<G>Chapter 13: Memorized – Understanded

243<Q>Which of the following factor is NOT included in the national influences of

the macro environment?
<A>The business cycle.
Government policies.
Globalization of markets.
Inflation.
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244<Q>In terms of the economic environment, the business cycle is part of:
<A>national influences in the macroeconomic environment.
global influences in the macroeconomic environment.
the microeconomic environment of the firm.
The price mechanism in the microeconomic environment of the firm.
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245<Q>Which of the following factor is NOT referred to in the four factors of
production in the gross domestic product?
<A>Land.
Government.
Labour.
Entrepreneurship.
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246<Q>Which of the following is NOT the government’s function within the
national economy?
<A>Producing certain goods and services such as public administration services,
the police force, armed forces, and public transportation.
Using funds obtained from firms or households of the economy in form of taxation
to buy goods or services from other firms.
Encouraging households to save as much as possible of the increase in their
disposal incomes.
Making transfer payments from one section of the economy to another.
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247<Q>Fiscal policy is government policies on the following except:
<A>Public borrowing.
Public spending.
The availability of credit.
Taxation.
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248<Q>Market mechanism is the interaction of demand and supply for:
<A>A specific item.
A single geographical place.
Worldwide.
A particular group of consumers.
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249<Q>Which of the following factor is NOT a determinant of demand?
<A>Price.
Cost of production.
Income levels.
Fashion.
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250<Q>When the demand for a good rises as incomes rise but then falls back as
incomes pass a certain point, the good is termed?
<A>giffen.
normal.
inferior.
veblen.
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251<Q>Anu manufactures pieces of classic furniture. Anu predicts that “If
people’s income rises next year, then the demand for my furniture will increase”.
The accuracy of Anu’s prediction depends on whether the pieces of furniture he
produces:
<A>are normal goods.
have few substitutes.
have many complements.
have few complements.
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252<Q>Potatoes are a Giffen good. An increase in the price of potatoes will cause:
<A>an increase in demand for potatoes.
a decrease in demand for substitutes for potatoes.
a decrease in demand for potatoes.
an increase in demand for substitutes for potatoes.
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253<Q>The cross elasticity of demand between Product A and Product B is zero.
The two products are:
<A>complements.
substitutes.
veblen goods.
unrelated.
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254<Q>Price elasticity of demand would be positive for the goods termed as:
<A>Normal.
Inferior.
Veblen.
Necessities.
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255<Q>The supply curve of Product A is a vertical straight line. This indicates
that the supply of A is:
<A>perfectly inelastic.
of unitary elasticity.
perfectly elastic.
one.
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256<Q>Which of the following are NOT associated with conditions of perfect
competition?
<A>Suppliers earn ‘normal’ profits.
Consumers lack influence over market price.
Differentiated products.
A single selling price.
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257<Q>Which of the following is the correct sequence in a business cycle:
<A>Boom, Recession, Depression, Recovery.
Recession, Recovery, Boom, Depression.
Boom, Recovery, Recession, Depression.
Recovery, Recession, Depression, Boom.
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<G>Chapter 13: Application – Analysis
258<Q>Y is a complement of X in consumption. An increase in the price of Y will:
<A>increase the demand for Y and decrease the demand for X.
decrease the demand for Y and increase the demand for Y.
increase the demand for both Y and X.
decrease the demand for both Y and X.
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259<Q>The difference between an increase in disposable income and an increase
in consumption by households is a formula to measure:
<A>Gross domestic product.
Marginal propensity to consume.
Price elasticity of demand.
Income elasticity of demand.
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260<Q>Which of the following is associated with a decrease in consumption by
households?
<A>An decrease in interest rate.
An increase in direct taxation.
Expectations of price increase.
The development of major new products.
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261<Q>Which of the following is associated with a low level of saving in the
national economy?
<A>A low level of income.
An increase in interest rates.
An increase in the cost of credit.
An increase in life expectancy.
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262<Q>Which of the following is associated with a low level of investment by
businesses in the national economy?
<A>A high level of interest rates.
A high level of business confidence.
The high strength of consumer demand for goods.
An increase in profitability by new technology.
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263<Q>The recession phase of the business cycle is normally accompanied by:
<A>A rise in general price levels.
A rise in the level of national output.
A fall in the level of unemployment.
A fall in consumer demand.
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264<Q>The government’s fiscal policy is considered as expansionary when:
<A>Increased taxation without an increase in public spending.
Increased both taxation and public spending.
Decreased public borrowing and decreased public spending.
Increased both public borrowing and public spending.
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265<Q>There has been a significant rise in factor costs for the ABC product
during recent months. It can be expected that there will be:
<A>a contraction in demand and supply.
an expansion in demand and supply.
a contraction in demand and an expansion in supply.
an expansion in demand and a contraction in supply.
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266<Q> The oil industry is an example of which kind of market structure?
<A>Perfect competition.
Monopoly.
Duopoly.
Oligopoly.
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267<Q>The market for a product is a natural monopoly. Production of the
product must be associated with:
<A>high marginal cost.
low marginal cost.
economies of scope acting as a barrier to entry.
low fixed cost.
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268<Q> Anu manufactures pieces of classic furniture. Anu predicts that “If
people’s income rises next year, then the demand for my furniture will increase”.
The accuracy of Anu’s prediction depends on whether the pieces of furniture he
produces:
<A>are normal goods.
have few substitutes.
have many complements.
have few complements.
<R>1
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269<Q>The basic economic problem facing all national economies is:
<A>maximizing economic growth.
unemployment.
inflation.
allocating scarce resources.
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270<Q>Which of the following is a source of economies of scale:
<A>The introduction of a new product.
Bulk buying (the purchase of much larger quantities than usual).
The use of skills in production.
Cost savings resulting from new production techniques.
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<G>Chapter 13: Synthesis and Judgement

271<Q>Travelling by train and air substitutes. Which of the following statements
will be true?
<A>A rise in the fare of trains will lead to a rise in demand for airlines.
A rise in the fare of airlines will lead to a rise in demand for airlines.
A fall in the fare of trains will lead to a rise in demand for airlines.
A fall in the fare of airlines will lead to a fall in demand for airlines.
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272<Q>A brand of cheese is an inferior good. A consultant has made two
statements about cheese
Statement (1): Demand for the cheese will rise as income rise.
Statement (2): Demand for the cheese only exists because of the effects of
advertising.
Identify whether each statement is accurate.
<A>Statement (1) is accurate; Statement (2) is inaccurate.
Statement (1) is inaccurate; Statement (2) is inaccurate.
Statement (1) is accurate; Statement (2) is accurate.
Statement (1) is inaccurate; Statement (2) is accurate.
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273<Q>A shift of the demand curve to the right could be caused by which of the
following conditions:
<A>A rise in household income.
A negative change in tastes for the goods.
A fall in the price of substitute.
A rise in the price of a complement.
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274<Q>When the government imposes a maximum price on a market, when will
supply be reduced
<A>Always.
If the maximum price is set above equilibrium.
If the maximum price is set below equilibrium.
Never.
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275<Q>The UK government has recently imposed a maximum price on Product X
which is set at a lower level than its equilibrium price. In the future, therefore, it
can be expected that there will be:
<A>excess supply of the product.
excess demand for the product.
no effect on supply but an increase in demand.
no effect on demand but a decrease in supply.
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276<Q> The price of a good is $1.50 and the annual demand is 50,000 units.
Research has shown that dropping the price to $1.40 will increase demand by 5,000
units. What is the Price Elasticity of Demand (PED) of the good at $1.5?
<A>0.10
0.67
1.50
1.96
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277<Q>The price of a product is $2.5 per unit, on average 40,000 units of the
product are sold each month. At a price of $3 per unit, on average 50,000 units per
month are sold. The price elasticity of demand (PED) for the product and type of
this product are:
<A>PED is 1.25, the product is Giffen product.
PED is -1.25, the product is an Inferior product.
PED is 1.04, the product is a Giffen product.
PED is 1.25, the product is an Inferior product.
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278<Q> When there is a fall in factor costs the effect will be:
<A>to shift the supply curve to the right so the market price falls and demand
rises.
to shift the demand curve to the right so supply and the market price rise.
to shift the demand curve to the left so supply and the market price fall.
to shift the supply curve to the left so the market price rises and demand falls.
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279<Q> The price of Sea has fallen by 5% in the last month, and in the same
period demand for Halcets where there has been no price change, has risen by 8%.
What is the cross-price elasticity of demand between Sea and Halcets?
<A>-1.600
-0.625
1.600
0.025
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