Master ECON1001: Key Concepts & Practice Exam Questions
School
English As A Second Language**We aren't endorsed by this school
Course
ECONOMICS 2106
Subject
Economics
Date
Dec 10, 2024
Pages
8
Uploaded by AgentMorning5356
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn overAnswer ALL QuestionsIndicate your answers in the spaces provided on this exam paper. Please write your student ID number below: STUDENT ID NUMBER …………………………………..……………………Only a calculator from APPROVED LIST A may be used in this examination Dictionaries are not allowed with one exception. Those whose first language is not English may use a standard translation dictionary to translate between that language and English provided that neither language is the subject of this examination. Subject specific translation dictionaries are not permitted. No electronic devices capable of storing and retrieving text, including electronic dictionaries, may be used. DO NOT turn examination paper over until instructed to do so.
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn over1. Demand and supply in the market for potatoes are given by D = 80 - P and S = 9P where P is the market price. What are the equilibrium price and quantity? Q* = 80, P* = 80. Q* = 80, P* = 8. Q* = 90, P* = 10. Q* = 72, P* = 8. No equilibrium exists in this market. 2. Assume that an individual consumes only two goods, A and B, and that these two goods are perfect substitutes in consumption. Which of the following statements is false? The indifference curves for A and B are straight lines. In equilibrium, only one of the two goods may be consumed. If the price of good A is higher than that of good B, only good B will be consumed in equilibrium. The marginal rate of substitution between the two goods is constant. Goods A and B cannot both be inferior goods. 3. Assume that a consumer's constrained choice problem has an interior solution. Which of the following statements is false? The marginal rate of substitution is equal to the marginal rate of transformation. Utility is maximised given the consumer's budget constraint. The optimal consumption bundle is on the highest indifference curve that just touches the budget constraint. All consumption bundles that lie on the budget constraint maximise utility. Consumption bundles below the budget constraint do not maximise utility. 4. Lisa spends all of her income on the consumption of oranges and apples, and the quantities consumed are denoted by qOand qA, respectively. If her income is £100, the price of oranges is £0.50/orange and the price of apples is 0.25/apple, her budget constraint is given by which of the following equations? qA= 400 - 2qOqA= 100 - 0.5qOqA= 400 - 0.5qOqO= 100 - 0.5qAqO= 400 - 2qA
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn over5. If good A is a normal good which of the following statements is true? If income goes up consumption of A will fall. If the price of good A rises, consumption of A will fall. Income effects of own-price changes will partially offset substitution effects. The imposition of a sales tax on good A that is borne by consumers will not lead to a shift of the demand curve for good A. If the price of good A falls, the income effect can overcompensate the substitution effect so that demand for good A decreases. 6. A person has utility function: U(x, y) = min(x, y). To maximise utility: the consumer will only buy the cheaper good. the consumer will always buy an equal amount of goods x and y. the consumer will always spend an equal amount on goods x and y. the consumer will always be indifferent between goods x and y. none of the above. 7. In the figure below, D denotes demand, S supply, Pethe equilibrium price and Qethe equilibrium quantity, respectively. A. Which area or areas measure producer surplus in this market? Area A. Area B. Area C. Areas A+B. Cannot tell from the information available.
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn over8. Given a firm's short-run production function q = L + 4 L2- 0.1 L3, where q denotes output and L denotes labour input, which of the following statements is true? The marginal productivity of labour is MPL = 1 + 4L - 0.1L2. The average productivity of labour is APL = 1 + 8L - 0.3L2. The marginal productivity of labour is MPL = 8L - 0.3L2. The average productivity of labour is APL = 1 + 4L - 0.1L2. The firm will be making losses at all possible labour input choices. 9. If a firm's isoquants exhibit a diminishing marginal rate of technical substitution then: The more labour the firm has, the easier it is to replace capital with labour. The marginal product of capital will increase as we increase capital inputs, holding labour inputs constant. The firm cannot have a linear production function. The firm's production technology must be subject to decreasing returns to scale. none of the above. 10. Suppose the demand curve in a market is Q = 100 –4p, where p is price and Q is quantity. The good currently sells at a price of £10 per unit. The price elasticity of demand equals: -3/2. -2/3 -4. -5/2. none of the above. 11. A monopolist produces its good at a constant marginal cost of £20 per unit with no fixed costs and faces a demand curve of Q = 100 –2 p. If the monopolist maximises profit its profit will be …less than zero. more than zero, but less than £100. more than £100, but less than £400. more than £400, but less than £900. more than £900.
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn over12. Which of the following statements about a profit-maximising, perfectly competitive firm is false? The firm cannot influence market price. The firm will expand output until marginal cost = price. The firm will expand output until marginal cost = marginal revenue. The firm will shut down if price is lower than the minimum of average variable cost. The firm will operate where average costs are minimised. 13. Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. Which of the following statements is true at all levels of production? MC = AVC. MC = AC. MC > AFC. MC > AC. none of the above. 14. Which of the following statements about a profit-maximising monopolist is true? The monopolist is better able than perfectly competitive firms to sustain losses and will continue to operate if revenue is smaller than variable cost. Average revenues will be smaller than the price in equilibrium. Marginal revenue will be higher than the price in equilibrium. The monopolist will expand output until marginal cost = price. The monopolist will never operate on the inelastic part of its demand curve. 15. For price discrimination to be possible, which of the following conditions need to hold: 1) The firm must have market power. 2) The firm must be able to prevent resale from customers who are charged a relatively low price to those who are charged a relatively high price. 3) The firm must be able to identify each individual customer's willingness-to-pay. Only statement 1) is correct. Only statement 2) is correct. Only statement 3) is correct. Only statements 1) and 2) are correct. All three statements are correct.
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn over16. Consider the diagram below which shows the impact of a per-unit tax on the equilibrium in a market: The deadweight loss from the tax is equivalent to: B + C + E B + C + G E + F A B + C + G + H 17. The figure below shows the market for steel ingots. If the market is competitive, then to achieve the socially optimal level of pollution, the government can: outlaw the production of steel. institute a specific tax of $25. institute a specific tax of $50. institute a specific tax equal to area b. institute a specific tax equal to area c.
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A Turn over18. Average productivity will fall as long as marginal productivity is falling. it exceeds marginal productivity. it is less than marginal productivity. the number of workers is increasing. marginal productivity is increasing 19. In a monopolistically competitive market, which of the following is true? A monopolist sets a low price to deter entry. Firms compete to be the sole supplier of a good. In the long run there is free entry and exit into the market. In a long run equilibrium price equals marginal cost. In a long run equilibrium firms operate where there are diseconomies of scale. 20. A firm operates under decreasing returns to scale if: its long run average cost is falling. the marginal product of each input is falling. its output less than doubles when all inputs are doubled. the law of diminishing marginal returns holds. its long run marginal cost is increasing. 21. Two firms compete in a market by simultaneously choosing either low, medium, or high production. The payoffs, in millions of pounds profit, are shown in the table below. Firm B Low Medium High Firm A Low A: 20, B: 30 A: 18, B: 26 A: 18, B: 24 Medium A: 22, B: 26 A: 22, B: 25 A: 18, B: 20 High A: 24, B: 22 A: 22, B: 18 A: 16, B: 20 In a Nash equilibrium …Both firms choose low production. Both firms choose medium production. Both firms choose high production. Firm A produces more than Firm B. Firm B produces more than Firm A.
ECON1001-MOCK SECTION A ECON1001-MOCK SECTION A END22. Suppose two firms produce differentiated products under constant marginal costs and with no fixed costs. The firms compete by setting prices. In equilibrium: The firms will set price equal to marginal cost. The firms will make zero profit. The price set by each firm will maximise its profit, given the price set by the rival firm. The prices will maximise the firms’ combined profit. Only one firm will sell any output. 23. Air pollution caused by a car manufacturer is an example of: A negative externality of car production. A positive externality of car production. Marginal private cost exceeding marginal social cost. Marginal private cost of car production equalling marginal social cost. Marginal private benefits exceeding marginal social benefits. 24. If a market is characterised by asymmetric information between buyers and sellers then: Sellers must be better informed than buyers. Buyers must be better informed than sellers. Either buyers or sellers must have hidden characteristics. Government intervention is needed to restore efficiency. Moral hazard or adverse selection can lead to market failure in that market. 25. A public good can be provided at a constant marginal cost of £4 per unit and is consumed by only two people, Albert and Berta. Each of them attaches a marginal benefit to the consumption of the public good given by MB = 10 - X, where X is the number of units of the public good consumed. What is optimal level of provision of the public good? X = 3 X = 6 X = 8 X = 12 none of the above