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ATD Level 3

Free Economics Revision questions & answers

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ATD 3

Free Principles of Economics revision questions & answers-ATD 3

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Category: ATD 3-Principles of Economics

Juno has a monthly income of KES 72,000 which he plans to spend on shoes and clothes in the ratio of 1:1. The unit price of the shoes and cloths is KES 500 and KES 600 respectively. Juno is satisfied with various combination the two services/goods, but prefers equal proportions of each.
1. Required
a. Calculate the optimal point for food and utilities and the X intercepts.
b. Juno’s income was reduced by 60%. Calculate the new optimum point and X-intercept.
c. Calculate the marginal rate of substitution when the consumer spends the new income in the purchase of 15 units of each good

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Category: ATD 3-Principles of Economics

2. Ordinal utility states that:

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Category: ATD 3-Principles of Economics

3. TRUE or FALSE: In a monopolistic firm, the marginal revenue (MR) curve lies below the average revenue arc curve at all units of output because to sell an additional unit, the firm must reduce its price.

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Category: ATD 3-Principles of Economics

4. In macroeconomics, ____________ describes a situation in which two people each want to exchange some good or service that the other can provide.

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Category: ATD 3-Principles of Economics

5. Define a perfect market structure and highlight six(6) characteristics of a perfect market structure.

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Category: ATD 3-Principles of Economics

6. The theory of the firm is a microeconomic concept that states that :

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Category: ATD 3-Principles of Economics

7. TRUE or FALSE: Only the goods produced in the home country are included in the GDP, regardless of the nationality status of the company owners.

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Category: ATD 3-Principles of Economics

8. The _______states that if a person has a thing which can be put to several uses, he/she will distribute it among these uses in such a way that it has the same marginal utility in all.

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Category: ATD 3-Principles of Economics

9. The Keynesian Multiplier is an economic theory that asserts that:

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Category: ATD 3-Principles of Economics

10. Which of the flowing are instruments of monetary policy that could be used by the central bank to control the level of money supply in an economy ?

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Category: ATD 3-Principles of Economics

11. A (a)________devaluation occurs when a country makes a conscious decision to lower its exchange rate in a fixed or semi-fixed exchange rate, whereas (b)__________occurs when there is a fall in the value of a currency in a floating exchange rate.

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Category: ATD 3-Principles of Economics

12. Identify six(6) factors that could lead to market failure in an economy.

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Category: ATD 3-Principles of Economics

13. Which of the following statements about inflationary gap and deflationary gap is not true?

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Category: ATD 3-Principles of Economics

14. Rightward shift in supply is caused by (a)_________in supply, whereas leftward shift in supply is caused by (b)_________in supply

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Category: ATD 3-Principles of Economics

15. TRUE or FALSE: For a price ceiling to be effective, it must be less than the free-market equilibrium price.

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Category: ATD 3-Principles of Economics

16. The graph below shows the supply Curve for Bungalows in a Nairobi Estate:

Bungalow Supply And Demand

Required: Based on the figure above:
a. How many bungalow owners would be willing to sell their Bungalows at KES 95 million?
b. In the above diagram,10 Bungalows may be available for sale. If 10 more Bungalow owners enter the market,20 will be available. The new entrants into the market would be willing to sell their Bungalows for any price above KED 90 million. Which of the following statements accurately describes the resulting change in the supply curve?
    A. The supply curve shifts upward
    B. The supply curve shifts downward
    C. The supply curve does not change.
    D. The supply curve shifts to the right.
    E. The supply curve shifts to the left
    F. The supply curve becomes longer.
    G. The supply curve can no longer be represented by a straight line.
c. Referring to (b) above, how many Bungalow owners will be willing to sell their Bungalows at KES 91 million?
    A. 2
    B. 10
    C. None
    D. 20
    E. 11

 

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Category: ATD 3-Principles of Economics

17. The law of diminishing marginal utility states that:

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Category: ATD 3-Principles of Economics

18. Monetary inflation occurs when:

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Category: ATD 3-Principles of Economics

19. TRUE or FALSE: The general equilibrium theory considers the economy as a network of interdependent markets and seeks to prove that all free markets eventually move towards general equilibrium.

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Category: ATD 3-Principles of Economics

20. (a)________measures the additional revenue a company earns by selling one additional unit of its good or service, whereas (b)________measures the consumer's benefit of consuming an additional unit of a good or service.

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Category: ATD 3-Principles of Economics

21. Using a graph/diagram, explain the condition where “marginal revenue equals marginal cost’’ is only a necessary but not a sufficient condition for profit maximization.

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Category: ATD 3-Principles of Economics

22. TRUE or FALSE: If Jane uses KES 5 million from funds she had invested in certificates of deposit as a down payment to buy a house, this portion of her investments serve as a medium of exchange when she made the down payment.

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Category: ATD 3-Principles of Economics

23. Why does the marginal cost curve always intersect the average cost curve at the lowest point?

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Category: ATD 3-Principles of Economics

24. Highlight three(3) key determinants of money supply in an economy.

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Category: ATD 3-Principles of Economics

25. Outline eight(8) characteristics of a good development plan.

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Category: ATD 3-Principles of Economics

26. Which of the following statements about the properties of indifferent curves is/are not true?

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Category: ATD 3-Principles of Economics

27. TRUE or FALSE: Agricultural prices in developing countries are often closely linked to international markets.

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Category: ATD 3-Principles of Economics

28. Safari Limited Manufactures Electric Buses in Mombasa. The following are the cost structures of the company:

Safari Electric Buses

Required
a. For every unit of production, compute the average cost and marginal cost.
b. If the company’s selling price per Bus is fixed at KES 67.5 million per unit, compute the firm’s profit-maximizing level of output and the maximum achievable profit.

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Category: ATD 3-Principles of Economics

29. ________refers to the ease with which productive factors like labor, capital, land, natural resources and so on can be reallocated across sectors within the domestic economy .

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Category: ATD 3-Principles of Economics

30. Economic development can be defined as :

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Category: ATD 3-Principles of Economics

31. Highlight five(5) differences between cardinal utility and ordinal utility in consumer theory.

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Category: ATD 3-Principles of Economics

32. The data provided below represents estimated national income figures for country XYZ in trillions of shillings:

Xyz National Income

Required: Use the data to compute the following:
a. Net National Income at factor cost
b. Net National Product at market price
c. Personal income
d. Disposable income for country XYZ

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