McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Arts in Economics (MA Economics) .
| 1. |
The law of demand states that an increase in the price of a good: |
| A. | increases the supply of that good. |
| B. | decreases the quantity demanded for that good. |
| C. | increases the quantity supplied of that good. |
| D. | none of these answers. |
| Answer» B. decreases the quantity demanded for that good. | |
| 2. |
The law of supply states that an increase in the price of a good: |
| A. | none of these answers. |
| B. | increases the quantity supplied of that good. |
| C. | decreases the demand for that good. |
| D. | decreases the quantity demanded for that good. |
| Answer» B. increases the quantity supplied of that good. | |
| 3. |
If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is: |
| A. | a normal good. |
| B. | an inferior good. |
| C. | a substitute good |
| D. | a complementary good. |
| Answer» C. a substitute good | |
| 4. |
Which of the following shifts the demand for watches to the right? |
| A. | an increase in the price of watches |
| B. | none of these answers |
| C. | a decrease in the price of watch batteries if watch batteries and watches are complements |
| D. | a decrease in consumer incomes if watches are a normal good |
| Answer» C. a decrease in the price of watch batteries if watch batteries and watches are complements | |
| 5. |
An inferior good is one for which an increase in income causes a(n) |
| A. | decrease in supply. |
| B. | increase in demand. |
| C. | increase in supply. |
| D. | decrease in demand. |
| Answer» D. decrease in demand. | |
| 6. |
If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is |
| A. | income inelastic. |
| B. | price inelastic. |
| C. | price elastic. |
| D. | unit price elastic. |
| Answer» C. price elastic. | |
| 7. |
The price elasticity of demand is defined as |
| A. | the percentage change in the quantity demanded divided by the percentage change in income. |
| B. | the percentage change in income divided by the percentage change in the quantity demanded. |
| C. | the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good. |
| D. | the percentage change in price of a good divided by the percentage change in the quantity demanded of that good. |
| Answer» C. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good. | |
| 8. |
In general, a flatter demand curve is more likely to be: |
| A. | price elastic |
| B. | unit price elastic |
| C. | none of these answers |
| D. | price inelastic. |
| Answer» A. price elastic | |
| 9. |
In general, a steeper supply curve is more likely to be |
| A. | price elastic |
| B. | none of these answers |
| C. | unit price elastic |
| D. | price inelastic |
| Answer» D. price inelastic | |
| 10. |
Which of the following would cause a demand curve for a good to be price inelastic? |
| A. | the good is a luxury |
| B. | there are a great number of substitutes for the good |
| C. | the good is a necessity |
| D. | the good is an inferior good |
| Answer» C. the good is a necessity | |
| 11. |
If the cross-price elasticity between two goods is negative, the two goods are likely to be: |
| A. | substitutes |
| B. | complements |
| C. | necessities |
| D. | luxuries |
| Answer» B. complements | |
| 12. |
If there is excess capacity in a production facility, it is likely that the firm’s supply curve is: |
| A. | price inelastic |
| B. | none of these answers |
| C. | unit price elastic |
| D. | price elastic |
| Answer» D. price elastic | |
| 13. |
If the income elasticity of demand for a good is negative, it must be: |
| A. | an elastic good |
| B. | an inferior good |
| C. | a normal good |
| D. | a luxury good |
| Answer» B. an inferior good | |
| 14. |
Which of the following would decrease the supply of wheat? |
| A. | a decrease in the price of pesticides |
| B. | an increase in the demand for wheat |
| C. | a rise in the price of wheat |
| D. | an increase in the price of corn |
| Answer» D. an increase in the price of corn | |
| 15. |
Which of the following defines marginal utility? |
| A. | the change in total utility divided by the price of a product |
| B. | the maximum amount of satisfaction from consuming a product |
| C. | the total satisfaction received from consuming as much of the product that isavailable for consumption |
| D. | the additional satisfaction received from consuming one more unit of a product |
| Answer» D. the additional satisfaction received from consuming one more unit of a product | |
| 16. |
Which best expresses the law of diminishing marginal utility? |
| A. | the more consumption of a product, the smaller is the total and marginal utilityfrom the consumption. |
| B. | the less consumption of a product, the greater is the total and marginal utilityof the consumption. |
| C. | the more consumption of a product, the smaller is the marginal utility fromconsuming an additional unit. |
| D. | the more consumption of a product, the smaller is the total and marginal utilityfrom the consumption. |
| Answer» C. the more consumption of a product, the smaller is the marginal utility fromconsuming an additional unit. | |
| 17. |
Which situation is consistent with the law of diminishing marginal utility? |
| A. | the more cake henry eats, the more he enjoys another slice. |
| B. | the more cake henry eats, the less he enjoys another slice. |
| C. | henry’s marginal utility from eating cake becomes positive after eating threeslices. |
| D. | henry’s marginal utility from eating cake reaches a maximum when total utilityis zero. |
| Answer» B. the more cake henry eats, the less he enjoys another slice. | |
| 18. |
A consumer with a fixed income will maximize utility when each good is purchased in amounts such that the: |
| A. | total utility is the same for each good. |
| B. | marginal utility of each good is maximized. |
| C. | marginal utility per dollar spent is the same for all goods. |
| D. | marginal utility per dollar spent is maximized for each good. |
| Answer» C. marginal utility per dollar spent is the same for all goods. | |
| 19. |
If a rational consumer is in equilibrium, then: |
| A. | the marginal utility obtained from one product is equal to the marginal utility obtained from any other product. |
| B. | a reallocation of income would increase the consumer’s total utility. |
| C. | the marginal utility per last dollar spent is the same for all goods consumed. |
| D. | total utility becomes zero. |
| Answer» C. the marginal utility per last dollar spent is the same for all goods consumed. | |
| 20. |
If you know that the marginal utility per rupees spent on product Alpha is less than the marginal utility per rupees spent on product Beta, consumers who spend all their income on these two products can: |
| A. | maximize total utility but not marginal utility. |
| B. | maximize marginal utility but not total utility. |
| C. | increase total utility by buying more of beta and less of alpha. |
| D. | increase total utility by buying more of alpha and less of beta. |
| Answer» C. increase total utility by buying more of beta and less of alpha. | |
| 21. |
A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 units and Y is 16 units. The unit price of X is Rs.5. The price of Y is: |
| A. | rs.1 per unit. |
| B. | rs.2 per unit. |
| C. | rs.3 per unit. |
| D. | rs.4 per unit. |
| Answer» B. rs.2 per unit. | |
| 22. |
Which is an explanation for why the demand curve is down sloping? |
| A. | normal goods |
| B. | the law of supply |
| C. | the law of diminishing marginal utility |
| D. | the law of increasing opportunity cost |
| Answer» C. the law of diminishing marginal utility | |
| 23. |
As If a few large firms dominate an industry the market is known as: |
| A. | monopolistic competition |
| B. | competitively monopolistic |
| C. | duopoly |
| D. | oligopoly |
| Answer» D. oligopoly | |
| 24. |
In a cartel, member firms may be given a fixed amount to produce. This amount is called |
| A. | limitless |
| B. | factor |
| C. | quota |
| D. | quotient |
| Answer» C. quota | |
| 25. |
The Kinked Demand Curve theory assumes: |
| A. | firms co-operate |
| B. | firms act as part of a cartel |
| C. | firms are competitive with each other |
| D. | firms are not profit maximisers |
| Answer» C. firms are competitive with each other | |
| 26. |
In Game Theory: |
| A. | firms are always assumed to act independently |
| B. | firms are always assumed to cooperate with each other |
| C. | firms always collude as part of a cartel |
| D. | firms consider the actions of others before deciding what to do |
| Answer» D. firms consider the actions of others before deciding what to do | |
| 27. |
In the Kinked Demand Curve theory: |
| A. | the marginal revenue curve is perfectly horizontal |
| B. | demand is always price inelastic |
| C. | demand is always price elastic |
| D. | non price competition is likely |
| Answer» D. non price competition is likely | |
| 28. |
In oligopoly: |
| A. | the largest four firms are likely to have a small market share |
| B. | the price is likely to equal marginal revenue |
| C. | firms will continue to produce in the long run if price is less than average cost |
| D. | firms may collude or compete depending on their assumptions about their competitors |
| Answer» D. firms may collude or compete depending on their assumptions about their competitors | |
| 29. |
A model of Game Theory of oligopoly is known as the: |
| A. | prisoner\s dilemma |
| B. | monopoly cell |
| C. | jailhouse sentence |
| D. | jury box |
| Answer» A. prisoner\s dilemma | |
| 30. |
In a cartel: |
| A. | firms compete against each other |
| B. | price wars are common |
| C. | firms use price to win market share from competitors |
| D. | firms collude |
| Answer» D. firms collude | |
| 31. |
In cartels |
| A. | each individual firm profit maximizes |
| B. | there may be an incentive to cheat |
| C. | the industry as a whole is loss making |
| D. | there is no need to police agreements |
| Answer» B. there may be an incentive to cheat | |
| 32. |
A firm that considers the potential reactions of its competitors when it makes a decision |
| A. | is referred to as a price leader |
| B. | is engaged in strategic behaviour |
| C. | is engaged in collusion |
| D. | is referred to as a barometric firm |
| Answer» B. is engaged in strategic behaviour | |
| 33. |
Which of the following is an example of strategic behaviour? |
| A. | a firm builds excess capacity to discourage the entry of competitors |
| B. | a firm adopts the pricing behaviour of a dominant firm under the assumption that other firms will do likewise |
| C. | firms in an industry increase advertising expenditures to avoid losing market share |
| D. | all of the above are examples of strategic behaviour |
| Answer» D. all of the above are examples of strategic behaviour | |
| 34. |
Which one of the following is a part of every game theory model? |
| A. | players |
| B. | payoffs |
| C. | probabilities |
| D. | strategies |
| Answer» D. strategies | |
| 35. |
In game theory, a choice that is optimal for a firm no matter what its competitors do is referred to as |
| A. | the dominant strategy |
| B. | the game-winning choice |
| C. | super optimal |
| D. | a gonzo selection |
| Answer» A. the dominant strategy | |
| 36. |
Which of the following circumstances in an industry will result in a Nash equilibrium? |
| A. | all firms have a dominant strategy and each firm chooses its dominant strategy |
| B. | all firms have a dominant strategy, but only some choose to follow it |
| C. | all firms have a dominant strategy, and none choose it |
| D. | none of the above is correct |
| Answer» A. all firms have a dominant strategy and each firm chooses its dominant strategy | |
| 37. |
A prisoners’ dilemma is a game with all of the following characteristics except one. Which one is present in a prisoners’ dilemma? |
| A. | players cooperate in arriving at their strategies |
| B. | both players have a dominant strategy |
| C. | both players would be better off if neither chose their dominant strategy |
| D. | the payoff from a strategy depends on the choice made by the other player |
| Answer» A. players cooperate in arriving at their strategies | |
| 38. |
Which of the following legal restrictions, if enforced effectively, would be likely to solve a prisoners’ dilemma type of problem for the firms involved? |
| A. | a law that prevents a cartel from enforcing rules against cheating |
| B. | a law that makes it illegal for oligopolists to engage in collusion |
| C. | a law that prohibits firms in an industry from advertising their services |
| D. | all of the above would be likely to solve a prisoners\ dilemma for the firms |
| Answer» C. a law that prohibits firms in an industry from advertising their services | |
| 39. |
Until recently, medical doctors and lawyers have been prohibited from engaging in competitive advertising. If the prisoners’ dilemma applies to this situation, then the presence of this restriction would be likely to |
| A. | increase profits earned by individuals in these professions |
| B. | reduce profits earned by individuals in these professions |
| C. | have no effect on the profits earned by individuals in these professions |
| D. | increase the profits of some and reduce the profits of other individuals in these professions |
| Answer» A. increase profits earned by individuals in these professions | |
| 40. |
Which one of the following conditions is required for the success of a tit-for-tat strategy? |
| A. | demand and cost conditions must change frequently and unpredictably |
| B. | the number of oligopolists in the industry must be relatively small |
| C. | the game can be repeated only a small number of times |
| D. | firms must be unable to detect the behaviour of their competitors |
| Answer» B. the number of oligopolists in the industry must be relatively small | |
| 41. |
An oligopolist may engage in short-run behaviour that results in lower profits if |
| A. | it leads to a nash equilibrium |
| B. | it is a dominant strategy |
| C. | it is not involved in a repeated game |
| D. | it lends credibility to the firm\s threats |
| Answer» D. it lends credibility to the firm\s threats | |
| 42. |
A firm may decide to increase its scale so that it has excess production capacity because, by doing so, it is able to |
| A. | minimize its average cost of production |
| B. | establish a credible deterrent to the entry of competing firms |
| C. | take advantage of a dominant strategy in a prisoners’ dilemma |
| D. | attain a nash equilibrium and avoid repeated games |
| Answer» B. establish a credible deterrent to the entry of competing firms | |
| 43. |
Game theory is concerned with |
| A. | predicting the results of bets placed on games like roulette |
| B. | the choice of an optimal strategy in conflict situations |
| C. | utility maximization by firms in perfectly competitive markets |
| D. | the migration patterns of caribou in alaska |
| Answer» B. the choice of an optimal strategy in conflict situations | |
| 44. |
Which of the following is an example of a game theory strategy? |
| A. | you scratch my back and i’ll scratch yours |
| B. | if the shoe fits, wear it |
| C. | monkey see, monkey do |
| D. | none of the above |
| Answer» A. you scratch my back and i’ll scratch yours | |
| 45. |
In game theory, a situation in which one firm can gain only what another firm loses is called a |
| A. | nonzero-sum game |
| B. | prisoners’ dilemma |
| C. | zero-sum game |
| D. | cartel temptation |
| Answer» C. zero-sum game | |
| 46. |
Which of the following is a nonzero-sum game? |
| A. | prisoners’ dilemma |
| B. | chess |
| C. | competition among duopolists when market share is the payoff |
| D. | all of the above |
| Answer» A. prisoners’ dilemma | |
| 47. |
Which of the following is a zero-sum game? |
| A. | prisoners’ dilemma |
| B. | chess |
| C. | a cartel member’s decision regarding whether or not to cheat |
| D. | all of the above |
| Answer» B. chess | |
| 48. |
A plan of action that considers the reactions of rivals is an example of |
| A. | accounting liability |
| B. | strategic behaviour |
| C. | accommodating behaviour |
| D. | risk management |
| Answer» B. strategic behaviour | |
| 49. |
In game theory, the outcome or consequence of a strategy is referred to as the |
| A. | payoff |
| B. | penalty |
| C. | reward |
| D. | end-game strategy |
| Answer» A. payoff | |
| 50. |
A strategy that is best regardless of what rival players do is called |
| A. | first-mover advantage |
| B. | a nash equilibrium strategy |
| C. | tit-for-tat |
| D. | a dominant strategy |
| Answer» D. a dominant strategy | |
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