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ECO401 Grand Quiz + Mid Term Quiz Fall 2020 Preparation Material Due Date: 30-12-2020

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1. What will happen if exchange rate decreases from \$1 = Pak Rs. 85 to \$1 = Pak Rs. 65?

1. It will reduce imports of Pakistan.
2. Its imports and exports will remain unchanged.
3. It will decrease exports of Pakistan.
4. It will increase exports of Pakistan.
2. Sultan is running a logistics business and provides logistics services to the local business community. For his company, truck falls in the category of ________.

1. Labor
2. Capital
3. Land
4. Entrepreneurship
3. Suppose Ali derives total utility equals to 10 utils from the consumption of 1 bottle of Pepsi. When he consumes another bottle of Pepsi, he gets total utility equals 25 utils. His marginal utility in this case will be:

1. 2.5 utils
2. 15 utils
3. 25 utils
4. 35 utils
4. A firm that benefits from lower costs per unit as it grows is an example of:

1. Economies of scale.
2. Diseconomies of scale.
3. Increasing opportunity costs.
4. Scale reduction.
5. It is expected that the sign of cross price elasticity of demand between two complementary goods would be:

1. Positive
2. Negative
3. Zero
4. Ambiguous
6. The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the ________ model.

1. Cournot
2. Stackelberg
3. Dominant firm
4. kinked demand curve
7. The branch of economics that studies the entire economy, such topics as aggregate production, unemployment and inflation is called:

1. Managerial economics
2. Macro economics
3. Micro economics
4. Financial economics
8. Gross National Product (GNP) is:

1. Gross Domestic Product (GDP) minus depreciation.
2. Net National Product (NNP) plus depreciation.
3. National income discounted by the GDP deflator.
4. Income from foreign investments.
9. The socially optimal level of price and quantity is determined where:

1. Marginal social benefit curve intersects marginal social cost curve.
2. Marginal social benefit curve intersects marginal private benefit curve.
3. Marginal social benefit curve intersects marginal private cost curve.
4. Marginal private benefit curves intersects marginal social cost curve.
10. The break-even point occurs when:

1. Price < Average Variable Cost.
2. Price < Average Total Cost.
3. Price = Average Total Cost.
4. Price > Average Variable Cost.
11. Which of the following factors would cause leftward shift in supply curve for bicycles?

1. Decrease in wages
2. Increase in prices of inputs
3. Decrease in prices of inputs
4. Use of latest technology in production of bicycles
12. Arif decides to work for an extra hour rather than playing cricket with his friends. He gets Rs. 500 for an extra hour. His opportunity cost of working for an extra hour is:

1. Rs. 500
2. Pleasure that he would have received from playing cricket
3. Rs.500 minus pleasure that he would have received from playing cricket
4. Undetermined
13. What is meant by the term utility?

1. Useless.
2. Require.
3. Necessary.
4. Satisfaction.
14. The percentage change in quantity demanded given a percentage change in consumer's income is known as:

1. Price elasticity of demand
2. Income elasticity of demand
3. Supply price elasticity
4. Cross price elasticity
15. A firm maximizes profit by operating at the level of output where:

1. Average revenue equals average cost.
2. Average revenue equals average variable cost.
3. Total costs are minimized.
4. Marginal revenue equals marginal cost.
16. The curve of unitary elastic demand will be:

1. A hyperbola
2. An ellipse
3. A rectangle
4. A parabola
17. The demand for apples is expressed as: Qd = 80 - P
The supply of apples is expressed as: Qs = 3P
Refer to the above scenario, the equilibrium price of apples is:

1. Rs. 10
2. Rs. 15
3. Rs. 20
4. Rs. 25
18. Which of the following is TRUE for a monopolistically competitive firm in the short run equilibrium?

1. It will make negative profit (lose money).
2. It will make zero profit (break-even).
3. It will make positive profit.
4. Any of the given is possible.
19. Suppose Fauji Fertilizer Company Limited produces 4500 bags of Sona Urea and sells each bag at a price of Rs. 350. What is the total revenue this firm gets by selling 4500 bags?

1. 128500
2. 150000
3. 1575000
4. 1636000
20. What would cause the supply curve of wheat to shift to the right?

1. An increase in the prices of inputs
2. A decrease in the number of wheat growers
3. An increase in wages paid to agricultural workers
4. Technological improvement which lowers the costs of production
21. When the cross-price elasticity of demand for two goods is less than zero then the goods are ________ goods.

1. Complementary
2. Substitute
3. Inferior
4. Giffen
22. Suppose the government sets minimum prices of crops to support farmers. This is an example of:

1. Price ceiling
2. Price floor
3. Free market equilibrium
4. Shortage
23. Suppose a firm produces 20 units of output and incurs Rs.40 in average variable cost and Rs.8 in average fixed cost, average total cost is:

1. 40
2. 35
3. 48
4. 60
24. If the income elasticity of demand for tea is 0.4, a 10% increase in consumer's income will lead to a _________ in the quantity of tea demanded.

1. 40 percent increase
2. 40 percent decrease
3. 4 percent increase
4. 0.4 percent increase
25. The opportunity cost of an action is:

1. Same for everyone
2. The value of the next best alternative
3. The undesirable aspects of that action
4. The average amount of unhappiness experienced by everyone involved
26. Suppose that a farmer grows wheat and sells it to a baker for Rs.1, the baker makes bread and sells it to a store for Rs.2, and the store sells it to the customer for Rs.3. This transaction increases GDP by:

1. Rs.1
2. Rs.2
3. Rs.3
4. Rs.6
27. If quantity demanded of videocassette players decreases by 15% as a result of 10% increase in its price, then one can conclude that demand for videocassette players is:

1. Elastic
2. Inelastic
3. Perfectly elastic
4. Perfectly inelastic
28. Zafar Iqbal stated in his opening note at University of Economics that food prices should be controlled for a comfortable living. Which category his statement falls in?

1. Normative
2. Positive
3. Negative
4. None of the given
29. If income elasticity is negative, the good is:

1. Normal good
2. A substitute good
3. A complementary good
4. inferior good
30. In a perfectly competitive market:

1. Firms can freely enter and exit
2. Firms sell a differentiated product
3. Transaction costs are high
4. All of the given

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