MCQ Worksheet 3

Ans : A
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Ans: C
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Ans B
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Ans A
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Ans D ( read carefully, question this time is asking not just about savings or borrowings, but the cost
of borrowings,”” higher the interest rate , higher the cost of borrowings and therefore decreased
borrowings. So answer is D (increased savings But increased (higher) cost of borrowings also(more
interest))

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Ans A (check the question is in negative tone, “less likely” so recession)

Ans B ( Observe, (1*)the order of income, lowest (first) to highest (last) AND (2*) Concept
“people with higher income spend lower proportion of income on basic necessities)
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Ans B ( You all know rt, no rocket science, (monopoly, so x-inefficiency, Deadweight
loss, welfare loss, reduced choices) decrease output and increase price)
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Observe New MCQ (I m changing the perspective, similar question but different
approach)

A perfectly competitive market (industry) changes to monopoly.

What is likely to happen to the cost of production and price in this market (industry)?

Cost of production Price

A Decrease Decrease
B Decrease Increase
C Increase Decrease
D Uncertain Increase

***** see this time focus is on cost of production and not output: concept
involved “economies of scale” *** Not all monopolies are BAD???

Ans : A (Single firm (monopoly) instead of many firms (in perfect competition)
so, in this case it is possible for monopoly to attain “economies of scale” and
therefore ?????? decreased cost of production and lower prices to customer.)

(B cannot be an answer because if cost of production decreases, firm may not

increase the price (necessarily) but may Decrease it, D obviously wrong, C cannot
be an answer because if cost of production increases, firms would increase the
price and not Decrease)

Any doubts write back to me.

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Ans C

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The world’s open-cast mining of mineral ores is dominated by a few multinational companies
which employ relatively few workers.
What does this indicate?

A Production is capital-intensive.
B Productivity of labour is low.
C The market is perfectly competitive.
D There is a monopoly of world production.
Ans ::: A

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Ans : B
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Ans D

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Ans A

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Ans: D TUZY (due to tax supply curve shifts to the left, the new lower level output Q1 supplied
before taxes ( see on old supply curve for quantity Q1), firms expect price level Y, anything above that is
tax per unit i.e UZ, for quantity equal to YZ (same as OQ1), govt tax revenue= area TUZY )
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Ans: C

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Ans D

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Ans C

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What is likely to fall when the rate of unemployment in a country falls?

A business confidence
B consumer spending
C government budget deficit
D government revenue from taxes
Ans : C ((*1)Reduction in unemployment expenses / benefits/ allowances and

(*2) Increase in tax revenue) therefore fall in government budget deficit.

Observe the question asking fall (reduction) so budget deficit will decrease/
fall; surplus increase/ rise.
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Ans : C

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Ans : B

(if different size big or small developed or developing economy is considered A C and D can
vary there also , less or more) therefore B is the feature, Higher rural area exist in developing
economies (Rural – Urban Divide))

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Ans : D (A and B obviously wrong, C is wrong because low standard of living country
income level is also low, so can’t manage )

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Ans : D (write bk if any doubt)

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Ans D (shift making supply curve Perfectly. inelastic (fixed supply) can only happen if quota that is
fixed number of cars is allowed to be produced and imported )
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Ans : B (theory of absolute advantage leads to specialization and increase in global produce.)

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Ans: D

Test yourself: answer all the questions from 26 till 33

Correct answers will be loaded tomm in the same worksheet by 8.30 pm jakarta time i.e on 3/06/20116

26

Which action is evidence that a country is a planned economy?

A A central bank plans an interest rate change.

B A government plans the allocation of all resources.
C A local authority plans a new library.
D A ministry of finance plans the annual budget.

Ans

27 Which statement best explains why drought is an economic problem?

A Drought cannot be controlled.

B Rainfall is unreliable.
C The effects of drought involve the government.
D Water is a scarce good.
Ans :

28 In 2002 the government of Zimbabwe diverted US$18 million, originally intended to support
private business, to help feed millions of people threatened by famine. Some of the money was
used to import up to 1.8 million tonnes of corn.
What was the opportunity cost to Zimbabwe of this decision?

A the cost of the extra food

B the cost of the 1.8 million tonnes of corn
C the effect on private business
D the US$18 million

Ans
29 What might increase the use of money as a medium of exchange?
A an increase in income tax
B an increase in interest rates
C an increase in savings
D an increase in specialisation
Ans
30 A state-owned industry is sold to the private sector. The industry consists of a number of
very large factories.
Which is the most likely change in business organisation to result from this?

A from private company to public corporations

B from public company to public corporations
C from public corporation to public companies
D from public corporation to private companies

Ans

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Ans

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Ans C (radios and salt both given PED value <1; so inelastic)

(Inelastic PED; Increase the price; for revenue maximization (increase) )

Uses of PED,

(*1) Inelastic PED (PED<1); increase the price to max revenue.

(*2) Elastic PED (PED> 1) Decrease thee price to max revenue.

(*3) Unitary elastic (PED=1) ; Consumer expenditure / or firms

Revenue remains constant and doesn’t change with change in pricing, so focus on other methods of
revenue maximization)

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Ans (take the challenge and deduct the correct answer )