macro issues.
industry is: www.vuzs.info
► The difference between profit at the
profit-maximizing and profit-minimizing level of Question No: 10 ( M - 1 ) .
output. The aggregate demand will decrease if:
► The difference between revenue and
total cost. ► Investment spending decreases.
► The difference between revenue and ► Government spending increases.
variable cost. ► Consumption spending increases.
► The difference between revenue and ► Imports decreases.
fixed cost.
www.vuzs.info Question No: 11 ( M - 1 ) .
Unlike the classical economists, Keynes
Question No: 6 ( M - 1 ) . believed that the economy could get stuck in
Second-degree price discrimination is the the short run for a significant period of time
practice of charging: because of:
FINALTERM EXAMINATION
Question No: 6 ( M - 1 ) .
Fixed costs are fixed with respect to
changes in:
► Output.
► Capital expenditures.
► Wages. Question No: 11 ( M - 1 ) .
► Time. Value of Marginal Product of Labor (VMPL) is
equal to:
Question No: 7 ( M - 1 ) . ► MPPL/ Pi.
If a firm experiences economies of scale, ► MPPL.
then the: ► Pi.
► Long-run average total cost curve is ► MPPL x Pi.
equal to the economies of scope.
► Long-run average total cost curve is Question No: 12 ( M - 1 ) .
positively sloped. According to classical economics, the
► Long-run average total cost curve is economy was unlikely to experience:
horizontal. ► Full employment.
► Long-run average total cost curve is ► Flexible wages and prices.
negatively sloped. ► Equality between saving and investment.
► High rates of unemployment.
Question No: 8 ( M - 1 ) .
When a firm charges each customer the Question No: 13 ( M - 1 ) .
maximum price that the customer is willing Say's Law is a proposition underlying
to pay, the firm: classical economics stating that:
► Engages in a discrete pricing strategy. ► Supply creates its own demand.
► Charges the average reservation price. ► Leakages are greater than injections.
► Engages in second-degree price ► Unemployment is a common condition.
discrimination. ► Consumption expenditures are a function
► Engages in first-degree price of disposable income.
discrimination.
Question No: 14 ( M - 1 ) .
Question No: 9 ( M - 1 ) . An assumption of classical economics is:
Which of the following is true in long run ► Prices and wages are inflexible.
equilibrium for a firm in a monopolistic ► Self-correction takes a long time.
competitive industry? ► Supply creates its own demand.
► The demand curve is tangent to marginal ► Investment and saving are seldom equal.
cost curve.
► The demand curve is tangent to Question No: 15 ( M - 1 ) .
average cost curve. Which of the following will result if there is a
► The marginal cost curve is tangent to decrease in aggregate demand?
average cost curve. ► Expansion; inflation.
► The demand curve is tangent to marginal ► Recession; deflation.
revenue curve. ► Expansion; deflation.
► Recession; inflation.
Question No: 10 ( M - 1 ) .
Which one of the following characteristics is Question No: 16 ( M - 1 ) .
common in monopolistic competition and Real Gross Domestic Product (GDP)
oligopoly? equals:
► Nominal GDP minus net exports.
► Nominal GDP divided by the GDP
deflator.
► Nominal GDP multiplied by the GDP
deflator.
► GDP minus depreciation. Question No: 22 ( M - 1 ) .
Which of the following best describes the
''Capital widening''?
Question No: 17 ( M - 1 ) . ► More capital per unit of labour.
Which of the following statements is TRUE? ► More capital and more labour but with
► Net National Product = Gross National the same amount of capital per
Product – Depreciation. unit of labour.
► Net National Product = National Income. ► Increasing the usage of existing capital.
► Net National Product = Disposable ► Importing capital from the developed
Personal Income. world.
► Net National Product = Personal
Income. Question No: 23 ( M - 1 ) .
Suppose there are two producers and two
Question No: 18 ( M - 1 ) . products. Which of the following is not TRUE
Which of the following shows the Fisher in this situation?
equation of exchange? ► A producer has an absolute advantage
► MT=PV. on one product.
► VT=PM. ► A producer has the comparative
► MV=PQ. advantage on both products.
► MY=VP. ► A producer has the comparative
advantage on one product.
Question No: 19 ( M - 1 ) . ► A producer has an absolute advantage
In the Keynesian cross model, the 45-degree on both products.
line has a slope of:
► 45. Question No: 24 ( M - 1 ) .
► Infinity. Public education creates:
► 1. ► Asymmetric information.
► 0. ► External costs.
► Internal costs.
Question No: 20 ( M - 1 ) . ► External benefits.
The principle economic difference between
a competitive and a non-competitive market Question No: 25 ( M - 1 ) .
is: A graph that depicts the relationship
► The number of firms in the market. between the total quantity of goods and
► The extent to which any firm can services demanded and the price level is
influence the price of the product. known as:
► The size of the firms in the market. ► Aggregate demand curve.
► The annual sales made by the largest ► Average price level.
firms in the market. ► Circular flow model.
► GDP curve.
Question No: 21 ( M - 1 ) .
An individual whose attitude towards risk is Question No: 26 (M-1) .
known as:
► Risk averse.
► Risk loving.
► Risk neutral.
► None of the given options.
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Which of the following can happen in a
boom period?
► Unemployment is likely to fall.
► Prices are likely to fall.
► Demand is likely to fall.
► Imports are likely to grow.
Question No: 31 ( M - 1 ) .
The taxes on alcohol, tobacco, and gasoline
are categorized as:
► Sales tax.
► Excise tax.
► Corporate income tax.
► Personal income tax.
Question No: 32 ( M - 1 ) .
The item which serves as a medium of
Refer to the above figure, if the real GDP is exchange is known as:
$7,000 billion and the implicit price deflator
► Gold.
is 1.16, what is the value of nominal GDP?
► Capital.
► $6,034 billion. ► Silver.
► $8,120 billion. ► Money.
► $9,120 billion.
► Cannot be determined from the given Question No: 33 ( M - 1 ) .
information. A country has a comparative advantage:
► If it can produce a good at a higher
Question No: 27 ( M - 1 ) . opportunity cost than other nations.
Let L equal the size of the labor force, E the ► If it can produce a good at a lower
number of employed workers, and U the opportunity cost than other nations.
number of unemployed workers. The
► If it can produce a good by using less
unemployment rate is equal to:
resources than other nations.
► (L + E)/L. ► If it can produce a good that lies outside
► U/L. its production possibilities curve.
► 1 + (E/L).
► All of the given options. Question No: 34 ( M - 1 ) .
A tariff is defined as:
Question No: 28 ( M - 1 ) .
► A restriction on exports.
The natural rate of unemployment is likely to ► A tax placed on an imported product.
fall if: ► A limit on the amount of a good or
► Unemployment benefits increase. service that can be exported.
► Income tax increases. ► A limit on the amount of a good or
► More training is available for the
service that can be imported.
unemployed.
► Geographical immobility increases. Question No: 35 ( M - 1 ) .
Countries that are not among the high
Question No: 29 ( M - 1 ) . income nations of the world are categorized
Which of the following is NOT a determinant as:
of net exports?
► Developed countries.
► Domestic and foreign incomes. ► Progressed countries.
► Relative price levels. ► Developing countries.
► Domestic and foreign trade policies. ► High income countries.
► Producers’ expectations about future
prices. Question No: 36 (M-1) .
Question No: 30 (M-1) .
Which of the following is (are) the The relationship between interest rate and
characteristic(s) of high income countries as consumption is:
compared to low income countries? ► Positive.
I. Lower rates of population growth. ► Negative.
II.Greater income inequality. ► Zero.
III. A large proportion of the labor ► Indeterminate.
force in agriculture.
IV. Higher rates of investment.
► I only. Question No: 42 ( M - 1 ) .
► I and II. The principle which states that a change in
► II and IV. income causes a magnified change in
► I and IV. investment is termed as the:
► None of the given.
► Paradox of thrift.
Question No: 37 ( M - 1 ) . ► Multiplier effect.
In which of the following conditions, a ► Accelerator effect.
welfare loss occurs in monopoly?
► Where the price is greater than the Question No: 43 ( M - 1 ) .
marginal cost. Hysteresis refers to the permanent effects of
► Where the price is greater than the a:
marginal benefit. ► Temporary change.
► Where the price is greater than the ► Structural change.
average revenue. ► Cyclical change.
► Where the price is greater than the ► Political change.
marginal revenue.
Question No: 44 ( M - 1 ) .
Question No: 38 ( M - 1 ) . Factor income from abroad like worker
If average physical product (APP) is remittances, dividends and interest has
decreasing then which of the following must positive impact on:
be true? ► Current account balance.
► Marginal physical product is more than ► Capital account balance.
the average physical product. ► Trade balance.
► Marginal physical product is less than ► Unemployment.
the average physical product.
► Marginal physical product is decreasing. Question No: 45 ( M - 1 ) .
► Marginal physical product is increasing. The growth rate of any country’s real GDP
can be:
Question No: 39 ( M - 1 ) . ► Negative or positive.
When different prices are charged to ► positive or zero.
customers who purchase different ► Negative or zero.
quantities, this is an example of ► Negative or positive or zero.
► Second-degree price discrimination.
► First-degree price discrimination. Question No: 46 ( M - 1 ) .
► Monopoly. Endogenous growth theory is also known
► Perfect competition. as:
► Neo-classical growth theory.
Question No: 40 ( M - 1 ) . ► New growth theory.
Which of the following may cause a ► Classical growth model.
decrease in national income? ► Keynesian growth model.
► Increase imports.
► Decrease unemployment. Question No: 47 ( M - 1 ) .
► Decreasing exports. Which of the following is not the World
► None of the given options. Bank’s structural reform policy?
► FDI liberalization.
Question No: 41 (M-1) . ► Trade liberalization.
► Financial liberalization.
► Same monetary policy for all not for good Y.
countries. Increasing opportunity cost for good Y but
not for good X.
Question No: 48 ( M - 1 ) . Constant opportunity cost for both goods.
The common characteristics of a developing
country is: ECO401 - Economics - Q.No. 3
► High growth rate. If the quantity demanded of a product is
► High literacy rate. greater than the quantity supplied of a
► Skilled labor. product, then:
► High unemployment rate. There is a shortage of the product.
There is a surplus of the product.
The product is a normal good.
Question No: 49 ( M - 3 ) The product is an inferior good.
At what point, the equilibrium occurs in the
foreign exchange market? ECO401 - Economics - Q.No. 4
The supply curve is upward-sloping
Question No: 50 ( M - 3 ) because:
What are the reasons that poor countries
remained poor? As the price increases, consumers demand
less.
Question No: 51 ( M - 5 ) As the price increases, suppliers can
If the government increase it’s spending e.g. earn higher levels of profit or justify higher
increases the wages of the government marginal costs to produce more.
servant, how it will affect on consumption, None of the given options.
production and hiring of new employees? As the price increases, so do costs.
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ECO401 - Economics - Q.No. 5
Question No: 52 ( M - 5 ) When an industry's raw material costs
Explain the difference between appreciation increase, other things remaining the same:
and depreciation of currency. The supply curve shifts to the right.
Output increases regardless of the market
Question No: 53 ( M - 5 ) price and the supply curve shifts upward.
Differentiate among M0, M1 and Output decreases and the market price
M2 components of money supply. also decrease.
The supply curve shifts to the left.