ECON7002 Economics for Commerce Semester Two Final Examination, 2022
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Semester Two Final Examination, 2022
ECON7002 Economics for Commerce
PART A - MULTIPLE CHOICE QUESTIONS
There are 20 multiple choice questions. Answer all 20 questions on the
Multiple Choice Answer sheet. Each question is worth 2 marks. No marks will be deducted for an incorrect choice, so attempt all questions.
(Total marks: 40)
1. If the price of refillable butane lighters was to decrease, then the:
A) demand for butane would decrease.
B) demand for butane would increase.
C) quantity of butane demanded would increase.
D) quantity of butane demanded would decrease.
2. Which of the following would cause a decrease in the supply of milk?
A) An increase in the price of cookies (assuming that milk and cookies are complements).
B) A decrease in the price of milk.
C) An increase in the price of a product that producers sell instead of milk.
D) An increase in the number of firms that produce milk.
3. Consider the table below:
If a minimum wage of $11.50 is mandated, there will be a:
A) shortage of 20 000 units of labour.
B) surplus of 20 000 units of labour.
C) shortage of 40 000 units of labour.
D) surplus of 40 000 units of labour.
4. Suppose that when the price of hamburgers decreases, the Landry family
decreases their purchases of chicken nuggets. To the Landry family:
A) hamburgers and chicken nuggets are complements.
B) hamburgers and chicken nuggets are inferior goods.
C) hamburgers and chicken nuggets are normal goods.
D) hamburgers and chicken nuggets are substitutes.
5. Consider the figure below:
If the firm is producing 700 units:
A) it is making a profit.
B) it is incurring a loss.
C) it should cut back its output to maximise profit.
D) it should increase its output to maximise profit.
6. Jason, a high-school student, mows lawns for families in his neighbourhood. The going rate is $12 for each lawn-mowing service. Jason would like to charge $20. If the market for lawn mowing services were perfectly competitive, what would happen if Jason raised his price?
A) He would lose some but not all his customers.
B) Initially, his customers might complain but over time, they will come to accept the new rate.
C) If Jason raises his price, he would lose all his customers.
D) If Jason raises his price, then all others supplying the same service will also raise their prices.
7. Refer to the figure below:
Assume the monopolist maximises its profits. The amount of consumer surplus is:
A) $21.
B) $124.
C) $186.
D) $332.
8) If a monopolist’s price is $50 per unit and its marginal cost is $25, then:
A) to maximise profit, the firm should increase output.
B) to maximise profit, the firm should decrease output.
C) to maximise profit, the firm should continue to produce the output it is producing.
D) Not enough information is given to say what the firm should do to maximise profit.
9. The Figure below shows a market with an externality. The current market equilibrium output of a1 is not the economically efficient output. The economically efficient output is a2.
In that case, the diagram shows:
A) the effect of a positive externality in the production of a good.
B) the effect of a negative externality in the production of a good.
C) the effect of an external cost imposed on a producer.
D) the effect of an external benefit such as a subsidy granted to consumers of a good.
10. David and Jane are roommates. David wants to host a party the same weekend that Jane wants to study for the ECON7002 final exam. David’s and Jane’s gain from the two events are described in the table below. If Jane has the right to the quietness, which one is correct?
a. The socially optimal outcome is to party and loud. David must compensate Jane.
b. The socially optimal outcome is to party and loud. David does not have to compensate Jane.
c. The socially optimal outcome is not to party and quiet. Jane must compensate David.
d. The socially optimal outcome is not to party and quiet. Jane does not have to compensate David.
11. Which of the following transactions would be included in the official calculation of
GDP?
A) A student buys a used textbook at the bookshop.
B) Bridgestone sells $2 million worth of tyres to General Motors Holden.
C) You buy a new SmartPhone.
D) You illegally download music off the Internet to put on your iPod.
12. By how much will the Australian GDP increase after the following transactions?
• An Australian resident purchases a $100,000 Mercedes-Benz from Germany.
• An Australian bank sells financial services, billed at $60,000 to an overseas company.
• An Australian sheep farmer sells $150,000 worth of sheep to Egypt.
• An Australian superannuation fund sells $300,000 worth of Australian shares to an overseas investment firm.
A) The Australian GDP will increase by $110,000
B) The Australian GDP will increase by $210,000
C) The Australian GDP will increase by $310,000
D) The Australian GDP will increase by $510,000
13. Consider the figure below:
The movement from A to B to C illustrates:
A) an improvement in technology.
B) a decline in capital per worker.
C) diminishing returns to capital.
D) diminishing returns to labour.
14. The official unemployment rate may understate the true rate of unemployment because of:
A) increases in worker productivity over time.
B) discouraged workers who no longer actively look for work.
C) workers who have more than one job.
D) changes in the wage rates which may increase unemployment.
15. Suppose that the data in the following table reflects the prices in the economy.
What is the inflation rate in between 2017 and 2018?
|
A) |
5% |
|
B) |
2.9% |
|
C) |
4.6% |
|
D) |
7.5% |
16. When would ‘structural unemployment’ increase?
A) When the economy enters a recession.
B) When the number of individuals who quit their job to find another increases.
C) When discouraged workers drop out of the work force.
D) When workers are replaced by machines, and the workers do not have the skills to perform new jobs.
17. If the Reserve Bank of Australia sells bonds and securities in the open market, this is likely to lead to a in interest rates and a(n) of the Australian dollar.
|
A) |
rise; appreciation |
|
B) |
rise; depreciation |
|
C) |
fall; appreciation |
|
D) |
fall; depreciation |
18. Consider the figure below
Suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B.
Which of the following policies could the government use to move the economy to point C?
A) Decrease income taxes.
B) Decrease government purchases.
C) Increase income taxes.
D) Sell commonwealth government bonds and securities.
19. If ‘crowding out’ occurs, an increase in government spending:
A) increases the interest rate and consumption, and investment spending decline.
B) decreases the interest rate and consumption, and investment spending decline.
C) increases the interest rate and consumption, and investment spending rise.
D) decreases the interest rate and consumption, and investment spending rise
20. If the economy were in a recession, we would expect government expenditure to be:
A) high and tax revenues to be high, probably leading to a budget deficit.
B) high and tax revenues to be low, probably leading to a budget deficit.
C) low and tax revenues to be low, probably leading to a budget surplus.
D) high and tax revenues to be low, probably leading to a budget surplus.
PART B: SHORT ESSAY QUESTIONS
Answer ALL questions in the booklet provided.
Each question is worth the marks allocated (Total marks: 60).
1. (10 marks: 2 marks each question) State whether each of the following goods and
services is non-rival, non-excludable, or both.
a. A toll road.
b. A public park.
c. A lighthouse.
d. An art museum.
e. A radio broadcast of ‘A Prairie Home Companion’ .
2) (10 marks: 2 marks each question) Refer to the figure below
a. What is the profit-maximising quantity and what price will the monopolist charge?
b. How much is the monopolist profit?
c. How much is the consumer surplus under this monopolist?
d. If this industry was organised as a perfectly competitive industry, what would be the profit-maximising price and quantity?
e. How much is the consumer surplus under a perfect competition? Compare your answer to part c. Are they the same or different? Why?
3. (10 marks: 5 marks each question) Answer the following questions.
a. Explain how the CPI is constructed, and discuss any weaknesswith this measurement technique.
b. What is the ‘natural rate of unemployment’ , and what types of unemployment constitute the ‘natural rate of unemployment’?
4. (10 marks) Why are the long-run effects of an increase in aggregate demand on price and output different from the short-run effects?
5. (10 marks) Suppose the following table illustrates the values of real and potential GDP and the price level, if the Reserve Bank of Australia (RBA) does not change its current policy to be more contractionary or expansionary.
a. (4 marks) Based on the above table, there are changes in potential GDP, real GDP, and the price level from 2017 to 2018. What movements or changes in the LRAS, SRAS, and AD curves from 2017 to 2018 could contribute to these results?
b.(6 marks: 2 marks each question) If the RBA wants to keep real GDP at its potential level in 2018:
b.1 Should the RBA use a contractionary or expansionary policy?
b.2 Should it raise or lower its interest rate target?
b.3 How should it conduct open market operations to achieve its goal?
6. (10 marks) Outline the differences between the government ‘purchases multiplier’ and the ‘tax multiplier’. For example, how does a $1 increase in the government spending affect economy differently from a $1 decrease in the income tax?
7. Assumptions question (no marks): Specify any assumptions you have made in completing the exam and to which questions those assumptions relate. You may also include queries you may have made with respect to a particular question, should you have been able to ’raise your hand’ in an examination room.
2023-08-15