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. |
A pure private good is |
| A. | nonrival in consumption and subject to exclusion. |
| B. | rival in consumption and subject to exclusion. |
| C. | rival in consumption and not subject to exclusion. |
| D. | all of the above |
| Answer» B. rival in consumption and subject to exclusion. | |
| 2. |
The M RTS L,K between any two inputs be equal in the production of all commodities. 3. The MRPTx,y be equal to the MRSx,y for any two goods. |
| A. | condition 1&2 are satisfied |
| B. | condition 1 &3 are satisfied |
| C. | condition 2 &3 are satisfied |
| D. | condition 1, 2 &3 are satisfied |
| Answer» D. condition 1, 2 &3 are satisfied | |
| 3. |
Points outside the production possibility frontier are |
| A. | producable. |
| B. | endowment points. |
| C. | consumer equilibrium points. |
| D. | unattainable. |
| Answer» D. unattainable. | |
| 4. |
Positive economics |
| A. | does not depend on market interactions. |
| B. | only looks at the best parts of the economy. |
| C. | examines how the economy actually works (as opposed to how it should work). |
| D. | is very subjective. |
| Answer» C. examines how the economy actually works (as opposed to how it should work). | |
| 5. |
The Coase theorem has problems because |
| A. | generally, bargaining costs are not zero. |
| B. | individuals are not concerned with others. |
| C. | markets always exist. |
| D. | all of the above. |
| Answer» A. generally, bargaining costs are not zero. | |
| 6. |
The marginal rate of substitution is |
| A. | the slope of the pareto curve. |
| B. | the slope of the contract curve. |
| C. | the slope of the utility possibilities curve. |
| D. | the slope of the indifference curve. |
| Answer» D. the slope of the indifference curve. | |
| 7. |
The slope of the production possibilities curve is the |
| A. | marginal rate of substitution. |
| B. | contract curve. |
| C. | marginal rate of transformation. |
| D. | offer curve. |
| Answer» C. marginal rate of transformation. | |
| 8. |
The First Fundamental Theorem of Welfare Economics requires |
| A. | producers and consumers to be price takers. |
| B. | that there be an efficient market for every commodity. |
| C. | that the economy operate at some point on the utility possibility curve. |
| D. | all of the above. |
| Answer» D. all of the above. | |
| 9. |
Market failure can occur when |
| A. | monopoly power exists in the market. |
| B. | markets are missing. |
| C. | consumers can influence prices. |
| D. | all of the above. |
| Answer» D. all of the above. | |
| 10. |
A public good is |
| A. | a good that the public must pay for. |
| B. | nonrival in consumption. |
| C. | more costly than a private good. |
| D. | paid for by the government. |
| Answer» B. nonrival in consumption. | |
| 11. |
Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will |
| A. | increase the utility of all individuals. |
| B. | increase the utility of at least one individual, but may decrease the level of utility of another person. |
| C. | increase the utility of one individual, but cannot decrease the utility of any individual. |
| D. | decrease the utility of all individuals. |
| Answer» B. increase the utility of at least one individual, but may decrease the level of utility of another person. | |
| 12. |
Points on the utility possibility frontier are |
| A. | inefficient. |
| B. | points of incomplete preferences. |
| C. | not producible. |
| D. | pareto efficient. |
| Answer» D. pareto efficient. | |
| 13. |
Market mechanisms are unlikely to provide |
| A. | prices. |
| B. | nonrival goods efficiently. |
| C. | supply and demand. |
| D. | none of the above. |
| Answer» B. nonrival goods efficiently. | |
| 14. |
Public goods can be |
| A. | provided privately. |
| B. | provided publicly. |
| C. | subject to free rider problems. |
| D. | all of the above. |
| Answer» D. all of the above. | |
| 15. |
Externalities can be positive because |
| A. | marginal damages do not last over time. |
| B. | utility can be impacted positively as well as negatively. |
| C. | there is no concept for marginal benefit. |
| D. | positive externalities are subsidies. |
| Answer» B. utility can be impacted positively as well as negatively. | |
| 16. |
A Pigouvian subsidy |
| A. | cannot exist with externalities. |
| B. | is the same thing as a pigouvian tax. |
| C. | is measured in terms of pigouvian dollars. |
| D. | moves production to the socially optimal level of output |
| Answer» D. moves production to the socially optimal level of output | |
| 17. |
Which method can help in obtaining a welfare improvement if externalites exist? |
| A. | pigouvian taxes |
| B. | regulation |
| C. | assigning property rights and permitting bargaining |
| D. | all of the above |
| Answer» D. all of the above | |
| 18. |
Marginal damages |
| A. | must always be considered in social marginal costs. |
| B. | must not be considered in social marginal costs. |
| C. | must sometimes be considered in social marginal costs. |
| D. | have nothing to do with social marginal costs. |
| Answer» A. must always be considered in social marginal costs. | |
| 19. |
In a public goods context, it is difficult to measure impact on real income because |
| A. | public goods are generally free to the public. |
| B. | they make up a small percentage of total gdp. |
| C. | it is hard to measure how people value the public good. |
| D. | inflation decreases the value of the good. |
| Answer» C. it is hard to measure how people value the public good. | |
| 20. |
According to the required reading from the 2003 Washington Post, a recent study by the U.S. Office of Management and Budget found that |
| A. | the benefits of tough new clean-air regulations in the past decade were five to seven times greater than their costs |
| B. | the most efficient way to control pollution is through pigouvian taxes |
| C. | the 1990 clean air act has not affected the problem of acid rain |
| D. | environmentalists are generally supportive of cost-benefit calculations in assessing |
| Answer» A. the benefits of tough new clean-air regulations in the past decade were five to seven times greater than their costs | |
| 21. |
impossibility theorem was propounded by |
| A. | hicks |
| B. | arrow |
| C. | kaldor |
| D. | scitovsky |
| Answer» B. arrow | |
| 22. |
According to a required reading from the 2003 Economist, the biggest problem facing Indonesia’s economy is |
| A. | terrorism |
| B. | an organic approach to public policy questions |
| C. | inadequate rule of law |
| D. | geographical (e) hobbits |
| Answer» C. inadequate rule of law | |
| 23. |
According to a required reading by P.J. O’Rourke, which of the following statements is false? |
| A. | in most of the world, food production has well outpaced the growth of population |
| B. | democracy may be able to help prevent famines from occurring |
| C. | in countries experiencing famine, security and order must be established before the famine can be contained |
| D. | famines are mainly caused by natural disasters or pestilence |
| Answer» D. famines are mainly caused by natural disasters or pestilence | |
| 24. |
According to a required reading by P.J. O’Rourke, which of the following statements is false? |
| A. | the pesticide ddt may have done more good than harm in some countries before it was banned |
| B. | despite their other problems, eastern european countries did a good job protecting the environment during the communist era |
| C. | the costs of environmental regulation exceed their benefits |
| D. | recycling is an economically inefficient way of reducing the human impact on the environment |
| Answer» B. despite their other problems, eastern european countries did a good job protecting the environment during the communist era | |
| 25. |
The assigned Washington Post Op-Ed by Daniel Chirot can be interpreted as asserting that |
| A. | inadequate education and lack of knowledge of history in the population is why saddam hussein’s government succeeded in ruling iraq for so long |
| B. | the right way to think about saddam hussein’s government is basically as if he were the head of a mafia organization |
| C. | saddam hussein’s government could be described as adhering to an organic philosophy |
| D. | the biggest problem in iraq under saddam hussein was a lack of rule of law |
| Answer» C. saddam hussein’s government could be described as adhering to an organic philosophy | |
| 26. |
If, for John’s current intertemporal consumption pattern (satisfying his intertemporal budget constraint), his marginal rate of intertemporal substitution is 1 and the real rate of interest is positive, then... |
| A. | the interest rate will fall to zero. |
| B. | john could increase his lifetime utility by consuming more today. |
| C. | john could increase his lifetime utility by consuming less today. |
| D. | john is necessarily a borrower. |
| Answer» C. john could increase his lifetime utility by consuming less today. | |
| 27. |
There are strong theoretical reasons to expect that changes in wealth are responsible for changes in consumption. Nonetheless, one reason that we observe a tight link between consumption and disposable income is... |
| A. | credit rationing which changes the intertemporal budget constraint for borrowers. |
| B. | households attempt to smooth their consumption. |
| C. | household saving provides a buffer between income and expenditure. |
| D. | ricardian equivalence. |
| Answer» A. credit rationing which changes the intertemporal budget constraint for borrowers. | |
| 28. |
The accelerator principle states: |
| A. | if an increase in the growth of output is expected, investment will increase. |
| B. | if an increase in investment is expected, output will increase. |
| C. | if an increase in the growth of investment is expected, output will increase. |
| D. | small swings in investment are associated with large swings of output. |
| Answer» A. if an increase in the growth of output is expected, investment will increase. | |
| 29. |
In the case of a negative externality, the social marginal cost will |
| A. | exceed the private marginal cost. |
| B. | be equal to private marginal cost. |
| C. | fall short of private marginal cost. |
| D. | bear no significant relation to private marginal cost. |
| Answer» A. exceed the private marginal cost. | |
| 30. |
A perfectly competitive steel mill that produces large amounts of pollution (a negative externality) will, from a social point of view |
| A. | produce too little steel |
| B. | produce the socially optimal quantity of steel. |
| C. | produce too much steel. |
| D. | produce too much steel only if it installs pollution control equipment. |
| Answer» C. produce too much steel. | |
| 31. |
Each of the following provides incentives to reduce a negative externality except: |
| A. | a merger with affected firms. |
| B. | subsidizing consumption of the good being produced. |
| C. | bargaining among firms. |
| D. | taxation of the externality. |
| Answer» B. subsidizing consumption of the good being produced. | |
| 32. |
To reach an economically efficient output level, the size of an excise tax imposed on a firm generating a negative externality should be |
| A. | the firm’s marginal cost. |
| B. | the social marginal cost. |
| C. | the difference between the social marginal cost and the firm’s marginal cost. |
| D. | the sum of the social marginal cost and the firm’s marginal cost. |
| Answer» C. the difference between the social marginal cost and the firm’s marginal cost. | |
| 33. |
In perfect competition, environmental externalities need not distort the allocation of resources providing |
| A. | transactions costs are zero. |
| B. | average costs are constant for all output levels. |
| C. | firms install pollution control equipment. |
| D. | the government sets realistic pollution standards. |
| Answer» A. transactions costs are zero. | |
| 34. |
In drilling a new oil well in an existing oil field, the fact that output on existing wells is reduced means that |
| A. | existing wells have negatively sloped marginal cost curves. |
| B. | existing wells and new wells are owned by different people. |
| C. | existing wells and new wells are owned by the same people. |
| D. | there is a discrepancy between private and social marginal costs. |
| Answer» D. there is a discrepancy between private and social marginal costs. | |
| 35. |
Bargaining costs are generally high in cases involving environmental externalities because |
| A. | there are strong incentives to be a free rider. |
| B. | many individuals may be affected by the externalities. |
| C. | it is difficult to measure the costs of the externalities. |
| D. | all of the above. |
| Answer» D. all of the above. | |
| 36. |
Externalities between two firms can be “internalized” if: I. The two firms merge. II. Bargaining costs are zero. III. The externalities affect each firm equally. IV. Marginal costs for both firms are constant. Which statement(s) correctly complete(s) the sentence? |
| A. | only ii. |
| B. | all except iii. |
| C. | i and ii, but not iii and iv. |
| D. | i and iv, but not ii and iii. |
| Answer» C. i and ii, but not iii and iv. | |
| 37. |
Common property |
| A. | is owned by specific people. |
| B. | is inexhaustible. |
| C. | refers strictly to land resource. |
| D. | refers to goods “owned” by society at large and freely usable by anyone. |
| Answer» D. refers to goods “owned” by society at large and freely usable by anyone. | |
| 38. |
Which best describes consumer surplus? |
| A. | the price consumers are willing to pay for a unit |
| B. | the cost of providing a unit |
| C. | the profits made by a firm |
| D. | the difference between the price a consumer pays for an item and the price he/she is willing to pay for it |
| Answer» D. the difference between the price a consumer pays for an item and the price he/she is willing to pay for it | |
| 39. |
Which of the following statements is NOT true? In the free market changes in the price of a product: |
| A. | can act as a signal to producers |
| B. | can provide an incentive to reallocate resources |
| C. | can act as a rationing device |
| D. | are set by the government |
| Answer» D. are set by the government | |
| 40. |
Community surplus equals: |
| A. | producer surplus minus consumer surplus |
| B. | profits plus utility |
| C. | total utility minus plus profit |
| D. | consumer surplus plus producer surplus |
| Answer» D. consumer surplus plus producer surplus | |
| 41. |
Monopoly power in a market is likely to: |
| A. | increase consumer surplus |
| B. | increase community surplus |
| C. | lead to higher producer surplus |
| D. | lead to lower prices and lower output |
| Answer» C. lead to higher producer surplus | |
| 42. |
A negative production externality means: |
| A. | the social marginal cost is greater than the private marginal cost |
| B. | the social marginal benefit is greater than the private marginal cost |
| C. | the social marginal cost is greater than the private marginal benefit |
| D. | the social marginal cost is less than the private marginal cost |
| Answer» A. the social marginal cost is greater than the private marginal cost | |
| 43. |
A positive consumption externality occurs when: |
| A. | the social marginal cost is greater than the private marginal cost |
| B. | the social marginal benefit is greater than the private marginal benefit |
| C. | the social marginal cost is greater than the private marginal benefit |
| D. | the social marginal cost is less than the private marginal cost |
| Answer» B. the social marginal benefit is greater than the private marginal benefit | |
| 44. |
A merit good: |
| A. | is a public good |
| B. | involves a negative externality |
| C. | is overprovided in the free market |
| D. | is under provided in the free market |
| Answer» D. is under provided in the free market | |
| 45. |
A demerit good: |
| A. | is a public good |
| B. | involves a positive externality |
| C. | is overprovided in the free market |
| D. | is under provided in the free market |
| Answer» C. is overprovided in the free market | |
| 46. |
A public good will probably: |
| A. | be expensive in a free market |
| B. | be overprovided in the free market |
| C. | not be provided in the free market |
| D. | has no opportunity cost |
| Answer» C. not be provided in the free market | |
| 47. |
Asymmetric information occurs when: |
| A. | information is free |
| B. | buyers and sellers have access to different information |
| C. | community surplus is maximized |
| D. | community surplus is minimized |
| Answer» B. buyers and sellers have access to different information | |
| 48. |
A situation where people who have taken out insurance behave more recklessly as a result is known as: |
| A. | asymmetric information. |
| B. | bad luck. |
| C. | adverse selection. |
| D. | moral hazard. |
| Answer» D. moral hazard. | |
| 49. |
An insurance company can protect itself from moral hazard by: |
| A. | monitoring. |
| B. | imposing an ‘excess’. |
| C. | holding liquid assets |
| D. | diversification |
| Answer» B. imposing an ‘excess’. | |
| 50. |
Taking into account the utility of all persons in society is referred to as |
| A. | a utilitarian social welfare function. |
| B. | equalizing social welfare function. |
| C. | an in-kind transfer. |
| D. | a pareto equilibrium. |
| Answer» A. a utilitarian social welfare function. | |
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