ECO402 Microeconomics Spring 2009 Marks: 20

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1 Microeconomics Marks: 20 NOTE: READ AND STRICTLY FOLLOW ALL THESE INSTRUCTIONS BEFORE ATTEMPTING THE QUIZ. INSTRUCTIONS This quiz covers Lesson # Do not use red color in your quiz. It is used only for marking purpose. Last date for submission of quiz is It means you can submit your quiz till , 12 O clock mid night. Upload your quiz with in due date and time. No quiz will be accepted after due date and time via . Write down only one option in the answer sheet which you think is correct. More than one answer will be marked zero. Submit your quiz in the word document not as a PDF file. Please submit your solution files (a word document) as given below. Copy the following sheet and solve your quiz by providing answer in the given column. In the Selected Option column, write down only the option number (e-g a, b, c, d) against each question number which you consider is the correct one. Upload only the answer sheet on LMS. Don t upload the whole quiz.

2 ANSWER SHEET TO SOLVE THE QUIZ Student ID/Login ID: Student Name: Question Number Selected Option

3 Quiz Microeconomics is the branch of economics that deals with which of the following topics? A. The behavior of individual consumers. B. Unemployment and interest rates. C. The behavior of individual firms and investors. D. The behavior of individual consumers, firms and investors. 2- Which of the following statements would you consider to be a normative one? A. Faster economic growth should result if an economy has a higher level of investment. B. Changing the level of interest rates is a better way of managing the economy than using taxation and government expenditure. C. Higher levels of unemployment will lead to higher levels of inflation. D. The average level of growth in the economy was faster in the 1990s than the 1980s. 3- Which of the following is a positive statement? A. When the price of a good goes up, consumers buy less of it. B. When the price of a good goes up, firms produce more of it. C. When the Federal government sells bonds, interest rates rise and private investment is reduced. D. All of the given options. 4- Suppose an industrious student (hoping to improve the grade on an upcoming economics exam) organizes a study group by reserving a meeting room, compiling study materials, and attracting fellow students. This student would most likely be which of the following factors of production? A. Land. B. Labor. C. Capital. D. Entrepreneurship. 5- The two opposing forces that reach balance in the market equilibrium are: A. Government and scarcity. B. Competition and monopoly.

4 C. Demand and supply. D. Science and policy. 6- A supply curve reveals: A. The quantity of output consumers are willing to purchase at each possible market price. B. The difference between quantity demanded and quantity supplied at each price. C. The maximum level of output an industry can produce, regardless of price. D. The quantity of output that producers are willing to produce and sell at each possible market price. 7- The demand for books is: Q d = 60-2P The supply of books is: Q s = 3P Refer to the above Scenario, What is the equilibrium price of books? A. 5 B. 10 C. 12 D Assume that steak and potatoes are complements. When the price of steak goes up, the demand curve for potatoes A. Shifts to the left. B. Shifts to the right. C. Remains constant. D. Shifts to the right initially and then returns to its original position. 9- Coffee and cream: A. Are both luxury goods. B. Are complements. C. Are both more inelastic in demand in the long run than in the short run. D. Have a positive cross price elasticity of demand.

5 10- The price of good A goes up. As a result the demand for good B shifts to the right. From this, we can infer that: A. Good A is used to produce good B. B. Good B is used to produce good A. C. Goods A and B are substitutes. D. Goods A and B are complements. 11- Production possibilities analysis assumes that: A. Resources and technology increase with production. B. Resources are used to produce thousands of goods. C. Extra resources are saved for emergency use. D. Resources are used in a technically efficient way. 12- If an economy is producing inside the production-possibilities curve, then it has: A. Unemployment. B. Full employment. C. Economic growth. D. Economic efficiency. 13- "Utility" is most closely related to the term: A. Useless. B. Require. C. Necessary. D. Satisfaction. 14- Economists use the term marginal utility to mean: A. Additional satisfaction gained divided by additional cost of the last unit. B. Total satisfaction gained when consuming a given number of units. C. Additional satisfaction gained by the consumption of one more unit of a good. D. The process of comparing marginal units of all goods which could be purchased. 15- Which of the following represents the price elasticity of demand? A. Q P P Q

6 Q P B. + P Q Q P C. P Q Q P D. P Q 16- Indifference curves are convex to the origin because of: A. Transitivity of consumer preferences. B. The assumption of a diminishing marginal rate of substitution. C. The assumption that more is preferred to less. D. The assumption of completeness. 17- Engel curve slopes backward bending for: A. Normal goods. B. Inferior goods. C. Giffen goods. D. All of the given options.

7 18- Ali's preferences for good X and good Y are shown in the diagram below. Based on the above figure, it can be inferred that: A. Ali does not consider good X as "good. B. Ali will never purchase any of good Y. C. Ali regards good X and good Y as perfect substitutes. D. Ali regards good X and good Y as perfect complements. 19- Ahmad's preferences for good X and good Y are shown in the diagram below. Good Y 45 A Good X

8 Based on the above figure, it can be inferred that: A. Ahmad does not consider good X as "good. B. Ahmad will never purchase any of good Y. C. Ahmad regards good X and good Y as perfect substitutes. D. Ahmad regards good X and good Y as perfect complements. 20- If the quantity of good a (Qa) is plotted along the horizontal axis, the quantity of good b (Qb) is plotted along the vertical axis, the price of good a is Pa, the price of good b is Pb and the consumer's income is I, then the slope of the consumer's budget constraint will be: A. -Qa / Qb B. -Qb / Qa C. -Pa / Pb D. -Pb / Pa BEST OF LUCK