[hafizuzair]

Dear All today is 20 October and on coming 27 October is our test which will include these questions. So please help me in answering these question including with comments and explanation also below each questions.

Questions are below


1. Which of the following would not be classified as a factor of production?

A. Jack, a bricklayer for a local construction firm.
B. The cement mixer Jim uses.
C. The cement puds in the mixer.
D. The building site Jim works on.
E. The wage Jim gets paid at the end of the week.

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2. Which one of the following statements is not an example of marginal analysis?

A. If I eat another chocolate bar, I might be sick.
B. If mortgage rates rise by another 1 percent, some people will no longer be able to afford the repayments.
C. If a firm earns more from selling its products than they cost to produce, it will make a profit.
D. If J. Fernando (Warehousing) Inc. buys a forklift truck of the latest design, it should be able to stack another 500 pallets per day.

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3. Which of the following might be a source of market failure?

A. A giant firm dominates the market for a good and charges a high
price in order to make large profits.
B. A firm becomes complacent from lack of competition and ceases to look for maximum efficiency.
C. A factory producing leather goods causes pollution.
D. Private enterprise is unable to provide street lighting.
E. All of the above.

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4. Make a list of the current problems that are the concern of development managers such as you. Are they macro or microeconomic problems, or a bit of both? How do they relate to the problem of scarcity?

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5. Consider the demand curve for gasoline. What effect will the following have?

A. An increase in the price of cars. Rightward shift/ leftward shift/ movement up along/ movement down along/ need more information.
B. An increase in the proportion of the population owning cars. Rightward shift/ leftward shift/ movement up along/ movement down along/ need more information.
C. A rise in transport cost of shipping oil. Rightward shift/ leftward shift/ movement up along/ movement down along/ need more information to say.
D. A growing concern for environmental issues by the general public. Rightward shift/ leftward shift/ movement up along/ movement down along/ need more information to say.
E. An increase in duty on diesel. Rightward shift/ leftward shift/ movement up along/ movement down along/ need more information to say.

F. A reduction in duty of gasoline. Rightward shift/ leftward shift/ movement up along/ movement down along/ need more information to say.

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6. Consider the case of the supply curve of organically grown wheat. What effect would the following have?

A. A reduction in the cost of organic fertilizers. Rightward shift/ leftward shift/ Movement up along/ movement down along.
B. An increase in the demand for organic bread. Rightward shift/ leftward shift/ Movement up along/ movement down along.
C. An increase in the price of organic oats and barley. Rightward shift/ leftward shift/ Movement up along/ movement down along.
D. The belief that the price of organic wheat will rise substantially in the future. Rightward shift/ leftward shift/ Movement up along/ movement down along.
E. A drought. Rightward shift/ leftward shift/ Movement up along/ movement down along.
F. A government subsidy granted to farmers using organic methods. Rightward shift/ leftward shift/ Movement up along/ movement down along.

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7. Which of the following are likely to be fixed costs and which variable costs for a pineapple juice factory over a course of a month?

A. Cost of pineapples Fixed/Variable
B. Business rates (local taxes) Fixed/Variable
C. An advertising campaign for pineapple juice Fixed/Variable
D. The cost of electricity (paid quarterly) Fixed/Variable
E. Overtime pay Fixed/Variable
F. The basic minimum wage agreed with the Unions (workers must be given at least one month’s notice if they are to be laid off) Fixed/Variable
G. Wear and tear on machines Fixed/Variable
H. Depreciation of machines due to age Fixed/Variable
I. Interest on a mortgage for the factory: the rate of interest rises over the course of the month Fixed/Variable

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8. Economies of scale can be defined as:

A. Large-scale production leading to bigger profits
B. Large-scale production leading to lower costs per unit of production
C. Large-scale production leading to greater marginal productivity of factors
D. Large-scale production leading to greater output per unit of input
E. Large-scale production leading to a better organization of the factors of production

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9. Which of the following are claimed to be advantages of perfect competition:
(a) It leads to allocative efficiency Yes/No
(b) It leads to production at minimum short-run AC Yes/No
(c) It leads to production at minimum long-run AC Yes/No
(d) It leads to a higher level of investment Yes/No
(e) It leads to intense non-price competition Yes/No
(f) It leads to firms combining their factors in the least-cost way Yes/No

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10. Which one of the following would not be a barrier to firms entering an industry:

(a) An upward-sloping long-run average cost curve.
(b) Patents on key processes.
(c) Substantial economies of scale.
(d) Large initial capital costs.
(e) The threat of takeover by existing firms.

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11. From the list of points below, select those which distinguish a monopolistically
competitive industry from a perfectly competitive industry.

(a) There are no barriers to the entry of new firms into the market Yes/No
(b) Firms in the industry produce differentiated products Yes/No
(c) The industry is characterized by a mass of sellers, each with a small market
share Yes/No
(d) A downward-sloping demand curve means the firm has some control over the products price Yes/No
(e) In the long-run only normal profits will be earned Yes/No
(f) Advertising plays a key role in bringing the product to the attention of the
consumer Yes/No

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12. Which of the following are characteristics of oligopoly?

(a) There are just a few firms that dominate the industry Yes/No
(b) There are few if any barriers to the entry of new firms into the industry Yes/No
(c) The firms face downward-sloping demand curves Yes/No
(d) There is little point in advertising because there are so few firms Yes/No
(e) Oligopolists tend to take into account the actions and reactions of other firms Yes/No
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13. Which of the following are examples of tacit collusion:

(a) Price leadership by a dominant firm Yes/No
(b) Agreements ‘behind closed doors’ Yes/No
(c) Discounts to retailers Yes/No
(d) Setting prices at a well-known benchmark Yes/No
(e) Increased product differentiation within the industry Yes/No

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14. Which of the following is the income effect and which is the substitution effect:

(a) As wage rates rise, people will tend to work more hours, since taking leisure would now involve a greater sacrifice of income and hence
consumption. income effect/substitution effect
(b) At higher wage rates, people do not need to work such long
hours income effect/substitution effect

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15. The following are possible explanations of why rents are higher in city centers than in rural areas:

(a) Land in city centers is of more use to commerce.
(b) Transport costs are lower for people in city centers.
(c) The supply of agricultural land is elastic.
(d) The marginal productivity of land is higher for shop and office use than for agricultural use.
(e) City centers are more congested than out-of-town areas.
(f) Costs of living (other than rents) are higher in towns than in countryside.

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[Curlyben]

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