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Economics April 2012 Final Exam MCQ.docx

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Department
Economics
Course
ECO100Y5
Professor
Edward Ho
Semester
Winter

Description
Economics April 2012 Final Exam MCQ A1. Most modern economies in the world today (A) are similar to feudal systems. (B) are complex systems that defy description and analysis. (C) have a mix of traditional, command and market elements. (D) have pure market exchange. (E) are mostly run by government decree. A2. Index numbers make it possible to compare (A) movements in different variables measured in different units. (B) movements in different variables measured in the same units. (C) government data with private-sector data. (D) time-series data with cross-sectional data. (E) linear and logarithmic data. A3. With a given upward-sloping supply curve for sirloin steak (a normal good), a rise in household income will cause the (A) equilibrium price and equilibrium quantity of sirloin steak to both decrease. (B) equilibrium price and equilibrium quantity of sirloin steak to both increase. (C) equilibrium price to decrease and equilibrium quantity of sirloin steak to increase. (D) equilibrium price to increase and equilibrium quantity of sirloin steak to remain constant. (E) equilibrium price to increase and equilibrium quantity of sirloin steak to decrease. A4. For which of the following pairs of products would we expect the cross-elasticity of demand to be negative? (A) Acetaminophen and ibuprofen. (B) s and plasma s. (C) iPhones and Blackberries. (D) Butter and margarine. (E) Printers and toner cartridges. A5. Suppose a binding output quota is imposed in a previously competitive market with free-market equilibrium price and quantity. The result is (A) lower price and higher quantity exchanged. (B) higher price and higher quantity exchanged. (C) higher price and lower quantity exchanged. (D) lower price and lower quantity exchanged. (E) no change in price or quantity exchanged. A6. Any consumption point that is on the budget line (A) implies that the household is spending all of its income on the goods in question. (B) implies the household is paying above-market prices for the goods in question. (C) indicates consumption spending beyond current income. (D) implies that the household is not spending all of its income on the goods in question. (E) implies the household is paying below-market prices for the goods in question. A7. A firm that maximizes its profits by producing a certain level of output must also (A) maximize its sales. (B) maximize its revenue. (C) minimize its variable costs. (D) maximize its output. (E) minimize its cost of producing that output. A8. Assume a firm is using 10 units of labour and 10 units of capital and is producing 10 units of output per hour. Now both inputs are doubled, resulting in output rising to 18 units per hour. The firm is experiencing (A) constant returns to scale. (B) increasing returns to scale. (C) decreasing costs. (D) decreasing returns to scale. (E) economies of scale. A9. Which of the following conditions is true of a perfectly competitive industry when it is in long- run equilibrium? (A) Price equals minimum short-run average total cost for all firms. (B) Firms are entering the industry. (C) Firms are experiencing increasing returns to scale. (D) Accounting profits for all firms are zero. (E) Firms are exiting the industry. A10. One reason airlines charge a higher price to business travellers is that (A) business travellers don't profit maximize. (B) they are thereby able to minimize costs. (C) business travellers have a relatively higher demand elasticity than other travellers. (D) business travellers have a relatively lower demand elasticity than other travellers. (E) government sets the price policies. A11. The process of "creative destruction" in an oligopolistic industry suggests that (A) profits are driven to zero by the entry of new firms. (B) the prospect of keeping the resulting profits provides an incentive for firms to innovate. (C) no firm can survive in the long run. (D) firms can enter and leave without incurring any sunk costs of entry. (E) there are no costs of exit in oligopoly. A12. Consider a regulated natural monopoly, such as an electricity distribution company, that faces falling long-run average costs. If it is forced to price its output at average cost it will provide (A) the socially optimal amount of output. (B) so little output that there will be a shortage. (C) more output than can be absorbed by the market. (D) more output than what is socially optimal. (E) less output than what is socially optimal. A13. If a country is experiencing inflation, the change in the nominal national product will (A) overstate the change in the real value of production. (B) overstate the inflation rate. (C) equal the change in the real national product. (D) be falling faster than the rate of inflation. (E) understate the value of national income. A14. Measures of GDP may understate the economic well-being of people in developing countries if those countries tend to (A) have a high degree of foreign direct investment. (B) have very high rates of pollution. (C) have a large share of non-market activities. (D) import much more than they export. (E) emphasize agricultural and resource-based production. A15. Suppose aggregate output is demand-determined. The simple multiplier will increase as a result of (A) a decrease in autonomous consumption. (B) an increase in autonomous consumption. (C) a decrease in the marginal propensity to consume. (D)
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