BSocSc Bachelor of Social Science Bachelor of Social Science Economics 3

Question 1

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

Accepted Answer

Complements

Answer

Negative cross-price elasticity means a rise in one good's price reduces demand for the other, indicating the goods are complements used together.

Question 2

The multiplier effect in macroeconomics suggests that an initial increase in government spending leads to:

Accepted Answer

A proportionally larger increase in national income

Answer

Each dollar of government spending cycles through the economy as recipients spend a portion, amplifying the total impact on national income beyond the initial injection.

Question 3

Which of the following is an example of a negative externality?

Accepted Answer

A factory emitting pollution into a river used by fishers

Answer

Factory pollution imposes costs on third parties (fishers) who are not part of the production transaction, making it a classic negative externality.

Question 4

In long-run equilibrium under perfect competition, economic profit is:

Accepted Answer

Zero, as entry eliminates excess profits

Answer

Free entry of firms in perfect competition drives prices down to average total cost, eliminating economic profit in the long run.

Question 5

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

Accepted Answer

Inflation and unemployment

Answer

The original Phillips Curve depicted an inverse relationship where lower unemployment was associated with higher inflation and vice versa.

BSocSc Bachelor of Social Science Practice Test

BSocSc Bachelor of Social Science Practice Test

BSocSc Bachelor of Social Science Bachelor of Social Science Economics 3