Economics Past Paper Practice Questions PDF

1 Part 1_Final Exam Practice Questions Chapter 9, 10, 13, 14, 15, 16, 17 1. Refer to the above figure. What would be the price and domestic quantity demanded after trade? a. $8 and 300 b. $8 and 900 c. $14 and 600 d. $14 and 900 ...

1 Part 1_Final Exam Practice Questions Chapter 9, 10, 13, 14, 15, 16, 17 1. Refer to the above figure. What would be the price and domestic quantity demanded after trade? a. $8 and 300 b. $8 and 900 c. $14 and 600 d. $14 and 900  2 2. Refer to the above figure. What is the consumer surplus in this market before trade? a. A b. A+B c. B + D d. B+C 3. Refer to the above figure. What would be the domestic price and domestic quantity demanded after the tariff? a. P1, Q1 b. P1, Q4 c. P2, Q2 d. P2, Q3  3 4. Refer to the above figure. With free trade, how much would this country import/export? a. export 35 baskets b. import 40 baskets c. export 65 baskets d. import 70 baskets  4 5. Refer to the above figure. What is the consumer surplus in this market after trade? a. A b. A+B c. A+B+D d. C  5 6. Refer to the above figure. As a result of the tariff, what would deadweight loss be? a. B b. B+D c. D + F d. E  6 7. Refer to the above figure. In which panel in the figure shown would there be a shortage for the product? a. panel (a) b. panel (b) c. panel (c) d. panel (d)  7 8. Refer to the above figure. What is this market experiencing? a. zero externality b. a negative production externality c. a positive externality d. a negative consumption externality 9. Refer to the figure. Which of the curves is most likely to represent the average fixed cost? a. A b. B c. C d. D  8 10. What happens when a business is operating a factory in the short run? a. The business cannot alter variable costs. b. Total cost and variable cost are usually the same. c. Average fixed cost rises as output increases. d. The business cannot adjust the quantity of fixed inputs. 11. Refer to the above figure. At what output levels does this firm experience diseconomies of scale? a. output levels below M b. output levels between M and N c. output levels at N d. output levels above N  9 12. What distinguishes short-run cost analysis from long-run cost analysis for a profit- maximizing firm? a. In the short run output is not variable. b. In the short run the number of workers used to produce the firm’s product is fixed. c. In the short run the size of the factory is fixed. d. In the short run there are no fixed costs. 13. What does diminishing marginal product suggest? a. Additional units of output become less costly as more output is produced. b. Marginal cost is upward sloping. c. The firm is at full capacity. d. Average product is rising. 14. Which of the following equations is correct? a. TC = ATC × Q b. TC = ATC / Q c. MC = ΔQ / ΔTC d. MC = ΔQ × ΔTC  10 15. Refer to the above figure. What is the amount of total cost? a. $28.98 b. $20.98 c. $35.98 d. $4.14  11 16. Refer to the above figure. What line segment best reflects the short-run supply curve for this firm? a. BCD b. CD c. CE d. DE  12 17. Refer to the above figure. In which panel is the firm making a profit? a. panel (a) b. panel (b) c. panel (c) d. both panels (b) and (c)  13 18. Refer to the above figure. Assume that the market starts in equilibrium at point A in panel (b). What will result from an increase in demand from Demand0 to Demand1? a. a new market equilibrium at point D b. an eventual increase in the number of firms in the market and a new long-run equilibrium at point C c. rising prices and falling profits for existing firms in the market d. falling prices and falling profits for existing firms in the market  14 19. Refer to the above figure. Which curve depicts the marginal-revenue curve for a monopoly firm? a. A b. B c. C d. D  15 20. Refer to the above figure. What is the amount of profit of this monopoly firm? a. $5.75 b. $4.36 c. $8 d. $12.51  16 21. Refer to the above figure. What is the loss of consumer surplus caused by a profit- maximizing monopoly? a. $100 b. $125 c. $200 d. $625  17 22. Refer to the above figure, which represents a monopolistically competitive firm. What does the distance between Q** and QC represent? a. excess capacity b. profit-maximizing output c. inefficient output d. efficient scale output Ben Strategies Confess Remain Silent Bill gets 1 year Confess Both get 10 years Bill Ben gets 20 year Bill gets 20 years Remain Silent Both get 5 years Ben gets 1 year 23. What is the predicted outcome of this game? a. Both get 10 years b. Bill gets 1 year; Ben gets 20 years c. Bill gets 20 years; Ben gets 1 year d. Both get 5 years  18 24. In a game, what is a dominant strategy, by definition? a. the best strategy for a player to follow only if other players are cooperative b. the best strategy for a player to follow, regardless of the strategies followed by other players c. a strategy that leads to a Nash equilibrium d. a strategy that leads to one player's interests dominating the interests of the other players Mexico High Tariffs Low Tariffs Canada trade value = Canada trade value = $140 Canada High Tariffs $65 Mexico trade Mexico trade value = value = $75 $5 Canada trade value = Canada trade value = $35 $130 Low Tariffs Mexico trade value = Mexico trade value = $285 $275 25. Refer to the above table. When this game reaches a Nash equilibrium, what will the value of trade flow benefits be? a. Canada $35 and Mexico $285b. Canada $65 and Mexico $75 c. Canada $130 and Mexico $5 d. Canada $140 and Mexico $275 26. The concept of a Nash equilibrium, when applied to an oligopoly, relies on the notion that Firm A in an oligopoly chooses its own best strategy based on which consideration? a. based on the strategies that other firms have chosen b. based on the knowledge that other firms are likely to choose their strategies in response to Firm A's choice of a strategy c. based on the objective of maximizing the collective profits of all firms in the industry d. based on the internal financial information of Firm A  19 27. What would oligopolists do regarding their cooperation in the market? a. The oligopolists are best off cooperating and behaving like a monopolist. b. Collusive agreements will always prevail. c. Collective profits are always lower with cartel arrangements than they are without cartel arrangements. d. Pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. 28. What does the prisoner’s dilemma provide insights into? a. the difficulty of maintaining cooperation b. the benefits of avoiding cooperation c. the benefits of government ownership of a monopoly d. the ease with which oligopoly firms maintain high prices 29. What would oligopolists do regarding their cooperation in the market? a. The oligopolists are best off cooperating and behaving like a monopolist. b. Collusive agreements will always prevail. c. Collective profits are always lower with cartel arrangements than they are without cartel arrangements. d. Pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. 30. In the case of oligopolists successfully maintaining monopoly profits, what is the effect of the profit-maximizing level of production? a. bad for consumers and bad for the oligopolists  20 b. bad for consumers and good for the oligopolists c. good for consumers and bad for the oligopolists d. good for consumers and good for the oligopolists 31. In monopolistically competitive markets, what is the role that economic losses play? a. They signal some incumbent firms to exit the market. b. They signal new firms to enter the market. c. They are maintained through government-imposed barriers to exit. d. They show that they are price takers in the market. 32. Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between which of its curves? a. marginal-revenue curve and its total-cost curve b. marginal-revenue curve and its average-total-cost curve c. demand curve and its total-cost curve d. demand curve and its average-total-cost curve 33. What is one way in which monopolistic competition differs from perfect competition? a. In monopolistically competitive markets there are barriers to entry.  21 b. In monopolistically competitive markets all firms produce at the efficient scale in the long run. c. In monopolistically competitive markets each of the sellers offers a somewhat different product. d. In monopolistically competitive markets strategic interactions between firms are vitally important. 34. When does a natural monopoly occur? a. when the product is sold in its natural state (such as water or diamonds) b. when there are economies of scale over the relevant range of output c. when the firm is characterized by a rising marginal-cost curve d. when production requires the use of free natural resources, such as water or air 35. A firm that exits its market has to pay a. its variable costs. b. its fixed costs. c. its marginal costs. d. no costs. 36. In a market that allows free entry and exit, when does the process of entry and exit end for the typical firm in the market? a. when economic profit is zero b. when total revenue is equal to average total cost c. when average revenue exceeds marginal cost d. when accounting profit is zero 37. What is the efficient scale of a firm? a. the quantity of output that maximizes marginal product  22 b. the quantity of output that maximizes total revenue c. the quantity of output that minimizes average total cost d. the quantity of output that minimizes average variable cost 38. When would a positive externality occur? a. when Jack receives a benefit from John’s consumption of a certain good b. when Jack receives personal benefits from his own consumption of a certain good c. when Jack’s benefit exceeds John’s benefit when they each consume the same good d. when Jack’s consumption is not beneficial to John 39. What will a positive externality cause a market to produce? a. more than is socially desirable b. more than is market optimal c. less than is socially desirable d. less than is market optimal 40. Who are the losers when a tariff is implemented in a small open economy? a. producers b. consumers c. government d. government and producers 41. What is a result of binding price ceilings? a. market efficiency b. shortages c. buyer bias d. surpluses 42. What is deadweight loss? a. the loss of consumer surplus  23 b. the loss of government revenue c. the loss of producer surplus d. the loss of total surplus 43. For any country, if the world price of computers is higher than the domestic price of computers, should that country export or import computers? a. export computers, since that country has a comparative advantage in computers b. import computers, since that country has a comparative advantage in computers c. not trade computers, since that country cannot gain from trade d. not trade computers, since they already produce computers more cheaply than other countries 44. Refer to the above figure. What type of externality is represented in this graph? a. a positive externality b. a negative externality c. zero externality d. hyper externality  24 45. What will a positive externality cause a market to produce? a. more than is socially desirable b. more than is market optimal c. less than is socially desirable d. less than is market optimal This figure reflects the market for outdoor concerts in a public park surrounded by residential neighbourhoods. 46. Refer to the above figure. Why is the social cost curve above the supply curve? a. It takes into account the external costs imposed on society by the concert organizers. b. Municipalities always impose noise restrictions on concerts in parks surrounded by residential neighbourhoods. c. Concert tickets are likely to be resold at a higher price, making it more costly to attend the concert. d. Residents in the surrounding neighbourhoods get to listen to the concert for free