Micro Economics Test Questions By cinema a. Define Production Possibilities Curve. . The figure below represents the production possibility frontier for the small entry of Bistro, which produces only agricultural products (measured in thousands of tons) and manufacturing products (measured in thousands of pounds): Does the production possibility frontier demonstrate the law of increasing opportunity cost? How can you tell? C. What happens too country’s production possibility frontier if it experiences a natural disaster such as a hurricane or an earthquake? Explain. D.
Why are the opportunity costs of an MBA graduate course greater than the opportunity cost of a B. Bus or B. Com undergraduate course? MBA student is qualified enough to work and earn a salary because he/she Has knishes her undergrad. Become student has fewer chances to get a Job because he/she is still doing undergraduate. The opportunity cost being money lost if MBA student went to work. Question 2 (2+3+5 = 10 marks) a. What is the difference between a change in demand and a change in quantity demanded? B.
For each of the following markets, indicate whether the stated change causes a shift of the supply curve, a shift of the demand curve, a movement along the supply curve and lord a movement along the demand curve. I) The housing market: consumers’ income increases it) The computer market: the price of broadband alls iii) The milk market: the price of milk increases and the amount of milk people are willing to buy decline iv) The fast-food market: the number of fast- food restaurants in the area increases of consumers in the area decreases yogurt falls v) The video-rental market: the number v’) The ice-cream market: the price of frozen c.
What is a price ceiling? Suppose that the equilibrium rent for a two-bedroom apartment in Chucking city is REARM per month. The city council decides to place a price ceiling on apartments and will not allow landlords to charge more than REARM ere month. Draw this situation using a graph. Make sure that you show the original equilibrium and the effect of the price ceiling on the market. What will happen in this Question 3 (4+4+2=10 marks) a. Briefly explain whether the demand for each of the following products is likely to be elastic or inelastic. ) Cereal elastic I’) Economics text books iii) Cola elastic iv) Prescription medicine inelastic b. The price of cabbage rises from ROOM. 20 per pound to ROOM. 30 per pound. The quantity of cabbage demanded falls from 800 pounds per week to 600 pounds per week. Use the midpoint formula to calculate the price elasticity of demand for cabbage. Is the demand elastic, inelastic, or unit elastic? C. Explain why supply is more elastic in the long run?
Firms will have time to adjust the factors of production Question 4 (3+4+3=10 marks) a. State and explain the Law of Diminishing Marginal Returns. States that increasing the amount of variable input such as labor to a fixed amount of input such as machinery will cause the marginal product of that variable to decline. B. Which of the following are short-run adjustments and which are long-run adjustments? Explain your answers. ) Holder builds a new assembly plant. Long run I’) BP Billion hires 200 more workers.
Short run iii) A farmer increases the amount of fertilizer used on a wheat crop. Short run iv) An Alcoa plant adds a third shift of workers short run c. Explain the difference between the economic cost and the accounting cost. Economic cost is the summation of explicit cost and implicit cost. Accounting costs are explicit costs only. Explicit costs are cost that require spending of money such as rent or labor wages. Implicit cost are non-monetary opportunity costs such as a company using it rented it out.