Economics Test 2024

Which statement is correct related to Adam Smith?...

• Adam Smith believed in the role of the government to improve societal welfare.

• Adam Smith believed that all markets were characterized by perfect competition.

• Adam Smith argued that economic agents were guided entirely by self-interest.

• Adam Smith claimed that coordination among a large number of economic actors (producers, transporters, sellers, consumers), often unknown to one another, will not spontaneously arise without any person or institution consciously attempting to create or maintain it.

• Adam Smith believes that gold is the source of wealth in every country

A firm is a way of organizing production with the following characteristics, except...

• One or more individuals own a set of capital goods that are used in production.

• They pay wages and salaries to employees.

• They direct the employees (through the managers they also employ) in the production of goods and services.

• The goods and services are the property of the owners.

• They sell the goods and services on markets with the intention of making a profit and promote social welfare

Which option is incorrect about Arthur Lewis?...

• Arthur Lewis investigated questions that were asked by the first economists.

• The Lewis model assumes that the supply of labour to the capitalist sector is unlimited.

• In the Lewis model, income per capita rises when workers move from the subsistence sector to the capitalist sector.

• One aspect of the Lewis model is the profit-seeking motives of the capitalist sector.

• At the London School of Economics, he was the student of another great economist, Friedrich Hayek

In the period between 1600 and 1750 (before the Industrial Revolution took off in Britain), India’s GDP per capita was...

• declining, because agricultural productivity was declining, and most people were working in agriculture

• declining, because the formerly booming textile industry was being out-competed by British textiles

• rising, because the domestic textile industry was booming, and more people worked in industry than in agriculture

• closer to the level of British GDP per capita than it was two hundred years later between 1900 and 1970.

• closer to the level of British GDP per capita than it was two hundred years later between 1945 and 1985.

You are a taxi driver in Melbourne who earns A$50 for a day’s work. You have been offered a one-day ticket to the Australian Open for A$40. As a tennis fan, you value the experience at A$100. With this information, what can we say?...

• The opportunity cost of the day at the Open is A$40.

• The economic cost of the day at the Open is A$40.

• The economic rent of the day at the Open is A$10.

• You would have paid up to A$100 for the ticket.

• The opportunity cost of the day at the Open is A$90.

Which statement is incorrect related to theory of portfolio choice? Holding all other factors constant:

• The quantity demanded of an asset is positively related to wealth

• The quantity demanded of an asset is negatively related to wealth

• The quantity demanded of an asset is positively related to its expected return relative to alternative assets

• The quantity demanded of an asset is negatively related to the risk of its returns relative to alternative assets

• The quantity demanded of an asset is positively related to its liquidity relative to alternative assets

When acquiring a ticket for a play takes a significant amount of time, the true economic cost of that ticket would include all of the following factors except...

• the amount of time spent acquiring the ticket.

• the transportation cost of the person acquiring the ticket.

• the utility provided by seeing the play.

• the earning power of the person acquiring the ticket.

• the purchase price of the ticket.

The government imposes a price floor on rice that is below the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest...

• using rationing coupons that cannot be resold.

• using rationing coupons that can be resold.

• using a queuing system to compensate for the excess demand.

• applying a first-come, first-served queuing mechanism

• that no rationing system will be necessary.

Which of the following, if true, would most effectively back the argument that raising cigarette taxes reduces the number of people who smoke cigarettes?...

• The demand for cigarettes is relatively inelastic.

• The demand for cigarettes is relatively elastic.

• The supply for cigarettes is relatively inelastic.

• The supply for cigarettes is relatively elastic.

• Both the demand and the supply for cigarettes are relatively inelastic.

If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?...

• Each duopolist produces 1,500 units of output.

• Each duopolist produces 4,000 units of output.

• Each duopolist produces 5,000 units of output.

• One duopolist produces 2,400 units of output and the other produces 1,600 units of output.

• One duopolist produces 3,000 units of output and the other produces 1,500 units of output.