Started on Saturday, 4 August 2018, 8:39 AM

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Completed on Saturday, 4 August 2018, 9:05 AM
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Question 1
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Which of the following statements about an economic model is incorrect?

Select one:

a. Economic models are used for predicting economic behaviour.

b. Economic models can be used to understand aggregate macroeconomic performance.

c. The prediction from an economic model is always correct.

d. Economic models are based on assumptions.

e. Economic models can be useful for understanding economic behavior.

f. None of the above is incorrect.

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The correct answer is: The prediction from an economic model is always correct.

Question 2
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Production Possibility Frontier (PPF) shows us :

Select one:

a.
different combinations of two goods an economy can and cannot produce with unlimited
resources.

b.
opportunity cost always decreases as we reduce production of an alternative good.

c.
maximum amount of goods and services that an economy can produce with existing level
of inputs and state of technology.

d.
allocative efficiency of all goods and services produced in an economy.

e.
technology and resources are fixed but the economy can produce more of both goods.

f. All of the above are correct.

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The correct answer is:
maximum amount of goods and services that an economy can produce with existing level
of inputs and state of technology.

Question 3
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Samuel operates a factory that produces shoes. Samuel employs around 1000 workers
and exports the shoes to China on monthly basis. The income earned by land owner for
letting Samuel operate factory on his/her land will be called :

Select one:

a. Samuel operates a factory that produces shoes. Samuel employs around 1000 workers
and exports the shoes to China on monthly basis. The income earned by land owner for
letting Samuel operate factory on his/her land will be called :

b. rent.
c. rental cost of land.

d. land use fee.

e. export income.

f. rental cost of capital

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The correct answer is: rent.

Question 4
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Suppose an economy produces computers and buses. The marginal cost curve is upward
sloping for both goods, while the production possibility frontier is bowed outwards. As
more computers are produced, the opportunity cost increases because :

Select one:

a. resources are equally distributed across production of computers and buses due to
scarcity of resources.

b. inputs used in the production of buses may not be equally good for production of
computers.

c. resources can’t be shifted always between production of computers and buses.

d.

there is rise in transfer cost of resources between production of computers and buses.

e.

cost of production increases as a result of technological progress.

f. firms like to increase cost to charge a higher price.

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The correct answer is: inputs used in the production of buses may not be equally good for
production of computers.

Question 5
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Which of the following is a way to measure aggregate output?

Select one:

a. Income approach

b. Value-added approach

c. Production approach

d. Expenditure approach

e. All of the above

f. None of the above are correct as output is estimated based on assumptions by

economists.

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The correct answer is: All of the above

Question 6
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Which of the following is not a payment for use of resources?

Select one:

a. Interest income

b. Labour payments

c. Capital income

d. Rent

e.
Royalty

f. Salary/Wages

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The correct answer is: Capital income

Question 7
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Which of the following statement is true about net investment?

Select one:

a. It is computed by subtracting depreciation from gross investment.

b. It is computed by adding up total decline in value of capital stock in an economy.

c. It computed by adding up total investment for all firms in an economy and then
subtracting cost of capital expenditure of all firms.

d. It is computed by taking difference of the total investment and capital stock.

e. It is computed by subtracting gross investment from total depreciation.

f. All of the above.

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The correct answer is: It is computed by subtracting depreciation from gross investment.

Question 8
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Which of the following is not an example of normative statement?

Select one:

a.
Developed countries should be fined for polluting the environment

b.
Carbon emission tax will solve the problem of environment pollution

c.
Exports may be important part of growth success in Asian economies

d.
Asian economies exports more than Pacific economies

e.
Rising imports should reduce foreign reserves during economic recession.

f. All of the above are normative statements.

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The correct answer is:
Asian economies exports more than Pacific economies

Question 9
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Question text

Circular flow model shows us :

Select one:

a. the relationship between different economic activities in an economy.

b. the movement of factor payments out of an economy.

c. interdependency between different economic units in an economy.

d. how an economy functions without the non-government sector.

e. that the economy is closed and still functioning.

f. all of the above.

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The correct answer is: interdependency between different economic units in an economy.

Question 10
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Scarcity implies that :

Select one:

a. choice needs to be made at margin when resources are unlimited.

b. Production Possibility Frontier (PPF)can’t move outwards.

c. marginal benefit equals marginal cost.

d. marginal cost will always fall as output level is increased.

e. choice needs to made regarding resources allocation amongst competing uses.

f. all of the above.

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The correct answer is: choice needs to made regarding resources allocation amongst
competing uses.

Question 11
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Business cycle:

Select one:

a.
shows us the fluctuations in business profits over time.

b.
shows us the ups and down in the aggregate economic activity over time.

c.
shows us economic fluctuations can be avoided through prudent policies.

d.
allows economists to study the different stages of economic cycle.

e.
is a theoretical concept which does not hold in reality due to incomplete information.

f. all of the above.

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The correct answer is:
shows us the ups and down in the aggregate economic activity over time.

Question 12
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Question text

Which of the following statements about marginal cost is not untrue?

Select one:

a. It is increasing function of production level.

b. It may remain constant if resources are equally allocated towards production of two
goods.

c. It reflects rising resource cost under scarcity.

d. It is inversely related with marginal benefit because resources are scarce.

e. All of the above.

f. None of the above are correct.

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The correct answer is: All of the above.

Question 13
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Marginal benefit curve is downward sloping because :

Select one:

a. additional unit of consumption reduces total benefit.

b. Marginal cost increases with increased cost of production.

c. there is negative relationship between total consumption and resource reallocation.

d. additional unit of consumption reduces the incremental benefit for the consumer.

e. consuming more always gives the consumer more satisfaction.

f. there is negative relationship between individual consumption and resource reallocation.

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The correct answer is: additional unit of consumption reduces the incremental benefit for
the consumer.

Question 14
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Factor income includes :

Select one:

a. payment for use of labour resources.

b. payment for use of capital resources.

c. payment for use of land.

d. payment for use of machines.

e. All of the above.

f. None of the above.

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The correct answer is: All of the above.

Question 15
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Absolute advantage is defined as :

Select one:

a. being able to produce more quickly at lower opportunity cost.

b. being able to produce more than others.

c. being able to produce and trade with others at lower cost.

d. being able to sell more than others in the market.

e. being able to produce goods at lower opportunity cost than the other person.

f. being able to produce more quickly at higher opportunity cost.

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The correct answer is: being able to produce more than others.