Economics for Business Revision 2

1) Which of the following will not lead to an appreciation of a courtiers currency? a. Purchase of currency by central bank b. A decrease in inflow of capital c. A rise in exports d. A fall in imports 2) The budget deficit of a government may increase to reduce? a. Technological unemployment b. Demand deficient unemployment c. Real wage unemployment d. Frictional unemployment 3) Which change in an economy can cause a rise in the prices of stocks and shares currency appreciates? 4) Who will be affected by currency depreciation? a. Importers c. Domestic producers b. Exporters d. Domestic service firms

5) The demand for a particular category of labour is shifting to the left which of the following could be a cause? a. Increase in the price of a substitute factor b. Decrease in the price of substitute factor c. An increase in the price of labour d. A decrease in the price of labour 6) What is exchange equalisation? 7) What is the impact of imposing a minimum price? 8) Which of the following would not be a source of finance for a business? a. Bank loan b. Fixed of Deposits c. Retained profits d. New share issue 9) When the income of individuals increase from 2000 to 2400 the demand for an item increases by 10%? a. The product is a normal good b. The demand for the product is income elastic c. The income elasticity is unity d. Groceries are inferior goods 10) Why cannot the private sector provide public goods such as street lighting? a. Free rider problem b. They will exploit consumers c. Governments are more efficient producers of such goods d. There will be significant external costs in such production 11) In an aggregate demand and supply diagram what would a significant rise in oil costs in an economy result in? 12) What is the cross elasticity of demand for substitute goods?

13) In a market economy which of the following roles does price not play? a. Signal to producers about consumer preferences b. Signals to consumers about costs c. A means of allocating scarce resources d. A substitute for barter 14) What is the general impact of tax imposed on a product which has to be paid by the producer? 15) The decision as to what to produce in a command economy is arrived at through? 16) Which of the following about inflation is not true? a. It shift wealth from debtors to creditors b. It makes business planning difficult c. It distorts the price system in an economy d. It decreases the international competitiveness of the countries firms 17) Which of the following may not be an indicator that an economy is recovering from a recession? a. An increase in unfilled vacancies b. A fall in the level of personal debt c. An increase in the growth of money supply d. A rise in business confidence 18) Which of the following definitions would fit monopolistic competition? a. Single firm in the market b .Many sellers of homogenous product c. Many sellers of differentiated products d .Few sellers of differentiated goods 19) Which of the following industries will achieve the largest fall in sales, output and employment if an economy moves into a recession? a. Food processing b. Automobile manufacture c. Retail supermarkets d. Petrol retailing 20) Which of the following do you think is the main aim of the government competition policy? a. Restricting anti competitive behaviour of firms b. Limit the ability of firms to secure long term profits c. Enforcing competition by breaking up large firms d. Preventing mergers between large firms 21) Where should a from price so as to maximise its revenue? 22) What does the existence of natural rate of unemployment indicate? a.Governments cannot reduce unemployment below this level b. The shape of the Philips curve varies over time c. Nominal wages rise faster than prices in the long run d. Governments cannot reduce unemployment below this level 23) A country is an oil exporter and the price for its oil is inelastic. Which of the following is correct about a substantial increase in oil prices? a. Will make the terms of trade to deteriorate b. Improves the countries balance of payments in the current account c. Improves the price competitiveness of manufacturing firms

d. Increases GDP but not the GNP of the country 24) Which of the following is a normative statements ? a. Free market economists recommend that welfare payments should be cut b. The government should cut welfare payments c. If welfare payments are cut poverty will increase d. If welfare payments are cut resources will be employed elsewhere in the economy 25) when a firm is in equilibrium what will the impact of cost of production increasing ? 26) When can we say that a country has comparative advantage in manufactured goods? 27) Which of the following might cause the demand for chicken meat to shift to the right a. A fall in the price of beef b. An outbreak of bird flu in chicken c. A health report favouring white meat d. A fall in the price of chicken meat 28) What does the accelerator principle shows that the demand for investment spending? a. Fluctuates wider than consumer spending b. Increases rapidly as the rate of interest falls c. Induces multiple changes in the national income d. Is positively related to capital consumption 29) Which of the following is a positive statement ? a. All taxes are bad but some public services are good b. Direct taxes should be increased to distribute income more widely c. The distribution of income and wealth is unequal d. The government ought to cut the taxes paid by motorists 30) Which of the following could be regarded as the increase in regulation by a government in an economy? a. Government privatising a state venture b. Government reducing controls on insurance funds c. The government encouraging accounting bodies to discipline accountants d. The government passing a regulation that motorists should wear seat belts and implementing it 31) The following are some statements about building societies which of them are correct ? a. They are mutually owned organisations b. They do not contribute to the national output c. They can raise capital by selling shares in the stock exchange d. Some banks used to be building societies 32) Which of the statements about a firms costs are not true ? a. Average variable cost first increases and then decreases as output rises b. Marginal cost is equal to average cost when average cost is the lowest c. Total fixed cost is a constant d. Average fixed cost decreases as output increases

33) All of the following are correct about small firms except which one ? a. Small firms generally do not raise finance in the capital markets b. Banks may refuse to lend to small firms because of the risks involved c. Small firms are common in industries which display increasing returns to scale d. Small firms are common in industries where there are niche markets 34) Which of the following could be regarded as criticisms of the market economy. ? a. It under produces goods and services that individuals want b. It overproduces goods and services that individuals do not want c. Limits the owners of resources the ability to use them as they wish d. Ignores some of the costs and benefits with production and consumption of goods and services. 35) Which of the following would be a basic criteria for an item to be regarded as scarce ? a. It should not be available in shops b. It should command a price c. It should provide consumers with welfare d. It should exist in smaller quantities 36) If a country has absolute advantage in the production of all goods and services which of the following would be correct ? a. Trade would take place but only that country will gain b. Trade would take place and all countries would gain c. Trade would take place and 37) What will be the impact of a price rising on a product with elastic demand ? 38) Which of the following is normal profit not ? a.A reward for risk taking b. The price of capital c. A source of investment funds d. A cost of production 39) Which of the following explain the structure of interest rates ? a. The borrowers have different risk profiles b. The lenders wish to lend for different time profiles c. The markets for loan able funds are competitive d. The existence of margins between borrowing and lending rates 40) Which of the following does not appear to involve the principle of diminishing marginal utility? a. After a while it is better to read a book than to play cricket b. There is a limit to the amount of television one wants to watch in a day c. It is boring to study continuously d. The second cup of coffee tastes better than the first cup.