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Semester II Examinations 20 11 / 20 12
Exam Code(s) 1 BC1, 1BCA1, 1CL
Exam(s) 1 st^ B.Comm., 1st^ B.Comm. (Accounting), 2 nd^ B.Corp.
Law
Module Code(s) EC 118
Module(s) Economics
Paper No. 1 of 1
External
Examiner(s)
Professor Liam Delaney
Professor Pat McGregor
Internal
Examiner(s)
Professor John McHale
*Dr. Ashley Piggins
*Dr. John Cullinan
Instructions Answer all questions on the same MCQ answer sheet
provided. There is no negative marking.
Duration 3 hours
No. of Pages 18
Discipline(s) Economics
Course Co-ordinator
Requirements
MCQ
Dr. Ashley Piggins and Dr. John Cullinan
Yes
Release to Library Yes
Section A: Microeconomics
1. Which of the following sentences best represents the concept represented by the adage, “There is no such thing as a free lunch”? A. Melissa can only attend the concert if she takes her sister with her. B. Greg is hungry and homeless. C. Brian must repair the tire on his bike before he can ride it to class. D. Kendra must decide between going to Colorado or Cancun for spring break. E. Fred wants to go on vacation, but only if his parents pay.
2. When society requires that firms reduce pollution, there is: A. A tradeoff because of reduced incomes to the firms’ owners, workers, and higher prices for the firms’ customers. B. No tradeoff, since everyone benefits from reduced pollution. C. No tradeoff for society as a whole, since the cost of reducing pollution falls only on the firms affected by the requirements. D. A tradeoff only if some firms are forced to close. E. A tradeoff only if some workers are fired. 3. Which of the following best defines economic efficiency? A. Absolute fairness. B. Equal distribution. C. Minimum waste. D. Consumer sovereignty. E. Rational behaviour. 4. Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is: A. The $24 she earns working. B. The $24 minus the enjoyment she would have received from watching the video. C. The enjoyment she would have received had she watched the video. D. Nothing, since she would have received less than $24 of enjoyment from the video. E. Nothing, since the decision to go to work was a rational one. 5. Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes vases, but Regan is better at producing both. In this case, trade could: A. Benefit both Jayson and Regan. B. Benefit Jayson, but not Regan. C. Benefit Regan, but not Jayson. D. Not benefit Jayson nor Regan. E. Not occur between Jayson and Regan.
10. Two goods are substitutes if a decrease in the price of one good: A. Increases the demand for the other good. B. Reduces the demand for the other good. C. Reduces the quantity demanded of the other good. D. Increases the quantity demanded of the other good. E. Has no effect on the quantity demanded of the other good. 11. When we move up or down a given demand curve: A. Only price is held constant. B. Income and the price of the good are held constant. C. Individual tastes are changing. D. All nonprice determinants of demand are assumed to be constant. E. All determinants of quantity demanded are held constant. 12. Knowing that the demand for wheat is inelastic, if all farmers voluntarily plowed under 10 percent of their wheat crop, then: A. Consumers of wheat would buy more wheat. B. Wheat farmers would suffer a reduction in their revenue. C. Wheat farmers would increase their revenue. D. The demand for wheat would decrease. E. Nothing would happen. 13. Consumer surplus is: A. A buyer’s willingness to pay minus the price. B. A seller’s willingness to sell minus the price. C. A buyer’s willingness to pay plus the price. D. The price of the product minus the buyer’s willingness to pay. E. When the buyer’s willingness to pay and the price of the product are equal. 14. We can say that the allocation of resources is efficient if: A. Producer surplus is maximized. B. Consumer surplus is maximized. C. Total surplus is maximized. D. Additional gains from trade are possible. E. None of the above are correct. 15. An externality is the impact of: A. Society’s decisions on the well-being of society. B. A person’s actions on that person’s well-being. C. One person’s actions on the well-being of a bystander. D. Society’s decisions on the poorest person in the society. E. None of the above. 16. If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then: A. A one-unit increase in output will increase the firm's profit. B. A one-unit decrease in output will increase the firm's profit. C. Total revenue exceeds total cost. D. Total cost exceeds total revenue. E. Total revenue and total cost are equal.
17. Which of the following is true of markets characterized by negative externalities? A. Social value exceeds private value, and market quantity exceeds the socially optimal quantity. B. Social value is less than private value, and market quantity exceeds the socially optimal quantity. C. Social value exceeds private value, and market quantity is less than the socially optimal quantity. D. Social value seldom exceeds private value; therefore, social quantity is less than private quantity. E. None of the above.
18. When a tax on a good is enacted: A. Buyers and sellers share the burden of the tax regardless of who it is levied on. B. Buyers always bear the full burden of the tax. C. Sellers always bear the full burden of the tax. D. Sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if the tax is levied on them. E. None of the above. 19. Which one of the following expressions is incorrect? A. AVC = ATC – AFC. B. AFC = ATC + AVC. C. ATC = AVC + AFC. D. AFC = ATC – AVC. E. Both (B) and (D) above. 20. A firm's short-run marginal cost curve takes its particular shape because of: A. The shape of the marginal product curve. B. Increasing returns to scale. C. The firm's production function. D. All of the above are correct. E. Both (a) and (c) above. 21. When the XYZ Co. is operating at the minimum point on its ATC curve, then all of the following are correct except: A. AVC is rising. B. AFC is also at its minimum. C. MC is rising. D. MC and ATC are equal. E. ATC lies above AVC. 22. In the table below: A. The marginal cost of the 5th^ unit is € 21. B. The marginal revenue of the 6th^ unit is € 19. C. The marginal revenue from the 3rd^ unit is €13.25. D. The marginal cost of the 2nd^ unit is €18.75. E. All of the above.
27. Referring to the figure above, what price will the monopolist charge? A. A. C. B. C. C. D. F. E. G. 28. Referring to the figure above, how much output will the monopolist produce? A. O. B. J. C. K. D. L. E. Between O and J. 29. Refer to the figure above, what area measures the monopolist’s profit? A. (B-F)K. B. (A-H)J. C. (B-G)K. D. 0.5[(B-F)(L-K)]. E. 0.5[(B-G)*K]. 30. The factors of production are best defined as the: A. Output produced from raw materials. B. Inputs used to produce goods and services. C. Wages paid to the workforce. D. Goods and services sold in the market. E. Forms of technological progress. 31. To maximize profit, a competitive firm hires workers up to the point of intersection of the: A. Marginal product curve and the wage line. B. Value of marginal product curve and the wage line. C. Value of marginal product curve and the marginal revenue curve. D. Total revenue curve and the wage line. E. None of the above. M C D M R ATC J K L A B C F G H O P Quantity Price
32. Which of the following is most likely an inferior good? A. An antique car. B. Gasoline. C. A bus ticket. D. An airline ticket. E. Coffee. 33. Economists generally hold that rent control is: A. An efficient and equitable way to help the poor. B. Not efficient, but the best way to solve a serious social problem. C. A highly inefficient way to help the poor raise their standard of living. D. An efficient way to allocate housing, but not a good way to help the poor. E. None of the above. 34. In the housing market, rent controls cause quantity supplied to: A. Fall and quantity demanded to fall. B. Fall and quantity demanded to rise. C. Rise and quantity demanded to fall. D. Rise and quantity demanded to rise. E. Rise with no effect on quantity demanded. 35. In the figure shown, which panel(s) best represent(s) a binding rent control in the short run? A. Panel (a). B. Panel (b). C. Neither panel. D. Both panels. 36. In the figure shown, which panel(s) best represent(s) a binding rent control in the long run? A. Panel (a). B. Panel (b). C. Neither panel. D. Both panels.
42. The growth rate of real GDP in 2005 was approximately: A. 24 per cent. B. 50 per cent. C. 97 per cent. D. 125 per cent. E. 0 per cent.
43. If private investment increased by €50 billion while GDP remained the same, which of the following could have occurred, all else being the same? A. Consumption spending decreased by €50 billion. B. Exports increased by €50 billion. C. Imports decreased by €50 billion. D. Net exports increased by €50 billion. E. Depreciation increased by €50 billion. 44. Suppose that a country’s population grows by 2 per cent. For the standard of living to rise, which of the following must occur? A. Nominal GDP must grow by more than 2 per cent. B. Real GDP must grow by more than 2 per cent. C. Nominal GDP per capita must grow by more than 2 per cent. D. Consumption spending must grow by more than 2 per cent. E. Real GDP per capita must grow by more than 2 per cent. 45. Which of the following is a reason why the Consumer Price Index (CPI) is not calculated as a simple average of all prices? A. Some goods experience large price changes and the CPI would be too variable if computed by a simple average. B. Goods differ in their importance in the average consumer's budget. C. Some goods never experience price changes and the CPI would not be variable enough if computed as a simple average. D. It would be difficult to compute a price index using a simple average of all prices. E. The CPI is calculated as a simple average of all prices 46. The CPI differs from the GDP deflator in that the CPI: A. Uses base year quantities of goods to weight prices. B. Uses current year quantities of goods to weight prices. C. Is not a weighted price index. D. Always indicates a higher rate of inflation than the GDP deflator. E. None of the above. 47. If the consumer price index has a value of 115 today and the base year is 2000, then consumer prices have: A. Declined by 1.5 per cent since 2000. B. Increased by 1.5 per cent since 2000. C. More than doubled since 2000. D. Declined by 15 per cent since 2000. E. Increased by 15 per cent since 2000.
48. Suppose that a trade union leader is trying to bargain for an increase in union workers’ real wages of 5 per cent. If she expected the price level to rise at a rate of 3 per cent this year, how much would nominal wages need to increase for her to accomplish her objective? A. 2 per cent. B. 3 per cent. C. 5 per cent. D. 8 per cent. E. 10 per cent. 49. If the capital stock increases faster than employment, then we would expect: A. No impact on output or labour productivity. B. Output to rise but labour productivity to fall. C. Both output and labour productivity to fall. D. Output to fall but labour productivity to rise. E. Both output and labour productivity to rise. 50. When a nation has very little GDP per person: A. It is doomed to being relatively poor forever. B. It must be a small nation. C. An increase in capital will likely have little impact on output. D. It has the potential to grow relatively quickly due to the ‘catch-up-effect’. E. None of the above. 51. Ownership of natural resources is not necessary for an economy to be highly productive because: A. Productivity depends only on human capital. B. Productivity depends only on the quantity of labour a country has. C. Natural resources can be acquired through international trade. D. Natural resources are less important than a country’s stock of capital goods. E. Natural resources are not a factor of production. 52. Consider a closed economy (i.e. one with no foreign trade). Assuming the economy was in equilibrium, use the following information to determine the government's budget deficit or surplus. Amount Consumption Spending €350 billion Net Taxes €270 billion Household Saving €250 billion Investment Spending €220 billion The government's deficit (surplus) was: A. €30 billion surplus. B. €20 billion surplus. C. €30 billion deficit. D. €50 billion deficit. E. €0 i.e. balanced budget.
58. If the market for unskilled this diagram, a minimum wage of of: A. 300 workers. B. 500 workers. C. 600 workers. D. 800 workers. E. There will be no unemployment 59. The idea of paying workers an efficiency wage is that A. Doing so is more efficient than paying them the market wage. B. Paying them less gives them the incentive to work harder. C. Workers and management gain at the expense of the s company. D. Workers have the incentive to do high quality work. E. Workers are more likely to ‘shirk’. 60. Credit cards are: A. Included in M2 but not in M1. B. Not considered to be money. C. Included in M3 but not in M2 or M1. D. Considered as money only when they are in the hands of the public. E. Essentially the same as currency in circulation. 61. Given an initial deposit of potentially created by a fractional reserve A. € 10 ,000. B. €20,000. C. € 30 ,000. D. € 40 ,000. E. €50,000. unskilled workers is in equilibrium at €5.00 per hour as shown in this diagram, a minimum wage of €8.00 per hour will lead to an unemployment level no unemployment. The idea of paying workers an efficiency wage is that: Doing so is more efficient than paying them the market wage. Paying them less gives them the incentive to work harder. Workers and management gain at the expense of the shareholders of the Workers have the incentive to do high quality work. Workers are more likely to ‘shirk’. Included in M2 but not in M1. Not considered to be money. Included in M3 but not in M2 or M1. Considered as money only when they are in the hands of the public. Essentially the same as currency in circulation. Given an initial deposit of €10,000 and a reserve ratio of 20%, the amount of money potentially created by a fractional reserve banking system is: €5.00 per hour as shown in lead to an unemployment level Doing so is more efficient than paying them the market wage. hareholders of the Considered as money only when they are in the hands of the public. %, the amount of money
62. If Gerard moves a deposit of €10,000 from Banca Solida, which operates with a 20% reserve ratio, to Gung-Ho Bank, which operates with 10% reserve ratio, then what would you expect to happen to the economy’s money supply? A. It will decrease by €50,000. B. It will be unchanged. C. It will increase by €50,000. D. It will increase by €100,000. E. It will decrease by €100,000. 63. In a system of fractional reserve banking, the central bank cannot perfectly control the money supply because: A. The central bank only has control of a fraction of the banking system. B. The money supply depends in part on the behaviour of commercial banks and their depositors. C. The government is likely to interfere with the central bank’s policy. D. Commercial banks resist the central bank’s control. E. There are numerous commercial banks operating in the market. 64. A bank run is said to have occurred when: A. Depositors realise that a particular bank is paying higher interest than its competitors and a substantial number rush to deposit their money in it. B. A substantial number of depositors suspect that a bank may go bankrupt and withdraw their deposits. C. A bank experiences a series of defaults on its loans. D. A bank converts its loans into deposits. E. A bank is deemed insolvent. 65. The quantity theory of money concludes that an increase in the money supply causes: A. A proportional increase in prices. B. A proportional increase in real output. C. A proportional decrease in velocity. D. A proportional increase in velocity. E. A proportional decrease in prices. 66. If money is neutral: A. An increase in the money supply does nothing. B. A change in the money supply only affects real variables such as real output. C. A change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output. D. A change in the money supply only affects nominal variables such as prices and wages. E. The money supply cannot be changed because it is tied to a commodity such as gold. 67. The inflation tax is: A. A tax on windfall profits. B. A special tax imposed on owners of shares. C. A special tax imposed on profits when inflation is over 10% per year. D. The loss incurred when inflation reduces the purchasing power of money. E. None of the above.
73. Which of these diagrams illustrates the effect in the money market government bonds in an open market operation by the central bank? A. (a). B. (b). C. (c). D. (d). E. None of the above. 74. Which of the following best describes how an increase in the money supply shifts the aggregate demand curv A. The money supply shifts right, prices fall, spending increases, and the aggregate demand curve shifts right. B. The money supply shifts right, the interest rate rises, investment decreases, and the aggregate demand curve shifts left. C. The money supply shifts right, the interest rate falls, investment increases, and the aggregate demand curve shifts right. D. The money supply shifts left, prices fall, spending falls, and the aggregate demand curve shifts left. E. The money supply shif demand curve shifts left. Questions 7 5 and 76 are Which of these diagrams illustrates the effect in the money market government bonds in an open market operation by the central bank? None of the above. Which of the following best describes how an increase in the money supply shifts the aggregate demand curve? The money supply shifts right, prices fall, spending increases, and the aggregate demand curve shifts right. The money supply shifts right, the interest rate rises, investment decreases, and the aggregate demand curve shifts left. The money supply shifts right, the interest rate falls, investment increases, and the aggregate demand curve shifts right. The money supply shifts left, prices fall, spending falls, and the aggregate demand curve shifts left. The money supply shifts right, prices rise, spending falls, and the aggregate demand curve shifts left. are based on the following diagram: Which of these diagrams illustrates the effect in the money market of the sale of government bonds in an open market operation by the central bank? Which of the following best describes how an increase in the money supply shifts the The money supply shifts right, prices fall, spending increases, and the The money supply shifts right, the interest rate rises, investment decreases, The money supply shifts right, the interest rate falls, investment increases, The money supply shifts left, prices fall, spending falls, and the aggregate ts right, prices rise, spending falls, and the aggregate
75. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policymakers wished to move output to its long-run natural rate, they should attempt to: A. Shift aggregate demand to the left. B. Shift short-run aggregate supply to the left. C. Shift long-run aggregate supply to the left. D. Shift short-run aggregate supply to the right. E. Shift aggregate demand to the right. 76. Suppose the economy is operating in a recession such as point B in Exhibit 4. If policymakers allow the economy to adjust to the long-run natural rate on its own: A. People will reduce their price expectations and the short-run aggregate supply will shift right. B. People will raise their price expectations and aggregate demand will shift left. C. People will raise their price expectations and the short-run aggregate supply will shift left. D. People will reduce their price expectations and aggregate demand will shift right. E. The long-run aggregate supply curve will shift to the left. 77. If government spending increases by €50 billion and if the marginal propensity to consume is equal to 0.8: A. Equilibrium GDP will rise by €250 billion. B. Equilibrium GDP will fall by €250 billion. C. Equilibrium GDP will fall by €50 billion. D. Nothing will happen in the short run, but real output will rise by €50 billion in the long run. E. Equilibrium GDP will rise by €50 billion.
78. Suppose a wave of investor and consumer optimism has increased spending so that the current level of output exceeds the long-run natural rate. If policy makers choose to engage in activist stabilization policy, they should: A. Decrease government spending, which the shifts the aggregate demand curve to the left. B. Decrease taxes, which shifts the aggregate demand curve to the right. C. Decrease taxes, which shifts the aggregate demand curve to the left. D. Decrease government spending, which shifts the aggregate demand curve to the right. E. None of the above. 79. To bring inflation down, an economy must sacrifice A. Real GDP. B. Exports. C. Employment for some people. D. Both A and C are correct. E. All of A, B and C are correct.
