Bcom Bachelor of Commerce Bachelor of Commerce: Economics 3

Question 1

If the cross-price elasticity of demand between two goods is negative, the goods are:

Accepted Answer

Complements

Answer

A negative cross-price elasticity means demand for one good falls when the price of the other rises, indicating the goods are used together (complements).

Question 2

The long-run aggregate supply (LRAS) curve is vertical because:

Accepted Answer

The economy always operates at full employment in the long run

Answer

In the long run, all prices adjust fully, so the economy returns to its natural (full employment) level of output regardless of the price level.

Question 3

Which theory of international trade argues that countries should export goods they can produce at a lower opportunity cost than their trading partners?

Accepted Answer

Comparative advantage theory

Answer

Comparative advantage, developed by David Ricardo, says trade should be based on relative opportunity costs, not absolute productivity.

Question 4

In a perfectly competitive market in long-run equilibrium, economic profit equals:

Accepted Answer

Both A and B

Answer

In long-run perfect competition, entry eliminates economic profit, leaving firms earning exactly zero economic profit, which equals normal (accounting) profit.

Question 5

The Phillips Curve illustrates a short-run trade-off between:

Accepted Answer

Inflation and unemployment

Answer

The original Phillips Curve shows that lower unemployment is historically associated with higher inflation in the short run.

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Bachelor of Commerce: Economics 3