1. Academic Year: 2012/2013
Instructors: Brenda Lynch and PJ Hunt
Contact: brendalynch@ucc.ie
p.hunt@ucc.ie

2. Q1. If demand is elastic, a price cut:
1.Lowers total revenue, but increases quantity sold.
2. Lowers total revenue and lowers the quantity sold.
3. Raises total revenue, but lowers the quantity sold.
4. Raises total revenue, and raises the quantity sold.
Q2. An automobile would be an example of:
1. A consumer non-durable good.
2. A durable good.
3. An inferior good.
4. A producer good.

3. Q3. If income elasticity was positive, this
indicates that the products are:
1. Compliments.
2. Substitutes.
3. Normal goods.
4. Inferior goods.
Q4. If income elasticity for compact disks is
3, and if income rises by 5%, what do you
forecast for sales of compact disks.
1. A rise of 5%.
2.A rise of 10%
3.A rise of 15%
4.A rise of 20%
5.None of these.

4. Q5. A price increase:
1. Raises total revenue if demand is inelastic.
2. Lowers total revenue if demand is elastic.
3. Neither raises or lowers total revenues if
demand is unit elastic.
4.All of the above.

5. Q6. In the short run
1. Output is fixed
2. At least one input is fixed
3. All of the inputs are permitted to vary
4. here is no fixed cost
Q7. If marginal costs are greater than
average total costs, then
1. Average total cost curve is falling
2. Average total cost curve is flat
3. Average total cost curve is rising
4. Average total cost curve is at a minimum

6. Q8. Suppose that FC is €100 and the AVC is €8 at
an output of 7 units. What is the TC at an
output of 7?
1. €56
2. €57
3. €156
4. €22.28

7. Q9. You are given the following cost function: TC
= 1500 + 300Q + 25Q2 . From this cost we know:
1. Fixed cost is 300
2. ATC is 1500/Q
3. TC declines as Q rises
4. MC is 300 + 50Q

8. Q10. In the short run, if the price is less than
ATC but higher than AVC:
1. The firm earns an economic profit
2. The firm earns a loss if it continues to operate,
but a smaller loss than if it shut down
3. The firm should shut down in the short run
4. The firm should expand production

9. Q11. A price increase tends to reduce purchases
of a good. According to the model of consumer
choice, the primary reason for this reduction is:
1. the substitution effect
2. inferior goods
3. luxury goods
4. the income effect

10. Q12. If the absolute value of PED for a good
equals 0.9, then the demand for that good is:
1. Relatively price inelastic;
2. Infinitely price elastic;
3.Relatively price elastic;
4.The above information is insufficient to make a
judgement.

11. Q13. If Government imposes a per-unit sales tax
on cars the retail price of cars will increase more
if the demand for cars is;
1. Price elastic.
2. Price inelastic.
3. Unit elastic.
4. Impossible to tell without further
information.

12. Q14. Which is NOT a characteristic of an
industry that displays perfect competition?
1. free entry
2. heterogeneous product
3. many sellers
4. free exit.