UNION CHRISTIAN COLLEGE

School of Business Sciences

Basic Microeconomics
Prelims Examinations

Name: Sobremonte, Joyce Anne B. Score:

Course & Year: BSBA 2 Date: September 21-23, 2023

I: IDENTIFICATION: identify the word or group of words that is being referred to in the
following statements.
(Knowledge and Comprehension) (10 marks)
Supply /Provide the correct answer. Each carries 1 mark

Efficiency 1. It means that society is getting the maximum benefits from its scarce
resources
Microeconomics 2. It focuses on the choices made by individual decision-making units in
the economy
Scarcity 3. It means that whether we like it or not, we must have to a make choice.
Macroeconomics 4. It focuses on the aggregate changes in the economy such as
unemployment, growth rate, gross domestic product and inflation.
Shortages 5. It is the amount by which the quantity demanded exceeds the quantity
supplied at the current price
Price 6. Refers to the amount of money given or set as consideration for the sale of a
specified thing.
Supply 7. It is the schedule of various quantities of commodities which producers are
willing and able to produce and offer at a given price, place and time
Surplus 8. It is the amount by which the quantity supplied exceeds the quantity
demanded at current price
Opportunity Cost 9. It is the value of the best alternative forgone in making any choice.
Productive Efficiency 10. It means that society is getting the maximum benefits from its
scarce resources. efficiency

II: TRUE OR FALSE: Write True if the statement is true and false if the statement is
false. (Knowledge and Comprehension) (15 marks)
Supply /Provide the correct answer. Each carries 1 mark

True 1. Microeconomics provides a more complete and detailed understanding than

macroeconomics
False 2. When a government creates large quantities of the nation’s money, the value of
the money increases
True 3.When thinking about how any policy will affect living standards, the key question
is how it will affect our ability to produce goods and services.
True 4. Our unlimited wants are continually colliding with the limits of our resources,
forcing us to pick some activities and to reject others
True 5. A change in technology alters the combinations of inputs or the types of inputs
required in the production process
True 6. A change in preferences that makes one good or service more popular will shift
the demand curve to the right.
False 7. If a reduction in the price of one good increases the demand for another, the two
goods are called substitutes
True 8. Because many individuals who benefit from public goods will not pay for them,
private firms will produce a smaller quantity of public goods than is efficient, if they
produce them at all
True 9. In a competitive market with exclusive and transferable property rights, buyers
and sellers are faced with all of the relevant benefits and costs, and the equilibrium price
exceeds the marginal cost to society of producing that good
False 10. The net benefit is total revenue minus total opportunity cost.
True 11. If the marginal benefit of an activity exceeds the marginal cost, the decision
maker will gain by increasing the activity.
True 12. Utility is not a quality inherent in the good or service itself
True 13. The marginal decision rule states that an activity should be expanded if its
marginal benefit exceeds its marginal cost
 False 14. The increase in price increases the consumer’s ability to buy goods
Fase 15. When the price of an inferior good falls, the quantity demanded increases as a
result of the substitution effect

III: MULTIPLE CHOICE; Choose the best answer by encircling the letter of your choice.
(Comprehension and Analysis) (20 marks)
Choose the letter of the best answer. Each question carries 1 mark

___E___1. Microeconomics shows the following, except…

a. how and why different goods have different values
b. how individuals and businesses conduct and benefit from efficient
production and
exchange
c. how individuals best coordinate and cooperate with one another.
d. All of the above
e. None of the above
a.
___A___ 2. It plays a very important role in the determination of the price elasticity of
supply and demand
a. Price elastic d. All of the above
b. Price unitary e. None of the above
c. Price inelastic
___D___3. It shows the responsiveness of quantity demanded to a price change, assuming
that other factors that influence demand are unchanged
a. The Law of Supply d. The Price Elasticity of Demand
b. The Law of Demand e. The Price Elasticity of Supply
c. The Law of Supply and Demand f. None of the above
___D___4. The following are determinants of the price elasticity of demand except…
a. Availability of Substitutes d. Price Floors and Price Ceiling
b. Importance in Household Budgets e. All of the above
c. Time
___A___5. Returns from alternative activities means….
a. To produce one good or service means forgoing the production of another.
b. Outlawing the use of certain equipment without pollution-control devices
has increased the cost of production for many goods and services.
c. A change in the number of sellers in an industry changes the quantity
available at each price
d. All of the above
e. None of the above
___C___ 6. It plays a very important role in the determination of the price elasticity of
supply and demand
a. Price elastic d. All of the above
b. Price unitary e. None of the above
c. Price inelastic
___C___ 7. These are resources for which no property rights have been defined
a. Public goods d. All of the above
b. Utility goods e. None of the above
c. Common property resources
___C___ 8. These are costs that are NOT included in what the business bases its price on.
a. Marginal cost d. Production cost
b. Total cost e. All of the above
c. External cost f. None of the above

___E___ 9. External cost includes…

a. the cost of disposing of the product at the end of its useful life
b. the environmental degradation caused by the emissions, pollutants and
wastes from production
c. the cost of health problems caused by harmful materials and ingredients
d. social costs associated with increasing unemployment due to increasing
automation
 e. all of the above
f. none of the above
___B___ 10. In a non-competitive market..
a. each consumer and producer takes the market price as given and responds
to it.
b. individual buyers or sellers are powerful enough to influence the market
price
c. the cost of an additional user is zero
d. Most public goods are provided directly by government agencies
e. All of the above
f. None of the above
___B___ 11. Which of the following statements is not correct…
a. maximizing consumer behavior lies at the heart of economic analysis
b. every household in a non-competitive market has any power over the
equilibrium price
c. "idle cash balances represent an opportunity cost in terms of lost interest"
d. All of the above
e. None of the above
___D___ 12. Achieving efficiency in the marketplace is …..
a. the forces of demand and supply determine price.
b. property rights are a set of rules that specify the ways in which an owner
can use a resource
c. producers maximize profit by expanding their production up to the point at
which their marginal cost equals their marginal benefit
d. all of the above
e. none of the above
___C___ 13. It is a good for which demand increases when income increases.
a. Marginal goods d. Inferior goods g. None of the above
b. Economic goods e. Consumer goods
c. Normal goods f. All of the above
___D___ 14. These are goods whose demand drops when people's incomes rise.
a. Marginal goods d. Inferior goods g. None of the above
b. Economic goods e. Consumer goods
c. Normal goods f. All of the above
___A___ 15. In the income effect…
a. there is a change in a consumers consumption of a good in response to an
income-compensated price change
b. Changes in seller expectations can have important effects on price and
quantity
c. more sellers or more factories to produce the goods and services mean an
increase in supplies
d. When prices of goods are expected to increase, sellers has the tendency to
hoard their goods and only release these goods when prices are already high
e. All of the above
f. None of the above
___B___ 16. This occurs when producing or consuming a good or service causes a benefit to
a third party
a. Marginal benefit c. Net benefit e. All of the above
b. External benefit d. Total benefit f. None of the above

___B___ 17. Which of the following statement is not correct…

a. maximizing behavior lies at the heart of economic analysis
b. marketplace must be competitive or function as if it were.
c. A competitive market with well-defined and transferable property rights
satisfies the efficiency condition
d. The sum of consumer surplus and producer surplus measures the marginal
benefit to society of any level of economic activity
e. All of the above
 f. None of the above
___D___ 18. How should goods and services be produced?
a. Should a firm employ a few skilled or a lot of unskilled workers?
b. Should it produce in its own country or should it use foreign plants?
c. Should manufacturing firms use new or recycled raw materials to make
their products?
d. Goods and services must be produced in the most efficient manner
e. All of the above
f. None of the above
___B___ 19. Utility maximization is ….
a. is one with many buyers and sellers in each market and in which entry and
exit are fairly easy.
b. is finding where the ideal meets reality, or where you can be the happiest
given your constraints and scarcity
c. achieved in markets through a competitive market and well-defined,
transferable property rights
d. all of the above
e. none of the above
___A___ 20. It is the amount by which an additional unit of an activity increases its total
benefit
a. Marginal benefit
b. External benefit
c. Net benefit
d. Total benefit
e. All of the above
f. None of the above

Prepared by: Checked by:

MARIA TERESA C. UMAYBAS EMMA A. GANUELAS, MBA, PhD

Faculty SBS - Focal Person

Approved by:

NELLIE M. GALVAN
Dean - SBS