1. A) B) C) D) Economies of scale can result from all of the following except one. Which is the exception? Increased firm size allowing the firm to employ specialist managers A bus company replacing smaller buses with larger buses An increase in the size of a firms capacity and plant A factory employing two shifts of workers rather than one shift per day
2.
Which of the following statements about the subject of economics are correct? (i) (ii) (iii) (iv) The main purpose of economic activity is to increase economic welfare Economic analysis suggests that economic growth is always beneficial Economics is solely concerned with the study of commercial business activity Economics studies the problem of allocating scarce resources between competing uses B) (i) and (iv) only C) (i), (ii) and (iv) only D) (i), (iii) and (iv) only
3. A) B) C) D)
All of the following are typical characteristics of oligopoly except which one? Extensive use of advertising and product differentiation The ability to conduct independent decision making Significant barriers to entry Small number of firms
4. A) B) C) D)
Financial intermediation is the process by which Net savers and net borrowers are brought together The central bank acts as a link between commercial banks and the government Banks provide commercial services for their customers Banks create credit on the basis of their liquid assets
5.
The short-run shut down price for a firm in perfect competition occurs where price equals B) Average variable cost D) Average total cost
6. A) B) C) D)
Which of the following businesses would benefit most from an expansionary monetary policy? Highly geared companies producing consumer durable goods Cash rich companies producing consumer durable goods Low geared companies in the supermarket industry Low geared companies whose inputs are mainly imported.
7. A) B) C) D)
Which of the following assertions would not be consistent with supply side economics? Increasing aggregate demand will not affect national income or the price level High interest rates may reduce investment expenditure and so harm national income growth Aggregate supply creates its own demand Lower taxation increases national income by reducing disincentives to work and invest.
8.
A) Some consumers being unable to afford goods because prices have been driven up by the demand from other consumers B) Firms training workers who then move to other employees C) Pollution resulting from a production process D) Road congestion caused by rush hour traffic on the roads
9. A) B) C) D)
In a customs union member countries Meet to agree tariff increases affecting internal trade between themselves Trade freely with each other and accept a common external tariff for trade with the rest of the world Trade freely with each other impose their own national restrictions on trade with the rest of the world Replace national currencies with a common currency such as the Euro
10. Select the definition of marginal cost form the list below: A) B) C) D) The addition to total costs when output rises by one unit The average variable cost when fixed costs are zero The average variable cost at any given level of output The average total cost at any given level of output.
11. Which of the following statements about the difference between profit and shareholder wealth is false? A) B) C) D) Shareholder wealth takes risk into account Shareholder wealth influences share prices but profit does not Shareholder wealth considers financial returns over a longer period than profit Shareholder wealth is a discounted present value of anticipated future earnings but profit is just a short term measure of past earnings.
12. Which of the following is most likely to increase rather then to reduce market imperfections? A) B) C) D) A lowering of entry barriers separating markets Informative advertising giving way to persuasive advertising Employers making grater use of the internet to advertise job vacancies An increase in the number of buyers and sellers in a market
13. Which of the following is not a suitable way for a manufacturing company to finance buying assets? A) Leases C) Certificates of deposits B) Commercial bonds D) Commercial bills
14. A country has a trade deficit. The demand for its imports and exports are both price elastic. All of the following would lead to an a reduction on the countrys trade deficit except which one? A) B) C) D) A depreciation in the exchange rate for the countrys currency? A fall in consumer incomes in the country. An improvement in the countrys terms of trade A rise in the rate of inflation in its trading partners economies.
15. Which of the following statement about public goods us correct? A) B) C) D) Public goods are examples of free goods The problem of scarcity does not affect the provision of public goods Public goods are characterized by the free-rider problem Public goods are defined as those goods provided by the state
16. If a firm operating in an oligopolistic market believes that its demand curve is kinked A) B) C) D) Its marginal cost curve must show a discontinuity It is unable to secure economies of large scale production It will tend to avoid price changes It cannot maximize profits where marginal cost and marginal revenue are equal
17. An advantage of a command economy is that: A) B) C) D) The goods and services produced reflect the preference of consumers Social costs and benefits can be taken into account The state always know what is in an individuals best interest Decision making is decentralised
18. All of the following would result from a shift from direct to indirect taxes except which one? A) B) C) D) A reduction in the disincentive to work and effort A shift in the burden of taxation towards lower income groups A more progressive taxation system An increase in the retail price index
19. Which one of the following is a characteristic of imperfect competition but not of perfect competition? A) Profit maximizing behaviour C) Ease of entry into the industry B) Large numbers of firms in the firms D) Product differentiation
20. In a market economy, price act as all of the following except which one? A) A means of allocating scarce resources C) Signals to producers about consumer preferences B) A substitute for barter D) Signals to consumers about costs
21. In a system of freely floating exchange rates the central bank and government will A) B) C) D) Not need to engage in exchange equalization Have to intervene in foreign exchange markets in order to maintain the system Allow market forces to determine the exchange rate within a strictly limited band Have less ability to control the money supply than in a fixed exchange rate system
22. Monetarist economists believe all of the following except which one? A) B) C) D) There is a stable relationship between the growth of the money supply and the rate of inhalation Supply side measures are the only effective means of reducing the natural rate of unemployment In the long run only fiscal policy is effective in reducing unemployment Budget deficits should be avoided since they are a significant source of growth in the money supply
23. A PPC can be used to show all of the following except A) B) C) D) The different combination of two goods that can be produced from available inputs The different combination of two goods that a household can purchase with the available income All the technically efficient combinations of output that can be produced with available inputs Full employment of resources in an economy
24. Which of the following statements must be true when a firms average total costs and average variable cost are identical? A) Total FC = 0 C) ATC of production are minimized B) MC = 0 D) The firm produces zero output.
25. Which of the following statements describes the role of an agent A) B) C) D) An employee of an organisation One who is responsible for the organization pursues the interests of owners One who is paid by the owners of the organization. An owner of the organisation
26. It is necessary to include a balancing item in the BOP to A) B) C) D) Compensate for mistakes made when recording current and capital flows Balance the capital and current accounts ensure that balance of payment is in equilibrium record accurately changes of official reserves
27. Which of the following is not a consequence of a country suffering a high rate of inflation? A) B) C) D) impoverishment of households on fixed income A high nominal rate of interest A depreciation of its exchange rate compared to currencies from countries with lower inflation rates Excess aggregate demand for goods and services
28. An example of forward vertical integration is A) B) C) D) A car manufacturer A car manufacturer taking over an engine factory The merger between Mercedes and Chrysler in the car industry The Ford car company producing refrigerators
29. A profit-maximising firm in imperfect competition must cut the products price is A) Demand is elastic C) Average total costs fall B) Marginal revenue is greater than marginal cost D) The demand curve shifts rightwards
30. Central banks fulfill all of the following functions except which? A) B) C) D) Lender of liquidity to the commercial banks Chief advisor to the government on taxation policy Provider of capital and liquidity to the government Holder of bank accounts on behalf of commercial banks
31. Which of the following statements is always true for a merit good? A) B) C) D) Zero negative externalities result from the consumption of a merit good It is characterized by non-excludability and non-rivalry When consumed, the social benefits exceed the private benefits It is provided by the government
32. Every year a household allows its bank account to become overdrawn for 3 months to pay for its annual holiday. Which one of the following statements correctly describes this? A) B) C) D) A short term lack of synchronization between payments and receipts Medium term borrowing Long Term borrowing Maturity transformation
33. Identify which of the following features does not distinguish redeemable debt apart from equity: A) B) C) D) It will pay a regular set sum of interest It will never be traded on an investment market It will have a maturity date when it will mature It has a face value which shows its value at redemption
34. A rise in the gross national product of a country will raise average living standards only if A) B) C) D) Taxation does not exceed government expenditure savings rise faster then investment It exceeds the rate of growth of population Exports are at least equal to imports
35. The development of the Indian economy in recent years has led to it becoming well-known as a place for the telephone call centres, IT programming and the conducting of transactions processing (e.g. invoice processing and sales order handling) for UK firms. Which of the following terms best describes this sort of economic development? A) B) C) D) Balanced economic growth Growth is the tertiary sector Growth is the primary sector Growth is the secondary sector