Economics set 2

If the price elasticity of demand for labour of workers who are paid a binding minimum wage is 0.5 (in absolute value) and the government mandates that the minimum wage rises by 10%, then employment at the minimum wage will:
1. fall by 5%
2. fall by 20%
3. fall by 50%
4. be unaffected
Which of the following is not always true with respect to a per unit tax on suppliers of a commodity where the demand curve is downward sloping and the supply curve is upward sloping?
1. It will result in an increase in the price the consumer pays for the commodity in the market.
2. It will result in a dead-weight loss
3. It will result in a decrease in price the producer receives for the commodity in the market.
4. It will result in a reduction of the quantity traded in the market
Rangimarie consumes two goods, X and Y, and is currently consuming optimally
– that is, in a utility maximising fashion. Her marginal utility (MU) from another unit of X is 5 and her MU from another unit of Y is 10. If X costs $1 per unit and Rangimarie’s income is $100, what can we conclude about the price of Y?
1. It must be E0.50
2. It must be E1
3. It must be E2
4. There is not enough information to identify the price of Y exactly.
If the substitution effect of a price change moves quantity demanded in the opposite direction to the income effect, then we can tell that:
1. the good is a normal good
2. the price of the good must have risen
3. the price of the good must have fallen
4. the good is an inferior good
Which of the following is not an example of a public good?
1. Street lighting.
2. A ﬁreworks display from the Palace.
3. National defence.
4. A public hospital.
If the supply of a good is perfectly inelastic and the government imposes a sales tax on suppliers, then which of the following is true about the economic incidence of this tax?
1. The buyer will pay all of the tax, and the seller will pay none of the tax.
2. The buyer will pay none of the tax, and the seller will pay all of the tax.
3. Both will pay some of the tax with the buyer paying a larger fraction than the seller.
4. Both will pay some of the tax with the buyer paying a smaller fraction than the seller.
Which of the following is not true about price discrimination:
1. It enables the seller to increase his or her proﬁt
2. It always reduces consumer surplus
3. The seller must have some degree of market power to be able to practise it.
4. It cannot be successful if arbitrage is possible
The marginal rate of technical substitution is
1. the amount of one good a consumer must be given to compensate them for a one unit reduction in the other good
2. the rate at which one input can be exchanged for another without altering the total level of output.
3. the rate at which one output can be exchanged for another at a point along the production possibilities frontier.
4. the number of units of future consumption a consumer would willingly exchange for one unit of consumption in the present.
Which of the following is not true of a perfectly competitive industry?
1. Firms sell a homogeneous product
2. The short run supply curve of the industry is the horizontal summation of the short-run marginal cost curves of individual ﬁrms.
3. The long run supply curve of the industry is the horizontal summation of the long-run marginal cost curves of individual ﬁrms.
4. There must be perfect mobility of production factors in the long run
A price ceiling is most likely to:
1. lead to a reduction in the volume of transactions as we move down the
  supply curve, below the equilibrium price, to the price ceiling
2. lead to a reduction in the volume of transactions as we move up the demand curve, above the equilibrium price, to the price ceiling.
3. lead to excess supply
4. be effective only if set at a level above the equilibrium price
If a ﬁrm is a price-taker on its input markets and experiences diminishing marginal returns to each factor, then as output rises we can deﬁnitely conclude that:
1. the ﬁrm experiences decreasing returns to scale
2. the ﬁrm’s marginal cost decreases
3. the ﬁrm’s total costs decrease
4. None of the above
For oligopolists facing a kinked demand curve, which of the following
statements is true?
1. Raising the price above the “sticky” price would raise proﬁts.
2. Lowering the price below the “sticky” price would raise proﬁts.
3. Marginal cost can vary over a range that still gives rise to the same
  “sticky” price.
4. The demand curve has the same slope all the way along the kinked demand curve.
Which of the following statements is not true of the demand curve faced by
an individual ﬁrm operating in a perfectly competitive market?
1. The price elasticity of demand for this demand curve is inﬁnite
2. The demand curve is the same as the marginal revenue curve
3. The demand curve is the same as the average revenue curve
4. The slope of the demand curve is inﬁnite.
Which of the following best illustrates the economic concept of moral hazard?
1. An increase in crime associated with an increase in poverty
2. The proﬁts earned from the sale of illicit drugs
3. A tradesperson offering to deduct the GST (Goods and Services Tax)from the price of a job if the customer agrees to pay cash.
4. A ﬁnancial adviser recommending a product they know to be highly risky because of an undeclared commission on sales of the product
You and nine friends are dining at a local restaurant. You plan to split the bill equally at the end of the evening – each of you will pay one tenth of the total. There are two meal choices: the Fish and the Chicken. The following table gives the value of each meal to you (i.e., the maximum you would be willing to pay for such a meal) and the price of each meal.
Meal Fish Chicken
Value E15 E12
Price E20 E10
In order to maximise your consumer surplus you should:-
1. deﬁnitely choose the Fish.
2. choose the Chicken if everyone else chooses the Chicken.
3. deﬁnitely choose the Chicken.
4. choose the Fish only if everyone else chooses the Chicken.
Which of the following statements about GDP (Gross Domestic Product) is correct?
1. GDP measures the total income of everyone in the economy.
2. GDP measures the total expenditure on the economy’s output of goods and services.
3. GDP is the most commonly used measure of a society’s economic well-being.
4. All of the above are correct
For an economy as a whole
1. wages must equal proﬁt.
2. consumption must equal saving.
3. income must equal expenditure.
4. household spending on goods must equal household spending on services.
A steel company sells some steel to a bicycle company for E100. The bicycle company uses the steel to produce a bicycle, which it sells for E200. Taken together, these two transactions contribute:
1. E100 to GDP
2. E200 to GDP
3. Between E200 and E300 to GDP, depending on the proﬁt earned by the bicycle company when it sold the bicycle.
4. E300 to GDP
An Italian company operates a Pasta restaurant in Swaziland. The proﬁts from this Pasta restaurant are included in
1. Swaziland’s GNP and Italy’s GNP
2. Swaziland’s GDP and Italy’s GDP
3. Swaziland’s GDP and Italy’s GNP
4. Swaziland’s GNP and Italy’s GDP
Economists use the term inﬂation to describe a situation in which:
1. some prices are rising faster than others
2. the economy’s overall price level is rising
3. the economy’s overall price level is high, but not necessarily rising
4. the economy’s overall output of goods and services is rising faster than the economy’s overall price level.
The current Policy Targets Agreement obliges the Reserve Bank Governor to
1. keep inﬂation as low as possible
2. maintain a stable exchange rate
3. keep inﬂation between 1% and 3% on average over the medium term
4. keep unemployment as low as possible subject to maintaining inﬂation below 5%.
If this year the CPI (Consumer Price Index) is 110 and last year it was 100, then:
1. the cost of the CPI basket of goods and services has increased this year by 110%.
2. the price level as measured by the CPI has increased by 10%.
3. the inﬂation rate for this year has increased by 10% over last year’s inﬂation rate.
4. All of the above are correct
The “lost decade” is used to denote which of the following episodes in economic history?
1. The period of depression in Japan in the 1990’s
2. The period following Roosevelt’s drastic cuts to public expenditure in the US.
3. The period of technology modernisation in China in the late 1950’s
4. The present decade because growth is expected to stagnate
A bond is a
1. ﬁnancial intermediary
2. certiﬁcate of indebtedness
3. certiﬁcate of partial ownership in an enterprise
4. None of the above is correct
A deposit in a cheque account is
1. a medium of exchange and a store of value
2. a medium of exchange, but not a store of value
3. a store of value, but not a medium of exchange
4. neither a medium of exchange nor a store of value
If the revenue of the Swaziland government exceeds its spending, then the government necessarily:
1. runs a budget deﬁcit
2. runs a budget surplus
3. runs a national debt
4. will increase taxes
If the nominal interest rate is 5% and the rate of inﬂation is 2%, then the real interest rate is:
1. 7%.
2. 3%
3. 2.5%
4. 0.4%
Cyclical unemployment is closely associated with
1. long term economic growth
2. short-run ups and downs in economic activity
3. ﬂuctuations in the natural rate of unemployment
4. changes in the minimum wage
The labour force of a country equals the
1. number of people who are employed
2. number of people who are unemployed
3. number of people employed plus the number of people unemployed
4. adult population
Commodity money is
1. backed by gold
2. the principal type of money in use today
3. money with intrinsic value
4. receipts created in international trade that are used as a medium of exchange.
During a recession the economy experiences
1. rising employment and income
2. rising employment and falling income
3. rising income and falling employment
4. falling employment and income
Between April 2008 and April 2009, Swazilands' Ofﬁcial Cash Rate (OCR):
1. fell from 8.25% to 2.5%
2. fell from 4.25% to 2.5%
3. remained constant at 4.25%
4. increased from 2.5% to 4.25%
A possible reason why purchasing power parity (PPP) may not hold at all times is because:
1. some goods are not easily transported
2. demand differs across countries
3. costs differ across countries
4. exchange rates differ across countries
If Swaziland imposed a binding import quota on garments manufactured in China, then in Swaziland:
1. domestic garment manufacturing would rise and imports of Chinese garments would rise.
2. domestic garment manufacturing would rise and imports of Chinese garments would fall.
3. domestic prices for garments would fall
4. there would be a decrease in demand for domestically produced garments.
Critics of stabilisation policy argue that
1. there is a lag between the time when policy is initiated and the time when the policy has an impact on the economy
2. the impact of the policy may last longer than the problem it was designed to offset.
3. the policy can be a source of, instead of a cure for, economic ﬂuctuations.
4. All of the above

Economics set 2

Quiz