INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY

ECONOMY REVIEWER – Quiz 1

I. MULTIPLE CHOICE
1. A graph that shows a locus of points for which a consumer would equally prefer varying
quantities of two items.
a. Economics
b. Indifference curve
c. Marginal utility
d. Marginal cost

2. Given that meat and rice are complementary goods, if the price of meat decreases
substantially, there would be:
a. an increase in the demand for rice
b. an increase in the quantity of rice demanded
c. a decrease in the demand for rice
d. a decrease in the quantity of rice demanded

3. The three broad types of resources used to produce goods and services are also known as:
a. economic systems
b. Factors of production
c. Production possibilities
d. Economic efficiency
e. financial capital

4. If an economy has to sacrifice only one unit of good X for each unit of good Y produced, then
its production possibilities curve has a(n):
a. zero slope
b. positive slope
c. constant, negative slope from left to right
d. increasing, negative slope from left to right
e. decreasing, negative slope from left to right

5. Government’s role of providing national defense is considered:

a. enforcing a legal system
b. providing certain goods and services
c. promoting equity
d. promoting efficiency
e. none of the above

For the next 5 numbers, choose your answer from among the following:

(A) Market price will decrease and market quantity will decrease.
(B) Market price will increase and market quantity will increase.
(C) Market price will decrease and market quantity will increase.
(D) Market price will increase and market quantity will decrease.
(E) Market price and quantity will not change.

6. A period of inclement weather destroys a significant portion of Luzon’s onion crop. What
effect will this have on the Metro Manila onion market?

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 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
ECONOMY REVIEWER – Quiz 1

7. Technology has helped to increase the productivity of workers in the truck industry. What
effects will this have on price and quantity in the truck industry?

8. The Journal of Philippine Medicine releases a study that indicates that the consumption of
ripe mangoes has a definite positive effect on an individual’s health. How will this news affect
the Philippine mango industry?

9. The economy is doing extremely well and to accommodate the need to workers, a large influx
of rural workers move to urbanized / industrial areas. None of these rural workers will work in
the book publication industry. What will be the effect on the price and quantity of the book
publishing market?

10. As a consequence of migration of workers in the previous question, children of the said
workers are brought with the worker parents. What would happen to the market for schools for
such children in rural areas they abandoned?

11. The primary difference between a change in supply and a change in quantity is:
a. both change in qty supplied and change in supply are shifts in the supply curve, only
in different directions
b. both a change in qty supplied and a change in supply are movements along the
supply curve, only in different directions
c. A change in supply is a movement along the supply curve while a change in qty
supplied is a shift in the supply curve
d. A change in qty supplied is a movement along the supply curve and a change in
supply is a shift in the supply curve

12. When we speak of the real foundation of our national wealth, or living standards, we would
include all of the following EXCEPT:
a. Natural resources
b. Amount of money in the economy
c. Skills possessed by members of our labor force
d. The number of self-employed entrepreneurs doing business in the country
e. The amount of capital goods such as factories and machinery, which we have
accumulated

13. If the economy is operating at a point inside the production possibilities frontier, this implies that:
a. Productive resources are insufficient to allow us to reach the frontier
b. More of one good would be available only if we are willing to sacrifice some output of the
other good
c. Consumers do not desire any more of either good
d. Our productive capacity is not being fully utilized
e. Both (a) and (b)

14. Elasticity of demand is a measure of how much the demand of a good will change in
response to a change in the ________ of that good.
a. price
b. quantity
c. income
d. shift in demand

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ECONOMY REVIEWER – Quiz 1

15. If demand is elastic, then a 5% increase in price of a product will result in ______ in demand
a. more than 5% increase
b. less than 5% increase
c. more than 5% decrease
d. less than 5% decrease
e. Exactly the same change

16. If we were to plot the information contained in a demand schedule with _____ on the vertical
axis …. ( see next question)
a. Price
b. Quantity
c. X
d. Y

17. and the corresponding amount on the horizontal axis, we will have constructed a(n) ____.
a. Equilibrium point
b. supply curve
c. demand curve
d. indifference map

18. When two goods are consumed jointly, there is a ____ relationship between their demands.
a. complementary
b. positive
c. substitute
d. negative

19. When supply is completely ____, the supply curve will be vertical.
a. complementary
b. elastic
c. substitute
d. inelastic

20. The market price for a good will rise whenever there is an excess ____ for that good.
a. demand
b. supply
c. surplus
d. shortage

21. Rising prices ___ additional production by profit seeking suppliers.

a. encourage
b. discourage
c. precede
d. follow

22. Higher price serves to ___ the available supplies.

a. reduce
b. black-market

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 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
ECONOMY REVIEWER – Quiz 1

c. ration
d. increase

23. Higher prices also encourage demanders to ____ in their use of the scarce commodity.
a. ration
b. black-market
c. economize
d. increase

For the next 4 numbers, consider the following market equations for the price P (in pesos) per
kilowatt-hour of electricity and the average number of kilowatt-hours consumed by households
every month:

Demand: P = 11 -

Supply: S =

24. If the price of electricity is 4 pesos per kWh, what would be the resulting market condition?

a. A shortage of 43.472 kWh per household per month

b. A shortage of 333 kwh per household per month
c. A surplus of 700 kwh per household per month
d. None of the above

25. What is the equilibrium price per kwh in pesos?

a. 9
b. 7
c. 6
d. 4
e. None of the above

26. What is the equilibrium average consumption per month in kwh?

a. 700
b. 500
c. 600
d. 400
e. None of the above

27. If a distribution charge of 3 pesos per month per household is imposed on consumers, what
would be the new equilibrium price?
a. 12
b. 9.28
c. 10
d. 7.36
e. None of the above

For the next 4 numbers, consider the following problem:

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 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
ECONOMY REVIEWER – Quiz 1

Budget = P 90.00
Price per unit X = P5.00
Price per unit Y = P9.00

QTY TOTAL UTILITY X TOTAL UTILITY Y

1 50 60
2 95 114
3 135 162
4 170 204
5 200 240
6 225 270
7 245 294
8 260 312
9 270 324
10 275 330

28. At the maximum total utility combination, the number of X to be consumed must be
a. 4
b. 5
c. 6
d. 7
e. 8

29. At the maximum total utility possible for the given budget?
a. 2
b. 3
c. 4
d. 5
e. 6

30. What is the maximum total utility possible for the given budget?
a. 485
b. 494
c. 515
d. 89
e. None of the above

31. Suppose that you now have an additional P10 budget, which of the following choices would
improve the previous optimal solution?
a. increase two units of X
b. increase one unit each of X and Y
c. Increase one unit of Y
d. Give up two units of X and increase 2 units of Y
e. Give up one unit of Y and increase 3 units of X

II. TRUE OR FALSE

1. Technological progress would generally shift society’s production possibilities curve to
the right.

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 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
ECONOMY REVIEWER – Quiz 1

2. A high degree of specialization would be impossible without a system of exchange.

3. A higher selling price for any commodity will always result in higher total revenues for the
producers of that product.
4. Some advertising performs a desirable economic function.
5. The more capital goods an economy produces today, the greater will be the total output
of all goods it can produce in the future, other things being equal.
6. An increase in income will result in an increase in demand for a product.
7. If the market price is below its equilibrium price, the market price will tend to rise
because demand will decrease and supply will increase.
8. Economists often make the assumption of other things being equal to hold constant the
effects of other factors when examining the relationship between prices and quantitites
demanded and supplied.
9. In a market system, the government owns most of the property resources (land and
capital).
10. A basic economic argument in factor of a market economy system is that it promotes an
efficient use of resources.

ANSWERS:
I. MULTIPLE CHOICE

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 INDUSTRIAL MANAGEMENT ENGINEERING SOCIETY
ECONOMY REVIEWER for Quiz 1
1. B
2. A
3. B
4. C
5. B
6. D
7. C
8. B
9. D
10. A
11. E
12. B
13. D
14. A
15. C
16. A
17. C
18. A
19. D
20. A
21. C
22. C
23. E
24. C
25. B
26. E
27. D
28. E
29. C
30. A

II. TRUE OR FALSE

1. True
2. True
3. False
4. True
5. True
6. True
7. False
8. True
9. False
10. True