Economics Mock Test 01

Consider the following statements: (i) Not-for-profit organisations (NFPs) have varied objectives, which depend on the needs of their members or the sections of society they were created to benefit. (ii) The primary objective of government-funded organisations is to reduce costs of their operations and thus minimise the burden on tax payers. Which of these statements is/are correct?

• A (i) only

• B (ii) only

• C Both

• D Neither

In the short run, companies will attempt to improve shareholder wealth by maximising:

• A Return On Capital Employed

• B Net Present Value

• C Normal profits

• D Average revenue

Transaction costs are associated with which ONE of the following?

• A Materials procurement

• B Flexible working arrangements

• C Outsourcing

• D Lobbying

A normal demand curve is downward sloping because:

• A raising prices causes an expansion in demand

• B raising prices causes a contraction in demand

• C companies require a lower profit margin as more of an item is produced

• D companies require a higher profit margin as more of an item is produced

How would you describe the supply of agricultural products in the short run?

• A completely elastic

• B elastic

• C inelastic

• D impossible to determine

When the price of a good is held above the equilibrium price, the result will be

• A. excess demand

• B. a shortage of goods

• C. a surplus of the good

• D. an increase in demand

Government introduces a minimum price below free market price. Which one of the following describes the consequences of this?

• A. There will be no effect on market price or producer incomes

• B. Suppliers will withdraw from the market due to falling incomes

• C. Unsold surpluses of the product will build up

• D. Demand for the product will contract

AB wishes to borrow $10m in 3 months' time and is concerned about the interest rates risk it faces. Which of the following best describes the interest rates risk?

• A. The risk from borrowing

• B. The risk from not being able to meet interest payments on debt obligations

• C. The risk that interest rates will rise

• D. The risk to profit, cash flow or company's valuation from changes interest rates

Which one of the following are external economies of scale for a business enterprise? (i) A locally available trained labour force. (ii) The presence of specialist firms providing components. (iii) The ability of larger firms to secure cheaper bank loans. (iv) The development of specialised transport and communications facilities.

• A (i), (ii) and (iii) only

• B (ii), (iii) and (iv) only

• C (i), (ii) and (iv) only

• D (i), (iii) and (iv) only

Which of the following is a description of a pure public good?

• A no individual can be excluded from consuming it

• B when consumed by one person implies less consumption by others

• C involves no social costs in production

• D is produced by the state