# Economics

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Economics Test 1
Q1. The equation for calculation of Gross Domestic Product through expenditure approach is
Y=C+I+G+ (X-M)
Y=C+I+ (X-M)
Y=C+I+G (X-M)
Y=C+I+G+ (X+M)
Q2. Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function?
The smaller the MPC, the steeper the consumption function
The larger the MPC, the steeper the consumption function
The larger the MPC, the larger the MPS
The larger the MPC, the Higher the level of autonomous consumption
Q3. Macroeconomics does not comprise of
Growth of national income
Study of unemployment in a country
Employment of factor inputs by a firm
Inflation in a country
Q4. A decrease in demand for a good could mean that
The demand curve has shifted to the left
The demand curve has undergone a parallel shift to the right
Consumers are willing to pay a higher price for each quantity of the good
Consumers are willing to buy larger quantities of the good at each price
Q5. The cost of the factor inputs hired by the producer to produce final output is called as
Marginal cost
external cost
implicit cost
explicit cost
Q6. Cartel is
Used to explain price rigidity
A form of tacit collusion
A form of overt collusion
Non collusive oligopoly
Q7. Marginal utility is defined as the
Additional satisfaction gained from consuming one more unit of a product
Average amount of satisfaction gained from consuming a product
Total amount of satisfaction gained from consuming a product divided by the number of units consumed
Total amount of satisfaction gained from consuming a product
Q8. A firm earns maximum profit when
MC=ATC
TR is greater than TC by the larger amount
MC=MR
Total revenue equals total costs
Q9. If Marginal Product of labour is lesser than Average Product of labour, then Product of labour is
Constant
Increasing
Decreasing
Maximum
Q10. Which of the following would cause as increase in the velocity of money?
An increase in the money supply
A decrease in interest rates
An increase in demand for money
Increased use of credit cards
Q11. Which of the following describes a situation in which demand must be elastic?
Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent
Total revenue increases by \$15 when the price of corndogs rises by \$15
Total revenue increases by 15 percent when the price of corndogs rises by 15 percent.
Total revenue increases by less than 15 percent when the price of corndogs rises by15 percent.

Q12. Price discrimination refers to
Selling a given product for different prices at two different points in time
any price above that which is equal to a minimum average total cost
the difference between the prices a purely competitive seller and a purely monopolistic selling would charge
the selling of a given product at different prices that do not reflect cost differences

Q13. Short run cost curves behavior is explained by
Economies of scale
Laws of returns
Law of variable proportions
Law of increasing returns
Q14. Which of the following industry most closely approximates the oligopoly model
Wheat wholesaler
Automobile
Services of doctors
Nuclear energy
Q15. In autarky,
Each country’s consumption possibilities are the same as its production possibilities
Equilibrium is attained with the maximum gains from specialization and trade
Equilibrium is attained with the maximum amount of international trade
A nation is governed by an individual with absolute authority

Q16. If future price changes were perfectly anticipated by both borrowers and lenders, what would happen to the real interest rate in the future if the price level changed?
It would not change
It would decrease
It would increase
It would decrease by the amount of the price increase
Q17. The percentage change in the demand for film divided by the percentage change in the price of cameras indicates
The price elasticity of demand for cameras
The cross-price elasticity of demand for photograph
The cross-price elasticity of demand between film and cameras
The price elasticity of demand for film
Q18. If a 12 % fall in price of burgers leads to a 3% increase in quantity demanded of burgers, then price elasticity would be
-1.25
-0.5
-4
-0.25
Q19. The reason that you don’t drink five cups of coffee at breakfast is that
The price of coffee rises as you buy more cups
The total utility of coffee rises as you consume more cups
The marginal utility of extra cups of coffee eventually diminishes
The marginal satisfaction derived from cups of coffee remains constant
Q20. Returns to scale depicts the relationship of an impact on output when there is a change
In all inputs simultaneously
In all inputs simultaneously and in different proportion
In all inputs simultaneously and in same proportion
None of the above
Q21. Demand pull inflation is due to
All of these
Increase in income with population
Increase in money supply
Q22. The law of demand refers to
A shift in the demand curve that occurs when a variable other than the good’s own price changes
A functional relationship between the various possible prices of a good and the quantity supplied by sellers of it per time period
The proposition that price and quantity demanded can be expected to be inversely related showing that consumers will be willing and able to buy more of a good at lower prices that they are at higher prices
The amounts of a good that consumers are willing and able to buy and other relevant variables such as income or the prices of other goods.
Q23. The simple spending multiplier is
1/(1-MPC)
1/MPC
-MPC/(1-MPC)
MPC/(1-MPC)
Q24. Oligopolistic industries are characterized by
Large firms and high entry barriers
A few dominant firms and low entry barriers
Large number of firms and low entry barriers
A few dominant firms and substantial entry barriers

Q25. The equilibrium quantity of aggregate output occurs when
Planned aggregate expenditure equals income generated from production
Actual aggregate expenditure equal real GDP
The economy reaches the full employment of labor
Inventories of good and services are increasing

Q26. The firm is a price taker under
All of these
Monopolistic competition
Perfect competition
oligopoly
Q27. The quantity theory of money states that
Since velocity is not stable, changes in the money supply have unpredictable impacts on income
Since velocity is reasonably stable, we can predict the effects of an increase in the money supply on employment
MV=PY
Since velocity is reasonably stable, we can predict the effects of an increase in the money supply on nominal income
Q28. When total utility is maximum Marginal Utility is
Falling and positive
Zero
Falling and negative
Rising
Q29. An isoquant is
Least cost combination
A locus of input combinations that give the same level of output
A locus of input combinations that give the different level of output
A locus of product combinations that give the same level of satisfaction

Q30. Under monopolistic competition
there is absence of cost of transportation
sellers have absolute control over price of the product
sellers control price through brand loyalty
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Economics Test 2

Q1. The demand curve faced by a pure monopolist
May be either more or less elastic than that faced by a single purely competitive firm
Is more elastic than that faced by a single purely competitive firm
Has the same elasticity as that faced by a single purely competitive firm
Is less elastic than that faced by a single purely competitive firm
Q2. The higher the anticipated inflation rate,
The less workers will ask for increase in wages, and the less firms will agree to pay
The more workers will ask for increase in wages, and the less firms will agree to pay
The more workers will ask for increase in wages, and the more firms will agree to pay
The higher the real wages increase offered by firms
Q3. A firm can earns maximum profit when
MC=ATC
TR is greater than TC by the larger amount
MC=MR
Total revenue equals total costs
Q4. Which of the following is assumed constant along the aggregate expenditure line?
Actual investment
Consumption
The price level
Q5. In choosing between burger and shirts, consumer increase their purchases of each until
The marginal utility from the last rupee of burger is the same as from the last shirt
The marginal utility from the last rupee spent on one is the same as the another
The total utility from one is the same as from the other
None of the above
Q6. Contractionary gap can be controlled by
Decrease in taxation and increase in public expenditure
Increase in taxation and increase in public expenditure
Increase in taxation and decrease in public expenditure
Decrease in taxation and decrease in public expenditure
Q7. If a 12 % fall in price of burgers leads to a 3% increase in quantity demanded of burgers, then price elasticity would be
-1.25
-0.5
-4
-0.25
Q8. For a perfectly competitive firm the average revenue
Is equal to marginal revenue
Is higher than marginal revenue
Is lower than total revenue
Coincides with total revenue
Q9. A decrease in demand for a good could mean that
The demand curve has undergone a parallel shift to the right
Consumers are willing to buy larger quantities of the good at each price
The demand curve has shifted to the left
Consumers are willing to pay a higher price for each quantity of the good
Q10. Utility is
Hard to measure because it is a subjective concept
Easily measure because it is an objective concept
Easily measure because it is a subjective concept
Easily measure because all people derive the same utility from consumption
Q11. In the long run, a monopolistic competitor
Any of above
Incurs losses
Reaps normal profits
Make economic profit
Q12. Which of the following industry most closely approximates the oligopoly model
Wheat wholesaler
Automobile
Services of doctors
Nuclear energy
Q13. The percentage change in the demand for film divided by the percentage change in the price of cameras indicates
The price elasticity of demand for cameras
The cross-price elasticity of demand for photograph
The cross-price elasticity of demand between film and cameras
The price elasticity of demand for film
Q14. A firm is in equilibrium when
Marginal revenue is more than marginal cost
Marginal revenue is equal to marginal cost
Both conditions 1 and 2 are fulfilled
Marginal cost of the firm is rising
Q15. Returns to scale depicts the relationship of an impact on output when there is a change
In all inputs simultaneously
In all inputs simultaneously and in different proportion
In all inputs simultaneously and in same proportion
None of the above
Q16. If an imperfectly competitive firm is selling its 100th unit of output for \$35, its marginal revenue
May be either greater or less than \$35
Will be less than \$35
Will be greater than \$35
Will also be \$35
Q17. Fiscal policy is concerned with
Government spending and money only
Government spending and taxation only
Government spending, taxation and money
Money and taxation only
Q18. The crowding in of private investment is associated with
A reduction in the level of government spending
Increased investment opportunities resulting from a withdrawal of foreign investors
Increased investment opportunities resulting from a decline in interest rates
More favorable business expectations resulting from an increase in aggregate demand induced by increased government borrowing
Q19. When economists say that people act as rational decision makers, that means
Once a pattern of behavior has been established, people tend to become set in their ways
They gather all relevant information before making their purchases
People rarely make errors when they are permitted to make transactions
People respond in predictable ways to changes in costs and benefits
Q20. GDP Price Index is calculated by formula
Real GDP/Nominal GDP*100
Nominal GDP/Real GDP
Nominal GDP/Real GDP*100
Real GDP/Nominal GDP
Q21. Gross Domestic Product can be calculated by adding ______in an accounting year
Expenditure approach
Adding income earned by all factors inputs
Adding output produced by all sectors
Any of these methods
Q22. Demand pull inflation is due to
All of these
Increase in income with population
Increase in money supply
Q23. If the economy experiences a contractionary gap and the RBI stimulates the economy.
The money supply is increasing because the RBI prints more money
The money supply is increasing because the RBI makes open-market purchases
The money supply is decreasing because the RBI makes open-market sales
The money supply is decreasing because the RBI hoards money
Q24. Gross domestic product is
The sum of money value of all intermediate goods and services produced within the domestic territories of a country during an accounting year
The aggregate final goods and services produced during an accounting year
The sum of money value of all final goods and services produced within the domestic territories of a country during an accounting year
The aggregate intermediate goods and services produced during an accounting year
Q25. Under perfect competition there are
Large number of buyers and sellers
Large number of sellers
Large number of buyers and sellers and selles are small in size
Q26. Price elasticity of demand is calculated as
The percentage change in price divided by the percentage change in quantity demanded
The percentage change in quantity demanded divided by the percentage change in price
The absolute change in quantity demanded divided by the absolute change in price
The absolute change in price divided by the absolute change in quantity demanded
Q27. If Marginal Product of labour is lesser than Average Product of labour then Average product of labour is
Constant
Increasing
Decreasing
Maximum
Q28. Macroeconomics does not comprise of
Growth of national income
Study of unemployment in a country
Employment of factor inputs by a firm
Inflation in a country

Q29. If the price charged by a firm is greater than average cost of production, the firm earns
Economic profit
Normal profit
Incurs losses
Any of these
Q30. When prices increase at such a speed that the value of money falls drastically is called as