MAS 18- Microeconomics PDF

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SMARTS CPA REVIEWBATCH 17 – OCTOBER 2019 3F Menorca Building, Roxas Street, GeneralSantos City KARLO D. RECLAMAS 18: MICROECONOMICS Economics is best defined as the study of A. financial decision-making. B. how consumers make purchasing decisions. C. choices made by people faced with scarcity. D. in...

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SMARTSCPA REVI EW BATCH 17 – OCTOBER 2019 Santos City

3F Menorca Building, Roxas Street, General KARLO D. RECLA

MAS 18: MICROECONOMICS 1. Economics is best defined as the study of A. financial decision-making. B. how consumers make purchasing decisions. C. choices made by people faced with scarcity. D. inflation, unemployment, and economic growth. 2. Economics is the study of A. how to invest in the stock market. B. how society uses limited resources. C. the role of money in markets. D. how government officials decide which goods and services are produced. 3. Microeconomics is best described as the study of A. the choices made by individual households, firms, and governments. B. inflation, unemployment, gross national product, and the nation’s economy as a whole. C. how markets interact in the aggregate economy. D. marginal changes in the economy. 4. Macroeconomics is best described as the study of A) B) C) D) A. very large issues. B. the choices made by individual households, firms, and governments. C. the nation’s economy as a whole. D. the relationship between inflation and wage inequality. 5. According to the law of demand, quantity demanded increases as________, ceteris paribus. A. B.

prices rise prices fall

C. D.

demand increases demand decreases

6. As an individual consumes ________ of a product within a given period of time, it is likely that each additional unit consumed will yield ________ satisfaction. A. B.

more; successively more more; successively less

C. D.

more; no additional less; negative

Refer to the information provided in the Figure below to answer the questions that follow.

PRICE PER BOTTLE

P

0

D D0 1 BOTTLES OF Dr. Pepper per week Figure 3.1.

1

7. Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1? A. an increase in income, assuming that Dr. Pepper is a normal good B. a decrease in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper C. an increase in the price of Dr. Pepper D. an increase in the price of sugar used to make Dr. Pepper Refer to the information provided in the Figure below to answer the questions that follow.

PRICE

P

0

D D0 1 Cartoons of macaroni and cheese Figure 3.2

8. Refer to Figure 3.2. Which of the following would be most likely to cause the demand for macaroni and cheese to shift from D0 to D1? A. an increase in the price of macaroni and cheese B. an increase in the price of flour used to make macaroni and cheese C. a decrease in income, assuming macaroni and cheese is a normal good D. an increase in the quantity demanded for macaroni and cheese 9. If the demand for mac and cheese decreases as income increases, mac and cheese is a(n) A. complementary good. C. inferior good. B. normal good. D. substitute good. 10. If the demand for green tea increases as income increases, green tea is a(n) C. normal good. A. complementary good. B. substitute good. D. inferior good. 11. For inferior goods, demand will fall when A. income increases. C. price increases. B. income decreases. D. price decreases. 12. A. B. C. D. 13. A. B. C. D. 14.

The quantity demanded of Coca Cola has increased. The best explanation for this is that the price of Pepsi has decreased. Coca Cola has instituted a new, successful advertising campaign. the price of Coca Cola has decreased. Coca Cola consumers had an increase in income. According to the law of ________, there is a positive relationship between price and ________. A) B) C) D) supply; the change in supply supply; the quantity supplied demand; quantity demanded demand; change in demand

The price of circuit boards used in the manufacturing of LCD televisions has fallen. This will lead to ________ LCD televisions. A) B) C) D) A. an increase in the supply of B. a decrease in the supply of

C. D. 15. A. B. C. D.

an increase in the quantity supplied of a decrease in the quantity supplied of An electronics manufacturer can produce either MP3 players or cell phones. As the result of a decrease in the price of cell phones, the firm produces more MP3 players and fewer cell phones. An economist would explain this by saying the supply of cell phones increased and the supply of MP3 players decreased. there has been an increase in the quantity supplied of cell phones and a decrease in the quantity supplied of MP3 players. there has been a decrease in the quantity supplied of cell phones and an increase in the supply of MP3 players. the supply of cell phones increased and the quantity supplied of MP3 players decreased.

16.

If, when the price of a product rises from P1.50 to P2, the quantity demanded of the product decreases from 1000 to 900, the price elasticity of demand coefficient using the midpoint formula is A. 3.00 C. 0.37 B. 2.71 D. 0.33

17.

In which range of the demand schedule is demand price-inelastic in the table below? Price Quantity Demanded P11 50 P9 100 P7 200 P5 300 P3 400

A. B.

P11-P9 P9-P7

C. D.

P7-P P5-P3

Refer to the information provided in Figure 5.1 below to answer the questions that foll ow

PRICE

D

PRICE OF TICKET 18. A. B. C. D. 19.

A. B. C. D. 20.

Refer to Figure 5.1. The demand for tickets is perfectly price elastic. perfectly price inelastic. unit price elastic. perfectly income inelastic

When the price of radios decreases 5%, quantity demanded increases 5%. The price elasticity of demand for radios is ________ and total revenue from radio sales will ________. elastic; decrease elastic; increase inelastic; decrease unit elastic; not change When the price of the fresh fish increase 10%, quantity decrease 5%. The price

A. B. C. D. 21.

elasticity of demand for fresh fish is _______ and total revenue from fresh fish sales will ________. inelastic; increase inelastic; decrease elastic; decrease elastic; increase When the price of fresh fish increases 10%, quantity demanded is unchanged. The p rice elasticity of demand for fresh fish is A. perfectly inelastic C. inelastic. B. elastic. D. unitary elastic.

22. Which one of the following has an inverse relationship with the demand for money? A. Aggregate income. C. Interest rates. B. Price levels. D. Flow of funds. 23. A. B. C. D.

An improvement in technology that in turn leads to improved worker productivity would most likely result in A shift to the right in the supply curve and a lowering of the price of the output. A shift to the left in the supply curve and a lowering of the price of the output. An increase in the price of the output if demand is unchanged. Wage increases.

24. A. B. C. D.

A decrease in the price of a complementary good will Shift the demand curve of the joint commodity to the left. Increase the price paid for a substitute good. Shift the supply curve of the joint commodity to the left. Shift the demand curve of the joint commodity to the right.

25. A. B. C. D.

Demand for a product tends to be price inelastic if The product is considered a luxury item. Few good complements for the product are available. The population in the market area is large. People spend a large share of their income on the product.

26. Which of the following has the highest price elasticity coefficient? A. Milk. C. Bread. D. Ski boats. B. Macaroni and cheese. 27.

The local video store’s business increased by 12% after the movie theater raised its prices from P6.50 to P7.00. Thus, relative to movie theater admissions, videos are A. Substitute goods. C. Complementary goods. B. Superior goods. D. Public goods.

28.

The ABC Computer Company wants to increase the quantity of computers it sells by 5%. If the price elasticity of demand is ‐2.5, the company must A. increase price by 2.0%. C. increase price by 0.5%. B. decrease price by 2.0%. D. decrease price by 0.5%.

29.

A government wants to reduce the electricity consumption by 10%. The price elasticity of demand for electricity is 5. The government must _______ the price of electricity by _______. A. raise; 2.0% C. raise; 1.25% B. raise; 0.5% D. lower; 0.5%

30.

The price elasticity of demand for heart transplants is perfectly inelastic. s, the price elasticity demand for heart transplants is A. 0.0. C. ‐1.0. B. 1.0. D. ‐100.0

31.

Price and total revenue move in inverse directions when demand is

Thu

A. B. 32. A. B. 33.

price elastic. price inelastic.

C. D.

unit price elastic. perfectly price inelastic

Price and total revenue are directly related when demand is A) B) C) D) price elastic. C. unit price elastic. price inelastic. D. perfectly price elastic.

As the price for a particular product changes, the quantity of the product demanded changes according to the following schedule: Total quantity demanded 100 150 200 225 230 232

Price per unit P50 45 40 35 30 25

Using the arc method, the price elasticity of demand for this product when the price decreases from P50 to P45 is A. 0.20 C. 0.10 D. 3.80 B. 10.00 34.

As the price for a particular product changes, the quantity of the product demanded changes according to the following schedule: is a. b. c. d. Total quantity demanded Price per unit 100 P50 150 45 200 40 225 35 230 30 232 25 Using the arc method, the price elasticity of demand for this product when the price decreases from P40 to P35 A. 0.20 C. 10.00 B. 0.88 D. 5.00 35.

Wilson Corporation has a major competitor that produces a product that is a close substitute for Wilson’s good. If the coefficient of cross-elasticity of demand for Wilson’s product with respect to the competitor’s product is 2.00 and the competitor decreases its price by 5%, what is the expected effect on demand for Wilson’s product? a A. A 5% increase in demand. C. A 10% increase in demand. B. A 5% decrease in demand. D. A 10% decrease in demand 36. A. B. C. D. 37. A. B. C. D. 38.

A supply curve illustrates the relationship between Price and quantity supplied. Price and consumer tastes Price and quantity demanded. Supply and demand. As a business owner you have determined that the demand for your product is inelastic. Based upon this assessment you understand that Increasing the price of your product will increase total revenue. Decreasing the price of your product will increase total revenue. Increasing the price of your product will have no effect on total revenue. Increasing the price of your product will increase competition. Identify the effect to equilibrium price and equilibrium quantity of shift in the supply and demand. EQUILIBRIUM SUPPLY DEMAND PRICE (Pe) QUANTITY(Qe) INCREASE CONSTANT

DECREASE CONSTANT CONSTANT INCREASE DECREASE INCREASE DECREASE 39. A. B. C. D.

CONSTANT INCREASE DECREAS INCREASE DECREASE DECREASE INCREASE

If both the supply and the demand for a good increase, the market price will Rise only in the case of an inelastic supply function. Fall only in the case of an inelastic supply function. Not be predictable with only these facts. Rise only in the case of an inelastic demand function.

Items 40 and 41 are based on the following information: Assume that demand for a particular product changed as shown below from D1 to D2. PRICE S

D2 D1

40. A. B. C. D.

QUANTITY

Which of the following could cause the change shown in the graph? A decrease in the price of the product. An increase in supply of the product. A change in consumer tastes. A decrease in the price of a substitute for the product.

41. What will be the result on the equilibrium price for the product? A. Increase. C. Remain the same. B. Decrease. D. Cannot be determined. 42.

Which of the following market features is likely to cause a surplus of a particular product? A. A monopoly. C. A price ceiling. B. A price floor. D. A perfect market. 43. A. B. C. D. 44. A. B. C. D. 45. A. B. C. D.

Which of the following will definitely occur when there is a simultaneous increas e in demand and an increase in supply? an increase in equilibrium price a decrease in equilibrium price an increase in equilibrium quantity a decrease in equilibrium quantity Which of the following will definitely occur when there is a decrease in the supp ly of and an increase in demand for wireless speakers? an increase in equilibrium price a decrease in equilibrium price an increase in equilibrium quantity a decrease in equilibrium quantity Which of the following will definitely occur when there is a decrease in demand f or and an increase in supply of potato chips? an increase in equilibrium price a decrease in equilibrium price an increase in equilibrium quantity a decrease in equilibrium quantity

Refer to the information provided in Figure 3.12 below to answer the questions that follow.

46.

Refer to Figure 3.12. The market is initially in equilibrium at Point A. If deman d shifts from D1 to D2 and there is an excess demand of 150 million pounds of burritos the price of burritos would be A. P1.50. C. P4.00. B. P3.00. D. P6.00. 47.

Refer to figure 3.12. the market is initially in equilibrium at point B. if demand shifts from D2 to D1 and there is an expensive supply of 200 million pounds of burritos, the price of burritos would be A. P1.50. C. P4.00. B. P3.00. D. P6.00. 48.

Refer to Figure 3.12 The market is initially in equilibrium at Point A. If the demand shifts from D1 to D2, the equilibrium price will change from ______ and the equilibrium quantity will change form _____. A. P4.00 to P3.00; 250 to 350 C. P3.00 to P4.00; 250 to 350 B. P4.00 to P3.00; 350 to 250 D. P3.00 to P4.00; 350 to 250 Refer to the information provided in Figure 3.13 below to answer the questions that follow.

49.

Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2 and there is an excess demand of 6 cheeseburgers, the price of cheeseburgers will have C. remained constant at P5.00. A. moved from P5.00 to P7.00. B. moved from P7.00 to P5.00. D. remained constant at P7.00. 50. Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2, the equilibrium price will change from ______ and the equilibrium quantity will change from ______. A. P5.00 to P7.00; 10 to 7. C. P7.00 to P5.00; 7 to 4. B. P5.00 to P7.00; 4 to 7. D. P7.00 to P5.00; 7 to 10. 51.

An individual receives an income of P3,000 per month, and spends P2,500. An increase in income of P500 per month occurs, and the individual spends P2,800. The individual’s marginal propensity to save is A. 0.2 C. 0.6 B. 0.4 D. 0.8 52.

Given the following data, what is the marginal propensity to consume? Level of Disposable income P40,000 48,000

A. B.

1.33 1.16

53. A. B. C. D.

Which Changes Changes Changes Changes

54. A. B. C. D. 55. A. B. C. D. 56.

Consumption P38,000 44,000 C. D.

of in in in in

0.95 0.75

the following will cause a shift in the supply curve of a product? the price of the product. production taxes. consumer tastes. the number of buyers in the market.

When the federal government imposes health and safety regulations on certain products, one of the most likely results is Greater consumption of the product. Lower prices for the product. Greater tax revenues for the federal government. Higher prices for the product. A A A A

In 5% 4% 4% 3%

which price price price price

of the following increase results increase results increase results decrease results

situations would there be inelastic demand? in 3% decrease in the quantity demanded. in a 6% decrease in the quantity demanded. in a 4% decrease in the quantity demanded. in 5% increase in the quantity demanded.

In a competitive market for labor in which demand is stable, if workers try to

A. B. C. D. 57. A. B. C. D. 58. A. B. C. D.

increase their wage Employment must fall. Government must set a maximum wage below the equilibrium wage. . Firms in the industry must become smaller. Product supply must decrease. A polluting manufacturing firm tends, from the societal viewpoint, to Price its products too low. Produce too little output. Report too little profitability. Employ too little equity financing. If the federal government regulates a product or service in a competitive market by setting a maximum price below the equilibrium price, what is the long-run effect? a. b. c. d. A surplus. A shortage. A decrease in demand. No effect on the market.

59. A. B. C. D.

60. A. B. C. D.

to . A A A

Which one of the following would cause the demand curve for a commodity to shift the left? a b. c. d. A rise in the price of a substitute product. rise in average household income. rise in the price of a complementary commodity. rise in the population.

Price ceilings Are illustrated by government price support programs in agriculture. Create prices greater than equilibrium prices. Create prices below equilibrium prices. Result in persistent surpluses.

*27. X and Y are substitute products. If the price of product Y increases, the immediate impact on product X is a. b. c. d. A. Price will increase. B. Quantity demanded will increase. C. Quantity supplied will increase. D. Price, quantity demanded, and supply will increase. 61. A. B. C. D. 62. A. B. C. D. 63.

The distinguishing characteristic of oligopolistic markets is A single seller of a homogeneous product with no close substitutes. A single seller of a heterogeneous product with no close substitutes. Lack of entry and exit barriers in the industry. Mutual interdependence of firm pricing and output decisions. Economic markets that are characterized by monopolistic competition have all of the following characteristics except a. b. c. d. One seller of the product. Economies or diseconomies of scale. Advertising. Heterogeneous products.

Which type of economic market structure is characterized by a few large sellers of a product or service, engaging primarily in nonprice competition? A. Monopoly. B. Oligopoly. C. Perfect competition. D. Monopolistic competition. 64. Which type of economic market structure is composed of a large number of sellers, each producing an identical product, and with no significant barriers to entry and exit?

A. B. C. D.

Monopoly. Oligopoly. Perfect competition Monopolistic competition.

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