emlyon Business Econ: Practice Exam

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The questions are purposefully designed to test your engagement and understanding of the course content, as opposed to any prior or background economic knowledge.

To best use this practice exam you should attempt these questions on your own, under timed conditions (e.g. for 1 hour), some time after the course has finished.

There are 10 questions worth 2 points each.

You should read all instructions carefully and consider each potential answer. You will not be able to change an answer after submitting it.

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You’re participating in another sealed-bid auction for a one-of-a-kind painting, for which you’d be happy to pay $100 but not a penny more. This time, you place your bid in an envelope, all the envelopes are opened, and the high bidder buys the painting for the amount of the second highest bid. The optimal bid is $100.

2 points

True

False

Uncertain

Clear selection

Why are people typically willing to pay more for diamonds than they are for water?

2 points

They’re scarcer

They cost more to produce

They have a higher marginal value

They’re prettier

All of the above

Clear selection

In December 2018, the inflation rate in the UK was 2.2% and the unemployment rate was 4.1%. Assume that the natural rate of unemployment is 5%. According to the Taylor Rule used in class, what should interest rates be?

2 points

2.2%

2.4%

3.2%

4.2%

5.2%

Other:

Clear selection

Imagine that a firm faces a demand curve such that Q = 30 – ½P. If marginal costs are equal to 2Q calculate the profit maximizing price and quantity.

2 points

P = 10, Q = 40

P = 40, Q = 10

P = 25, Q = 30

P = 40, Q = 40

Clear selection

Which of the following were NOT reasons why the Fed's response to covid-19 was unusual?

2 points

They decided to cut interest rates

The cut was by more than 0.25 percentage points

They increased the amount of QE

The decision was made in an emergency meeting

Consider the following information about the costs of La Marmotte. Imagine that an increase in demand has caused the price of a meal to rise to €34. What would be the profit maximising level of output? How much profit would it make per day?

2 points

Output = 66 meals per day; Profit = €1,588

Output = 67 meals per day; Profit = €1,592

Output = 69 meals per day; Profit = €1,588

Output = 70 meals per day; Profit = €1,592

Clear selection

Which of the following was not provided as an example of a “problem” with a fiscal stimulus?

2 points

The consumption function

Crowding out

Ricardian equivalence

The signal extraction problem

Clear selection

Scott McNeally, the former CEO of Sun Microsystems, made the mistake of believing that the high growth rate of the high tech market meant that the economy was going to remain strong. Which behavioural anomaly is this?

2 points

Hindsight bias

Over confidence bias

Ownership bias

Representative heuristic

Affect heuristic

Clear selection

What, according to the lecture, were the downsides of a money growth rule?

2 points

It is difficult to get real time data regarding the money supply

People’s desire to spend money isn’t constant

It relies on policy makers having to make complex judgments

Consumers would be unable to form expectations

It isn’t clear which measure of the money supply to use

Which of the following is an example of a real (i.e. supply side) shock? Choose all that apply

2 points

A flood

An increase in the growth rate of the money supply

A general strike

An increase in productivity due to a switch to home working and virtual meetings

A change in the demand for money

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