True or False

1. Leakages in the circular flow of goods and services include saving, taxes and imports while inflows are investments, government expenditures and exports.

2. A change in demand refers to the movement of demand curve along the curve brought about by the change in the price of the good demanded.

3. The expectation of buyers to price change has a direct effect to quantity supplied of the good.

4. Market equilibrium exists when the Qd = Qs of the commodity in the market.

5. Price elasticity of demand is elastic, when the %change in price is greater than the %change in quantity demanded.

1. Multiple Choice.

1. Part of the households' income that is paid to government is known as (tax, saving, import good).

2. (Price of the complement good, Price expected to change, Number of buyers) is indirectly or inversely related to the price of the good demanded.

3. If the price of producing computer printer increases, sellers quantity supplied (ceteris paribus) will (increase, decrease, remain the same).

4. There is market (shortage, surplus, equilibrium) when Pg = 7 at the Qd = 21 - 2Pg and Qs = 2 + 1Pg.

5. The commodity is said to be normal good when the income elasticity is (positive, negative, zero).

1. Problem Solving.

Suppose the individual demand equation for bananas is Qd = 24 - 2P g and the individual supply equation is expressed as Qs = 3 + 1P g .

a. Tabulate the Market Schedule (Demand and Supply Schedule) using the market prices, Pg 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11, respectively

b. Graph the demand and supply curves using the y-axis as the Pg and x-axis as the Economics 2A - Price Theory: Basic Microeconomics 44 Quantity, Qd /Qs

c. Determine the equilibrium point, eo graphically and mathematically (Qd = Qs). What is the Equilibrium Price, Pe _____ and Equilibrium Quantity, Qe _______

d. Identify the areas of Market Shortage and Market Surplus.

Module 3

True or False

1. Economic Efficiency is the technically efficient method with the highest production cost to the business firm.

2. The Law of Diminishing Returns stipulates that for every additional input (variable) to a fixed input, output increases in a diminishing rate.

3. In the irrational production stage, MP is already negative, TP and AP decreased.

4. Isocosts are non-intersecting and non-tangent. Isocosts have the same properties as consumers' indifference curves.

5. Long-run cost, LAC is the cost of adjusting all factors of production, including plant capacity.

Multiple Choice.

1. In the function, Q = f(L), any changes in the input L would result to a change in the output Q. Labor (L) here is a(variable, fixed, constant)input.

2. The saturation point in production curve shows the TP that is(increasing, constant, decreasing).

3. The symbolic equation of total cost is, TC = TFC + TVC. In graphs the curve that is represented by a straight horizontal line is( TC, TFC, TVC).

4. Diseconomies of scale means the(increase, decrease, constant)in output of the firm is

5.(less than, greater than)proportionate to the increase in input of the firm.

Essay:

1. What is more important to a firm: technical efficiency or economic efficiency? Support or justify your answer.

2. The marginal product and the average product are more derivative concepts of the total product, yet they appear to be playing a vital role in microeconomic analysis. Give the importance of the MP and the AP showing mathematical derivation.

3. In the Factor-Factor Relationship, state the governing principle in determining the optimum combination of two variable inputs. Sketch a graphical illustration with complete labels.

4. Some scholars recommend that all students, regardless of course major must study price theory. Justify your answers.

5. Someone tells you "That theory has no practical value because it is abstract, it is not real, it exists only in the mind of the theorist."

Refute the statement.