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Ecs1500 Exam pack Questions and Answers
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Multiple Choice Questions (Section A):(A)
1. A normal good is one for which the income elasticity is greater than one.
a. True
b. False
2. The demand for a good, perceived by the consumer to be a necessity, will tend to be elastic.
a. True
b. False
3. Macroeconomics is concerned with the study of how households and firms make decisions and how
they interact in specific markets
a. True
b. False
4. Price and quantity demanded for most goods are positively related
a. True
b. False
5. If three variables are related, one of them must be held constant when plotting the other two in the
by-coordinate system
a. True
b. False
6. A 50% increase in price, which results in a 90% decrease in the quantity demanded, indicates that
demand is elastic in this price range
a. True
b. False
7. Absolute advantage is a comparison based on productivity
a. True
b. False
2
,8. A decrease m the price of soft drinks will increase their demand (will shrift the curve to the right).
a. True
b. False
9. If pizza and hamburgers are substitutes, a decrease in the price of pizza would increase the demand
for hamburgers.
a. True
b. False
10. Voluntary unemployment occurs when individuals choose not to be employed because they are not
willing to work for the current wage rate.
a. True
b. False
11. Cyclical unemployment is the result of a downturn in economic activity.
a. True
b. False
12. An increase in the price level is the same as a decrease in the value of money.
a. True
b. False
13. If the nominal interest rate is 7% and the inflation rate is 5%, the real interest rate is 12%.
a. True
b. False
14. A changes in prices of a good indicate that the market for that good is in equilibrium.
a. True
b. False
15. The impact lag is shorter for monetary policy than for fiscal policy.
a. True
b. False
3
,(B)
1. We have observed that both the price and the quantity sold of golf balls are raising over time.
This is due to …..
1. Continual improvements in the technology used to produce golf balls.
2. Increases in the price of golf clubs over time.
3. Decreases in membership fees for country clubs with golf facilities.
4. An increase in the number of country clubs with golf facilities.
2. The price of good A goes up. As a result, the demand for good Q shifts to the left. From this, we
can infer that …
1. good A is a normal good
2. good Q IS an inferior good
3. goods A and Q are substitutes
4. goods A and Q are complements
3. You decide to take a vacation and the trip costs you R3 500. While you are on vacation, you do
not report to work where you could have earned R2 750. The opportunity cost of the vacation is
…..
1. R6 250 2
2. R2 750 3
3. R3 500
4. R 750
4. In the market for fitness balls, which of the following variables would decrease demand, ceteris
paribus?
1. An increase in the price of fitness balls
2. A decrease m the price of fitness balls
3. A fall in the income of consumers
4. A decrease in the price of hand pumps, a complement
5. Pete is considering attending a concert where the price of a ticket is R350 He estimates that the
cost of driving to the concert and parking there will amount to an additional R20. To be able to
attend the concert Pete will have to take time off from his part-time job. He estimates that he
will lose five hours at work, at a wage of R60 per hour Pete’s opportunity cost of attending the
concert equals ….
1. R350
2. R370
3. R300
4. R670
4
, 6. Which of the following is most likely to have a high-income elasticity of demand?
1. Meals at classy restaurants
2. Lunches at fast food restaurants
3. Packed lunches from home
4. Apples
7. If the price elasticity of demand is 0,5 then a 20% price hike will lead to a
1. 5% decrease in quantity demanded
2. 10% decrease in quantity demanded
3. 20% decrease in quantity demanded
4. 40% decrease in quantity demanded
8. If a 10% price hike leads to a 30% increase in quantity supplied, then the
1. price elasticity of demand to 0,33
2. price elasticity of supply to 0,33
3. price elasticity of demand is 3,0
4. price elasticity of supply is 3,0
9. Which of the following would not cause the demand curve for Varsity Cup (rugby) tickets to
shift?
1. An increase in the price of professional rugby tickets
2. A decrease in the price of university hockey tickets
3. An increase in the price of Varsity Cup tickets
4. A drop in student incomes
10. Suppose that the market for baked beans is in equilibrium, and both the supply and the demand
curves for baked beans shift to the left. As a result, the equilibrium price and the
equilibrium quantity will _
1. will fall, fall
2. will fall, rise
3. will rise, fall
4. cannot be determined, fall
11. Which one of the following statements is CORRECT?
1. The price elasticity of demand is always positive.
2. Elastic demand means that the quantity supplied is sensitive to the price.
3. Inelastic demand means that the quantity demanded is highly sensitive to the price.
4. Elastic supply means that the quantity supplied is sensitive to the price.
5
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