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Ollscoil na hÉireann, Gaillimh _GX______ National University of Ireland, Galway Autumn Examinations, 2008/ Exam Code(s) 1BC2, 1BC3, 1BC4, 1BC5, 1BF1, 1FM Exam(s) 1 st^ Comm. (French), 1st^ Comm. (German), 1 st^ Comm. (Spanish), 1 st Comm. (Italian), 1st^ B.Sc. (BIS), 1 st^ B.Sc. (Fin. Maths. & Ec) Module Code(s) EC Module(s) Economics Paper No. Repeat Paper External Examiner(s) Professor Robert Wright; Professor Cillian Ryan Internal Examiner(s) Professor Eamon O’ Shea Dr. Gerard Turley Dr. Terrence McDonough Instructions: Please follow instructions carefully. Please answer both Section A (40 marks) and Section B (40 marks) on the same MCQ answer sheet provided. Duration 3 hrs. No. of Answer books MCQ Course Coordinators Department(s) G. Turley & T. McDonough Economics Requirements : Handout MCQ Yes Statistical Tables Graph Paper Log Graph Paper Other Material
Section A Microeconomics (40 marks)
Answer all questions (no negative marking). Please use the MCQ answer sheet
provided, using lines 1 – 40.
- Which of the following ‘events’ will cause the supply curve for wine to shift to the right? (a) a frost kills half of the grape crop; (b) there is an improvement in technology; (c) there is an increase in the wage paid to labour; (d) a study is produced that states that drinking wine improves your health; (e) none of the above. 2.The price of coffee will tend to fall if (a) there is a surplus at the current price; (b) the current price is above equilibrium; (c) the quantity supplied exceeds the quantity demanded at the current price; (d) all of the above; (e) none of the above.
- Qs = f(P). Hence (a) price is the explanatory variable; (b) quantity supplied is a function of price; (c) price is the dependent variable; (d) both (a) and (b) above; (e) (a), (b) and ( c) above.
- In the market economy, excess demand (a) is equivalent to a surplus; (b) pushes price downward; (c) is equivalent to a shortage; (d) both (a) and (b) above; (e) both (b) and (c) above.
- Which of the following would not be a determinant of demand? (a) the price of related goods; (b) the price of inputs used to produce the good; (c) preferences; (d) income; (e) both (a) and (d) above.
- A legal maximum price at which a good or service can be sold is called a price (a) floor; (b) mechanism; (c) support; (d) ceiling; (e) both (b) and (d) above.
- Suppose the market for coal is described by the following equations: Qd = 27 - P Qs = 2P + 3 Q = quantity, 000s P = price (euros) The market price and quantity is (a) (8, 8000); (b) (19, 19000);
(d) total revenue is maximized; (e) both (c) and (d) are correct.
- It is assumed when we study consumer behaviour that the consumer tries to maximize (a) the level of personal savings; (b) the price of one good relative to another; (c) utility; (d) income; (e) profits.;
- In Table 2 below, the marginal utility of the 8th^ slice of pizza is (a) 322; (b) 27; (c) 60; (d) 49; (e) not enough information is provided. Units Total Utils from Pizzas Total Utils from Beer 1 60 360 2 111 630 3 156 810 4 196 945 5 232 1050 6 265 1140 7 295 1215 8 322 1275 9 371 1350 10 371 1350 Table 2 Utility from Pizzas and Beer
- In Table 2 above, the marginal utility of the 2nd^ bottle of beer is (a) 630; (b) 270; (c) 51; (d) 180; (e) not enough information is provided.
- In Table 2 above, marginal utility is the (a) change in total utility per one unit change in the quantity of the good; (b) extra satisfaction gained from consuming one extra unit of the good; (c) change in total utility divided by the change in quantity; (d) additional utility from the last unit consumed; (e) all of the above.
- In terms of the principle of diminishing marginal utility, (a) each additional unit consumed adds less than the previous unit; (b) total utility is negative; (c) total utility declines; (d) marginal utility is negative; (e) both (a) and (d) above.
- In neoclassical consumer choice theory, (a) consumers are utility maximisers; (b) tastes are represented by the indifference curve; (c) consumers are constrained by income and prices;
(d) consumers are assumed to be rational; (e) all of the above. 21.Which of the following is not a property of indifference curves? (a) the slope is the ratio of prices; (b) normally convex to the origin; (c) the higher the indifference curve the higher level of utility; (d) utility is constant along a given indifference curve; (e) indifferences curves cannot intersect.
- For a Giffen good, (a) the demand curve slopes upward from left to right; (b) the income effect is outweighed by the substitution effect; (c) prices and quantity demanded are positively related; (d) both (a) and (c) above (e) both (b) and (c) above.
- Short-run marginal cost rises as output increases because (a) each additional unit produced requires more inputs; (b) of the law of diminishing marginal returns; (c) marginal product of the variable factor declines; (d) of the capacity constraint when a variable factor is combined with a fixed factor of production; (e) all of the above.
- In neoclassical economic orthodoxy, firms are assumed to (a) maximise sales; (b) maximise profits; (c) minimise industrial strife; (d) maximise growth; (e) minimise trade union power.
- Figure 1 below depicts the decision for the (a) utility-maximising household; (b) profit-maximising firm; (c) perfectly competitive firm; (d) both (b) and (c) above. (e) not enough information is provided.
- In perfect competition, (a) the industry demand curve is horizontal; (b) the individual firm’s demand curve is downward sloping; (c) MR < P; (d) the competitive firm has some market power; (e) none of the above.
- The special condition for the perfectly competitive firm is (a) MR = MC; (b) SATC = SAVC + SAFC; (c) LAC = LTC/Q; (d) MR = P; (e) TC = FC + VC.
- In the short-run the supply curve for the competitive firm is derived from the (a) short-run average total cost curve; (b) short-run average variable cost curve; (c) short-run marginal cost curve; (d) short-run average fixed cost curve; (e) none of the above;
- With respect to the competitive firm, which of the following statements is incorrect? (a) the product is homogenous; (b) the demand curve is horizontal; (c) there is free entry and exit; (d) to sell more, the firm must cut price; (e) price is determined bat market demand and market supply.
- Select the answer that correctly completes the following statement: “The possibility of earning excess (or economic) profits exist (a) for the firm in perfect competition but not the monopolist” (b) for both the perfect competitor and the pure monopolist” (c) for neither the pure monopolist nor the perfect competitor” (d) for the pure monopolist but not for the perfect competitor” (e) None of the above.
- A measure of the monopoly power possessed by a firm is the difference between (a) marginal revenue and marginal cost; (b) market price and marginal cost; (c) demand and quantity supplied; (d) average total and average fixed cost; (e) average revenue and market price.
- All of the following statements are correct except (a) the monopolist charges a higher price for its output than does the competitive firm; (b) the profit-maximizing monopolist will always charge the highest price possible for its product; (c) the monopolist offers a lower level of output for sale than does the competitive firm when both face the same cost and production techniques; (d) society's overall welfare is reduced when a competitive firm is monopolised; (e) the competitive firm and the monopolist produce where MC = MR.
- Other things being equal, if a monopolist's cost of production increases, (a) the marginal cost curve shifts upward; (b) equilibrium output falls; (c) equilibrium price rises; (d) monopoly profits may either rise or fall; (e) all of the above are correct.
- A situation in which a market left on its own fails to allocate resources efficiently is defined as: (a) monopoly; (b) market failure; (c) oligopoly; (d) market power; (e) none of the above.
- Public goods (a) are an example of market failure; (b) are often supplied by government; (c) are normally underprovided for in a market system; (d) have the characteristics of non-excludability and non-rivalry; (e) all of the above.
a. one group of people lives off the labour of another group.
b. one group of people has more social influence than another group.
c. one group of people has more income than another group.
d. one group of people has power over another group.
47. Instability is the key factor in a capitalist economy according to which school?
a. Neoclassical
b. Marxian
c. Institutional
d. Keynesian
48. In the circular flow model consumer expenditure flows in one direction. The
corresponding monetary flow in the other direction consists of
a. factors of production
b. factor income
c. goods and services
d. savings and taxes
49. What does the government contribute to the income stream?
a. investment
b. transfer payments
c. indirect taxes
d. savings
50. Which of the following does not contribute to the GDP on the expenditure side?
a. consumption
b. rent
c. investment
d. government
51. To get net product you subtract
a. depreciation
b. taxes and subsidies
c. imports and exports
d. factor cost
52. Which of the following is not a limitation on the usefulness of GDP
a. “bads” as well as goods are included
b. inflation is not taken account of
c. no value is placed on leisure
d. the black economy is not included
53. Subtracting the depreciation of natural capital gives the
a. Net Domestic Product
b. Net National Product
c. environmentally adjusted Net Domestic Product
d. disposable income.
54. Discouraged workers are an example of
a. measured unemployment
b. hidden unemployment
c. the ineffectiveness of training schemes
d. discrimination by employers
55. In the neoclassical theory the supply of labour slopes up because
a. the wage falls
b. leisure is valuable
c. the demand for labour slopes down
d. as wages fall, prices rise
56. In the neoclassical theory unemployment results when
a. the wage is allowed to reach equilibrium
b. the supply of labour equals the demand for labour
c. the wage is stuck above equilibrium
d. the wage is stuck below equilibrium
57. The marginal propensity to consume is the
a. change in consumption divided by the change in disposable income
b. slope of the consumption function
c. change in consumption over the life cycle of the consumer
d. both a and b
58. Where production equals aggregate expenditure
a. the economy is at equilibrium GDP
b. the equilibrium is along the 45 degree line
c. there is no tendency for the GDP to change
d. all of the above
59. If the investment line in the Keynesian cross graph is flat, investment is not related to
a. business confidence
c. increasing the money supply
d. allowing wages to fall
65. The Marxian solution to unemployment involves
a. allowing wages to fall
b. raising aggregate expenditure
c. cutting the link between private profit and investment
d. reducing the power of unions
66. Menu costs arise from
a. poor business planning
b. rising food prices
c. foreign competition
d. inflation
67. Barter depends on
a. the availability of money
b. a universal commodity
c. double coincidence of wants
d. market exchange
68. In the chartalist account
a. money must be divisible and storable
b. the first bankers were goldsmiths
c. taxes drive money
d. money is a unit of account
69. M3 includes
a. notes and coins
b. current accounts
c. savings accounts
d. all of the above
70. The demand for money consists of
a. transactions demand
b. speculative demand
c. transactions demand plus speculative demand
d. bank demand
71. Aggregate Demand slopes down because of
a. the wealth effect
b. the interest rate effect
c. the international trade effect
d. all of the above
72. In the long run Aggregate Supply
a. slopes up
b. slopes down
c. is vertical
d. is horizontal
73. According to the quantity theory of money
a. the quantity of money is predictable and changes slowly
b. the quantity of output is flexible
c. the quantity of money varies widely
d. prices do not vary directly with the money supply
74. A negative supply shock will
a. raise the price level and lower output
b. lower the price level and raise output
c. raise the price level and raise output
d. lower the price level and lower output
75. Investment divided by the change in GDP is the
a. multiplier
b. accelerator
c. velocity
d. none of the above
76. Borrowing is risky because
a. yield on investments is uncertain
b. payments on debt are certain
c. banks are subject to default
d. both a and b
77. According to the Marxian theory which of the following is favorable to profits during
the upturn
a. demand
b. effort
c. wages
d. raw materials prices
