Bonus Exam For Intoeco L81, T1, Ay2010-11

In a market, the basic coordinating mechanism is price. Price acts as a signal that helps to allocate resources efficiently. It is determined by the interaction of supply and demand forces in the market. When the price of a good or service increases, it indicates that demand is higher than supply, leading to an increase in production. On the other hand, when the price decreases, it signals a surplus in supply, prompting producers to reduce production. Thus, price plays a crucial role in balancing the quantity of goods or services demanded and supplied in the market.

The study of economics is a way of analyzing decision-making processes caused by scarcity. Economics examines how individuals, businesses, and societies allocate limited resources to satisfy unlimited wants and needs. It analyzes how people make choices in the face of scarcity, considering factors such as supply and demand, production and consumption, and the allocation of resources. By studying economics, we gain insights into how individuals and societies make decisions to maximize their well-being in a world of limited resources.

The correct answer is the best definition of economics because it encompasses the fundamental concept of scarcity and how individuals and societies make choices regarding the limited resources available to them. It also acknowledges the role of nature and previous generations in providing these resources. The other statements provided in the options are more narrow in scope and do not capture the entirety of the field of economics.

Macroeconomics is the branch of economics that focuses on the overall performance and behavior of an economy as a whole. It deals with topics such as economic growth, inflation, unemployment, and the effects of government policies on the economy. The impact of a sudden oil price decrease on Southeast Asian economies falls under the purview of macroeconomics as it examines the broader implications of this event on the regional economy.

The 30-year old professional basketball player without a sports team should be classified as unemployed because they are actively seeking employment as a basketball player but currently do not have a team to play for.

The correct answer is "All of the above". The simple circular flow diagram of the economy shows that the government is a sector that interacts with both firms and households. Households' incomes can be either spent or saved, and a portion of it goes towards paying taxes. Firms, through the financial markets, utilize household savings for their operations. Therefore, all the statements mentioned in the options are true according to the circular flow diagram.

The statement is true because the impact of a price increase on revenues depends on the elasticity of demand for the product. If the demand for the product is inelastic, meaning that consumers are not very responsive to price changes, a price increase will result in higher revenues for the producer. On the other hand, if the demand for the product is elastic, meaning that consumers are highly responsive to price changes, a price increase may lead to a decrease in revenues as consumers may choose to buy alternative products or reduce their quantity demanded. Therefore, the effect of a price increase on revenues is dependent on the elasticity of demand.

The statement that GDP and GNP are comprehensive measures of people's well-being is false. While GDP and GNP are commonly used indicators of economic activity and productivity, they do not capture all aspects of well-being such as health, education, and standard of living. These measures focus primarily on economic output and do not take into account factors that contribute to overall quality of life.

The correct answer is Efficiency, equity, stability, and economic growth. These four criteria are frequently used in judging the outcome of economic policy. Efficiency refers to the ability to maximize output with minimum input, while equity focuses on fairness and equal distribution of resources. Stability refers to the ability to maintain steady economic conditions without significant fluctuations. Economic growth refers to the increase in the overall production and consumption of goods and services in an economy. These criteria are important in evaluating the effectiveness and impact of economic policies.

The opportunity cost of watching the Star Wars DVDs for the second time is the value of the alternative use of the time you spend watching them. This means that by choosing to watch the DVDs again, you are giving up the potential value that could have been gained from doing something else with that time, such as pursuing a different activity or engaging in a productive task. The opportunity cost is not zero because there is always a trade-off involved when making a choice.

The law of demand states that as prices fall, the quantity demanded increases. This means that when the price of a product decreases, consumers are more willing and able to purchase it, resulting in a higher demand for the product. Conversely, as prices rise, the quantity demanded decreases because consumers are less willing or able to afford the product at higher prices. This relationship between price and quantity demanded is a fundamental principle in economics and helps to explain consumer behavior in the market.

The correct answer is "Bench products made in China and India." This is because GDP (Gross Domestic Product) measures the value of all goods and services produced within a country's borders. Bench products made in China and India are not produced within the Philippines' borders, so they would not be included in the country's GDP.

Computers purchased by an IBM office can be considered a "final good" because they are bought for the direct use and consumption of the IBM office itself. They are not intended for further production or resale, unlike the other options. Flour purchased by BreadTalk is a raw material used in the production of bread, paint purchased by a toy manufacturer is a raw material used in the production of toys, and clothes purchased for resale by a department store are intended for further sale to consumers.

Opportunity costs arise because resources are scarce. This means that there is a limited availability of resources such as land, labor, and capital to produce goods and services. Due to this scarcity, choices must be made on how to allocate these resources, and by choosing one option, the opportunity to pursue alternative options is forgone. Therefore, opportunity costs exist because resources are limited and must be allocated efficiently.

An individual has a comparative advantage in producing a good if they can produce that good at a lower opportunity cost. This means that they can produce the good with a lower sacrifice of producing other goods or services. In other words, they have a lower alternative cost for producing the good compared to others. This allows them to allocate their resources more efficiently and specialize in producing the good in which they have a comparative advantage.

In monopolistic competition, there are many firms selling similar but slightly differentiated products. This type of market allows for more freedom in advertising strategies as firms can highlight the unique features of their products to attract customers. With a larger number of competitors, advertising becomes crucial to differentiate one's product from others and gain a competitive edge. In perfect competition, advertising may not be as effective as products are homogeneous and price is the main determinant of consumer choice. In a monopoly, there is no competition, so advertising may not be necessary. In an oligopoly, a few dominant firms control the market, making advertising important but limited due to the interdependence among firms.

A price floor is a government-imposed minimum price that is set above the equilibrium price in a market. It is designed to protect producers and ensure they receive a fair income. By setting the price floor above the equilibrium price, it creates a surplus of supply, as producers are incentivized to produce more at the higher price. This surplus leads to excess demand, as consumers are unwilling to purchase the higher quantity at the higher price. Therefore, the correct answer is that a price floor is always above the equilibrium price.

Monopolies can arise from intellectual property rights such as patents, as they grant exclusive rights to produce and sell a particular invention or idea. Very large economies of scale can also lead to monopolies, as companies that can produce goods or services at a lower cost due to their size can drive competitors out of the market. Additionally, exclusive permits to operate can create monopolies by granting a single entity the sole right to provide a certain good or service in a specific area. Therefore, all of the given options can contribute to the formation of monopolies.

An efficient economy is one that produces what consumers demand and does so at the least possible cost. This means that the economy is able to efficiently allocate resources and produce goods and services that are in demand by consumers. Additionally, by doing so at the least possible cost, the economy is able to maximize productivity and minimize waste, leading to higher overall efficiency. This answer captures the essence of an efficient economy by focusing on the production of goods and services that meet consumer demands while minimizing costs.

In a free market system, individuals are motivated by their own self-interest to produce goods and services that are in demand by other people. This is because in a free market, individuals are driven by the desire to maximize their own profits and benefits. As a result, they will naturally produce goods and services that are desired by consumers, leading to the efficient allocation of resources and the satisfaction of consumer needs. This statement reflects the fundamental principle of self-interest driving economic activity in a free market.

When information is less costly and more easily available, it allows market participants to make more informed decisions. This leads to a more efficient allocation of resources and a better matching of supply and demand. With easy access to information, buyers and sellers can quickly compare prices and quality, leading to more competitive markets. Additionally, lower information costs reduce the barriers to entry for new competitors, increasing market competition and further improving efficiency. Therefore, when information is more accessible and affordable, it generally makes markets more efficient.

As an individual consumes more of a product within a given period of time, each additional unit consumed is likely to yield successively less satisfaction. This is because of the concept of diminishing marginal utility, which states that as the quantity of a good consumed increases, the additional utility or satisfaction derived from each additional unit decreases. Therefore, the more of a product someone consumes, the less satisfaction they will derive from each additional unit.

A price ceiling creates a situation where the maximum price that can be charged for a good or service is set below the equilibrium price. This means that the price ceiling is below the price at which the quantity demanded and the quantity supplied are equal. As a result, there is excess demand for the product because consumers are willing to buy more at the lower price, but producers are unable or unwilling to supply enough at that price. This excess demand can lead to shortages and a lack of availability of the product in the market.

Interest rates represent the cost of holding and borrowing money. This means that when individuals or businesses borrow money from banks or other financial institutions, they are charged an interest rate as a cost for using that money. Similarly, when individuals or businesses hold money in savings accounts or investments, they earn interest on those funds as a return for lending the money to the bank or investment provider. Therefore, interest rates serve as a measure of the cost of borrowing and the return on investment.

A change in the price of CDs will not cause a shift in the demand curve for audio CDs because it is a movement along the demand curve, not a shift. Changes in the price of CDs will result in a change in quantity demanded, but it will not shift the entire demand curve. Shifts in the demand curve are caused by factors such as changes in income, preferences, or the price of substitutes or complements.

The correct answer is "Are means of allocating resources" because markets play a crucial role in the distribution of resources in an economy. Through the interaction of buyers and sellers, markets determine the prices of goods and services, which in turn influence the allocation of resources. Market forces of supply and demand guide producers and consumers in making decisions about what to produce, how much to produce, and at what price. Therefore, markets serve as a mechanism for efficiently allocating scarce resources in an economy.

Unpaid family business workers are included in the labor force because they contribute to the overall economic activity of the country. Even though they may not receive a salary or wages, their work is still considered as a form of employment. Including them in the labor force provides a more comprehensive understanding of the workforce and its impact on the economy.

According to the theory of comparative advantage, specialization and free trade will benefit all trading parties, even when some are absolutely more efficient producers than others. This is because each trading party has a comparative advantage in the production of certain goods, meaning they can produce those goods at a lower opportunity cost compared to other goods. By specializing in the production of goods they have a comparative advantage in and trading with other parties, all parties can benefit from increased efficiency and a wider variety of goods available in the market.

Yearly nominal GDP figures are not used to track the country's economic performance accurately. While they provide a measure of a country's economic output, they do not account for inflation, which can distort the true economic performance. To accurately track economic performance, real GDP figures, which adjust for inflation, are used. Therefore, the statement that yearly nominal GDP figures are used to track the country's economic performance is false.

The given correct answer is "None of the above". This means that all of the options listed are reasons for faster economic growth. People devoting more of their income to savings can lead to increased investment and capital accumulation, which can stimulate economic growth. An increase in the number of skilled workers, as foreign-educated Filipinos return to the country, can contribute to productivity and innovation, driving economic growth. Reduction of red tape in government via streamlining of rules on issuing business permits can make it easier for businesses to operate and attract investment, promoting economic growth. Therefore, all of these factors can contribute to faster economic growth.

The statement is false because not all legal economic activities are included in GDP. GDP only includes the value of final goods and services produced within a country's borders during a specific time period. It does not include certain types of economic activities such as unpaid household work, illegal activities, and underground economy transactions. Therefore, it is incorrect to say that all legal economic activities are included in GDP.

The correct answer states that there has been an increase in the quantity supplied of calzones and a decrease in the supply of pizza. This means that the frozen food manufacturer is producing more calzones and fewer pizzas in response to the increase in the price of calzones. The increase in quantity supplied of calzones indicates that the manufacturer is willing and able to produce more calzones at the current price. On the other hand, the decrease in the supply of pizza suggests that the manufacturer is producing fewer pizzas due to factors such as higher production costs or lower demand.

In an efficient market, profit opportunities are eliminated almost instantaneously. This means that as soon as a profitable opportunity arises, it is quickly identified and acted upon by market participants, causing the profit potential to be quickly eliminated. This is because in an efficient market, information is readily available to all participants and is quickly incorporated into prices, leaving little room for individuals to consistently earn above-average returns.

Passers-by enjoying the view of fireworks launched for a nearby invitation-only event is a market failure because it represents a situation where the benefits of a good or service are not fully captured by the market. In this case, the fireworks display is meant for a specific group of people (invitation-only event), but passers-by who are not part of that event are still able to enjoy the view without paying for it. This results in a failure of the market to allocate and price the benefits of the fireworks display properly.

The only ice cream stand along an unoccupied beachfront could be classified as a monopoly because it is the sole provider of ice cream in that specific location. A monopoly occurs when there is only one seller or provider of a particular product or service in a given market, giving them complete control over the market and the ability to set prices without competition. In this case, the ice cream stand has no competition in the area, making it a monopoly.