A lighthouse is a classic example of a:

• A) Common-pool resource.
• B) Merit good.
• C) Public good.
• D) Private good.

Which of the following relationship is true for monopoly power and elasticity of demand?

• A) Direct
• B) All of the given relations can occur
• C) No relation
• D) Inverse

What was the primary policy recommendation by Keynesians to address the Great Depression?

• A) Reducing taxes to stimulate consumer spending.
• B) Implementing high-interest rates to control inflation.
• C) Increasing government spending to create jobs and boost demand.
• D) Reducing government spending to balance the budget.

In the Car industry, fewer manufacturers manufacture slightly differentiated cars. They make decisions by considering the actions of rival firms. This industry operates in:

• A) Monopoly.
• B) Natural Monopoly.
• C) Oligopoly.
• D) Monopolistic Competition.

Which of the following factors would shift aggregate demand curve to the right?

• A) Increase in taxes
• B) Decrease in business investment
• C) Decrease in government expenditures
• D) Increase in consumption expenditures

Those who hold the Classical view of the labour market are likely to believe that:

• A) Neither monetary nor fiscal policy will have an effect on output and employment.
• B) Both monetary and fiscal policy will have an effect on output and employment.
• C) Fiscal but not monetary policy will have an effect on output and employment.
• D) Monetary, but not fiscal policy will have an effect on output and employment

Which of the following can occur at long run market equilibrium according to classical school of thought?

• A) People are unemployed voluntarily.
• B) Prices remain at very high level.
• C) All of the given options are correct.
• D) Factors of production must be unemployed.

Oligopoly differs from monopolistic competition in that an oligopoly includes:

• A) Barriers to entry.
• B) All of the given options.
• C) Product differentiation.
• D) No barriers to entry.

Which efficiency is concerned with producing goods in the most cost-efficient manner?

• A) Economic efficiency
• B) Productive efficiency
• C) Technical efficiency
• D) Allocative efficiency

Followings are the disadvantages of monopoly EXCEPT:

• A) Most of the “surplus” (producer + consumer surplus) accrues to monopolists.
• B) Monopolists earn higher profits.
• C) Monopolists do not pay sufficient attention to increase efficiency.
• D) Monopolists produce high quality goods at higher prices.

In classical economics, what is the assumption regarding price and wage flexibility?

• A) These are flexible and adjust to changes in supply and demand.
• B) These are sticky and do not change.
• C) These are rigid and do not adjust easily
• D) These are controlled by the government.

If there is a decline in demand for Pakistani products in international market, then the aggregate demand curve will:

• A) Become steeper.
• B) Become flatter.
• C) Shift to the left.
• D) Shift to the right.

When the wage rate for a particular job increases, what is likely to happen to the quantity of labor supplied, according to the supply curve for labor?

• A) It increases.
• B) A. It depends on the type of job.
• C) It remains constant.
• D) It decreases.

Which of the followings describe agents?

• A) Individual laborer
• B) Individual consumer
• C) Individual firm
• D) All of the given options are true

The Classical economists thought that the economy would quickly overcome any short run instability because:

• A) Prices would get stuck at a low level.
• B) Price level and quantity were flexible.
• C) Prices and wages were flexible.
• D) The long run aggregate supply would shift to the left.

The value of marginal product of labor is:

• A) Marginal physical product of labor - Price of the good
• B) Marginal physical product of labor ÷ Price of the good
• C) Marginal physical product of labor + Price of the good
• D) Marginal physical product of labor × Price of the good

In the Classical model, given an initial aggregate equilibrium at full employment level, what will be the long run effect of an increase in government spending?

• A) An increase in the price level.
• B) An upward shift of the aggregate demand curve.
• C) All of the given options.
• D) A constant level of output.

If one firm increases its price, in the kinked demand curve model then:

• A) Other firms will not increase their price.
• B) Other firms will reduce their price.
• C) Other firms will increase their output level.
• D) Other firms will decrease their output level.

Productive efficiency is achieved when firms produce at the:

• A) Lowest point of average cost curve
• B) Lowest point of marginal cost curve
• C) Highest point of average cost curve
• D) Highest point of marginal cost curve

Which of the following goods is merit good?

• A) All of the following goods are merit goods
• B) Food stamps
• C) Subsidized housing
• D) Health care