economics MCQs – Page 393

Practise multiple-choice questions from economics for competitive examinations and subject revision. Review each marked answer and report any item that may be outdated or unclear.

economics Mcqs

1. the national economy 2. profit maximizing under perfect competition and monopoly 3. application of economics 4. the aggregate demand aggregate supply model 5. surplus 6. money interest rates and output 7. average and total cost 8. stabilization adjustment reform and privatization 9. risks and diversification efficient market hypothesis 10. the phillips curve 11. supply and demand 12. capital formation investment choice information technology and technical progress 13. aggregate supply unemployment and inflation 14. elasticity 15. comparative gdp 16. roots of modern macroeconomics 17. production factors 18. poverty malnutrition and income inequality 19. trade regulations and industrial policies 20. monetary union 21. exchange rate systems and currency crises 22. economic development in historical perspective 23. exchange rate determination 24. monopoly competition 25. the balance of payments 26. inflation productivity 27. macroeconomic issues and analysis 28. employment migration and urbanization 29. macroeconomic policy tools 30. supply side policies 31. exchange rate adjustments and the balance of 32. miscellaneous 33. taxation 34. trade policies for the developing nations 35. markets efficiency and the public interest 36. the external debt and financial crises 37. budget deficits and the trade balance 38. alternative theories of the firm 39. public goods 40. the meaning and measurement of economic development 41. characteristics and institutions of developing countries 42. agriculture irrigation system of pakistan 43. education health and human capital 44. economic problems of developing countries 45. theories of economic development 46. basic of economics 47. consumer theory vs real consumers 48. applied microeconomics 49. long term economic growth 50. externality internality 51. fiscal and monetary policy 52. prices wages taxes 53. balance of payments aid and foreign investment 54. international factor movements and multinational corporations 55. entrepreneurship organization and innovation 56. the international economy and globalization 57. population and development 58. non tariff trade barriers 59. foundations of modern trade theory 60. global economic development 61. market 62. rural poverty and agricultural transformation 63. regional trading arrangements 64. foreign exchange 65. introduction to economics 66. world economy miscellaneous 67. sources of comparative advantage 68. natural resources and the environment toward sustainable development 69. monopoly 70. asymmetric information 71. income inequality 72. labour market 73. tariffs 74. development planning and policy making the state and the market 75. oligopoly 76. industrial development 77. costs supply and perfect competition 78. human capital 79. monetary fiscal and incomes policy and inflation 80. stocks

7841. The golden-rule saving rate is the rate of saving that ?
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A. maximizes the level of long-run consumption

B. maximizes the level of long-run investment

C. gets the highest rate of interest

D. maximizes human capital

7842. All of the following are parts of the business cycle except ?
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A. boom

B. recovery

C. slump

D. acceleration

7843. Economic growth is important because ?
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A. People want a better environment

B. People want higher incomes and more consumer goods.

C. People want to be happier

D. People want less crime

7844. Real business cycle theorists argue that _________ can explain short- and long-term fluctuation in output?
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A. sun spot cycles

B. imperfect labor markets

C. intertertemporal decisions of households, firms and government

D. rational expectations

7845. The idea of convergence of GDP in Europe suggests that ?
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A. Poorer less developed countries will catch up with richer ones.

B. Poorer countries have higher capital/labour ratios than richer countries.

C. The gap between countries GDP per head will widen

D. All countries will eventually join the EEC

7846. Tradable pollution permits ?
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A. Set the quantity of pollution

B. determine the demand for pollution rights.

C. set the price of pollution.

D. reduce the incentive for technological innovations to further reduce pollution.

7847. The most efficient pollution control system would ensure that ?
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A. the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount

B. no pollution of the environment is tolerated

C. the regulators decide how much each polluter should reduce its pollution.

D. each polluter reduces its pollution an equal amount

7848. According to the Coase theorem, private parties can solve the problem of externalities if ?
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A. the party affected by the externality has the initial property right to be left alone.

B. there are no transaction costs.

C. the government requires them to negotiate with each other

D. There are a large number of affected parties.

E. each affected party has equal power in the negotiations.

7849. To internalize a positive externality an appropriate public policy response would be to ?
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A. tax the good

B. subsidize the good

C. have the government produce the good until the value of an additional unit is zero

D. ban the good creating the externality

7850. Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality ?
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A. costs incurred due to a large number of parties affected by the externality

B. costs incurred to enforce the agreement

C. All of these answers are considered transaction costs

D. costs incurred due to lawyers fees

E. costs incurred to reduce the pollution

7851. A negative externality generates ?
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A. none of these answers

B. a social cost curve that is below the supply curve (private cost curve) for a good

C. a social cost curve that is below the supply curve (private cost curve) for a good

D. a social value curve that is above the demand curve (private value curve) for a good

7852. Roberto and Thomas live in a university hall of residence. Reberto values playing loud music at a value of 100. Thomas values peace and quiet at a value of 150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs ?
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A. Roberto will pay Thomas 100 and Roberto will stop playing loud music

B. Roberto will pay Thomas 150 and Roberto will continue to play loud music

C. Thomas will pay Roberto between 100 and 150 and Roberto will stop playing loud music

D. Thomas will pay Roberto between 100 and 150 and Roberto will continue to play loud music

7853. To internalize a negative externality an appropriate public policy response would be to ?
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A. have the government take over the production of the good causing the externality

B. subsidize the good

C. ban the production of all goods creating negative externalities

D. tax the good

7854. Suppose an industry emits a negative externality such a pollution and the possible methods to internalize the externality are command-and-control policies, pigovian taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency ease of implementation and the incentive for the industry to further reduce pollution in the future, they would probably rank them in the following order (from most favored to least favored) ?
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A. tradable pollution permits, Pigouvian taxes, command-and-control policies

B. They would all rank equally high because the same result can be obtained from any one of the policies

C. Pigouvian taxes, command-and-control policies, tradable pollution permits.

D. tradable pollution permits command-and-control policies, Pigovian taxes.

E. command-and-control policies, tradable pollution permits, Pigovian taxes.

7855. When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students it is an example of ?
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A. an attempt to internalize a negative externality

B. a command-and-control policy

C. an attempt to internalize a positive externality

D. a Pigouvian tax

7856. A positive externality (that has not been internalized) caused the ?
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A. equilibrium quantity to exceed the optimal quantity

B. equilibrium quantity to be either above or below the optimal quantity

C. optimal quantity to exceed the equilibrium quantity

D. equilibrium quantity to equal the optimal quantity

7857. A positive externality generates ?
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A. none of these answers

B. a social value curve that is below the demand curve (private value curve) for a good

C. a social cost curve that is above the supply curve (private cost curve) for a good

D. a social value curve that is above the demand curve (private value curve) for good

7858. Which of the following is true regarding tradable pollution permits and Pigouvian taxes ?
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A. All of these answers are true

B. Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.

C. Pigouvian taxes and tradable pollution permits create an efficient market for pollution.

D. To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights.

E. Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest cost.

7859. A negative externality (that has not been internalized) causes the ?
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A. equilibrium quantity to exceed the optimal quantity

B. equilibrium quantity to be either above or below the optimal quantity

C. optimal quantity to exceed the equilibrium quantity.

D. equilibrium quantity to equal the optimal quantity

7860. A pigovian tax on pollution ?
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A. determines the demand for pollution rights.

B. Sets the price of pollution

C. reduces the incentive for technological innovations to further reduce pollution

D. Sets the quantity of pollution

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