CH 1-5 Review - Economics PDF

CH 1 + 2 Review: 1. Which of the following is not related to 3 key economic questions: a) What products do we produce? b) How do we produce these products? c) Where should these products to produce? d) Who consumes the products? 2. a) b) c) d) Which of the following is an example of a normative que...

CH 1 + 2 Review: 1. Which of the following is not related to 3 key economic questions: a) What products do we produce? b) How do we produce these products? c) Where should these products to produce? d) Who consumes the products? 2. a) b) c) d) Which of the following is an example of a normative question? How will an increase in unemployment benefits affect the unemployment rate? Should the government subsidize a college education? If the government increases the minimum wage, how many workers will lose their jobs? How does a college education affect a person’s productivity and earnings? 3. The Latin expression ceteris paribus means that when a relationship between two variables is being studied a) We consider that some factors are unknown. b) Both variables are treated as unpredictable. c) Keeping all other variables fixed. d) Neither of those two variables is allowed to change. 4. a) b) c) d) In decision making process, economists often think at margin, it means to consider The way people will decide what to purchase Nothing remains fixed over time. How people behave in their own self-interest. How a small change in one variable affects another variable. 5. When your economics exam was very near, you decided to watch a football match in a nearby stadium. The cost of watching game is paid by your friend. The opportunity cost of watching the match a) Is zero because your friend paid for it. b) Is equal to the cost of watching the match c) Is equal to sacrificing your preparation for the exam and getting poor grade. d) Is equal to the opportunity cost of your friend. 6. You run a small copy shop with one copying machine and one worker, who can copy 500 pages per hour. You add another worker, while keeping the copying machine remain one. You notice that output increases to only 800 pages per hour, not doubling to 1,000. This incidence can best be explained by a) Marginal principle. b) Principle of opportunity cost. c) Principle of diminishing returns. d) Spill over principle. 7. a) b) c) d) Which of the following terms would best describe the consequence of scarcity? Limited wants. Trade-offs. Unlimited wants. Voluntary exchange. 8. a) b) c) d) In economics, the accumulated skills and training that workers have is known as: Human capital. Entrepreneurship. Physical capital. Innovation. 9. a) b) c) d) The slope of a curve is calculated as: The run divided by the rise. The horizontal axis divided by the vertical axis. The horizontal difference divided by the vertical difference between two points. The vertical difference divided by the horizontal difference between two points. 10. The production possibilities curve illustrates a) The principle of opportunity cost. b) The principle of diminishing returns. c) The marginal principle. d) The principle of voluntary exchange. 11. The additional cost resulting from a small increase in an activity is called a) Accounting cost. b) Marginal benefit. c) Marginal cost. d) Economic profit. 12. If an economy moves from producing 20 units of mobiles and 4 units of computers to producing 15 mobiles and 5 computers, the opportunity cost of the 5th computer is: a) 20 mobiles. b) 10 mobiles. c) 5 mobiles. d) 15 mobiles. 13. Production efficiency occurs when production a) Is at point beyond the production possibility frontier. b) Is on the production possibility frontier or inside it. c) Is at any attainable point. d) Is on the production possibility frontier. 14. If an economy is operating inside its current PPF then it must be experiencing a) The efficient use of resources b) Unemployment c) Scarcity d) Inflation 15. . Which economic principles is most involved in the analysis of scarcity using a production possibility curve? a) Principles of margin b) Principles of voluntary exchange c) Principles of opportunity cost d) All of the above Essay Questions: 1. You are running a business. You pay your employees $400,000 per year, the cost of raw materials $100,000 per year. Prior to running this business, you were a teacher earning $80,000 per year. What is the opportunity cost of running this business? 2. List out the factors of production. CH 3+4 Review: 1. a) b) c) d) A change in quantity supplied of a product is the result of a change in: consumer income. the state of production technology. the cost of producing the product. the price of the product. 2. a) b) c) d) A shift of demand curve or increase in demand is the result of a change in: The price of related goods. Income of the consumer. Increase in Population. All options are correct. 3. a) b) c) d) The price elasticity of demand is calculated by: The change in price is divided by the change in quantity demanded. The change in quantity demanded divided by the change in price. The percentage change in price divided by the percentage change in quantity demanded. The percentage change in quantity demanded divided by the percentage change in price. 4. a) b) c) d) In the case of perfectly elastic demand, the demand curve is: upward sloping. downward sloping. vertical. horizontal. 5. a) b) c) d) A shift of the supply curve to the right is the result of: A decrease in input costs. An increase in input costs. Shift in consumer preferences. A change in income of the consumer. 6. a) b) c) d) A normal good is a good for which There are very few complements. Demand decreases when income increases. Demand increases when income increases. There are few substitutes. 7. Suppose the equilibrium price of pizza is $8 and the equilibrium quantity is 50 units. If the price of pizza decreases to $6: a) The quantity demanded will be less than 50 units. b) The quantity supplied will be more than 50 units. c) There will be an excess demand of pizza. d) There will be an excess supply of pizza. 8. When the price of Video games went from $4000 to $5000, the quantity demanded of board games changed from 100 to 120 units a day. Video games and board games are: a) Substitutes. b) Complements. c) Inferior goods. d) Necessities. 9. The price elasticity of demand is calculated as: a) The absolute value of the percentage change in quantity demanded divided by the percentage change in price. b) The responsiveness of revenue to a change in quantity. c) The ratio of the change in quantity demanded divided by the change in price. d) The responsiveness of revenue to a change in price. 10. If supply is perfectly elastic, the price elasticity of supply is equal to: a) 1. b) -1. c) Infinity. d) A number between -1 and 1. 11. Suppose that the elasticity of demand for a product is 0.5 (Inelastic demand). What will happen to total revenue as a firm increases the price? a) Total revenue will increase. b) Total revenue will decrease. c) Total revenue will stay the same. d) Cannot be determined from the information provided. 12. Suppose that a 4% increase in price results in an 8% decrease in quantity demanded. Price elasticity of demand is equal to: a) 3. b) 2. c) 4. d) 8. 13. The ratio of the percentage changes in quantity demanded to the percentage change in income is known as the: a) Demand-side shift factor. b) Income elasticity of demand. c) Price elasticity of demand. d) Cross elasticity of demand. Essay Questions: 1) Suppose maestro restaurant sold 20,000 pizzas at $6.50 per pizza. When this restaurant increased its price by 20%, its sales for the next month decreased by 15%. As a result of this price increase the monthly sales of Pepsi decreased by 10%. Using the initial value elasticity method, a. Find the price elasticity of demand for this pizza; b. Would you expect total revenue to increase after increasing the price? Why? c. Are pizza and Pepsi substitutes or complements? Why? CH 5 Review: 1) When the total product curve is falling, the: a. b. c. d. The marginal product of labor is zero. The marginal product of labor is negative. The average product of labor is increasing. The average product of labor must be negative. 2) Diminishing marginal returns implies that: a. b. c. d. marginal costs are decreasing. marginal costs are increasing. marginal costs are constant. marginal costs may be increasing or decreasing. 3) An input is indivisible if: a. b. c. d. It cannot be scaled down to produce a smaller quantity of output. It cannot be increased to produce a larger quantity of output. It cannot be used as a substitute for other inputs in the production process. It is sufficiently inexpensive to purchase what firms will want to buy as much as they can. 4) Economic cost is equal to: a. b. c. d. Explicit cost + implicit cost. Explicit cost - implicit cost. Accounting cost. Explicit cost 5) The change in output from one additional unit of labor is called: a. b. c. d. Marginal product of labor Long-run average cost Marginal cost Marginal-revenue product of labor 6) The key difference between the short run and the long run is that there are ___________in the long run. a. b. c. d. Diminishing returns No diminishing returns Fixed cost Opportunity cost. 7) When the total product curve is increasing, the: a. b. c. d. Marginal product of labor is zero. Marginal product of labor is negative. Marginal product of labor is increasing. Average product of labor must be negative 8) Which of the following statement is not correct? a) b) c) d) When Average cost is minimum, marginal cost equals average cost When average cost rises, marginal cost is below or less than average cost When average cost is falling, marginal cost will be less than average cost Marginal cost intersects the average cost at its minimum point 9) Suppose total cost is $600 with 5 units of output and fixed cost is $ 150, then what is average variable cost at the same output level. a) b) c) d) 200 650 90 450 Short Essay Questions 1. Explain the difference between Explicit Cost and Implicit Cost. 2. What is the difference between accounting and economic profit? 3. The following table shows cost schedule of production at different units of output. Units of Output 0 1 2 3 4 Total cost 100 125 145 160 180 a. Calculate average fixed cost at 2 units of output b. Calculate the marginal cost at 3 units of output. c. Calculate variable cost at the 4 units of output.