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Test 4-2016with Odd Number Solutions

This document outlines the instructions and content for Test 4 of Economics 101/105, scheduled for May 10, 2016. It consists of 20 multiple choice questions covering various economic concepts, including production functions, market structures, and efficiency. Candidates are instructed to answer using HB pencil on an MCQ answer sheet and to read each question carefully.

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0% found this document useful (0 votes)
43 views8 pages

Test 4-2016with Odd Number Solutions

This document outlines the instructions and content for Test 4 of Economics 101/105, scheduled for May 10, 2016. It consists of 20 multiple choice questions covering various economic concepts, including production functions, market structures, and efficiency. Candidates are instructed to answer using HB pencil on an MCQ answer sheet and to read each question carefully.

Uploaded by

smbhele2004
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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SCHOOL OF ACCOUNTING, ECONOMICS AND FINANCE

ECONOMICS 101/105

TEST 4: Tuesday 10 May 2016

DURATION: 45 MINUTES TOTAL MARKS: 100

INSTRUCTIONS TO CANDIDATES:

This test consists of 20 multiple choice questions only.

1. Answer as many of the questions as possible.


2. Choose the most correct answer in each case.
3. Enter your answers on the MCQ Answer Sheet.
4. Complete the Student number and Seat number blocks. Remember to fill in
the squares corresponding to your student number.
5. All entries on the MCQ answer sheet MUST BE IN HB PENCIL. Entries in
pen will not be recorded by the scanner and marks will thus be lost.
6. Read each question fully before attempting to answer it.
7. There is no negative marking.

1
*Note: Odd numbers solutions. For the rest attend tuts

1. When a hospital replaces some of its nursing staff with sophisticated electronic
equipment, its decision directly relates to the _______ function.
A) allocative
B) production
C) distribution
D) welfare
E) capitalist

2. Which of the following statements is/are correct?


A) Economics is not concerned with the very rich as they do not experience the
problem of scarcity.
B) Economists have agreement on all positive issues but differ only on normative
ones.
C) When economists build models to explain economic events, they take into
account only relevant variables and ignore the rest.
D) Because economists are aware of the various fallacies of reasoning, they are
able to easily avoid them whenever they formulate theories.
E) All of the above.

3. The point of allocative efficiency on the PPF is achieved:


A) as long as total benefit exceeds total cost.
B) when total benefit is equal to total cost.
C) as long as marginal benefit exceeds marginal cost.
D) when marginal benefit is equal to marginal cost.
E) when total benefit is equal to marginal benefit.

4. Which of the following will not cause a shift in the demand curve for footballs?
a) A decrease in the price of football boots.
b) An increase in the price of footballs.
c) Very good weather for the playing of football.
d) An increase in the number of people playing football.
e) All of the above will shift the demand curve for footballs.

2
5. Referring to the figure below, if the government imposes a price ceiling of $2,
the result will be:

A) equilibrium.
B) excess supply.
C) no different than before the price ceiling is imposed.
D) excess demand.
E) demand will shift leftward and supply will shift rightward.

6. When demand is _________, a decrease in price _______________ total


revenue.
A) elastic; decreases
B) elastic; does not change
C) inelastic; decreases
D) inelastic; increases
E) unit elastic; increases

7. Ernie has an income of R40 which he plans to spend on cookies and milk. The
price of milk is R1 per litre, and the price of cookies is R2 per packet. If Ernie
buys 12 litres of milk, how many packets of cookies will he buy if he spends all of
his income?
A) 14.
B) 12.
C) 28.
D) 20.
E) Not enough information to calculate.

3
8. At point d in the above figure, the average product of labour equals:
A) 3.75.
B) 4.
C) 15.
D) approximately 1.
E) 11.

9. If a firm's marginal product of labour is less than its average product of labour,
then an increase in the quantity of labour it employs definitely will:
A) increase its marginal product of labour.
B) decrease its average product of labour.
C) increase its average product of labour.
D) decrease its total product.
E) not change its average product of labour.

10. If a firm operating in perfect competition attempts to sell its product at a price above
the market price of its competitors:
A) it will make an economic profit.
B) its sales will drop to zero.
C) its sales will decrease.
D) its sales will increase.
E) it will make more profit than its competitors.

11. Suppose a firm under perfect competition is producing at a point of long run
equilibrium. If it tries to double its inputs in an attempt to increase output, which
of the following will occur?
A) The firm will experience diminishing marginal returns.
B) The firm will experience increasing returns to scale.
C) The firm will experience decreasing returns to scale.
D) The firm will experience increasing marginal returns.
E) The firm will experience diminishing marginal utility.

4
The table below shows output of a perfectly competitive firm. Use the table
below to answer questions 12 and 13. .

Output Total revenue (Rands) Marginal cost (Rands)


0 0 19
1 20 15
2 40 10
3 60 20
4 80 32
5 100 43
6 120 56

12. The price of the above product is:


A) R20 per unit.
B) R40 per unit.
C) R60 per unit.
D) R10 per unit.
E) R5 per unit.

13. To maximise profits, the firm should produce:


A) 2 units.
B) 3 units.
C) 4 units.
D) 5 units.
E) 6 units.

5
The diagram below shows the price and cost curves facing a perfectly
competitive firm. Use the diagram to answer questions 14, 15, and 16.

14. At a price:
A) greater than 13 the firm will shut down temporarily.
B) between 10 and 13 the firm will make an economic profit.
C) of 13 the firm will make an economic profit.
D) above 10 but below 13 the firm will shut down temporarily
E) below 10 the firm will shut down temporarily.

15. In the short run equilibrium, the firm will:


A) make an economic profit of 540.
B) make a total revenue of 540.
C) incur a total cost of 540.
D) make an economic profit of zero.
E) Options B), C) and D) are all correct.

16. If more firms entered this market, ceteris paribus, then:


A) The price line would move upwards.
B) The average variable cost curve would move upwards.
C) The marginal cost curve would move downwards.
D) This firm’s average revenue would fall and the firm would increase its output.
E) This firm’s marginal revenue would fall and the firm would decrease its output.

6
The diagram below shows the price and cost curves facing a monopolist. Use
the diagram to answer questions 17, 18, and 19.

and X.

17. At the profit maximising level of output, the monopolist’s total revenue is area:
A) GIDB.
B) GKCB.
C) GEJB.
D) GHCB.
E) GIJB.

18. At the profit maximising level of output, producer surplus is area:


A) GIJB.
B) GIDB.
C) GKCB.
D) GHJB.
E) CHJ.

19. If the monopolist was replaced by a perfectly competitive market then the gain in
consumer surplus and producer surplus would be area:
A) HIG.
B) HKG.
C) HIK.
D) HFEG.
E) There is no gain.

7
20. Consider the following statements:

i) In the long run a monopolistically competitive firm produces at a level


of output that is less than their minimum average total cost.
ii) In the long run a monopolistically competitive firm will earn the same
profit as a perfectly competitive firm.
iii) In the long run a monopolistically competitive firm does not set its
price equal to marginal cost but it produces at the minimum efficient
scale.

Which of the above statements is correct?


A) i only.
B) ii only.
C) ii and iii only.
D) i and ii only.
E) i, ii and iii.

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