QUIZ 1: INTRODUCTION TO ECONOMICS

16. The opportunity cost of a choice is the value of the

1. It is the root cause of the creation of the economic
problem.  foregone alternative that was not chosen.
SCARCITY
2. Money is considered as capital in economics. TRUE
FALSE
3. Traditional economy is modeled upon age-old means of 17. Social science that deals with proper allocation of
production, such as agriculture, fishing, hunting, and
gathering. scarce resources with their alternative uses in order to
TRUE
4. Central Bank controlled inflation through which policy? satisfy human needs and wants. 
MONETARY POLICY
5. An autoworker is considered _________ and earns ECONOMICS
_______.
LABOR; WAGES
6. Human wants refers to all goods and services individual
desires QUIZ 2: DEMAND, SUPPLY AND EQUILIBRIUM
FALSE
1. An increase in the supply of a good will cause:
7. A positive statement is: 
ABOUT WHAT IS
A DECREASE IN EQUILIBRIUM PRICE AND AN
8. When government prints too much money, prices;
RISE
INCREASE IN EQUILIBRIUM QUANTITY
9. Trade policy regulates money in circulation using taxes
2. An increase in the price of a good will:
and expenditure.
DECREASE IN QUANTITY DEMANDED
FALSE
3. A situation in which the market price has reached the
10. Scarcity requires people must: 
level at which quantity supplied equals quantity demanded.
MAKE CHOICES
EQUILIBRIUM
11. The field of "microeconomics' concerns itself primarily
4. Supply curve shows the inverse relationship between
with the:
price and quantity supplied.
STUDY OF THE BEHAVIOR OF INDIVIDUAL ECONOMIC
FALSE
UNITS
5. It is the price that balances quantity supplied and
12. Macroeconomics deals with individual economic
quantity demanded or the price which the buyers and
entities.
sellers agreed upon.
FALSE EQUILIBRIUM PRICE

13. It refers to the process of selection from available 6. A table showing the quantity of units would purchase at

limited alternatives. It emerges because of scarce alternative prices is know as:

resources and their alternative uses. DEMAND SCHEDULE

CHOICE 8. If the supply of a product has increased, we know that:

14. Adam Smith published his book, An Inquiry into the MORE FIRMS HAVE ENTERED THE MARKET

Nature and Causes of the Wealth of Nations in 1767.  9. The law of __________ explains the general behavior of

FALSE sellers with respect to price, other things held constant 

15. The what to produce problem deals with the way in SUPPLY

which output is distributed among the members of the 10. A good whose consumption increases when income

society. increases and falls when income falls, price remained

TRUE constant

NORMAL GOOD
11. Refers to the amount or quantity of a good which the LAW OF DIMINISHING MARGINAL UTILITY

buyer is willing and able to purchase at a given price, 3. Which of the following is not the property of indifference

place, and time.  curve?

INDIFFERENCE IS CONCAVE TO THE ORIGIN

DEMAND 4. Consumer optimum occurs at the point where the

12. If there is a shortage, firms must decrease its price until highest indifference curve and the budget line are tangent.

it reaches the equilibrium point. TRUE

FALSE 5. When a percentage change is quantity demanded is

13. If coffee and milk are complements, then which of the greater than the percentage change in price is known as: 

following will occur if the price of coffee increases? ELASTIC DEMAND

DEMAND FOR MILK WILL DECREASE 6. Income elasticity of demand measures the

14. An increase in the demand for a good will cause:  responsiveness of demand to a change in:

AN INCREASE IN EQUILIBRIUM PRICE AND QUANTITY INCOME

15. Leftward shift of the demand curve shows that demand 7. Demand does not change when price changes is known

will __________.  as perfectly inelastic demand.

DECREASE TRUE

16. When quantity supplied is less than quantity demanded 8. Price elasticity of supply measures the responsiveness

there is:  of quantity demanded to a change in price.

SHORTAGE FALSE

17. If there is an increase in supply, the curve shifts to the 9. When the proportion of change in demand is exactly the

left.  same in the change in price, demand is known as; 

FALSE UNITARY ELASTICITY

18. A situation in which quantity supplied is greater than 10. A good with a horizontal demand curve has a demand:

quantity demanded: WITH A PRICE ELASTICITY OF DEMAND IS INFINITE

SURPLUS 11. It refers to the additional satisfaction derived by a

19. People buy more of good A when the price of good B consumers from consuming an additional quantity of that

rises. These goods are: good or service.

SUBSTITUTES GOODS MARGINAL UTILITY

12. Economists use the term utility to mean:

QUIZ 3: ELASTICITY AND CONSUMER BEHAVIOR THE LEVEL OF SATISFACTION THAT A CONSUMER

1. Elasticity is another word for: OBTAINS FROM CONSUMING A GOOD OR SERVICE

RESPONSIVENESS 13. Arc elasticity measures elasticity at the midpoint

2. It states that as the quantity consumed of a good between the two selected points.

increases, eventually a point is reached where the TRUE

marginal utility of an additional unit of the good decreases

is called:
14. A situation where there is no change in quantity ON THE HIGHEST ATTAINABLE INDIFFERENCE

supplied even if there is a change in price of the goods is CURVE

known as:  24. It shows various combinations of goods the consumer

can afford given his income and the prices of the two

goods.

15. The total satisfaction derived from consuming a total BUDGET CONSTRAINT

quantity of goods and services. 25. It is a curve that shows the consumption bundles that

TOTAL UTILITY give the consumer the same level of satisfaction.

16. When the elasticity coefficient of supply is more than 1, INDIFFERENCE CURVE

price elasticity of supply is called elastic supply.

TRUE QUIZ 4: THEORY OF PRODUCTION

17. When the percentage change in price is less than the 1. It illustrates all possible combinations of two inputs that

percentage change is quantity supplied is known as results in the same level of total cost.

perfectly inelastic supply. ISOCOST CURVE

FALSE 2. Production Isocost’s Slope is equal to the marginal

18. The cross elasticity of demand between Coke and product of the input on the horizontal axis divided by the

Pepsi is:  marginal product the input on the vertical axis.

POSITIVE, THAT IS, COKE AND PEPSI ARE FALSE

SUBSTITUTES 3. It is a basic rule used by producers to determine what

19. Cross elasticity of demand measures the percentage in mix of labor and capital produces output at the lowest cost.

price for a good over the percentage change in the quantity COST MINIMIZATION

demanded of the other. 4. Is widely used because it assumes some degree of

FALSE substitutability between inputs but not perfect

20. Complementary goods are goods which are used substitutability.

together , therefore the cross elasticity of demand is COBB-DOUGLAS FUNCTION

positive. 5. Production refers to all activities involved in the

FALSE production of goods and services.

21. It refers to a consumer's switch to another similar good TRUE

when the price of the preferred good increases. 6. The point of tangency between a convex isoquant and

SUBSTITUTION EFFECT an budget line represents an optimal combination of

22. It is a reduction in the quantity demanded of a good inputs. 

when its price increases because of a consumer's FALSE

decreased purchasing power. 7. Specifies relationship that exist between inputs and

INCOME EFFECT outputs for a given technology.

23. A point where the budget line is touching an PRODUCTION FUNCTION

indifference curve at one point is:

8. Average product refers to the entire quantity of output

produced from a given set of inputs.

FALSE

9. It states that ceteris paribus, as the quantity employed of SUPPLY AND DEMAND

an input increases, eventually a point is reached where the I. PPT

marginal product of an additional unit of that input Shortage - excess demand

decreases. Surplus – excess supply

LAW OF DIMINISHING MARGINAL RETURNS Higher demand leads to higher equilibrium price and

10. Isoquant curves do not intersect to each other. higher equilibrium quantity.

TRUE Higher supply leads to lower equilibrium price and higher

11. It is the additional output resulting from employing one equilibrium quantity.

more unit of labour.

MARGINAL PRODUCT Lower demand leads to lower price and lower quantity

12. An isoquant curve slopes downward, or is positively exchanged.

sloped. Lower supply leads to higher price and lower quantity

FALSE exchanged.

13. It shows various combinations of two factors of

production which give the same level of output per unit of RELATIVE MAGNITUDES OF CHANGE

time.  *The relative magnitudes of change in supply and demand

ISOQUANT determine the outcome of market equilibrium.

14. Stage II of production begins at a level of output where *When supply and demand both increase, quantity will

the average product of the variable input is at a maximum increase, but price may go up or down.

and ends where the total product of the variable input is

equal to zero.  II. Facebook

FALSE CHANGE IN QTY. DEMANDED - change in its own price

15. Are inputs whose quantities can't be readily changed in other things remaining constant

response to market conditions. CHANGE IN DEMAND SHIFT - caused by changes in other

FIXED INPUTS factors; constant price of good

16. The short run is a time period in which:  CHANGE IN QTY. SUPPLIED - changes in price and other

SOME RESOURCES ARE FIXED AND OTHERS ARE determinants are constant

VARIABLE CHANGE IN SUPPLY SHIFT - changes in factors other than

17. When marginal product reaches its maximum, what can the price of good

be said of total product? 

TOTAL PRODUCT MUST BE AT ITS MAXIMUM *changes in PRICE does not shift demand and supply

*DEMAND and SUPPLY

INCREASE- always to the right

DECREASE- always to the left ELASTICITY

- measures consumer or customer flexibility

LAW OF DEMAND- inverse/negative relationship bet. price - how responsive they are to other changes in various

and qty. demanded; ↑↓ ↓↑ factors

LAW OF SUPPLY- direct/positive relationship bet. price and

qty. demanded; ↑↑ ↓↓ INCOME ELASTICITY OF DEMAND

EQUILIBRIUM- qty. demanded = qty. supplied - measures the responsiveness of a good’s demand to

SHORTAGE- price is low changes in income

SURPLUS- price is high *Negative – inferior goods

*Positive – normal goods

CHAPTER 4: USING THE ELASTICITY SHORTCUT NECESSITIES - goods you have to have

I. PPT (Reporting) LUXURIES - things you like, but you can do without.

INELASTIC

- quantity demanded changes very CROSS-PRICE ELASTICITY DEMAND

little when price changes - measures the responsiveness of a good’s demand.

- when price elasticity of demand is SUBSTITUTES – goods where you can consume in the

between 0 and -1 place of another

*Price and Total revenue change in the same direction. *The cross-price elasticity of demand for two substitutes is

PERFECTLY INELASTIC positive.

- quantity demanded doesn't COMPLEMENTS – goods that are consumed together

change at all when price changes *The cross-price elasticity of demand for two substitutes is

- when price elasticity of demand is equal to 0 negative.

ELASTIC

- quantity demanded changes a lot when price changes ADVERTISING ELASTICITY DEMAND

- when price elasticity of demand is any negative number - measures the responsiveness of a good's demand to

larger than -1 changes in spending on advertising.

*Price and Total revenue change in opposite directions.

PERFECTLY ELASTIC CHAPTER 5: CONSUMER BEHAVIOR

- when the slightest change in price causes an incredibly I. PPT (Reporting)

large change in quantity demanded UTILITY - is the amount of satisfaction an individual

- when price elasticity of demand is Infinite receives from consuming a good.

MARGINAL UTILITY – additional satisfaction or change in

MARGINAL REVENUE satisfaction from an additional unit of the good

- the change in total revenue that occurs when one

additional unit of a good is sold LAW OF DIMINISHING MARGINAL UTILITY

- as the quantity consumed of a good increases, - rate at which the consumer is willing to give up certain

eventually a point is reached where the marginal utility of units of a commodity for one more unit of another

additional unit of the good decreases. commodity to keep him/her at the same level of utility.

PROPERTIES OF INDIFFERENCE CURVE

BUDGET CONSTRAINT - refers to all possible 1. negatively sloped or sloped downward

combinations of goods that someone can afford, given the 2. convex to the origin

prices of goods, when all income is spent. 3. do not intersect

SLOPE OF THE BUDGET CONSTRAINT – represents 4. IC to the right represents a higher level of satisfaction

how many goods on the y-axis the consumer must give up 5. cannot touch either axis

in order to be able to afford one more of the goods on the 6. need not to be parallel to each other

x-axis or vice versa.

TYPES/FORMS OF UTILITY

INDIFFERENCE – exists when the amount of utility from 1. Form Utility – utility can be created by changing the

one situation is equal to the amount of utility you get from form of the products

another situation 2. Time Utility – when a company ensures the availability

INDIFFERENCE CURVE - shows all possible of a product

combinations of two goods that result in the same level of 3. Place Utility – making goods or services physically

total utility. available or accessible to potential customers

4. Possession Utility – measures the satisfaction that

CONSUMER THEORY - the study of how people decide comes from owning a product or enjoying a service

to spend their money based on their individual

preferences and budget constraints CHAPTER 6: PRODUCTION

I. PPT (Reporting)

COMMON PRICING STRATEGIES: FOUR MAJOR FACTORS OF PRODUCTION

1. Buying one to get one free 1. Labor – refers to human effort

2. Selling gift cards 2. Capital – machinery, equipment and factories

3. Issuing coupon 3. Land – resources taken from earth

4. Entrepreneurial skills – skills related to innovation and

II. Facebook risk evaluation

*It is a fact that a higher indifference curve shows a higher

level of satisfaction than a lower one and thus a rational VARIABLE INPUTS – inputs whose quantities can be

consumer always tries to reach the highest possible readily changed in response to changes in market

indifference curve to get the highest possible level of FIXED INPUTS - inputs whose quantities can’t be readily

satisfaction. changed in response to changes in market

MARGINAL RATE OF SUBSTITUTION

SHORT RUN – some inputs are fixed, some inputs are 2. Change in Price of a factor-input

variable

LONG RUN – all inputs can be changed and thus are

variable

PRODUCTION FUNCTION COST MINIMIZATION

- specifies the relationship that exists between inputs and - The costs of producing a given quantity of output are

outputs for a given technology. minimized at the point where the production isoquant is

COBB-DOUGLAS FUNCTION just tangent —or, in other words, just touching —the

-this commonly used production function. isocost curve.

-it assumes some degree of substitutability between ISOQUANT CURVE

inputs, but not perfect substitutability - Is a concave-shaped line on a graph, used in the study

of microeconomics, that charts all the factors, or inputs,

TOTAL PRODUCT - refers to the entire quantity of output that produce a specified level of output.

produced from a given set of inputs. - This graph is used as a metric for the influence that the

AVERAGE PRODUCT - refers to the output per unit of inputs—most commonly, capital and labor—have on the

input. obtainable level of output or production.

MARGINAL PRODUCT - it is the change in total product

that occurs when one additional unit of a variable input is RETURNS TO SCALE

employed. - refers to the changes in output that occur when the scale

of production changes. Changes in the scale of production

LAW OF DIMINISHING MARGINAL RETURNS indicate a proportional change in the quantity employed of

- states that ceteris paribus, as the quantity employed of all inputs.

an input increases, eventually a point is reached where 3 KINDS OF RETURNS TO SCALE:

the marginal product of an additional unit of that input ▪ Increasing returns to scale

decreases ▪ Decreasing returns to scale

▪ Constant returns to scale

PRODUCTION ISOQUANTS

- shows all possible combinations of OUTPUT ELASTICITY

two inputs that produce a given - is the percentage change in output that results from a

quantity of outputs one-percent change in the quantity employed of all inputs.

ISOCOST CURVE - illustrates all possible combinations of II. Facebook

two inputs that result in the same level of total cost. SHORT-RUN - have at least 1 resource

SHIFT IN ISOCOST LINE: LONG-RUN - all resources are variable

An isocost line may shift due to two reasons:

1. Change in total outlay to be made by the firm LAW OF DIMINISHING MARGINAL RETURNS
- as you add variable resources to fixed resources

the additional output will eventually decrease

STAGE 1 - increasing

STAGE 2 - constant

STAGE 3 – decreasing/negative

LAW OF VARIABLE PROPORTION

- a widely observed law of prod. that takes place

in the short run

- more and more units of variable input, keeping

other inputs fixed

LAW OF RETURNS TO SCALE

- for long run production

- all factors can be changed

1. increasing returns to scale

2. constant returns to scale

3. decreasing returns to scale