C. Economists are assuming that other influences on quantity demanded are constant so that the effect of price can be isolated.

EXAM IN MICROECONOMICS

(April, 2009)

MOCK

VARIANT 2

SOLUTIONS

Section 1. Multiple choice questions

You have 70 minutes to do this part of the exam.

Marking scheme: 1 point for a correct answer, -0.25 for a wrong answer, 0 if the answer has not been given.

1. In economics, the scarcity principle means that

A. Some natural resources are scarce

B. The goods we find in nature are scarcely suitable for consumption in their raw form

C. The resources available to satisfy our unlimited wants are limited, so trade-offs have to be made

D. The supply of goods that are beneficial to society is limited relative to the demand for them

E. The price of the good is determined by its scarcity

2. The opportunity cost of something is

A. What you have to give up by not putting the resources necessary to acquire it to their next best alternative use

B. The sum of all of the other things you could have bought with the money

C. The price you paid for it

D. Any cost that cannot be recovered

E. Any cost other than the direct money cost

3. Along a country’s production possibilities curve

A. The prices of the goods that are produced are identical

B. There are no idle resources

C. The costs of production of the goods that are produced are identical

D. Resources are equally well equipped for the production of any good

E. There is only one efficient point

4. Vasya is an accountant. He receives $200 per hour doing tax returns. He can type 12,000 characters per hour into spreadsheets. He can hire an assistant who types 3,000 characters per hour into spreadsheets. Which of the following statements is true?

A. Vasya should not hire an assistant because the assistant can't type as fast as he.

B. Vasya should hire the assistant as long as he pays the assistant less than $200 per hour.

C. Vasya should hire the assistant as long as he pays the assistant less than $100 per hour.

D. Vasya should hire the assistant as long as he pays the assistant less than $50 per hour.

E. None of the above.

5. Which of the following will NOT entail an outward shift of the production possibilities curve?

A. An upgrading of the quality of a nation's human resources

B. An increase in the quantity of a society's labour force

C. The improvement of a society's technological knowledge

D. All of the above will shift the curve outwards

E. The reduction of unemployment

6. Which of the following is an example of a normative economic statement?

A. The MICEX index reached over 2000 in June 2008.

B. The Russian budget deficit has reached alarming levels due to crisis.

C. 10% of the population in Russia lives below poverty level.

D. Moscow had a budget surplus in 2007.

E. The students have paid $10000 as a tuition fee in ICEF.

7. By the term “demand curve” economists mean the curve describing the relationship between price and quantity demanded. The focus on price means that

A. Economists believe price is the only factor that influences quantity demanded.

B. Price is the only factor that influences quantity demanded.

C. Economists are assuming that other influences on quantity demanded are constant so that the effect of price can be isolated.

D. The model's predictive power is of little value.

E. Economists are inappropriately overlooking other influences on quantity demanded.

8. Which of the following is correct? As price rises, quantity supplied rises along an individual firm’s supply curve because

I. The higher price encourages the firm to offer more units of the good for sale.

II. As the price rises, new firms enter the market.

A. Both I and II apply

B. Neither I nor II applies

C. Either I or II can apply, but not simultaneously

D. Only II applies

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