Objectives of past papers of Economics-I

[huma gillani]

ECONOMICS-I
PAPER 2000
COMPULSORY QUESTION
3. Write only the correct answers in the Answer Book. Don’t reproduce the questions.

(1) A firm’s monopolistic position is strengthened by:
(a) Low elasticity of demand for its product.
(b) High elasticity of demand for its product.
(c) Constant elasticity of demand.
(d None of the above.

(2) The overall Budget Deficit is financed from:
(a) External borrowing
(b) Non-Bank borrowing domestically
(c) Bank borrowing plus the above two at (a) and (b)
(d) None of the above.

(3) Devaluation leads to:
(a) Increase in imports (b) ‘ Increase in exports
(c) Decline in imports (d) Nona of the above.

(4) guild-up ‘of Foreign exchange reserves leads to:
(a) Decrease in money supply
(b) Increase in money supply
(c) Contraction in money supply
(d) None of the above.

(5) . monopolist would maximize profit at that level’ of production where:
(a) His/her average cost of production equals his/her marginal revenue
(b) marginal cost of production equal marginal ‘revenue
(c) Average cost equal average revenue
(d) None of the above.

(6) Cost push inflation results from: -
(a) Enhancement in wage bill
(b) Increase in the cost of inputs going into product ion
(c) Increase in the international prices of imports
(d) None of the above.

(7) Balance of trade deficit refers to:
(a) Difference between receipts from exports of goods and services and the, payments for imports of goods and services.
(b) Difference between commodity export earnings versus payment for commodity imports.

(8) Health of a country’s economy is indicated by:
(a) Number of doctors per 1.000 population
(b) Per capita income
(c) Literacy rate (d) None of the above.

(9) According to classical theory of employment Laissez Faire System of enterprise:
(a) Ensures continuous Full - Employment
(b) Leads to general over production
(c) Leads to investment higher than savings,
(d) None of the above.

(10) Saving means:
(a) Part of income for investment
(b) Income for boarding
(c) Non-consumption of income in the current period
(d) None of the above.

(11) Thee eziee of GDP in nominal terms refer to:
(a) Natioal, output iz~ ~a]. te~m~
(b) National output in prices prevaiLing in market
(c) Output at constant prices
(d) None of the above.

(12) Rs. 100 note has value because:
(a) It has intrinsic value
(b) State Bank guarantees it
(c) Its holder can exchange it for goods and services
(d) None of the above.

(13) In 25 years (1960-85) Pakistan’s Per Capita income:
(a) More than doubled (b) Less than doubled
(c) Did not show more than 70% increase (d) None of the above.

(14) All economic models’are based on:
(a) Realistic assumptions
(b) Assumptions which can never be perfectly realistic
(c) Unrealistic assumptions
(d) None of the above.

(15) Terms of Trade improvment if:
(a) Unit value of i#t~Orts goes d6wn
(b) Unit value of 6*~rts go up
(c) Relative value b~ exports ~O higher thäi’~ that of imports
(d) None of the abO~V6.

(16) An important policy instrument tO influence commercial banks is:
(a) Open market operations
(b) Changing reserve ratios of co~tnercial ba~riks
(c) Moral persuasion
(d) None of the above.

(17) Expansion in money supply stems f torn:
(a) Increasing the cost of bank credit
(b) Reducing availability of bank credit
(c) Reducing the financial cost of bank credit
(d) None of the above.

(18) During the 1980’s empirical evidence indicates that:
(a) Poverty re-emerged in Pakistan
(b) Good growth brought down poverty in Pakistan
(c) Poverty situation showed no change
(d) None of the above.

(19) Expansion in international trade is preferable over:
(a) Foreign aid (b) Project assistance
(c) Commodity assistance by foreign donors (d) None of the above.

(20) Supply factors in economic growth, are:
(a) Manpower (b) Stock of capital
(c) Technology and skills (d) None of the above

[huma gillani]

PAPER 2001
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) Budgetary Deficit refers to:
(a) Total Revenue Receipts minus Total Expenditures
(b) Fiscal Deficit minus Interest Payments
(c) Total Receipts (Revenue Account + Capital Account) Minus Total Expenditure (Revenue + Capital)
(d) None of the above

(2) Increase in the number of buyers in the market would lead to a shift of the demand curve to:
(a) The right
(b) The left
(c) Upwards along the curve
(d) None of the above

(3) Balance of Trade Deficit refers to:
(a) Excess of payments for import of goods and services over receipts from exports of goods and services.
(b) Excess of receipts from commodity exports minus payments of imports of goods
(c) Payments for commodity imports minus receipts from commodity exports
(d) None of the above

(4) A monopolist gains more if:
(a) Elasticity of demand for his product is low comparatively
(b) Elasticity of demand for his product is high comparatively
(c) Demand elasticity does not change
(d) None of the above

(5) Devaluation of Pak. Rupee in the 1990’s led to:
(a) Increase in exports
(b) Increase in imports
(c) Increase in both exports and imports
(d) None of the above

(6) Most sophisticated models of economics growth are based on:
(a) Realistic assumption
(b) Unrealistic assumptions
(c) On assumptions, at least some of which are extremely difficult to be proved as valid.
(d) None of the above

(7) Real GDP refers to:
(a) GDP, at constant prices
(b) GDP, at current prices over time
(c) GDP, at nominal prices over time
(d) None of the above

(8) Terms of trade refer to:
(a) Unit price of commodity import
(b) Value of exports vs. Value of imports.
(c) Exchange rate applicable to foreign trade of a country
(d) None of the above

(9) Cost-push inflation is the result of:
(a) Increase in the production cost
(b) Increase in the price of industrial production
(c) Escalation of international prices
(d) None of the above

(10) Competitive market comprises:
(a) Large number of buyers
(b) Large number of firms
(c) Large number of both buyers and producers
(d) None of the above

(11) A monopolist maximizes his profit at a point where:
(a) His average cost curve meets the marginal revenue curve.
(b) His marginal cost = marginal revenue
(c) His average cost = market price of market
(d) None of the above

(12) Under perfect competition, a firm would maximize profit at a point where:
(a) Average revenue = average cost
(b) Marginal cost = average revenue
(c) Marginal cost = marginal revenue
(d) None of the above

(13) Foreign trade differs from domestic trade:
(a) Because of terms of trade
(b) Due to differences in production costs
(c) Because of territorial differences
(d) None of the above

(14) World Trade Organization is:
(a) The same thing as UNCTAD
(b) The same as WHO
(c) A replacement of UNCTAD
(d) None of the above

(15) Major sources of revenue in Pakistan’s Budget:
(a) Have not changed in the 1990’s
(b) Have drastically changed in the nineties
(c) Have changed slightly in the nineties
(d) None of the above

(16) Main heads of expenditure in Pakistan's Budget (in ascending order) are:
(a) Foreign debt, Development, Defence.
(b) Defence, foreign debt, development
(c) Development, defence and foreign debt
(d) None of the above

(17) Increase in foreign exchange reserves causes:
(a) Inflation
(b) Deflation
(c) No increase in price level
(d) None of the above

(18) Pakistan’s Budget deficit is financed by:
(a) Revenue Budget surplus
(b) Borrowing (both bank and non-bank)
(c) Foreign resource inflow
(d) None of the above

(19) Most important economic indicator of the health of an economy is:
(a) Income per capita
(b) National output
(c) Literacy rate
(d) None of the above

(20) Most important catalyst in economic growth is:
(a) Savings and investments
(b) Technology and skills
(c) Both at (a) and (b)
(d) None of the above

[huma gillani]

PAPER 2002
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) Two commodities are considered to be perfect substitutes for each other if the elasticity of substitution is:
(a) Positive
(b) Negative
(c) Infinite
(d) None of these

(2) A straight – line downward sloping demand curve implies that, as price falls, the elasticity of demand:
(a) Increases
(b) Decreases
(c) Remains the same
(d) None of these

(3) Which of the following is often considered to be inconsistent with the notion of perfect competition?
(a) Large number of firms
(b) Free entry
(c) Complete mobility
(d) None of these

(4) Currently total investment as percentage of GDP in Pakistan is:
(a) 12.9
(b) 14.9
(c) 16.9
(d) None of these

(5) A purely monetary explanation of the business cycle is proposed by:
(a) Hawtrey
(b) Schumpeter
(c) Hansen
(d) None of these

(6) The exogenous variable in the income equation C + I + G = Y is:
(a) C
(b) I
(c) G
(d) None of these

(7) The Lorenz curve describes:
(a) Income distribution
(b) The interest rate
(c) The marginal efficiency of capital
(d) None of these

(8) A stable equilibrium requires that the marginal propensity to consume is:
(a) Less than zero
(b) Zero
(c) One
(d) None of these

(9) International trade during the 19th century was characterized by:
(a) Extensive barriers to trade
(b) Operation of the gold standard
(c) A small volume of international trade
(d) None of these

(10) The type of business in which an individual has unlimited responsibility for the debts of the organization is:
(a) Partnership
(b) Corporation
(c) Monopoly
(d) None of these

(11) Which one of the following types of taxes is the most regressive?
(a) Income taxes
(b) Sales taxes
(c) Excise taxes
(d) None of these

(12) An Engel curve is based on which one of the following assumptions?
(a) Constant prices, varying incomes
(b) Constant prices, Constant incomes
(c) Constant incomes, varying prices
(d) None of these

(13) The largest trading partner of Pakistan is:
(a) Italy
(b) Hong Kong
(c) Germany
(d) None of these

(14) Of the following which one is a characteristic of monopolistic competition?
(a) Standardized product
(b) Comparatively easy entry
(c) Little non-price competition
(d) None of these

(15) In the long run:
(a) Fixed costs will be greater than variable costs
(b) Variable costs will be greater than fixed costs
(c) All costs are variable costs
(d) None of these

(16) Currently the total export value of Pakistan is:
(a) $ 10 billions
(b) $ 9 billions
(c) $ 8 billions
(d) None of these

(17) A competitive firm will maximize profits at the output where:
(a) The difference between price and marginal cost is highest
(b) Price is higher than the average total cost by the largest amount
(c) Total revenues and total costs are exactly equal
(d) None of these

(18) Structural unemployment can be eliminated by:
(a) Training the technologically unemployed
(b) Increased federal expenditures
(c) An increase in the general credit level
(d) None of these

(19) Public utilities tend to be:
(a) Inefficient
(b) Natural monopolies
(c) Subject to increasing costs
(d) None of these

(20) Which one of the following is incorrectly matched?
(a) Joan Robinson --- Imperfect Competition
(b) Edward Chamberlain --- Monopolistic Competition
(c) Vilfredo Pareto --- Welfare Economics
(d) None of these

[huma gillani]

PAPER 2003
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) Total revenue receipts are maximum at that point on a demand curve where price elasticity is:
(a) Increasing
(b) Decreasing
(c) Unitary
(d) None of these

(2) Which of the following products will have an elastic demand?
(a) Flour
(b) Cloth
(c) Honda city
(d) None of these

(3) Price controls are:
(a) Necessary for consumer’s welfare
(b) A must to check inflation
(c) Doomed to fail
(d) None of these

(4) Increase in minimum wage:
(a) Helps in controlling unemployment
(b) Increases unemployment
(c) Reduces wage bill
(d) None of these

(5) An indifference curve gives:
(a) The actual combination of goods that consumer chooses
(b) The minimum choice of the consumer
(c) The highest level of satisfaction
(d) None of these

(6) MRSxy being 6 means:
(a) Consumer is willing to give up 6 units of x for one of y
(b) Preference for y is 6 times that of x
(c) Both of the above
(d) None of these

(7) Consider cardinal measure of utility, increase in consumption will:
(a) Increase marginal utility
(b) Will not average utility
(c) Both (a) and (b)
(d) None of these

(8) In pure competition
(a) Strong rivalries exist
(b) Cartels are formed
(c) Both (a) and (b)
(d) None of these

(9) National incomes include:
(a) Undistributed corporate profits
(b) Fringe benefits
(c) Both (a) and (b)
(d) None of these

(10) Personal income is obtained by adding which item(s) to national income:
(a) Govt. transfer payments
(b) Business transfer payments
(c) Both (a) and (b)
(d) None of these

(11) Which of the following is a stock variable?
(a) Gross private domestic investment
(b) Personal savings
(c) Both (a) and (b)
(d) None of these

(12) Find out the true statement(s):
(a) When aggregate supply exceeds aggregate demand, output rises.
(b) If intended investment exceeds savings, output falls
(c) Both (a) and (b)
(d) None of these

(13) When un-intended investment is positive:
(a) Output tends to rise
(b) Output tends to fail
(c) Output is in equilibrium
(d) None of these

(14) With no government and foreign trade sectors, savings always equals:
(a) Intended investment
(b) Realized investment
(c) Both (a) and (b)
(d) None of these

(15) If MPC = 2/3, the investment multiplier is:
(a) 2/3
(b) 1/3
(c) 3/2
(d) None of these

(16) Find out the true statement(s):
(a) When consumption function is linear, the mpc=apc
(b) The short run consumption function has a steeper slope that that of the LR
(c) Both (a) and (b)
(d) None of these

(17) If Union Bank has demand deposits of Rs. 25 million, no time deposits and required reserves of Rs. 7.5 million, the legal reserve requirement ration must be:
(a) 3.3 %
(b) 33.3 %
(c) 40 %
(d) None of these

(18) Which of the following is likely to be longer for monetary policy that for fiscal policy?
(a) The implementation lag
(b) The recognition lag
(c) Both (a) and (b)
(d) None of these

(19) The number of income tax payers in Pakistan is:
(a) 2 million
(b) 0.7 million
(c) 1 million
(d) None of these

(20) The impact and incidence of sales tax is:
(a) On the consumer
(b) On the seller
(c) On the producer
(d) None of these

[huma gillani]

PAPER 2004
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) In supply of and demand for a product, an increase in production costs will shift:
(a) Demand curve to the left
(b) Supply curve to the right
(c) Demand curve to the right
(d) Supply curve to the left
(e) None of these

(2) When a demand schedule is drawn up, which of the following is not held constant?
(a) Price of Substitutes
(b) Price of factors of production
(c) Price of Complementary goods
(d) The price of the goods
(e) None of these

(3) The more a person consumes of a thing:
(a) The smaller is his total gain
(b) The slower is the rate of increase in his total pleasure
(c) The higher is the price
(d) Consumes the maximum
(e) None of these

(4) When AC is less than MC:
(a) An increase in output would cause AC to rise
(b) Fixed costs must be rising
(c) AC to fall
(d) Should not produce beyond minimum AC
(e) None of these

(5) A firm’s total fixed costs are Rs. 2400. If at a certain output its price per unit is Rs. 20/- and average variable cost per unit is Rs. 14/-, the level of output is:
(a) 1000 units
(b) 800 units
(c) 600 units
(d) 400 units
(e) None of these

(6) Which of the following is not a condition of perfect competition?
(a) Inelastic Demand curve
(b) Single price
(c) Uniform product
(d) Many buyers
(e) None of these

(7) Profit maximizing monopolist will produce at the level of output, where:
(a) Price is greater than MC
(b) AR = MR
(c) AR = MC
(d) Total cost are minimized
(e) None of these

(8) A steel firm takes over a Coalmine Company. It is an example of:
(a) Holding Company
(b) Internal economies of scale
(c) Horizontal integrator
(d) Vertical integrator
(e) None of these

(9) Which of the following is not part of aggregate demand?
(a) Investment
(b) Govt. Spending
(c) Net exports
(d) Taxes
(e) None of these

(10) If GNP rises while 3 of the following four remain fixed, which of the four could not have risen?
(a) Consumption
(b) Taxes
(c) Saving
(d) Transfers
(e) None of these

(11) An increase in the income tax rate causes the full employment budget surplus to:
(a) Increase
(b) Depends on tax
(c) Decrease
(d) Depends on propensity
(e) None of these

(12) The most important factor responsible for growth in GNP has been:
(a) Technological change
(b) Govt. Spending
(c) Capital formation
(d) Population growth
(e) None of these

(13) A businessman expects an internal rate of return of 12% and decides that the investment is attractive. The decision is based on:
(a) Accelerator principle
(b) Marginal efficiency theory
(c) Marginal propensity to invest
(d) Multiplier principle
(e) None of these

(14) Over time increase in interest rate is expected to:
(a) Reduce inflation
(b) Increase inflation
(c) Reduction in GDP
(d) Decrease in liquidity
(e) None of these

(15) Exchange rates are:
(a) Only a demand factor
(b) A demand & supply factor
(c) Only supply factor
(d) Neither demand nor supply factor
(e) None of these

(16) An increase in disposable income
(a) Increases economic good
(b) Reduces economic good
(c) Reduces spending
(d) Has no effect on economy
(e) None of these

(17) Demand pull inflation is:
(a) When aggregate demand is rising
(b) When aggregate demand is low
(c) When costs are rising
(d) When costs are low
(e) None of these

(18) The foreign debt can be reduced by:
(a) Increase in domestic saving
(b) Increase in aggregate demand
(c) Increase in exchange rate
(d) Decrease in wealth
(e) None of these

(19) Net foreign debt is:
(a) The difference between exports and imports
(b) Debt less equity
(c) Difference between gross borrowing from non residents and lending overseas.
(d) Only savings
(e) None of these

(20) The focus of Monetary policy is a:
(a) Price stability
(b) External Balance
(c) Stimulating growth
(d) Current account deficit
(e) None of these

[huma gillani]

PAPER 2005
COMPULSORY QUESTION
8. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) Which cause the demand curve for a good to move to the right?
(a) A decrease in the cost of production.
(b) A fall in the price of the good.
(c) An increase in the price of a complimentary good.
(d) An increase in the price of a close substitute good.

(2) If an economy experiences an increase in productivity, it means that:
(a) The level of output has risen
(b) Employees are working harder than before
(c) Output per unit of input has risen
(d) Technical change has taken place

(3) The central economic problem in an economy refers to:
(a) The prevalence of unemployment
(b) To allocate scarce resources between competing uses.
(c) Consumers having less money than they would like.
(d) Ensures that production costs are covered by sales revenue

(4) If the price elasticity for a product is -2, a 10% fall in its price will:
(a) Decrease total revenue by 20 %
(b) Increase sales volume by 10%
(c) Increase sales volume by 20%
(d) Increase total revenue by 20 %

(5) Average cost curve rises after a certain level of output because of:
(a) Diseconomies of scale of production
(b) Law of decreasing returns
(c) Diminishing marginal utility
(d) Rise in price of factor of production

(6) Which one of the following will tend to increase the degree of Competition in an industry:
(a) Product differentiation
(b) Horizontal integration
(c) Economies of scale
(d) Low fixed costs

(7) A rise in the interest rate can lead to all except which one:
(a) Fall in the share prices
(b) A rise in investment
(c) A rise in exchange rate
(d) A shift of income from borrowers to savers

(8) If demand is inelastic, which of the following statement is correct?
(a) If price of the good rises, the total revenue earned will increase.
(b) If price of the good rises, the total revenue earned will fall.
(c) If price of the good falls, the total revenue earned will increase.
(d) If price of the good falls, the total revenue earned is unaffected.

(9) Which would shift the production possibility frontier to the right?
(a) A fall in unemployment
(b) An increase in exports
(c) A rise in total consumer expenditure
(d) Technical progress reducing production costs

(10) A fiscal expansion is most likely to reduce unemployment when:
(a) There is high marginal propensity to consume.
(b) There is high marginal propensity to save.
(c) Structural unemployment.
(d) There is a fixed exchange rate.

(11) Economic welfare refers to:
(a) An increase in state welfare payment
(b) A rising standard of living.
(c) Increased employment opportunities.
(d) Increase in health and education services

(12) In calculating National income, double counting can be avoided by:
(a) Deducing taxes and adding subsidies.
(b) Deducing imports and adding exports
(c) Excluding the value of the output of intermediate goods.
(d) Excluding the value of transactions in second hand goods.

(13) Government wish to control inflation because it:
(a) Tends to reduce government tax revenue
(b) Causes money supply to expand
(c) Damages international competitiveness
(d) Shift income towards holders of financial assets.

(14) If the exchange rate of currency fell, the result would be that export prices:
(a) Measured in the domestic currency would fall
(b) Measured in the domestic currency would rise
(c) Measured in foreign currency would fall
(d) Measured in foreign currency would ris

(15) Which one of the following is most likely to lead to a fall in the money supply.
(a) A fall in the interest rates.
(b) Purchase of government securities by the State Bank.
(c) Sale of government securities by the State Bank.
(d) A rise in the amount of cash held by commercial banks.

(16) The real rate of interest is:
(a) The rate at which the central bank leads to financial institution.
(b) Bank base rate.
(c) The difference between the rate of interest and the rate of inflation.
(d) The annual percentage rate of interest.

(17) Public sector borrowing requirement is best defined as:
(a) The borrowing by the general public over the period of a year.
(b) To finance the difference between a country’s exports and imports
(c) The amount of taxation and borrowing needed to finance public expenditure.
(d) The difference between government expenditure and its revenue from taxation:

(18) Multi-national company is best described as one which:
(a) Engages extensively in international trade.
(b) Sells its output in more than one country
(c) Producers goods or services in more than one country.
(d) Is owned by share holders in more than one country.

(19) Which of the following is not an economic advantage of international trade?
(a) It encourages specialization.
(b) Consumer choice is widened.
(c) Industry secure economics of large scale production
(d) Trade surpluses can be used to finance the budget deficit.

(20) Which of the following cause most likely a country’s balance of payments to move towards a deficit?
(a) Devalue the country’s currency.
(b) The expansionary fiscal policy.
(c) A contractionary fiscal policy.
(d) A rise in the rate of domestic saving.

[huma gillani]

PAPER 2007
COMPULSORY QUESTION
Q. 8 write only the correct answer in the Answer book. Do not reproduce the question.

1) In perfect competition if a firm maximizes profit, then equilibrium:
a) MR=MC.
b) AR = AC
c) MR = AR = PRICE = MC
d) ALL of these

2) The production function will be affected by changes in the prices of:
a) Inputs
b) out puts
c) Neither
d)all of the above

3) If a firm can fund an investment from its own sources, the opportunity cost of its investment is
a) less than Zero
b) Zero
c) more than zero
d) neither

4) The funds used for further Investment in joint stock company refers to:
a) Distributed
b) Undistributed
c) Remaining
d) All of the above

5) The % change in quantity demanded due to % change in income is:
a) Price elasticity
b) Prices cross elasticity
c) Income elasticity
d) All of these

6) Indifference curves shows various combinations of:
a) One commodity
b) Two
c) Three
d) All of these.

7) equilibrum price is a price at which
a) Quantity demanded is equal to quantity supplied
b) Quantity demanded minus quantity supplied is zero
c) Quantity demanded = quantity supplied
d) All of these.

8) in oligopoly market seller are :
a) Few
b) Four
c) Some
d) A large number

9) monopoly market is characterized by:
a) A large number of sellers
b) Only one seller
c) Thousands of seller
d) All of these

10) A demand curve shows the relationship between the quantity demanded for a commodity over a given time and:
a) The tastes of consumer.
b) The money income of consumer
c) The price of related commodities
d) The price of the commodity

11) a supply schedule shows the relationship between the quantity supplied of a commodity over a given time and:
a) Factor prices
b) Technology
c) Both (a) and (b)
d) The price of the commodity

12) The intersection of market demand and supply curves for a given commodity determines
a) The equilibrium price of the commodity
b) The equilibrium quantity of the commodity
c) The point of neither surplus nor shortage for the commodity
d) All of these

13) If the % change in quantity demanded is more than % change in price coefficient of price elasticity is:
a) > 1
b) < 1
c) =1
d) =Zero

14) Disposable income is:
a) Income less taxes
b) Income less Direct taxes
c) Income less indirect taxes
d) All of these

15) If the coefficient of Price elasticity is less than one:
a) It is normal good
b) It is inferior good
c) It is luxury good
d) All of these

16) If the coefficient of income elasticity is negative:
a) It is inferior good
b) It is normal good
c) It is luxury good
d) All of these

17) If in a market the seller is charging different prices for the same commodity from different consumers, it is known as:
a) Price discrimination
b) Efficient selling
c) Profit maxi-mizer in Monopoly
d) All of these

18) The locus of equilibrium of consumers due to changes in price of a commodity is known as:
a) Price consumption curve
b) Income consumption curve
c) Production possibility curve
d) none of these

19) a pure number by which change in investment is multiplied to change in income is called:
a) Multiplier
b) Accelerator
c) Stabilizer
d) All of these

20) There is positive relationship between multiplier and:
a) Marginal propensity to consume
b) Marginal propensity to save
c) Marginal efficiency of capital
d) All of these.

[huma gillani]

PAPER 2008
Part I (MCQs)
Question No.1 Select the best option /answer and fill in the appropriate box on the answer sheet.

1. in the theory of the firm, profit maximization is always synonymous with:
(a) profitability
(b) economic profit making
(c) maximization of the sales revenue
(d) both (a) and (c)
(e) none of these

2. the law of demand is valid when price elasticity of demand is:
(a) inelastic
(b) perfectly elastic
(c) unitary elastic
(d) both (a) and (c)
(e) none of these

3. at the breakeven point a producer covering entire opportunity cost of production happens to produce under a market structure characterized as:
(a) perfectly competitive
(b) monopoly
(c) oligopoly
(d) monopolistic competition
(e) all of these

4. in the short run, the decreasing returns to scale are caused by the existence of:
(a) internal diseconomies
(b) external economies
(c) technical inefficiency
(d) allocative inefficiency
(e) both (b) and (d)

5. the left hand side variable of the saving function is always:
(a) endogenous
(b) exogenous
(c) insignificant
(d) significant
(e) both (b) and (d)

6. the macro management model of the classical function economist assigns the supreme role to the:
(a) fiscal policy
(b) monetary policy
(c) commercial policy
(d) market
(e) both (b) and (c)

7. while determining the national income equilibrium of an open economy, exports are considered to be:
(a) exogenous
(b) endogenous
(c) autonomous
(d) both (a) and (c)
(e) both (b) and (c)

8. counterpart of the intercept of consumption function is the intercept of:
(a) import function
(b) exports
(c) saving function
(d) X-M
(e) None of these

9. price stability in an economy is indicative of:
(a) presence of sound money
(b) rising output
(c) rising employment
(d) both (a) and (c)
(e) none of these

10. the Central Bank of a country plays a significant role in her macroeconomics performance by regulating the:
(a) money supply
(b) supply credit
(c) interest rate
(d) money market
(e) all of these

11. the relationship depicted by the Phillips curve is not valid if the change in general price level is :
(a) positively related with output
(b) negatively related with output
(c) positively related with employment
(d) negatively related with employment
(e) all of these

12. with each successive stage of its operation, the marginal cost of a firm in the banking sector:
(a) increase
(b) decrease
(c) remains constant
(d) remains unpredictable
(e) none of these

13. the theory of comparative advantage from international trade considers the difference between the trading countries’ factor prices arising from the different in:
(a) factor productivity
(b) factor intensity
(c) factor availability
(d) both (a) and (c)
(e) all of these

14. Marshell-lerner condition for stability of a foreign exchange market enquires that the sum total of the elasticity of demand for exports and demand for imports is:
(a) cross elasticity of demand
(b) income elasticity of demand
(c) price elasticity of demand
(d) both (b) and (c)
(e) none of these

15. expenditure switching policies for adjusting the balance of disequilibrium include:
(a) commercial policy
(b) fiscal policy
(c) monetary policy
(d) both (b) and (c)
(e) all of these

16. deadweight loss of a trade tariff is higher if the demand and supply functions of importable are:
(a) inelastic
(b) elastic
(c) completely inelastic
(d) both (a) and (c)
(e) none of these

17. An increasingly higher marginal income tax is:
(a) progressive
(b) regressive
(c) proportional
(d) both (b) and (c)
(e) none of these

18.the reallocative role of public economies indicates the existence of:
(a) Production externalities
(b) Inefficiency in resource utilization
(c) Consumption externalities
(d) Both (a) and (c)
(e) None of these

19.a price control interferes with the market by:
(a) causing market imperfection
(b) disallowing the market to work
(c) introducing price floor or ceiling
(d) both (b) and (c)
(e) all of these

20. in the presence of elastic supply and demand conditions, sales tax on a product interferes with the market by causing:
(a) welfare loss
(b) efficiency loss
(c) deadweight loss
(d) both (a) and (b)
(e) all of these

[huma gillani]

PAPER 2009
COMPULSORY
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (20)

(i) Modern microeconomics theory generally regards utility as:
(a) cardinal
(b) ordinal
(c) independent
(d) Republican

(ii) A basic assumption of the theory of consumption choice is that:
(a) the consumer tries to get on the highest indifference curve
(b) the consumer tries to get the most of good Y
(c) the budget line is concave
(d) none of these

(iii) The substitution effect must always be:
(a) positive
(b) negative
(c) zero
(d) bigger than the income effect

(iv) The income effect:
(a) must always be negative
(b) must always be positive
(c) can be negative or positive
(d) must be smaller than substitution effect

(v) Normal goods experience an increase in consumption when:
(a) real income increase
(b) real income falls
(c) price rises
(d) tastes change

(vi) The demand for a good is price inelastic if:
(a) the price elasticity is one
(b) the price elasticity is less than one
(c) the price elasticity is greater than one
(d) all of these

(vii) A demand curve with unitary elasticity at all points is:
(a) a straight line
(b) a parabola
(c) a hyperbola
(d) all of these

(viii) The marginal product equals the average product when the latter is:
(a) ½ of its maximum value
(b) ¼ of its maximum value
(c) equals to its maximum value
(d) equals to its minimum value

(ix) A firm’s aspiration level is:
(a) its profits last year
(b) the boundary between “satisfactory” and “unsatisfactory” outcomes.
(c) its highest previous profit level
(d) none of these

(x) The firm’s cost functions are determined by:
(a) the price of its product
(b) its assets
(c) its production function
(d) the age of the firm

(xi) The following industry often is a natural monopoly:
(a) cigarette industry
(b) publishing industry
(c) drug industry
(d) electric power industry

(xii) Recognizing that the assumptions of perfect competition never hold at all precisely, the perfectly competitive model is:
(a) interesting mainly for academic studies
(b) outmoded and seldom used even by academic economists
(c) of considerable use to industrial economists, as well as academic economists
(d) all of these

(xiii) Under perfect competition, rivalry is:
(a) impersonal
(b) very personal and direct, advertising being important
(c) nonexistent since the firms cooperate
(d) all of these

(xiv) If average total cost is less than marginal cost at its profit-maximizing output, a perfectly competitive firm:
(a) will make positive profit
(b) will operate at a point to the right of the minimum point on the average total cost curve
(c) will not discontinue production
(d) all of these

(xv) Monopolies arise as a consequence of:
(a) patents
(b) control over the supply of a basic input
(c) franchise
(d) all of these

(xvi) A monopolistic firm will expand its output when:
(a) marginal revenue exceeds marginal cost
(b) marginal cost exceeds marginal revenue
(c) marginal cost equals marginal revenue
(d) marginal revenue is negative

(xvii) A monopolist will never produce at a point where:
(a) demand is price-inelastic
(b) demand is price-elastic
(c) marginal cost is positive
(d) marginal cost is increasing

(xviii) When demand is elastic:
(a) a fall in price is more than offset by an increase in quantity demanded, so that total revenue rises.
(b) the good is probably a necessity, so price has little effect on quantity demanded
(c) a rise in price will increase total revenue, even though less is sold.
(d) buyers are not much influenced by prices of competing proceduts

(xix) If the price elasticity of demand for product is 0.5, this means that:
(a) a 1 percent change in price will change quantity demanded by 50%
(b) a 1 percent increase in quantity demanded is associated with a 0.5 percent fall in price
(c) a 1 percent increase in price is associated with 0.5% fall in quantity demanded
(d) a 1 percent increase in price will cause a 0.5% increase in quantity demanded.

(xx) Price elasticity of demand for a commodity tends to be greater:
(a) the more of a necessity it is
(b) the more substitutes there are for it
(c) over shorter time periods
(d) the lower the price.

[huma gillani]

PAPER 2010
(COMPULSORY)
Q.1. Select the best option/answer and fill in the appropriate box on the Answer Sheet. (20)

(i) Demand curve in case of Giffen good is:
(a) Negatively sloped
(b) Vertical
(c) Positively sloped
(d) None of these

(ii) Price consumption curve in case of complementary goods is:
(a) Downward sloping
(b) Vertical
(c) Upward sloping
(d) None of these

(iii) In case of two goods, following utility approach, a consumer is in equilibrium when:
(a) MUx/Px = MUy/Py
(b) MUx/Px < MUy/Py
(c) MUx/Mx > MUy/Py
(d) Both (b) and (c)

(iv) In short run:
(a) Labour is variable
(b) Both labour and capital are variable
(c) Both labour and capital fixed
(d) None of these

(v) When MC is equal to AC, the AC:
(a) Increases
(b) Decreases
(c) Remains constant
(d) None of these

(vi) Normal profit, excess profit and loss of the firm depends on level of:
(a) Average costs in short run
(b) Total costs in short run
(c) Marginal costs in short run
(d) All of these

(vii) In case of perfect competition, the sellers are:
(a) Two
(b) A few
(c) Very large
(d) None of these

(viii) The firm is in equilibrium when:
(a) Slope of TC = Slope of TR
(b) Slope of TC is less than slope of TR
(c) Slope of TC is more than slope of TR
(d) None of these

(ix) The Marginal Revenue Product of labour MRPL is:
(a) MR x MP
(b) MR / MP
(c) MR – MP
(d) Both (b) and (c)

(x) In case of imperfect competition the MRPL is the:
(a) Supply of labour curve
(b) Demand for labour curve
(c) Both of these
(d) None of these

(xi) Per Capita Income is calculated as:
(a) N.I+Population
(b) N.*Population
(c) N.I/Population
(d) Both (a) and (c)

(xii) Gross Domestic Product equals:
(a) GNP – NFI
(b) GNP + NFI
(c) GNP – indirect taxes
(d) Both (a) and (c)

(xiii) The deposit multiplier is always:
(a) Greater than one
(b) Less than one
(c) Equal to one
(d) None of these

(xiv) Money can be a standard of deferred payments only if the value of money itself:
(a) Remains stable
(b) increases
(c) Decreases
(d) None of these

(xv) The fiscal policy with a deliberate policy action is:
(a) Expansionary fiscal policy
(b) Concretionary fiscal policy
(c) Discretionary fiscal policy
(d) All of these

(xvi) Trade based on absolute advantage was presented by:
(a) Alfred Marshall
(b) Adam Smith
(c) Lionel Robbins
(d) None of these

(xvii) According to Keynes, the relationship between money supply and rate of interest is:
(a) Negative
(b) Positive
(c) Indirect
(d) None of these

(xviii) An object that is generally accepted in exchange for goods and services is called:
(a) Standardized money
(b) Medium of exchange
(c) Unit of account
(d) All of these

(xix) The account in balance of payment that consists of all transactions in financial assets is known as:
(a) Capital account
(b) Current account
(c) Official Reserve account
(d) None of these

(xx) The difference between exports and imports of visible items of a country is called:
(a) Budget surplus
(b) Balanced budget
(c) Balance of trade
(d) Both (a) and (c)