MIDTERM EXAMINATION Spring 2011 ECO401 Economics solve paper

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Question No: 1 ( Marks: 1 ) - Please choose one
An individual whose attitude towards risk is known as:

► Risk averse.
► Risk loving.
► Risk neutral.
► None of the given options.

Question No: 2 ( Marks: 1 ) - Please choose one
The concept of a risk premium applies to a person that is:

► All of the given options.
► Risk averse.
► Risk neutral.
► Risk loving.

Question No: 3 ( Marks: 1 ) - Please choose one
A normative economic statement:

► Is a statement of fact.
► Is a hypothesis used to test economic theory.
► Is a statement of what ought to be, not what is.
► Is a statement of what will occur if certain assumptions are true.

Question No: 4 ( Marks: 1 ) - Please choose one
Economics is different from other social sciences because it is primarily concerned with the study of ________, it is similar to other social sciences because they are all concerned with the study of ________.


► Limited resources, market behavior.
► Scarcity, human behavior.
► Social behavior, limited resources.
► Biological behavior, scarcity.

Question No: 5 ( Marks: 1 ) - Please choose one
Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as:
► P = MR.
► P = AVC.
► AR = MR.
► P = MC.

Question No: 6 ( Marks: 1 ) - Please choose one
A welfare loss occurs in monopoly where:

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► The price is greater than the marginal cost.
► The price is greater than the marginal benefit.
► The price is greater than the average revenue.
► The price is greater than the marginal revenue.

Question No: 7 ( Marks: 1 ) - Please choose one
The "perfect information" assumption of perfect competition includes all of the following EXCEPT:
► Consumers know their preferences.
► Consumers know their income levels.
► Consumers know the prices available.
► Consumers can anticipate price changes.

Question No: 8 ( Marks: 1 ) - Please choose one

Figure
In figure given above, the marginal utility of income is:


► Increasing as income increases.
► Constant for all levels of income.
► Diminishes as income increases.
► None of the given options.

Question No: 9 ( Marks: 1 ) - Please choose one
A consultant for Mattel (the producer of Barbie) reports that their long run average cost curve is decreasing. In other words, he is saying that: