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ECO101
Selected Economic Glossary
SSC351--Improving Office Productivity Through TQM
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SSC351 Study Guide

 

MCQ

 

A1.

Product X and Product Y are related and an increase in price of Product X causes less of Product Y to be demanded.  Which of the following best describes Product Y?

A.       Product Y uses the same factors of production as Product X.

B.       Product Y is substitute of Product X.

C.      Product Y is complementary to Product X.

D.      Product Y is an inferior good.

 

A2.

When the price a Product Q increases, people demand more of Product R because

A.       Product R is a substitute of Product Q.

B.       Product R complements Product Q.

C.      The supply of Product Q decreases.

D.      The price of Product R decreases.

 

A3.

What will happen if a product is sold above equilibrium?

A.       Suppliers will supply less quantity.

B.       The quantity consumers buys is higher.

C.      There will be shortage in the market for the product.

D.      More units are available in the market for consumers to buy.

 

A4.

Which of the following is likely to happen during the Monsoon season?

A.       Demand for fish increases.

B.       The supply curve for fish shifts left.

C.      The supply of beef increases.

D.      The price of chickens decreases.

 

A5.

If people are able but not willing to pay for a particular good,

A.       sellers will not supply the good.

B.       there will be no demand for the good.

C.      the demand curve will shift left.

D.      The equilibrium price will be set lower.

 

B1.

Which of the following situations will shift the demand curve of Product S?

A.       When there is a change price of Product S.

B.       When the price of a related good to Product S changes.

C.      When the supply of Product S changes.

D.      When the demand and supply of Product S is not in equilibrium.

 

B2.

What would happen to the price of Product G if its supply increases?

A.       Price increases.

B.       Price remains unchanged.

C.      Quantity supplied and quantity demand is not in equilibrium.

D.      Price drops.

 

B3.

Which of the following is an example of variable cost?

A.       Insurance against fire.

B.       Production Manager’s salary.

C.      Raw materials.

D.      Office rent.

 

B4.

Which of the following will happen if the government sets a price floor?

A.       Quantity demanded increases.

B.       Demand curve shifts right.

C.      Quantity demanded is greater than quantity supplied.

D.      Surpluses occur.

 

B5.

The price of good Y was increased by 25% and this led to a decrease in quantity demanded by 10%.  Which of the following best describe good Y?

A.       Good Y has many substitutes.

B.       Good Y is fairly price elastic.

C.      Consumers are very sensitive to the change in price of good Y.

D.      Good Y is fairly price inelastic.

 

C1.

Of the following goods, which one is probably fairly price inelastic?

A.       Rice.

B.       Beef.

C.      Newspapers.

D.      Ice creams.

 

C2.

Which of the following would happen if the demand curve shifts right while at the same time supply decreases?

A.       Price will fall.

B.       Price will remain unchanged.

C.      There will be a new equilibrium price.

D.      We cannot figure out what will happen.

 

C3.

The demand curve of Product Z shifts left.  Which of the following can be a likely cause?

A.       More people demand Product Z.

B.       The price of Product Z goes up.

C.      The price of Product Z’s close substitute drops.

D.      There is a shortage of Product Z in the market.

 

C4.

Sacrificing an evening out with your friends because you had to study for your economics test is an example of

A.       equilibrium.

B.       opportunity cost.

C.      microeconomics.

D.      scarcity.

 

C5.

Products are considered related if

A.       They are priced similarly.

B.       They are bought by people with similar needs and wants.

C.      They can be substituted by each other.

D.      Their production costs are the same.

 

D1.

Which of the following would happen if the demand curve shifts right while at the same time supply decreases?

A.       Price will fall.

B.       Price will remain unchanged.

C.      There will be a new equilibrium price.

D.      We cannot figure out what will happen.

 

D2.

Which of the following will happen if the government sets a price floor?

A.       Quantity demanded increases.

B.       Demand curve shifts right.

C.      Quantity demanded is greater than quantity supplied.

D.      Surpluses occur.

 

D3.

When the price a Product Q increases, people demand more of Product R because

A.       Product R is a substitute of Product Q.

B.       Product R complements Product Q.

C.      The supply of Product Q decreases.

D.      The price of Product R decreases.

 

D4.

Which of the following situations will shift the demand curve of Product S?

A.       When there is a change price of Product S.

B.       When the price of a related good to Product S changes.

C.      When the supply of Product S changes.

D.      When the demand and supply of Product S is not in equilibrium.

 

D5.

What will happen if a product is sold above equilibrium?

A.       Suppliers will supply less quantity.

B.       The quantity consumers buys is higher.

C.      There will be shortage in the market for the product.

D.      More units are available in the market for consumers to buy.

 

 

PART A (20 MARKS).  Answer ALL questions.

 

1.

One factor contributing to the economic problem is:

A.      the difficulty of suppliers to produce goods.

B.      the high demand of certain essential goods.

C.      the scarcity of resources.

D.      high equilibrium price of non-essential items.

 

2.

 Which one of the following is not considered a fundamental economic question?

A.      For whom are goods produced?

B.      What commodities to produce?

C.      How are goods produced?

D.      When should goods be produced?

 

3.

What will happen to the quantity demanded for beef when its price increases?

A.      Lesser quantities demanded.

B.      More quantities demanded.

C.      Quantity demanded remains unchanged.

D.      Changes to quantity demanded cannot be predicted.

 

4.

Which of the following will likely happen during rainy seasons?

A.      The supply curve of fish shifts left.

B.      Demand for rooms at beach resorts increases.

C.      Demand for fish decreases.

D.      The supply of taxi services decreases.

 

5.

What is the price elasticity of demand coefficient for pencils that increases in price by 20% with a reduction in quantity demanded by 25%?

A.  1.25

B.  0.80

C.  125

D.  80

 

6.

If the price elasticity of demand coefficient of a product is 0.16, we say the product is:

A.      fairly price inelastic.

B.      fairly price elastic.

C.      perfectly inelastic.

D.      perfectly elastic.

 

7.

Which of the following will happen when goods are sold above equilibrium?

A.      More goods will be purchased.

B.      Shortages will result.

C.      Consumers will demand lower quantities.

D.      The demand curve will shift left.

 

8.

As income increases, less of Product A is demanded because Product A is a/an:

A.      normal good.

B.      cheap good.

C.      luxury item.

D.      inferior good.

 

9.

If the supply curve of Product B shifts right, it is because:

A.      more people demand Product B.

B.      the price of Product B increases.

C.      the income of consumers increases.

D.      production costs decrease.

10.

If the supply of a product increases but its demand remains unchanged, the price of the product will:

A.      remain unchanged.

B.      Increase.

C.      decrease.

D.      not be in equilibrium.

 

 

 

PART B (20 MARKS).  Answer ALL Questions.

 

QUESTION 1

 

The schedule below shows the quantity demanded and quantity supplied respectively of pencils at various price levels.   Use the schedule to answer questions that follow.

 

Price per unit

($)

Quantity

Demanded

(units)

Quantity Supplied

(units)

1.00

200

1000

.80

400

800

.60

600

600

.50

800

400

.40

1000

200

 

(a)      What is the equilibrium price and equilibrium quantity?

(2 marks)

 

(b)      When pencils are sold at $0.80 per unit, will it create a surplus or a shortage?  How much is the amount of shortage or surplus?

(2 marks)

 

(c)      Calculate the price elasticity of supply coefficient when the price of pencils increases from $0.60 to $1.00 per unit.  Show your calculations.

(2 marks)

 

 

QUESTION 2 

 

(a)      The following is a partially completed cost schedule.  Copy the schedule onto your answer sheet and fill in the blank spaces.

 

Output

(units)

Total Cost

($)

Average Cost

($)

Marginal Cost ($)

Total Variable Cost ($)

Average Fixed Cost ($)

Average Variable Cost ($)

0

24

-

-

0

-

-

1

 

 

9

 

 

9

2

 

20.5

8

 

12

 

3

48

 

7

 

 

 

4

 

 

6

30

 

7.5

5

 

12.2

7

 

4.8

 

6

 

 

8

45

 

 

 

(6 marks)

 

(b)      Sketch the following curves in one diagram:  (i) Average fixed cost curve, (ii) Marginal cost curve, (iii) Average cost curve, and (iv) Average variable cost curve.  Label the diagram correctly. 

(3 marks)

 

(c)      The following is a diagram showing various short-run average cost curves with each representing different factory sizes.  Refer to the diagram to answer the questions that follow. 

 

Cost ($)

SRAC 1

SRAC 2

SRAC 3

SRAC 4

SRAC 5

0     100     200     300     400     500     600     700     800     900     1000     1100

Output (units)

    750

10

 

8

 

6

 

4

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


i.                     Which factory size should the firm use to produce 750 units of output in the short run?

 

(1 marks)

 

ii.                   Complete the diagram by drawing the long-run average cost (LRAC) curve and label it.

 

(2 marks)

 

iii.                  Estimate the number of output with the lowest average cost in the long run.

(2 marks)

 

 


PART C ( 20 MARKS).  Answer EITHER question 1 OR question 2

 

QUESTION 1

 

(a)     With the aid of suitable diagrams, explain the differences between changes in quantity demanded and changes in demand.

 

(6 marks)

 

(b)     Briefly explain 2 factors that can change supply.

 

(4 marks)

 

(c)     With the aid of suitable diagrams, explain how changes in the price of beef can change the demand for chickens.

 

(4 marks)

 

(d)     What will changes in income do to demand?  Use appropriate diagrams to explain your answer.

 

(6 marks)

 

QUESTION 2

 

(a)      What is meant by scarcity and how does it relate to the economic problem?

(4 marks)

 

(b)      Briefly explain the concept of opportunity cost.  Please use appropriate examples to support your answer.

 

(6 marks)

 

(c)      Describe the 4 factors of production.

 

(8 marks)

 

(d)      From the perspective of economics, why isn’t there a demand for sea water?

 

(2 marks)

END OF QUESTION PAPER

 

 

 

 

 

 

 

 

 

 

 

 

 

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