Preparatory questions on Basics of Economic Theory

1. If two goods are interchangeable, growth of the price for the first goods will cause:

1. Falling of demand for the second goods.

2. Growth of demand for the second goods.

3. Increase in volume of demand at the second goods.

4. Falling of size of demand for the second goods.

5. No right answer

2. The manufacturer of goods X has reduced the price for the goods for 5 % therefore the sales volume has grown on 4 %. Demand for goods X is:

1. Elastic.

2. Inelastic.

3. Demand of individual elasticity.

4. Absolutely elastic.

5. No right answer.

3. The inclination of a curve of indifference expresses:

1. Quantity of one good, which the given consumer is ready to exchange on such quantities of other good to remain on a former standard of well-being.

2. Borders of possible consumption of two blessings at the given prices of these blessings.

3. Increase of a marginal rate of replacement of one blessing by other blessing.

4. All answers are right

5. No right answer

4. Consumer’s equilibrium on a map of indifference is:

1. Any crossing of a budgetary line and curve of indifference.

2. Any point on highest of curves of indifference.

3. Any point of a budget line and indifference curve touch.

4. Any point located on a budgetary line.

5. Any point located on space, limited by a budgetary line.

5. If one-percentage reduction of the price for the goods leads to two-percentage increase in volume of demand at it, this demand:

1. Inelastic.

2. Elastic.

3. Individual elasticity.

4. Absolutely not elastic.

5. Absolutely elastic.

6. Inelastic demand means, that:

1. Growth of the price for 1 % leads to reduction of size of demand less than on 1 %.

2. Growth of the price for 1 % leads to reduction of size of demand more than on 1 %.

3. Any change of the price does not lead to change of the general proceeds.

4. Growth of the price for 1 % does not influence size of demand.

5. Any of statements is not true.

8. The law of demand assumes that:

1. Excess of the supply over demand will cause reduction of price.

2. If incomes at consumers grow, they usually buy more goods.

3. The curve of demand usually has a negative inclination.

4. When the price of the goods falls, the volume of planned purchases grows.

5. When the price of the goods falls, the volume of planned purchases falls too.

9. The rise in prices on the materials necessary for manufacture of goods X will cause:

1. Shift of a curve of demand upwards (or to the right).

2. Shift of a curve of the supply upwards (or to the left).

3. Shift of a curve of demand and curve of the supply upwards.

4. Shift of a curve of the supply downwards (or to the right).

5. Movement along the supply curve.

10. What change of the factor does not cause shift of a curve of demand?

1. Tastes and preferences of consumers.

2. The size or distribution of the national income.

3. The prices of the goods.

4. Number or age of consumers.

5. No right answer

11. Perfection of technology shifts:

1. Curve of demand upwards and to the right.

2. Curve of demand downwards and to the left.

3. Curve of the supply downwards and to the right.

4. Curve of the supply upwards and to the left.

5. No right answer

12. Wealth is identified with gold and silver:

1. physiocrats

2. Early mercantilists

3. Late mercantilists

4. Smitians

5. Ricardians

13. Concept of elasticity of demand, i.e. the attitude of dynamics of demand to dynamics of the price, was entered into practice of the economic analysis by:

1. Marshall

2. Marx

3. Меnger

4. Malthus

5. Gossen

14. In what works of scientists the agriculture is the major sector of economy:

1. Socialists - utopians

2. mercantilists

3. D.Rikardo

4. A.Marshall

5. physiocrats

15. Keynesians basic difference from all modern economic theories:

1. Full non-interference of the state to market processes

2. Active intervention of the state in market processes

3. Partial intervention of the state in market processes

4. Regulation only a credit policy

5. Regulation only budgetary-tax policy

16. A market economy relies on:

1. decentralized choices coordinated by Adam Smith's "invisible hand."

2. centralized choices coordinated by Adam Smith's "invisible hand."

3. decentralized choices coordinated by the "visible hand" of authority.

4. centralized choices coordinated by the "visible hand" of authority.

5. centralized choices coordinated by the "visible hand" of individuals.

17. Inflation refers to:

1. a continuing decrease in the overall level of prices in the economy.

2. an increase in all prices in the economy.

3. a persistent increase in the amount of goods, which can be purchased with a given amount of money.

4. an increase in the overall level of prices in the economy.

5. an decrease in all prices in the economy.

18. According to the Phillips curve:

1. there is no tradeoff between inflation and unemployment.

2. if inflation increases, so does unemployment.

3. increases in unemployment are associated with a rise in prices.

4. there is a short-run tradeoff between inflation and unemployment.

5. there is a long-run tradeoff between inflation and unemployment.

19. The "invisible hand" that Adam Smith writes about as coordinating economic activity is:

1. the government

2. God

3. man's natural affinity for his fellow-man

4. the price system

5. foreign trade

20. What ever must be given up to obtain some item is:

1. an explicit cost.

2. an implicit cost

3. a historical cost.

4. an accounting cost.

5. an opportunity cost.

21. Scarcity arises because of:

1. poverty.

2. limited resources.

3. too little money in an economy.

4. government inefficiencies.

5. richness

22. Opportunity cost is:

1. the cost incurred when one fails to take advantage of an opportunity.

2. the cost incurred in order to increase the number of alternatives open to choice.

3. the money that must be spent to take advantage of an opportunity.

4. the value of everything when a choice is made.

5. the value of the best alternative given up when a choice is made.

23. National saving is composed of:

1. private saving and government surpluses.

2. public saving and government deficits.

3. private saving and public saving.

4. private saving, public saving, and government surpluses.

5. private saving, public saving, and government deficits.

24. As the price level increases:

1. the quantity of money demanded falls.

2. the value of money falls.

3. the money supply will decrease.

4. real GDP will increase.

5. real GNP will increase.

25. A decrease in the price level indicates:

1. that the economy has experienced deflation.

2. the existence of inflation.

3. a decline in real GDP.

4. that either inflation or deflation may exist.

5. a decline in real GNP.

26. A market economy relies on:

1. decentralized choices coordinated by Adam Smith's "invisible hand."

2. centralized choices coordinated by Adam Smith's "invisible hand."

3. decentralized choices coordinated by the "visible hand" of authority.

4. centralized choices coordinated by the "visible hand" of authority.

5. centralized choices coordinated by the "visible hand" of individuals.

27. What ever must be given up to obtain some item is:

1. an explicit cost.

2. an implicit cost

3. a historical cost.

4. an accounting cost.

5. an opportunity cost.

28. Generally the firm's objective is to:

1. maximize sales.

2. maximize profits.

3. maximize total revenues.

4. maximize returns to stockholder.

5. maximize the welfare of the society.

29. Profit equals:

1. price times quantity.

2. price minus average cost.

3. total revenue minus average cost.

4. total revenue minus total cost.

5. total cost minus total revenue.

30. Explicit costs are:

1. costs that increase as production increases.

2. costs that require no outlay of money by the firm.

3. costs that decrease as production increases.

4. costs that require an outlay of money by the firm.

5. accounting costs-economic costs

31. When marginal cost is above average variable cost:

1. average variable cost must be rising.

2. average variable cost must be falling.

3. average variable cost may be rising or falling.

4. average fixed cost must be rising.

5. average fixed cost may be rising or falling.

32. A firm's economic profit is equal to:

1. revenue less explicit costs.

2. revenue less implicit costs.

3. revenue less money costs.

4. revenue less total opportunity costs.

5. revenues minus accounting costs.

33. When a perfectly competitive firm produces eight units of output, it receives total revenue of $200. The price per unit is:

1. greater than $25.

2. $25.

3. less than $25.

4. somewhere between $25 and $30.

5. less than $30.

34. A monopoly may arise for which of the following reasons?

1. too many buyers

2. firms can only produce a similar product

3. government antitrust laws

4. a lot of people own a key resource

5. a single firm owns a key resource

35. A perfectly competitive firm is producing notebooks for $1.00 each. If the firm produces 1,200 notebooks, its total revenue will be:

1. $12,000.

2. B).$12

3. $120.

4. 10 cents.

5. $1,200

36. Because cars and gasoline are complements, and increase in the price of gasoline will:

1. increase the demand for cars.

2. decrease the demand for cars.

3. increase the demand for gasoline.

4. decrease the demand for gasoline.

5. there will be no change in the market.

37. An increase in the price of a complementary good will result in:

1. an increase in equilibrium price and a decrease in equilibrium quantity of the related good.

2. a decrease in both the equilibrium price and the equilibrium quantity of the related good.

3. an increase in both the equilibrium price and the equilibrium quantity of the related good.

4. a decrease in equilibrium price and an increase in equilibrium quantity of the related good.

5. no change in the complements and substitutes.

38. Which of the following is a characteristic of perfect competition?

1. a single seller

2. a small number of buyers

3. Buyers and sellers are price setters.

4. Buyers and sellers are price takers.

5. Buyers and sellers are price makers.

39. Whenever the price of a good is below the equilibrium price, we know that:

1. a surplus exists.

2. a shortage exists.

3. quantity supplied exceeds quantity demanded.

4. the market is in equilibrium.

5. government interferes the prices.

40. Which of the following is the most likely example of an inferior good?

1. a passenger van

2. an imported beer

3. notebook computers

4. a component stereo system

5. a 20-inch black and white TV

41. The one word that best describes elasticity is:

1. income.

2. price.

3. responsiveness.

4. reaction

5. contraction

42. The local movie theater lowers admission prices in an attempt to increase its revenues. The managers of the theater must believe demand to be:

1. unit price elastic.

2. perfectly price inelastic.

3. price elastic.

4. price inelastic.

5. unit income inelastic

43. To say that a market is in equilibrium implies that:

1. producers are earning a profit.

2. the quantity that buyers are willing and able to buy equals the quantity that sellers are willing and able to sell.

3. the market allocates goods fairly.

4. the government is not intervening.

5. the government is intervening.

44. The price elasticity of demand will tend to be higher for goods with more substitutes because:

1. goods with many substitutes tend to be inexpensive.

2. as the price of substitutes rises, the quantity demanded will increase greatly.

3. buyers can buy alternatives to the good in question.

4. the cross-price elasticity of demand will be low.

5. buyers can never buy alternatives to the good in question.

45. The price elasticity of demand is defined as the percentage change in the quantity demanded of a good divided by the:

1. absolute change in the quantity demanded.

2. percentage change in the good's price.

3. absolute change in the good's price.

4. percentage change in the price of some related good.

5. percentage change in the good's quality.

46. As prices increase by one percent, quantity supplied increases by two percent. This means:

1. the firm is in equilibrium.

2. supply is inelastic.

3. supply is unit elastic.

4. the firm is operating in its market period.

5. supply is elastic.

47. Suppose the price of cigarettes increases. If the demand for cigarettes is price inelastic, then the revenue of the cigarette industry will:

1. increase.

2. decrease.

3. remain unchanged.

4. decrease initially, but then increase as people get used to the higher prices.

5. change in an unpredictable way.

48. Income elasticity determines whether goods are:

1. price elastic or not.

2. elastic or inelastic.

3. individual or collective.

4. substitutes or complements.

5. normal or inferior.

49. A price ceiling is:

1. a price set by government that varies with market conditions.

2. a legal maximum price at which a good can be sold.

3. a legal minimum price at which a good can be sold.

4. typically equal to the equilibrium price of a good.

5. a price set by sellers that varies with market conditions.

50. If a price ceiling above the equilibrium price is imposed on gasoline, which of the following will result?

1. There will be a surplus of gasoline.

2. The quantity demanded will exceed the quantity supplied.

3. The quantity supplied will exceed the quantity demanded.

4. The quantity of gasoline demanded will equal the quantity of gasoline supplied.

5. The quantity of gasoline demanded will not equal the quantity of gasoline supplied.

51. If you had been willing to pay $3.05 for the gallon of milk purchased at the supermarket but were required to pay only $2.05, you have gained:

1. a refund of $1.00 from the clerk

2. revenue for $2.00

3. windfall profits.

4. excess marginal utility of $3.05.

5. a consumer surplus amounting to $1.00.

52. Producer surplus is measured as:

1. the area above the supply curve and below the market price.

2. the area below the supply curve and above the market price.

3. the area lying above the market price, as bounded by the supply curve.

4. the area below the supply curve and above the market price as long as the market is in an equilibrium position.

5. the area above the supply curve and below the demand curve.

53. Greg Jones owns a company that sells video club memberships door to door. When he employs 50 workers his firm sells $8,000 worth of contracts per day. When he employs 51 workers total sales are $8,100. The value of the marginal product of the 51st worker is:

1. $8,100.

2. $160.

3. $158.98

4. $100.

5. $150.

53. Human capital:

1. is a form of economic rent.

2. is a new term economists have devised for robotics technology.

3. claims that employers make hiring decisions solely on the basis of education credentials.

4. is financial capital owned by individuals.

5. is knowledge and skill acquired through education and training.

54. Diminishing marginal product refers to the fact that:

1. the marginal product of an input decreases as the quantity of the input increases.

2. the marginal product of an input increases as the quantity of the input increases.

3. the marginal product of an input does not change as the quantity of the input increases.

4. output will increase at an increasing rate as more inputs are hired.

5. the marginal product of an input decreases as the quantity of the input decreases.

55. If a firm has revenues of $150 million, explicit costs of $70 million, and implicit costs of $20 million. Its accounting profit is:

1. $80 million.

2. $70 million.

3. $50 million.

4. $40 million.

5. $60 million.

56. Explicit costs are:

1. costs that require an outlay of money by the firm.

2. costs that increase as production increases.

3. costs that decrease as production increases.

4. costs that require no outlay of money by the firm.

5. accounting costs-economic costs

57. At Paula's Pizza, the marginal revenue of the last pizza produced is $12. The marginal cost of the last pizza produced is $10. In order to increase profits, Paula should:

1. increase output.

2. decrease output.

3. not change output.

4. offer a different variety of pizza.

5. increase the inputs.

58. The purchase of final goods and services by households is called:

1. investment.

2. consumption.

3. public sector expenditure.

4. net exports.

5. outflow.

59. Investment is the purchase of capital equipment, inventories, and:

1. structures.

2. nondurable goods.

3. depreciation.

4. import investment.

5. appreciation.

60. GDP is represented by:

1. C + I + G.

2. NX + G.

3. I + G + NX.

4. C + I + G + NX.

5. C + I + G – NX

61. Which of the following would NOT be included in GDP?

1. Student buys a cup of tea in canteen.

2. Brooke purchases a new suit to wear to work.

3. Brea purchases a new Ford Taurus.

4. Community Bank purchases new computers for its loan officers.

5. Margaret grows tomatoes in her home garden.

62. A shortage will occur if:

1. a price ceiling is set above the equilibrium price.

2. a price floor is set below the equilibrium price.

3. a price floor is set above the equilibrium price.

4. a price ceiling is set below the equilibrium price.

5. a price floor is at the equilibrium price.

65. Define Kuznets cycles by their duration (trough to trough or peak to peak):

1. within a year

2. 3 years

3. 9-10 years

4. 15-20 years

5. 48-60 years

66. Define Kitchin cycles by their duration (trough to trough or peak to peak):

1. within a year

2. 3 years

3. 9-10 years

4. 15-20 years

5. 48-60 years

63. Define Kondratiev cycles by their duration (trough to trough or peak to peak):

1. within a year

2. 3 years

3. 9-10 years

4. 15-20 years

5. 48-60 years

64. Define Juglar cycles by their duration (trough to trough or peak to peak):

1. within a year

2. 3 years

3. 9-10 years

4. 15-20 years

5. 48-60 years

1. According to the Phillips curve:

A) there is a short-run tradeoff between inflation and unemployment.

B) there is a long-run tradeoff between inflation and unemployment.

C) increases in unemployment are associated with a rise in prices.

D) if inflation increases, so does unemployment.

E) there is no tradeoff between inflation and unemployment.

2. In most cases, high or persistent inflation is caused by:

A) a decrease in unemployment.

B) an increase in productivity.

C) a reduction in the quantity of money.

D) an increase in unemployment.

E) too rapid growth in the quantity of money.

3. Which of the following variables is the key ingredient in improving the standard of living of the average citizen?

A) low unemployment rates

B) population growth

C) high inflation