SECTION ONE (Compulsory):Single-choice questions
. Q. \( W" v! f5 X: N# Y Multiple-choice questions: from the following four options, select a correct and fill in its labeling the brackets. (A total of 10 points)
: C3 S( }9 m; ]- T. ?( ? 1. Tom cannot tell the difference between Coke and Pepsi. For Tom, these goods are: ()
5 ^& C# }, b. U7 B3 E A. Perfect substitutes. - b7 s4 F! h5 Q) V
B. Perfect complements.
) `0 s3 p8 G$ ^6 Y- N/ F- H C. Necessities.
- l" O5 d7 s$ D1 X D. None of the above. ! d/ H6 G- F5 s! F* d& z! a
2. Suppose the economy is running at the level of potential GDP, an increase in government spending in the long run will ___ the price level and ___ the output level,
4 D, Z: {, f8 x# h) ` ?* B7 ] A. Increase, not change
9 n7 n2 ~9 d2 H; f) }. y9 D B. Increase, increase
; ?0 w6 d1 B1 [( {: t5 |7 o C. Increase, decrease ! _4 C3 \; J! v( p
D. Decrease, increase
0 E. |) ~4 j& u6 j: Y' ^ 3. For a natural monopoly, the optimal policy for a regulator to set is a price such that: () , U, Q" O, s9 A- O9 K; K0 H
A. The price level equals marginal cost.
5 F* v0 j5 M) R f% A) C B. The price level equals average variable cost. 7 z3 e( S; R3 v& N6 o" B
C. The price level equals average total cost but higher than marginal cost. , X% M+ \' k$ K3 j) a U% B
D. The price level is lower than marginal cost but higher than average total cost. " E4 v# ?! v/ \3 E W" P
4. If AD shifts to the right to adapt to oil shocks from OPEC, then: () + w& J! J6 q5 Q. z4 m$ ?! i
A. P and GDP will remain normal automatically.
3 l. K) X: F4 k B. GDP may be unchanged although P will rise. 6 o3 k+ W! o( b! k3 X( S
C. GDP will rise and P will drop.
" m; [. g4 n- B& g/ o* _) d6 s D. The domestic P of oil will drop.
8 N$ Y+ ~9 _# f6 r8 S 5. School students paying a lower fare than adults on the MTR trains, or cheaper tickets to the theatre, is an example of: ()
" U- X, H- ]( Z1 `) _. F) F4 _7 s A. The suppliers making less profit because some customers pay a lower price.
+ j7 w2 Q/ X) Y/ U B. Consumers obtaining more consumer surplus. 6 |7 I4 m8 q; d: u: |: N" I
C. Price discrimination allowing the suppliers to make more profit from charging a higher price to customers whose demand is more elastic. 8 d' G3 k: ?# p
D. Price discrimination allowing the suppliers to make more profit from charging a lower price to customers whose demand is more elastic. ; T6 t$ B) W* O4 E1 C/ ]
6. When the nominal interest rate rises, ()
x w2 Z, W% _) c9 d A. Economic activity is encouraged.
* X& {+ W7 r7 t9 d( d+ E" U+ H B. The real interest rate rises and the price of bonds rises.
( I3 o/ r8 \% @. C8 d C. Inflation rises and the real interest rate falls.
) P+ Q$ a" |3 Z$ \- V D. The real interest rate rises and the price of bonds falls. 5 i) }% O1 T- ~, p3 J% |) C" R) T
7. A firm has fixed costs of £100,000 per month and variable costs of £25 for item. It proposes to sell these items for £50 each. What is the break-even output for this firm? () 1 i% u0 _" o! @
A. 4,000 units ( [8 I* v' T4 _; F
B. 4,000 units in a month. 4 G& R$ X9 C5 z# L# V
C. Cannot be worked out from the information. ( K$ Q, ~" H2 D) K& h4 A! ^
D. 2,000 units per month.
& t! w- e4 [" I1 s2 V) N* T 8. For an A- rated corporate bond that has deteriorating fundamentals, but is expected to remain investment grade, the greatest risk is most likely: ()
2 o3 a0 n7 a0 O# k+ F# E; }/ h A. Event risk.
9 O* i* Z: T8 L/ k2 c- _ B. Default risk.
' V. z. T' Y3 x% t3 l C. Liquidity risk.
" a4 S) S# i9 k% L9 U D. Credit spread risk.
" s" H5 M3 g* @7 _; w 9. An investor currently has a portfolio valued at $700,000. The investor’s objective is long-term growth, but the investor will need $30,000 by the end of the year to pay her son’s college tuition and another $10,000 by year-end for her annual vacation. The investor is considering four alternative portfolios: + n4 A9 p" w6 r' p( u4 a G
Portfolio Expected Return Standard Deviation of Returns
" L u6 ]! u! E1 I R 1.8% 10%
" F' q w6 R" u" c 2.10% 13%
7 i; o! X/ r6 | 3.14% 22%
% F3 Q6 @! |$ f/ } 4.18% 35% " ]" v' o# ]8 p, z" |2 e
Using Roy’s safety-first criterion, which of the alternative portfolios minimizes the probability that the investor’s portfolio will have a value lower than $700,000 at year-end? ()
" ^) H1 E. g, s1 E% I A. Portfolio 1.
' k# k! J" S: k8 k B. Portfolio 2. % C; ]- l- s$ q4 J
C. Portfolio 3. 7 C* T) _' O# d7 e2 G9 W
D. Portfolio 4. & J2 y1 \8 c! i# ~5 W: x
10. A futures trader must deposit an additional amount of money into a margin account at the clearinghouse if the margin account ending balance is below the: ()
) [9 d; t/ z( q7 U. I A. Initial margin requirement.
% `% M/ o; F% R. T" S3 G- K0 r- R6 Z B. Variation margin requirement.
; G" o# v' Y7 t C. Maintenance margin requirement.
1 w& w0 z/ `8 ?( r D. Amount of the loan borrowed from the clearinghouse. |