Mock exam 2020

According to Adam Smith, what is are the three consequences of division of labor? 1) Dexterity, efficiency, development of machines. 2) Efficiency, produce a surplus, trade. 3) Dexterity, development of machines, consumer surplus. 4) Trade, efficiency, dexterity.

1) Dexterity, efficiency, development of machines.

What does Harberger assume about the supply curve? 1) That AC=MC, rendering the manufacturing industry a constant cost industry. 2) That the own price elasticity of supply is unity. 3) That it is concave. 4) All of the above.

1) That AC=MC, rendering the manufacturing industry a constant cost industry.

What is an absolute advantage? 1) The ability to produce the same good using fewer resources than another producer. 2) The ability to produce the same good at a lower opportunity cost than another producer. 3) The ability to produce a good with no opportunity cost. 4) The ability to produce more than another producer.

1) The ability to produce the same good using fewer resources than another producer.

________ can be an adopted strategy that a firm uses to increase __________. 1) Tying products; switching costs. 2) Product differentiation; the competition. 3) Market prediction; opportunity costs. 4) Self cannibalization; the competition.

1) Trying products can be an adopted strategy that a firm uses to increase switching costs.

An increase in spending growth will create what shift in the AD curve? 1) AD will shift inward. 2) AD will shift outward. 3) AD will shift outward by the corresponding change in spending growth. 4) AD will remain unchanged.

2) AD will shift outward.

Who advocated the claim that: "The essence of strategy formulation is coping with competition"? 1) Friedrich von Hayek. 2) Michael Porter. 3) Ronald Coase. 4) Joseph Schumpeter.

2) Michael Porter.

Speculators may increase total welfare because: 1) They create shortages in markets, which increases prices. 2) They stock in the expectation of shortages that they thereby reduce. 3) They reduce the consumption of scarce goods. 4) They buy up items in advance of falling prices and then sell them short.

2) They stock in the expectation of shortages that they thereby reduce.

The Solow growth rate is the rate of economic growth that occurs: 1) At given static prices. 2) With the existing real factors of production. 3) In the long-run average. 4) Without technological progress

2) With the existing real factors of production.

A country can either produce 2500 T-shirts or 50 computers, or any linear combination. What is the opportunity cost of producing a computer? 1) 250 T-shirts. 2) 50 computers. 3) 50 T-shirts. 4) 250 computers.

3) 50 T-shirts.

Keynes pointed out that prices do not always adjust immediately to changing market conditions. Which of the following is not a reason for prices to be sticky in the short run? 1) Nominal wage confusion. 2) Menu costs. 3) Business cycles. 4) Money illusion.

3) Business cycles.

Which statement(s) is/are correct? Statement A: An IPO does not increase net investments. Statement B: When someone buys Starbucks stocks from you, it increases net investments. 1) Statement A is correct, B is not. 2) Statement B is correct, A is not. 3) Statement A and B are both incorrect. 4) Statement A and B are both correct.

3) Statement A and B are both incorrect.

If marginal costs are non-decreasing in volume, what in essence is the reason that total production costs between two plants are minimized if the marginal cost of production are equal between the two plants? In that case: 1) Marginal costs equal average costs. 2) Average costs between the two plants are equal. 3) Switching an extra unit from one plant to the other increases its cost of production. 4) Switching an extra unit from one plant to the other decreases its cost of production.

3) Switching an extra unit from one plant to the other increases its cost of production.

Consider a company that operates with fixed costs of €50K contracted for the year. The variable cost per unit produced are €7. Suppose that the market price is €10 per unit, at which the company produces 15.000 units until the end of the year. What can we advise about this firm's business strategy? 1) The firm should stay in the market. 2) The firm should shut down immediately. 3) The firm should shut down as soon as possible, once the year if over. 4) None of the above.

3) The firm should shut down as soon as possible, once the year if over.

In the story of the convict ships carrying prisoners to Australia, paying the captains for every prisoner they got on board was an example of: 1) Alignment of self and social interest. 2) Socially good incentives. 3) Insufficient incentives. 4) Self and social interest not being aligned.

4) Self and social interest not being aligned.

The following are four of the ten big ideas, described in chapter 1 of the Cowen & Tabarrok textbook. Which of the following is not applicable to the theory of Adam Smith that we read as well? 1) Incentives. 2) The power of trade. 3) Institutions matter. 4) Thinking on the margin.

4) Thinking on the margin.