LAGUNA STATE POLYTECHNIC UNIVERSITY

LOS BAÑOS CAMPUS

1st SEMESTER A.Y. 2019-2020

Name: Q1 Score:

Section: Date:
Professor
Subject: Managerial Economics W.V. Dangue
:

I. MULTIPLE CHOICE

1. The quantity demanded of Pepsi has decreased. The best explanation for this is that:
a. The price of Pepsi increased.
b. Pepsi consumers had an increase in income.
c. Pepsi's advertising is not as effective as in the past.
d. The price of Coca Cola has increased.

2. Demand curves are derived while holding constant:

a. Income, tastes, and the price of other goods.
b. Tastes and the price of other goods.
c. Income and tastes.
d. Income, tastes, and the price of the good.

3. When the decrease in the price of one good causes the demand for another good to
decrease, the goods are:
a. Normal
b. Inferior
c. Substitutes
d. Complements

4. Suppose the demand for good Z goes up when the price of good Y goes down. We can
say that goods Z and Y are:
a. Substitutes.
b. Complements.
c. Unrelated goods.
d. Perfect substitutes.

5. If the demand for coffee decreases as income decreases, coffee is:

a. An inferior good.
b. A normal good.
c. A complementary good.
d. A substitute good.

6. Which of the following will NOT cause a shift in the demand curve for compact discs?
a. A change in the price of pre-recorded cassette tapes.
b. A change in income.
c. A change in the price of compact discs.
d. A change in wealth.

7. When excess demand occurs in an unregulated market, there is a tendency for:

a. Quantity supplied to decrease.
b. Quantity demanded to increase.
c. Price to rise.
d. Price to fall.

8. Market equilibrium exists when _____________ at the prevailing price.

a. quantity demanded is less than quantity supplied
b. quantity supplied is greater than quantity demanded
c. quantity demanded equals quantity supplied
d. quantity demanded is greater than quantity supplied

9. A movement along the demand curve to the left may be caused by:
a. A decrease in supply.
b. A rise in the price of inputs.
c. A fall in the number of substitute goods.
d. A rise in income.

10. The quantity demanded of a product rises whenever

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 a. The product’s price falls.
b. Incomes increase.
c. Population increases.
d. The prices of substitute goods rise.
e. Consumer tastes and preferences change.

11. The equilibrium quantity must fall when

a. There is a decrease in demand.
b. There is a decrease in supply.
c. There is an increase in price.
d. There is an increase in demand and supply.
e. There is a decrease in demand and supply

12. The demand curve will shift to the left for most consumer goods when
a. Incomes decrease.
b. The prices of substitutes fall.
c. The prices of complements increase
d. All of the above.

13. Producer goods, also called intermediate goods, in economics, goods manufactured
and used in further manufacturing, processing, or resale.
(a)True (b) False

14. Consumer goods are alternately called final goods, and the second term makes more
sense in understanding the concept.
(a)True (b) False

15. The 'law of demand' implies that:

a. As prices fall, quantity demanded increases.
b. As prices rise, quantity demanded increases.
c. As prices fall, demand increases.
d. As prices rise, demand decreases.

16. When the market operates without interference, price increases will distribute what is
available to those who are willing and able to pay the most. This process is known as:
a. Price rationing.
b. Price fixing.
c. Quantity adjustment.
d. Quantity setting

17. If A and B are complements, an increase in the price of good A would:

a. have no effect on the quantity demanded of B.
b. lead to an increase in demand for B.
c. lead to a decrease in demand for B.
d. none of the above.

18. If a shortage exists in a market, the natural tendency is for:

a. demand to increase.
b. price to increase.
c. quantity supplied to decrease.
d. no change in the market.

19. Suppose you produce wooden desks, and government legislation protecting the spotted owl has made it more expensive
for you to purchase wood. What do you expect to happen to the equilibrium price and quantity of wooden desks?
a. price and quantity will increase.
b. price will increase but quantity will decrease.
c. price and quantity will decrease.
d. price will decrease but quantity will increase.

20. Suppose that good X is a substitute for good Y. Then an increase in the price of good Y leads to
a. an increase in the demand of good X.
b. a decrease in the demand of good X.
c. a decrease in the supply of good X.
d. an increase in the supply of good X.

21. If consumers expect future prices to be higher

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 a. they substitute current purchases for future purchases of perishable products.
b. stockpiling will happen when products are durable in nature.
c. the position of the demand will not change.
d. the demand for automobiles today will not change.

22. All else held constant, as additional firms enter an industry

a. more output is available at each given price.
b. less output is available at each given price.
c. the same output is available at each given price.
d. output could increase or decrease at each given price.

23. Suppose there is a simultaneous increase in demand and decrease in supply, what effect will this have on the
equilibrium price?
a. it will rise.
b. it will fall.
c. it may rise or fall.
d. it will remain the same.

24. A schedule which shows the various amounts of a product consumers are willing and ableto purchase at each price in a
series of possible prices during a specified period of time is called:
a. Supply Schedule.
b. Demand Schedule.
c. Quantity supplied Schedule.
d. Quantity demanded Schedule.

25. The demand for chicken is downward-sloping. Suddenly the price of chicken rises from P130 per kg to P140 per kg.
This will cause:
a. The demand curve of chicken to shift to the right.
b. The demand curve of chicken to shift to the left.
c. Quantity demanded of chicken to increase.
d. Quantity demanded of chicken to decrease.

26. When government sets the price of a good and that price is below the equilibrium price, the result will be:
a. A surplus of the good.
b. A shortage of the good.
c. An increase in the demand for the good.
d. A decrease in the supply of the good.

27. In the following figure, there will be an excess supply at any price:

a. above Pb.
b. below Pb.
c. other than Pb.
d. below Pa.
e. above Pc.

28. In the accompanying figure, the equilibrium price and quantity are:

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 a. Pa and Qa.
b. Pb and Qb.
c. Pc and Qc.
d. Pa and Qc.
e. Pc and Qa.

29. In the following figure, there will be an excess demand at any price:

a. below Pa.
b. below Pb.
c. other than Pb.
d. above Pb.
e. above Pc.

30. The market supply curve shows the quantity of a good or service that , holding other possible influences constant.
a. households would sell at various prices
b. households would buy at various outputs
c. firms would sell at various prices
d. firms would buy at various prices
e. households would buy at various prices

31. Economics deals primarily with the concept of

a. Scarcity.
b. Poverty.
c. Change.
d. Power.

32. Which of the following is NOT included in the decisions that every society must make?
a. what goods will be produced
b. who will produce goods
c. what determines consumer preferences
d. who will consume the goods

33. Both households and societies face many decisions because

a. resources are scarce.
b. populations may increase or decrease over time.
c. wages for households and therefore society fluctuate with business cycles.
d. people, by nature, tend to disagree.

34. A good is considered scarce in a society when

a. more output of the good is possible.
b. everyone in that society cannot have all they want of the good.
c. the government restricts production of the good.
d. only the richest people in the economy can buy all they want of the good.

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35. Scarcity exists when
a. there is less than an infinite amount of a resource or good.
b. society can meet the wants of every individual.
c. there is less of a good or resource available than people wish to have.
d. the government fails to produce goods.

36. Which of the following would NOT be true in a world without scarcity?
a. There would be no need for the science of economics.
b. Everyone would have all the goods and services they wanted.
c. There would have to be an infinite supply of every resource.
d. There would be opportunity costs.

37. Approximately what percentage of the world’s economies experience scarcity?

a. 25%
b. 50%
c. 75%
d. 100%

38. The opportunity cost of going to college is

a. the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
b. the value of the best opportunity a student gives up to attend college.
c. zero for students who are fortunate enough to have all of their college expenses paid by someone else.
d. zero, since a college education will allow a student to earn a larger income after graduation.

39. Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns P8 an hour.
Her opportunity cost of working is
a. the P24 she earns working.
b. the P24 minus the enjoyment she would have received from watching the video.
c. the enjoyment she would have received had she watched the video.
d. nothing, since she would have received less than P24 of enjoyment from the video.

40. Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is
a. the improvement in his grades from studying for the hour.
b. the difference between the improvement in his grades from studying minus the enjoyment of playing tennis.
c. the enjoyment and exercise he would have received had he played tennis.
d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the
value of playing tennis.

41. Communist countries worked on the premise that economic well-being could be organized only through/by
a. a market economy.
b. government central planners.
c. government-imposed private monopolies.
d. increased competition.

42. A company decides to install more machines and lay off workers. Which economic question is addressed directly?

a. How to produce
b. What to produce
c. For whom to produce
d. Where to produce

43. In economic terms, what are land, labor, capital and entrepreneurship?
a. Production possibility
b. Factors of production
c. Production trade-offs
d. Opportunity costs

44. What is the main idea behind the study of economics?

a. Monetary policy
b. Efficiency of production
c. Allocation of scarce resources
d. Business decisions

45. In which of the following economic systems is the “factors of production” privately owned?
a. Capitalism
b. Socialism

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 c. Communism
d. Confucianism

46. In economics, the “how” or production question refers to

a. the problem of allocating scarce resources among competing users.
b. the ways in which factors of production may be combined to produce output.
c. the way in which a firm decides on its profit-maximising rate of output.
d. the problem of how output is distributed among individuals and groups in society.E.the way in which the state sets
output targets in a command economy.

47. The economic problem arises from the coexistence of

a. A.unlimited wants and unlimited resources.
b. limited wants and limited resources.
c. unlimited wants and limited resources.
d. E.limited wants and unlimited resources.

48. If the principal concern of economics is the question of how best to use society’s resources, then economics would be
irrelevant if
a. we had unlimited wants.
b. economies were organised around command rather than market principles.
c. economies were organised around market rather than command principles.
d. resources were available in unlimited quantities.

49. The fundamental purpose of production is to:

a. earn high profits.
b. increase exports.
c. fulfil government plans.
d. meet human wants.

50. Fundamental economic problems basically arise from

a. the fact that society has more than it needs.
b. turmoil in the stock market.
c. the unequal distribution of income.
d. our wants exceeding our scarce resources.

Draw the following

1. Draw and Explain the Circular Flow of the Production Process (5 points)
2. Draw and Explain the Circular Flow of Income between Households and Firms (5 points)

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