Economics Exam Revision Questions 2011

Exam revision questions 2011.
2009 trimester 1 exam.
??12. The New Zealand government is the main supplier of education services because: a) The private sector is incapable of providing education services. b) Education is a public good. c) The government is the most efficient producer. d) The voting public support the government being the main supplier.

??18. The real interest rate on a bond is defined as: a) The amount of money – principal plus interest – expected to be received tomorrow, for a dollar invested in the bond today. b) The amount of money – above the principal - expected to be received tomorrow, for a dollar invested in the bond today. c) The amount of a good – principal plus interest – expected to be received tomorrow, for a unit of the good invested in the bond today. d) The amount of a good – above the principal – expected to be received tomorrow, for a unit of the good invested in the bond today.

??19. The price of a bond and its interest rate (or yield) are: a) Positively related. b) Negatively related. c) Unrelated. d) None of the above.

??32. In a general equilibrium model of saving and investment, suppose the profits of investment firms increase. We can infer that the saving function will: a) Shift to the right. b) Shift to the left. c) Remain unchanged. d) None of the above.

??33. The cost of producing ideas is a ________ cost. a) Variable. b) Marginal. c) Opportunity. d) Fixed.
??37. Which of the following statements is inaccurate? a) The growth rate of income per capita is the sum of the growth rate of labour productivity per hour and the growth rate of hours worked per person. b) The number of hours worked per person depends on the labour force participation rate and the average number of hours each worker works. c) The growth rate of output is the product of the growth rate of labour productivity and the growth rate of total hours worked. d) Growth in labour productivity is the key to rising living standards.

??40. When bus fares increase, some people who usually travel by bus decide to walk instead. This indicates that bus travel is an example of: a) A normal good. b) An inferior good. c) A complement. d) None of the above.

??46. Suppose that Mary and Bill can both produce pizzas and beer. Further, suppose that while Mary has an absolute advantage in producing pizzas, Bill has a comparative advantage (in producing pizzas). From this, we can infer that: a) Mary has both an absolute and comparative advantage in producing beer. b) Mary has an absolute advantage, but Bill has a comparative advantage, in producing beer. c) Bill has an absolute advantage, but Mary has a comparative advantage, in producing beer. d) Bill has both an absolute and comparative advantage in producing beer.

??52. Suppose average variable cost is a decreasing function of output. From this, we can infer that: a) Marginal cost is a decreasing function of output. b) Marginal cost is an increasing function of output. c) Average variable cost is less than marginal cost. d) Average variable cost is greater than marginal cost.

??53. Suppose average cost is an increasing function of output. From this, we can infer that: a) Marginal cost is a decreasing function of output. b) Marginal cost is an increasing function of output. c) Average variable cost is less than marginal cost. d) Average variable cost is greater than marginal cost.
??59. Suppose pizza is an inferior good for a specific consumer with income of $1,000 per week. From this we can infer: a) Pizza is an inferior good for all consumers. b) For the specific consumer, pizza is an inferior good at all levels of income. c) For the specific individual, pizza is a normal good for some income levels. d) None of the above.

??62. Consider an economy with no externalities, such that the demand curve for every good is downward sloping. For every individual, leisure does not generate utility and so the supply of labour is fixed. Suppose the government imposes a tax on labour income. The equilibrium for the economy will be such that: a) The equilibrium allocation is not Pareto efficient. b) The equilibrium allocation is Pareto efficient. c) The rich will gain at the expense of the poor. d) None of the above.

??61. Consider an economy with no externalities, such that the demand curve for every good is downward sloping. Suppose the government redistributes income by imposing lump-sum taxes and transfers on individuals. The equilibrium for the economy will be such that: a) The equilibrium allocation is not Pareto efficient. b) The equilibrium allocation is Pareto efficient. c) The rich will gain at the expense of the poor. d) None of the above.

69. Ben spends all his income on curries and beer, currently consuming ten curries and twenty beers per week. Suppose the price of beer rises, causing Ben to now consume nine curries and nineteen beers. From this, we can infer that: a) Beer is a normal good, to Ben. b) Curry is a normal good, to Ben. c) Both beer and curry are normal goods, to Ben. d) None of the above.

2010 trimester 1 exam.
??8. In question 4, if New Zealand and Australia signed a free-trade agreement, then: a) The price of milk, relative to wine, would rise in New Zealand. b) The price of milk, relative to wine, would fall in New Zealand. c) The price of milk, relative to wine, would rise in Australia. d) None of the above (as it will depend on the circumstances).

??31. An increase in future household income will cause the equilibrium real interest rate to ________ and the equilibrium quantity of saving and investment to ______. a) Fall; fall. b) Fall; rise. c) Remain unchanged; fall. d) Remain unchanged; rise.

??39. A technological improvement in the investment technology will cause the saving function to: a) Shift to the left. b) Shift to the right. c) Remain unchanged. d) None of the above (as it will depend on the circumstances).

????41. A technological improvement in the investment technology will cause the equilibrium level of saving (and investment) to: a) Rise. b) Fall. c) Remain unchanged. d) None of the above (as it will depend on the circumstances).

??45. Real income per person is useful for which of the following reasons? a) It identifies how much of a nation’s GDP each citizen receives. b) It identifies how many workers are gainfully employed. c) It defines a nation’s ability to produce goods and services for its citizens. d) It indicates how income is distributed across the population.

??51. The costs of economic growth include all of the following except the: a) Loss of existing jobs. b) Increased demand for newly skilled workers. c) Need to relocate workers. d) Damage to the environment.

??52. As a country becomes richer, the real wages of workers will rise. An increase in the real wage will cause the supply of labour to: a) Increase. b) Decrease. c) Remain unchanged. d) None of the above (as it will depend on the circumstances).

??58. A perfectly competitive firm takes: a) The price of their output as fixed but the prices of their inputs as being dependent on their behaviour. b) The prices of their inputs as fixed but their output price as being dependent on their behaviour. c) The prices of their output and their inputs as being dependent on their behaviour. d) The prices of their output and their inputs as fixed.

??68. Consider an individual who derives utility from consumption now and consumption in the future. For the individual, consumption now and in the future are both normal goods. Further, the individual is currently a saver. An increase in the real interest rate has an income effect, which results in the individual saving _____, and a substitution effect, which results in the individual saving _____. a) Less; less. b) More; less. c) Less; more. d) More; more.