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EXERCISE

1.1
NAME
SCORE
COURSE & SECTION
DATE
Problem:
A.
Describe your potential opportunity cost given the listed decision that you
have made.
1.
_

Attending your Economics class for today

2.

Spending 2 hours in computer games

3.

Spending your P300 for a buffet lunch

4.

Going on a vacation in your mothers hometown

B.
Identify whether the statement is an outcome of positive or normative
economic analysis.
1.

The Philippine economy attained 4% growth in 2011.

2.

Education must be the top priority of the government.

3.
Non-traditional politicians are most likely to win in the
election, hence, economic growth is expected.
4.

The Philippine exchange rate for a dollar decreases from P45 to

5.

A good dealer should inculcate nationalism to attain growth in

P41.50.
the country.
C.
Indicate whether the following events are concerns of macroeconomics or
microeconomics.
1.

The consumption of expenditure in the Philippines

2.

A subsidy given by the government to the fishing industry

3.

The underemployment in the country

4.

The supply and demand for rice in the Philippines

5.

The oil deregulation program

EXERCISE
1.2
NAME
SCORE
COURSE & SECTION
DATE

Given demand and supply function: Qd = 120 4P and


Qs = -10 + 6P Where: P is the price
Qd is quantity demanded
Qs is quantity supplied

A.

Complete the table below by substitution


Quantity Supplied (Qs)

Price
(P)
2

Quantity Demanded
(Qd)

5
10
13
20
B.
Based on the table above, plot the supply curve and demand curve. Be
sure to observe the pointers of good practice in making a graph. Label Price (P) in
the vertical axis and Quantity (Q) on the horizontal axis. Have a consistent scale
on your graph.

EXERCISE
1.3
NAME
SCORE
COURSE & SECTION
DATE
TRUE OR FALSE. Write True if the statement is correct and False if the statement is
false.
1. Economics is a study of efficient use of scarce resources in the
production of goods and services to satisfy as many wants as possible.
2.

Human wants can easily be satisfied given a lot of money.

3.

Resources are not scarce in a wealthy economy.

4. Economics is a science because it uses a scientific method of


inquiry in understanding economic reality.
5. The major purpose of studying economics is to learn how to
succeed in business.
6.
microeconomics.

Infation and unemployment topics belong to the study of

7. One important test of a good theory is whether it is useful in


our understanding of problems to which it is applied.
8.

With the power to tax, government does not need to make

9.

Positive economics seeks to understand but not to make

choices.
judgement.
10. Economic model is an abstract representation of economic
reality is false.

EXERCISE
2.1
NAME
SCORE
COURSE & SECTION
DATE
GRAPHICAL ANALYSIS: Given the Production Possibilities Curve for a
hypothetical economy, which production points A, B, C, D, F represent the
following situations.
30
25
20
15
10
5
0
0
70

10
80

20

30

40

50

60

1.

The economy has decided to produce 30 of good X and 80 good

2.

Efficient production point/s for the economy.

3.

Point or points of impossible production level.

4.

Production point of inefficiency.

5.

Production point if all inputs are used for Y.

Y.

6.

The economy uses all its available inputs in the production of

7.

The economy has not maximized the use of its productive inputs.

8.

The economy uses all its available inputs in production of good

good Y.

X.

9. The economy produces good X and good Y where it will


make use of all available inputs, nothing is left unutilized.
10. The economy produces 20 of good X and 50 of good Y.

EXERCISE
2.2
NAME
SCORE
COURSE & SECTION
DATE
TRUE OR FALSE: Write True if the statement is correct and False if the statement is
false.
1. The basic problem in economics of what, how and for whom to
produce in a command economy is decided by private individuals or corporations.
2.
An economy can shift its production possibilities curve (PPC)
outward by the increase in the use of productive inputs.
3. The measurement of economic growth in the economy is
the increase in money holdings of people on the economy.
4. The economy is operating inside its PPC if the economy failed
to use all its productive inputs, hence, there is unemployment.
5.

A doubling of input used would shift outward an economys PPC.

6. Production of more and better goods and services is a


description of economic goal which is economic security.
7.

Land is not considered capital in economics.

8.
An improvement in technology of producing both goods
will shift the PPC curve inward.
9. Resources in the market economy are distributed
according to the needs of the citizens of the country.
10. The free-enterprise economy is the best economic system to
narrow the gap between the rich and the poor.

EXERCISE
2.3
NAME
SCORE
COURSE & SECTION
DATE

MULTIPLE CHOICE: Write only the letter corresponding to your answer in the space
provided.
1.

Which of the following is not an economic problem?

a.

Deciding on whether or not to have more than

one girlfriend. b.

Choosing between eating lunch

at home or in school.
c.

Deciding between working overtime or taking vacation.

d.

Praying for less exams and more discussions in Economics.


2.

Which of the following is correct if resources were not

scarce: i.e. unlimited a.

What, how and for whom to produce would

not be problems.
b.

It would not matter how goods and income are distributed

among different people. c.

It would not matter if resources were

combined unwisely.
d.

All of the above would be true.

3. The mechanism that solves the problems of what, hot and for
whom to produce under the free enterprise economic system.
a.

Distribution

Advertisement b.
d.

c.
Allocation

Market System
4.

Which of the following is not an example of capital?

a.

Money

c.

Tools

b.
these

Factory

d.

None of

5. The economic system which assumes private prosperity rights


and freedom of contract together with certain government regulations that define
the limits of market forces is
a.

Traditional

c.

b.
Market Economy
Economy
6.
a.

d.

Consumer

c.

Entrepreneur

d.

Mixed

7. Which of the following statements below is not a


characteristic of the command economy
Public ownership of resources

Central
planning
b.
Absence of competition
d.
Operation for
profit
8.
Full utilization of resources is the basic
economics goal of:
a.
Economic freedom
c.
Full
employment
b.
Economic security
d.
Price stability
9.

Mixed

The risk bearer in the production process is the

b.
Capitalist
economy

a.

Command

c.

Factor payment for the entrepreneur.

a.

Wages

c.

Normal Profit

b.

Profit

d.

Interest

10. What is the fundamental problem in Economics?


a.

Infation

c.

Scarcity

b.

Devaluation

d.

Unemploym
ent

EXERCISE
3.1
NAME
SCORE
COURSE & SECTION
DATE
Differentiate the following:
1.

Economic goods vs. free goods

2.

Normal goods vs. inferior goods

3.

Substitute goods vs. complementary goods

4.

Change in demand vs. change in quantity demanded

5.

Change in supply vs. change in quantity supplied

6.

Pure profit vs. normal profit

7.

Surplus vs. shortage in the market

8.

Product market vs. factor market

9.

Macroeconomics vs. microeconomics

10.

Cost vs. Expense

EXERCISE
3.2
NAME
SCORE
COURSE & SECTION
DATE
INDENTIFICATION: Use the choices below for your answer.
CHOICES:
Demand function
Demand schedule
Demand curve
Supply function
Supply curve
1.

Change in demand
Change in quantity
demanded
Chance in quantity
supplied
Law
of demand
Increase in supply

Change in
supply
Decrease
in
demand
Increased
demand
Law
of supply
Decrease in
supply

It is represented by a shift of the supple curve to the right.

2.
It is represented by a shift of the demand curve either to the
right or to the left.
3.

It is represented by a shift of the supply curve to the right or to

the left.
4.
things constant.

It states that the higher the price the higher the quantity all other

5.
A mathematical equation that shows an inverse relation
between price and quantity all other things constant.
6.
A list or table that shows a direct relation between price and
quantity all other things constant.
7.
A locus of points that shows an inverse relation between price
and quantity all other things constant.
8.
A mathematical equation that shows the direct relation between
price and quantity all other things constant.
9.
A list or table that shows the inverse relation between price
and quantity all other things constant.
10. A locus of points that shows the direct relation between price
and quantity all other things constant.
11. It is represented by a shift of the demand curve to the right.

12. It states that the higher the price the lower the quantity all other
things constant.
13. It is represented by a movement from one point to another along
a given supply curve.
14. It is represented by a movement from one point to another along
a given supply curve.
15. A graphical presentation of the supply schedule.

EXERCISE
3.3
NAME
SCORE
COURSE & SECTION
DATE
MATCHING TYPE: Write the letter of the correct answer in Column 2 on the blank
before each number in
Column 1.
1.

Price support or floor price

2.

Increase in Tax

3.

Market or Equilibrium price

4.

Price ceiling or price control

5.

Increased in resource prices

6.

Increase in the income if the product is a normal good

7.

Increase in subsidy

8.

Increase in the price of substitute goods

9.

Increase in rental payment

10. Decrease in number of buyers

a.

b.

c.

d.

11. Decrease in the price of the good itself


12. Increase in the number of sellers
13. Surplus in the market
14. Improvement in technology
15. Shortage in the market

e.

f.

g.

h.

NAME
SCORE
COURSE & SECTION
A.

EXERCISE
3.4

TABULAR ANALYSIS: Demand and Supply Schedule


Qd

Qs

85

70

20

45

10

45

35

12

55

MODIFIED TRUE OR FALSE: Write T if the statement is correct. If false, change the
underlined word/s to make it correct.

B.

1.

At P = P2, shortage is 90 units

2.

At P = P5, surplus is 50 units

3.

At P = P12, surplus is 20 units

4.

At P = P10, surplus is 10 units

5.

P e = P 45 ,

6.

Qe = 10 units

Draw Demand and Supply Curves given the

above schedules. P

MODIFIED TRUE OR FALSE: Write True if the statement is correct, if false change
the underlined words to make it true. Write your answer on the space below or
above the underlined word(s).
1. The law of demand states that if price increases, quantity of
sold increases all other things constant.
2.

An increase in income will mean an increase in the demand for

3.

The most stable price in the market is the equilibrium or market

inferior goods.
price.
4.

Bread and butter, coffee and sugar are examples of substitute

goods.
5.

Demand increases if price of complementary goods increases.

6.

Supply curve shifts to the right if taxes increases.

7.

A price higher than equilibrium price will result to a surplus in

the market.
8.
Sardines, noodles, eggs are examples of normal goods
usually bought if income decreases.
9.

There is an inverse relation between price and quantity

demanded.
10. An improved technology encourages producers, hence an
increase in supply.
11. A shortage occurs when the price is above the equilibrium price.
12. Surpluses drive prices down and shortages drive prices up in a
market economy.
13. Economic goods are goods which command prices and also
called the zero priced goods.
14. Taste and preferences have inverse relation to demand.
15. Change in demand is affected by chance in the price of the good
itself.
16. Demand curve shifts to the right if there is a decrease in the
number of buyers.
17. Demand function is a graphical presentation of a demand
schedule.
18. An increase in taxes, demand constant, will result to an
increase in the equilibrium price in the market.
19. Subsidy directly affects supply hence an increase in the
equilibrium price in the market.
20. The market price decreases if number of buyers increases other
things constant.

NAME
SCORE
COURSE & SECTION

EXERCISE
4.1

IDENTIFICATION: Use the choices below for your answer. Write your answer in the
space provided for.
1.

Quantity demanded is not very responsive to changes in the price of the


good itself, all other things constant.

2.

Measures the degree of responsiveness of quantity demanded due to the


changes in the price of the good itself all other things constant.

3.
A maximum price regulated by the government to protect the interest of the
consumers.
4.

Measures the degree of responsiveness of quantity supplied to the change in


the price of the good itself all other things constant.

5.

Quantity demanded does not respond at all to changes in the price of the
good itself, all other things constant.

6.

Measures the degree of responsiveness of quantity demanded due to the


change in the consumers income all other things constant.

7.

The percentage change in quantity demanded is just proportional to the


percentage change in the price of the good.
_

8.

Measures the degree of responsiveness of quantity demanded due to


changes in the price of other goods all other things constant.

9.

A minimum price regulated by the government to protect the interest of


producers specifically the farmers.

10.

Quantity demanded changes even if the price of the good itself does not
change. All other things constant.

CHOICES:

Price elasticity of demand


Price elasticity of supply
Income elasticity of demand
Cross elasticity of demand
Price ceiling
Price foor

Relatively elastic
demand
Relatively inelastic
demand
Perfectly elastic
demand
Perfectly inelastic
demand
Unitary elastic
demand
Market price

NAME
SCORE
COURSE & SECTION

EXERCISE
4.2

Given the statements below, determine the type of elasticity. Write RE for relatively
elastic, RI relatively inelastic, U for unitary, PE for perfectly elastic and PI for
perfectly inelastic.
1. Price elasticity for oil.
2.

Elasticity coefficient is -2.5

3.

Total revenue increases after the same after a change in price.

4.

Total revenue remains the same after a change in price.

5.

The price elasticity of demand for textbook that is required in

6.

Demand for medicine which you need for tetanus.

7.

Demand for the firm under pure competition.

your course.

8.
the goods itself.
9.

Quantity demanded is not responsive to change in the price of


Demand for products which are considered necessities.

10. Demand for luxuries such as expensive jewelleries, clothes,


dresses, bags.
11. Elasticity coefficient is zero.
12. The value of elasticity coefficient is infinite.
13. What kind of demand is illustrated if price falls and total
revenue moves in the opposite direction?
14. Demand for the product which has many substitutes.
15. The value of elasticity coefficient is 0.25
EXERCISE
4.3
NAME
SCORE
COURSE & SECTION
DATE
TRUE OR FALSE
1.

The value of the price elasticity of demand is always positive.

2. The price elasticity of demand considers extent of effect of the


price of related goods, to the demand for the good under study.
3.
If the Ed = -1, then it is a unitary demand.
4.
increases.

Inferior goods are goods, which are usually demanded as income

EXERCISE
4.2

NAME
SCORE
COURSE & SECTION
5.
If coefficient of the cross price elasticity of demand is positive
then the goods under study are complementary goods.

6.
A perfectly elastic demand shows that consumers demand
is not affected by the
change in price.
7. Total revenue of the firm increases as price increases when its Ed
is relatively elastic.
8.

Demand is relatively inelastic if Ed < 1.

9.

Price ceiling creates surplus and price foor creates shortage in

the market.
10. The price elasticity of demand is defined as the change in
quantity demanded divided by the change in the price of the good itself.
11. A vertical demand curve would have a price elasticity of zero.
12. The income elasticity of demand is positive for inferior or giffen
goods.
13. Two goods are complementary goods, if the cross price
elasticity of demand is positive.
14. It is advisable for seller to reduce the price when demand is
price elastic.
15. A minim wage above equilibrium wage creates unemployment.
EXERCISE
4.4
NAME
SCORE
COURSE & SECTION
DATE
MULTIPLE CHOICE: Write only the letter corresponding to your answer.
1.
If 10% increase in price resulted to a 20% reduction in the
quantity demanded, the value of elasticity is:
a.
-10

-1

b.

-2

c.

-0.5

d.

2.
If jeepney drivers raised the fares from P8.00 to P10.00 and
realized higher earnings after increase, the demand for jeeps is:
a.
elastic
perfectly elastic

b.

inelastic

c.

unitary

d.

3.
If a small rise in the price of concert tickets caused a decrease
in total sales, it could be concluded that demand is:
a.
inelastic
perfectly elastic
4.

b.

elastic

c.

unitary

d.

Price elasticity of demand for a commodity tends to be elastic

a.

the more of a necessity it is

c.

b.

the more substitutes are for


it

d.

over shorter time


period
the lower the price

Use the diagrams below to answer questions


nos. 5 to 10
a.
b.
c.

d.

e.

5.

The demand with elasticity coefficient of zero.

6.

Demand curve for necessities like that of sugar and salt.

7.

The demand curve with unitary elasticity.

8.

The demand curve for products which are extremely important

9.

The demand curve with an elasticity coefficient of infinity.

like medicine.
10. The demand curve for luxury items.
EXERCISE
5.1
NAME
SCORE
COURSE & SECTION
DATE
TRUE OR FALSE: Write True if the statement is correct and False, if it is wrong.
1.
It is marginal utility which the rational consumer maximizes
and expense which he minimizes.
2.
At the point of tangency of indifference curve and budget line,
the combination is both affordable and with the highest level of satisfaction.
3.
For the law of diminishing marginal utility to hold, there must
not be interruption in the consumption of successive units of a good.
4. Beyond saturation point, any increases in unit of a good
consumed will lead to positive marginal utility.
5.

A series of indifference curves is an indifference map.

6.

Saturation point for consumer is when total utility is increasing.

7. Budget line is a locus of points that shows various combinations


of two goods what can be consumed which will yield the same level of satisfaction.
8. The law of diminishing marginal utility states that as one
consumes more of a particular commodity, total utility diminishes.
9.
Higher indifference curve is preferable compared to a lower
indifference curve.
10. Total utility is the additional or the extra utility brought about by
the additional unit of good consumed.
EXERCISE
5.2
NAME
SCORE
COURSE & SECTION
DATE
IDENTIFICATION
1.
A theory which states that utility is not measurable, but can be
ranked or compared.
2.
An additional or extra satisfaction brought about by the
additional unit of the good consumed.
3.

The unit of measurement for satisfaction.

4.

The degree of satisfaction from units of the good consumed.

5.

What does the rational consumer maximize?

6.

What does rational consumer minimize?

7.
It states that as one consumes more and more of a particular
commodity, marginal utility diminishes.
8.
A curve showing various combinations of 2 goods that can be
consumed that will yield the same level of satisfaction.
9.

The point where total utility is already maximum.

10. A list that shows various combinations of 2 goods that can


be purchased given the same money income.
EXERCISE
5.3
NAME
SCORE
COURSE & SECTION
DATE

PROBLEM: Suppose that a consumer has a budget of P400 per day and he must
allocate it only on fruits or vegetables. The price of vegetable is P20 per kg and the
fruits is P25 per kg.

a.

Write down your budget function

b.

Budget schedule

c.

Draw the budget line

EXERCISE
6.1
NAME
SCORE
COURSE & SECTION
DATE
The graphical illustration below shows the theory of production. Label the
unknown variables represented by numbers.

1.
2.
3.
4.
5.
6.
7.
8.
EXERCISE
6.2
NAME
SCORE
COURSE & SECTION
DATE
A.
Use the following data to compute for average product and marginal
product.
Number of
Workers
0

Total Product

Marginal product

Average product

15

30

45

55

60

60

55

B.
Plot the total, average and marginal product and identify the stages of
production.

EXERCISE
6.3

NAME
SCORE
COURSE & SECTION

Suppose the Payumo Enterprises has the following cost schedule. Its TFC is P1,000
per month and its variable costs are in column 3. Complete the table below and
graph TFC, TVC and TC and the AFC, AVC, ATC and MC curves in another graph.
See pp 106 for your guide in graphing.
Output

TFC

500

1,00
0
2,00
0
3,50
0
5,00
0

3
4
5

TVC

TC

AFC

AVC

ATC

MC

IDENTIFICATION
1.

The additional cost from an additional unit of output produced.

2.

It shows the relationship between the level of input and output.

3.

The difference between ATC and AVC in the short-run period.

4.

Cost that exists only in the very short run or immediate period.

5.

Cost that decreases with the increases in the output produced.

6.

A monetary expenditure made to outsiders who supply the

7.

Inputs that do not vary with the level of output.

8.

Variable cost per unit of output.

inputs.

9.
It states that as you combine the fixed inputs to the
variable inputs, total product increases at an increasing rate continuously
increase at a decreasing rate and at a certain point it declines.
10. Cost of self-owned or self-employed resources.
11. The total output produced per unit of a resource employed.
12.
variable inputs.

Production period where all factors of production used are

13.

The rational stage of production.

14.

A production stage where the firm is over utilizing its fixed

15.

It is a J shaped curve.

input.

EXERCISE
6.5
NAME
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COURSE & SECTION
DATE
TRUE OR FALSE
1.
2.
in the short run.

Land and managerial talent are fixed inputs in the short run.
Rent, depreciation and salary of the managers are variable costs

3.
Implicit cost of a resource is counted as economic cost due to
the opportunity cost of the said resource.
4.

When TP is maximum, MP is negative.

5.

In the short-run period, TC = TFC at zero output.

In the long-run, ATC =


AVC.
7.
From the economists point of view, the real importance of
cost lies in the fact they represent constraints to production.
6.

8.

For the firm to reduce its fixed cost, it has to produce more

9.

Normal profit is part of the firms implicit cost.

output.
10. In the short run, the firms plant capacity or size of the plant is
fixed.
EXERCISE
7.1
NAME
SCORE
COURSE & SECTION
DATE
TRUE OR FALSE
1.

Advertisement is important in monopolistic competition.

2.

Pure competition is characterized by product differentiation.

3.

In order to sell more, firms under pure competition have to lower

4.

Under monopoly, economic profit is still present in the long-run

their price.
period.
5.
If the price is equal to its the average total cost, the firm is
operating with positive profit.
6.

Pure competition is prevalent in the agriculture sector.

7.
where MR = MC.

Loss is minimized or profit maximized at quantity produced

8.
differentiation.

Monopoly is a market structure characterized by product

9.

Collusion is prevalent under monopolistic competition.

10. Under monopolistic competition, product differentiation allows


some firms to charge higher prices than others.
11. Consumers prefer a market characterized by oligopoly
rather than monopolistic competition.
12. In order to sell more a monopolist has to lower price.
EXERCISE
7.2
NAME
SCORE

In the long-run, ATC =


COURSE
& SECTION
6.
AVC.
DATE
Identify the market structure as indicated below.
1.

One seller in the market.

2.

Demand is perfectly
elastic.
3. May produce identical or differentiated products.
4.

May produce identical or differentiated products.

5.

May practice price discrimination.

6.

Few sellers in the market.

7.

Product produce has no close substitute.

8.

No control over price by producer.

9.

Relatively easy to enter the industry.

10. Exists in the automotive industry.


11. Product is differentiated.
12. Prevalent in clothing industry.
13. Common in public utilities, protected industries.
14. Demand is relatively elastic.
15. Blocked entry in the industry.
EXERCISE
7.3
NAME
SCORE
COURSE & SECTION
DATE
MATCHING TYPE: Copy the letter of the correct answer on the blank before each
number.
1.

Demand for the industry.

2.

Demand for the firm in pure competition.

3.

Demand for pure monopoly.

4.

Demand for oligopoly.

5.

Demand for monopolistic competition.

6.

Kinked demand curve.

7.

Relatively inelastic demand.

8.

Perfectly elastic demand.

9.

Demand where neither buyer nor


seller cant control price in the market.
d.

10. Demand curve where price is


rigid, to increase or to decrease the
price will always
mean to decrease in revenue.
e.

a.

b.

c.

EXERCISE
7.4
NAME
SCORE
COURSE & SECTION
DATE
MULTIPLE CHOICE
1.

Break-even output is where:


a.
AVC

P = ATC

c.

P = minimum

b.

P < ATC

d.

MR = MC

2.

Shut-down output is where:


a.

P < ATC

c.

P > AVC

b.

P = ATC

d.

P < AVC

3.

The MR = MC profit maximizing/loss minimizing condition applies in:


a.

Pure Competition only

b.
Pure Monopoly only
Structure
4.

Oligopoly only

d.

All Market

Which among the following is not true?


a.
MR =
when MR = MC
b.
above

5.

TR/

c.

Total profit = TR TC

d.

Profit maximum
None of the

Which of the following does not apply to pure monopoly.


a.

Control of supply of basic input

c.

b.
Holding franchise
the price
6.

c.

Holding patents
d.

No control over

The equality of P,MC and Minimum ATC in Pure


Competition a.

Results to zero accounting

profit
b.

Encourages entry of new firm

c.

Shows that right goods are produced in

the right ways. d.

none of the above

7.
In which of the following market structure are sellers mutually
interdependent?
a.

Pure Competition

c.

Oligopoly

b.

Pure Monopoly

d.

Monopolistic
Competition