B) a deposit in a bank
C) cash
D) a stock
Which of the following scenarios best describes the concept of scarcity and opportunity costs:
A) a birthday present your cousin sends you a $20 bill
B) your state government in order to increase support for higher education must increase the sales tax to keep the budget balanced
C) your state government in order to increase support for higher education must cut spending for environmental protection to keep the budget balanced
D) the local government introduce lump-sum tax for durty cars to raise funds for a new equipment
E) smoke from the burning forest, that pollutes air in a small town
Suppose the production possibility frontier of the nation moves from PPF1 to PPF2 (the diagram above) now the economy is operating in point B. What has happened to the opportunity cost of producing these goods:
A) the opportunity cost of producing tractors has decreased, the opportunity cost of producing corn has increased
B) the opportunity cost of producing tractors has increased, the opportunity cost of production or has decreased
C) the opportunity cost of producing tractors and corn have both decreased
D) opportunity cost of producing tractors and corn have both increased
E)There has been no change in the opportunity cost of producing tractors and corn
In the figure above economic growth is the best represented by a movement from:
A) a to B
B) B to C
C) C to D
D) D to E
E) E to A
The shape of this PPF tells us that:
A) economic resources are perfectly substitutable from production of X to production of Y
B) citizens prefer that an equal amount of X and Yis to be produced
C) the opportunity cost of producing Y rises as more Y is produced
D) the opportunity cost of producing Y is constant along the curve
E) the opportunity cost of producing X falls is more X is produced
The law of increasing opportunity cost is useful in:
A) describing a marginal benefit curve
B) is the result of resources not being perfectly adaptable between the production of two goods
C) implies that prices will rise done the costs of making a good rise
D) causes the production possibilities frontier to be a straight line
E) implies that opportunity costs will rise as production levels fall
According to the table above, the economy is producing at the point, where the opportunity cost of the 10th unit of consumer goods will be
A) 4 units of capital goods
B) 2 units of capital goes
C) 3 units of capital goods
D) 1/3 of a unit of capital goods
E) 1 unit of capital goods
Which of the following will not entail an outward shift of the production possibility frontier:
A) an upgrading of the quality of nations human resources
B) the reduction of unemployment
C) An increase the quality of society's labour force
D) the improvement of the societies technological knowledge I
E) All of the above will push of the PPF outwards
An image depicted in the diagram above could have been caused by:
A) a better production methods in the gun industry
B) an increase in the number of resources in the economy
C) an increase in the number of workers in the country
D) technological set back in the whole industry
E) reduction in farmland available due to pollution
An individual enterpreneur has $100,000 in the bank on deposit at 30% a year. It is a one-year deposit. If he gets off this money from his bank account, than the percents will not be paid. Percent for half a year deposit makes 20% a year.
Today is 1 September and enterpreneur has 1/2 of the year time of a deposit. He decides to buy any equipment which costs $300,000. The rest of the Sum he can take from the bank at 35% a year for one year. The time of usage of such an equipment is 10 years and costs of using this equipment is 17,000 a year. Calculate the full economic costs of this at equipment for the year for:
A) the first year of usage
B) for the second year of usage
There are three countries in the world A,B and C. First country can produce by its own resources only 50 units of wheat or 100 units of coffee. Second country can produce on its own only 60 units of wheat or 80 units of coffee on one day. Third country can produce on its own either 70 units of wheat or 60 units of coffee.
Required:
A) construct PPF for the case of union of all countries
B) construct Trading possibility curve for each country in case of trading only between countries given with a condition that one coffee can be changed for one wheat.
In the certain small country there are some feel to develop gold silver end copper however they are distributed on the territory unevenly. There are three territorial is in the country in the first territory there are fields of gold and silver in the second silver and copper on the third gold and copper production possibility curves of each territory can be described as
2Au(1)+ Ag(1)=140
2Ag(2)+ Cu(2)=140
2Au(3)+ Cu(3)=140
There is an increase in demand for each of these three goods.
A) For example it is needed to produce 80 units of gold and 80 units of copper. What is the maximum amount of silver, that can be produced in this country in this case?
B) consider the case, when it is needed to produce all three goods in a proportion 1:1:1. what is the maximum amount of goods, that can a country produce according to this proportion?
A farmer has two fields. On each of them he can produce two cultures X and Y. Information about the fields is given below
By productivity it is meant that the amount of good X or Y that can be got from each hectare differs at the end of the season that lasts 100 days. A farmer can divide each field between two cultures in any proportion.
Required:
A) construct BPF for all the farmer's land in coordinates (X; Y)
B) Farmer is thinking about buying a new machinery, usage of each of which can increase the productivity of culture Y. The machinery works only on a certain field at one time and productivity of culture Y on this field will increase by (0,02*t) tons per hectare. The machinery cannot work on two fields at the same time and if the farmer buys is, he can distribute the time of work of this machinery between two fields in any proportion. in particular it may not be a concrete "good" number. what will be the PPF of a farmer if he buys a machinery?
An investor Pasha has 10 opportunities to invest his money, characterised by different amounts of accounting profits. Furthermore, he has an opportunity to invest his money in neither of projects. He does not have another opportunities and opportunity cost in each of the variants are only tired with giving up other projects. It is given that the sum of all accounting profits of all 11 alternatives is equal to $ 6 million. The sum of economic profits of all 11 alternatives is $ -25 million. Economic profit of the best alternative equals $2 million.
Required:
A) calculate the accounting profit of the best alternative.
Solution
In general we have 11 alternatives. Also we know that accounting profit of an alternative "to invest in nowhere" equals Zero.
Let's consider the best of an accounting profits as A1, the second (by the absolute value) accounting profit as A2 and so on. The smallest accounting profit will be A11.
By the first equation given A1+A2+...+A11=6 million.
Alternative cost of the best alternative is A2, at the same time opportunity cost of all other alternatives is A1.
Then we know that by the second equation given: is (A1-A2) + (A2-A1)+ (A3-A1) + (A4-A1) +...+ (A11-A1) = -25 million.
Then by solving this equation way to get that it is really blessed day for +1+811-81 multiplied by nine it cost of -25
But from the first equation we get that A3+ A4 +... + A11 = 6-A1-A2.
Then A1-A2 = 2 by third equation given.
Finally, we solve a system:
6 - 10A1- A2 = - 25
A1-A2 = 2
So by solving these equations we got that A1 = 3
Answer is $3 million.
Consumer choice
alongside the study of choices on following decisions sat in the context of scarcity limited by constraint we buy a basket of goods knowing that we can invite as large a selection as one might want given the constraints of prices and income how do we make these decisions how does the consumer allocate a limited income among the many choices of goods and services
At first is needed to understand who is the consumer and there are several basic assumptions about him in economic theory.
At first consumer is rational it means that I want is to get the most satisfaction or dissatisfaction is known is going on in economics as utility for the money expanded on the products and services in the basket the boys
That the consumer can round look good in order of preference though in four example open for iPhone to Nokia
Consumer understanding diminishing marginal utility this means that his satisfaction increases from zero when he buys first hot dog and chickens as he consumes a second hand dog years total utility from the second hotdog is likely to be less than the satisfaction he derived from the first one this process is considered to be infinite
Humour faces constraints of prices and incomes than factor of rationality preferences and diminishing marginal utility of are not sufficient in order for consumer to make final decision about what to buy and how much to buy the cancer risk through constrained from buying everyone service that needs the first three terms of consumer choice was the box she can be effectively prevented from purchasing every item on the list by a limited income and prices of goods and services
The tool to maximising rule it means that the consumer wants to make choices from a variety of goods and services that will maximise her totally two at your satisfaction relative to constraint of prices are going to do that the consumer will want to obtain as much extra satisfaction from one good purchase price as will be obtained from any other good courage price given the amount of income available for an number of goods that were as much income as is available links band given a discrete number of good whatever combination of two girls that means this condition will be available in coming with the available income the consumers total utility
Mu(a) /
so on this equation will be in the "equilibrium even more there I wouldn't be no tendency to change this combination of the two good
Consumer surplus
Even with diminishing marginal utility the consumer may enjoy the situation in which the market volatility is greater than the price charge for the good for instance in Dubai would pay different price based on his willingness to take part in competitive markets such as we are assuming here salaries are often pricing their products at the going market price therefore in competitive market and even in in perfectly competitive markets with Blaston for information provided salaries fees downward sloping demand curves in which sellers price at the last unit approaches with the F fact that previous units were sold at prices below the value was received at the margin by the consumers
And if we would like to show it to McGrath that will be day a BC
Income and substitution effects
It is needed to clearly understand that the combination mentioned in the equation above maximises the total utility diminishing marginal to your tea helps took to explain the downward sloping demand curve for example F marginal tool to decrease as the consumer may compare the marginal to order of good eight and its price with much going to do you have good be ended prize that's the income effect on substitution effect also help to explain the downward sloping demand curve
Let's consider an example price of a good age has increased is the rest has not changed their ratio of utility of my joy duty to price of good able change so that the whole equation will change therefore it is more convenient to change the amount of good eight and amount of good be consumed to be more precise good beer will be more attractive to consumers this is known as the substitution effect
Also as the price of gold a increases the consumer can afford less of both good and good beat and thus will purchase you few right amount of that good it is known as the income effect and further reinforces the notion of downward sloping demand curve
MC Consumer choice:
Every possible combination of goods that an individual can purchase with a given income will be on or below the consumers:
A) Indifference curve
B) demand curve
C) price consumption curve
D) budget line
E) Supply curve
An increase in income with no changes in price of either good will cause the consumer and budget line to:
A) Pivot so that it becomes flatter
B) Shift inward
C) Pivot so that it becomes steeper
D) Shift outward
E) None of the above
Bundles that lie above a given indifference curve are preferred to bundles on or below, according to the standard assumption that consumer preferences functions reflect:
A) Complexity
B) Transitivity
C) Monotonicity
D) Completeness
E) Reflectiveness
The rate at which are consumer is willing to exchange one good for another is given by the slope of a/an:
A) indifference curve
B) market price line
C) Elasticity ratio map
D) Isoquant curve
E) substitution index
Two teachers Dima and Pasha are consuming coffee and donuts on coffee break during the conference. If the MRS of a cup of coffee is -2 units of donuts for Dima and minus one unit of donuts Pasha, then:
A) to get one more cup of coffee Dima would sacrifice two units of donuts while Pasha would only sacrifice one unit
B) to get one more unit of donuts, Dima would sacrifice twice as much coffee as Pasha
C) Dima likes only one good while Pasha likes both
D) both teachers like coffee more than donuts
E) Dima only one good, Pasha likes bot
Suppose good X is inferior, but not giffen. if consumers incomes rise and technology for producing good X improve, than, given the usual shape of the supply and demand curve:
A) price of good else will increase
B) price of good acts will decrease
C) equilibrium quantity of good X will increase
D) Equilibrium quantity of good acts will decrease
E) nothing can be said for sure
When the price of good X went up from $10 to $12and that the consumer's income fell by 10%, the quantity demanded decreased by 5%. given that the price elasticity of demand is equal to -3, the good X is:
A) a normal good, however it is impossible to tell whether it will be a luxury or B) a necessity
C) a luxury good
D) an inferior good
E) a giffen good
Supply and demand
Where the competitive market the sellers or friends are priced takers another one word anyone for groups of firms can significantly alter the terms of exchange transaction terms the price put another way there are too many sellers for any effects of price transparency to take place the seller of firm must sell at the market price the price established by the interaction of all buyers and all you and all salaries in the market setting later Will you that what happens in the real world of imperfect competition from from now on we will assume that all information about the prices everywhere of each seller is known to every buyer so the full information is given the technology and the production courses in the same of each seller sold the product is the same in each firm buyers and sellers can easily enter or leave the market without any consequences
Market equilibrium
The establishment of prices and competitive settings comes about by trial and then initiating a prize only to discover that a surplus or glad the card I will ring of this initial Prestridge reduces the surplus and to have disappeared with equilibrium the conversed holds with a price resulting in shortage and is therefore a distinction between the relative and absolute prices is important and absolute price is the price of gold as stated at prices high or low relative to other prices or a brazier price increases that the price reduce the shortages in other words buyers and consumers bid against one another until disappears of the Bolivian disequilibrium illustrated below the following characteristics
There is no tendency to change the demand and supply functions stay constant
The amount demanded a call to amount supplied that their point of equilibrium
There is no no surplus of shortage the equilibrium price clears the market
It is quite important to distinguish to turn demand and a mild is demanded amongst the manager referred to demands consumers are willing to buy it off a particular goal the service at writing prices of the good service changes in demands demand it referred to changes along the demand curve function as a result of the of the changes in the price holding a other all other factors are conditions constant changes in demand occur when these are their factories nonprice factors are changing
To be more precise in these conditions or determinants of demand are the number of consumers tastes and preferences of consumers fashion prices of related goods substitutes and compliments consumer's income price expectations
Let's consider an example where I am for example fashion tells us that are long dresses are no more fashionable fashionable and it is better to wear short skirts around consequently this leads to the planted amount demanded at each price ran the whole demand curve shifts down words
Also we have distinctions between the two supply and demand supply and demand supply is the amount that is that producers are willing to to supply at each concrete price so with only with changes in prices the quantity supplied the fridge and difference in conditions or a nonprice determinants of supply because the hall supply curve to move these conditions are the number of sailors providers suppliers cost of resources or production prices of subsidy goods goods that are also produced I could be using C Morris dictations price expectations technology tax and subsidises if any on the functions either supply or demand changes these consequently lead to new equilibrium quantity and price
Price Ceilings and price floors
Following reasons a government may wish to establish a press selling which prohibits prices to rise above a certain level as city controlled press earlier rounds for apartments I as in the establishment of a Saleen or interest rate for mortgage loans in a visitation the government may wish to establish a price floor making it illegal for example to hire workers at the wage a war were dug in the minimum wage
Let's consider a put price floor plan is an equilibrium price is lower than the price floor this will cause a shortage in demand in comparison to supply in other words overproduction
And if it is higher nothing changes
Is the price selling is S is estimated that there is an equilibrium price is a small red and nothing changes and if it is higher than there will be a deficit in the product
Normal good is the good whose consumption increases as income increases.
Inferior goods are good whose consumption decreases as income increases.
Giffen good is a good for which there is an upward sloping demand current (theoretical).
Which of the following is true in the market of a certain product if producers consistently are willing to sell more at the going price than consumers are willing to buy?)
A) demand is highly inelastic
B) supply is highly elastic
C) the product is inferior
D) there is a price ceiling on the market
E) there is a price floor on the market
Which of the following situations would necessary lead to an increase in the price of peaches?
A) the wage paid to peach farm workers rises, at the same time medical researchers find that eating peaches reduces the chances of a person's developing cancer.
B) while the wages of peach farm workers fall dramatically,the peach industry launches a highly successful advertising campaign for peaches
C) a breakthrough in technology enables peach farmers to use the same amount of resources as before to produce more peaches per acre
D) the prices of apples and oranges fall
E) The weather during the growing season is ideal for peach production
When the price of peaches increases we expect the following:
A) quantity demanded of pears rises
B) quantity supplied of pears falls
C) quantity demanded of pears falls
D) demand for pears falls
E) supply of pears rises
The Apple market is in equilibrium. Suppose we observe that Apple growers are using more pesticides to increase apple production. At the same time we hear that the price of pears, a substitute for apples, rises which of the following is a reasonable prediction for the new price and quantity of apples?
A) price rises, but quantity is ambiguous
B) price falls, but quantity is ambiguous
C) price is ambiguous, but the quantity rises
D) price is ambiguous, but the quantity falls
E) both price and quantity are ambiguous
What will happen to the equilibrium price and the equilibrium quantity of a good A if produces of good A expect the price to be higher in the near future?
A) the equilibrium price will rise and the equilibrium quantity will fall
B) the equilibrium price will fall and the equilibrium quantity will rise
C) the equilibrium price and the equilibrium quantity will rise
D) the equilibrium price and the equilibrium quantity will fall
E) there is not enough information to answer definitely
Price and quantity demanded can only move in the same direction when:
A) the good is normal
B) the good is inferior
C) the good is giffen
D) well substitution effect outweighs income effect
E) none of the above
Which of these statements describes the market demand curve correctly?
A) market demand curve represents the average quantity that a typical buyer would purchase for every given price
B) you obtain market demand curve by summing up individual demand curves vertically
C) for every quantity demanded market demand curve shows us the consumers marginal rate of substitution of this good for money
D) market demand curve is the set of allocatively efficient combinations of quantities and prices of the good
E) if market demand curve is downward - sloping, every buyer's demand curve must be downward - sloping too
In January 1000 mobile phones were sold at the market price of $100 each. In February the price was $80 and 1200 phones were sold. How will this change can be explained?
A) consumers' income decreased
B) more firms entered the market
C) costs of production increased
D) mobile phones became more popular
E) more than one answer is correct
Which of the following would cause a shift in supply?
1. The income level of consumers changes
2. The price of production inputs changes
3. The production technology changes
A) only 1 is true
B) only 2 is true
C) only 3 is true
D) 1 and 3 are true
E) none of the above
Is the government imposes a price floor which is lower than the equilibrium price this will result in:
A) deficit of the product
B) surplus of the product
C) price increase in the market
D) quantity sold decrease
E) no changes occur
If supply and demand both decrease simultaneously, which of the following will happen?
A) price will rise
B) quantities sold will rise
C) price will fall
D) quantity sold will decrease
E) more than one answer is correct
Problems: Supply and demand:
Population of certain city can be divided into two groups.First is the people who are living close to work and they do not need the car desperately. The second group can be described as people are leaving very far and can't live without a car. Demand for oil of these two groups can be described as:
Q(1)=300-10p,
While of the second:
Q(2)=600-p.
Required:
Calculate the amount of sales of oil for each group separately if the supply curve of oil is given by an equation:
Qs=90+5p
