Economics Quiz: Wages and Investment Concepts

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Questions and Answers

What is the consequence of setting the minimum wage above the equilibrium wage?

It creates a surplus of labor or unemployment. (correct)

It encourages businesses to hire more workers.

It reduces the cost of living.

It leads to an increase in employment.

What is included in the definition of 'investment' in economic terms?

The purchase of personal goods for consumption.

Acquiring items that generate income and building capital stock. (correct)

The act of saving money in a bank account.

Purchasing stocks and bonds for immediate profit.

Which of the following best describes 'rent' in economic terms?

The average profit landowners earn from their properties.

The value of physical capital stock.

The total purchase price of land.

The fee for using property for a specified duration. (correct)

What type of assets does 'financial capital stock' refer to?

Intangible assets like patents and brand equity. Signup and view all the answers

What is the primary role of investment in a business?

To add to the stock of capital and expand a business. Signup and view all the answers

What does the 'rental price' refer to in economic terms?

The ongoing cost of using land or capital temporarily. Signup and view all the answers

In what situation is minimum wage considered a price floor?

When it is set above the equilibrium wage. Signup and view all the answers

What is an essential benefit of physical capital stock for firms?

Supporting production needs through tangible assets. Signup and view all the answers

What does Price Elasticity of Supply measure?

The responsiveness of quantity supplied to a change in market price Signup and view all the answers

Which of the following is NOT a characteristic of perfect competition?

Unique products with no close substitutes Signup and view all the answers

What defines monopolistic competition?

Many sellers with differentiated products Signup and view all the answers

How do firms in a monopoly market behave in terms of pricing?

They set and control the price. Signup and view all the answers

Which of the following factors is essential in determining a market structure?

Control over price Signup and view all the answers

In long-run equilibrium under perfect competition, what is the expected economic profit for firms?

Zero economic profit Signup and view all the answers

Which market structure is characterized by high barriers to entry?

Monopoly Signup and view all the answers

What is a common feature of monopolistic competition in the long run?

Profits are driven to zero Signup and view all the answers

Which of the following is NOT a characteristic of an oligopoly?

Variable pricing strategies Signup and view all the answers

What is one major implication of different market structures for policymakers?

Market structures can inform regulatory designs to promote competition. Signup and view all the answers

Which example is characteristic of an oligopoly market?

Automobile industry Signup and view all the answers

In an oligopoly, how do firms typically react to the actions of their competitors?

They may collude to set prices and output. Signup and view all the answers

What is the role of suppliers in relation to a business?

They provide the source of materials used in production. Signup and view all the answers

What does price rigidity in oligopolistic markets imply?

Prices remain stable despite changes in demand and supply. Signup and view all the answers

Which of the following best describes colluding competitors in an oligopoly?

They conspire to control prices and output for mutual benefit. Signup and view all the answers

Why is understanding customers crucial for businesses?

To identify suitable products for offerings in the market. Signup and view all the answers

What is a primary purpose of taxation?

To raise income for government expenditures Signup and view all the answers

Which type of tax is considered progressive?

Individual income tax Signup and view all the answers

What is the effect of high interest rates on investment?

Decreases investment levels Signup and view all the answers

What characteristic defines regressive taxes?

Lower rates as income rises Signup and view all the answers

How do taxes serve as an instrument of fiscal policy?

By raising revenue to control economic spending Signup and view all the answers

Which of the following correctly describes indirect taxes?

Taxes on goods and services Signup and view all the answers

What is a likely consequence of rising rental costs?

Insecure tenancy and additional costs Signup and view all the answers

What is the relationship between inflation and production costs?

Inflation increases production costs Signup and view all the answers

What type of tax levies charges on specific products?

Excise tax Signup and view all the answers

Which category of taxes imposes equal burden across all social classes?

Proportional taxes Signup and view all the answers

What role do reliable suppliers play in business operations?

They ensure timely delivery of products. Signup and view all the answers

Why is it important for businesses to analyze their competitors?

To uncover opportunities based on rivals' strengths and weaknesses. Signup and view all the answers

What happens when the price of a good increases?

Consumers are likely to switch to substitutes. Signup and view all the answers

What does a SWOT analysis primarily evaluate?

Internal and external factors affecting a business. Signup and view all the answers

What is the main purpose of the TOWS analysis?

To match internal factors with external factors for strategic decision-making. Signup and view all the answers

Which of the following best describes a 'threat' in SWOT analysis?

Challenges that could hinder business objectives. Signup and view all the answers

What component involves identifying trends that work in favor of a business in SWOT analysis?

Opportunities Signup and view all the answers

How does TOWS analysis help in overcoming weaknesses?

By matching weaknesses with external opportunities. Signup and view all the answers

What is the likely consequence of high inflation on the buying power of a currency?

Erodes the buying power of the currency Signup and view all the answers

According to the law of demand, what happens to the quantity of housing demanded when housing costs increase?

Quantity demanded decreases Signup and view all the answers

Which factor is NOT mentioned as influencing shifts in housing demand?

Supply chain efficiency Signup and view all the answers

What is a housing shortage characterized by?

More demand than supply Signup and view all the answers

What typically leads to a real estate boom?

Rising incomes and falling unemployment Signup and view all the answers

What effect does higher rent typically have on housing prices?

Higher prices Signup and view all the answers

What does market equilibrium signify?

Demand equals supply Signup and view all the answers

What happens when there is a surplus in the market?

Supply exceeds demand Signup and view all the answers

What is a primary consequence of implementing a price ceiling below equilibrium?

Prevents price gouging Signup and view all the answers

What does a price floor above equilibrium aim to achieve?

Stabilize producer incomes Signup and view all the answers

How is price elasticity of demand defined?

How much demand changes as price changes Signup and view all the answers

What effect can government intervention via price ceilings have on essential goods?

Enhances accessibility for lower-income consumers Signup and view all the answers

In terms of housing demand, what would increased expectations of future prices lead to?

Increased current demand Signup and view all the answers

Study Notes

Economics WW2 Reviewer - Competencies

Contemporary Economic Issues Facing the Filipino Entrepreneur
Introduction and Applications of Supply and Demand
Market Equilibrium | Price Elasticity of Supply & Demand
Market Structures
Principles, Tools, and Techniques
Identification of Business Opportunities

Contemporary Economic Issues Facing the Filipino Entrepreneur - Definitions

Inflation: A general increase in the prices of goods and services over time.
Investment: An item acquired to generate income.
- Process of building capital stock: Total value of a company's assets used for production.
- Value of machinery, plants, and buildings: Items bought by firms for production purposes.
- Physical Capital Stock: Tangible assets like machinery and tools.
- Financial Capital Stock: Intangible assets like patents, copyrights, and brand equity.
Essentiality: Used to address immediate needs (expenses), expand a business, and add to stock of capital.
Rent: Typically the use of property for a certain amount.
- Price paid for the use of land and other natural resources.
- Traditionally associated with land.
- Scarcity of land is the concept of rent.

Minimum Wage

Definition: A price floor, an example of a price floor.
Impact of Binding Minimum Wage: Setting minimum wage above equilibrium wage creates a surplus of labor or unemployment.
Legal Implications: R.A. 6727 mandates employers to pay workers at least the minimum wage; otherwise, they face fines and imprisonment.

Taxes

Lifeblood of the government: Taxation is the act of levying tax to cover government expenses such as social services, salaries, and public infrastructure.
Fiscal Policy: Taxes are a tool of fiscal policy in adjusting the level of total spending to stabilize the economy.
Impacts: Affects income distribution and wealth and the volume of trade (imports/exports).

Types of Taxes

Direct Taxes: Levied on income and wealth received by households and businesses.
- Example: Individual income taxes.
Indirect Taxes: Levied on goods and services.
- Example: Value Added Taxes (VAT), Excise taxes.
Progressive Taxes: Place a greater burden on those with a higher ability to pay.
- Example: Individual income tax, where higher income brackets pay a higher average tax rate.
Proportional Taxes: Place equal burden on all social classes.
Regressive Taxes: Fall more heavily on the poor than the rich.
- Income drops at a decreasing rate as income rises.

Economic Problems

Inflation: Increases production costs and reduces consumer purchasing power, impacting the difficulty of pricing strategies.
Relationship between Investment and Interest Rate: Negative relationship; higher interest rates reduce investment, vice versa.

Additional Pages (Summary)

Rental Costs: Higher costs lead to more firms renting than buying, and vice-versa.
Minimum Wage Impacts: Increased labor costs, reduced hiring capacity, higher prices, and reduced competitiveness.
Demand Determinants:
- Income: Normal goods see demand increase when income rises; inferior goods see demand increase when income falls.
- Size of Market/Population: Rural areas have lower demand due to lower population, and urban areas have higher demand due to higher population.
- Price of Related Goods: Substitute goods' prices impact demand for another good in the opposite direction.
Demand Schedule/Curve: Inverse relationship between price and quantity demanded; downward sloping.
Change in Demand vs. Change in Quantity Demanded: Shift in demand is a shift in the demand curve; changes in quantity demanded are a movement along the demand curve.
Law of Demand: Higher price leads to a lower quantity demanded and vice versa.
Supply Determinants:
- High price leads to higher profit potential.
- Change in Input Costs impacts supply.
Supply Schedule: Direct relation between prices and supplied quantity.
Supply Curve: Upward sloping.
Law of Supply: Higher prices lead to more supply, and vice versa.
Labor Market: Demand for output influences the demand for labor; labor supply is affected by productivity, technology, firm numbers, regulations, input costs.
Labor Shifts: Inward and Outward shifts impact supply and demand curves
Labor Migration: Movement affects labor markets in host and home countries.
Foreign Exchange: Currency Exchange, Foreign Exchange Market, Exchange rates, effects of exchange rate fluctuations.
Factors Shifting Supply and Demand Curves: e.g. Balance of trade, interest rate differences, relative inflation, expectations
Housing Market: Demand is determined by the law of demand.
Housing Shortage: Quantity demanded exceeds quantity supplied; caused by rising population, income, low interest rates, and expectations.
Market Equilibrium: Intersection of supply and demand curves, determining price and quantity.
Surplus/Shortage: Above or below equilibrium point; prices adjust to eliminate surplus or shortages.
Price Controls:
- Price Floor: Minimum price below which exchange is not permitted.
- Price Ceiling: Maximum price, usually set by government.
Market Structure: Organizational and competitive characteristics of a market.
- Perfect Competition: many buyers and sellers, homogenous products, easy entry/exit; price takers; zero economic profit.
- Monopoly: single seller, unique product, high barriers to entry; price makers; positive economic profit.
- Monopolistic Competition: many sellers, differentiated products, relatively easy entry/exit; price makers; positive economic profit (short run) zero economic profit (long run).
- Oligopoly: Few sellers, homogeneous or differentiated products, high barriers to entry; interdependence, price rigidity.
Tools and Techniques:
- SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats to understand a business position.
- TOWS Analysis: Matches internal (SWOT) elements to external factors for strategic decision-making.
- Price Elasticity of Supply and Demand: Measures responsiveness of demand and supply to price changes; relevant examples of different types of curves and computation.

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Description

Test your understanding of key economic concepts related to wages, investment, and financial capital. This quiz covers topics such as the implications of minimum wage, definitions of investment, and the nature of financial assets. Challenge yourself to see how well you grasp these essential principles of economics!