Answer Exercises ECO 162 Chapter 1 To 4 PDF

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EXERCISES CHAPTER 1 TO 4MULTIPLE-CHOICE QUESTIONS As a result of scarcity A. there is never enough of anything. B. production has to be centrally planned. C. things which are plentiful have relative high prices. D. individuals and communities have to choose from among alternatives. The basic foundat...

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EXERCISES CHAPTER 1 TO 4 MULTIPLE-CHOICE QUESTIONS 1.

As a result of scarcity A. there is never enough of anything. B. production has to be centrally planned. C. things which are plentiful have relative high prices. D. individuals and communities have to choose from among alternatives.

2.

The basic foundation of Islamic economics that refers to the responsibility of man in purifying his wealth according to the rules of Islam is A. Rububiyyah. B. Khilafah. C. Tazkiyyah. D. Ukhwah.

3.

A free market economy depends on market mechanism to A. provide everyone with a minimum level of price. B. decide how large the government’s budget should be. C. determine the most efficient way of using resources. D. be perfectly elastic.

4.

A point inside the production possibility curve may indicate A. all productive resources are efficiently utilized. B. inefficient allocation of productive resources. C. full employment of scarce resources. D. technological efficiency.

5.

Microeconomics is concerned with A. changes in the overall level of economic activities. B. the entire economic system. C. specific unit of the economic system. D. reducing inflation rate and stimulating economic growth.

6.

If the price of good A decreases, the demand curve for its closes substitutes will A. shift to the left. B. shift to the left. C. remain unchanged. D. cannot be determined.

7.

A leftward shift of leather shoes supply curve might be caused by A. an improvement in the relevant technique of production. B. a decline in the prices of inputs. C. a decrease in consumer incomes. D. exit of some firms in that industry.

8.

The supply of mutton and wool may be interrelated because both are A. complementary goods. B. supplementary goods. C. jointly demanded. D. jointly supplied.

9.

Which of the following would cause the demand curve of clothes to shift to the right? A. Price of clothes decreases.

B. C. D.

Price of cotton increases. Price of clothes increases. Consumer’ income increases.

10.

As price of fresh fish declines A. demand for fresh fish increases. B. demand for chicken increases. C. quantity demanded for fresh fish increases. D. quantity demanded for fresh fish cannot be determined.

11.

The value of elasticity of demand for a good will ___________ as the availability of substitutes _____________. A. increase; decreases. B. increase; increases. C. remain positive; decreases. D. decrease; increases.

12.

Estimates of income elasticity of demand of health care indicates that is 1. These estimates suggest that spending on health care should A. increase proportionately with income. B. increase faster than income. C. increase less than income. D. remain unchanged.

13.

The larger the proportion of income spent on a good A. the less elastic is the good’s demand curve. B. the more elastic is the good’s demand curve. C. the more inelastic is the good’s demand curve. D. no effect on the good’s demand curve.

14.

If the cross price elasticity of demand between good S and T is 2, then a 2% increase in the price of good S will result in A. a 1% increase in quantity of good T demanded. B. a 20% increase in quantity of good T demanded. C. a 10% increase in quantity of good T demanded. D. a 4% increase in quantity of good T demanded.

15.

If your income increases by 20% and the quantity demanded for a good has decreased by 5%, the coefficient of the income elasticity of demand for the good is A. -0.5 B. +0.5 C. -0.25 D. +0.25

16.

Which of the following will happen if government imposed a price floor legislation? A. Consumers will have to pay a higher price. B. Quantity supplied will decrease. C. Government will earn more revenue. D. Producer’s income will decline.

17.

If the supply of commodity increases and at the same time the demand for it rises, its price will A. rise. B. fall. C. stay the same.

D.

be indeterminate.

18.

A rightward shift in a demand curve and a rightward shift in a supply curve both result in a A. lower equilibrium price. B. higher equilibrium price. C. lower equilibrium quantity. D. higher equilibrium quantity.

19.

Subsidies given to vegetable farmers will result in A. a shift in the supply curve of vegetables. B. a shift in the demand curve of vegetables. C. a movement along the supply curve of vegetables. D. a movement along the demand curve of vegetables.

20.

A black market will tend to occur when A. no price regulation set in our economy system. B. a minimum price is set by the government. C. a maximum price is set by the government. D. a price is set higher than the equilibrium price.

SHORT ANSWER QUESTIONS QUESTION 1 When the resources are fully employed, Tuesday Island is able to produce a combination of two types of products (cookies and cars. Possibility A B C D E F

Cars (‘000) 0 1 2 3 4 5

Cookies (in tones) 30 26 21 15 8 0

a)

On a piece of graph paper, plot the production possibilities curve. Label the vertical axis as Cookies. (3 marks)

b)

State the type of opportunity cost faced by this island. Give a reason to your answer. Increasing opportunity cost because the PPC is concave. (2 marks)

c)

Calculate the opportunity cost by increasing the production of: i) Cars from point A to B. 30 – 26 = 4 tones of cookies ii) Cars from point D to E. 15 – 8 = 7 tones of cookies iii) Cookies from point F to A. 5 000 cars

d)

Give the production possibilities curve you have plotted, state whether the combination of 17 tons of cookies and 3,000 of cars can be attained or not. Justify your answer. Unattainable because of scarcity (2 marks)

QUESTION 2 The diagram below shows the production possibilities curve of RST country. Coffeee A

18 17 15

B C D

12

E 7 F Pillows 0

2

4

6

8

10

a)

Define the production possibilities curve and state the types of opportunity cost faced by this country. A curve that shows two combinations of goods produces in a country by using limited resources and existing technology. Types of opportunity cost is increasing opportunity cost.

b)

State whether it is possible for the country to produce 12 cups of coffee and 8 units of pillows at the same time. Give a reason. Not possible/unattainable because of scarcity/lack of resources.

c)

Calculate the opportunity cost by increasing the production of: i) Pillows from point A to C. 18 – 15 = 3 cups of coffee ii) Coffee from point E to C. 8 – 4 = 4 units of pillow iii) 10 units of pillow. 18 cups of coffee

d)

State any two (2) assumptions in the construction of the production possibilities curve. - only two goods produced in a nation. - limited and fixed resources.

QUESTION 3 Given the information below. Price of Good S (RM/unit) 2

Quantity demanded Good S (unit) 30

Income per month (RM) 1200

4 6 8 10 12

28 26 24 22 20

2400 3600 4800 6000 7200

Answer the following question based on information above. a)

Calculate the price elasticity of demand for Good S increases from RM6 to RM12 per unit. (2 marks) Ed = - 0.23 or 0.23

b)

Calculate the income elasticity of demand for Good S when income decreases from RM6000 to RM2400 per month. (2 marks) Ey= - 0.45

c)

Based on question (b), what type of good is Good S? State your reason. (1 marks) Inferior goods because the Ey is negative (Ey...