Bangladesh Economics Olympiad 2023 Primary Selection Round

Total Points: 40*1=40

Duration: 1 hour

1. What would the government reduce to decrease inflation?

a. income tax
b. its foreign exchange rate
c. the money supply
d. the rate of interest

2. A country wishes to encourage economic growth. Which policy measure is most likely to
achieve this aim?
a. increasing interest rates
b. increasing spending on education
c. reducing the maximum permitted hours of work
d. reducing spending on infrastructure

3. How does a country usually measure its Gross Domestic Product?

a. by calculating the total value of all goods and services produced within the economy
b. by measuring the average prices of a basket of goods and services throughout the country
c. by subtracting government expenditure from government revenue
d. by surveying the number of people who are out of work but willing and able to work

4. What is the most likely consequence of increased unemployment?

a. higher output
b. higher government budget deficit
c. higher self-esteem
d. higher inflation

5. Why is deflation undesirable for an economy?

a. It reduces business confidence.
b. It reduces export competitiveness.
c. It reduces purchasing power.
d. It reduces real incomes.

6. Why does a government provide public goods?

a. Public goods are always used by everyone.
b. Public goods are not profitable for private firms.
c. Public goods can only be provided by monopolies.
d. Public goods create large external costs.
7. What is the usual effect of net immigration for a high-income country?
a. an increase in the size of the labor force
b. a rise in the average age of the population
c. lower economic growth
d. reduced demand for housing

8. Country X produces cars and also imports cars. Which group is least likely to benefit
from the introduction of an import tariff on cars?
a. consumers of cars in country X
b. producers of cars in country X
c. the government of country X
d. workers making cars in country X

9. What may be the cost to its home country when a multinational company (MNC) expands
abroad?
a. Increased competition from the MNC may force firms in the host country to close.
b. Many jobs created by the MNC may be low-skilled.
c. The MNC’s profits from the host country may be sent to its home country.
d. The MNC may cause job losses in its home country by moving production abroad.

10. What is a certain outcome on an aggregate demand and aggregate supply diagram of an
increase in factor productivity?
a. downward shift of the aggregate demand curve
b. downward shift of the aggregate supply curve
c. an upward shift of the aggregate demand curve
d. an upward shift of the aggregate supply curve

11. Trade in services is a component of the current account of the balance of payments. What
is an example of a trade in services?
a. development aid for foreign countries
b. export revenue from primary commodities
c. income from foreign tourists
d. income from overseas investments

12. Which statement about changing price levels is correct?

a. Anyone on a fixed income has rising real income during deflation.
b. Government revenue from indirect taxes falls during inflation.
c. Producers prefer deflation to inflation.
d. Savers prefer index-linked savings when there is deflation rather than inflation.
13. What would be likely to decrease inflation in an economy?
a. a decrease in consumer saving
b. a decrease in unemployment
c. an increase in labor productivity
d. an increase in taxes on imports

14. Which change in economic circumstances is most likely to lead to a reduction in the rate
of domestic inflation in an economy?
a. a depreciation in the currency
b. a reduction in the productivity of labor
c. a worldwide recession
d. an increase in direct taxes to finance increased welfare payments

15. When is Pareto efficiency achieved?

a. at a level of output that is productively and allocatively efficient
b. when everyone has equal amounts of goods and services
c. when social benefits are greater than private benefits
d. when social marginal benefit is greater than social marginal cost

16. Let, a market demand function is represented by the equation: Qd = 50 – 0.75P. Qd is the
quantity demanded and P is the price. If P = 10, what is the value of the consumer
surplus?
a. 67
b. 1,205
c. 1,667
d. 1,333

17. A quota on an imported good or service below the market-clearing quantity level will
MOST LIKELY lead to which of the following effects?
a. The supply curve shifts upward
b. The demand curve shifts upward
c. Some of the buyer’s surplus transfers to the seller
d. Some of the seller’s surplus transfers to the buyer

18. Which of the following MOST ACCURATELY AND COMPLETELY describes a

deadweight loss?
a. A reduction of surplus from one party to another
b. A reduction in either the buyer’s or the seller’s surplus
c. A reduction in total surplus resulting from market interference
d. A reduction in the buyer’s and an increase in the seller’s surplus
19. Which of the following statements BEST explains why indifference curves are generally
convex as viewed from the origin?
a. The assumption of diminishing marginal utility
b. The assumption of non-satiation
c. The assumption of constant marginal rate of substitution
d. The axioms of transitivity of preferences

20. In the case of a normal good with a decrease in its own price, which of the following
statements is MOST LIKELY true?
a. The substitution effect leads to an increase in the quantity purchased, while the income
effect has no impact
b. The substitution effect leads to an increase in the quantity purchased, while the income
effect leads to a decrease
c. The substitution effect leads to a decrease in the quantity purchased, while the income
effect leads to an increase
d. Both the substitution effect and the income effect lead to an increase in the quantity
purchased

21. Which of the following statements BEST illustrates the difference between a Giffen good
and a Veblen good?
a. The Giffen good alone is an inferior good
b. Both Giffen good and Veblen good are inferior goods
c. Their substitution effects are in opposite directions
d. The Veblen good alone has a positively sloped demand curve

22. The short-term break-even point of production for a firm operating under perfect
competition will MOST LIKELY occur when:
a. Price is equal to average total cost
b. Price is equal to marginal cost
c. Marginal revenue is equal to marginal cost
d. Marginal revenue is equal to average variable costs

23. A firm that increases its quantity produced without any change in per-unit cost is
experiencing:
a. Economies of scale
b. Diseconomies of scale
c. Constant returns to scale
d. Increasing returns to scale
24. A firm develops and markets computer accessories in a perfectly competitive, decreasing-
cost industry. The firm’s products have grown in popularity. The MOST LIKELY
equilibrium response in the long run to rising demand for such accessories is for selling
prices to:
a. Rise and per-unit production costs to decrease
b. Fall and per-unit production costs to decrease
c. Rise and per-unit production costs to increase
d. Remain constant and per-unit production costs to remain constant

25. A firm will expand production by 200 units and must hire at least one additional worker.
The marginal product per day for one additional unskilled worker is 100 units, and for
one additional skilled worker it is 200 units. Wages per day are Tk. 200 for an unskilled
worker and Tk. 450 for a skilled worker. The firm will MOST LIKELY minimize costs at
the higher level of production by hiring:
a. One additional skilled worker
b. Either a skilled worker or two unskilled workers
c. No skilled or unskilled workers at all
d. Two additional unskilled workers

26. Delta Natural Gas, Inc. is a monopoly enjoying very high barriers to entry. Its marginal
cost is Tk. 40 and its average cost is Tk. 70. A recent market study has determined that
the price elasticity of demand is 1.5. The company will MOST LIKELY set its price at:
a. Tk. 40
b. Tk. 70
c. Tk. 120
d. Tk. 280

27. Companies MOST LIKELY have a well-defined supply function when the market
structure is:
a. Monopoly
b. Perfect competition
c. Oligopoly
d. Monopolistic competition

28. A government entity that regulates an authorized monopoly will MOST LIKELY base
regulated prices on:
a. Marginal cost
b. Marginal-revenue mark-up
c. First-degree price discrimination
d. Long-run average cost
29. Equality between aggregate expenditure and aggregate output indicates that the
government’s fiscal deficit MUST equal:
a. Private saving – Investment – Net exports
b. Private saving – Investment + Net exports
c. Investment – Private saving + Net exports
d. Investment – Private saving – Net exports

30. Because of a severe decline in real estate values, the household sector has increased the
fraction of disposable income that it saves. If output and investment spending remain
unchanged, which of the following is MOST LIKELY?
a. A decrease in the government deficit
b. An increase in the government deficit
c. A decrease in net exports and increased capital inflow
d. An increase in net exports and increased capital outflow

31. Which of the following best describes the aggregate supply curve in the short run? The
short run aggregate supply curve is:
a. Flat because output is more flexible than prices in the short run
b. Vertical because output is less flexible than prices in the short run
c. Vertical because wages and other input prices fully adjust to the price level
d. Upward sloping because input prices do not fully adjust to the price level in the short run

32. Which of the following is LEAST LIKELY to be caused by a shift in aggregate demand?
a. Unemployment
b. Stagflation
c. A recessionary gap
d. An inflationary gap

33. Monetarists prefer a limited role for the government because they argue that:
a. Government policies operate with a lag
b. Firms take time to adjust to systemic shocks to the economy
c. Resource use is efficient with marginal revenue and cost equal
d. Economic policies are subjected to self-serving political commitments

34. The LEAST LIKELY consequence of a period of hyperinflation is the:

a. Increased supply of money
b. Possibility of social unrest
c. Reduced velocity of money
d. Increase of aggregate output for a very limited period of time
35. The theory that the real interest rate is relatively stable is MOST CLOSELY associated
with:
a. The Fisher effect
b. Money neutrality
c. The quantity theory of money
d. Classical dichotomy

36. A country that maintains a target exchange rate is MOST LIKELY to have which
outcome when its inflation rate rises above the level of the inflation rate in the target
country?
a. An increase in short-term interest rates
b. An increase in the domestic money supply
c. An increase in its foreign currency reserves
d. An increase in its monetary base

37. A prolonged period of an official interest rate of zero without an increase in economic
growth MOST LIKELY suggests that:
a. Quantitative easing must be limited to be successful
b. There may be limits to the effectiveness of monetary policy
c. Targeting reserve levels is more important than targeting interest rates
d. Targeting inflation may be offset by targeting unemployment

38. Which statement regarding fiscal policy is MOST accurate?

a. To raise business capital spending, personal income taxes should be reduced
b. An increase in the budget surplus is associated with expansionary fiscal policy
c. A budget deficit cannot be run for an infinite time horizon
d. Cyclically adjusted budget deficits are appropriate indicators of fiscal policy

39. Which of the following trade restrictions is MOST LIKELY to result in the greatest
welfare loss for the importing country?
a. A tariff
b. An import quota
c. A voluntary export restraint
d. A non-tariff barrier

40. Patent fees and legal services are recorded in which of the following balance of payments
components?
a. Capital account
b. Current account
c. Financial account
d. None of the above