Economics with Agrarian Reform

1. The condition in an economy that makes a "rationing device" a necessity is the fact that a. the economy is organized around free markets. b. the economy is centrally planned by the government. c. scarcity exists. d. there are fewer types of goods than there are people in the economy. 2. In every economy people vie for the economy's rationing device, a process called a. competition. b. entrepreneurship. c. marginal benefit. d. positive economics. 3. Decision making "at the margin" means making a choice based on __________ of a decision. a. the total benefits b. the total costs c. comparing the total benefits and costs d. comparing the additional benefits and costs 4. Every time you make a __________, you incur a (an) __________. a. decision; unintended effect b. choice; opportunity cost c. competitive move; price d. decision; mistake e. none of the above 5. If increasingly more units of good Y must be given up as each successive unit of good X is produced, then the PPF for these two goods is a. a downward-sloping straight line. b. circular. c. an upward-sloping curve. d. a downward-sloping curve that is bowed outward. e. a downward-sloping curve that is bowed inward. 6. The law of supply states that price and quantity supplied are a. inversely related, ceteris paribus . b. directly related, ceteris paribus. c. not related. d. fixed. 7. The headline in the newspaper reads "County Supervisors Debate Building New Schools." The headline relates closest to which economic concept? a. goods and bads b. utility c. choice d. efficiency 8. Here are three things you could do if you do not attend your neighbor's barbecue: watch television with some friends (you value this at $17), read a good novel (you value this at $14), or go in to work (you could earn $16 during the barbecue). The opportunity cost of going to your neighbor's barbecue is a. $16, because this is the only alternative of the three where you actually receive a monetary payment. b. $14, because this is the lowest valued alternative forfeited. c. $17, because this is the highest valued alternative forfeited. 9. When economists speak of scarcity, they are referring to the a. condition in which society is not employing all its resources in an efficient way. b. condition in which people's wants outstrip the limited resources available to satisfy those wants. c. economic condition that exists in only very poor countries of the world. d. condition in which society produces too many frivolous goods and not enough socially desirable goods. 10. Which of the following statements is false? a. To an economist, the resource land includes natural resources such as minerals, forests, water and unimproved land. b. To an economist, the resource capital consists of unproduced goods that can be turned into produced goods. c. To an economist, the resource labor consists of the physical and mental talents people contribute to the production process. d. To an economist, the resource entrepreneurship refers to a particular talent that some people have for organizing the resources of land, labor, and capital to produce goods, seek new business opportunities, and develop new ways of doing things. 11. The point where the PPF intersects the vertical axis is a. unattainable. b. attainable and productive efficient. c. attainable but productive inefficient. d. attainable and neither productive efficient nor productive inefficient. 12. Microeconomics is the branch of economics that deals with a. highly aggregated markets or the entire economy. b. the production side of the economy, exclusively. c. the buying side of the economy, exclusively. d. human behavior and choices as they relate to relatively small units --- an individual, a firm, an industry. 13. At the optimal or efficient level of an activity, the activityÕs marginal benefit must a. be zero. b. be greater than zero. c. equal the marginal cost of the activity. d. exceed the marginal cost of the activity. 14. A theory is an abstract representation of reality. This means a theory a. is descriptive of the way the world is. b. is an unrealistic representation of reality. c. omits certain factors when trying to explain something. d. is usually expressed in professional jargon. e. none of the above Exhi Exhibit bit 1 Marginal Benefit, Marginal Cost d. $47, because this is the total dollar sum of the alternatives forfeited. MC MB 2 4 6 8 Time Spent Studying (hours) 15. Refer to Exhibit 1. The student whose study habits are illustrated here will maximize the net benefits of studying when she has studied a. 2 hours b. 4 hours c. 6 hours d. 8 hours 16. Refer to Exhibit 1. If the student whose study habits are illustrated here is currently studying for the 8th hour, she should a. cut back on the number of hours she is studying because the marginal benefit of studying for the 8th hour is less than the marginal cost of doing so. b. cut back on the number of hours she is studying because the marginal benefit of studying for the 8th greater than the marginal cost of doing so. c. increase the number of hours she is studying because the marginal benefit of studying for the 8th hour is less than the marginal cost of doing so. d. increase the number of hours she is studying because the marginal benefit of studying for the 8th hour is greater than the marginal cost of doing so. 17. Refer to Exhibit 1. If the student whose study habits are illustrated here is currently studying for the 2nd hour she should a. cut back on the number of hours she is studying because the marginal benefit of studying for the 2nd hour is less than the marginal cost of doing so. b. cut back on the number of hours she is studying because the marginal benefit of studying for the 2nd hour is greater than the marginal cost of doing so. c. increase the number of hours she is studying because the marginal benefit of studying for the 2nd hour is less than the marginal cost of doing so. d. increase the number of hours she is studying because the marginal benefit of studying for the 2ndhour is greater than the marginal cost of doing so. 18. Both country 1 and country 2 are located on their respective production possibilities frontiers (PPFs), but country 1 produces twice the output that country 2 produces. It follows that a. country 1's PPF lies further to the right than country 2's PPF. b. country 1 has a smaller population than country 2. c. country 1 has a bigger population than country 2. d. country 1 is efficient and country 2 is inefficient. e. none of the above 19. If an economist says "the higher the price of oranges, the fewer oranges individuals will buy, ceteris paribus," this means that a. individuals don't like high-priced oranges. b. as the price of oranges rises, individuals' preferences change and they no longer like oranges as much as they once did. c. as the price of oranges rises, individuals' preferences do not change, nor does anything else, but individuals buy fewer oranges in response to the higher price of oranges. d. the higher the price of oranges, the fewer oranges individuals will buy, assuming that people have economic motives. 20. Saying "the marginal costs are greater than the marginal benefits" is the same as saying a. the average costs are greater than the average benefits. b. the total costs are greater than the average benefits. c. the benefits are greater than the costs. d. the additional costs are greater than the additional benefits. e. the costs minus the benefits equal the net costs. 21. Points outside (or beyond) the PPF are a. attainable. b. unattainable. c. efficient. d. inefficient. 22. Through war, many of the factories in country 1 are destroyed and many of its people are killed. As a result, the country's a. production possibilities frontier (PPF) after the war has probably shifted to the right compared to its PPF prior to the war. b. PPF after the war has probably shifted to the left compared to its PPF prior to the war. c. PPF after the war is probably the same PPF as before the war. d. ability to produce goods and services has increased. e. b and d 23. Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the vertical axis a. is greater along curve I. b. is greater along curve II. c. is the same along both curves. d. cannot be compared for the two curves without more information. 24. The increased production of lamps comes at constant opportunity costs in terms of bookshelves. This means a. that it takes more resources to produce a lamp than a bookshelf. b. that it takes fewer resources to produce a lamp than a bookshelf. c. that for every lamp produced, a constant number of bookshelves is forfeited. d. that for every lamp produced, a different number of bookshelves is forfeited. 25. Productive inefficiency implies that a. it is possible to obtain gains in one area without losses in another. b. it is impossible to obtain gains in one area without losses in another. c. there are too many resources. d. there are too few resources. e. none of the above 26. If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y, then what is the maximum number of units of good Y the economy can produce? a. 250 b. 100 c. 20 d. 500 e. none of the above 27. An "increase in the quantity demanded" means that a. the demand curve has shifted to the right. b. the supply curve has shifted to the left. c. price has declined and consumers therefore want to purchase more of the good. d. given supply, the price of the good can be expected to rise. 28. A "decrease in demand" means that a. the demand curve has shifted to the left. b. price has declined and consumers want to purchase more of the good. c. the demand curve has shifted to the right. d. the price of the good can be expected to decline, assuming supply stays constant. Exhi Exhibit bit 2 29. Refer to Exhibit 2. The PPF illustrates a. constant opportunity costs between guns and butter. b. that guns are more important than butter. c. increasing opportunity costs between guns and butter. d. the opportunity cost of one unit of guns is four units of butter. e. none of the above c. move this society to PPF . 30. Refer to Exhibit 2. A movement from point B to point D a. could only happen through economic growth. b. is necessarily a movement from a productive efficient point to a productive inefficient point. c. is a movement from a productive efficient point to another productive efficient point. d. is necessarily a movement from a productive inefficient point to another productive inefficient point. 31. Refer to Exhibit 2. The opportunity cost of moving from point B to A is a. 10,000 units of butter. b. 20,000 units of butter. c. 50,000 units of guns. d. the maximum amount of butter that can be produced with available resources. 32. Refer to Exhibit 2. Scarcity exists a. at point C but not at point A. b. neither at point C nor at point A. c. at both point C and at point A. d. at point A but not at point C. d. not affect this society. 34. Refer to Exhibit 3. The production possibilities frontiers shown in this exhibit depict _______________ opportunity costs. a. constant b. increasing c. decreasing d. There is not enough information provided to answer this question. 35. In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eighthour day, John can produce either 8 loaves of bread or 8 pounds of butter. The opportunity cost of producing 1 pound of butter is a. 1/3 hour for Andy and 1 hour for John. b. 1 hour for Andy and 1 hour for John. c. 3 loaves of bread for Andy and 1 loaf of bread for John. d. 1/3 loaves of bread for Andy and 1 loaf of bread for John. e. none of the above Exhi Exhibit bit 4 Exhi Exhibit bit 3 Good X 90 60 30 0 33. Refer to Exhibit 3. If PPF 2 is the relevant production possibilities frontier, a significant loss of resources will a. move this society from point D to point G on PPF . b. move this society to PPF . Mar Maria ia Good Y 0 30 60 90 May Maya a Good X Good Y 60 0 40 10 20 20 0 30 36. Refer to Exhibit 4. Who has the comparative advantage in the production of good X? a. Maria b. Maya c. Both Maria and Maya d. Neither Maria nor Maya 37. Refer to Exhibit 4. If Maria and Maya each specialize in the good in which she has a comparative advantage and then engage in trade, ____________________ can consume a combination of goods that lies beyond her PPF. a. Maria, but not Maya, b. Maya, but not Maria, c. both Maria and Maya d. neither Maria nor Maya 38. Refer to Exhibit 4. For Maya, the opportunity cost of producing one unit of good Y is ___________ unit(s) of good X. a. 2.00 b. 1.00 c. 10.00 d. 0.50 Exhi Exhibit bit 5 b. rationer. c. entrepreneur. d. abstraction. 41. In all cases, normative economics deals with a. what is. b. what should be. c. relatively small units in the economy. d. the entire economy. 42. The opportunity cost of attending college is a. the money one spends on college tuition, books, and so forth. b. the highest valued alternative one forfeits to attend college. c. the least valued alternative one forfeits to attend college. d. equal to the salary one will earn when one graduates from college. 43. Which of the following is an example of a positive economic statement? a. The Philippine public should devote more resources to education. b. The poor should pay lower taxes and the rich should pay higher taxes. c. Soap operas should be taken off television. d. If you drop a ball from the top of a building, it will fall to the ground. 39. Refer to Exhibit 5. Which graph depicts a technological breakthrough in the production of good Y only? a. (1) b. (2) c. (3) d. (4) e. none of the above 40. Some years ago, chemists at 3M Corporation were trying to create a super-strong glue. Somehow they got their molecules twisted and came up with one of the weakest glues ever made. But, rather than pouring it down the drain, they tried coating some paper with it, and the "Post-It Note" was born. In this case, 3M was acting as a(n) a. utility. 44. At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct? a. Yes, Luz is correct. b. No, Luz is incorrect. Marta's demand has increased. c. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same. d. No, Luz is incorrect. Marta's quantity demanded has increased, but her demand has stayed the same. e. No, Luz is incorrect. Marta's quantity demanded has decreased and her demand has increased. 45. If people begin to favor science fiction novels to a greater degree than previously, the demand curve for science fiction novels a. shifts rightward. b. shifts leftward. c. stays constant. d. can shift either rightward or leftward. 46. "As the price of apples goes up, the demand for apples goes down." The author of this statement a. implies that price and demand are unrelated. b. uses the word "demand" when he should use the word "supply." c. uses the word "demand" when he should use the words "quantity demanded." d. implies that demand and price have a direct relationship. 47. One major reason for the law of demand is that a. one price changing requires at least one other price to change in the opposite direction. b. people substitute relatively lower-priced goods for relatively higher-priced goods. c. a higher price never reduces quantity demanded by enough to lower total revenue. d. people are willing to produce more units at a higher price. 48. Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely to a. place more oil on the market this year, thus shifting the present supply curve of oil rightward. b. hold some oil off the market this year, thus shifting the present supply curve of oil leftward. c. place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher prices. d. hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher prices. 49. Which of the following will not shift a supply curve? a. a change in the price of relevant resources b. a change in the good's own price c. a change in the number of sellers d. a change in per-unit costs brought about by a change in taxes. 50. If the workers of a firm successfully negotiate an increase in wages, which of the following is most likely to happen? a. The demand curve for the product the firm produces shifts rightward. b. The demand curve for the product the firm produces shifts leftward. c. The supply curve of the product the firm produces shifts rightward. d. The supply curve of the product the firm produces shifts leftward. 51. Resource X is necessary to the production of good Y. If the price of resource X rises, a. the supply curve of Y shifts leftward. b. the supply curve of Y shifts rightward. c. the supply curve of Y is unaffected. d. there is a movement down the supply curve of Y. e. there is a movement up the supply curve of Y. 52. Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the homeconstruction industry by giving the homeconstruction companies P200,000 for every house that they build. As a result of this, a. the supply curve of new houses would shift leftward, since it now costs P200,000 more for builders to produce a house. b. the demand curve for new houses would shift rightward, since now every family would want to buy a house. c. the demand curve for new houses would shift leftward. d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price. e. c and d 53. On a supply-and-demand diagram, quantity demanded equals quantity supplied a. b. c. d. only at the single equilibrium price. at every price at or above the equilibrium price. at every price at or below the equilibrium price. at every price. 54. At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. surplus; downward b. surplus; upward c. shortage; downward d. shortage; upward 55. If the supply curve and the demand curve for lettuce both shift to the left by an equal amount, what can we say about the resulting changes in price and quantity? a. The price will increase, but the quantity may increase or decrease. b. The price will increase, and the quantity will increase. c. The price will decrease, and the quantity will increase. d. The price will stay the same, but the quantity will increase. e. The price will stay the same, but the quantity will decrease. Exhi Exhibit bit 6 c. $2 and 150 units. d. $6 and 250 units. 57. Refer to Exhibit 6. At a price of $6 there is a a. surplus of 100 units. b. surplus of 150 units. c. surplus of 200 units. d. shortage of 150 units. e. shortage of 200 units. Exhi Exhibit bit 7 58. Refer to Exhibit 7. $20 is the a. equilibrium price. b. market-clearing price. c. price at which there is neither a surplus nor a shortage. d. all of the above Price (dollars) Exhi Exhibit bit 8 56. Refer to Exhibit 6. Equilibrium price and quantity are a. $2 and 250 units. b. $4 and 250 units. S1 S2 V Z X W D2 D1 Quant it y 59. Refer to Exhibit 8. In the market shown, if equilibrium was originally at point Z and the new equilibrium is now at point V, this change may have been caused by a. a decrease in consumersÕ income (assuming that this is an inferior good) and a simultaneous decline in technology in the production of this good. b. an increase in consumersÕ income (assuming that this is an inferior good) and a simultaneous improvement in technology in the production of this good. c. a decrease in consumersÕ income (assuming that this is an inferior good) and no change in supply. d. an increase in consumersÕ income (assuming that this is an inferior good) and no change in supply. 60. Refer to Exhibit 8. In the market shown, if equilibrium was originally at point W and is now at point X, the new equilibrium price is __________ it was originally and the new equilibrium quantity is ____________ it was originally. a. greater than; greater than b. less than; greater than c. greater than; less than d. less than; less than