Introduction to Economics (XXXX)
College of Technology (COLTECH)
Semester: First Semester
Level: 200
Year: 2014
COLLEGE OF TECHNOLOGY, UNIVERSITY OF BAMENDA,
INTRODUCTION TO ECONOMICS
Instructions: Attempt all the questions in Section A and three in Section B
Time Allowed: 2 Hours 30 Minutes
SECTION A
Write the correct answer on the answer sheet
1. Economics is the study of: a) production technology b) consumption decision c) how society decides
what, how and for whom to produce d) the best way to run the society
2. In a free enterprise economy, the problem of what, how and for whom are solved by: a) a planning
committee b) the elected representative of the people c) the price mechanism d) none of the above
3. A resource is scarce if supply exceeds demand at zero price a) true b) false c) either true or false
d) none of the above
4. The opportunity cost of a good is: a) the time lost in finding it b) the quantity of goods sacrificed to get
unit of that good c) the expenditure on the good d) the loss of interest in using savings
5. A market can accurately be described as: a) a place to buy things b) a place to sell things c) the process
by which prices adjust to reconcile the allocation of resources d) a place where buyers and sellers meet
6. Microeconomics is concerned with: a) the economy as a whole b) the electronics industry c) the study
of individual economic behaviour d) the interactions within the entire economy
7. When we know the quantity of a product that buyers wish to purchase at each possible price, we know:
a) demand b) supply c) excess demand d) excess supply
8. The equilibrium price clears the market; it is the price at which: a) everything is sold b) buyers spend
all their money c) quantity demanded equals quantity supplied d) excess demand is zero
9. …………. and……………. do not directly affect the demand curve: a) the price of related goods,
consumer income b) consumer income, taste c) the cost of production, the bank opening hours d) the price of
related goods, preferences
10. When a person’s income rises, (while everything else remains the same), that person’s demand for a
normal good: a) rises [ ]
b
) falls [ ] c) remains the same [ ] d) any of the above [ ]
11. A supply curve is directly affected by: a) technology b) input costs c) government regulations d) all the
above
12. Given the supply of a commodity in the market period, the price of the commodity is determined by:
a) the market demand curve alone b) the market supply curve alone c) the market demand and the market supply
curve alone d) none of the above
13. If demand is……………then price cuts will ……………spending. a) inelastic, increase b) elastic,
increase c) elastic decrease d) none of the above
14. Inferior goods have …………….. and luxury goods have …………….. a) negative income elasticity,
income elasticity greater than 1 b) income elasticity greater than 1, negative income elasticity c) positive income
elasticity, negative income elasticity d) none of the above
15. The opportunity cost of a student is: a) course fees and rent b) a loan from the bank c) what the student
could have earned in the best job available by not studying d) what the student will earn after graduation
16. Economics assumes that people consumer goods and services to achieve: a) status b) prestige c) utility
d) self-esteem
17. When an individual’s income falls (while everything else remains the same), that person’s demand for
an inferior good: a) increases b) decreases c) remains the same d) we cannot say without additional information
18. Adding up the quantities demanded for a good by different people facing the same price gives us the:
a) supply curve b) market demand curve c) demand curve d) market supply curve
19. When both the price of a substitute and the price of a complement of commodity X rises, the demand
for X: a) rises b) falls c) remains unchanged d) all of the above are possible
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20. Firms are assumed to ……………. costs and to …………… profits a) incur, desire b) pay, make
c) charge, earn d) minimize, maximize
21. The increase in total cost when one more unit is produced is known as: a) marginal cost b) opportunity
cost c) limited cost d) average cost
22. Marginal revenue is the………….. when the output is…………… a) change in average revenue,
increased b) change in total revenue, increased by one unit c) change in average revenue, increased by one unit
d) change in total revenue, increase
23. The monopolists may sell the same quantity of a commodity at two different prices or two different
quantities at the same price depending on a) the price elasticity of supply of the commodity b) the price
elasticity of demand of the commodity c) the price elasticity of demand and supply of the commodity d) all of
the above
24. Profits are maximized when……………….. a) costs are maximized b) revenue is maximized
c) average cost is less than average revenue d) marginal cost equals the marginal revenue
25. If only part of the labour force employed by a firm can be dismissed at any time and without pay, the
total wages and salaries paid out by the firm must considered: a) a fixed cost b) a variable cost c) partly a fixed
and partly a variable cost d) all of the above
26. Price determination is possible in: a) perfect market b) monopoly c) monopolistic competition
d) oligopoly
27. In a perfect market, a firm which at equilibrium point earns: a) normal profit b) economic profit
c) supernormal profit d) accounting profit
28. In drawing the farmer’s supply curve for a commodity, all but which one of the following are kept
constant? a) technology b) the prices of the inputs c) features of nature such as climate and weather conditions
d) the price of the commodity under consideration
29. When does a firm reach equilibrium point? a) when revenue equals cost b) when is abnormal profit
c) when marginal revenue equals marginal cost d) when total profit is high
30. Selling chocolates at a higher price in Buea and at a lower price in Garoua and other parts of Cameroon
is an example of: a) price sensitization b) price discrimination c) price reduction d) price harmonization
31. In what type of products is elasticity lowest? a) perishables b) luxury goods c) giffen goods
d) medicines
32. In what type of products is elasticity highest? a) perishables b) luxury goods c) giffen goods
d) medicines
33. Supply curves shift rightwards when: a) there is decrease in price b) there is a reduction in the costs of
inputs c) there is decrease in the prices of substitute goods d) there is increase in the prices of complementary
goods
34. Demand curves shift rightwards when: a) there is decrease in price b) there is increase in income
c) there is decrease in the prices of substitute goods d) there is increase in the prices of complementary goods
35. What is the slope of average revenue curve in perfect market? a) downwards from left to right
b) upwards from left to right c) horizontal straight line d) vertical straight line
36. What is the slope of a perfectly elastic demand curve? a) downwards from left to right b) upwards from
left to right c) horizontal straight line d) vertical straight line
37. What is the slope of average revenue curve in monopoly? a) downwards from left to right b) upwards
from left to right c) horizontal straight line d) vertical straight line
38. Which of these is not a determinant of price elasticity of demand? a) time period b) price expectations
c) number of user substitute goods d) income of the consumer
39. Which of the following most closely approximates our definition of oligopoly? a) a cigarette industry
b) the barbers shops in Bamenda c) the petrol stations in Bamenda d) SO.NA.RA in Limbe
40. If by increasing the quantity of labour (L) used by one input, the firm can give up 2 units of capital (K)
and still produce the same output, then the MRTS
L for K
is: a) ½ b) 2 c) 1 d) 4
41. An auto-worker who is still out of work two years after her plant closed down is an example of
a) structural unemployment b) frictional unemployment c) cyclical unemployment d) none of the above
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42. People who are between jobs is an example of: a) structural unemployment b) frictional unemployment
c) cyclical unemployment d) none of the above
43. A person whose skills have become obsolete is an example of a) structural unemployment b) frictional
unemployment c) cyclical unemployment d) none of the above
44. Farmers have generally been …………………..by inflation. a) hurt b) helped c) neither helped nor
hurt c) none of the above
45. Which is the most important job of money? a) medium of exchange b) store of value c) standard of
value d) receipt of gold
46. Batter involves..……………. a) money b) specialization c) a double coincidence of wants d) demand
deposits
47. Which of the following is a microeconomics statement? a) the real domestic output increased by 2.5%
last tear b) unemployment was 9.8% of the labour force last year c) the price of wheat declined last year d) the
general price level increased by 4% last year
48. If we say that two variables are inversely related, this means that: a) the variables are an up-sloping line
b) an increase in one is associated with a decrease in the other c) an increase in one is associated with an
increase in the other d) the resulting relationship can be portrayed by a straight line, parallel to the horizontal
axis
49. In the simple circular flow model: a) households are suppliers of resources b) businesses are the
suppliers of the final products c) households are the demanders of the final products d) all of the above are true
50. The law of demand states that: a) price and quantity demanded are inversely related b) the larger the
number of buyers in a market, the lower the product price c) price and quantity demanded are directly related
d) consumers will buy more of a given product at high prices than they will at low prices
51. The relationship between quantity supplied and price is………………………and the relationship
between quantity demanded and price is……..…… a) direct, inverse b) inverse, direct c) inverse, inverse
d) direct, direct
52. The larger the coefficient of price elasticity of demand for a product, the : a) larger the resulting price
change for a given increases in supply b) more rapid the rate at which the marginal utility of that product
diminishes c) less competitive will be the industry supplying that product d) smaller the resulting price change
for a given increase in supply
53. Variable costs are: a) the additional total cost associated with produ8cing an additional unit of product
b) irrelevant to decision making because they are sunk c) the cost of input that vary with the level of production
d) the costs of inputs that do not vary with the level of production
54. All of the following are characteristics of a perfectly competitive market except one. Which is the
exception? a) large number of sellers b) a standardized product c) no barriers to entry d) sellers can easily exit
the market
55. A monopolist’s supply curve: a) is the upward-sloping part of its marginal cost curve b) is the portion
of its marginal cost curve above AVC c) is parallel to its long run ATC curve d) does not exist because quantity
supplied depends on the market demand curve
56. For which of the following goods is the income elasticity of demand most likely to be largest?
a) poultry products b) meals at restaurants c) lemonade d) used books
57. In a perfectly competitive labour market, a) al firms are wage takers b) all firms are wage searchers
c) all firms sell their output at a constant price d) none of the firms that demand labour can be monopolists
58. A firm’s total revenue: a) is the profit it earns by producing and selling a particular quantity of output
b) varies as the output varies along the demand curve the firm faces c) is constant at all points along a fixed
demand curve d) is determined by subtracting total profit from total cost
59. An increase in the minimum wage would be expected to: a) raise unemployment b) lower
unemployment c) have no effect on unemployment d) raise total wages received by workers who work for an
hourly wage below the minimum level
60. A convex isoquant implies diminishing marginal production and production is in : a) stage I b) stage II
c) stage or d) all the stages of the production function
Fill in the blanks
61. An economy which has no economic transaction with the rest of the world is called……………………
62. The value of all goods and services produced in a country during a specific period of time called.……..
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63. The sum of all incomes accruing to all factors of production supplied by the residents of a country over
a period of time after deducting depreciation is called……………………………………………………………..
64. The circular flow of income is a simple model of the economy showing………………………………
65. Income earned and saved by the providers of factors of production represents…………………from the
circular flow.
66. Income passed into the circular flow of income from outside the system is called……………….………
67. Income which is spent on goods and services that are used in a specified time, usually a short period is
called………………………………………………………………………………………………………………..
.
68. The change in saving as a result of change in disposable income of the households is called……………
69. The amount of money which is available in an economy at any given time is referred to as…………….
70. Part of income which is spent on real capital goods is called……………………………………………..
71. Withdrawals are …………………………………………………………………………………………
SECTION B
Answer three questions from this section.
Either
1a. i) What is a function? (1 mark)
ii) In what way can a function be expressed? (1 mark)
b. What do you understand by a production function? (2 mark)
c. With the help of a diagram, explain the three stages of production. (6 marks)
Or
2a. What can be said of the elasticity of production, assuming that the classical product on function, at the
output at which:
i) MPP is at maximum. (1 mark)
ii) APP is at maximum. (1 mark)
iii) MPP is zero. (1 mark)
iv) MPP = APP. (1 mark)
v) MPP is negative. (1 mark)
b. With the help of a diagram, show the relation between TFC, TC and TVC. (2 marks)
c. Explain the reason(s) for the shape of the curves in (b). (3 marks)
3a. i) What do you understand by a monopoly? (3 marks)
ii) What are the conditions that may give rise to a monopoly? (3 marks)
b. What factors limit the monopolist’s power? (2 marks)
c. What is the single most important characteristic of an oligopoly market model? (2 marks)
4a. List four factors that affect perfect competition. (2 marks)
b. Explain in detail how each of the factors in (a) affect a perfect competitive market. (6 marks)
c. Why do we study the perfectly competitive market model? (2 marks)
5a. What is macroeconomics? (2 marks)
b. Why are the national accounts important to macroeconomic analysis? (2 marks)
c. What determines how much a person will spend for consumption? (3 marks)
d. What are the MPC and the APC and how do they differ? (3 marks)
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