Economics

In Constructing models, economists:
A. Make Simplified assumption
B. Must use mathematical equations
C. Include all available information
D. Attempt to duplicate the real world

Which of the following is a microeconomic stattement?
A. The real domestic output increased b 2.5% last year
B Unemployment was 6.% of the labourforce last year
C The price of wheat declined last year
D The general price level increased by 4% last year

A hypothesis is:
A. Always athe result of induction
B. a tentative, untested principle
C. the same sa a normative statement
D. A fundamental truth which all economists accept

Microeconomics is concerned with:
A. A detailed examination of specific economic units which comprise the economic system.
B. The establishment of an overall view of the operation of the economic system.
C. The concealment of detailed information about specific segments of the economy.
D. aggregate or total levels of income, employment and output.

Macroeconomics approaches the study of economics from the view point of
A. The entire economy
B. The operation of specific product and resource markets
C. Individual firms
D. Governmental units

Generally speaking, it may be said that the inductive method:
A. Begins with hypotheses that are tested against real world facts.
B. Confuses correlation with cause and effect.
C. Moves from facts to generalisations or theory
D. Cannot be applied to economic analysis

The study of economics is primarily concerned with:
A. Keeping private businesses from losing money
B. Demonstrating that capitalistic economies are superior to socialistic economies.
C Choices that are made in seeking to use scares resources efficiently.
D. Determining the most equitable distribution of society's output.

Economic Theories:
A are useless becuase they are not based on laboratory experimentation.
B. That are true for individual economic units are never true for the economic units are never true for the economy as a whole.
C. are generalisations based upon a careful observations of facts.
D. Are abstractions and therefore have no application to real situations.

Which of the following is a correct statement?
A. Economic concepts or laws that are valid during depression are necessarily valid during prosperity
B. Thought not quantitatively exact, economic laws are useful becuase they allow us to make predictions that are meaningful and useful.
C. Economics is as scientific as physics and chemistry becuase economic laws are as quantitatively precise as the laws of physics or chemistry.
D. Since economics is concerned with questions of 'ought', it is a branch of applied ethics and is not scientific.

Economics may best be defined as:
A. The study of behaviour of people and institutions in the production distribution and consumption of scarce goods.
B. The empirical testing of value judgements through the use of induction and deduction.
C. the interaction between macro and micro considerations.
D. The use of policy to refute facts and hypotheses.

The term ceteris parbus means that:
A. the associated statement is normative.
B. A number of relevant variables are assumed to be constant.
C. When variable X increases, so does the related variable.
D. Many variables affect the variable under consideration.

The deductive method:
A. Applies to the physical sciences but not to social sciences.
B. Begins with facts and moves to generalisations or theory.
C. Begins with hypotheses that are tested against real world facts
D. Confuses correlation with cause and effect.

The term ceteris parbus means:
A. Other things being equal.
B. If event A precedes event B, A has caused B.
C. Economics deals with facts, not values.
D. Prosperity inevitably follows recession.

The basic purpose of the ceteris paribus assumption is to:
A. Determine whether X causes Y or vice versa
B. Allow one to focus upon macro variables by ignoring micro variables.
C. Allow one to reason about the relationship between two variables, without the intrusion of other variables.
D. Allow one to focus upon micro variables by ignoring macro variables.

Economic models:
A. Are unrealistic and therfore are of no practical consequence.
B. Are of limited use because they cannot be tested empirically.
C. Emphasise basic economic relationships by abstracting from the complexitites of the real world.
D. Are limited to variables that are directly related to one another.

The production possibilities curve illustrates the basic principle that:
A. The larger production of a particular good, in time, will require smaller and smaller sacrifices from other goods.
B. An economy will automatically seek a level of output so that all of its resources are employed.
C. An economy has the capacity to produce increases in proportion to its population size.
D. If all the resources of an economy are in use, more of one good can be produced if less of another good is produced.

The economising problem is essentially one of deciding how to make the best use of:
A. Limited resources, to satisfy virtually unlimited wants.
B. Unlimited resources, to satisfy limited wants.
C. Limited resources, to satisfy limited wants
D. Virtually unlimited resources, to satisfy virtually unlimited wants.

The scarcity problem:
A. Persists because material wants exceed available productive resources.
B. Has been eliminated in affluent societies such as Austrlia
C. Has been solved in all industrialised nation.
D. Persists only because countries have failed to achieve continuous full employment.

The idea of 'allocative efficiency' refers to:
A. The use of least-cost method of production.
B. The full employment of all available resources.
C. The production of the product-mix most wanted by society.
D. Production, at some point, inside of the production possibilities curve.

A fundamental problem of economics is:
A. To establish a democratic political framework for the provision of social goods and services.
B. The scarcity of productive resources relative to material wants.
C. The establishment of prices that accurately reflect the relative scarcities of products and resources.
D. To establish an equitable system of personal and business taxation.

Productive efficiency refers to:
A. The production of the product-mix most wanted by society.
B. The use of the least-cost method of production.
C. The full employment of all available resources
D. Production, at some point inside of the production possibilities curve.

An 'increase in efficiency' suggests that an economy:
A. Has decided to produce more consumer goods and fewer capital goods.
B. Is using more costly production techniques.
C. Is able to obtain more goods and services from a given amount of resources.
D. Is able to obtain to obtain fewer goods and services from a given amount of resources.

Economic resources are also called:
A. units of money capital.
B. Free girts of nature.
C. Factors of production
D. Consumption goods.

The concept of economic efficiency is primarily concerned with:
A. The conservation of irreplaceable natural resources.
B. Obtaining the maximum output from available resources.
C. Considerations of equity in the distribution of wealth
D. The limited wants and unlimited resources dilemma

Which of the following will not entail an outward shift of the production possibilities curve?
A. The improvement of a society's technological knowledge
B. An increase in the quantity of a society's labour force.
C. An upgrading of the quality of a nation's human resources.
D. The reduction of employment.

An increase in the price of a product will reduce the amount purchased because:
A. The higher price means that real incomes have risen.
B. Supply curves are up-sloping.
C. Consumers will substitute other products for the one whose price has risen.
D. Consumers substitute relatively high-priced products for relatively low-priced products.

Economists use the term 'demand' to refer to:
A. An up-sloping line on a graph that relates consumer purchases and product price.
B. The total amount spent on a particular commodity over a stipulated time period.
C. A schedule of various combinations of market prices and quantities demanded.
D. A particular price-quantity combination on a stable demand curve.

Alyssa rents 5 movies per month when the price is $3.00 each and 7 movies per month when the price is $2.50. Alyssahas demonstrated the:
A. Law of supply
B. Law of price.
C. Law of demand.
D. Actions of an irrational consumer.

If the number of buyers in the market decreases, the:
A. Supply in the market will decrease.
B. Supply in the market will increase.
C. Demand in the market will decrease.
D. Demand in the market will increase.

A market:
A. Entails the exchange of goods, but not services.
B. Reflects up-sloping demand and down-sloping supply curves.
C. Is an institution that brings together buyers and sellers.
D. Always entails face-to-face contact between buyer and seller.

Represented graphically, the market demand curve is:
A. The horizontal sum of individual demand curves.
B. Greater than the sum of the individual demand curves.
C. The vertical sum of individual demand curves
D. Steeper than any individual demand curve that comprises it.

The law of demand states that:
A. Price and quantity demanded are inversely related.
B. Price and quantity demanded are directly related.
C. Consumers will buy more of a given product at high prices than they will at low prices.
D. The larger the number of buyers in the market, the lower the product price.

A higher price for batteries would tend to:
A. Increase the demand for electricity
B. Decrease the demand for electricity.
C. Increase the demand for flashlights.
D. S: increase the demand for batteries.

The construction of demand and suppl curves assumes that the primary variable that influences decisions to produce and purchase goods is:
A. Incomes.
B. Expectations.
C. Price
D. Preferences.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes:
A. The cost effect
B. The income effect.
C. The substitution effect.
D. The inflationary effect

A demand curve is:
A. The downward sloping line relating the price of the good to the quantity demanded.
B. The curve that relates income to quantity demanded.
C. Showing the same relationship between two goods as a production possibilities frontier.
D. The upward  sloping line relating price to quantity supplied.

If the price of product L increases, the demand curve for close-substitute product J will:
A. Shift downward toward the horizontal axis.
B. Shift to the right.
C. Shift to the left
D. Remain unchanged.

A market demand is:
A. A horizontal summation of individual demand curves.
B. A vertical summation of individual demand curves.
C. Determined solely by the number of the buyers and sellers in the market.
D. Not responsive to change in tastes and preferences.

Which of the following will not cause the demand for product K to change?
A. A change in consumer tastes.
B. A change in the price of K.
C. An increase in consumer incomes.
D. A change in the price of close-substitue product J.

Which of the following would not shift the demand curve for beef?
A. A change in the incomes of beef consumers.
B. A reduction in the price of cattle feed.
C. An effective advertising campaign by pork producers.
D. A widely publicised study that indicates beef increases one's cholesterol.

Normal Profits are:
A. A cost, because any excess of total receipts over total costs will accrue to the business person.
B. Not a cost of production, because they need not be realised, in order for a firm to retain entrepreneurial ability.
C. A cost, because they represent payments made for the resources that the businessperson owns and supplies in his or her own enterprise.
D. Not a cost, because a firm can avoid these payments by temporarily closing down.

The most efficient combination of resources producing any output is the combination that:
A. Uses the smallest total quantity of all resources.
B. Can be obtained for the smallest money outlay.
C. Comes closest to using the same quantities of land, labour, capital, and entrepreneurial ability.
D. Conserves most on the use of labour.

For whom is a given mix of goods and services to be produced? In other words, how is the product to be distributed among people when such commodities and services are available? In a market economy, this problem is primarily resolved in the:
A. Money market, through borrowing and saving by households and businesses.
B. Private sector, through the earning and spending of income.
C. Public sector, through the mechanism of central planning.
D. Business sector, through the mechanism of advertising.

Economic profits are:
A. Not a cost, because they cannot be calculated.
B. A cost, because they are really a part of wage costs.
C. Not an economic cost, because they need not be realised, in order for a business to acquire and retain entrepreneurial ability.
D. A cost, because they accrue to the entrepreneur.

Which of the following best describes the 'guiding function' of competitive prices?
A. The market system can negotiate reallocations of resources that are appropriate to changes in consumer tastes, technology and resource supplies.
B. Profitable industries tend to contract and unprofitable industries tend to expand.
C. The market system will always generate economic profits for firms that use the least costly production technology.
D. When prices are in equilibrium, product shortages or surpluses cannot occur.

"Consumer sovereignty" refers to the:
A. Notion that the decision of producers and resource suppliers, with repsect to the kinds and amounts of goods produced, must be appropriate to consumer demands.
B. Fact that a federal authority exists to protect consumers from harmful and defective products.
C. Idea that the pursuit of self-interests will prove, ultimately, to be in the public's interest.
D. Fact that resource prices tend to be high relative to product prices, in capitalistic economies.

The presence of economic profits in an industry suggests that the industry:
A. Can earn more profits by increasing product price.
B. Will attract more firms.
C. Has excess productive capacity.
D. Is the size that consumers want it to be.

Assume the demand for product Y increases and the subsequent market system response results the production of more Y. This illustrates:
A. That the concept of derived demand is applicable.
B. The scarcity function of prices.
C. The directing or guiding function of prices.
D. That consumer sovereignty is inoperative in this economy.

In a competitive market economy, firms will select the least-cost production technique because:
A. 'Dollar voting' by consumers mandates such a choice.
B. Such choices will result in the full employment of available resources.
C. To do so will maximise a firm's profit.
D. This will prevent new firms from entering the industry.

When economists say that the demand for a resource is a 'derived demand', they mean that:
A. Resource demand curves are often up-sloping.
B. The demand for resources depends upon the demand for the product produced by those resources.
C. producers tend to substitute low-priced resources for high-priced resources.
D. Government demand complements private demand for most foods and services.

If a company owns plants at various stages of the production process, this is called a:
A. Vertical Combination
B. Conglomerate.
C. Monolpoly
D. Horizontal Combination

The three basic legal forms of business enterprises are:
A. Conglomerates, multinationals and partnerships.
B. Monopolists, competitors and enterprises.
C. Vertical, horizontal and conglomerate corporations.
D. Proprietorships, partnerships and corporations.

An industry is best defined as a group of firms:
A. That use identical production techniques.
B. Producing identical or similar products.
C. Located in the same city or geographic area.
D. That compete for labour.

Which of the following statements is correct?
A. Manufacturing contributes the largest percentage to GDP and the colume of employment and income.
B. Through relatively small in number manufacturing accounts for roughly a third of the economy's income and employment.
C. Agriculture provides more income and employment than the wholesale or retail industries.
D. The public service provides more jobs and a larger proportion of the national income than any other industry classification.

The division of Australian businesses into categories of proprietorship, partnership, and corporation is based on:
A. Generally accepted accounting principles.
B. Judgements made by the Australian Economics society.
C. Basic legal considerations.
D. An executive order of the prime minister.

Coles supermarket is part of a:
A. Sole proprietorship.
B. Vertical combination.
C. Horizontal combination.
D. Conglomerate

A conglomerate is:
A. A firm that owns plants at various stages of the production process
B. A firm that owns plants in different markets and industries.
C. A firm with monopoly power.
D. An industry in which there is only one firm.

A group of three plants owned and operated by a single firm and consisting of a wheat-growing farm, a flour-milling plant and a plant that bakes and sells bread, is an example of a:
A. Vertical combination
B. Horizontal combination
C. Holding company
D. Trust

A group of chain store operating at the retail level - for example, Woolworths - is an illustration of:
A. An integrated combination.
B. A horizontal combination.
C. A conglomerate combination.
D. A vertical combination.

Which of the following is true of partnerships?
A. All partners are protected b the concept of limited liability.
B. Each partner is responsible for all business debts.
C. Each partner is liable for only his or her share of business debts.
D. Each partner must post a bond to guarantee that all business debst will be paid.

The advantages of the 'company form of business' include:
A. All of the answers given
B. The ability to raise money capital by selling stocks and bonds.
C. The ability to realise production advantages associated with a large scale of operations.
D. The fact that owners are subject only to limited liability.

Which form of business enterprise accounts for the largest proportion of total output?
A. Partnership
B. Proprietorship
C. Company
D. Cooperative

one of the major advantages of a sole proprietorship is that:
A. There is little red tape and expense in organising such a business.
B. The owner is protected by the concept of limited liability.
C. It is easier to borrow money because lenders have to deal with only one person.
D. There are tax advantages for firms that are highly profitable.

Which of the following is numberically the dominant type of business in Australia?
A. Cooperative
B. Proprietorship.
C. Corporation.
D. Partnership.

If a company goes bankrupt, its shareholders will lose:
A. The value of their shares plus any other business assets they own.
B. Only the value of their shares.
C. The value of their shares plus any other personal assets they own.
D. The value of their shares plus any other business and personal assets they own.

Price Elasticity of demand is generally:
A. Greater in the long run than in the short run.
B. Greater in the short run than in the long run.
C. The same in both the short run and the long run.
D. Greater for 'necessities' than it is for 'luxuries'.

The main determinant of elasticity of supply is ther:
A. Amount of time the producer has to adjust inputs in response to a price change.
B. Urgency of consumer wants for the product.
C. Number of uses for the product.
D. Number of close substitutes for the product available to consumers.

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50-60 units. From this we can conclude that the demand for X in this price range:
A. Is elastic.
B. has declined.
C. Is inelastic.
D. Is of unit elasticity

Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11 and 0.29 for products W, X, Y and Z respectively. a 1% decrease in price will result in an increase in total revenue in the case of:
A. W and Y
B. Z and W.
C. X and Z.
D. Y and Z.

A given leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:
A. More elastic the supply curve.
B. More elastic the demand for the product.
C. Larger the elasticity of demand coefficient.
D. More inelastic the demand for the product.

Supply curves tend to be:
A. Less elastic in the long run, because there is time for firms to enter or leave an industry.
B. Perfectly inelastic in the long run, because the law of scarcity imposes absolute limits upon production.
C. More elastic in the long run, because there is time for firms to enter or leave the industry.
D. Perfectly elastic in the long run, because consumer demand will have sufficient time to adjust fully to changes in supply.

Suppose that the price of product X rises by 20%, and the quantity supplied of X increases 18%. The coefficient of price elasticity of supply for good X is:
A. Negative and, therefore, X is an inferior good.
B. Positive and, therefore, X is a normal good.
C. Less than 1 and, therefore, supply is inelastic.
D. More than 1 and, therefore, supply is elastic.

Suppose that, as the price of Y falls from $2.00 to $1.90, the demanded quantity of Y increases from 110 to 118. It can be concluded that the price elasticity of demand is:
A. 4.00
B. 2.09
C. 1.37
D. 3.94

Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price:
A. Will decrease, but equilibrium quantity will increase.
B. And quantity will both decrease.
C. Will increase but equilibrium quantity will declien.
D. Will increase but equilibrium quantity will be unchanged.

In which of the following cases will total revenue increase?
A. Price falls and demand is inelastic.
B. Price falls and supply is elastic.
C. Price rises and demand is inelastic.
D. Price rises and demand is elastic.

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
A. Do none of the answers given.
B. Increase the quantity demanded by 25%
C. Decrease the quantity demanded by 2.5%
D. Increase the quantity demanded by 2.5%

If the supply of product X is perfectly elastic, an increase in the demand for it will increase:
A. equilibrium quantity, but reduce equilibrium price.
B. Equilibrium quantity, but equilibrium price will be unchanged.
C. Equilibrium price, but reduce equilibrium quantity.
D. Both equilibrium quantity and equilibrium price.

The price elasticity of demand coefficient indicates:
A. How far business executives can stretch their fixed costs.
B. The extent to which a demand curve shifts when incomes change.
C. The slope of the demand curve.
D. buyer responsiveness to price changes.

A perfectly inelastic demand schedule:
A. Cannot be shown on a two-dimensional graph.
B. Can be represented by a line parallel to the vertical axis.
C. Can be represented by a line parallel to the horizontal axis.
D. rises upward and to the right, but has a constant slope.

In which of the following instances will total revenue declien?
A. Price falls and demand is elastic.
B. Price rises and demand is elastic.
C. Price rises and supply is inelastic.
D. Price rises and supply is elastic.