{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

2005_EC1301 - EC1301 NATIONAL UNIVERSITY OF SINGAPORE...

Info icon This preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
Image of page 11

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 12
Image of page 13

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: EC1301 NATIONAL UNIVERSITY OF SINGAPORE EC1301 PRINCIPLES OF ECONOMICS (SEMESTER I :2005-2006) Time Allowed : 2 Hours INSTRUCTIONS TO CANDIDATES 1. This examination paper comprises 14 printed pages, including the cover page. 2. It contains 80 multiple-choice questions of 1 mark each. Answer all questions on the bubble form provided. The total marks are 80. 3. Please shade your matriculation number and write your matriculation number clearly in the blank spaces provided in the Section B of the bubble form. U m 0 D) D A) B) C) D) 3 A) B) O D) Q A) B) O D) 3 A) B) O D) Q A) B) C) D) D A) B) C) D) $ A) B) C) D) Q A) B) C) D) 2 Which of the following statements about a monopoly is FALSE? Monopolies have no barriers to entry or exit. The good produced by a monopoly has no close substitutes. A monopoly is the only producer of the good. None of the above; that is, all of the above answers are true statements about a monopoly. Which of the following is LEAST likely to be a monopoly? The holder of a public franchise. A pharmaceutical company with a patent on a drug. A store in a large shopping mall. The sole owner of an occupational license. EC1301 An industry in which one firm can supply the entire market at a lower price than two or more firms can is called a legal monopoly. natural monopoly. single-price monopoly. price-discriminating monopoly. For a single-price monopoly, marginal revenue is __ when demand is elastic and is is inelastic. negative; negative negative; positive positive; negative positive; positive An unregulated monopoly will flood the market with goods to deter entry. produce only where marginal revenue is zero. produce in the inelastic range of its demand curve. produce in the elastic range of its demand curve. A single-price monopoly will set its price according to which of the following rules? P = MR and MR equals MC. P equals MC where the MC curve crosses the demand curve. P equals MR where the MR curve crosses the demand curve. None of the above answers is correct. Unregulated monopolies can often earn an economic profit in the long run because they receive government subsidies. they have high costs. barriers to entry prevent competing firms from entering the market. the risks of running a monopoly are high. The fundamental reason a single-price monopoly creates a deadweight loss is that it raises variable cost. raises fixed cost. restricts output. reduces the elasticity of demand. The more perfectly a monopoly can price discriminate, the smaller its output and the lower its profits. smaller its output and the higher its profits. larger its output and the lower its profits. larger its output and the higher its profits. when demand 10) M m 0 D) 11) A) m 0 D) 12) A) B) O D) 13) A) E O D) 19 A) B) C) D) 19 A) B) C) D) 19 A) B) O D) 1n A) B) C) D) 3 EC1301 It is easier for a monopolist to price discriminate between groups for a service than for a product because it is easier to calculate average willingness to pay for services. it is easier to distinguish between groups of customers for services than customers for products. it is easier for consumers to resell products than services. customers for products usually do not differ with respect to their average willingness to pay. When comparing perfect competition and monopolistic competition, we find that firms in monopolistic competition produce identical products just as do firms in perfect competition. firms in monopolistic competition face barriers to entry, unlike firms in perfect competition. advertising plays a large role in monopolistic competition, unlike in perfect competition. firms in monopolistic competition are price takers just as is the case for firms in perfect competition. One important difference between monopoly and monopolistic competition is the slope of the demand curve that the firms faces. point there are no barriers to entry in monopolistic competition. greater restriction of output in monopolistic competition. ‘ point that the marginal revenue and demand curves are the same for a monopoly. If a monopolistically competitive firrn’s marginal cost curve shifts upward, then its level of output will increase. will stay the same. will decrease. could increase, decrease, or stay the same but more information is needed. In the long run, a firm in a monopolistically competitive industry produces where its marginal cost is less than its average cost. equals its average cost. exceeds its average cost. equals its price. The kinked demand curve model of oligopoly is based on the assumption that each firm believes that if it raises or lowers its price other firms will follow. if it raises its price other firms will not follow, and if it lowers its price other firms will follow. if it raises or lowers its price other firms will not follow. if it raises its price other firms will follow, and if it lowers its price other firms will not follow. The kinked—demand curve model predicts that dominant firms in oligopolistic markets will frequently change their prices. small firms will look to larger firms for price leadership. oligopolies often show no change in price although costs have changed. the law of demand doesn’t work for oligopolies. Game theory proves most useful for analyzing perfect competition. monopolistic competition. oligopoly. monopoly. 18) A) m O D) 19) A) m O D) 20) A) B) O D) 21) A) B) Q D) 22) A) B) O D) 4 EC1301 Two software firms have developed an identical new software application. They are debating whether to give the new application away free and then sell add-ons or sell the application at $30 a copy. The payoff matrix is above and the payoffs are profits in millions of dollars. What is Firm 1’s best strategy? Give away the application regardless of what Firm 2 does. Sell the application at $30 a copy regardless of what Firm 2 does. Give away the application only if Firm 2 sells the application. Give away the application only if Firm 2 gives away the application. Thanksgiving Fox release (F) Christmas release Thanksgiving Christmas release release F: $80 F: $95 D‘ ”5 F: $100 F: $85 Disney and Fox must decide when to release their next films. The revenues received by each studio depend on when the other studio releases its film. Each studio can release its film at Thanksgiving or at Christmas. The revenues received by each studio, in millions of dollars, are depicted in the payoff matrix above. Which of the following statements correctly describes Fox’s strategy given What Disney’s release choice may be? If Disney chooses a Thanksgiving release, Fox should choose a Christmas release. If Disney chooses a Christmas release, Fox should choose a Thanksgiving release. Fox should release on Christmas regardless of what Disney does. Both answers A and B are correct. Game theory is distinctive in that its elements are costs, prices, and profits. revenues, elasticity, and profits. rules, strategies, payoffs, and outcomes. patents, copyrights, and barriers to entry. As the price level rises, the demand for money drops because the interest rate is too high. drops because the reward for saving increases. increases because more money is needed for the same level of transaction. increases because the cost of borrowing increases. If aggregate demand curve shifts dominate aggregate supply shifts following a currency depreciation, then the price level and the real GDP will rise. the price level and the real GDP will fall. the price level will fall and the real GDP will rise. the price level will rise and the real GDP will fall. 23) N m 0 m 24) A) B) O D) 29 A) B) O D) 2m A) m 0 D) 23 A) B) O D) 28 A) B) Q D) 5 EC1301 Which of the following actions may increase unemployment? increasing both taxes and government transfer payments by equal amounts. reducing both taxes and government transfer payments by equal amounts. reducing taxes and increasing government purchases by equal amounts. reducing govemment purchases and taxes by equal amounts. The equation of exchange is an identity used to balance the national account. relates money supply to real GDP. relates money supply to nominal GDP. that equates money supply with money demand. A smaller budget deficit would reduce the trade deficit by lowering interest rates and depreciating the currency. raising interest rates and appreciating the currency. lowering interest rates and appreciating the currency. raising interest rates and depreciating the currency. An increase in aggregate demand may result from an increase in taxes and an increase in money supply. a decrease in taxes and an increase in money supply. an increase in taxes and a decrease in money supply. a decrease in taxes and a decrease in money supply. The value of US‘s foreign debt measured in terms US dollar increases as the US dollar depreciates. increases as the US dollar appreciates. decreases as the foreign currency in which the debt is denominated appreciates relative to the US dollar. is not related to the foreign currency price of the US dollar. If there were an increase in the rate of growth of real output and a decrease in the rate of growth of nominal product prices would rise less rapidly than before. prices would rise more rapidly than before. prices would fall. prices would not change. 29) The net exports of Singapore tend to rise when A) B) C) D) 3m A) B) O D) 3n A) B) O D) Singapore inflation exceeds foreign inflation. foreign countries increase tariff rates. the value of the Singapore dollar, relative to foreign currencies, rises. incomes of Singapore’s trading partners rise faster than Singaporean incomes. Given other things, if the central bank increases interest rates, this will lead to an increase in aggregate demand. this will lead to a decrease in aggregate demand. this may encourage borrowing of funds. this may encourage investment as the rewards are higher. Which of the following could cause an increase in the quantity of real output demanded in Singapore? An increase in sales taxes. An increase in personal income taxes. An increase in government purchases of goods and services. An increase in the value of Singapore dollar in terms of foreign currencies. 32) A) m C) D) 33) A) B) Q D) 39 A) B) O D) 33 A) B) O D) [email protected] A) B) O D) 37) A) B) O D) 3& A) B) O D) 3% A) B) O D) 40) A) B) O D) 6 EC1301 An increase in interest rates due to the action of the central bank can reasonably be expected to encourage investment because it makes lending of money more attractive. discourage investment because it makes borrowing of money more costly. have little or no effect on investment since interest rate changes are intended to alter security prices not investment. discourage investment because it makes lending of money less attractive. Given a decrease in a government deficit, the contractionary effect will be greater the less sensitive is the level of investment to changes in the interest rate. the more sensitive is the level of investment to changes in the interest rate. the larger the income expenditure multiplier. the smaller the marginal propensity to consume. An increase in the grth of productivity will raise the rate at which the aggregate demand curve shifts to the right. raise the rate at which the aggregate demand curve shifts to the left. raise the rate at which the aggregate supply curve shifts to the right. raise the rate at which the aggregate supply curve shifts to the left. Unanticipated inflation will redistribute income from poor to rich. borrowers to lenders. lenders to borrowers. rich to poor. An expansionary monetary policy, with the economy operating at less than full employment, will lower prices and increase output. . increase prices with little change in output. increase prices and output. lower prices and lower output. When inflation and unemployment are both increasing, it is likely that aggregate demand and aggregate supply are both growing. aggregate supply is falling. aggregate demand is falling and aggregate supply is growing. none of the above. Fiscal and monetary policies are generally used to influence the position of the short run aggregate supply curve. long run aggregate supply curve. aggregate demand curve. None of the above. Which of the following would cause the Singapore dollar to depreciate against the Japanese yen? An increase in the Singapore money supply. An increase in interest rates in Singapore. A decrease in interest rates in Japan. An increase in Singapore’s exports to Japan. Which of the following actions may increase unemployment? increasing both taxes and government transfer payments by equal amounts. reducing both taxes and government transfer payments by equal amounts. reducing taxes and increasing government purchases by equal amounts. reducing government purchases and taxes by equal amounts. 7 EC1301 41) You would be less willing to purchase government bonds, given other things, if A) you expect interest rates to rise. B) gold becomes less liquid. C) you expect bond prices to rise. D) either (a) or (b) of the above occurs 42) When the economy is at fiill employment A) the entire working age population is employed. B) the entire labour force is employed. C) frictional and structural unemployment exists. ‘ D) cyclical unemployment exists. 43) Inflation resulting from an increase in aggregate demand is referred to as A) supply inflation. B) demand inflation. C) anticipated inflation. D) unanticipated inflation. 44) If the inflation rate is less than expected, A) money wages will be set too high. B) profits will be lower than expected. C) workers gain in the form of the more purchasing power for their money wages than expected. D) All of the above answers are correct. 45) An appreciation of Singapore dollar tends to make A) overseas produced goods more expensive in Singapore and goods produced in Singapore cheaper overseas. B) overseas produced goods dearer in Singapore but it has no effect on goOds produced in Singapore. C) overseas produced goods cheaper in Singapore and goods produced in Singapore more expensive overseas. D) None of the above. 46) When the net exports is positive, A) there is a trade deficit. B) there is a trade surplus. C) there is no trade deficit or surplus D) imports exceed exports. 47) The natural rate of unemployment is the rate of unemployment when the economy is A) in a recession. B) in a boom. C) in either a recession or a boom D) in nether a recession or a boom. 48) A decrease in inflation causes a A) rightward shift of the aggregate demand curve. B) leftward shifi of the aggregate demand curve. C) movement up along the aggregate demand curve. D) movement down along the aggregate demand curve. 49) Unemployment that occurs during and immediately following a recession is called A) natural unemployment. B) cyclical unemployment. C) frictional unemployment. D) structural unemployment. 50) Which of the following shifts the aggregate demand curve leftward? A) An increase in transfer payments. B) An increase in taxes. C) An increase in government purchases. D) An increase in inflation. 8 EC1301 51) The functions of money are A) pricing, contracts, and means of payment. B) medium of exchange and the ability to buy goods and services. C) medium of exchange, unit of account, and means of payment. D) medium of exchange, unit of account, and store of value. 52) When you buy a hamburger for lunch, you are using money as a A) unit of accounting. B) standard of deferred payment. C) medium of exchange. D) store of value. 53) Suppose that the required reserve ratio is 0.1 and the ratio of currency to deposits between 0.2 and 0.6. If the Central Bank sells $2 million in securities, then the quantity of money will A) decrease by more than 20 million. B) decrease by less than 20 million. C) increase by more than 20 million. D) increase by less than 20 million. 54) Checks are m money because they A) are issued by banks, not by the government. B) have value in exchange but little intrinsic value. C) are not backed by either gold or silver. D) are merely instructions to transfer money. 55) Credit cards are M money because they A) are not issued by the government. B) do not serve as a unit of account. C) are ID cards that make borrowing easier. D) have a value in exchange but little intrinsic value. 56) The monetary base in the US does M include A) bank deposits at the Fed. B) cash in vaults at commercial banks. C) checking accounts at commercial banks. D) Federal Reserve notes. 57) A(n) in the required reserve ratio will the money multiplier. A) increase; have no effect on B) decrease; will have no effect on C) decrease; decrease D) increase; decrease 9 EC1301 Price level {GDP deflator, 2000 - 100] " 0 Real GDP {trillions of 2000 dollars! ' :msrmwrt. wiéitflfiwix?» m v.wmwrtxrarrrmmrssmmmigtmtmag; taxman -, r. :r'rr 58) The figure above shows the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves for the country of Slag. The economy is currently at point c. The quantity of money in Slag decreases. Slag moves to point in the short run and to point in the long run. A) b a B) d; a C) d; c D) a; c 59) If the Central Bank fears inflation it will undertake an open market of securities, the quantity of money will and interest rates will A) sale; decrease; rise B) purchase; increase; fall C) sale; increase; fall D) purchase; decrease; rise 60) Which of the following is correct? The demand for money A) depends on the quantity of money. B) increases as real GDP increases. C) increases when the interest rate increases. D) decreases as the price level increases. MS 6 0 Interest rate [percent per year! (D h. M00 MD. MW 0 3.0 3.1 3.2 3.3 3.4 3.5 Real money [trillions of 2000 dollars] 10 EC1301 61) The figure above illustrates the effect of A) an open market purchase by the Central Bank of government securities. B) an open market sale by the Central Bank of government securities. C) an increase in real GDP. D) a decrease in real GDP. 62) If the Central Bank chose to slow monetary growth, one would see a A) fall in the interest rate and an increase in the real quantity of money. B) rise in the interest rate and a decrease in the real quantity of money. C) rise in the interest rate and an increase in the real quantity of money. D) fall in the interest rate and a decrease in the real quantity of money. 63) In the short run, a decrease in the quantity of money A) shifts the long-run aggregate supply curve rightward. B) shifts the aggregate demand curve leftward. C) shifts the aggregate demand curve rightward. D) shifts the long-run aggregate supply curve leftward. 64) According to the AS/AD model, in the short run a decrease in the quantity of money will A) increase the equilibrium price level and decrease equilibrium output. B) decrease the equilibrium price level but leave equilibrium output unchanged. C) decrease the equilibrium price level and decrease equilibrium output. D) decrease equilibrium output but leave the equilibrium price level unchanged. 65) In the short run, in the quantity of money the price level, and real GDP. A) an increase; increases; increases B) a decrease; decreases; does not change C) an increase; increases; does not change D) an increase; increases; decreases 66) If the quantity of money increases when the economy is at full employment, aggregate demand In the long run, the price level and real GDP will A) decreases; real GDP decreases; increase to potential GDP B) increases; the price level rises; return to potential GDP C) increases; real GDP increases; increase further D) decreases; the price level falls; return to potential GDP 67) Suppose that the price level was 100 in 2002, 110 in 2003, and 130 in 2004. Over these three years, A) deflation occurred at an accelerating rate. B) the inflation rate was positive and accelerating. C) prices were stable. D) the inflation rate was positive but slowing. 11 EC1301 Price level (GDP daflotor, 2000 - 100) 06810121416 Reel GDP [trillions OF 2000 dollars) samwmmmxxmw‘mwm.56:11,:mesa-(u:manamwezmemn V 68) In the above figure, the economy initia...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern