Economics Past Paper PDF

++++ What is the fundamental problem that the study of economics addresses? ==== \#Unlimited wants and limited resources ==== Equal distribution of wealth ==== Overproduction and under consumption ==== Government intervention ++++ According to the principle of opportunity cost, what is th...

++++ What is the fundamental problem that the study of economics addresses? ==== \#Unlimited wants and limited resources ==== Equal distribution of wealth ==== Overproduction and under consumption ==== Government intervention ++++ According to the principle of opportunity cost, what is the cost of an economic decision? ==== The monetary cost ==== The time and effort involved ==== \#The value of the next best alternative foregone ==== The total expenses incurred ++++ Which principle suggests that people make decisions by comparing marginal benefits and marginal costs? ==== \#Marginal analysis ==== Ceteris paribus ==== Scarcity principle ==== Production possibilities frontier ++++ What is the primary characteristic of a market economy? ==== Centralized planning ==== Government ownership of resources ==== \#Consumer choice and private ownership ==== Equality of income ++++ Which economic system relies on the forces of supply and demand to determine prices and allocate resources? ==== Command economy ==== Traditional economy ==== Socialist economy ==== \#Market economy ++++ In a command economy, who typically makes decisions about what and how much to produce? ==== Private individuals ==== Consumers ==== \#Government authorities ==== Market forces ++++ Which economic system combines elements of both market and command economies? ==== Traditional economy ==== \#Mixed economy ==== Market economy ==== Command economy ++++ What does \"invisible hand\" refer to in economic theory? ==== Government regulations ==== \#Market forces guiding self-interest ==== Centralized planning ==== Social safety nets ++++ Which of the following goods is likely to have a more inelastic demand? ==== Gasoline ==== \#Loaf ==== Cola ==== Luxury cars ++++ What is the main difference between economic profit and accounting profit? ==== \#Economic profit includes explicit and implicit costs, while accounting profit only includes explicit costs. ==== Economic profit includes only explicit costs, while accounting profit includes explicit and implicit costs. ==== Economic profit and accounting profit are the same. ==== Economic profit includes only implicit costs, while accounting profit includes explicit and implicit costs. ++++ If a firm\'s marginal product of labor is 10, what does this mean? ==== The firm is producing 10 units of output. ==== \#The firm is adding 10 units of output for each additional unit of labor. ==== The firm\'s total output is 10 units. ==== The firm\'s average output is 10 units. ++++ What does diminishing marginal product of labor indicate? ==== \#Output decreases as more labor is added. ==== Output increases as more labor is added. ==== Output remains constant as more labor is added. ==== Output fluctuates as more labor is added. ++++ Which of the following is a characteristic of perfectly competitive markets? ==== Product differentiation ==== \#Many buyers and sellers ==== Barriers to entry ==== Monopolistic competition ++++ In a perfectly competitive market, each firm is a: ==== Price creator ==== \#Price taker ==== Monopolist ==== Oligopolist ++++ What is the main goal of a firm in a perfectly competitive market? ==== \#Maximize profit ==== Increase market share ==== Control prices ==== Minimize revenue ++++ The demand curve facing a perfectly competitive firm is: ==== \#Perfectly elastic ==== Perfectly inelastic ==== Downward-sloping ==== Upward-sloping ++++ Which of the following is a characteristic of a monopolistic competition market structure? ==== Many sellers, identical products ==== \#Many sellers, differentiated products ==== One seller, unique product ==== Few sellers, identical products ++++ What is a key feature of an oligopoly? ==== Many firms, identical products ==== \#Few firms, differentiated products ==== One firm, unique product ==== Many firms, similar products ++++ What is a natural monopoly? ==== A monopoly that arises due to government regulations ==== A monopoly formed through aggressive business practices ==== \#Single company can produce at a lower cost than other competitors can ==== A monopoly resulting from unfair competition ++++ A firm in a monopolistic market faces a: ==== \#Downward-sloping demand curve ==== Perfectly elastic demand curve ==== Perfectly inelastic demand curve ==== Upward-sloping demand curve ++++ Which of the following best describes the term \"externality\" in economics? ==== A government policy aimed at controlling inflation ==== A cost or benefit incurred by a third party who did not choose to be affected by it ==== A strategy used by companies to increase their market share ==== A direct payment made by consumers for a product or service ++++ Which of the following is an example of a positive externality? ==== Pollution ==== \#Education ==== Traffic congestion ==== Noise pollution ++++ What does a point inside the production possibilities frontier (PPF) indicate? ==== \#Inefficiency ==== Unattainability ==== Economic growth ==== Opportunity cost ++++ If an economy is operating on the production possibilities frontier (PPF), what does it imply? ==== \#Efficient allocation of resources ==== Underutilization of resources ==== Overutilization of resources ==== Unattainable production levels ++++ What happens to the equilibrium price and quantity when demand increases while supply remains constant? ==== \#Price increases, quantity increases ==== Price increases, quantity decreases ==== Price decreases, quantity increases ==== Price decreases, quantity decreases ++++ In the law of demand, what is the typical relationship between price and quantity demanded? ==== Direct ==== \#Inverse ==== No relationship ==== Random ++++ When the supply of a good decreases while demand remains constant, what is the likely effect on the equilibrium price and quantity? ==== \#Price increases, quantity decreases ==== Price decreases, quantity increases ==== Price decreases, quantity decreases ==== Price increases, quantity increases ++++ If the cross-price elasticity of two goods is positive, what can be concluded about their relationship? ==== Complementary goods ==== \#Substitute goods ==== Unrelated goods ==== Inferior goods ++++ What does the term \"elasticity of demand\" measure? ==== \#How much quantity demanded changes in response to a change in one of its determinants ==== Total consumer spending on a good ==== The responsiveness of supply to changes in demand ==== The total quantity demanded in the market ++++ If the government imposes a price ceiling below the equilibrium price, what is likely to occur? ==== Surplus ==== \#Shortage ==== No change ==== Equilibrium ++++ Which factor is likely to shift the supply curve to the right? ==== Increase in production costs ==== Decrease in demand ==== \#Technological improvements ==== Decrease in the number of suppliers ++++ When consumers perceive a good as a luxury, how does the demand curve behave when their income increases? ==== \#Shifts right ==== Shifts left ==== Becomes steeper ==== Becomes flatter ++++ What is the name given to the situation when quantity demanded exceeds quantity supplied at the existing price? ==== Surplus ==== \#Shortage ==== Equilibrium ==== Disequilibrium ++++ How is the price elasticity of demand calculated? ==== \#Percentage change in quantity demanded divided by percentage change in price ==== Percentage change in price divided by percentage change in quantity demanded ==== Change in quantity demanded multiplied by change in price ==== Change in price multiplied by change in quantity demanded ++++ If a good has many substitutes available in the market, what is likely to happen to its price elasticity of demand? ==== \#Increase ==== Decrease ==== Remain constant ==== No effect ++++ What happens to equilibrium price and quantity when both demand and supply decrease? ==== Price decreases, quantity increases ==== Price increases, quantity is ambiguous ==== \#Price is ambiguous, quantity decreases ==== Price increases, quantity increases ++++ What is the relationship between the price elasticity of demand and total revenue for a normal (not perfectly elastic or inelastigood? ==== \#Direct ==== Inverse ==== No relationship ==== Random ++++ When the government imposes a tax on a good, how does it typically affect the equilibrium price and quantity? ==== Price decreases, quantity increases ==== Price increases, quantity increases ==== Price decreases, quantity decreases ==== \#Price increases, quantity decreases ++++ If the price of a good falls and the total revenue increases, what can be said about the price elasticity of demand? ==== \#Elastic ==== Inelastic ==== Unit elastic ==== Indeterminate ++++ What does price elasticity of demand indicate when the coefficient is more than one? ==== Inelastic demand ==== \#Elastic demand ==== Unitary elastic demand ==== Perfectly elastic demand ++++ If the price of a good increases by 10%, and the quantity demanded decreases by 20%, what is the price elasticity of demand? ==== 0.5 ==== 1.5 ==== \#2.0 ==== 5.0 ++++ In which scenario would the demand for a good be most elastic? ==== Necessity with few substitutes ==== \#Luxury with many substitutes ==== Necessity with no substitutes ==== Luxury with no substitutes ++++ What is the elasticity of demand for a perfectly inelastic good? ==== \# 0 ==== 1 ==== ∞ (infinity) ==== -1 ++++ If the cross-price elasticity between two goods is negative, what does it imply about their relationship? ==== \#Complementary goods ==== Substitute goods ==== Unrelated goods ==== Inferior goods ++++ What does a perfectly elastic supply curve look like? ==== \#Horizontal line ==== Vertical line ==== Upward-sloping line ==== Downward-sloping line ++++ If the percentage change in quantity supplied is greater than the percentage change in price, what is the elasticity of supply? ==== Inelastic ==== \#Elastic ==== Unitary elastic ==== Perfectly elastic ++++ In the long run, supply is generally more elastic than in the short run because: ==== \#Firms can easily enter or exit the market ==== Firms are constrained by fixed factors of production ==== Demand is more stable ==== Prices are more volatile ++++ What is the definition of fixed costs in production? ==== Costs that vary with production levels ==== \#Costs that remain constant regardless of production levels ==== Variable costs per unit ==== Direct labor costs ++++ Which of the following is an example of variable costs in manufacturing? ==== Rent for the production facility ==== Salaries of permanent staff ==== \#Raw material expenses ==== Annual insurance premiums ++++ What does the term \"opportunity cost\" refer to in the context of production costs? ==== Explicit monetary expenses ==== \#The cost of forgoing the next best alternative ==== Variable costs ==== Sunk costs ++++ Which cost is also known as \"incremental cost\" and represents the additional cost incurred by producing one more unit? ==== Fixed cost ==== \#Marginal cost ==== Average cost ==== Sunk cost ++++ What is the formula for calculating total cost? ==== \#Total Cost = Fixed Costs + Variable Costs ==== Total Cost = Fixed Costs - Variable Costs ==== Total Cost = Average Costs + Marginal Costs ==== Total Cost = Opportunity Costs - Sunk Costs ++++ What is the formula for calculating average variable cost? ==== \#Average Variable Cost = Total Variable Cost / Quantity of Output ==== Average Variable Cost = Total Cost / Quantity of Output ==== Average Variable Cost = Fixed Costs / Quantity of Output ==== Average Variable Cost = Marginal Cost / Quantity of Output ++++ Which of the following is an example of an implicit cost? ==== Rental payment for office space ==== The salary paid to employees ==== \#The value of owner\'s time spent working in the business ==== The cost of raw materials ++++ What is the purpose of calculating the break-even point in a business? ==== To maximize profits ==== \#To determine the minimum production level needed to cover all costs ==== To calculate average variable costs ==== To assess historical costs ++++ In a monopoly, the firm is a: ==== Price taker ==== \#Price maker ==== Price follower ==== Price discriminator ++++ Which market structure is characterized by a few interdependent firms? ==== \#Oligopoly ==== Monopoly ==== Perfect competition ==== Monopolistic competition ++++ In a monopolistically competitive market, firms differentiate their products to: ==== \#Increase price elasticity of demand ==== Encourage collusion ==== Achieve economies of scale ==== Create perfect competition ++++ A firm in perfect competition maximizes profit by producing where: ==== \#Marginal cost equals marginal revenue ==== Average cost is minimized ==== Total revenue is maximized ==== Quantity equals marginal cost ++++ Which market structure is most likely to exhibit non-price competition? ==== Perfect competition ==== Monopoly ==== Oligopoly ==== \#Monopolistic competition ++++ The Herfindahl-Hirschman Index (HHI) is a measure of: ==== \#Market share concentration ==== Price elasticity ==== Consumer surplus ==== Profit maximization ++++ In a perfectly competitive market, a firm will shut down in the short run if: ==== \#Total revenue is less than variable cost ==== Total revenue is less than total cost ==== Total revenue is equal to total cost ==== Average variable cost exceeds price ++++ What does GDP stand for? ==== Gross Domestic Price ==== General Domestic Product ==== Gross Domestic Profit ==== \#Gross Domestic Product ++++ What is the economic term for the satisfaction or benefit derived from consuming a good or service? ==== Profit ==== Cost ==== \#Utility ==== Demand ++++ Compute equilibrium quantity by using the following linear functions of Qd and Qs: Qd=20-2p and Qs=-10+2p ==== Q=7,5 ==== Q=6,5 ==== Q=5,5 ==== \#Q=5 ++++ In the circular flow model, households primarily provide which of the following to firms? ==== Final goods and services ==== Taxes and government spending ==== \#Factors of production ==== Government regulations ++++ In a closed economy with no government, what are the two primary markets in the circular flow model? ==== Product market and labor market ==== \#Factor market and product market ==== Capital market and labor market ==== Financial market and goods market ++++ When economists say that "people face trade-offs," they mean: ==== \#Every choice has a benefit and a cost. ==== There is a fixed limit on resources. ==== People can obtain everything they desire. ==== Trade-offs occur only in business transactions. ++++ Which of the following demonstrates the "rational people think at the margin" principle? ==== Deciding to buy more groceries because there is a discount. ==== \#Comparing the additional benefit of one more unit of production with its additional cost. ==== Making a decision based only on total costs. ==== Opting to buy a product because everyone else is buying it. ++++ Economists refer to incentives as: ==== Actions that result in automatic economic growth. ==== \#Factors that motivate individuals to act in certain ways. ==== Policies that always lead to a stable economy. ==== Unintended consequences of government intervention. ==== ++++ The principle of "trade can make everyone better off" suggests that: ==== Trade benefits only the wealthier party. ==== \#Trade allows people to specialize in what they do best. ==== Trade always leads to higher employment. ==== Trade eliminates competition between countries. ++++ According to the principle of markets, a competitive market: ==== Guarantees that all participants will receive equal benefits. ==== \#Leads to efficient outcomes without any government intervention. ==== Cannot exist without price controls. ==== Operates more effectively without any rules. ++++ Which statement best describes the role of government in correcting a market failure? ==== Governments should avoid intervening in markets. ==== \#Governments are often needed to improve efficiency when externalities are present. ==== Market failures correct themselves automatically without government help. ==== Market failure is not affected by government policies. ++++ Which of the following would be considered an externality? ==== A company lowering its prices. ==== \#Pollution caused by a factory that affects nearby residents. ==== Consumers choosing alternative products. ==== A government program to help unemployed workers. ++++ Which of these statements reflects the principle that "the standard of living depends on a country's production"? ==== \#Higher production per worker usually correlates with higher income and living standards. ==== The amount of money printed by a country determines its standard of living. ==== A country's wealth is solely based on its natural resources. ==== Increased imports raise a country's standard of living directly. ++++ Which principle explains the concept of inflation? ==== Inflation is always caused by an increase in exports. ==== \#When the government creates more money, the overall price level tends to rise.\* ==== Inflation can only occur if there is a decrease in production. ==== Inflation occurs when the supply of goods exceeds demand. ++++ "There is no such thing as a free lunch" illustrates which economic principle? ==== Incentives are always present. ==== \#People face trade-offs. ==== Inflation is inevitable. ==== Government intervention is necessary. ++++ Which best represents the concept that "markets are usually a good way to organize economic activity"? ==== Governments should set all prices in the economy. ==== Central planning is necessary for market success. ==== \#Markets allocate resources through the self-interest of individuals. ==== Markets need strict regulations to function. ++++ According to economic principles, which scenario could improve a country's standard of living? ==== \#Increasing the production of goods and services. ==== Reducing trade with other nations. ==== Restricting access to foreign markets. ==== Implementing minimum wage laws. ++++ What does the principle that "trade can make everyone better off" imply about international trade? ==== Every country should produce everything domestically. ==== \#Countries benefit from trade due to specialization. ==== Trade leads to job losses only in poorer nations. ==== Only developed nations benefit from trade. ++++ Which scenario demonstrates "thinking at the margin"? ==== \#A business deciding whether to add one more employee based on additional profits. ==== A government choosing to cut taxes by half. ==== A family deciding to move to a different country. ==== An individual selecting a completely different career. ++++ Which of these statements reflects the relationship between inflation and unemployment in the short run? ==== Higher inflation always leads to higher unemployment. ==== \#There is often a trade-off between inflation and unemployment in the short run. ==== Inflation and unemployment are unrelated. ==== Reducing inflation always lowers unemployment. ++++ According to economic principles, which factor directly affects a nation's productivity? ==== Natural resource availability ==== The amount of money in circulation ==== \#The quality of technology and education ==== The size of its population ++++ In terms of economic principles, why do people face trade-offs? ==== \#Because resources are limited and choices must be made. ==== Because all resources are distributed equally. ==== Because governments control all resources. ==== Because markets are inefficient in distributing goods. ++++ According to G.Mankiw, economists make use of assumptions because: ==== \#They simplify complex realities to focus on specific economic behaviors. ==== They reduce the need for mathematical models. ==== They allow economists to avoid empirical testing. ==== They ensure that all economic theories apply universally. ++++ Which of the following is an example of a \"positive statement\" in economics? ==== \"The government should lower taxes to boost spending.\" ==== \#\"Higher interest rates increase savings in the economy.\" ==== \"Income inequality is morally unacceptable.\" ==== \"Minimum wage laws should be abolished.\" ++++ In the context of production possibilities frontiers (PPF), an outward shift of the frontier typically represents: ==== \#Economic growth or an improvement in resources or technology. ==== A decrease in the opportunity cost of producing goods. ==== A decline in the available resources or labor force. ==== Increasing returns to scale in all industries. ++++ Which of the following is a normative statement? ==== \"The unemployment rate is 4%.\" ==== \"Higher inflation reduces the purchasing power of money.\" ==== \#\"The government ought to reduce unemployment benefits.\" ==== \"The economy grew by 2% last quarter.\" ++++ In economic models, the term \"ceteris paribus\" means: ==== Considering all factors equally in the analysis. ==== \#Keeping other relevant variables constant. ==== Adapting conclusions based on changing variables. ==== Comparing different outcomes to understand relative impacts. ++++ Which of the following best defines the concept of absolute advantage? ==== The ability to produce a good with a lower opportunity cost than others. ==== \#The ability to produce more of a good with fewer resources than others. ==== The reliance on other countries for goods not produced domestically. ==== The economic benefit of engaging in trade with other countries. ++++ In terms of comparative advantage, what must a country consider when determining which goods to produce and trade? ==== The number of resources available for each good. ==== The absolute advantage it has in producing all goods. ==== \#The opportunity cost of producing each good relative to others. ==== The potential profit margins on each good. ++++ Two countries, A and B, can produce both cars and computers. Country A can produce 10 cars or 5 computers per hour, while Country B can produce 5 cars or 10 computers per hour. Which of the following is true? ==== \#Country A has a comparative advantage in producing cars. ==== Country B has a comparative advantage in producing cars. ==== Both countries have a comparative advantage in computers. ==== Both countries have a comparative advantage in cars. ++++ The \"Gains from Trade\" concept relies on which of the following economic theories? ==== Law of Demand ==== \#Comparative Advantage ==== Economies of Scale ==== Theory of Supply ++++ Which of the following scenarios best illustrates the concept of interdependence? ==== A country produces all the goods it needs domestically. ==== A country exports all of its production to other countries without importing any goods. ==== \#A country imports goods from others because it can produce them at a higher cost. ==== A country consumes only what it can afford without borrowing from other nations. ++++ When analyzing gains from trade, economists focus on opportunity cost because: ==== Opportunity cost determines absolute advantage. ==== Lower opportunity cost ensures a higher rate of productivity. ==== \#Opportunity cost reveals the most efficient allocation of resources for maximum benefit. ==== Higher opportunity cost increases a country\'s likelihood to specialize. ++++ Which of the following is classified as a fixed cost in cost of production? ==== Raw material cost that varies with production ==== \#Interest payments on long-term loans ==== Wages paid to factory workers per hour ==== Energy expenses that increase with output ++++ What is the total cost if the fixed cost is \$200, the variable cost per unit is \$5, and 100 units are produced? ==== \$500 ==== \#\$700 ==== \$600 ==== \$800 ++++ A firm's total cost is \$500 when it produces 20 units. If the firm's fixed cost is \$100, what is its average variable cost? ==== \$25 ==== \#\$20 ==== \$15 ==== \$30 ++++ In the short run, what is a firm's supply decision based on if the market price falls below the minimum of the average variable cost? ==== The firm will increase production ==== \#The firm will shut down temporarily ==== The firm will increase prices ==== The firm will reduce its fixed costs ++++ A factory incurs \$500 in total fixed costs and \$300 in total variable costs at a production level of 50 units. What is the average total cost per unit? ==== \$10 ==== \#\$16 ==== \$6 ==== \$20 ++++ If marginal cost is above average total cost, then: ==== Average total cost is decreasing ==== Average total cost is constant ==== \#Average total cost is increasing ==== Marginal cost must also be decreasing ++++ When a company's total costs rise from \$2,000 to \$2,500 after increasing production from 100 units to 150 units, what is the marginal cost of the additional 50 units? ==== \$20 ==== \$25 ==== \#\$10 ==== \$50 ++++ Which of the following accurately describes the relationship between marginal cost (MC) and average total cost (ATC)? ==== \#MC intersects ATC at its minimum point. ==== MC is always below ATC. ==== ATC decreases as long as MC is increasing. ==== MC intersects ATC at its maximum point. ++++ When average variable cost (AVC) is at its minimum, which of the following statements is true? ==== \#AVC is equal to marginal cost (MC). ==== AVC is equal to average fixed cost (AFC). ==== AVC is decreasing, and MC is increasing. ==== AVC is at its maximum point. ++++ Which of the following statements best explains why the average total cost (ATC) curve is U-shaped? ==== ATC initially falls due to decreasing marginal returns, then rises due to increasing marginal returns. ==== \#ATC initially falls due to spreading fixed costs, then rises as diminishing marginal returns set in. ==== ATC initially rises due to increasing marginal costs, then falls as economies of scale are realized. ==== ATC remains constant due to the fixed costs. ++++ If the marginal cost (MC) is above average total cost (ATC), what happens to ATC as production increases? ==== ATC decreases. ==== \#ATC increases. ==== ATC remains unchanged. ==== ATC fluctuates randomly. ++++ In the short run, what is the effect of an increase in production on the average fixed cost (AFC) curve? ==== AFC remains constant as production increases. ==== \#AFC decreases as production increases. ==== AFC increases as production increases. ==== AFC first increases and then decreases. ++++ Which of the following statements is true regarding the relationship between total cost (TC), total fixed cost (TFC), and total variable cost (TVC)? ==== \#TC = TFC + TVC. ==== TC = TFC - TVC. ==== TC = TFC × TVC. ==== TC = TFC / TVC.