Assume that a firm's production process is experiencing increasing returns to scale over a broad range of outputs. Long run average costs over this range of output will tend to:

• A) Increase.
• B) Fall to a minimum and then rise.
• C) Decline.
• D) Remain constant.

Which of the following measures Economies of scale?

• A) Slope of Isocost line
• B) cost-output elasticity
• C) Producer surplus
• D) Firm's expansion path

Suppose Fauji Fertilizer Company Limited spends Rs. 10000 on two inputs, labor (graphed on the horizontal axis) and capital (graphed on the vertical axis) to produce 10 bags of Urea. If the wage rate is Rs. 100 per hour and the rental cost of capital is Rs. 200 per hour, then slope of the Isocost line will be:

• A) -200
• B) - 1/2
• C) -2
• D) -1/200

The long-run supply curve of an increasing cost industry is:

• A) Downward sloping.
• B) Upward sloping.
• C) Vertical.
• D) Horizontal.

Revenue is equal to:

• A) Price times quantity.
• B) Price times quantity minus average cost.
• C) Price times quantity minus marginal cost.
• D) Price times quantity minus total cost.

In a constant-cost industry, price always equals:

• A) LRMC and LRAC, but not necessarily minimum LRAC.
• B) LRMC and minimum LRAC.
• C) Minimum LRAC, but not LRMC.
• D) LRAC and minimum LRMC.

In the long run, which of the following is considered a variable cost?

• A) Expenditures for capital machinery and equipment.
• B) All of the given options.
• C) Expenditures for raw materials.
• D) Expenditures for wages.

In the long run under perfect competition a firm produces at a point where:

• A) Price is less than long run average cost
• B) Price is equal to long run average cost
• C) Price is greater than long run average cost
• D) Price is greater than long run marginal cost

The producer surplus for a market can be measured as:

• A) Area under the demand curve to the left of equilibrium output.
• B) Area between the equilibrium price line and the supply curve to the left of equilibrium output.
• C) Area under the supply curve to the left of equilibrium output.
• D) Vertical intercept of the supply curve.

If marginal propensity to consume is 0.5, the tax multiplier is equal to-----------

• A) -1.
• B) +0.5.
• C) -0.5.
• D) +1.

A decrease in tax that results from expansionary -------------policy causes interest rate to -------

• A) Monetary; fall.
• B) Monetary; rise.
• C) Fiscal; fall
• D) Fiscal; rise.

In the Solow growth model with technological growth rate, L × E shows the number of effective--------

• A) Workers.
• B) Output per worker.
• C) Capital per worker.
• D) Saving per worker.

In the Solow growth model with technological growth rate,y = Y/ (L×E) shows-----------per effective worker.

• A) Output
• B) Technology
• C) Capital
• D) Labor

In the steady state ----------does not change because investment equal to-----------

• A) Investment; saving.
• B) Capital; saving.
• C) Capital; depreciation.
• D) Investment; consumption.

In Solow model,national income identity in per worker terms:

• A) Y = C + I + T
• B) Y = C + I + S
• C) y = c + i
• D) Y = C + I

In basic endogenous growth theory capital exhibits------------return.

• A) constant
• B) Increasing
• C) zero
• D) Decreasing

Which of the following is also known as endogenous growth model?

• A) Best growth model
• B) AK Model
• C) Population growth model
• D) Exogenous growth model

Currency exchange rate which is determined by free market forces is called --------------

• A) Pegged exchange rate.
• B) Floating exchange rate.
• C) Exchange rate.
• D) Fixed exchange rate.

The liquidity preference theory is presented by ---------

• A) Milton.
• B) Johan Maynard Keynes.
• C) Fisher.
• D) Adam smith.

In Solow model consumption per person is equal to ----------

• A) (1-s)y.
• B) (1+s)y.
• C) (1*s)y.
• D) sy.