Download One-Day KSE Preparatory Session Sample Exam in Economics 2011

Kyiv School of Economics
One-Day Training Session
Mock Admission Examination in Economics
Instructions:
1. Do not turn this page until told to do so.
2. You have twenty minutes at your disposal.
3. The exam consists of 12 questions that are all equally weighted but have varying difficulty
levels.
4. Each question has up to five suggested answers you have to choose from (multiple choice).
Attention! One or more answers can be correct. You will get full credit only if you mark
ALL correct questions (and do not mark any incorrect ones).
5. No dictionaries are allowed.
6. No calculators or other similar devices are allowed. Mobile phones must be switched off for
the duration of the exam.
7. Positively no cheating. If caught cheating, you will be asked to leave the room
immediately, and your grade for this exam will be zero.
June 09, 2011
Kyiv
Question 1
Suppose that a consumer chooses an optimal bundle of goods X and Y. The price of a unit of
good Y is $2. The marginal utilities are MUX=6 and MUY=4. The income of the consumer is
$90. Both goods are consumed in equal amounts. Which of the following is correct?
A. The price of good X is $2.5.
B. The price of good X is $3.
C. The marginal rate of substitution between goods is equal to the ratio of the prices between
goods.
D. The optimal bundle consists of 18 units of each good.
E. The optimal bundle consists of 20 units of each good.
Question 2
In the diagram below (which represents the market for Korona chocolate candies), the initial
equilibrium is at the intersection of S1 and D1. If there is an increase in productivity and at the
same time a decrease in the price of Roshen chocolate candies bars, the new equilibrium will
most likely be at the intersection of
A. S1 and D2
B. S2 and D2
C. S2 and D3
D. S3 and D2
E. S3 and D3
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Question 3
Fill in the gaps in the paragraph below choosing the words provided in brackets (clearly mark the
appropriate word).
The effect of a tax will be to shift the supply curve vertically ______ (upwards, downwards).
The supply curve will be shifted vertically by _______ (more than, less than, exactly) the
amount of the tax. However, this does not mean that the tax will change the price of the good by
the full amount of the tax. This will depend on the elasticity of supply and demand. A tax will
change the price by more if the demand curve is _______ (elastic, inelastic) rather than _______
(elastic, inelastic).
Question 4
The market for good X prior to government intervention is described in the table below.
If the government imposes a tax of £2 per unit on this good, which of the following is true?
A. The new equilibrium price is £5.
B. The new equilibrium price is £6.
C. The government collects £1200 in tax revenues.
D. The government collects £1400 in tax revenues.
E. Total after-tax revenue of producers is £1000.
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Question 5
Referring to the table below, identify the correct statements.
A. The average total cost at 2 units of output is 9.
B. The average total cost at 2 units of output is 24.
C. The marginal cost of the 8th unit of output is 15.
D. The marginal cost of the 8th unit of output is 29.
E. The variable cost at 7 units of output is 75.
Question 6
Which of the following would generally be regarded as fixed costs in the short-run?
A. Interest charged on a bank loan for new equipment.
B. Security costs for the factory site.
C. Weekly wages for shop-floor workers.
D. The cost of raw materials.
E. Payments for rent.
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Question 7
Assuming there is no government or foreign sector, if the marginal propensity to consume
(MPC) for the economy is 0.8, then
A. the multiplier is 1.25.
B. the multiplier is 4.
C. the multiplier is 5.
D. the marginal propensity to save (MPS) is 0.2.
E. the marginal propensity to save (MPS) is 0.4.
Question 8
An example of an expansionary monetary policy is
A. an increase in the required reserve ratio.
B. an decrease in the discount (refinancing) rate.
C. a reduction in the taxes banks pay on their profits.
D. the Central bank buying government securities in the open market.
E. the Central bank selling foreign exchange in the open market.
Question 9
According to the Laffer curve,
A. as tax rates increase, tax revenues rise continuously.
B. as tax rates increase, tax revenues decrease continuously.
C. as tax rates increase, tax revenues initially decrease and then increase.
D. as tax rates increase, tax revenues initially increase and then decrease.
E. the optimal tax rate is around 50%.
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Question 10
If a nation's interest rates are relatively high compared to those of other countries, then the
exchange value of its currency will tend to
A. depreciate under a system of floating exchange rates.
B. depreciate under a system of fixed exchange rates.
C. appreciate under a system of fixed exchange rates.
D. appreciate under a system of floating exchange rates.
E. interest rates have no effect on exchange rates.
Question 11
The main advantage of quotas as compared to tariffs in the view of policymakers is
A. quotas are easier to get passed in Parliament
B. quotas bring more revenue to the budget than tariffs
C. quotas remove the uncertainty about the quantity of imports
D. quotas have the strong support of economists
E. quotas are less expensive to administer
Question 12
Suppose that this year’s money supply in a hypothetical economy is $400 billion and real GDP is
$8 trillion.
A. The price level in this economy could be equal to 2 and the velocity of money could be
equal to 1.
B. The price level in this economy could be equal to 1 and the velocity of money could be
equal to 2.
C. The price level in this economy could be equal to 1.5 and the velocity of money could be
equal to 3.
D. The price level in this economy could be equal to 1.8 and the velocity of money could be
equal to 3.
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Answer key:
1. B,C,D
2. D
3. upwards/exactly/inelastic/elastic
4. A,C
5. B,D
6. A,B,E
7. C,D
8. B,D
9. D
10. D
11. D
12. B,C
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