ATD ECONOMICS FREE CAT

Question One

Which of the following is not an element of fiscal policy?

Government spending

Correct Incorrect Correct answer

Government borrowing

Correct Incorrect Correct answer

Taxation

Correct Incorrect Correct answer

Exchange rates

Correct Incorrect Correct answer

Question Two

…………………………………. taxes are collected by the Revenue authority from a business, which attempts to pass on the tax to consumers in the price of goods.

Which word correctly completes this statement?

Progressive

Correct Incorrect Correct answer

Direct

Correct Incorrect Correct answer

Indirect

Correct Incorrect Correct answer

Question Three

The currency in country X is the Krone while country Y uses the Euro. Country Y has recently experienced an increase in its exchange rate with Country X. Which of the following effects is likely to result in Country Y?

A stimulus to exports in Country Y

Correct Incorrect Correct answer

An increase in the costs of imports from Country X

Correct Incorrect Correct answer

Reducing demand for imports from Country X

Correct Incorrect Correct answer

A reduction in the rate of cost push inflation

Correct Incorrect Correct answer

Question Four

The following, with one exception, are ‘protectionist measures’ in international trade. Which is the exception?

Import quotas

Correct Incorrect Correct answer

Subsidies for exporters

Correct Incorrect Correct answer

Customs procedures

Correct Incorrect Correct answer

Tariffs

Correct Incorrect Correct answer

Question Five

Monetary policy is a government economic policy relating to:

1 Interest rates

2 Taxation

3 Public borrowing and spending

4 Exchange rates

Which of the above are correct?

1 and 4

Correct Incorrect Correct answer

2 and 3

Correct Incorrect Correct answer

2 and 4

Correct Incorrect Correct answer

3 and 4

Correct Incorrect Correct answer

Question Six

Which of the following organisations might benefit from a period of high price inflation?

An organisation which has a large number of long term payables

Correct Incorrect Correct answer

An exporter of goods to a country with relatively low inflation

Correct Incorrect Correct answer

A large retailer with a high level of inventory on display and low rate of inventory turnover

Correct Incorrect Correct answer

Question Seven

Which of the following is an example of cyclical unemployment?

The entry of school leavers into the labour pool each year

Correct Incorrect Correct answer

Lay-offs among agricultural labourers in winter

Correct Incorrect Correct answer

Automation of ticketing services in tourism

Correct Incorrect Correct answer

Recession in the building industry

Correct Incorrect Correct answer

Question Eight

A surplus on the balance of payments usually refers to a surplus or deficit on the

…………………………………. account.

Which word correctly complete this statement?

Current

Correct Incorrect Correct answer

Capital

Correct Incorrect Correct answer

Financial

Correct Incorrect Correct answer

Question Nine
The supply curve of a firm operating in a competitive market is its

Marginal cost curve above the average variable cost curve

Correct Incorrect Correct answer

Marginal cost curve above the average total cost curve

Correct Incorrect Correct answer

Average total cost curve beyond the point where the marginal cost curve cuts it from below

Correct Incorrect Correct answer

Average variable cost curve below the average revenue curve

Correct Incorrect Correct answer

Question Ten

Which one of the following would cause the supply curve for a good to shift to the right (outwards from the origin)?

A fall in the price of the good

Correct Incorrect Correct answer

An increase in the demand for the good

Correct Incorrect Correct answer

A fall in production costs of the good

Correct Incorrect Correct answer

The imposition of a minimum price

Correct Incorrect Correct answer

Question Eleven

When the price of a good is held above the equilibrium price, the result will be

Excess demand

Correct Incorrect Correct answer

A shortage of the good

Correct Incorrect Correct answer

A surplus of the good

Correct Incorrect Correct answer

Question Twelve

Which one of the following would not lead directly to a shift in the demand curve for overseas holidays?

An advertising campaign by holiday tour operators

Correct Incorrect Correct answer

A fall in the disposable incomes of consumers

Correct Incorrect Correct answer

A rise in the price of domestic holidays

Correct Incorrect Correct answer

A rise in the price of overseas holidays

Correct Incorrect Correct answer

Question Thirteen

Which of the following is likely to lead to a fall in the price of good Q which is a normal good?

A rise in the price of good P, a substitute for good Q

Correct Incorrect Correct answer

A fall in the level of household incomes generally

Correct Incorrect Correct answer

A fall in the price of good T, a complement to good Q

Correct Incorrect Correct answer

A belief that the price of good Q is likely to double in the next 3 months

Correct Incorrect Correct answer

Question Fourteen

According to the theory of the firm, which of the following statements describes an oligopoly?

There are no barriers to entry into or exit from the market

Correct Incorrect Correct answer

There is only one producer in the market

Correct Incorrect Correct answer

There are four producers exerting considerable influence in the market

Correct Incorrect Correct answer

There are many producers but they each use product differentiation to distinguish themselves from each other

Correct Incorrect Correct answer

Question Fifteen

Which of the following is not a substitute for carpets?

Ceramic floor tiles

Correct Incorrect Correct answer

Wooden floorboard

Correct Incorrect Correct answer

Carpet underlay

Correct Incorrect Correct answer

Question Sixteen

The demand for fashion goods is not influenced by:

Price

Correct Incorrect Correct answer

Allocative inefficiency among producers

Correct Incorrect Correct answer

The distribution of income among households

Correct Incorrect Correct answer

Expectation of future price changes

Correct Incorrect Correct answer

Question Seventeen

Which of the following is not a complement to cars?

Petrol

Correct Incorrect Correct answer

Tyres

Correct Incorrect Correct answer

Holidays

Correct Incorrect Correct answer

Question Eighteen

If the price of coffee falls, which one of the following outcomes would be expected to occur?

A fall in the quantity of coffee demanded

Correct Incorrect Correct answer

A rise in the price of tea

Correct Incorrect Correct answer

A fall in the demand for drinking cups

Correct Incorrect Correct answer

A fall in the demand for tea

Correct Incorrect Correct answer

Question Nineteen

What is an inferior good?

A good of such poor quality that demand for it is very weak

Correct Incorrect Correct answer

A good for which the cross elasticity of demand with a substitute product is greater than 1

Correct Incorrect Correct answer

A good for which demand will fall as household income rises

Correct Incorrect Correct answer

Question Twenty

ABC produces a variety of soft drink. It has two competitors but all three producers use product differentiation to distinguish themselves from each other. What type of market is this?

Perfect competition

Correct Incorrect Correct answer

Monopoly

Correct Incorrect Correct answer

Monopolistic competition

Correct Incorrect Correct answer

Oligopoly

Correct Incorrect Correct answer

Question Twenty One

The income elasticity of demand for a product is high. This means that:

Sales will fall only slightly when incomes of households fall

Correct Incorrect Correct answer

Sales will rise sharply when incomes of households rise

Correct Incorrect Correct answer

The good is an inferior good

Correct Incorrect Correct answer

Question Twenty Two

Using the point method, what is the price elasticity of demand of product X as price falls from its current

price of ksh20 to ksh15?

state Old New

price 20 15

Quantity 10 15

0.5

Correct Incorrect Correct answer

1

Correct Incorrect Correct answer

1.5

Correct Incorrect Correct answer

2

Correct Incorrect Correct answer

RCM Demo Course

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July 24, 2023

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