Name: ______________________________ Score: ____________

SR Code: ______________________________ Class Schedule: ____________

MIDTERMS EXAMINATION
SS 105: INTRODUCTION TO ECONOMICS WITH TAXATION AND LAND REFORM

GENERAL DIRECTIONS: Read the instructions carefully. Write all your answers in CAPITAL LETTERS. Erasures
or any form of modification on the answers shall not be given a point. You are allowed to use CALCULATORS
(cellphones ARE NOT ALLOWED). Answers written in pencil shall NOT be honored. Use the back for scratch. Answers
at the back will NOT be honored.

I. True or False. Write TRUE of the statement is correct, and FALSE if it is incorrect. (20 points)

_________ 1. The Double Shift Rule tells you that when supply and demand shift at different times, one of the two
equilibrium values (the price or the quantity) will change in an indeterminate manner.
_________ 2. The Law of Demand states that when the price goes up, the quantity demanded will go down.
_________ 3. The Law of Supply states that when the price goes up, the quantity demanded also goes up.
_________ 4. When the demand increases, the equilibrium price will increase and the equilibrium quantity will
decrease.
_________ 5. Market equilibrium is represented by Qd = Qs
_________ 6. Demand and supply functions will help you find the market equilibrium price and quantity.
_________ 7. Elasticity is different along the demand curve.
_________ 8. A positive cross price elasticity tells you that the goods are substitutes.
_________ 9. The price elasticity of demand measures the responsiveness of price to quantity demanded.
_________ 10. In a linear demand curve, the top most part will always be perfectly inelastic.
_________ 11. When demand is price inelastic, total revenues will fall together with the price increase.
_________ 12. When supply is perfectly inelastic, a 10% change in price will result in a 10% change in quantity
supplied.
_________ 13. When demand is relatively price inelastic, a 5% change in price shall result in a greater than 5% change
in quantity demanded.
_________ 14. The elasticity coefficient of a good with elastic demand is 1.
_________ 15. In perfectly elastic demands, change in price is greater than change in demand.
_________ 16. Gasoline is one example of a good with a perfectly elastic demand.
_________ 17. An increase in utility means consumers are worse, and a decrease means consumers are better off.
_________ 18. Your tastes and preferences tell you which goods provide satisfaction and how much satisfaction you
will receive from these goods.
_________ 19. Examples of total variable costs include payments for raw materials, wages, tax payments, and
operating expenses.
_________ 20. Long-run is a time period wherein all fixed factors can be variable.

II. Multiple Choice. Write the letter of the correct answer on the space provided. (10 points)

_____ 1. What happens to the price and quantity when the demand increases, and the supply decreases?

A. Price indeterminate, quantity increases C. Price increases, quantity indeterminate

B. Price indeterminate, quantity decreases D. Price decreases, quantity indeterminate

_____ 2. Which among the types of elasticity of demand has an elasticity coefficient of greater than 1?

A. Elastic C. Inelastic
B. Perfectly Elastic D. Perfectly Inelastic

_____ 3. Which law states that as an individual consume more units of commodity per unit of time, his total utility increase
reaches its maximum capacity and starts to decrease?

A. Law of Marginal Utility C. Law of Marginal Returns

B. Law of Diminishing Marginal Utility D. Law of Diminishing Marginal Returns

_____ 4. Which is used as measurement for utility?

A. Units C. Lot
B. Utils D. Totals

_____ 5. If marginal utility is less than zero, what must happen to price to increase quantity demanded?

A. Increase C. Stay the same

B. Decrease D. None of the above
_____ 6. This shows the different combinations of two goods a consumer can purchase given his income and the prices of
goods.

A. PPF C. Budget Line

B. Income Line D. B and C

_____ 7. Which among the following represents perfectly inelastic demand?

A. Shallow downward sloping curve C. Vertical line

B. Steep downward sloping curve D. Horizontal line

_____ 8. If longer production lag affects the elasticity of supply, what must be true?

A. Supply is relatively inelastic C. Supply is perfectly inelastic

B. Supply is relatively elastic D. Supply is perfectly elastic

_____ 9. Which shows the different combinations of two goods that a consumer can purchase given his income and the
prices of the goods?

A. Indifference Curve C. MRS

B. Budget Line D. Price Consumption Curve

_____ 10. It is the difference between total revenue and both explicit and implicit costs.

A. Business profit C. Marginal cost

B. Economic profit D. Shutdown point

III. Problem Solving. Read each scenario carefully and answer the questions that follow. Choose the letter of the
correct answer and write on the space provided. (25 points)

The price of gasoline falls together with increase in consumer income. Identify what will happen to the market for bus rides,
an inferior good.

_____ 1. What will happen to the supply and demand curves?

A. Supply stays the same, demand increases C. Supply increases, demand decreases
B. Supply increases, demand stays the same D. Supply decreases, demand increases

_____ 2. What will happen to the equilibrium price?

A. Price increases C. Price indeterminate

B. Price decreases D. Price stays the same

_____ 3. What will happen to the equilibrium quantity?

A. Quantity increases C. Quantity indeterminate

B. Quantity decreases D. Quantity stays the same

The price of notebooks went up to P25 from P12, and the quantity demanded falls from 10 boxes to 8 boxes of notebooks.

_____ 4. How much is the initial revenue? How much is the old revenue?

A. P250 C. P120
B. P200 D. P96

_____ 5. Using the total revenue test of elasticity, what type of elasticity demand exists?

A. Perfectly elastic C. Unit Elastic

B. Perfectly Inelastic D. Elastic

A 12% increase in the price of cookies increased the quantity demanded for muffins by 24%, and decreased the quantity of
cookies demanded by 18%.

_____ 6. What is the cross price elasticity of demand between muffins and cookies?

A. 2 C. -2.16
B. -2 D. 2.16

_____ 7. What is the relationship between cookies and muffins?

A. Cookies and muffins are substitutes C. Cookies and muffins are inferior goods
B. Cookies and muffins are complements D. Cookies and muffins are normal goods
Daniel’s income changed from KRW500,000 per guesting to KRW1.2m, and the amount of gaming consoles he buys
increased by 60%.

_____ 8. What is the percentage change in Daniel’s income?

A. -58% C. -140%
B. 58% D. 14-%

_____ 9. What is the income elasticity of demand coefficient?

A. -2.33 C. 0.43
B. 2.33 D. -0.43

_____ 10. What type of goods are gaming consoles in relation to Daniel’s income?

A. Inferior goods, necessity C. Normal goods, necessity

B. Inferior goods, luxury D. Normal goods, luxury

Mr. Ong’s salary changed to KRW825,000 from KRW1,210,000. His vending machine coffee intake increased by 20%.

_____ 11. What is the percentage change in Mr. Ong’s salary?

A. 47% C. -34%
B. -47% D. 34%

_____ 12. What type of good is vending machine coffee in relation to Mr. Ong’s salary?

A. Inferior goods, necessity C. Normal goods, necessity

B. Inferior goods, luxury D. Normal goods, luxury

_____ 13. What is the income elasticity of demand coefficient?

A. 1.7 C. 0.59
B. -1.7 D. -0.59

After spending his allowance on video games, Mr. Kang only has P200 left. He’s interested in buying burgers and sodas.
Burgers cost P35 per sandwich and sodas cost P20 per glass. Given the following data on Marginal Utility, answer the
succeeding questions.

14-18. Fill in the marginal utility per peso for burgers and soda.

Quantity MU of Burger MU/Px MU of Soda MU/Py

1 100 60
2 90 50
3 80 40
4 70 30
5 60 20

_____ 19. What are the first two items that Mr. Kang will purchase?

A. Burger, then soda C. Sodas only

B. Soda, then burger D. Burgers only

_____ 20-21 How many burgers will maximize Mr. Kang’s utility?

A. 1 C. 3
B. 2 D. 4

_____ 22-23 How many sodas will maximize Mr. Kang’s utility?

A. 1 C. 3
B. 2 D. 4

_____ 24-25. How much is the total utility?

A. 450 C. 480
B. 460 D. 490
IV. Table Completion and Essay. Fill out the missing values required.

The following is a production schedule of DAY6 ENTERTAINMENT COMPANY. Fill the missing value of Marginal
Product (MP) and Average Product (AP) of labor. (1-10)

Amount of Capital Amount of Labor TP AP MP

2 0 0 0 0
2 1 57 __ __
2 2 118 __ __
2 3 177 59 59
2 4 228 57 51
2 5 270 54 __
2 6 300 50 30
2 7 322 __ __
2 8 336 42 __
2 9 342 __ 8
2 10 340 34 __

Describe the stages of returns using the information above. (5 points)

END OF EXAM