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Economic Analysis Quiz
1. Which of the following statements about price-takers is false?
Select one:
a. They include monopolistic competitors and monopolists.
b. They can always raise their prices and still retain some customers.
c. They may set different prices in the short run and in the long run.
d. We do not analyse them using diagrams with supply and demand curves. (Correct)
2. Suppose a market is in equilibrium, and then the demand increases. Which of the following would be shown on a graph that illustrated the effects?
Select one:
a. An excess demand at the initial equilibrium price. (Correct)
b. An excess demand at the new equilibrium price.
c. An excess supply at the initial equilibrium price.
d. An excess supply at the new equilibrium price.
3. The concept of opportunity cost:
Select one:
a. Suggests a major increase in public health-care spending means an expansion in other areas will be harder to achieve. (Correct)
b. Suggests all our wants can be achieved.
c. Would be irrelevant if we eliminated poverty.
d. Is relevant only for a capitalist economy like the United States.
4. The branch of economics wherein mathematics and statistics are used to measure and analyze economic activities is called ____________.
Select one:
a. Applied Economics
b. Econometrics (Correct)
c. Statistics
d. Macro Economics
5. Factors of production are:
Select one:
a. Inputs into the production process. (Correct)
b. Weather, social, and political conditions that affect production.
c. The physical relationships between economic inputs and outputs.
d. The mathematical calculations firms make to determine production.
6. Opportunity cost is term which describes
Select one:
a. A bargain for a factor of production.
b. Costs related to an optimum level of production.
c. Average variable cost.
d. None of these. (Correct)
7. Which of the following would not lead to a decrease in the supply of a product that can be stored?
Select one:
a. An increase in the demand for a joint product. (Correct)
b. A rise in the price of another input.
c. A decrease in the number of firms supplying the product.
d. An expected rise in the price of the product.
8. Economics is the science, which studies human behaviours as a relationship between ends and scarce means which have alternative uses. This definition of Economics is given by:
Select one:
a. Lord Robbins. (Correct)
b. Samuelson.
c. Alfred Marshal.
d. Adam Smith.
9. It is the difference between total revenue and total economic cost
Select one:
a. Accounting Profit
b. Economic Profit (Correct)
c. Gross Profit
d. Net Profit
10. In the circular-flow diagram:
Select one:
a. Spending on goods and services flow from firms to households.
b. Goods and services flow from households to firms.
c. Factors of production flow from firms to households.
d. Income from factors of production flows from firms to households. (Correct)
11. A recession is:
Select one:
a. A period of declining unemployment.
b. A period of declining prices.
c. A period during which aggregate output declines. (Correct)
d. A period of very rapidly declining prices.
12. A rational person does not act unless:
Select one:
a. The action is ethical.
b. The action produces marginal costs that exceed marginal benefits.
c. The action produces marginal benefits that exceed marginal costs. (Correct)
d. The action makes money for the person.
13. Invisible Hand theory was described by ____________
Select one:
a. Robert Anthony.
b. Adam Smith. (Correct)
c. Amartya Sen.
d. C.K. Pralhad.
14. A normative statement is
Select one:
a. One that does not use the ceteris paribus clause.
b. About what ought to be. (Correct)
c. Always true.
d. About what is.
15. Which one of the following is a normative statement?
Select one:
a. The richest 10 per cent of the population has had a bigger percentage increase in incomes over the past 10 years than the poorest 10 per cent.
b. The proportion of people’s income paid in taxes is higher under this government than under the previous one.
c. Inflation is rising.
d. Inequality in the distribution of income is a more serious problem than unemployment. (Correct)
16. It is also known as prescriptive economics
Select one:
a. Positive Economics
b. Micro economics
c. Normative economics (Correct)
d. Economics
17. Moral hazard ____________.
Select one:
a. Occurs when managers pursue profit maximization without regard to the interests of society in general. (Correct)
b. Is the cause of principal-agent problems. (Correct)
c. Occurs only rarely in modern corporations.
d. Exists when either party to a contract has an incentive to cancel the contract.
18. Which of the following statements about industries that are oligopolies is false?
Select one:
a. Firms in these industries may attempt to cooperate.
b. Firms in these industries are interdependent.
c. The fact that there is more than one firm in an oligopoly means that there are no barriers to entry. (Correct)
d. An oligopoly with two firms is called a duopoly.
19. ____________ costs are also known as Imputed Costs
Select one:
a. Opportunity (Correct)
b. Marginal
c. Total
d. Historical
20. Managers are Agents when:
Select one:
a. Managers and workers
b. Shareholders and managers (Correct)
c. Managers and contractors
21. Which of the following statements about duopolists in the Cournot model of oligopoly is false?
Select one:
a. Each firm makes an assumption about how much the other will produce, and sets its own output at the level which will maximize its profit if the other firm behaves as assumed.
b. Each firm has a reaction curve showing its chosen output for different outputs that the other might set.
c. The equilibrium is where the reaction curves intersect.
d. If the duopolists produce homogeneous products, then the equilibrium price will be the same as if the industry had a monopoly. (Correct)
22. Microeconomics is not concerned with the behavior of:
Select one:
a. Consumers
b. Aggregate demand (Correct)
c. Firms
d. Industries
23. The value of an entrepreneur’s resources that she uses in production are known as:
Select one:
a. Explicit costs
b. Sunk costs
c. Operating expenses
d. Implicit costs (Correct)
24. Income flow is also known as ____________
Select one:
a. Product Flow
b. Money flow (Correct)
c. Profit flow
d. Cash flow
25. Income and revenues that are created within a country
Select one:
a. always will remain within that country.
b. Can leave that country only when goods are exported.
c. Can leave that country when goods are imported. (Correct)
d. Can leave that country when capital flows into that country’s financial institutions.
26. The opportunity cost of a machine which can produce only one product is:
a. Low
b. Infinite
c. High (Correct)
d. Medium
27. Which of the following statements regarding the circular-flow diagram is true?
Select one:
a. If Vijay works for XYZ Solutions Ltd. and receives a salary payment, the transaction takes place in the market for goods and services.
b. If XYZ Solutions Ltd. sells a military aircraft, the transaction takes place in the market for factors of production.
c. None of these answers
d. The factors of production are owned by households. (Correct)
e. The factors of production are owned by firms.
28. The growth of an economy is indicated by an
Select one:
a. Increase in savings
b. Increase in investment
c. Increase in general prices
d. Increase in national income (Correct)
29. The circular flow of goods and incomes shows the relationship between:
Select one:
a. Firms and households. (Correct)
b. Goods and services
c. Income and money
d. Wages and salaries
30. Scarcity is a condition that exists when
Select one:
a. There is a fixed supply of resources
b. There is a large demand for a product
c. Resources are not able to meet the entire demand for a product (Correct)
d. All of the above
31. In factor market suppliers are:
Select one:
a. Firms
b. Households (Correct)
c. Government
32. Microeconomics focuses on all of the following EXCEPT
Select one:
a. The effect of increasing the money supply on inflation. (Correct)
b. The purchasing decisions that an individual consumer makes
c. The effect of an increase in the tax on cigarettes on cigarette sales
d. The hiring decisions that a business makes
33. Economics includes the following economic activities:
Select one:
a. Production
b. Consumption
c. Exchange
d. All of the above (Correct)
34. In a planned or command economy, all the economic decisions are taken by the:
Select one:
a. Workers
b. Consumers
c. Voters
d. Government (Correct)
35. Business Economics is also known as ____________.
Select one:
a. Managerial Economics
b. Economics for Executives (Correct)
c. Economic Analysis for Business Decision
d. All of the above
36. A profit-maximizing monopolist sets an output of 100 per day and a price of £10. Which of the following statements is true?
Select one:
a. The firm’s SMC and MR curves intersect at an output of 100, and the point on its demand curve at this output is at £10. (Correct)
b. The firm’s SMC and MR curves intersect at an output of 100, and the point on its MR curve at this output is at £10.
c. The firm’s SMC and AR curves intersect at an output of 100, and the point on its MR curve at this output is at £10.
d. The firm’s SMC and AR curves intersect at an output of 100, and the point on its AR curve at this output is at £10.
37. The total demand for goods and services in an economy is known as:
Select one:
a. Aggregate demand (Correct)
b. Gross national product
c. Economy-wide demand
d. National demand
38. In a free-market economy the allocation of resources is determined by:
Select one:
a. Votes taken by consumers
b. A central planning authority
c. By consumer preferences (Correct)
d. The level of profits of firms
39. Indian economy is:
Select one:
a. Capitalist Economy
b. Socialist Economy
c. Mixed Economy (Correct)
40. Which of the following statements about duopolists in the Bertrand model of oligopoly is false?
Select one:
a. The model assumes one firm is a price leader. (Correct)
b. Each firm makes an assumption about the price that the other will set, and sets its own price at the level which will maximize its profit if the other firm behaves as assumed.
c. Each firm has a reaction curve showing its chosen price for different prices that the other might set.
d. If the duopolists produce homogeneous products, then the equilibrium price will be the same as would arise if the industry was in perfect competition.
41. Continues consumption of homogeneous product is an assumption for:
Select one:
a. Law of Demand (Correct)
b. Law of Supply
c. Law of Diminishing Marginal Utility
42. Which of the following statements about a monopolistic competitor is false?
Select one:
a. It faces a downward sloping demand curve.
b. Its demand curve, and those for its competitors, may all be in different positions.
c. It will produce at the output where its MR and SMC curves intersect, provided it would make either a profit or a loss that was less than its total fixed cost. (Correct)
d. Its supply curve is part of its marginal cost curve.
43. Which of the following is a limitation of the simple circular flow model?
Select one:
a. Product markets are ignored.
b. Resource markets are ignored.
c. The determination of product and resource prices is not explained. (Correct)
d. Households are included, but not businesses.
44. Money is
Select one:
a. Backed by gold in Fort Knox.
b. The same as income.
c. The value of all coins and currency in circulation at any time.
d. Anything that is generally accepted as a medium of exchange. (Correct)
45. Which of the following factor is important for demand along with other factors?
Select one:
a. Selling Power
b. Ability to Buy (Correct)
c. Product Development
d. New product Launch
46. In economics the central problem is:
Select one:
a. Money
b. Scarcity (Correct)
c. Allocation
d. Production
47. According to profit maximization theory of the firm, management:
Select one:
a. Decides output level which maximizes revenue.
b. Output level which minimizes cost.
c. Output level which maximizes difference between the two (Correct)
d. None of these
48. An economic system:
Select one:
a. Requires a grouping of private markets linked to one another.
b. Is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem. (Correct)
c. Requires some sort of centralized authority (such as government) to coordinate economic activity.
d. Is a plan or scheme that allows a firm to make money at some other firm’s expense.
49. Suppose there is a decrease in supply in a market where the supply curve slopes upwards and the demand curve slopes downwards. Which of the following would not occur?
Select one:
a. An excess supply. (Correct)
b. A fall in price.
c. A fall in supply.
d. A fall in the equilibrium level of expenditure.
50. Company goals that are concerned with creating employee and customer satisfaction and maintaining a high degree of social responsibility are called ____________ objectives.
Select one:
a. Social
b. Noneconomic (Correct)
c. Welfare
d. Public Relations
