Bcom Bachelor of Commerce Bachelor of Commerce: Economics 5

Question 1

The Fisher Effect states that nominal interest rates rise one-for-one with:

Accepted Answer

Expected inflation

Answer

The Fisher Effect: nominal rate = real rate + expected inflation, so higher expected inflation translates directly into higher nominal interest rates.

Question 2

Which of the following best describes the concept of 'price discrimination'?

Accepted Answer

Charging different prices to different customers for the same good based on willingness to pay

Answer

Price discrimination allows a firm to capture more consumer surplus by charging each consumer group a price closer to their reservation price.

Question 3

Automatic stabilizers in fiscal policy include:

Accepted Answer

Progressive income taxes and unemployment insurance

Answer

Automatic stabilizers like progressive taxes and unemployment benefits automatically increase or decrease without legislative action, dampening business cycle swings.

Question 4

The Laffer Curve illustrates the relationship between:

Accepted Answer

Tax rates and government tax revenue

Answer

The Laffer Curve shows that tax revenue can be maximized at an intermediate tax rate; rates too high or too low reduce revenue.

Question 5

When a firm's average total cost is declining as output increases, marginal cost must be:

Accepted Answer

Less than average total cost

Answer

ATC falls when MC is below it, because each additional unit brings the average down — a mathematical pull-down effect.

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Bachelor of Commerce: Economics 5