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1. If both the supply and the demand for a good increase, the market price will:
a. Rise only in the case of an inelastic supply function.
b. Fall only in the case of an inelastic supply function.
c. Not be predictable with only these facts.
d. Rise only in the case of an inelastic demand function.
3. Which one of the following has an inverse relationship with the demand for money/
a. Aggregate income c. Interest rates
b. Price levels d. Flow of funds
4. Which of the following market features is likely to cause a surplus of a particular product?
a. A monopoly c. A price ceiling
b. A price floor d. A perfect market\
6. The local video stores business increased by 12% after the movie theater raised its prices from
P65 to P70. Thus, relative to movie theater admissions, videos are:
a. substitute goods c. complementary goods
b. superior goods d. public goods
7. An individual receives an income of P3, 000 per month, and spends P 2, 500. An increase in
income of P 500 per month occurs, and the individual spends P 2, 800. The individual’s marginal
propensity to save is:
a. 0.2 c. 0.6
b. 0.4 d. 0.8
8. In any competitive market, an equal increase in both demand and supply can be expected to
always:
a. increase both price and market-clearing quantity
b. decrease both price and market-clearing quantity
c. increase market-clearing quantity
d. increase price
9. Which of the following will cause a shift in the supply curve of a product?
a. Changes in the price of the product
b. Changes in production taxes
c. Changes in consumer taxes
d. Changes in the number of buyers in the market
10. When the government imposes health and safety regulations on certain products, one of the
most likely results is:
a. greater consumption of the product
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11. In a competitive market for labor in which demand is stable, if workers try to increase their
wage:
a. employment must fall
b. government must set a maximum wage below the equilibrium wage
c. firms in the industry must become smaller
d. product supply must decrease
14. If the income elasticity of demand coefficient for a product is 3.00, the good is likely:
a. a luxury good c. a complement good
b. an inferior good d. a necessity
15. Which of the following would cause the demand curve for a commodity to shift to the left?
a. A rise in the price of a substitute product.
b. A rise in average household income.
c. A rise in the price of a complementary commodity.
d. A rise in the population.
17. X and Y are substitute products. If the price of product Y increase, the immediate impact on
product x is:
a. price will increase. c. quantity supplied will increase
b. quantity demanded will increase d. no effect.
18. Which of the following is not likely to affect the supply of a particular good?
a. Changes in government subsidies.
b. Changes in technology
c. Changes in consumer income
d. Changes in production costs
19. If a product’s demand is elastic and there is a decrease in price, the effect will be:
a. a decrease in total revenue.
b. No change in total revenue.
c. A decrease in total revenue and the demand curve shifts to the left.
d. An increase in total revenue.
22. In the pharmaceutical industry where a diabetic must have insulin no matter the cost and
where there is no other substitute, the diabetic’s demand curve is best described as:
a. Perfectly elastic c. Perfectly inelastic
b. Elastic d. Inelastic
23. In the long run, a firm may experience increasing returns due to:
a. law of diminishing returns c. Comparative advantage
b. Opportunity cots d. Economies of scale
24. The measurement of the benefit lost by using resources for a given purpose is:
a. Economic efficiency c. Comparative advantage
b. Opportunity costs d. Absolute advantage
26. In microeconomics, the distinguishing cjharacteristic of the long run on the supply side is
that:
a. Only supply factors determine price and output.
b. Only demand factors determine price and output.
c. Firms are not allowed to enter or exit the industry.
d. All inputs are variable.
29. For a given level of tax collections, prices, and interest rates, a decrease in governmental
purchases will result in a(n):
a. Increase in aggregate demand. c. Decrease in aggregate demand
b. Increase in aggregate supply d. Decrease in aggregate supply
30. Which of the following would not be included in the calculation of the gross domestic
product?
a. Purchase of a new home c. A doctor’s fee
b. An automotive worker’s wages d. Purchase of common stock
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32. Which of the following may provide a leading indicator of a future increase in gross domestic
product?
A. A reduction in the money supply.
B. A decrease in the issuance of building permits.
C. An increase in the timeliness of delivery by vendors.
D. An increase in the average hours worked per week of production workers.
33. The primary reason for allowing legal immigration into industrial nations is the immigrants’
potential for:
A. Reducing a trade deficit C. Contributing to economic growth
B. Fulfilling a trade agreement D. Fulfilling a political agreement
34. Some indicators that lead the economy into a recovery or recession, and some lag it. An
example of a lagging indicator is:
A. Chronic unemployment
B. Housing starts
C. Orders for consumer and producer goods.
D. Consumer expectations
37. Which of the following instruments of monetary policy is the most important means by
which the money supply is controlled?
A. Changing the reserve ratio C. Manipulation of government spending
B. Open-market operations D. Changing the discount rate
40. What factors explain the difference between real and nominal interest rates?
A. Inflation risk C. Default risk
B. Credit risk D. Market risk
42. The money supply in a nation’s economy will decrease the following:
A. Open-market purchases by the nation’s central bank
B. A decrease in the discount rate
C. An increase in the reserve ratio
D. A decrease in the margin requirement
43. If the government were to use only fiscal policy to stimulate the economy from recession, it
would:
A. Raise consumer taxes and increase government spending
B. Lower business taxes and government spending
C. Increase the money supply and increase government spending
D. Lower consumer taxes and increase government spending
44. A market with many independent firms, low barriers to entry, and product differentiation is
best classified as:
A. A monopoly C. Monopolistic competition
B. A natural monopoly D. An oligopoly
45. Which type of economic market structure is composed of a large number of sellers of a
product or service, engaging primarily in nonprice competition?
A. Monopoly C. Perfect competition
B. Oligopoly D. Monopolistic competition
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