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# Republic of the Philippines

## BATANGAS STATE UNIVERISTY

College of Accountancy Business Economics and International Hospitality Management
CITE Building, Pablo Borbon Main 1, Rizal Avenue, Batangas City

## MICROECONOMICS THEORY AND APPLICATION

MULTIPLE CHOICE: Read and analyze the statement or situation carefully then answer the question that follows by choosing the letter that corresponds to the best

1. Which of the following issues that will fit to the concepts of microeconomics?
a. The unemployment rate increases by 10%.
b. Currently, the Philippines is on the peak of the business cycle.
c. The sales of clamps and sea foods decline because of red tide.
d. Answer not given

2. When an 18 year old man chooses to work in a factory rather than to attend on college as a Business Economics student, what is his opportunity cost?
a. A Bachelors degree who may earn Php15, 000 a month after 5 years.
b. The tuition fee costing Php24, 000 a year, travel and project expenses worth Php75, 000 a year.
c. A salary of a factory worker earning Php8, 000 a month.
d. All of the above

3. The following are the main assumption about Product Possibilities Frontier. Which is not included?
a. There are only two goods produced within the economy.
b. The PPF curve bowed about the origin.
c. Not all resources is being utilized for two goods.
d. All of the above are the assumptions of PPF.

For number 4-10, refer to the Product Possibilities Frontier for Lumber and Paper in terms of thousands.

## 4. Referring on the tick PPF curve, what is the meaning of point A?

a. The economy is producing only two goods, the paper and lumber.
b. Point A shows the maximizing point in which no resources are
being wasted.
c. Point A shows that the economy is producing 80, 000 units of
papers while no production of lumber.
d. All of the above

## 5. At what point does the economy can maximize the economic

resources?
a. Point A
b. Point B
c. Point C
d. All of the above

## 6. Inefficient allocation utilization of resources can be found at what

point?
a. A b. C c. D d. E

## 7. Unattainable production of paper and lumber can be found at what

point?
b. A b. C c. D d. E

## 8. The broken PPF curve means:

a. The resources are scarce.
b. The resources decline.
c. There is economic growth
d. All of the above

## 9. The thin PPF curve means:

a. The resources are scarce.
b. The resources decline.
c. There is economic growth
d. All of the above

10. At point B, what is the opportunity cost of producing 80, 000 units of lumber?
a. 40, 000 units of paper
b. 20, 000 units of paper
c. 60,000 units of paper
d. There is no opportunity cost.

11. Which of the following can you considered belong to the demand of a CAR worth Php800, 000?
a. A carpenter who wants to buy a car with Php799, 000.00
b. Henry Sy who wants to purchase a chopper with Php30,000,000.00
c. Joana, an 8 year old girl who have Php801,000.00
d. Xintel, 20 year old who have Php800,000.00

## 12. Which of the following is NOT TRUE about law of demand?

a. As the price of commodity increases, quantity demanded increases.
b. As the price of commodity increases, demand also increases.
c. There is a negative relationship between quantity demanded and price.
d. None of the above.

13. What changes will occur in the demand and supply model for commodity X if its price decreases?
a. Movement along the curve (Qd increases)
b. Movement along the curve (Qd decreases)
c. Movement along the curve (Qs increases)
d. Both A and C
e. Both B and C

14. Which of the following have an effect to the quantity demanded of Commodity Zebra?
a. Price of commodity Zebra
b. Price of Commodity Tiger (substitute)
c. Income
d. Technology

## 15. If the income of household increases, which of the following is true?

a. The quantity demanded for good X also increases.
b. The quantity demanded for good X will decrease.
c. The demand for good X decreases (considering X is a normal good)
d. The demand for good X decreases (considering X is an inferior good)
e. All of the above

16. You are the manager of KOTCHI Corporation. One of the manufacturers of car in the country. There is news that the car being produced by your firm emits
a gas that can harm the health of the consumer. What will be the effect of this information to the goods produced by your company?
a. Quantity supplied increases.
b. The price of cars will increase.
c. Demand for the product will decline.
d. Quantity demanded for the car will decline.

17. If the price of sardines increases, which of the following will occur?
a. Quantity supplied will decrease
b. Quantity supplied will increase
c. Supply will increase
d. Supply will decrease

## 18. The law of supply states that:

a. There is a negative relationship between price and quantity supplied.
b. There is a positive relationship between price and supply.
c. As the price of commodity increases, supply also increases.
d. There is a positive relationship between price and quantity supplied.

## 19. Shifting of the supply curve to the right is caused by:

a. Flood and typhoons
b. Increase in tax rate
c. Increase in the minimum wage rate
d. Increase in government subsidies

## 20. Hoarding occurs when:

a. The technology of the firms increases.
b. The firms are expecting that the price of their commodity will increase in future.
c. The consumers are expecting that the price of their commodity will decrease in future.
d. All of the above.

## 21. Which of the following is true about equilibrium point?

a. It is the point where the demand and supply meet.
b. It is the point where demand is greater than supply.
c. It is the point where the demand is less than supply.
d. All of the above

## For question 22 to 26, refer to the graph at the right.

22. Looking at the graph at right side, what is the equilibrium price?
a. \$3 b. \$2 c. \$1 d. Answer not given

## 23. What is the equilibrium quantity?

a. 200
b. 100
c. 300
d. All of the above

24. Suppose the firm acquires new technology, what will happen to the equilibrium point?
a. P* increases while Q* decreases
b. P* decreases while Q* increases
c. Both P* and Q* increases
d. Both P* and Q* decreases

25. Suppose the income of the household increases considering that the model is an inferior good, what will happen to the equilibrium point?
a. P* increases while Q* decreases
b. P* decreases while Q* increases
c. Both P* and Q* increases
d. Both P* and Q* decreases

26. Suppose the income of household increases and the good is inferior, and the technology increases simultaneously, what will happen to the equilibrium
point?
a. P* increases while Q* decreases
b. P* decreases while Q* increases
c. Both P* and Q* increases
d. Both P* and Q* decreases

## 27. What is the implication of determining the P*?

a. It is the price where the firm can maximize his revenue.
b. It is the price where the firm can offer in the market.
c. It is the prevailing price in the market.
d. All of the above

28. Given the mathematical model of supply and demand, how will you determine which is the demand model?
a. In mathematical demand model, the coefficient of price is positive
b. In mathematical demand model, the coefficient of price is negative
c. In mathematical demand model, the coefficient of price is either positive not negative.
d. Answer not given

29. The demand and supply model is Q = 300 – 2P and Q = 150 + 3P respectively, what is the P*?
a. 50 b. 30 c. 20 d. 10

## 30. Refer to question number 26, what is the Q*?

a. 240 b. 250 c. 350 d. Answer not given

31. Supposed the supply shift due to an increase in the number of seller, the new supply model is Q = 100 + 8P, what is the new P*?
a. 50 b. 30 c. 20 d. 10

## 32. What is the new P*?

a. 210 b. 220 c. 260 d. Answer not given

33. What is the first name of your instructor in ECO 201? ____________________________
34. What is the middle name of your instructor in ECO 201? _________________________
35. What is the last name of your instructor in ECO 201? ____________________________

END OF EXAMINATION