microeconomics workbook

Bachelor of Arts in Economics

MICROECONOMICS

W O R K T E X T

Pangasinan State UniversityLINGAYEN CAMPUSLingayen, Pangasinan

JAMESON N. ESTRADA

Pangasinan State University

Advanced Microeconomics with the course code Econ 112 is concerned with the theories and principles of microeconomics which attempt to analyze how households, firms and government behave and make economic decisions and how they interact in specific markets. The course deals with price theory, market, demand and supply, consumer behavior, production process, cost minimization, profit maximization, market failure, government intervention and other microeconomic theories and variables with emphasis on the use of economic models such as tables, graphs and equation for a comprehensive economic analysis.

This worktext is intended for use by the students of AB Economics program taking up the subject Econ 101 with the objective of providing them with a comprehensive understanding about microeconomics. Likewise, it has been designed as an instrument for learning development and assessment, providing students with a practical approach to applying the knowledge learned in the lectures. Each worktext covers exercises that is built upon the lessons of all the chapters with the following course outcomes:

1. Understand the nature and scope of microeconomic analysis.2. Utilize economic models using graphs and equation to analyze economic data and

variables.3. Examine the fundamental concepts and ideas regarding economic system and its

classification.4. Know the different functions and operations of market structures.5. Analyze how and why consumers demand for goods and services.6. Analyze how producers or firms supply goods and services.7. Analyze the equilibrium and disequilibrium condition of the forces of demand and supply in

the market.8. Determine the sensitivity of consumers and producers in responding to price and income

changes.9. Demonstrate how the consumers maximize their utility or satisfaction, given the budget

constraints they face.10. Describe the production process of firms.11. Determine how firms incur and minimize costs of production.12. Analyze the economic analysis of profit maximization13. Comprehend why market failures exist.14. Understand the economic roles and functions of government.15. Understand the basic principles of taxation and assess the effects of tax impositions to

different organizations and entities.

Bear in mind that it takes sustained effort – and some dedicated patience – to study and learn thesubject. But, it is assured that the effort is well worth it. It is hoped this modest work helps you. So, thebest of luck as you begin your journey in answering the worktext exercises!

PREFACE

ECONOMIC MODEL, GRAPH AND EQUATION

ECONOMIC SYSTEM

PRODUCTION

CONSUMER BEHAVIOR

ELASTICITY

MARKET EQUILIBRIUM

SUPPLY

DEMAND

MARKET STRUCTURE

COST

PROFIT MAXIMIZATION

MARKET FAILURE

GOVERNMENT INTERVENTION

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TAXATION

INTRODUCTION TO MICROECONOMICS 14

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31

36

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MICROECONOMICS (ECON 101) SYLLABUS

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Course Syllabus in Econ 101 – Microeconomics

AB ECONOMICS PROGRAM

COURSE SYLLABUS 1st Semester, S.Y 2016 – 2017

COURSE INFORMATION COURSE CODE Econ 112 COURSE TITLE ADVANCED MICROECONOMICS COURSE TYPE Lecture CREDIT UNITS 3 units TIME FRAME 3 hours / week (54 Hours) PREREQUISITE None

VISION, MISSION, GOALS AND OUTCOMES

UNIVERSITY VISION To become an ASEAN Premier State University by 2020

UNIVERSITY MISSION The Pangasinan State University, through instruction, research, extension and production, commits to develop highly principled, morally upright, innovative and globally competent individuals capable of meeting the needs of industry, public service and civil society.

UNIVERSITY STRATEGIC GOALS

1. Excellent student learning and career development2. Strong research culture and technology transfer3. Good governance4. Sustainable social responsibilities5. Quality human resources management and development6. Efficient management of assets and finances7. Responsive to Globalization and Diversity8. Customer-focused

UNIVERSITY OUTCOMES

The Pangasinan State University Institutional Learning Outcomes (PSU ILO) are the qualities that PSUnians must possess.

These outcomes are anchored on the following core values: Accountability and Transparency, Credibility and Integrity, Competence and Commitment to Achieve, Excellence in Service Delivery, Social and Environmental Responsiveness, and Spirituality – (ACCESS). Anchored on these core values, the PSU graduates are able to:

1. Demonstrate through institutional mechanisms, systems, policies, and processes which are reflectiveof transparency, equity, participatory decision making, and accountability;

2. Engage in relevant, comprehensive and sustainable development initiatives through multipleperspectives in decisions and actions that build personal and professional credibility and integrity.

3. Set challenging goals and tasks with determination and sense of urgency which provide continuousimprovement and producing quality outputs leading to inclusive growth;

4. Exhibit life-long learning and global competency proficiency in communication skills,inter/interpersonal skills, entrepreneurial skills, innovative mindset, research and production initiativesand capability in meeting the industry requirements of local, ASEAN and international human capitalmarket through relevant and comprehensive programs;

Republic of the Philippines PANGASINAN STATE UNIVERSITY LINGAYEN CAMPUS

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5. Display, socially and environmentally responsive organizational culture, which ensures higherproductivity among the university constituents and elevate the welfare of the multi-sectoralcommunities and;

6. Practice spiritual values and morally upright behavior which promote and inspire greater harmony toproject a credible public image.

PSU LINGAYENCAMPUS OUTCOMES

PROGRAM OUTCOMES The AB Economics program is designed to produce graduates to

PROGRAM OUTCOMES PERFORMANCE INDICATORS

Demonstrate working knowledge on economic concepts, theories and principles necessary to understand the functioning of the Philippine and global economies.

Familiarize the terms and concepts commonly used in discussions ofeconomic issues.

Communicate effectively economic ideas, problems, and findings. Generate constructive analysis of the real world issues using the theories in

economics.

Develop understanding on the economic behaviors of the different economic units such as the consumers, firms, government, and foreign sector.

Analyze how economic actors maximize their various objective functions,given the constraints they face.

Frame and solve problems in economics, using concepts such asoptimization, equilibrium, and the incentives faced by economic units.

Practice economic decision-making with reference to individuals, groupsand organizations to understand better the world in which they live in.

Show mastery of various mathematical and statistical tools used in research and economic modelling.

Utilize effectively various mathematical and statistical tools to interpreteconomic data and address an economic case or problem.

Prepare and complete an economic research applying both the qualitativeand quantitative methods.

Build theoretically sound and technically correct econometric models anduse statistical software to obtain results

Exhibit competence and dynamism in performing functions as a productive player of the economy and an active member of the community and organization who takes the initiatives to lead for good governance.

Conduct extension services such as financial building, cooperativedevelopment, and livelihood projects to educate and empower citizens inthe community with lasting impact and sustainability.

Produce a constructive assessment of a social or economic problem bydrawing upon relevant data and utilizing suitable economic theories andevaluate alternative public policy choices.

Evaluate the welfare implications of various forms of competition andgovernment policies

Demonstrate expertise in the conduct of economic programs, projects and activities that adopt national and international standards.

Prepare project proposals, feasibility studies, and policy proposals. Propose community-driven development programs, projects, and activities. Conduct economic programs, projects and activities based on community

needs.

Employ necessary tools in communication and information technology applicable to economic analysis.

Utilize computer software like SPSS, STATA, Mathematica, and the like indata analysis and policy formulation.

Use E-learning with the aid of internet technologies to enhance learning andknowledge in economics.

Use certain IT applications in decision making and economic analysis.

Develop skills to become globally competitive in the field of economics, particularly along entrepreneurship and be able to have comparative advantage.

Use entrepreneurial and critical thinking skills in economic and businesssituations.

Undertake innovations, finance and business insight in an effort to transforminnovations into economic goods.

Value the importance of production as one of the major economic activitiesleading to economic growth.

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COURSE DESCRIPTION

This course is concerned with the theories and principles of microeconomics which attempt to analyze how households, firms and government behave and make economic decisions and how they interact in specific markets. The course deals with price theory, market, demand and supply, consumer behavior, production process, cost minimization, profit maximization, market failure, government intervention and other microeconomic theories and variables with emphasis on the use of economic models such as tables, graphs and equation for a comprehensive economic analysis.

COURSE OUTCOMES

The course demonstrates a comprehensive understanding of basic microeconomic theory. Specifically, at the end of the course, students are expected to:

1. Understand the nature and scope of microeconomic analysis. 2. Utilize economic models using graphs and equation to analyze economic data and variables. 3. Examine the fundamental concepts and ideas regarding economic system and its classification. 4. Know the different functions and operations of market structures. 5. Analyze how and why consumers demand for goods and services. 6. Analyze how producers or firms supply goods and services. 7. Analyze the equilibrium and disequilibrium condition of the forces of demand and supply in the market. 8. Determine the sensitivity of consumers and producers in responding to price and income changes. 9. Demonstrate how the consumers maximize their utility or satisfaction, given the budget constraints they face. 10. Describe the production process of firms. 11. Determine how firms incur and minimize costs of production. 12. Analyze the economic analysis of profit maximization 13. Comprehend why market failures exist. 14. Understand the economic roles and functions of government. 15. Understand the basic principles of taxation and assess the effects of tax impositions to different organizations and entities.

COURSE LEARNING PLAN

Course

Outcome

Learning Outcomes

Topics

No. of

Hrs.

Teaching

and Learning Activities

Resource Materials

Assess

ment

State the vision, mission, goals and

core values of the University Enumerate and explain the objectives

and learning outcomes of the program Describe the course information Explain the description of the course Examine the outline /plan of the

course Comment on the requirements and

policies of the course List the references and supplemental

readings to be used in the course

COURSE ORIENTATION 1. Vision, Mission

on, Goals, Guiding Philosophy and Core Values of the University

2. Program Outcomes 3. Course Information 4. Course Description 5. Course Outcomes 6. Course Outline 7. Course Requirements and

Course Polices 8. Course References and

Supplemental Readings

1

Lecture/ Discussion

Syllabus Glass board,

marker and eraser

Laptop and LED Projector for PowerPoint Slides

Course Website at www.psuecon.com

E-learning (LMS) site

Quiz

CO1

Define economics and explain that

economics is a social science Explain the relevance of studying

economics Distinguish between microeconomics

and macroeconomics

CHAPTER 1: INTRODUCTION TO MICROECONOMICS 1. Economics Defined 2. Importance of Studying

Economics 3. Microeconomics vs

Macroeconomics

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Explain that scarcity exists becauseresources are finite and wants areinfinite

Define opportunity cost and analyzeparticular circumstances to illustratethe concept

Examine the assumption of rationaleconomic decision making

Distinguish the difference betweenwants and needs

Outline and explain the four economicactivities including production,distribution, exchange andconsumption

Describe the four categories ofeconomic resources or factors ofproduction

Identify and explain the differenteconomic goals

Define an economic model andexplain the process of model buildingin economics.

Distinguish between positive andnormative economics

Describe and illustrate, using adiagram, the circular flow of incomebetween households and firms.

Demonstrate how productionpossibility curves can be used toillustrate choice and resourceallocation

4. Scarcity and Choice5. Opportunity Cost6. Economic Activities7. Economic Resources/

Factors of Production8. Economic Goals9. Positive versus Normative

Economics10. Circular Flow of Income

Model11. Production Possibility

Frontier

for PowerPoint Slides

CourseWebsiteavailable atwww.psuecon.com

E-learning(LMS) site atwww.psuecon.neolms.com

CO2 Define an economic model andexplain the process of model buildingin economics.

Outline and differentiate the differentforms of economic model

Distinguish between descriptive andanalytical model

Explain the use of the ceteris paribusassumption

Describe a graph and explain the useof graphs in economic analysis

Identify the forms of graphs Examine and interpret rectangular

coordinate system (Cartesian plane)as a way of representing economicrelationship/variables

Define variable and constant Distinguish between dependent

variable and independent variable Distinguish between inverse and direct

relationship Define slope and determine the slope

of a line Define linear equation Describe slope and intercept Solve for x and y-intercept Calculate the slope of a line or curve Express the general form of a linear

equation Find the equations of the line using

standard form, two-point form, slope-intercept form and intercept form

Solve x and y-intercept

CHAPTER 2 : ECONOMIC MODEL, GRAPHS AND EQUATIONS

1. Economic Model Defined2. Forms of Economic Model3. Descriptive and Analytical

Model4. The Ceteris Paribus

Assumption5. Graph: Its Meaning and

Uses6. Forms of Graph7. Rectangular Coordinate

System8. Variable and Constant9. Dependent Variable and

Independent Variable10. Economic Relationship11. Inverse vs. Direct

Relationship12. Slope of a Line13. Linear Equation14. Slope Intercept Form15. X and Y-Intercepts

3 Lecture/Discussion

ProblemSolving

Web-basedInstruction

E-Learning(LMS)

Books and E-books

Worktext Glass board,

marker anderaser

Laptop andLED Projector for PowerPoint Slides

ScientificCalculator



Exercises

Recitation

Assignment

WrittenQuiz

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http://www.psuabeconomics.com/

http://www.psuecon.neolms.com/






CO3

Define economic system Outline the roles of economic system Describe the salient functions of

economic system Enumerate the basic types of

economic system Define a traditional economy Describe the characteristics of the

economy Identify countries with traditional form

of economy Define market economy Describe the characteristics of a free

market economy Explain the roles of government in a

market economy Define command economy Describe the characteristics of a

command economy Explain the roles of government in a

command economy Identify countries with command form

of economy Define mixed economy Describe the characteristics of a mixed

economy Explain the roles of government in a

mixed economy Identify countries with traditional form

of economy

CHAPTER 3: ECONOMIC SYSTEM 1. Definition of Economic

System 2. Roles of Economic System 3. Salient Functions of

Economic System 4. Basic Types of Economic

System Traditional Economy Free Market Economy Planned or Command

Economy Mixed Economy

5. Traditional Economy Definition of a Traditional

Economy Characteristics Countries w/ Traditional

Economy 6. Market Economy

Definition Characteristics of a Free

Market Economy Roles of Government in a

Market Economy Countries w/ Free Market

Economy 7. Command Economy

Definition Characteristics of a Free

Market Economy Roles of Government in a

Command Economy Flaws of a Command

Economy Countries w/ Command

Economy 8. Mixed Economy

Definition Characteristics of a

Mixed Economy Roles of Government in a

Mixed Economy Countries w/ Mixed

Economy

2

Lecture/Dis

cussion Problem

Solving Web-based


(LMS) Case Study Debate

Books and E-


marker and eraser


Scientific Calculator

Course Website available at www.psuecon.com

E-learning (LMS) site at www.psuecon.neolms.com

Exerci

ses Recitat

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ment Written

Quiz

CO4

Define market and understand how a

market works Identify and describe the elements of

the market Define market structure and outline

the forms of market structure Describe, using examples, the

assumed characteristics of perfect competition

Describe, using examples, the assumed characteristics of a monopolistic competition

Describe, using examples, the assumed characteristics of an oligopoly.

Describe, using examples, the assumed characteristics of a monopoly

CHAPTER 4 : MARKET STRUCTURE 1. Definition of a Market 2. Elements of a Market 3. Categories of a Market 4. Definition of a Market

Structure 5. Market Structure 6. Characteristics of Market

Models 7. Perfect Competition 8. Monopolistic Competition 9. Oligopoly

10. Monopoly

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CO5

Define demand Distinguish between Desired

demand vs. Effective demand State the law of demand and

explain the inverse relationship between price and quantity demanded

Describe the relationship between an individual consumer’s demand and market demand.

Create a demand schedule and draw a demand curve

Explain a demand function (equation) of the form 𝑄𝑑 = 𝑎 – 𝑏𝑃

Derive demand equation from a set of data and/or diagrams

Distinguish between change in demand and change in quantity demanded

Draw diagrams to show the difference between movements along the demand curve and shifts of the demand curve

Explain how factors including changes in income (in the cases of normal and inferior goods), tastes and preferences, prices of related goods (in the cases of substitutes and complements), number of buyers, demographics and advertisement may change demand.

CHAPTER 5: DEMAND 1. Definition of Demand 2. Desired Demand vs.

Effective Demand 3. Law of Demand 4. Individual Demand and

Market Demand 5. Demand Schedule 6. Demand Curve 7. Demand Function /

Equation 8. Derivation of Demand

Equation 9. Change in Quantity

Demand vs. Change in Demand

10. The Non-Price Determinants of Demand Income (Normal Good

vs. Inferior Good) Price of Related Goods

(Substitutes vs. Complements

Taste and Preference Population Expectation Credit Availability Advertisement

11. Economic Analysis (Application) of Demand

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CO6

Define supply State the law of supply and explain

the positive causal relationship between price and quantity supplied.

Describe the relationship between an individual producer’s supply and market supply

Create a supply schedule and draw a supply curve

Explain a supply function (equation) of the form 𝑄𝑠 = 𝑎 + 𝑏𝑃

Derive supply equation from a set of data and/or diagrams

Distinguish between change in supply and change in quantity supplied

Distinguish between movements along the supply curve and shifts of the supply curve

Construct diagrams to show the difference between movements along the supply curve and shifts of the supply curve

Explain how factors including changes in costs of factors of production, technology, prices of related goods (joint/competitive supply), expectations, taxes and subsidies and the number of firms in the market can change supply

CHAPTER 6 : SUPPLY 1. Definition of Supply 2. Desired Supply vs.

Effective Supply 3. Law of Supply 4. Individual Supply vs.

Market Supply 5. Supply Schedule 6. Supply Curve 7. Supply Function/Equation 8. Derivation of Demand

Equation 9. Change in Quantity

Supplied vs. Change in Supply

10. The Non-Price Determinants of Supply Costs of

Production/Input Prices Number of Producers Expectation Labor Productivity Technology Taxes and Subsidies Weather Condition

11. Economic Analysis (Application) of Demand

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CO7

Define market equilibrium Explain, using diagrams, how

demand and supply interact to produce market equilibrium

Analyze, using diagrams and with reference to excess demand or excess supply, how changes in the determinants of demand and/or supply result in a new market equilibrium

Calculate the equilibrium price and equilibrium quantity from linear demand and supply functions

Plot demand and supply curves from linear functions, identify the equilibrium price and equilibrium quantity and state the quantity of excess demand or excess supply in the above diagrams

Describe shortage and surplus Distinguish between price floor and

price ceiling Explain the concept of consumer

surplus and producer surplus. Discuss some of the application of

market equilibrium analysis

CHAPTER 7: MARKET EQUILIBRIUM 1. Definition of Market

Equilibrium 2. Graphical Illustration of

Market Equilibrium 3. Determination of Market

Equilibrium Point using Demand and Supply Equations

4. Equilibrium price and Equilibrium Quantity

5. Shortage and Surplus 6. Price Ceiling vs. Price Floor 7. Consumer Surplus 8. Producer Surplus 9. Application: Government-

Set Prices

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CO8

Define elasticity

Describe its importance of elasticity to economic analysis

Explain the concept of price elasticity of demand and calculate PED using the elasticity formula

Explain or interpret, using diagrams and PED coefficients, the concepts of price elastic demand, price inelastic demand, unit elastic demand, perfectly elastic demand and perfectly inelastic demand.

Perform a revenue test to determine the effect of price changes to total revenue

Identify and explain the various determinants of PED

Explain, solve and graph cross price elasticity of demand

Explain, solve and graph income elasticity of demand

Explain, solve and graph supply elasticity of demand

CHPATER 8: ELASTICITY 1. Elasticity Defined 2. Importance of Elasticity in

Economics 3. The Price Elasticity

Coefficient and Formula 4. Price Elasticity of Demand

and Interpretations of 𝐸𝑑 Elastic Demand Inelastic Demand Unitary Demand Perfectly Elastic and

Perfectly Inelastic Demand

5. Total Revenue test 6. Price Elasticity and Total

Revenue Curve 7. Determinants of Price

Elasticity of Demand 8. Application of Price

Elasticity of Demand 9. Income Elasticity of

Demand 10. Cross-price Elasticity of

Demand 11. Supply Elasticity 12. Application of Income

Elasticity, Cross-price Elasticity and Supply Elasticity

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CHAPTER 9: CONSUMER BEHAVIOR

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Illustrate and explain how individualsmake choices in a wide variety ofgoods and services

Define utility and explain thecharacteristics of utility

Distinguish between total utility andmarginal utility.

Calculate and draw total utility andmarginal utility

Define indifference curve Explain the properties of indifference

curves Explain (MRS) as slope of indifference

curve Define budget line Analyze the budget line equation Explain the utility maximizing rule

1. Basic Assumptions ofRational Individual’sChoice

2. Definition of Utility3. Utility Function4. Total Utility and Marginal

Utility5. Total Utility and Marginal

Utility Curve and Schedule6. Definition of Indifference

Curve7. Characteristics of

Indifference Curve8. Indifference Map9. Marginal Rate of

Substitution10. Consumer Equilibrium11. Budget Line12. Budget Line Equation13. Marginal Rate of

Transformation14. Utility-Maximization and

Choice

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CO10 Define firm and describe its roles inproduction process

Distinguish between firm andindustry

Define production Describe using examples, the types

of inputs in production Distinguish between the short run

and long run in the context ofproduction

Interpret the production function Explain the two time horizons in

production process namely short-runand long-run production period

Define total product, average productand marginal product, and constructdiagrams to show their relationship

Explain the Law of DiminishingReturns

Calculate total, average and marginalproduct from a set of data and/ordiagrams

Describe and draw the three stagesof production

Determine and explain the best stageof production process

Define isoquant curve Outline the characteristics of

Isoquant Curve Interpret MRTS as slope of isoquant

curve

CHAPTER 10: PRODUCTION

1. Firm defined2. Roles of a Firm3. Firm vs. Industry4. Definition of Production5. Types of Inputs (Fixed and

Variable)6. Production Function7. Short-Run and Long—Run

Production Period8. Total Product, Marginal

Product and AverageProduct

9. Law of DiminishingReturns

10. The Three Stages ofProduction

11. Isoquant Defined12. Characteristics of Isoquant

Curve13. Marginal Rate of

Technical Substitution


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CO11 Define cost of production Interpret the cost function Distinguish between fixed costs and

variable costs Distinguish between total costs,

marginal costs and average costs. Draw diagrams illustrating the

relationship between marginal costsand average costs, and explain the

CHAPTER 11: COST

1. Definition of Cost2. Explicit and Implicit Costs3. Cost Function4. Short-run Production Costs5. Fixed Cost and Variable

Cost6. Total Cost7. Marginal Cost


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connection with production in the short run

Explain the relationship between the product curves (average product and marginal product) and the cost curves (average variable cost and marginal cost), with reference to the law of diminishing returns

Calculate total fixed costs, total variable costs, total costs, average fixed costs, average variable costs, average total costs and marginal costs from a set of data and/or diagrams

8. Average Fixed Cost, Average Variable Cost and Average Total Cost

9. Isocost Line 10. Isocost Equation 11. Long-run Production Costs 12. Long-run Cost Curve 13. Economies and

Diseconomies of Scale 14. Minimum Efficient Scale

and Industry Structure




CO12

Describe the goals of a frim Define profit Interpret the profit function Describe the concept of break-even

analysis Calculate and graph break-even

point Distinguish between total revenue,

average Calculate total revenue, average

revenue and marginal revenue from a set of data and/or diagrams

Have an insight on how producers make decisions about optimizing production and minimizing costs using marginal analysis

Distinguish between increasing returns to scale, decreasing returns to scale and constant returns to scale

Draw diagrams illustrating the relationship between total revenue, average revenue and marginal revenue

Explain the goal of profit maximization where the difference between total revenue and total cost is maximized or where marginal revenue equals marginal cost.

CHAPTER 12 : PROFIT MAXIMIZATION

1. Goals of a Firm 2. Definition of Profit 3. Three Ways in Maximizing

Profit 4. Profit Function 5. Break-even Analysis 6. Marginal Revenue and

Marginal Cost 7. The Profit-Maximizing Rule:

MR=MC 100 8. Graphical Derivation of the

MR=MC Rule

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CO13

Define market failure Explain why market failure exists Outline the categories of market

failure Define an externality Distinguish between private cost and

private benefits Describe and give examples positive

externalities Describe and give examples of

negative externalities Explain the social surplus Define public good Distinguish between private good

and public good Explain the characteristics of public

good and private good as excludable, non-excludable, rival and non-rival

Explain the free rider problem

CHAPTER 13: MARKET FAILURE 1. Definition of Market

Failure 2. Why Market Failure Exists 3. Categories of Market

Failures 4. Definition of Externalities 5. Private Costs vs. Private

Benefits 6. External Benefits (Positive

Externalities) 7. External Costs (Negative

Externalities) 8. Social Surplus 9. Definition of Public Good 10. Private Goods vs. Public

Goods

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Aanalysis Debate

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Define asymmetric information Describe the problems of asymmetric

information such as adverse selection and moral hazard

Explain the existence of private property rights

Outline the different measures and solutions to market failures

11. Characteristics of Public Goods

12. The Free Rider Problem 13. Asymmetric Information 14. Adverse Selection and

Moral Hazards 15. Private Property Rights 16. Solutions to Market

Failures

www.psuecon.neolms.com

CO14

Define government Distinguish between private sector

and public sector Explain the three-sector circular flow

model integrating the government Discuss the economic roles of the

government Outline and explain the economic

functions of the government including providing public goods and services, maintain competition, stabilizing the economy, correcting market failures, redistributing income and providing social and legal framework

Outline the tools of the government to execute its economic functions such as government spending, taxation, regulation, subsidy and borrowing

Define government failure Explain the factors why government

failure exists.

CHAPTER 14: GOVERNMENT INTERVENTION 1. Government Defined 2. Distinguish between

private sector and public sector

3. Integrating Government in the Circular Flow Model

4. Roles of Government 5. Economic Functions of the

Government Provide public goods and

services Maintain competition Stabilize the economy Correct market failures Redistribute income Provide social and legal

framework 6. Tools of the Government 7. Government Involvement

in the Market 8. Government Failure 9. Forms of government

failure

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CO15

Define the terms taxes and taxation Identify and explain the objectives of

taxation Explain taxes as a means of

development Enumerate the canons of taxation

by Adam Smith Explain the principles of taxation Describe the characteristics of taxes Discuss the structure of taxes as

progressive, regressive and proportional

Explain the approaches to equitable taxation

Explain the requisites of a valid taxation

Classify taxes according to subject matter, purpose, scope, graduation or rate.

Explain the limitations on the power of taxation

Distinguish between tax evasion and tax avoidance

Distinguish between tax evasion and tax avoidance

Discuss the tax reforms in the Philippines

Analyze and compute tax problems

CHAPTER 15 : TAXATION AND AGRARIAN REFORM 1. Taxation Defined 2. Objectives of Taxation 3. Taxes as a Means of

Development 4. Canons of Taxation

according to Adam Smith 5. Principles of Taxation 6. Characteristics of Taxes 7. Structure of Taxes 8. Approaches to Equitable

Taxation 9. Requisites of a Valid

Taxation 10. Classification of Taxes 11. Limitations on the Power

of Taxation 12. Tax Evasion and Tax

Avoidance 13. Taxes and Tax Reforms in

the Philippines 14. Tax Computations

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Exercis

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on Assign

ment Written

Quiz

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COURSE REQUIREMENTS

1. Pass final and midterm exams, quizzes and worksheet exercises. 2. At least 80% class attendance rate. 3. Submission of all homework assignments. 4. Submission of a research paper/term paper. 5. Registration and subscription in the course webpage at www.psuecon.com 6. Enrolment in the E-learning system at www.psuecon.neolms.com

A. LECTURES

Three-hour lecture will be spent each week. You are encouraged to actively ask questions at any time and answer questions during class lectures. For each lecture, there will be provided powerpoint slides covering the main points, which will be published on the course web page. Should there be queries you wish to raise in lectures, whether about the course organization or about materials covered, you are welcome to come to see me during office hours or email me. B. COURSE WEBSITE ACCESS

A course website is maintained which will be used round the year to communicate all the course resources to you including syllabus, homework, class notes, worktext exercises, lecture slides, online tests and links to suggested reading materials. You are encouraged to register or subscribe to gain full access to all the website materials. You should also frequently access the course web site to find updated course information and materials. The site is available at www.psuecon.com. C. E-LEARNING ENROLMENT

You are required to create an account and enroll the course in the E-learning system which can be accessed at www.psuecon.neolms.com. This is the portal for the sending of your softcopy assignment and term papers. Here you can download and access course resources, take online quiz and exam, read class announcement, post queries and comments, etc.

CLASS POLICIES

A. ABSENCES AND TARDINESS

Every student is required to attend his classes regularly and punctually. Absence or persistent tardiness for more than 20% of the total number of class meetings during the entire course shall be sufficient reason for disqualifying a student from taking final examination or for dropping the student without credit. A student who is late for class for at least 10 minutes will be marked as absent. A student will incur an absence for every 3 times that he is tardy. B. MAKE-UP EXAM

Every student is required to attend the final exam, midterm exam, and at least five quizzes. If he is absent on days when tests are scheduled, he should notify me in advance and bring documentation of the excuse upon returning to class. Unexcused absences from exams will result in a zero grade. Make–up exams will be arranged only under extraordinary circumstances. Acceptable or valid reasons for missing an exam include religious observances, athletic trips, illness and urgent circumstances beyond your control. Makeups must occur within one week of the regularly scheduled exam or quiz, otherwise a zero score will be given. C. HOMEWORK POLICY

There will be 6 homework assignments (3 for midterm and 3 for final). Each assignment is worth 30 points. These assignments will be posted on the course website and are mostly due on Mondays in the beginning of class. Any assignment can be late for up to 1 day without penalty. Late homework for two to three days loses 10 points. After 4 days, zero credit is given for late assignments. D. ACADEMIC HONESTY

All students are expected to be academically honest. Cheating, plagiarisms, lying, theft and other forms of unethical behavior will not be tolerated. Any student suspected or found guilty of academic dishonesty in this course will be handled according to the procedures set out in the PSU Student Handbook.

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http://www.jamesonestrada.com/

http://www.jamesonestrada.neolms.com/


GRADING SYSTEM

The grades for this course will be based on preliminary and semi-final, midterm and final exams, quizzes, worktext exercises, recitation, homework and a term paper. The course grade will be determined as follows:

Midterm / Final Exam 25% Preliminary/Semi-Final Exam 15% Quizzes / Exercises 30% Recitation 10% Homework 10% Term Paper /Project 10% TOTAL 100%

COURSE REFERENCES AND SUPPLEMENTAL READINGS

A. BOOKS AND E-BOOKS

Boyes, William and Melvin, Michael, FUNDAMENTALS OF ECONOMICS, 6th Edition, South-Western Cengage Learning, Mason USA, 2014 Brue, S.L. et al. ESSENTIALS OF ECONOMICS, 3rd Edition, New York McGraw Hill Irwin, 2014

Cowen, Tyler and Tabrrok, Alex, MODERN PRINCIPLES OF ECONOMICS, 2nd Edition, Worth Publishing, USA, 2013

De Guzman, Rachelle, D., et. Al.,. GENERAL ECONOMICS, TAXATION AND LAND REFORM, IPM Publishing, Bulacan, Philippines, 2013..

Fajardo, Feliciano, R. ECONOMICS, 3RD ED. Rex Printing Company, Inc. Quezon City, 2001

Krugman, Paul and Wells, Robin, ECONOMICS, 3rd Edition, Worth Publishing, USA, 2013

Mankiw, N. Gregory, PRINCIPLES OF ECONOMICS, 6th Edition, South-Western Cengage Learning, Mason USA, 2012

Nicholson, Walter and Snyder Christopher, MICROECONOMIC THEORY: BASIC PRINCIPLES AND EXTENSIONS, 10th Edition, Thomson

Learning Academic Resource Center, 2008

Roger, Arnold A., ECONOMICS, 11the Edition, South-Western Cengage Learning, Mason USA, 2014

Rosser, Mike, BASIC MATHEMATICS FOR ECONOMISTS, Routledge Taylor and Francis Group, New York City, USA.

Samuelson, Paul A. ECONOMICS McGraw Hill, New York, 2011

Tucker, Irvin B. MICROECONOMICS FOR TODAY, 7th Edition, South-Western Cengage Learning, Mason, USA, 2011

Varian, Hal R. INTERMEDIATE ECONOMICS: A MODERN APPROACH W.W Norton and Company, Inc., New York, 2010

Viray, Marcelino, et al. PRINCIPLES OF ECONOMICS (w/ TAR) National Book Store, Mandaluyong City, 2010

B. ONLINE SOURCES

www.pearsonhighered.com/educator).

www.myeconlab.com

http://visualizingeconomics.com/

https://www.khanacademy.org/

http://www.businessweek.com/blogs/econochat

http://gregmankiw.blogspot.com/

http://welkerswikinomics.com/blog/

http://econblog.aplia.com/

http://economistsview.typepad.com/

http://www.economicshelp.org/blog/

http://www.ritholtz.com/blog/

http://www.economicpopulist.org/

http://freakonomics.com//

http://wikipedia.com//

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http://freakonomics.com/

http://wikipedia.com/


INSTRUCTOR’S CONTACT INFORMATION NAME JAMESON N. ESTRADA OFFICE AB Programs Office MOBILE NUMBER 0949-9756-345 EMAIL [email protected] WEBSITE www.psuecon.com / www.jamesonestrada.com CONSULTATION HOURS 8:00 – 12:00 (Every Wednesday)

PREPARED BY:

JAMESON N. ESTRADA Instructor I

CHECKED BY:

ERNA M. SALAZAR, MaEd Chairperson, AB Economics Program

LORNA G. URBIZTONDO, Ed.D Dean, College of Arts and Sciences

ARMANDO D. JUNIO, Ph.D Campus Executive Director, PSU Lingayen

13

mailto:[email protected]

http://www.jamesonestrada.com/

WORKTEXT 1 : INTRODUCTION TO MICROECONOMICS

EXERCISE 1

True or False. Determine whether each of the following statements is true or false. Write T if it is true and F it is false on the blank after the number.

1. Economics studies how individuals and societieschoose to allocate and use scarce resources to satisfyunlimited wants. _________

2. Microeconomics views the performance of the economyas a whole. ___________

3. Scarcity exists because individuals want more than canbe produced. ___________

4. Wants are unlimited and resources are limited.___________

5. Land is an economic resource which is paid in interest.___________

6. Because scarcity exists, people must make choices,which means they do not incur opportunity costs.___________

7. An economic good brings a person dissatisfaction,disutility, or unhappiness. ___________

8. If an economist wants to analyze how a market works,he applies a macroeconomic model. ___________

9. Opportunity cost is the lowest-valued alternative thatmust be forgone when a choice is made. ___________

10. Economists seldom use models to help understand theeffects of an economic change. ___________

11. Economic models and theories are accurate statementsof reality. ___________

12. If an economist wants to analyze how a market works,he applies a macroeconomic model. ___________

13. Positive economics deals with factual statements whilenormative economics reflects value judgments.___________

14. Labor is a human resource that combines the factors ofproduction creatively and efficiently. ___________

15. Equipment and machineries are considered consumergoods. ____________

EXERCISE 2

Multiple Choice. Encircle the one alternative that best completes the statement or answers the question.

16. Economics is best defined as the study ofA. how to operate a business.B. how society manages its unlimited resources.C. how individuals make choices to cope with scarcity.D. the best way of eliminating scarcity.E. the economic issues affecting economy.

17. Which of the following discloses the reason why scarcityexists?

A. Governments make bad economic decisions.B. The gap between the rich and the poor is too wide.C. Wants exceed the resources available to satisfy them.D. There is too much unemployment.E. The quantity of money in the economy is low.

18. Enjoying the cosmetic treatments at a beauty salon is anexample of

A. production. B. distribution.C. exchange. D. competition.E. consumption.

19. You should decide to go to a movie this weekend to watchAvengers: Age of Ultron

A. because the movie is better than its prequel, The Avengers.B. if your limited income will allow you to buy a movie ticket.C. because this would be a perfect opportunity to have a date

with your loved one. D. if the marginal cost of the movie exceeds its marginal

benefit. E. if the marginal benefit of the movie exceeds its marginal

cost.

20. Which of the following reflects a normative statement?A. As the wage rate falls, the quantity supplied of labor

increases, ceteris paribus. B. Earnings increase with education because the latter raises

a worker's productivity. C. Structural unemployment is a situation where jobs exist but

workers looking for work do not have the necessary skills for these jobs.

D. Employment is highly responsive to changes in the wage.E. Policymakers have argued that the minimum wage should

be raised in order to ensure that unskilled workers can make a decent living.

Republic of the Philippines Pangasinan State University

Lingayen Campus

WORKTEXT 1 : INTRODUCTION TO MICROECONOMICS Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________

YEAR AND COURSE: ___________________________ DATE: ____________________________________

14


21. The house or an apartment which is leased to a tenant isconsidered ___________ and the landlord who owns it earns___________.

A. entrepreneurship; rent B. capital; interestC. capital; rent D. land; rentE. labor; wage

22. Val decides to take a summer vacation in Palawan and thetrip costs P11,000 for 5 days. While he is on vacation, he doesnot go to work where he could have earned P7,500. In terms ofpesos, what is the opportunity cost of the summer vacation?

A. Ᵽ11,000 B. Ᵽ3,500C. Ᵽ37,000 D. Ᵽ18,500E. Ᵽ7,500

23. After the eggplants were harvested, the farmer directly soldthe produce to the market and bought eventually by buyers. Inthis case, what economic activity is involved?

A. Production B. DistributionC. Consumption D. ExchangeE. Supply

24. The two categories of markets illustrated by the simplecircular flow model are

A. capital good market and consumer good market.B. household market and firm market.C. good market and factor market.D. free market and controlled market.E. real flow market and money flow market.

25. A teacher can either spend his summer break working atschool for Ᵽ900 per day for six days or go to Boracay for theweek. If he stays at school, his weekly expenses will total aboutⱣ1,500. If he goes to Boracay, the airfare, hotel, food andmiscellaneous expenses will total about Ᵽ12,000. What’s theteacher’s opportunity cost of going to Boracay?

A. Ᵽ12,000 B. Ᵽ17,400C. Ᵽ900 D. Ᵽ1,500E. Ᵽ15,900

26. Entrepreneurs perform all of the following, exceptA. bear risk from business decisions.B. organize labor, land, and capital.C. own all the other economic resources.D. innovate new products and production techniques.E. make strategic business decisions.

27. Which of the following is a concern of microeconomics?A. The effects of increasing the supply of money in circulation.B. The reasons why Maria demands more for chocolates.C. The reasons why Thailand experiences a higher inflation

rate than Philippines does. D. The effects of an increased government spending on total

production. E. The causes of why total employment declines.

28. Resource payments which include wages, rent, interest, andprofits flow from

A. business firms to the government.B. the government to business firms.C. households to business firms.D. business firms to households.E. households to the government.

29. Which of the following would be determined in the productmarket?

A. The price of a new house and lot.B. A manager’s salary in a real estate company.C. The wage of a construction worker.D. The price of 10 hectares of farmland.E. The price of construction equipment used in a building.

30. Any point inside the production possibilities frontier isA. an inefficient point. B. an unfeasible point.C. an efficient point. D. an unattainable point.E. a maximum output combination.

EXERCISE 3

Classification. Indicate whether each of the following economic statements applies to microeconomics or macroeconomics. Write MI for Microeconomics and MA for Macroeconomics.

31. The government subsidizes the price of milk and someagricultural products. ___________

32. The demand for construction inputs in the constructionindustry increases. ___________

33. A soap manufacturing company lays off twenty-fiveworkers. ___________

34. A physician provides medical services at a fee ofⱣ1,200 per patient. ___________

35. The prices of the Bench line of clothing considerablyincrease. ___________

36. The government decides between tax and subsidymeasures to solve an externality problem.___________

37. The increase in Bob’s income causes his demand to aninferior good to increase. ___________

38. The unemployment rate of the Philippines falls from7.1% to 6.2%. ___________

39. People make purchases today because they expecttheir income level to increase a certain amount in thefuture. ___________

40. The exchange rate for Philippine peso against the USdollars drops to Ᵽ46.35 from Ᵽ47.65 ___________

41. The consumption spending of Filipinos sharplyincreases thus GDP rises. ___________

42. The Philippine economy experiences trade deficit ofⱣ2.1 billion. ___________

43. A country declares a state of economic emergencybecause of hyperinflation. ___________

44. A strong typhoon hit the country that reduced thesupply of agricultural commodities. ___________

45. The market value of coconut exported by thePhilippines to Asian countries increases by 5%.___________

15


EXERCISE 4

Classification. Identify what economic activity is described in each of the following cases. Write P for production, D for distribution, E for exchange and C for consumption on the space provided for after the item.

46. A worker eats three scoops of buko ice cream._________

47. A farmer buys fertilizers and new farming equipment forhis corn production. _________

48. A software developer creates a new fitness app forApple smartwatch. _________

49. An exporter of coconut oils uses cargo ships to deliverthe products to Singapore. _________

50. A housewife goes to a public market to buy five kilos ofbeef. _________

51. A real estate developer sells multi-family dwellings to100 households. _________

52. An online shopper purchases 3 units of air coolers._________

53. An electronics company hires 360 laborers to assemblesmartphones. _________

54. A student downloads a new game application fromGoogle Play Store. _________

55. Ann eats Chowking’s Chicken Lauriat meal and Leeeats Chowking Fish Lauriat meal. _________

56. A vegetable dealer uses delivery trucks to transportvegetables from La Trinidad to Metro Manila._________

57. An apparel company works with regional distributors tomarket its products. _________

58. A teacher buys a newly released brand of perfume froma department store. _________

59. A bakery bakes 800 loaves of bread every week._________

60. A moviegoer spends two hours to watch Mad Max: Furyof Road. _________

EXERCISE 5

Classification. Identify what category of resources does each of the following belong. Write LD for land, LR for labor, CL for capital and EP for entrepreneurship.

61. Assembly tools ____________

62. Company’s CEO ____________

63. Industrial plant ____________

64. Roads and bridges ____________

65. Delivery trucks ____________

66. Architects ____________

67. Lifestyle entrepreneur ____________

68. Communications networks ____________

69. Chemical substances ____________

70. Farmland ____________

71. Renewable resources ____________

72. Soil used for farming ____________

73. Software developers ____________

74. Mineral deposits ____________

75. Lawyers ____________

EXERCISE 6

Classification. Determine whether the each of the following is a want or a need. Write W for want and N for need.

76. College education ____________

77. Medicine ____________

78. Expensive condominium unit ____________

79. Jewelries ____________

80. Hi-tech gadgets ____________

81. Job security ____________

82. Nutritious food ____________

83. Residential housing ____________

84. Cosmetics ____________

85. Instant noodles ____________

EXERCISE 7

Classification. Determine whether the each of the following is a good or a service. Write G for good and S for service.

86. Bottled mineral water _____________

87. Computers produced ____________

88. Game application _____________

89. Coffee creamer _____________

90. Legal counsel _____________

91. A pack of candies_____________

92. Haircut_____________

93. Medical care_____________

94. Razors _____________

95. Hotel accommodation _____________

16


EXERCISE 8

Determine your opportunity costs when you decide to do each of the following cases.

96. Play Pokemon Go instead of playing basketball withfriends __________

97. Pursue college education instead of having ajob__________

98. Open a new factory instead of investing in research anddevelopment __________

99. Watch a television show instead of reviewing a quiz__________

100. Eat in a fast food restaurant instead of eating in a buffetrestaurant. __________

101. Spend your money to buy a new smartphone instead ofputting it away fora year in a bank account that pays 4percent interest. __________

102. Shop at the local public market rather than paying ahigher price for the same item at thesupermarket__________

103. Buy a book online instead of purchasing at thebookstore. __________

104. Allocate more budget for social works instead ofallocating more budget for agrarian reform __________

105. Produce eggplants instead of planting squash.__________

EXERCISE 9

Problem Analysis. Refer to the accompanying table and answer the questions that follow.

Shoemakers Leather Shoes

Rubber Shoes

Rustan 4 16 Van 8 20

106. Rustan’s opportunity cost of making leather shoes is_____________

107. Van’s opportunity cost of making leather shoes is_____________

108. Rustan’s opportunity cost of making rubber shoes is_____________

109. Van’s opportunity cost of making rubber shoes is_____________

110. Who has a comparative advantage in making leathershoes? In making rubber shoes? _____________

EXERCISE 10

Classification. Determine whether each of the following microeconomic statements is normative or positive. Write N for Normative statement and P for positive statement.

111. The prices of smartphones have increased over thelast seven years. ___________

112. Local producers deserve more subsidies and protectionthan foreign firms. ___________

113. Firms seek to maximize their market share.___________

114. Increased spending on new automobiles will cause arise in traffic congestion. ___________

115. Prices in a perfectly competitive market are likely to belower than a monopolistic market. ___________

116. If the government provides conditional cash transfers ,many people would be better off. ___________

117. The minimum wage rate in Metro Manila should beincreased to Ᵽ600 per day. ___________

118. A 50% increase in income results to a 70% increase inthe consumption of lobsters. ___________

119. Increasing the minimum wage leads to rise inunemployment rate. ___________

120. If the price of music streaming service falls, more musiclovers subscribe or pay for the service. ___________

121. Teachers deserve higher pay than policemen.___________

122. The government should raise taxes on products whichharm the health of people. ___________

EXERCISE 11

Matching Type. Match each term with its correct description by connecting the appropriate number next to the corresponding letter.

123. Economic efficiency A. 0% unemployment rate

124. Economic growth B. Fair allocation of wealth

125. Economic freedom C. Stable income

126. Economic security D. Exports exceed imports

127. Distribution of income E. Ownership of property

128. Full employment F. Absence of inflation

129. Price level stability G. Increase in GDP

130. Balance of trade H. Absence of waste

17


0

10

20

30

40

50

60

70

0 10 20 30 40 50 60 70

Tele

visi

ons

(thou

sand

uni

ts)

Microwave Ovens (thousand units)

Production Possibility Frontier

EXERCISE 12

A. Graphical Analysis. Fill in the blanks with the appropriateword or phrase that completes each statement. Refer to thecircular flow diagram below to answer the following.

131. Households receive income from businesses throughthe ____________.

132. Businesses receive revenue from households throughthe ____________.

133. The resource market is the place where households____________ resources.

134. In this circular flow diagram, money income andconsumption expenditure flow ____________.

135. In this circular flow diagram, inputs and outputs flow____________.

136. In the market for the factors of production, householdsare sellers, and firms are ____________.

137. In the product market, ___________ combine resourcesto produce and sell goods and services.

138. In the resource market, households provide the____________ that firms use to produce goods andservices.

139. Households sell labor to the resource market andreceive factor payment in the form of ____________.

140. Households use the income they have received from thesale of resources to ____________ goods and services.

B. Classification. Indicate on a graph of the circular flow model,the real or money flow in which the following items belong.

141. Samsung pays a female celebrity for promoting its newsmartphone. ______________

142. Jollibee Corporation pays a dividend to its stockholders.______________

143. Mrs. Santos buys groceries for a week.______________

144. Apple buys industrial robots to assemble its products.______________

145. A BPO firm rents an office building in Makati City______________

C. Classification. In which of the factor markets or goodmarket is each of the following goods or resources traded?Identify what resource or product payment is being received ormade.

146. The selling skills of a real estate agent._____________

147. Microsoft software _____________

148. The business knowledge of SM Malls’ owner_____________

149. An entrepreneur’s shares of San Miguel Corp. stock_____________

150. A farm equipment _____________

EXERCISE 13

Graphical Analysis. Refer to the diagram below showing the production possibilities curve between two goods, shoes and watches to answer questions that follow.

151. Efficient production points ______________

152. Attainable points with the resources and technologycurrently available ______________

153. Inefficient points ______________

154. Full employment production points ______________

155. Opportunity cost of moving from point A to pointC______________

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WORKTEXT 2 : Economic Model, Graph and Equation

1 2 3 4

1

2

3

4

– 4 – 3 – 2 – 1

– 4

–3

–2

– 1

AB

C

D

E

X

y

EXERCISE 1


1. Economists seldom use models to help understand theeffects of an economic change. ___________

2. Economic models are inaccurate statements of reality.___________

3. Ceteris paribus means "all other things being equal”.___________

4. The upper right quadrant of the coordinate system isoften used in economic analysis because mosteconomic data are negative numbers. ___________

5. Graphs provide a visual representation of therelationship between two variables. ___________

6. A line graph is a convenient way to represent thedifferent parts of something that when added togetherequal the whole. ___________

7. Two variables are directly related if one variable rises asthe other falls. ___________

8. An inverse relationship occurs when two variableschange in the same directions. ___________

9. An independent relationship occurs when two variablesare unrelated. ___________

10. A dependent variable changes as a consequence of achange in independent variable. ___________

11. The slope of a vertical line is zero. ___________

12. An inverse relationship has a positive slope.___________

13. The slope of an upward-sloping line is positive.___________

14. A line parallel to the vertical axis has an infinite slope.___________

15. The point at which a straight line cuts the vertical y-axisis called the x-intercept. _____________

EXERCISE 2


16. In constructing or building economic models, an economistA. describes a necessary information.B. uses mathematical equations.C. formulates an assumption.D. makes use of graphs to express information.E. does all of these.

17. An economic statement describes that an increase in pricecauses the demand for a product to fall, ceteris paribus. Thephrase ceteris paribus means that

A. buyers consume less when the price is higher.B. the associated economic statement is normative.C. other relevant factors like income are held constant.D. No government intervention is allowed.E. some relevant variables are assumed to vary.

18. In understanding the concept of cost using a cost equation,an economist should most likely use

A. a descriptive model. B. mathematical model.C. an assumption. D. graphical model.E. a normative statement.

19. In which quadrant does the point, (8, −3) be plotted?A. Quadrant I B. Quadrant IIC. Quadrant III D. Quadrant IVE. Quadrant V

20. Graphs are a convenient and revealing way to representeconomic relationships. Which of the following is most likely thebest graph to present two variables?

A. pie chart B. Cartesian planeC. line graph D. bar graphE. linear equation

21. What is the coordinate (ordered pair) of point A as shown inthe cartesian plane?

A. (−2, − 2) B. (4, −2) C. (3, 2) D. (−4, 3) E. (2,2)


Lingayen Campus

WORKTEXT 2 : ECONOMIC MODEL, GRAPH AND EQUATION Econ 112 – Advanced Microecon omics

NAME: _______________________________________ SCORE: ___________________________________


19


10 20 30 400

10

20

30

40

Y

X

A

B

10 20 30 400

20

40

60

80

Y

X

E

F

22. The resulting line of an inverse relationship if it is graphed isA. vertical. B. parallel.C. horizontal. D. downward sloping.E. upward sloping.

23. Consumers buy more tokneneng when the price of balot goesup. In this statement you can predict that the relationshipbetween variables is

A. positive. B. negative.C. constant. D. zero.E. not significant.

24. In the equation of a straight line 𝑦 = 𝑚𝑥 + 𝑏, 𝑚 representsthe

A. vertical intercept. B. dependent variable.C. constant term. D. independent variable.E. slope.

25. What is the slope of the line containing the points (4, 5) and(−8, −7)?

A. 4 B. −0.5C. 1 D. 12E. −3

26. Given the following diagram, the slope of straight line AB is

A. 1

2

B. 2C. −1D. 1E. 0.5

27. Given the following diagram, the slope of straight line EF is

A. 1

2

B. −2C. −1D. 1E. 2

28. A linear equation is given 𝑃 = 50 − 3𝑄𝑑 where P representsthe price and 𝑄𝑑 represents quantity demanded. What is thevertical intercept?

A. 50 B. 25C. 3 D. 50

3

E. 10

29. What is the 𝑥-intercept of the linear equation 𝑦 = −5𝑥 + 10?A. (10,0) B. (−5,0)

C. (2,0) D. (1

2, 0)

E. (−3, 2)

30. What is the inverse function of the equation 𝑦 = 2𝑥 + 8 ?A. 𝑥 =

1

2𝑦 − 4 B. 𝑥 = 2𝑦 + 8

C. 𝑦 = 2𝑥 + 4 D. 𝑥 = 8𝑦 + 16

E. 𝑥 =1

4𝑦 − 2

EXERCISE 3

Classification. Choose the letter that most likely indicates the type of economic model to be used in the following microeconomic topics.

A. Descriptive modelB. AssumptionC. Graphical modelD. Mathematical model

31. Circular flow of income model ___________

32. Production function ___________

33. Ceteris paribus ___________

34. Graph of elastic income elasticity of demand___________

35. Meaning of law of diminishing marginal returns___________

36. Definition of indifference curve___________

37. Relationship between cost and total product labelled onCartesian plane ___________

38. Concept of scarcity ___________

39. Total utility schedule ___________

40. Positive statement of market failure ___________

41. Three fundamental economic questions ___________

42. Shifting of supply curve caused by non-pricedeterminants of supply ___________

43. Derivation of the demand equation ___________

44. Diagram of a market equilibrium point ___________

45. Difference between a firm and an industry___________

EXERCISE 4

Problem Analysis. In each case, state whether the expected economic relationship is direct or inverse. Draw a graph and explain the relationships you would expect to find between the variables.

46. A consumer’s income and the quantity of Chineserestaurant meals consumed per month. ____________

47. The wage rate and the supply of factory workers in thetextile industry. ____________

48. The price of infant milks and the number of infant milksdemanded by mothers. ____________

49. The amount of fertilizers added to a hectare offarmland and the quantity of strawberries grown on thatland in one growing season. ____________

20


50. The number of tourists and the demand for hotelservices. ____________

51. The level of consumption of a buyer and the degree ofsatisfaction he received. ____________

52. The price of chewing gum and the demand for candybars. ____________

53. The price of guns and the demand for bullets.

54. The cost of raw materials and level of output producedfor non-stick pans. ____________

55. The state of the weather condition and the supply of rootcrops. ____________

56. The price of electric fans and the quantity manufacturerswill sell per month. ____________

57. The apartment rental and the no. of apartment unitsoccupied. ____________

58. The demand for an inferior good and income of aconsumer. ____________

59. No. of hours (study time) and the points (examinationscore). ____________

60. The tax rate and the supply of goods to be sold by afirm.

EXERCISE 5

Problem Analysis. Consider the following statements and indicate which diagram below matches each statement by determining what variable would appear on the horizontal and which on the vertical axis. Also, indicate whether the slope is positive, negative, zero, or infinite.

61. The expenditure on household appliances increases aspeople’s annual income rises.

62. Regardless of their wages, a particular hospital hiresthe same quantity of cardiologists. ___________

63. When the price of canned goods decreases, moreconsumers go to supermarkets to buy sardines.___________

64. The number of enrollees in a university declines whenthe amount of tuition fee increases. ___________

65. Whatever the budget the government has, the latterspends the same amount for infrastructure projects permonth. ___________

66. Some consumers tend to buy less pork when the priceof beef falls. ___________

67. A research finds no relationship between the number ofslimming pills taken and the number of pounds lost bythe average users. ___________

68. Because they are considered necessary for patientswith Hepatitis A, 5,000 vaccines are purchased by ahospital every month, regardless of price.___________

69. A household subscriber pays an internet providercompany P1500 per month for the unlimited internetconnection regardless the number and length of timeused. ___________

70. The price of leather bags decreases when the cost ofproducing them falls. ___________

EXERCISE 6

Graphical Analysis. Analyze and answer what is required in the following questions.

A. The following data shows the relationship between twovariables 𝑥 and 𝑦.

66. Is the relationship between 𝑥 and 𝑦 positive ornegative? Calculate the slope of the relationship when𝑥 equals 2 and when 𝑥 equals 5. How does the slopechange as the value of 𝑥 increases?

B. The following table depicts the budget of the Philippines bysector for 2014 provided by DBM.

67. Represent the above data in pie chart form.

𝑥 0 1 2 3 4 5 𝑦 30 25 21 16 12 7

Sector Budget (in trillions of pesos)

Economic Service 0.59 Social Service 0.84 General Public Service 0.37 Debt Service 0.35 Defense 0.11 TOTAL 2.26

21


DepEd23%

DPWH17%

DND14%

DILG13%

DA10%

DSWD9%

DOH8%

DOTC7%

Government Budget Allocation

DepEd

DPWH

DND

DILG

DA

DSWD

DOH

DOTC

0102030405060708090

100

Num

ber o

f Job

s (in

thou

sand

s)

Months of 2015

New Jobs Added to the Phillipine Economy (2015)

C. Suppose the following information reflects the number ofsmartphones sold in the Philippines from 2008 – 2013.

Year Number of Smartphones Sold

2008 7,800 2009 10,300 2010 15,900 2011 18,000 2012 23,100 2013 28,500

68. Represent the above data in bar graph form.

D. The accompanying table illustrates annual salaries andincome tax paid by six individuals. Apart from the fact that theyreceive different salaries and paid different amounts of incometax, these six individuals are otherwise identical.

Name Annual Salary (Pesos)

Annual Income Tax Paid

Pedro 250,000 30,000 Diego 180,000 21,600 Eduardo 460,000 55,200 Leopoldo 600,000 72,000 Emilio 90,000 10,800 Honorio 375,000 45,000

69. Draw a scatter diagram illustrating this relationship.Draw a (nonlinear) curve that connects the points. Putthe annual salary on the vertical axis.

70. What is the average slope of the curve between thepoints for Diego’s and Leopoldo’s salaries and taxes?How would you interpret this value for slope?

71. What is the average slope of the curve between thepoints for Pedro’s and Eduardo’s salaries and taxes?How would you interpret that value for slope?

72. What happens to the slope as salary increases? Whatdoes this relationship imply about how the level ofincome taxes affects a person’s incentive to earn ahigher salary?

E. Suppose the graph below tells the new jobs added to thePhilippine economy in 2015. Answer the following.

73. The diagram above that shows the number of jobsgenerated in 2015 is what form of graph?___________

74. What month has the lowest number of jobs added tothe economy? ___________

75. What month has the greatest number of jobs added tothe economy? ___________

76. How many jobs are created in May 2015?___________

77. What are the months with same number of jobs addedto the economy? ___________

F. Suppose the graph below indicates the budget allocation ofthe Philippine government by department in 2015 bydepartment. Answer the following.

78. The diagram above that shows the Philippinegovernment budget allocation by department is whatform of graph? ___________

79. What government department received the highestamount of budget in 2015? ___________

80. What government department received the leastamount of budget in 2015? ___________

81. If the total government budget is Ᵽ1.14 trillion pesos,how much is the budget allocated for DILG? -_________

82. If the total government budget is Ᵽ1.14 trillion pesos,how much is the budget allocated for DSWD? -________

G. Refer to the graph below showing the total cost curve of afirm to answer the following.

22


0

100

200

300

400

500

600

700

0 1 2 3 4 5 6 7 8 9 10Tota

l Cos

t (n

thou

sand

pes

os)

Output Produced

83. The diagram above that shows the relationship betweentotal cost and output produced is what form of graph?___________

84. Based on the graph, what linear relationship existsbetween total cost and output produced? ___________

85. Based on the graph, what is the independent variable?___________

86. How many outputs can be produced if the firm incurs atotal cost of Ᵽ500,000 ? ___________

87. When the firm produces 5 units of output, how much willthe cost be incurred by the firm? ___________

H. Suppose you are given the following data on wage rates andnumber of hours worked.

Point Hourly Wage (Pesos)

Hourly Hours per Week

A 0 0 B 25 10 C 50 20 D 75 30 E 150 40 F 175 50

88. Construct and label a set of axes and plot these sevenpoints. Label each point A, B, C, and so on. Whichvariable do you think should be measured on thevertical axis, and which variable should be measured onthe horizontal axis? Describe the resulting curve.

89. Compute the slope of the curve between points A andB. Between points B and C. Between points C and D.What is the slope as you move from point A to point F?

I. The following shows the revenue data of a firm selling good X.

Price Quantity Sold Total Revenue

900 200 180,000 800 300 240,000 700 400 280,000 600 500 300,000 500 600 300,000 400 700 280,000 300 800 240,000 200 900 180,000

90. Plot the data listed in the table above. Use price as thevertical axis and quantity as the horizontal axis and plotthe first two columns.

91. Show what quantity is sold when the price is Ᵽ550.

92. Directly below the graph in part a, plot the data incolumns 2 and 3. Use total revenue as the vertical axisand quantity as the horizontal axis.

93. What is total revenue when the price is Ᵽ550? Will totalrevenue increase or decrease when the price islowered?

J. The following table contains data on the relationship betweenconsumption and income.

94. Rearrange these data into a meaningful order andgraph.

95. What is the slope of the line? The vertical intercept?Interpret the meaning of both the slope and theintercept.

96. Write the equation that represents this line.

97. What would you predict saving to be at the Ᵽ4,000level of income?

K. Assume a research firm collects survey sales data that revealthe relationship between the possible selling prices ofsmartphones and the quantity of smartphones consumers wouldpurchase per month at alternative prices. The report is disclosedby the following table.

98. Based on these data, describe the relevant relationshipbetween the price of a smartphone and the quantityconsumers are willing to purchase, using a verbalstatement a graph or an equation. Which model do youprefer and why?

99. Plot the data.

100. From this relationship between price and quantitydemanded, derive a linear equation.

Income per Week Consumption per Week

3,000 4,500 0 1,500

1,000 750 2,000 3,000 5,000 2,250 4,000 3,750

Price (Pesos) Quantity Demanded

5,000 1200 10,000 1000 15,000 800 20,000 600 25,000 400 30,000 200

23


EXERCISE 7

Problem Solving. Compute the slope, the 𝑥-intercept and the 𝑦-intercept of the following linear equations. Graph also each equation using the derived intercepts. Write your answer on the space provided for after the equation.

101. 𝑦 = 3𝑥 + 9

Slope ____________ 𝑋-intercept ____________ 𝑌-intercept ____________ Graph ____________

102. 5𝑥 − 8𝑦 + 3 = 0


103. 𝑦 = 0.6𝑥 + 15,000


104. 2𝑥 + 7𝑦 = 350


105. 𝐶 = 1,200 + 0.75𝑌 (Consumption function)


106. 𝐶(𝑥) = 250𝑥 + 40,000 (Cost function)


107. 𝑄𝑑 = 10 − 2𝑃 (Demand function)


108. 𝑅(𝑥) = 100𝑥 (Revenue function)


109. 𝑦 = −3

4𝑥 − 3.5


110. 𝑦 − 2 = −8(𝑥 − 1)


24

WORKTEXT 3 : ECONOMIC SYSTEM

EXERCISE 1

True or False. Determine whether each of the following statements is true or false. Write the answer on the blank after the number

1. Economic system is a particular set of institutionalarrangements and a coordinating mechanism torespond to the economizing problem. ____________

2. Market economy is also termed as free enterpriseeconomy. ____________

3. People’s economic behavior is motivated by self-interest. ____________

4. Command economy is an economic system in whichresources are allocated through individual decisionmaking. ____________

5. In the real world, market economies exist in pure formamong countries. ____________

6. Most countries have communist economic system.____________

7. North Korea is the most centrally planned economy inthe world today. ____________

8. The price mechanism is least important under acapitalist economic system. ____________

9. Competition makes the price system works.__________

10. Under free enterprise, businesses have the right tochoose the products they will produce and offer for sale.____________

11. Laissez-faire implies letting people do as they choosewithout government intervention. ____________

12. Some producers may try to monopolize markets byeliminating the competition. ____________

13. Freedom of enterprise enables owners to employ ordispose of their property and money as they see fit.____________

14. In a mixed economy, the government does not interferewith business. ____________

15. In a command economy, the government controls howbusiness operates. ____________

EXERCISE 2

Multiple Choice. Encircle the one alternative that best completes the statement or answers the question

15. A country has a mixed economy becauseA. it produces consumer and capital goods.B. it exports and imports goods and services.C. people consume both goods and services.D. there is a private sector and a public sector.E. a market exists.

16. Which does not fit with the others?A. invisible handB. competitionC. government planningD. price mechanismE. freedom of enterprise

17. The price system is based onA. the feelings of the individual buyer.B. government regulation.C. supply and demand.D. the monopolist who sets the price.E. competing producers.

17. In the Philippines, nearly all resources are owned byA. government B. foreignersC. poor individuals D. business firmsE. local officials

19. The strongest indictment of the capitalist system wasA. Adam Smith B. Karl MarxC. John Maynard Keynes D. David RicardoE. Thomas Malthus

20. Private ownership of most of the means of production iscommon to

A. mixed economy B. command economyC. market economy D. traditional economyE. planned economy

21. Which is the most accurate statement?A. North Korea has a capitalist form of economy.B. The Philippine economy is evolving away from capitalism.C. Singapore has a mixed economy.D. The United States is basically a communist economy.E. China is evolving toward communism.


Lingayen Campus

WORKTEXT 3 : ECONOMIC SYSTEM Econ 112 – Advanced Microecon omics

NAME: _______________________________________ SCORE: ___________________________________


25


22. In a traditional economy, economic decisions are based onA. science. B. technology.C. capitalism. D. custom.E. history.

23. Which of the following economic questions must be made byall economies?

A. How much to produce? When to produce? How to produce?B. What is the price? Who will produce it? Who will consume it?C. What to produce? How to produce it? For whom to produce?D. Where to produce? How to produce? Why to produce?E. For whom to produce? Why to produce? Who will produce?

24. Which of these economic goals are best promoted by the freemarket?

A. freedom and growth B. freedom and securityC. efficiency and freedom D. efficiency and equityE. innovation and security

25. Competition and self-interest are two forces inA. traditional economies.B. communist economies.C. centrally planned economies.D. market economies.E. planned economies.

26. What to produce answers the economic resources to be usedin production process. Which is not an economic resource?

A. CapitalB. LaborC. EntrepreneurshipD. LandE. Taxes.

27. Adam Smith believed the best way to promote the publicinterest was to

A. have the government produce most goods and servicesB. let people pursue their own selfish interestsC. wait for individuals to set out to promote the public interestD. get rid of the price mechanismE. None of these.

28. The economic system of the Philippines is best described asa

A. traditional economy.B. market economy.C. command economy.D. mixed economy.E. none of these.

29. The former Soviet Union was an example of a communistcountry where

A. consumers had many choices.B. free enterprise was encouraged.C. individual freedom was allowed.D. ownership of resources belongs to the private individuals.E. most economic power was controlled by government.

30. Which is true about the government in a command economy?A. It build every house in every village.B. It passes laws to protect businessmen and consumers.C. It encourages workers to innovate.D. It makes all important economic decisions.E. It places emphasis on the production of consumer good.

EXERCISE 3

Classification. For each of the items below, choose the letter that best describes the economic questions given as follows.

A. What will be produced?B. How will it be produced?C. For whom will it be produced?

31. Consumer goods _____________

32. Industrial robots _____________

33. Road and rail systems _____________

34. Chemicals _____________

35. Automobiles _____________

36. Freight services _____________

37. Managerial skills _____________

38. Capital-intensive technology _____________

39. Machineries _____________

40. Textiles _____________

41. Factory workers _____________

42. Furniture _____________

43. Rice _____________

44. Office buildings _____________

45. Airplanes _____________

EXERCISE 4

Classification. Identify what type of economic system is described in each of the following. Write MA for market economy, CO for command economy, MI for mixed economy TR for traditional economy.

46. Private individuals own most, if not all, the resourcesand control their use. ___________

47. A society produces what best ensures its survival.___________

48. People are largely free to do what they want with theresources at their disposal. ___________

49. Government makes all economic decisions. _________

50. Individual choice and voluntary exchange directeconomic decisions. ___________

51. The government decides what goods and services willbe produced, how they will be produced, and how theywill be distributed. ___________

52. People make economic decisions based on customsand beliefs that have been handed down fromgeneration to generation. ___________

53. This involves a degree of private economic freedommixed with a degree of government regulation ofmarkets. ___________

26

zim://A/A/Economic%20freedom.html


54. The prices of goods and services are determined in afree price system. ___________

55. This is characterized by the public ownership ofresources and centralized planning. ___________

56. Voluntary choices based on rational self-interest aremade in unrestricted markets to answer the questionswhat, how, and for whom. ___________

57. Resources are allocated according to long-livedpractices from the past. ___________

58. The major and strategic industries are owned andmanaged by the state while the minor industries belongto the private sector. ___________

59. There is no free competition because the government isthe only seller. ___________

60. There is competition and the opportunity to make largeprofits, greater efficiency and innovation. ___________

EXERCISE 5

For each of the following, choose the letter that best describes the feature or characteristic of a market economy.

A. Private PropertyB. Freedom of Enterprise or ChoiceC. Self-interestD. CompetitionE. Markets and PricesF. Economic IncentivesG. Technology and Capital GoodsH. SpecializationI. Use of MoneyJ. Active, but Limited, Government

61. Producers are free to make and sell whatever they thinkwill be profitable. ___________

62. Decisions made by buyers and sellers of products andresources are conveyed. ___________

63. Entrepreneurs seek to maximize profit or minimize loss.___________

64. Workers try to maximize their utility (satisfaction) byfinding jobs that offer the best combination of wages,fringe benefits, and working conditions. ___________

65. Prices guide resources to their most productive use andchannel goods and services to the consumers whovalue them the most. ___________

66. Producers can enter or leave an industry; noinsurmountable barriers prevent an industry’s expandingor contracting. ___________

67. It is generally accepted as payment for goods andservices and repayment of debts in a given marketeconomy. ___________

68. This diffuses economic power and limits the actions ofany single seller or buyer. ___________

69. Government has high degree of efficiency in the use ofits resources but suffers from market failures.___________

70. The monetary rewards for new products or productiontechniques accrue directly to the innovator.__________

71. Under free enterprise, individuals and businesses havethe right to own property. ___________

72. Individuals have the right to make exchanges or tradesthey believe will make them better off. ___________

73. This involves the use of resources of an individual, firm,region, or nation to produce one or a few goods orservices rather than the entire range of goods andservices. ___________

74. Consumers are free to buy whatever goods they canafford. ___________

75. Individual owners are allowed to use resources or tocharge others for their use. ___________

EXERCISE 6

Classification. Determine what type of economic system each of the following countries have. Write the answer on the blank provided for after the number.

76. Philippines ___________

77. Kavango People of Namibia ___________

78. North Korea ___________

79. South Korea ___________

80. Former Soviet Union ___________

81. Canada ___________

82. United States ___________

83. France ___________

84. Cuba ___________

85. China ___________

86. Thailand ___________

87. Caste Systems in India ___________

88. Australia ___________

89. Poland ___________

90. Turkmenistan ___________

27

zim://A/A/Good%20%28economics%29.html

zim://A/A/Service%20%28economics%29.html

zim://A/A/Free%20price%20system.html

zim://A/A/Payment.html

zim://A/A/Goods%20and%20services.html

zim://A/A/Goods%20and%20services.html

zim://A/A/Debts.html

WORKTEXT 4 :MARKET STRUCTURE

EXERCISE 1


1. A market is a group of buyers and sellers of a particulargood or service. __________

2. The most important characteristic that distinguishes onemarket structure from another is the size of the firms inthe market. __________

3. Each firm in a perfectly competitive market produces andsells a homogeneous product.

4. A firm in perfect competition is free to set price atwhatever level it pleases. __________

5. Industries consist of firms producing the same good whilemarkets consist of industries producing substitute goods.__________

6. Firms make up a market while markets make up anindustry. __________

7. In monopoly, the firm is the industry. __________

8. Sellers in perfectly competitive markets are said to beprice takers. __________

9. The perfectly competitive market has few sellers butmany buyers. __________

10. Market structure with one buyer is called monopsony.__________

11. The market structure that tends to have the most intensecompetition is oligopoly. __________

12. In monopoly, the single seller sells a product for whichthere are no close substitutes. __________

13. The barriers to entry into the industry in a monopolisticmarket are very easy. __________

14. The monopolistic competitor is a price searcher.__________

15. Each firm in monopolistically competitive marketproduces and sells a slightly differentiated product.__________

EXERCISE 2


16. Which of the following is an example of market?A. Labor market B. Commodity marketC. Stock market D. Land marketE. All of these

17. Which of these statements about markets and industries isnot false?

A. A market comprises of sellers but not buyers.B. A market comprises of buyers but not sellers.C. An industry comprises of sellers but not buyers.D. An industry comprises of buyers but not sellers.E. Market and industry include both sellers and buyers.

18. Which of the following goods is being sold and bought to aperfectly competitive market?

A. Tomatoes B. RiceC. Gold D. SmartphoneE. All of these

19. Which of these is a form of market structure?A. Oligopoly B. Perfect competitionC. Monopoly D. Monopolistic competitionE. All of these

20. Firms in a perfectly competitive market are characterized asA. price takers. B. price creators.C. price makers. D. price setters.E. price negotiators.

21. Which of these is not a characteristic of a perfectly competitivemarket?

A. A large number of firms exist in the industry.B. It is easy for firms to enter and exit the industry.C. There are many buyers.D. Homogenous products are sold by firms.E. There are few firms selling differentiated products.:

22. In which market structure would you most likely place themarket for water and sewerage services?

A. MonopolyB. OligopolyC. Monopolistic competitionD. Perfect competitionE. Monopsony

WORKTEXT 4 : MARKET STRUCTURE Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________



Lingayen Campus

28


23. Which of the following could not be possibly included in thesame market of San Miguel beer?

A. Gatorade B. Emperador BrandyC. Johnnie Walker D. Red HorseE. Kleenex

24. The market for mobile prepaid and postpaid in the Philippinesis a/an

A. pure monopoly. B. monopsony.C. monopolistic competition. perfect competition.E. oligopoly.

25. What would be the order of market structures according tothe ease of entry for new firms from easy entry to more difficultentry?

A. monopoly, oligopoly, monopolistic competition, perfectcompetition

B. perfect competition, oligopoly, monopolistic competition,monopoly

C. perfect competition, oligopoly, monopolistic competition,natural monopoly

D. perfect competition, oligopoly, monopoly, monopolisticcompetition

E. perfect competition, monopolistic competition, oligopoly,monopoly

26. Shell, Caltex, Petron and Total are best described as operatingin which of the following market structures?

A. Monopoly B. OligopolyC. Monopolistic competition D. Perfect competitionE. Oligopsony

27. Most of the agricultural products are traded in what marketstructure?

A. Monopoly B. OligopolyC. Monopolistic competition D. Perfect competitionE. Oligopsony

28. Businesses such as retail clothing, computer software,restaurants, and service stations are examples of

A. monopoly.B. monopolistic competition.C. oligopoly.D. perfect competition.E. monopsony.

29. The market structure with typical characteristics such as highbarriers to entry, non-price competition and branding is

A. monopoly.B. monopolistic competition.C. oligopoly.D. perfect competition.

30. Monopolies are often referred to asA. Price takersB. Price creators.C. Price makers.D. Price setters.E. Price negotiators.

EXERCISE 3

Matching Type. Markets vary in form, scale, location, types of participants, as well as the types of goods and services traded. Match each form of market with its correct description by connecting the appropriate number next to the corresponding letter.

31. Labor market A. Electronic commerce

32. Stock market B. Minerals

33. Real estate market C. Construction workers

34. Foreign exchange market D. Street foods

35. Capital good market E. Fruits and vegetables

36. Bond market F. House and lot

37. Supermarket G. Illegal drugs

38. Agricultural market H. Locally raised meats

39. Public wet market I. Malls

40. Internet market J. Shares in corporations

41. Street market K. Dollar currency

42. Retail market L. Dump trucks

43. Natural resource market M. Fast moving consumergoods

44. Black market N. Debt securities

45. Media market O. Television offerings

EXERCISE 4

Classification. Determine whether the following represents a market or an industry. Write M for a market and I for an industry.

46. A salon spa offering cosmetic treatments for men andwomen ___________

47. A group of garment factories in Metro Manila___________

48. A wet market providing prime commodities to localpeople ___________

49. All shopping malls in a metro city ___________

50. A mobile application store where developers and usersconnect with each other ___________

51. The music recording industry in the Philippines whichmakes most of its revenues from full-length album sales___________

52. A group of firms manufacturing heavy constructionequipment ___________

29


53. A group of farmers producing the same agriculturalcommodities ___________

54. An online auction and shopping website in whichshoppers and businesses buy and sell ___________

55. Some manufacturers producing chemicals used inpharmaceutical industry ___________

EXERCISE 5

Classification. In which market structure would you most likely place each of the following businesses. Write PC for perfect competition, MC for monopolistic competition, MO for monopoly and O for oligopoly.

56. Restaurants in a large city _________

57. Air travel from any one airport _________

58. Healthcare services _________

59. Mobile telecommunications _________

60. Electric power _________

61. Livestock raising _________

62. Computer software _________

63. Movie production _________

64. Oil refining companies _________

65. Rural banks _________

66. Insurance companies _________

67. Rice production _________

68. Internet rentals _________

69. Sari-sari stores _________

70. Movie theaters _________

EXERCISE 6

Determine what market structure is characterized by each of the following products. Write PC for perfect competition, MC for monopolistic competition, MO for monopoly and O for oligopoly.

71. Lechon manok _________

72. Jack 'n Jill snack foods

73. ABS-CBN shows_________

74. Apple IOS _________

75. Digital cameras _________

76. Branded feminine pads _________

77. Jeans _________

78. Onions _________

79. Haircuts _________

80. Economics textbook by Feliciano Fajardo _________

81. Canned sardines_________

82. Android smartphones _________

83. Cigarettes _________

84. Born for You song_________

85. Electric cars _________

EXERCISE 7

Describe the market structure characteristics of the following products and services according to number of firms, nature of product, ease of entry and exit and firm’s control over the price. Write your answer on the table below.

Product/ Services

Market Structure Characteristics Number of Firms

Nature of Product

Ease of Entry and Exit

Firm’s Control over the Price

86. X-Menmovie franchise

87. Bananas

88. Musicstreamingservice89. Siomaistreet food

90. Eggs

91. Liquiddetergent

92. Refinedsugar

93. Toothpaste

94. Low-costhousing

95. Sports car

30

WORKTEXT 5 : DEMAND

Income effect

Market

Quantity demanded

Change in quantity demandedEffective demand Demand schedule

Law of demand

Price

Demand curve

Ceteris paribus Complements

Increase in demandDecrease in demandSubstitutes

Normal good

Elastic good

SupplyDemand

Inferior good

Change in demandNon-price determinants

Preferences

EXERCISE 1

Identification. Match the following statements to the items inside the box below. Write your answer on the blank provided.

1. Negative relationship between price and quantitydemanded. _________

2. Movement along the demand curve. _________

3. Shifting of the demand curve to the left. _________

4. Shifting of the demand curve to the right. _________

5. Goods that are used in place of each other. _________

6. Factors affecting demand other than price. _________

7. Caused by a change in non-price determinants ofdemand. _________

8. Good that varies directly with income. _________

9. Place where buyers and sellers meet for transaction._________

10. Amount of good that a buyer is willing to buy at a certainprice. _________

11. Willingness and ability of a consumer to buy a good undervarious conditions. _________

12. Graph that shows relationship between price and quantitydemanded. _________

13. All other things being equal or held constant. _________

14. Reflects various quantities of a good at various prices ona table. _________

15. Amount of money that a buyer pays for a good. ________

EXERCISE 2


16. When demand increases, the demand curve shiftsA. along a demand curve. B. down and to the left.C. to the right and upward. D. counter-clockwise.E. away from origin.

17. According to the law of demand, consumers will purchasemore of a good when the

A. market price of the good rises. B. income rises.C. market price of the good falls. D. supply price increases.E. related price of a good decreases.

18. Which of the following influences buying plans of a consumerthat causes a movement along a demand curve?

A. Tastes and preferences B. IncomeC. Price of the good D. Prices of related goodE. Expectations

19. Which of the following pairs of goods are most likelysubstitutes?

A. milk and sugar B. DSLR and lensC. lemonade and iced tea D. tablet and smartphoneE. lettuce and salad dressings

20. People come to expect that the price of a liter of gasoline willrise next week. What’s the effect?

A. This week’s demand rises. B. This week’s demand falls.C. Next week’s demand rises. D. This week’s supply falls.E. Next week’s demand will not change.

21. Many Filipinos have decreased their consumption of pork andswitched to chicken meat in the belief that eating chicken insteadof pork lowers cholesterol. The determinant of demand that isconsidered in the statement is

A. consumer’s expectation B. price of a complement.C. income. D. tastes.E. consumption

22. If a rise in the price of Good A decreases the demand for GoodB, then

A. Good A and Good B are complements in consumption.B. Good A and Good B are substitutes in consumption.C. Good A and Good B are both inferior goods.D. Good A is an inferior good and Good B is a normal good.E. Good A is elastic good and Good B is inelastic good.


Lingayen Campus

WORKTEXT 5 : DEMAND Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


31

WORKTEXT 5 : DEMAND

23. If a good is an inferior good, then the demand for that gooddecreases when the

A. number of buyers increases. B. price of a substitute risesC. price of the good increases. D. income increases.E. income decreases.

24. Which of the following will shift the demand curve of onions tothe right?

A. The price of onion per kilo decreases.B. The income of a customer who buys onions goes up.C. The price of a substitute good for onions decreases.D. The price of a complement good for onions decreases.E. The income of consumers increases.

25. Assuming spaghetti (Good A) and pancit palabok (Good B) aresubstitutes, a decrease in the price of spaghetti will cause thedemand curve for pancit palabok to

A. shift to the left as consumers switch from good A to good B.B. shift to the right as consumers switch from good A to good BC. move leftward as consumers switch from good A to good B.D. move rightward as consumers switch from good A to good BE. remain unchanged, because good A and B are complements.

EXERCISE 3

Classification. Identify the following pairs of goods as substitutes or complements. Write S for substitutes and C for complements after each number.

26. Beer and vodka _________

27. Eggs and hash browns _________

28. Coke and Pepsi _________

29. Laptop and tablet _________

30. Computer hardware and software _________

31. Ball-point pens and paper _________

32. Salt and pepper _________

33. Ice cream and frozen yogurt _________

34. Butter and margarine _________

35. Gasoline and automobiles _________

36. LED TV and plasma TV _________

37. DSLR and lens _________

38. Coffee and creamer_________

39. Knorr Cubes and Magic Sarap Granules _________

40. Taxi and city bus _________

41. DVD player and DVDs _________

42. Bacon and egg _________

43. Smart prepaid and Globe prepaid _________

44. Hotel or inn _________

45. Ketsup and banana _________

EXERCISE 4

Classification. Identify the following pairs of goods as normal or inferior. Write N for normal good and I for inferior good after each number.

46. Secondhand clothes _________

47. Imported beer _________

48. Luxury car _________

49. Restaurant meals _________

50. Carinderia meals

51. Dried fish (tuyo) _________

52. Bus rides _________

53. Single-ply paper towels _________

54. Low-rent housing units _________

55. Condominium _________

56. Surplus TV units _________

57. NFA rice _________

58. Airline travel _________

59. Health club memberships _________

60. New hi-tech gadgets _________

61. Affordable smartphone _________

62. Generic paracetamol_________

63. Used books _________

64. E-books _________

65. Branded jeans _________

EXERCISE 5

Graphical Analysis. Among the four diagrams below, choose what graph represents each of the following changes. Write the letter of choice after the statement.

32

WORKTEXT 5 : DEMAND

66. When the price of a substitute rises, demand for theoriginal good increases. _________

67. When the price of a complement rises, demand for theoriginal good decreases. _________

68. When income rises, demand for an inferior gooddecreases. _________

69. When income rises, demand for a normal goodincreases. _________

70. When tastes change in favor of a good, demand for thegood increases. _________

71. When tastes change against a good, demand for thegood decreases. _________

72. When income rises, demand for an inferior gooddecreases. _________

73. When income falls, demand for an inferior goodincreases. _________

74. When the price is expected to fall in the future, demandfor the good decreases today. _________

75. When the price is expected to rise in the future, demandfor the good increases today. _________

76. When the price of a complement falls, demand for theoriginal good increases. _________

77. When the price of a substitute falls, demand for theoriginal good decreases. _________

78. When the price of a good rises, quantity demandeddecreases. _________

79. When the price of a good falls, quantity demandedincreases. _________

80. When the number of consumers rises, market demandfor the good increases. _________

81. When the number of consumers falls, market demand forthe good decreases. _________

82. When the income is expected to rise in the future,demand for the good increases today. _________

83. When income is expected to fall in future, demand for thegood decreases today. _________

84. When good is expected to be unavailable in the future,demand for the good increases today. _________

85. When credit rises, the demand for the good rises._________

EXERCISE 6

Problem Analysis. Analyze and answer what is required in the following problems.

A. Determine whether each of the following will have effect on thechange in quantity demanded (movement along the demandcurve) or change in demand (shift of the demand curve). Indicatewhat variable or factor causes the change.

86. A new version of a mobile game app just came out andAdrian purchased it now because it has improvementsover the current version. _________

87. The demand for laptops falls due to the massdistribution of affordable tablets in Metro Manila. ______

88. The price of Fuji apples falls, thus a market goer buysmore. _________

89. The price of sugar (a complement) eventuallyincreases, therefore, the weekly demand for milk teadecreases. _________

90. When the price of beef rises, consumers tend toincrease their purchases for pork. _________

91. A store owner finds that customers are willing to paymore for umbrellas on rainy days. _________

92. When PLDT, a long-distance telephone serviceprovider, offered reduced rates on weekends, its volumeof weekend calling increased sharply. _________

93. People buy more long-stem roses the week ofValentine’s Day, even though the prices are higher thanat other times during the year. _________

94. A sharp rise in the price of gasoline leads manycommuters to join carpools in order to reduce theirgasoline purchases. _________

95. When the price of Apple Ipads decreases, the demandfor Samsung tablets (a substitute) falls. _________

96. A new study reports that chocolate has significantbenefits. Eventually, the demand for Hershey’s andCadbury chocolate brands increases. _________

97. When the price of lobster increases, the demand ofSalazar family for steak increases. _________

98. The demand for Windows-based computers rises whenthe price of Apple computers goes up. _________

99. Everyone thinks that the price of tomatoes will go upnext week, thus people demand more for tomatoes thisweek. _________

100. Because of the increased price, a restaurant reduces itspurchases for olive oil and decides to increase itsdemand for corn oil. _________

33

WORKTEXT 5 : DEMAND

101. Due to increase in their income, many companymanagers have availed condominium units in the GrandMidori, a twin–tower luxury condo in Makati City._________

102. When Pepito’s income rises, his demand for second-hand clothes declines as he prefers to buy brand-newclothes. _________

103. As the population increases in Pangasinan, the demandfor Lingayen’s fish sauce (patis) rises. _________

104. A company executes a full-blast media advertisement forits improved product brand. _________

105. Globe Telecom decides to reduce its postpaid plan ratesfor its new line-up of smartphones. _________

B. Think about and consider the demand for the three tabletbrands: Apple Ipad Mini, Google Nexus 7, and Samsung GalaxyTab 8.0. Explain the effect of the following events on the demandfor Ipad Mini and the quantity of Ipad Mini demanded, other thingsremaining the same.

106. The price of a Google Nexus 7 falls by 20%. _________

107. The number of people willing to download apps andgames from the App Store continues to rise. _________

108. The price of an Ipad mini falls from Ᵽ15,000 to Ᵽ12,000________

109. The incomes of consumers’ increase sharply._________

110. Developers who create apps for Apple devices tend toincrease due to in demand use of tablet apps. _________

111. The price of Ipad Mini is anticipated to rise rapidly in thenear future. _________

112. It has been found out that the latest batch of Ipad Miniproduced and distributed have factory defects withsoftware glitches. _________

113. A new tablet brand from HTC that is a close substitute forIpad Mini is introduced to the market. _________

114. Many telecom carriers order Ipad Mini for their internetplan offerings. _________

115. Samsung Galaxy Tab offers an attractive promotionbecause it is bundled with a Samsung digital camerawhere a customer can save P6, 000. _________

116. The prices of smart cover and dock keyboard for Ipadmini decline. _________

117. Apple aggressively advertises in print ads and TV theunique selling points of Ipad Mini. _________

C. Given the options below, choose the appropriate letter thatcorresponds to the effect on demand of Coffee X, an instantcoffee. Based on the chosen letter, indicate what variable ordeterminant of demand affects the change and show throughgraph the change of the demand curve.

A. Increase in Quantity DemandedB. Decrease in Quantity DemandedC. Increase in DemandD. Decrease in Demand

118. The price of Coffee X increases by 5%. Aling Rosingbuys less for her sari-sari store. _________

119. A decrease in the price of tea, a related good, causesAling Rosing to reduce its purchases of Coffee X._________

120. Many consumers like the new flavor variant of CoffeeY than that of Coffee X. _________

121. A new coffee brand, Coffee Z, has introduced in themarket with full-blast media advertisement. ________

122. Several coffee shops and internet café chops inPangasinan have opened. _________

123. The price of a particular coffee creamer brand has priceroll back promo of less 20% off. _________

124. The price of sugar increases. _________

125. It is reported that frequent intake of instant coffeeincreases the risk of a certain illness. _________

126. Because it’s summer season, the demand for colddrinks rises. _________

127. The price of Coffee X goes down due to price off promo(Less Ᵽ15). _________

128. Consumers expect the price of Coffee X to increasetomorrow. _________

129. The profit earned of Aling Rosing from her sari-saristore increases. _________

130. Consumers expect that stocks of Coffee X insupermarkets will be running out next week._________

131. Due to rainy and cold season, consumers tend topurchase more of Coffee X. _________

132. Both prices of Coffee Y and Coffee Z rise. _________

133. Some imported instant coffee brands from Japan flockthe Philippine market. _________

134. Most consumers’ incomes go up. _________

135. An additional increase of 4% in VAT (Value-added Tax)has been levied on Coffee X. _________

34

WORKTEXT 5 : DEMAND

EXERCISE 7


A. The demand curve for a commodity is given by theequation, 𝑄𝑑 = 200 − 5𝑃, where 𝑄𝑑 is quantity demanded and 𝑃is price.

136. What is the quantity demanded if the price is 20?

137. What is the quantity demanded if the price is 50?

138. What is the price if the quantity demanded is 40 units?

139. What is the inverse demand curve?

140. What is the highest price that would be paid for thiscommodity?

141. What quantity would be demanded if the commoditywere free?

142. Graph the demand curve.

B. Suppose the demand for onions per kilo in Pangasinan isrepresented in the table below, expressed as 𝑄𝑑 = 𝑎 − 𝑏𝑃.

Price (per kilo) Quantity Demanded

8 260 16 220 24 180 32 140 40 100

143. Using the information in the demand schedule above,derive the demand equation for onions.

144. Assume that due to a decrease in the price of garlic (asubstitute), the demand for onions decreases, and ateach of the prices on the original demand schedule, thequantity demanded is now 40 kilos lower than it waspreviously. Create a new demand schedulerepresenting the lower demand for onions and derive anew demand function based on the new demandschedule. Graph the original and new demand curve.

145. Now assume that due to rising incomes, buyers inPangasinan have increased their purchases of onionsthus demand increases. If at each of the prices on theoriginal demand schedule, the quantity demanded is 20kilos higher that it was previously, what is the newdemand schedule and new demand equation? Graphthe original and new demand curve.

35

WORKTEXT 6 : SUPPLY

EXERCISE 1


1. Firms want to earn a profit, so when the price of a goodrises they are willing to supply more of it. ___________

2. A rise in the expected price of a good will increase supply,shifting the supply to the left. ____________

3. Cost-saving technological advances increase the supplyof a good, shifting the supply curve to the right. ________

4. The increased price of an input causes a decrease insupply, shifting the supply curve to the left. ___________

5. The market supply curve is the sum of the individualsupply curves of all firms in the market. ____________

6. When the price of a good changes, this results ina movement along the supply curve and a change in thequantity supplied. ____________

7. The law of supply states that producers are willing to sellless of a good or service at a higher price. ____________

8. Change in supply is an increase or decrease in theamount of a good or service that producers are willing tosell because of a change in price. ___________

9. Input costs are a major factor that affects productioncosts and, therefore, supply. ____________

10. Taxes tend to increase supply; subsidies have theopposite effect. ____________

11. If a farmer expects the price of corn to be higher in thefuture, he may store some of the current crop, therebyincreasing supply. ____________

12. An increase in the number of firms means increasedcompetition, which may eventually drive less-efficientfirms out of the market, decreasing supply. ___________

13. Supply refers to the willingness and ability of consumersto offer goods and services for sale. ____________

14. Labor productivity involves the application of scientificmethods to the production process. ____________

15. Because the market supply curve holds other thingsconstant, the curve shifts when one of the factorschanges. ____________

EXERCISE 2


16. An improvement in production technology for a specific goodwill cause a(n)

A. increase in demand and an increase in price.B. increase in demand and a drop in price.C. drop in price and increase in quantity demanded.D. increase in supply and an increase in price.E. None of the above.

17. The supply curve is upward-sloping becauseA. as the price increases, consumers demand less.B. as the price increases, so do costs.C. as the price increases, suppliers earn higher levels of profit.D. as price increases, suppliers justify lower marginal cost to

produce more. E. None of these.

18. If the cost of computer components falls, thenA. the demand curve for computers shifts to the left.B. the demand curve for computers shifts to the left.C. the supply curve shifts to the right.D. the supply curve shifts to the left.E. the supply curve moves along the curve.

19. The law of supply states that, ceteris paribus,A. firms will produce less of a good as inputs become scarcer.B. firms will produce more of a good the higher its price.C. firms will produce less of a good the more it costs to

produce it. D. firms will produce more of a good the less it costs to

produce it. E. firms will produce more of a good the lower its price.

20. Consider the market for broccoli. If the price per kilo of broccoliincreases, what will happen to the supply curve?

A. The supply of broccoli will increase.B. The supply of broccoli will decrease.C. There will be no change in the supply of broccoli, but

instead will be a decrease in the quantity supplied of broccoli. D. There will be no change in the supply of broccoli, but

instead will be an increase in the quantity supplied of broccoli. E. None of these.


Lingayen Campus

WORKTEXT 6 : SUPPLY Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


36

WORKTEXT 6 : SUPPLY

21. Which of the following shifts the supply curve of Baguiostrawberries?

A. An increase in income for all strawberry consumers.B. A change in tastes of strawberry consumers.C. An increase in the price of grapes, a substitute in consumption

for strawberries. D. Disastrous weather that destroys this year’s strawberry crop.E. An increase in population of Baguio City.

22. Chinese producers of shoes offered such low prices thatPhilippine producers of shoes were driven out of business. As thenumber of producers reduced,

A. the market supply of shoes increased.B. the market supply of shoes decreased.C. the market demand of shoes decreased.D. the market demand of shoes decreased.E. there was no change in the supply of shoes.

23. Consider the market for bagoong (Sal. Suppose that bagoongworkers form a union and receive a P50 per day wage increase.What will happen now?

A. The demand for bagoong will increase.B. The demand for bagoong will decrease.C. The supply of bagoong will decrease.D. The supply of bagoong will increase.E. The supply of bagoong will remain constant.

24 In the market for smartphones, which of the following events rises the supply of smartphones?

A. New technology lowers the cost of making a smartphone.B. A decrease in the market price of smartphones.C. Input costs of smartphones sharply rise.D. An increase in consumers’ incomesE. A bad whether affects the production sites of smartphones.

25. Which of the following will not result in a change in the supplyof digital camcorders?

A. New firms enter the industry.B. Prices of photographic equipment increase dramatically.C. Production technology advances rapidly.D. Costs of production rise.E. Consumers prefer digital camcorders over cameras.

EXERCISE 3

Classification. Classify the following pairs of goods as substitutes or complements in production. Write S for substitutes and C for complements after each number.

26. French fries and baked potatoes _________

27. Shirts, ties and sock _________

28. Vitamin pills and surgery _________

29. College tuitions and textbook _________

30. Leather purses and leather shoes. _________

31. Gasoline and kerosene _________

32. Digital camera and digital camcorder _________

33. Coke Light and Coke Zero _________

34. Bread and roll cake _________

35. Cup and saucer _________

EXERCISE 4


A. Determine whether each of the following will have effect on thechange in the quantity supplied (movement along the supplycurve) or change in supply (shift of the supply curve). Indicatewhat variable or factor causes the change.

36. Some manufactures of android phones came out in themarket recently. _____________

37. A rise in the excise tax of liquor products induces theproducers to reduce their supply of rums._____________

38. A rise in the wages of paid workers is provided by themanagement in a toy factory. _____________

39. Many homeowners put their houses up for sale during areal estate boom that causes house prices to rise._____________

40. More construction workers temporary move to areas thathave suffered typhoon damage, lured by higher wages._____________

41. The prices of baking supplies in producing loaf breadrise. _____________

42. Many restaurants of buffet meals opened up in themarket recently. _____________

43. Potato farmers in Baguio City open temporary roadsidestands during harvest season, even though prices areusually low at that time. _____________

44. An increase in the number of Internet service providersincreases the supply of data usage. _____________

45. Econ Phone develops an effective wireless technologythat it increases the supply of cell phones. __________

46. A pharmaceutical company producing analgesic drugsexpects that there will be a substantial decrease in futureprices of the latter _____________

47. Since the price of cucumbers increases sharply, afarmer decreases its supply of watermelons._____________

48. The price of air conditioners sharply falls so somemanufacturers produce less. _____________

49. Since bicycles are made out of steel and the price of thelatter increases, many bicycle producers reduce theirsupply for bicycle. _____________

50. An electronics company deploys industrial robots toincrease its production of a particular gadget._____________

37

WORKTEXT 6 : SUPPLY

B. What effect will each of the following have on the supply ofproduct J (increase in supply or decrease in supply)? Illustrate thechange through a graph.

51. A technological advance in the methods of producingproduct J. _____________

52. A decline in the number of firms in industry of product J._____________

53. An increase in the prices of inputs required in theproduction of B. _____________

54. The expectation that the equilibrium price J will be lowerin the future than it is currently. _____________

55. A decline in the price of product A, a good whoseproduction requires substantially the same techniquesand resources as does the production of J._____________

56. The levying of a specific sales tax on product J._____________

57. The granting of a 2-peso per-unit subsidy for each unit ofproduct J produced. _____________

58. A disastrous weather occurred that affects the productionof Good J. _____________

59. A rise in the wages of workers producing product J._____________

60. An increase in the cost of media advertisement forproduct J. _____________

C. Given the options below, choose the appropriate letter thatcorresponds to the effect on supply of Pinoy Mobile, anandroid tablet. Based on the chosen letter; indicate whatvariable or determinant of supply affects the change andshow through graph the change of the supply curve.

A. Increase in Quantity SuppliedB. Decrease in Quantity SuppliedC. Increase in SupplyD. Decrease in Supply

61. The price of Pinoy Mobile android tablet rises._______

62. A new machine speeds up the manufacturing processof Pinoy Mobile. _________

63. Major internet providers offer Pinoy Mobile as one of thetablet brands for postpaid plan subscription. _________

64. A flock of android phone brands from Chinamanufacturers are being sold to the Philippine market.

_________

65. The prices of LCD displays and processor chips used inPinoy Mobile sharply rise. _________

66. The government levies an increased sales tax on tabletproducts. _________

67. The labor union workers at Pinoy Mobile factorynegotiate a high wage increase. _________

68. The mass supply distribution of major competingtablets like Ipad and Galaxy Tab affects the supply ofPinoy Mobile. _________

69. The company producing Pinoy mobile anticipates thatthere will be a sharp price reduction of android tabletsafter two months. _________

70. A strong typhoon hit the manufacturing site thatstopped production of Pinoy Mobile for several days.

_________

71. The government provides a subsidy of Ᵽ100 for eachunit produced of Pinoy Mobile. _________

72. Price of Pinoy Mobile drops by 10 percent. _________

73. Better-trained and more-skilled workers are hired toincrease labor productivity in assembling Pinoy Mobile._________

74. Firms expect that prices of electronic gadgets willdramatically rise next month. _________

75. The input costs of producing Pinoy mobile decline._________

EXERCISE 5


A. Consider the following supply curve of Econ Phone, a newbrand of smartphone in the market. This depicts the relationshipbetween price (in pesos) and quantity supplied (in thousands).

76. Based on the above supply curve, fill in the supplyschedule below.

Price (Ᵽ) Quantity Supplied

3,000

30 12,000

24,000

0

5000

10000

15000

20000

25000

30000

0 10 20 30 40 50 60

Supply of Econ Phone

S1

38

WORKTEXT 6 : SUPPLY

77. If the price per unit of Econ Phone is Ᵽ18, 000, howmany units would smartphone manufacturer be willingto supply?

78. Derive the supply equation.

B. Given the following table of prices of branded jeans and quantitysupplied (in thousands of jeans). draw the supply curve forbranded jeans. Describe the curve.

79. Draw the supply curve for branded jeans.

80. Describe the supply curve.

81. Derive the supply

C. Suppose the yearly supply of cauliflower in Baguio City isdescribed by the equation 𝑄𝑠 = 150 + 2𝑃 where 𝑄𝑠 is thequantity supplied (in thousands of kilos) and 𝑃 is the price (inpesos per kilo).

82. What is the quantity of cauliflower supplied per yearwhen price is Php 50?

83. Sketch the supply curve for cauliflower.

D. When the price is Ᵽ500, 50 MP3 players of a fixed type areavailable for sale. When the price is Ᵽ750, 100 of the MP3 playersare available.

84. Derive the supply equation.

85. Graph the supply equation.

E. At a price of Ᵽ1, 200 per unit, a firm will supply 9,000 ofprocessor chips for tablets and at P900 per unit it will supply 6,000units.

86. Determine supply equation.

87. Graph the supply equation.

F. The supply curve for a product is represented by theequation, 𝑄𝑠 = 600 +

1

2𝑃, where 𝑄𝑠 is quantity supplied and 𝑃 is

price.

88. What is the quantity supplied if the price is Ᵽ500?

89. What is the price if the quantity supplied is 400 units?

90. What quantity would be supplied if the product is free?

91. What is the inverse equation of the supply curve?

92. Graph the supply curve

G. Suppose the supply of sport shoes is represented by the tablebelow, expressed as 𝑄𝑠 = 𝑎 + 𝑏𝑃.

Price per unit Quantity Supplied

400 200 800 400

1,200 600 1,600 800 2,000 1,000 2,400 1,200

93. Using the information in the supply schedule above,derive the supply equation for sport shoes.

94. Now assume that there is a significant increase in thecosts of production of sport shoes and the quantitysupplied therefore decreases at each price by 50 units.Create a new supply schedule demonstrating theimpact of the higher production costs for sport shoemanufacturers. Plot the original and new demandcurve and explain the graph.

95. Now assume that due to advanced technology andimprovement in supply-chain efficiency, producers areable to produce more resulting to increased supply ofsport shoes. If at each of the prices on the originalsupply schedule, the quantity demanded is 40 kiloshigher that it was previously, what is the new supplyschedule and new supply equation? Graph the originaland new demand curve and explain the graph.

Price (Ᵽ) Quantity Supplied

250 50 500 60 750 70

1,000 80 1,250 90 1,500 100

39

WORKTEXT 7 : MARKET EQUILIBRIUM

EXERCISE 1

Multiple Choice .Encircle the one alternative that best completes the statement or answers the question.

1. Which of the following implies what will happen in the marketfor tomatoes if a salmonella outbreak is attributed to taintedtomatoes?

A. Supply will decrease and price will increase.B. Supply will decrease and price will decrease.C. Demand will decrease and price will increase.D. Demand will decrease and price will decrease.E. Supply and demand will both decrease.

2. An increase in the number of buyers and a technologicaladvance will cause

A. demand to increase and supply to increase.B. demand to increase and supply to decrease.C. demand to decrease and supply to increase.D. demand to decrease and supply to decrease.E. no change in demand and an increase in supply.

3. A shortage causes theA. price to fall. B. price to rise.C. supply curve to shift rightward. D. supply to equal demand.E. demand curve to shift leftward.

4. If the price of an Android smartphone is above the equilibriumprice, there will be a _____ of Android smartphone and the pricewill _____.

A. surplus; fall B. shortage; fallsC. shortage; rise D. surplus; riseE. none of these

5. When the quantity demanded exceeds the quantity supplied,then there is

A. a surplus and the price is below the equilibrium price.B. a surplus and the price is above the equilibrium price.C. a shortage and the price is below the equilibrium price.D. a shortage and the price is above the equilibrium price.E. a market equilibrium where demand is greater than supply.

6. Which of the following definitely raises the equilibrium price?A. An increase in both demand and supply.B. A decrease in both demand and supply.C. An increase in demand combined with a decrease in supply.D. A decrease in demand combined with an increase in supply.E. None of the above.

7. Which of the following will lead to an increase in the equilibriumprice of product A?

A. increase in consumer incomes if product A is an inferior good.B. increase in the price of machinery used to produce product AC. technological advance in the production of good A.D. decrease in the price of good B (a substitute for good A).E. expectation by consumers that the price of good A will fall.

8. Which of the following is certainly true if demand and supplyincrease at the same time?

A. The equilibrium price will decrease.B. The equilibrium price will increase.C. The equilibrium quantity will decrease.D. The equilibrium quantity will increase.E. The equilibrium quantity may increase or decrease.

9. Kazuma sells cookies according to his supply function 𝑄𝑠 =−15 + 3𝑃. Kioske buys cookies according to his demand function𝑄𝑑 = 27 − 4𝑃. If the two of them make up the entire market forcookies, what will the equilibrium quantity be?

A. 6 B. 2C. 3 D. 10E. 5

10. Leather belts and leather shoes are substitutes in production.If style changes increase the demand for leather belts, the supplycurve of leather shoes will shift

A. rightward and the equilibrium price of leather shoes will fall.B. leftward and the equilibrium price of leather shoes will rise.C. leftward and the equilibrium price of leather shoes will fall.D. rightward and the equilibrium price of leather shoes will rise.E. None of these.

11. The market for a good is in equilibrium if theA. supply and demand are equal.B. price equals costs plus a profit.C. rate of technological change is steady.D. quantity supplied equals quantity demanded.E. price and quantity of a good are equal.

12. A price below the equilibrium price results inA. excess supply. B. a surplus.C. a shortage. D. increased supply.B. increased demand.


Lingayen Campus

WORKTEXT 7 : MARKET EQUILIBRIUM Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


40


EXERCISE 2

Problem Analysis. Analyze and answer what is required in the following problems. A. Assume that you are analyzing the market of digital cameras.In each of the following events, determine (i) the market inquestion; (ii) whether a shift in demand or supply occurred, thedirection of the shift, and what induced the shift; and (iii) the effectof the shift on the equilibrium price and quantity.

13. One company invented a new machinery on productiontechnology that speeds up the manufacturing processof its camera products. _________

14. Many companies introduced their new digital cameramodels in the market during the 1st quarter of the year._________

15. The prices of image sensors and LCD screens used indigital cameras sharply increase. _________

16. The government placed an increased sales tax ondigital camera products. _________

17. The workers working for camera manufacturers have asubstantial increase in their wages. _________

18. Many consumers are not induced to purchase a digitalcamera because of the decreased price of smartphoneswith built-in camera. _________

19. Manufactures expect the price of digicams to increasenext month._________

20. A disastrous weather affects factories of majormanufacturers producing digicams. _________

21. The government extends a subsidy of Ᵽ500 for eachcamera unit produced. _________

22. Consumers anticipate the price of digital cameras to fallnext week. _________

23. The market size (population) in a certain areaincreases. _________

24. Firms expect that prices of electronic gadgets willdramatically rise next month. _________

25. The input costs of producing camera units rise. _______________

26. The incomes of camera buyers fall significantly.________

27. There is a sharp decrease in the price of DSLRs (closedsubstitute for digicams). ________

28. Consumers expect the stocks of digicams frommanufacturers to be running out next month. ________

29. Buyers like the retro design and improved camerafeatures of the newly introduced camera models.________

30. Because of the Christmas holiday season, the demandfor digital cameras eventually goes up. _________

B. Use a diagram to illustrate how each of the following eventsaffects the equilibrium price and quantity demanded of spaghetti.

31. The price of mozzarella cheese rises. _________

32. The health hazards of hamburgers are widelypublicized. _________

33. The price of spaghetti sauce falls. _________

34. The incomes of consumers rise and spaghetti is aninferior good. _________

35. Consumers expect the price of spaghetti to fall nextweek. _________

36. The price of carbonara, a close substitute for spaghettirises. _________

37. Most consumers like the improved taste of spaghetti._________

C. Use a diagram to illustrate how each of the following eventsaffects the equilibrium price and quantity supplied of pancitguisado.

38. The price of meat and vegetables which are majoringredients for pancit guisado increases. _________

39. Some restaurants who sell pancit guisado have shutdown in business operation. _________

40. Since the price of pancit palabok increases sharply,most restaurants decrease their supply of pancitguisado. _________

41. Sellers who sell pancit guisado expect that price of thelatter will decrease soon. _________

42. A new technology in cooking helps most restaurants tocook and sell more pancit guisado. _________

43. An increased tax rate is placed on the sales of pancitproducts. _________

D. In a supply and demand diagram, draw the shift of the demandcurve for hamburgers in your hometown due to the followingevents. In each case, show the effect on equilibrium price andquantity.

44. The price of pizza decreases. _________

45. All hamburger sellers raise the price of their Frenchfries. _________

46. Income falls in town. Assume that hamburgers are anormal good for most people. _________

47. Consumers expect the price of hamburger to fall inthe near future. _________

48. Hot dog stands cut the price of hot dogs. _________

41


EXERCISE 3

Analyze and answer what is required in the following questions and problems.

A. Suppose the market for candies is described by the diagrambelow.

49. What is the quantity demanded if price is Ᵽ250. What is the price if quantity supplied is 400 units?51. What is the equilibrium price?52. What is the equilibrium quantity?53. At a price of Ᵽ10, there is a surplus of how many units?54. At a price of Ᵽ4, there is a shortage of how many units?

B. The market for pancit palabok is given by the following diagram.

55. Label the two curves. Which curve shows thewillingness to pay for the pancit palabok?

56. If the price of the pancit palabok is Ᵽ160 per small bilao,is there a shortage or a surplus and does the price riseor fall?

57. Sellers want to receive the highest possible price, sowhy would they be willing to accept less than Ᵽ160 fora pancit palabok?

58. If the price of the pancit palabok is Ᵽ120, is there ashortage or a surplus and does the price rise or fall?

59. Buyers want to pay the lowest possible price, so whywould they be willing to pay more than Ᵽ120 for a pancitpalabok?

C. The demand for flash drives has the equation 𝑄𝑑 = 800 − 𝑃while the supply has the equation 𝑄𝑠 = 200 + 𝑃. In bothequations, 𝑃 denotes the market price.

Price 200 250 300 350 400 𝑄𝑑

𝑄𝑠

60. Fill in the above table.

61. Find the equilibrium price and quantity by solving thedemand and equations simultaneously.

E. The demand and supply schedules for lanzones in Pangasinanare given by the following. (Price is in pesos and quantity is inthousand kilos)

Price Quantity Demanded

Quantity Supplied

20 180 60 40 140 100 60 100 140 80 60 180

100 20 220

62. Draw a graph of the market for lanzones and mark inthe equilibrium price and quantity.

63. If the price of lanzones is Ᵽ70 per kilo, describe thesituation in the lanzones market and explain how theprice adjusts.

64. If the price is Ᵽ30 per kilo, describe the situation in thelanzones market and explain how the price adjusts.

65. Suppose that a disastrous typhoon destroys somefarmlands that produce lanzones and the quantity oflanzones supplied decreases by 40 thousand kilos amonth at each price. Explain what happens in themarket for lanzones and draw a graph to illustrate thechanges.

66. If at a time the typhoon occurs there is an increase inincome of consumers, which increases the quantity oflanzones demanded by 20 thousand packs a month ateach price, what are the new equilibrium price andquantity of lanzones. Illustrate these changes on thegraph.

F. The demand function for a product is 𝑄𝑑 = 1000 − 6𝑃 and thesupply function is 𝑄𝑠 = 200 + 4𝑃.

67. Find the equilibrium price and quantity for the product.

68. If the demand function shifts to 𝑄𝑑 = 1200 − 6𝑃, findthe equilibrium price and quantity.

69. Describe the change in demand by comparing the twodemand functions.

70. Graph on the same set of axes the demand and supplycurves. Indicate the point of equilibrium and show onthe same diagram the change in demand.

0

2

4

6

8

10

12

0 100 200 300 400 500 600

Pric

e (in

pes

os)

Quantity (in millions)

S1

D1

020406080

100120140160180

0 100 200 300 400 500Quantity (pancit per day)

42

1

WORKTEXT 8 : ELASTICITY

EXERCISE 1


1. If the demand for a product is said to be elastic, this isdemand for which price elasticity is less than 1.___________

2. Supply of a good is said to be elastic if the quantitysupplied responds substantially to changes in the price.___________

3. Demand is inelastic if it does not respond much to pricechanges.___________

4. Demand tends to be more price inelastic when there areclosed substitutes for a product. ___________

5. Supply is perfectly inelastic and the supply curve isvertical if the quantity supplied is the same regardless ofthe price. ___________

6. The elasticity of supply varies directly with the amount oftime producers have to respond to the price change.___________

7. Perfectly inelastic demand is graphed as a line parallel tothe vertical axis. ___________

8. Demand for necessities tends to be inelastic.___________

9. When the income elasticity of demand is positive, thegood is an inferior good. ____________

10. Price elasticity of demand indicates how sensitive thepurchase of one product is to changes in the price ofanother product. _____________

EXERCISE 2


11. The demand for table salt is probably more inelastic than thedemand for potatoes because:

A. potatoes require salt but salt does not require potatoes.B. salt will keep longer than potatoes before spoiling.C. there is so much potential salt in the ocean.D. salt is cheap relative to most consumer's incomes and has

few good substitutes.E. None of these.

12. If each 5 percent increase in the price of newspapers reducesby 3 percent the quantity purchased, the price elasticity ofdemand for newspapers is

A. 2.0 B. 2. 5C. 5.0 D. 0.6E. 0.7

13. If at a price of Ᵽ5 the quantity demanded of itlog maalat (saltedegg) is 400 per day, and at Ᵽ10 the quantity demanded is 300 perday, then the price elasticity of demand for itlog maalat is

A. 2.40 B. 0.67C. 3.51 D. 0.43E. 0.32

14. Which of the following goods would be expected to have thehighest price elasticity of demand?

A. mineral water B. soft drinksC. Coke or Pepsi D. lemonadeE. soda

15. Which of the following characteristics of a product tend tomake the elasticity of demand greater?

A. The product is a necessity.B. The time period is relatively short.C. The product is relatively expensive.D. There are no good substitutes for the product.E. A, B and C

16. Suppose you are in charge of pricing at Samsungsmartphones and you wish to increase revenues from yourGalaxy product line. Samsung's chief economist informs you thatthe price elasticity of demand for Galaxy smartphones isestimated to be E = 2.17. Based on this, you would

A. increase price. B. decrease price.C. not change price. D. increase output.E. not enough information to make a rational decision.


Lingayen Campus

WORKTEXT 8 : ELASTICITY Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


43


17. When the price of coffee rose 25% the quantity of coffee soldfell 30% and the sale of creamer also fell 20%. This set of factsimplies that:

A. the demand for coffee is price elastic.B. the demand for creamer is price elastic.C. the cross price elasticity between coffee and creamer is

negative so the two are complements.D. the cross price elasticity between coffee and creamer is

positive so the two are substitutes.E. Coffee and creamer are inferior good.

18. If the income elasticity of demand for tuyo is - 0.25 and theincome elasticity of demand for tuna is 1.2

A. tuyo and tuna are substitutes.B. tuyo and tuna are complements.C. tuyo is a normal good and tuna is an inferior good.D. tuyo is an inferior good and tuna is a normal good.E. tuyo and tuna are both normal good.

19. If the price elasticity of demand for a good is 1.5, then a 5%decrease in the price of the good will cause a

A. 7.5% increase in the quantity demanded.B. 7.5% decrease in the quantity demanded.C. 3.33% increase in the quantity demanded.D. 3.33% decrease in the quantity demanded.E. None of these.

20. Suppose you produce and sell homemade shanghai. Younotice that when you charge Ᵽ70 per pack, you sell 200 packs.Also, when you raise the price to Ᵽ100, you sell 150 packs. As theprice goes up from Ᵽ70 to Ᵽ100, your total revenue _____,therefore the demand for homemade shanghai must be _____.

A. increases; elastic B. increases, inelasticC. decreases; elastic D. decreases; inelasticE. stays the same; unitary elastic

EXERCISE 3

Classification. Identify the following goods as either elastic or inelastic. Write E for elastic and I for inelastic after each number.

21. Milk _________

22. Movies _________

23. Sports Car _________

24. Automobile repair _________

25. Bread _________

26. Gasoline _________

27. Sugar _________


29. Clothing _________

30. Electricity (household) _________

31. Prepaid and postpaid services _________

32. Eggs _________

33. Red wine _________

34. Apple Iphone smartphone _________

35. Airline travel _________

36. Cigarettes _________

37. Toothpaste _________

38. Rice _________

39. Housing _________

40. Nestea Iced Tea _________

EXERCISE 4

Classification In each of the following cases, analyze and indicate whether the demand for the good would become (i) elastic, (ii) unitary, (iii) inelastic, (iv) perfectly elastic or (v) perfectly inelastic. Identify what type of demand elasticity is described.

41. The water refilling business in this town is verycompetitive as the business will lose half of thecustomers if the price of distilled water is raised by aslittle as 10%. ______________

42. When the price of all-purpose cream declines by 10%, asupplier increases its quantity of macaroni saladsdemanded by 12%. ______________

43. After Cristine’s income increased from Ᵽ30,000 toⱣ40,000 a month, her demand for movie ticketsincreased from 3 to 5 tickets. ______________

44. Fewer people want to fly to Boracay during June thanduring any other month thus, airlines cancel about 10%of their flights as ticket prices fall about 20% during thismonth. ______________

45. A study found that a 4% increase in tuition led to anapproximately 3% fall in the number of students enrolledin a certain university. ______________

46. Due to decreased number of visitors this summer, a 25%decline in the price of a vacation rental leads more thanhalf of homeowners to occupy their vacation homesthemselves during the summer. ________________

47. Because they are considered necessary for diabeticpatients, 1,000 insulin injections are bought everymonth, regardless of price. ______________

48. Some goods that were once considered luxuries, like asmartphone, are now considered virtual necessities. Asa result, the demand curve for telecom services hasbecome steeper over time. ______________

49. Consumers will buy 1,400 doses of anti-venom per yearregardless of the price. ______________

44


50. Consumers buy more frozen yogurt when the price of icecream goes up. ______________

51. A subscriber pays the internet provider company Ᵽ1,800per month for unlimited internet connection (regardlessthe number and length of time). ______________

52. An increase in the toll fee by 20% from Ᵽ80 to Ᵽ96 leadsto a fall in the quantity by 10% of drivers who use theexpressway. ______________

53. An increase in demand this summer for luxury cruisesleads to a huge jump in the sales price of a cabin on theAsian Cruise. ______________

54. The price of a kilowatt of electricity is the same duringperiods of high electricity demand as during periods oflow electricity demand. ______________

55. The price of Baguio strawberries falls from Ᵽ150 to Ᵽ100per carton and the quantity demanded goes from 1,000to 2,000 cartons. ______________

EXERCISE 5


56. Given the demand data for restaurant meals subject tothe change in income, calculate the income elasticity forrestaurant meals. Is demand elastic, inelastic or unitary?Is the good normal or inferior?

Income (per month)

Quantity Demanded (No. of Meals)

Ᵽ20,000 3 Ᵽ30,000 6

57. When the price of pandesal per piece is Ᵽ2, Santos familyusually bought 20 pieces every morning. When the priceincreased to Ᵽ3, the family now buys 15 pieces. Basedon the data, compute for the price elasticity of demand.Interpret the computed elasticity value and determinewhether the good (pandesal) is a necessity or a luxury.

58. Given the demand data of Sunrise bakery for loaf breadsubject to price increase of flour, calculate the crosselasticity for loaf bread. Identify if it is elastic, unitary orinelastic and determine whether the loaf bread and flourare substitutes or complements.

Flour Price (per bag)

Quantity Demanded (per month)

Ᵽ1,000 1,400 Ᵽ1,250 1,300

59. Given the demand data of Sunriser Bakery for margarinesubject to price decrease of butter, calculate the crosselasticity for margarine. Identify if it is elastic, unitary orinelastic and determine whether the butter and margarineare substitutes or complements.

60. When the price per hour of web-design servicesincreases from Ᵽ50 to Ᵽ80, the number of hourstransacted increases from 2,100 to 4,000. Using themidpoint method, calculate the price elasticity of supply.Is supply elastic, inelastic, or unitary elastic?

61. Assume that a linear demand curve is represented bythe formula, 𝑄𝑑 = 500 − 2𝑃. What is the price elasticityof demand at 𝑃 = 30? At 𝑃 = 10?

62. Suppose the demand equation for cellphone case in astore is given by equation, 𝑄𝑑 = 900 − 2𝑃. In thisequation, P denotes the price per case in pesos. Fill inthe following table. At what price is demand elastic? Atwhat price is demand inelastic?

Price 50 100 175 200 400 𝑸𝒅

𝑬𝒑

63. Based on the accompanying demand data, use themidpoint formula for Ed to determine price elasticity ofdemand for each of the five possible Ᵽ20-price changes.Compute also for the total revenue by filling in the tablebelow.

Price Quantity Demanded

Elasticity Total Revenue

0 1,200 20 1,000 40 800 60 600 80 400

100 200

Suppose you are a siomai seller who wants to predict how changes in the price of siomai affect the total revenue you earned from the sale of that good. How would the following changes in price affect total revenue? That is, would total revenue increase, decrease, or remain unchanged? Use a diagram to illustrate the change.

64. Price of siomai rises and demand is elastic.

65. Price of siomai falls and demand is inelastic.

66. Price of siomai rises and supply is elastic.

67. Price of siomai rises and supply is inelastic.

68. Price of siomai rises and demand is inelastic.

69. Price of siomai falls and demand is elastic.

70. Price of siomai falls and demand is unit elastic.

Butter Price (per bag)

Quantity Demanded (per month)

Ᵽ700 18 Ᵽ500 16

45

WORKTEXT 9 : CONSUMER BEHAVIOR

EXERCISE 1


1. The slope of the indifference curve measures themarginal rate of substitution. _____________

2. According to the principle of diminishing marginal utility,each successive unit of a good or service consumedadds less to total utility than the previous unit._____________

3. If the marginal utility per last peso spent on each good isequal and the entire budget is spent, total utility ismaximized. _____________

4. Indifference curves farther from the origin are preferredbecause they yield higher levels of total utility._____________

5. The ratio of the price of good X on the horizontal axis tothe price of good Y on the vertical axis is the slope of thebudget line. _____________

6. Marginal utility typically rises as successive units of agood are consumed. _____________

7. An indifference curve consists of quantity combinationsof two goods that yield negative marginal utilities._____________

8. Given the prices of two goods, all quantity combinationsinside the budget line are unattainable. _____________

9. Consumer equilibrium occurs where the budget line istangent to the lowest attainable indifference curve._____________

10. When total utility is at a maximum, marginal utility isnegative. _____________

EXERCISE 2


11. A utility function shows the relationship betweenA. price and a consumer’s utility.B. income and a consumer’s utility.C. quantity demanded and a consumer’s utility.D. the amount of goods consumed and a consumer’s utility.E. revenue and a consumer’s utility.

12. The amount of added utility that a consumer gains from theconsumption of one more unit of a good is called

A. total utility. B. incremental utility.C. diminishing utility. D. marginal utility.E. preference.

13. According to the law of diminishing marginal utility, as theconsumption of a particular good increases.

A. total utility increases. B. marginal utility increases.C. total utility decreases. D. marginal utility decreasesE. marginal utility stays the same.

14. As a person consumes more of a given good, the marginalutility of that good to the consumer

A. rises at an increasing rate. B. rises at a decreasing rate.C. falls. D. rises.E. stays constant.

15. The total utilities associated with the first 5 units ofconsumption of mangoes are 12, 28, 40, 48, and 52, respectively.What is the marginal utility associated with the third unit?

A. 20 B. 16C. 12 D. 8E. 4

16. Suppose the person experienced a diminished taste for aparticular good. As a result, the

A. TU curve would get steeper.B. MU curve would get flatter.C. TU and MU curves would shift downward.D. MU curve, but not the TU curve, would collapse to the

horizontal axis. E. TU is at an increasing rate.


Lingayen Campus

WORKTEXT 9 : CONSUMER BEHAVIOR Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


46


17. After eating nine scoops of mocha ice creams, you are offereda tenth scoop of ice cream. You turn down the ice cream. Yourrefusal indicates that the

A. total utility for mocha ice creams is negative.B. marginal utility for mocha ice creams is negative.C. marginal utility is positive for the 9th and negative for the 10th

ice cream. D. total utility was zero because you ate one cookie and refused

the other. E. None of these.

18. If A, B, C, and D are any four market baskets, and if theconsumer has ranked them so that D is preferred to C, A is notpreferred to B, and B is not preferred to C, then

A. A is preferred to C.B. A is preferred to D.C. B is preferred to D.D. D is preferred to A.E. D is not preferred to B.

19. Which of the following is not a property of indifference curvesrepresenting a consumer’s tastes between food and clothing, bothof which are economic goods?

A. A given basket of food and clothing cannot be on more thanone indifference curve.

B. No two indifference curves for the same consumer can cross.C. The indifference curves are parallel (though not necessarily

straight lines). D. The indifference curves are downward sloping.E. The indifference curves reflect the marginal utility of food in

terms of clothing.

20. If bundles of goods A and B lie on the same indifference curve,one can assume the individual

A. prefers bundle A to bundle B.B. prefers bundle B to bundle A.C. enjoys bundle A and B equally.D. bundle A contains the same goods as bundle B.E. None of these.

21. To derive the demand curve of a product, the price of theproduct is varied. For the indifference curve analysis, the

A. budget line is held constant.B. tastes and preferences of the consumer are held constant.C. prices of other products the consumer might purchase

change. D. money income of the consumer changes.E. the values of marginal utility are varied.

22. If the prices of both goods increase by the same percent, thebudget line will

A. shift parallel to the left.B. shift parallel to the right.C. pivot about the x axis.D. pivot about the y axis.E. none of the above.

23. A decrease in income willA. shift the budget line inward and increase its slope.B. shift the budget line outward and increase its slope.C. shift the budget line outward and have no effect on its slope.D. shift the budget line inward and have no effect on its slope.E. None of these.

24. Assume that a person’s consumption of just the right amountsof pork and beef is in equilibrium. We can conclude that the

A. marginal utility of pork must equal the marginal utility of beef.B. price of pork must equal the price of beef.C. ratio of marginal cost to price must be the same in both the

pork and the beef markets. D. ratio of marginal utility to price must be the same for pork and

beef. E. none of these.

25. Suppose that Mr. J is currently exhausting his money incomeby purchasing 10 units of A and 8 units of B at prices of Ᵽ2 andⱣ4 respectively. The marginal utility of the last units of A and Bare 16 and 24 respectively. These data suggest that Mr. J

A. considers A and B to be complementary goods.B. considers A and B to be substitute goods.C. should buy less A and more B.D. should buy less B and more A.E has preferences that are at odds with the principle of

diminishing marginal utility.

26. Suppose an individual consumes pizza and cola. To reachconsumer equilibrium, the individual must consume pizza andcola so that the

A. diminishing marginal utility happens.B. price paid for the two goods is the same.C. ratio of marginal utility to price is the same for both goods.D. marginal utility of the two goods is equal.E. ratio of the marginal utility of cola to the marginal utility of

pizza is 1.

27. A tourist is maximizing his satisfaction consuming two goods,X and Y. If the marginal utility of X is half that of Y, what is theprice of X if the price of Y is Ᵽ100?

A. 200 B. 50C. 25 D. 375E. 10

28. A consumer is making purchases of products A and B suchthat the marginal utility of product A is 20 and the marginal utilityof product B is 30. The price of product A is Ᵽ10 and the price ofproduct B is Ᵽ20. The utility- maximizing rule suggests that thisconsumer should increase consumption of product

A. B and decrease consumption of product A.B. B and increase consumption of product A.C. A and decrease consumption of product B.D. make no change in consumption of A and B.E. All of these.

29.. If the consumer's income is Ᵽ200, the prices are Ᵽ10 for good X and Ᵽ20 for good Y, the budget line can be found by joining the intercept terms, which are:

A. 10 on the X axis and 5 on the Y axis.B. 20 on the X axis and 10 on the Y axis.C. 20 on the X axis and 20 on the Y axis.D. 10 on the X axis and 20 on the Y axis.E. 15 on the X axis and 15 on the Y axis.

30. Pedro buys only banana and apple and he buys the quantitiesthat maximize his utility. His marginal utility from a banana is 30units and his marginal utility from an apple is 60 units. If the priceof a banana is Ᵽ4, then you are sure that the price of an apple is

A. 4 B. 8C. 2 D. 12E. 10

47


EXERCISE 3

Analyze and answer what is required in the following problems.

A. In each of the following cases, decide whether Pepito hasdiminishing, constant, or increasing marginal utility. Explain youranswer.

31. The more Pepito exercises, the more he enjoys eachadditional visit to the gym. ______________

32. Although Pepito’s classical CD collection is huge, hisenjoyment from buying another CD has not changed ashis collection has grown. ______________

33. Pepito enjoys watching reruns of the show Bitoy’sFunniest Videos. He claims that these episodes arealways funny, but he does admit that the more he seesan episode, the less funny it gets. ______________

34. Pepito likes loud music. In fact, according to him, “thelouder, the better.” Each time he turns the volume up anotch, he adds 6 utils to his total utility. ______________

35. The more dancing classes Pepito takes, the more heenjoys the activity. And the more classes he takes, theeasier each one gets, making him enjoy each additionalclass even more than the one before. ______________

B. Refer to the total utility schedule of a consumer for chocolatebars to answer the questions below.

36. Derive the marginal utility per chocolate barconsumed. _______

37. What is the marginal utility of the third chocolate barto this consumer? _______

38. If chocolate barsare P6 each, whatis the marginalutility per peso ofthe 3rd chocolatebar? _______

39. This consumerbegins to experience diminishing marginal utility when he consumes how many units? _______

40. Marginal utility becomes negative if the consumerconsumes how many units? _______

C. In the following cases, find all the consumption bundles that lieon the consumer’s budget line. Illustrate these consumptionpossibilities in a diagram and draw the budget line through them.

41. The consumption bundle consists of movie tickets andbuckets of popcorn. The price of each ticket is Ᵽ100, theprice of each bucket of popcorn is Ᵽ50, and theconsumer’s income is Ᵽ 200. In your diagram, put movietickets on the vertical axis and buckets of popcorn on thehorizontal axis.

42. The consumption bundle consists of infant milk andinfant diaper. The price of each can of infant milk isⱣ400, the price of each economy pack of infant diaper isⱣ200, and the consumer’s income is Ᵽ1,200. In yourdiagram, put infant milk on the vertical axis and infantdiaper on the horizontal axis.

D. For each of the following situations, draw a diagram containingEmma’s indifference curve between two goods.

43. For Emma, shampoo and conditioner are perfectcomplements, but in a ratio of 1:4 that is, for eachshampoo, Emma wants exactly four conditioners. Labeland number the axes of your diagram by placingconditioners on the horizontal axis and shampoos on thevertical axis.

44. Emma gets utility only from her caffeine intake. She canconsume Nescafe coffee and Pepsi cola. The lattercontains twice as much caffeine as the former. Labeland number the axes of your diagram by placing Pepsicola on the horizontal axis and Nescafe coffee on thevertical axis.

E. Shown below is the utility schedule of a consumer for a good.

Units Consumed

Total Utility Marginal Utility

0 0 0 2 21 4 78 6 14 8 124

10 132 12 0 14 128

45. Fill in the missing values to complete the table.

46. Draw the TU curve on a graph and the MU curve onanother graph and indicate the diminishing marginalutility by using demarcation lines in the graphs.

F. The following table represents a combination of puto anddinuguan that yields equal total utility for a given consumer.

47. Compute for the absolute value of the slope of pointsof indifference curve (MRS).

48. Graph the indifference curve

Chocolate bars

consumed

Total Utility

Marginal Utility

0 0 1 10 2 18 3 24 4 28 5 30 6 30 7 28

Choice Dinuguan (Y)

Puto (X)

MRS

A 8 3 B 6 6 C 4 7 D 3 8 E 2 10

48


F. Jecelle loves sandwiches. The graph below shows threecurves from her indifference map – 𝐼1, 𝐼2, 𝐼3, expressing herpreferences for sandwiches and a composite good. The pointsA, B and C are tangency points between the indifferencecurves and the budget constraints 𝐵1, 𝐵2, 𝐵3.

49. What is Jecelle’s total weekly budget?

50. What is the price of a sandwich in budget constraint 𝐵1?

51. What is the optimal (sandwich, composite good) bundlewhen Jecelle is subject to budget constraint 𝐵1?





G. The following table shows the marginal utility schedules forgoods A and B for a hypothetical consumer. The price of GoodA is P1 and the price of good B is Ᵽ2.

56 – 60.

The income of the consumer is Ᵽ9 and he spends this all. How many units of good A and good B should be bought in order to maximize utility.

H. Solve for the following:

61. A consumer has an income of Ᵽ3,000 and he wants tospend this all to buy flash drives (good X) and MP3players (good Y). Flash drive costs Ᵽ300 per unit, andMP3 player costs Ᵽ600 per unit. Draw the consumer’sbudget line and determine its slope.

62. If a consumer has an income of P100, the price of goodU is Ᵽ10, and the price of good V is Ᵽ20, what is themaximum quantity of good U the consumer is able topurchase?

I. Refer to the diagram below that shows the consumerequilibrium and answer the questions below.

63. At point A, a consumer would be ____________.

64. At point B, a consumer would be ____________.

65. At point C, a consumer would be ____________.

66. At point D, a consumer would be ____________.

J. Jeric is a utility maximizer. His income is Ᵽ1,000, which he canspend on cafeteria meals and on notepads. Each meal costs P50,and each notepad costs Ᵽ20. At these prices Jeric chooses to buy16 cafeteria meals and 10 notepads.

67. Draw a diagram that shows Jeric’s choice using anindifference curve and his budget line, placing notepadson the y-axis and cafeteria meals on the x-axis. Labelthe indifference curve L1 and the budget line BL1.

68. The price of notepads falls to Ᵽ10; the price of cafeteriameals remains the same. On the same diagram, drawJeric’s budget line with the new prices and label it BL2.

69. Lastly, Jeric’s income falls to Ᵽ900. On the samediagram, draw his budget line with this income and thenew prices and label it BL3. Is he worse off, better off, orequally as well off with these new prices and lowerincome than compared to the original prices and higherincome? (Hint: Determine whether Jeric can afford tobuy his original consumption bundle of 16 meals and 10notepads with the lower income and new prices.Illustrate your answer using an indifference curve andlabel it L2.

70. Give an intuitive explanation of your answer to no. 69.

GOOD A GOOD B Quantity Total

Utility MUA Quantity Total

Utility MUB

1 8 1 10 2 15 2 18 3 23 3 24 4 28 4 28 5 32 5 31 6 35 6 33 7 37 7 34

49

WORKTEXT 10 : PRODUCTION

EXERCISE 1


1. For each different combination of inputs, the productionfunction shows the maximum quantity of output a firmcan produce over some period of time. _____________

2. The long run is defined as the period required for allinputs to be variable._____________

3. Households combine inputs to produce outputs._____________

4. Total product is the minimum quantity of output that canbe produced from a given combination of inputs._____________

5. The average product of labor indicates the averageamount of output per unit of labor. _____________

6. A variable input is any resource for which the quantitycannot change during the period of time underconsideration. _____________

7. Geometrically, the total product at any point is simply theslope of the marginal product curve at that point._____________

8. There are diminishing returns to an input when itsmarginal product declines as more of the input is used,holding the quantity of all other inputs fixed._____________

9. The MRTS at any point is simply the absolute value of theslope of the isoquant at that point. _____________

10. The marginal product of labor is the additional outputproduced when one more worker is hired. ___________

11. If a proportional increase in every input yields a less thanproportional increase in output, then there is increasingreturns to scale. _____________

12. The total output of a firm will be at a maximum where MPis zero. _____________

EXERCISE 2


13. Fixed inputs are factors of production thatA. can be increased or decreased quickly as output changes.B. are determined by a firm’s plant size.C. cannot be increased or decreased as output changes.D. the firm can vary at any time.E. can be varied in the short run.

14. The long run is characterized byA. the relevance of the law of diminishing returns.B. at least one fixed input.C. insufficient time for firms to enter or leave the industry.D. the ability of the firm to change its plant size.E. the combination of fixed and variable inputs.

15. If a variable input is added to some fixed input, beyond somepoint the resulting extra output will decline. This statementdescribes

A. economies and diseconomies of scale.B. the law of diminishing returns.C. returns to scale.D. the law of diminishing marginal utility.E. marginal rate of transformation.

16. The units of variable input in a production process are 1, 2, 3,4, and 5 and the corresponding total outputs are 7, 21, 33, 42,and 49, respectively. What is the marginal product of the fourthunit?

A. 12 B. 9C. 6 D. 5E. 42

17. If 9 workers can produce 1,850 units of output and 10 workerscan produce 1,750 units of output, then the marginal product ofthe 10th worker is

A.1,750. B. 1,850.C. 100. D. – 100.E. 50.

18. Suppose a car wash has 2 washing stations and 5 workersand is able to wash 100 cars per day. When it adds a third station,but no more workers, it is able to wash 150 cars per day. Themarginal product of the third station is

A. 100 cars per day. B. 150 cars per day.C. 5 cars per day. D. 50 cars per day.E. 12 cars per day


Lingayen Campus

WORKTEXT 10 : PRODUCTION Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


50


19. Marginal productA. diminishes at all levels of production.B. may initially increase, then diminish, but never become

negative. C. may initially increase, then diminish, and ultimately become

negative. D. is always less than average product.E. None of these

20. Which of the following is not correct?A. Where marginal product is greater than average product,

average product is rising. B. Where total product is at a maximum, average product is

also at a maximum. C. Where marginal product is zero, total product is at a

maximum. D. Marginal product becomes negative before average product

becomes negative. E. Marginal product rises faster than average product and also

falls faster than average product

21. Which of these statements concerning the relationshipsbetween total product (TP), average product (AP), and marginalproduct (MP) is incorrect?

A. AP continues to rise so long as TP is rising.B. AP reaches a maximum before TP reaches a maximum.C. TP reaches a maximum when the MP of the variable input

becomes zero. D. MP cuts AP at the maximum AP.E. None of these.

22. When the average product is at its maximum,A. the marginal product is increasing as output increases.B. the marginal product is negative.C. it is equal to the marginal product.D. total product is also at its maximum.E. total product is at its minimum.

23. At low levels of output, the marginal product curve usually ____and the marginal cost curve usually ____.

A. slopes upward; slopes downwardB. slopes upward; slopes upwardC. slopes downward; slopes downwardD. slopes downward; slopes upwardE. is horizontal; is horizontal

24. Which of the following statements correctly describes a totalproduct curve?

A. Points above the total produce curve are efficient.B. The curve shows that output always increases as labor

employed increases. C. The curve separates attainable outputs from unattainable

outputs. D. The curve shows minimum levels of output.E. The curve first falls, reaches a minimum, and then rises.

25. At what stage of the production function in which rationaldecision by a firm to maximize its profit is made?

A. stage IB. stage IIC. stage IIID. stage IVE. stage V

EXERCISE 3

Classification. Identify the following as either fixed input or variable input (assume the firm operates in short run). Write F for fixed input and V for variable input.

26. 10-hectare farm _________

27. Fuel _________

28. Mortgage on factory _________

29. Machineries _________

30. Electricity _________

31. Transportation _________

32. Wages of workers _________

33. Business property taxes _________

34. Raw materials_________

35. Manufacturing plant _________

EXERCISE 4


A. Assume that the production function describing corn yieldresponse to chemical fertilizer is represented by 𝑦 = 0.2𝑥 +0.08𝑥2 − 0.004𝑥3.

36. Find the total output for values of x between 0 and 20.37. Derive the marginal function and average product

function.38. Determine and graph the corresponding values of

marginal product and average product.

B. The production function is expressed by 𝑄 = 6𝐿2 − 𝐿3.

39. Fill in the following table for TP, MP and AP

Labor Total Output

Marginal Product

Average Product

0 1 2 3 4 5 6

C. Buko ni Juan is a small buko vending shop that sells bottles ofbuko shakes in a shopping mall. Juan owns one vending cart andfour blender machines. His other inputs are refrigerator, bukoshake mix, bottles, and, of course, workers. He estimates that hisdaily production function when he varies the number of workersemployed (and at the same time, the other inputs) is as shown inthe accompanying table.

51


Quantity of Labor (Workers)

Quantity of Buko Shakes (Bottles)

0 0 1 200 2 360 3 480 4 560 5 600 6 600 7 540

40. What are the fixed inputs and variable inputs in theproduction of buko shakes?

41. Draw the total product curve.42. What is the marginal product of the first worker up to the

seventh worker?

D. Refer to the following production schedule..

Inputs of labor

Total product

Marginal Product

Average Product

0 0 2 30 4 68 6 110 8 146

10 176 12 196 14 208 16 208 18 200

43. Complete the following table by calculating marginalproduct and average product from the data given.

E. Given the schedule for shoe production in a particular shoefactory, reflecting TP, MP and AP.

Number of Employees

Total product (No. of shoes

per day

Marginal Product

Average Product

0 0 0 0 1 12 12.0 2 18 3 53 17.7 4 18 5 88 6 100 16.7 7 8 8 111 3 9 0 12.3

10 106

44. Complete the above production data.

45. Plot the TP, MP and AP curves on a graph using thecompleted data on the table and indicate the three stagesof production in the drawn graph

F. A flower farm in Baguio City uses the inputs of fertilizer, labor,and hothouses to produce roses. Suppose that when the quantityof labor and hothouses is fixed, the relationship between thequantity of fertilizer and the number of roses produced is given bythe following table:

Pounds of Fertilizers per week

Number of Roses per week

0 0 1 1,000 2 2,000 3 3,700 4 4,200 5 4,500 6 4,500 7 4,100

46. What is the average product of fertilizer when 5 poundsare used? What is the marginal product of the sixthpounds of fertilizer?

47. Does this total product function exhibit diminishingmarginal returns? If so, over what quantities of fertilizerdo they occur?

48. Does this total product function exhibit diminishing totalreturns? If so, over what quantities of fertilizer do theyoccur?

G. The level of production in a furniture factory is represented bythe following diagram.

49. Label the axes on the graphs and the three productioncurves.

50. Indicate the three stages of production by usingdemarcation lines in the drawn graphs.

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WORKTEXT 11 : COST

EXERCISE 1

Matching Type. Match each term with its correct definition by placing the appropriate letter next to the corresponding number.

_______ 1. Cost A. Total cost per unit of output

_______ 2. Inputs B. Product innovation

_______ 3. Business firm C. A natural resource

_______ 4. Short-run D. 𝐶(𝑥) = 𝑎 + 𝑏𝑥

_______ 5. Long-run E. Economic resources

_______ 6. Fixed cost F. Variable cost divided by output

_______ 7. Variable cost G. A firm engaged in production

_______ 8. Accounting profit H. A process of combining inputs

_______ 9. Economic profit I. Payment incurred for an input

_______ 10. Sunk cost J. Costs that don’t vary w/ output

_______ 11. Total cost K. A human resource

_______ 12. Marginal cost L. All inputs are variable

_______ 13. AFC M. Some input are fixed

_______ 14. AVC N. Unrecovered cost

_______ 15. ATC O. Incremental cost

_______ 16. Production P. Costs that vary with output

_______ 17. Land Q. TR – TC (Explicit Cost)

_______ 18. Labor R. TR – TC (Explicit + Implicit)

_______ 19. Technology S. Fixed cost divided by output

_______ 20. Cost function T. Fixed cost + variable cost

EXERCISE 2


21. The government says that firm X must pay Ᵽ10,000 in taxessimply because it is in the business of producing a good. Whatcost curves, if any, does this tax affect?

A. variable cost B. fixed costC. marginal cost D. average costE. sun

22. If you operated a small bakery, which of the following wouldbe a variable cost in the short run?

A. baking ovens B. Baking suppliesC. baking equipment D. interest on business loanE. annual lease payment for building

23. The average variable cost curve and the average total costcurve get closer to each other as output_________.

A. increases B. decreasesC. stays the same D. doublesE. becomes zero

24. The ATC and MC curves are shaped like the letterA. S B. NC. V D. UE. C

25. If the marginal cost is greater than the average total cost, theaverage total cost will

A. rise B. fallC. stay the same D. become negativeE. turn zero

26. The marginal cost curve first declines and then increasesbecause of

A. increasing, then diminishing, marginal utility.B. the decline in the gap between ATC and AVC as output rises.C. increasing, then diminishing, marginal returns.D. constant marginal revenue.E. increasing fixed cost.

27. The vertical distance between ATC and AVC measuresA. marginal cost. B. total fixed cost.C. average fixed cost. D. economic profit per unit.E. diseconomies of scale


Lingayen Campus

WORKTEXT 11 : COST Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


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WORKTEXT 11 : COST

28. Average total Cost (ATC) isA. TC x Q B. MC - AVCC. AFC + AVC D. AVC - AFCE. AVC + MC

29. When the marginal cost curve liesA. above the ATC curve, ATC rises.B. above the AVC curve, ATC rises.C. below the AVC curve, total fixed cost increases.D. below the ATC curve, total fixed cost falls.E. below the AVC curve, ATC falls.

30. If marginal product is rising, marginal cost isA. negative. B. zero.C. also rising. D. falling.E. undetermined.

31. The fixed cost curve is a ______ line.A. horizontal B. downward slopingC. vertical D. upward sloping lineE. diagonal

32. A flower shop incurs a fixed cost of Ᵽ6,000 per day and avariable cost of Ᵽ150 per bouquet of flowers. How many bouquetsof flowers can be made for a total daily cost of Ᵽ24,000?

A. 570 B. 120C. 375 D. 60E. 3,000

33. V-ta is planning to introduce a new papaya beauty soap. Thefixed cost for production is Ᵽ180,800. The variable cost forproducing each soap is Ᵽ32. To calculate its cost at each level ofoutput, the firm will use which of these equations?

A. 𝐶(𝑥) = 180,800 − 32𝑥 B. 𝐶(𝑥) = 180,800𝑥C. 𝐶(𝑥) = 180,000𝑥 + 32 D. 𝐶(𝑥) = 180,000 + 32𝑥

E. 𝐶(𝑥) =180,000

32𝑥

34. As we move to the northeast in the isocost map, isocost linescorrespond to

A. higher levels of total cost. B. lower levels of total cost.C. lower levels of marginal cost. D. equal level of total cost.E. higher levels of outputs.

35. The downward-sloping segment of the long-run average costcurve corresponds to

A. diseconomies of scale.B. both economies and diseconomies of scale.C. the decrease in average variable costs.D. economies of scale.E. diminishing marginal returns.

36. Long-run diseconomies of scale exist when theA. short-run average total cost curve falls.B. long-run marginal cost curve rises.C. long-run average total cost curve falls.D. short-run average variable cost curve rises.E. long-run average cost curve rises.

37. Long-run constant returns to scale exist when theA. short-run average total cost curve is constant.B. long-run average cost curve rises.C. long-run average cost curve is flat.D. long-run average cost curve falls.E. long-run average cost curve is constant.

EXERCISE 3

Classification. Classify the following as either fixed cost or variable cost. Write FC for fixed cost and VC for variable cost.

38. Medical insurance payments a company makes for itsemployees _________

39. A manager’s salary paid by the firm _________

40. Payments for an internet service provider for wirelessconnection _________

41. A monthly electric bill incurred by a firm _________

42. Purchase of a new production machinery _________

43. Transportation expenses on the delivery of products._________

44. Meal allowance provided for out-based employees_________

45. Mortgage incurred on factory _________

46. Payment for newly purchased raw materials. _________

47. Business property taxes incurred. _________

48. Interest loan an owner makes to his company. ________

49. Payments for labor purchased in the labor market. ______

50. Rent paid for the use of a warehouse. _________

EXERCISE 4


A. Consider the following cost data for a perfectly competitive firmin the short run.

51. Construct the cost schedule by filling in the missingvalues of cost items.

52. Plot the FC, VC and TC in a graph.

Total Output

Fixed Cost

Variable Cost

Total Cost

MC AFC AVC ATC

0 100 0 2 100 300 4 100 400 6 100 450 8 100 475

10 100 525 12 100 625 14 100 775 16 100 975 18 100 1225 20 100 1525

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WORKTEXT 11 : COST

5,000

10,000

15,000

20,000

25,000

10 20 30 40 50 60 70 80 90 100

A. Total Cost

B. Unit Cost

200

400

600

800

1,000

Cos

ts p

er b

ilao

Cos

ts p

er b

ilao

Output (number of pancit bihon guisado)

Output (number of pancit bihon guisado)

10 20 30 40 50 60 70 80 90 100

B. The following table is composed of production and cost items ofJNE’s firm operating in short-run. Assume that labor and capitalare the only inputs used. Capital is fixed at 3 units, which cost Ᵽ50each. Workers can be hired for Ᵽ250 each.

Capital Input

Labor Input

Total Product

MP AP FC VC TC MC

3 0 0 3 1 4 3 2 10 3 3 20 3 4 28 3 5 28 3 6 24 3 7 20 3 8 18

53. Complete the above table to show marginal product(MP), average product (AP), fixed cost (FC), variable cost(VC), total cost (TC) and marginal cost (MC).

54. Plot the MP and MC in a graph and describe theirrelationship.

C. Suppose the firm has this cost equation, 𝐶(𝑥) = 900 + 260𝑥.

Output Fixed Cost

Variable Cost

Total Cost

0 5

10 15 20 25 30 35 40

55. Fill in the missing values in the cost schedule above bycalculating the FC, VC and TC.

56. Graph the fixed cost, variable cost, and total cost curvesfor the derived data. Describe each curve.

D. The isocost schedule of a firm operating with a cost of Ᵽ20,000per month is provided below. It is described by the equation 𝑇𝐶 =200𝐿 + 100𝐾 in which 𝑤 = 200 per labor-hour, 𝑟 = 100 permachine-hour.

Firm's Choice

Labor Capital Total Cost (𝑤𝐾 + 𝑟𝐾)

A 0 200 B 20 160 C 60 80 D 80 40 E 100 0

57. Fill in the total cost computation for each firm’s choice.

58. Compute the slope of the isocost line.

59. Graph the isocost line.

EXERCISE 5

Graphical Analysis. Graph what is required in the following problems.

A. Make use of the following total cost schedule for Mang Juan’sPanciteria to answer the following.

No. of Bilaos

Total Cost

ATC MC

0 50 10 2,000 20 3,500 30 4,700 40 6,000 50 7,500 60 9,300 70 11,700 80 15,300 90 21,000

100 30,000

60. Calculate Mang Juan’s ATC.

61. Calculate Mang Juan’s MC.

62. Plot the TC curve on graph A below and plot the ATCand MC curves on graph B.

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WORKTEXT 11 : COST

B. The diagram below shows the relationship of marginal andaverage cost curves of Lorna’s Siomai House. Cost is in pesosand output is in thousand pieces.

63. What does cost curve A represent? _____________

64. What does cost curve B represent? _____________

65. What does cost curve C represent? _____________

66. What does cost curve D represent? _____________

67. What cost curve is downward sloping? _____________

68. What cost curve has a U-shaped pattern? ____________

69. What cost curve goes through the minimum points of theATC and AVC curves? _____________

70. What is the average variable cost if output produced is4,000 pieces of siomai? _____________

71. What is the average fixed cost if there are 2000 pieces ofsiomai produced? _____________

72. What is the quantity of siomai produced if the firmincurred a cost of Ᵽ9,000? _____________

C. Suppose a firm has only three possible scales of productionas shown below.

73. Which scale of production is most efficient when 𝑄 =65?

74. Which scale of production is most efficient when 𝑄 =75?

75. Trace out the long-run average cost curve on thediagram.

56

WORKTEXT 12 : PROFIT MAXIMIZATION Econ 101 – Microeconomics

EXERCISE 1


1. Profit is maximized at the output level at which totalrevenue exceeds total costs by the greatest amount, atthe point at which MR = MC. _________

2. If the firm shuts down temporarily, it receives no revenueand incurs no variable costs. _________

3. An increase in output will always lower profit whenevermarginal revenue is less than marginal cost. _________

4. The firm has a loss if total cost exceeds total revenue._________

5. As output increases, total revenue increases, but totalcost also increases. _________

6. When total revenue is less than total variable cost, thefirm’s loss will exceed total fixed cost. _________

7. Marginal revenue is the firm’s change in total revenuefrom selling an additional unit. _________

8. If price is less than average variable cost, the firmminimizes its loss by shutting down. _________

9. When marginal revenue is less than marginal cost, thereis more output and profit is reduced. _________

10. The firm’s profit function is: 𝑃(𝑥) = 𝑅(𝑥) − 𝐶(𝑥)._________

11. Break-even point (BEP) is the point at which total costand total revenue are equal. _________

12. An increase in output will always raise profit as long asmarginal revenue is greater than marginal cost._________

EXERCISE 2


13. The ultimate goal of business firms is toA. increase market share. B. sell as much as possible.C. maximize profit D. minimize debts.E. receive highest revenue.

14. A perfectly competitive firm's marginal revenueA. is less than the market price of its product.B. decreases as the firm produces more output.C. increases as the firm produces more output.D. equals the market price of its product.E. is the same as the total cost of output produced.

15. On the graph of a firm’s total cost and total revenue curves,the profit-maximizing level of output is found where

A. TR is at a maximum.B. TR lies above TC by the greatest amount.C. TR becomes verticalD. TR and TC intersect.E. TC intersects the vertical axis.

16. The figure below depicts the marginal revenue and costs ofa perfectly competitive firm. The firm's profit is maximized whenthe firm produces

A. 210 units of output.B. 130 units of output.C. 75 units of output.D. 170 units of output.E. 90 units of output

17. Refer to the diagram above to determine the marginal costof the last unit produced.

A. 4 per unit.B. 16 per unit.C. 8 per unit.D. 20 per unitE. 12 per unit.


Lingayen Campus

WORKTEXT 12 : PROFIT MAXIMIZATION Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


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WORKTEXT 12 : PROFIT MAXIMIZATION

18. A firm's shutdown point is the output and price at which thefirm just covers it

A. total fixed cost. B. marginal cost.C. total cost. D. total variable cost.E. total revenue.

19. Consider a perfectly competitive firm in the following situation:output = 90 units, market price = Ᵽ150, fixed costs = Ᵽ5,000,variable costs = Ᵽ5,000, and marginal cost = Ᵽ150. To maximizeprofits the firm should

A. not change output. B. expand output.C. reduce output. D. increase the market price.E. shut down.

20. Suppose that in a perfectly competitive industry, the marketprice of the product is Ᵽ70. Firm A is producing the output level atwhich average total cost equals marginal cost, both of which areP90. Average variable cost is Ᵽ60. To achieve its optimum output,firm A should

A. not change output. B. expand output.C. reduce output. D. increase the market price.E. shut down.

.

EXERCISE 3


A. A souvenir shop has a fixed cost of Ᵽ300 per day and a variablecost of Ᵽ15 per piece of a particular type of souvenir items. Theshop sells its product for Ᵽ30. The output schedule is providedbelow.

Output Total Revenue

Total Cost Profit / Loss

0 10 20 30 40 50 60 70 80 90

100

21. Calculate the total revenue.

22. Calculate the total cost.

23. Calculate the profit.

24. Determine the break-even point.

25. Graph the total revenue and total cost curves. Mark in theloss, profit and break-even point.

B. A perfectly competitive firm has the following fixed and variablecosts in the short run. The market price for the firm’s product is Ᵽ180.

26. Complete the table.

27. At what output rate does the firm maximize profit orminimize loss?

28. What is the firm’s marginal revenue at each positive rate ofoutput?

29. What can you say about the relationship between marginalrevenue and marginal cost for output rates below the profit- maximizing (or loss-minimizing) rate? For output ratesabove the profit-maximizing (or loss-minimizing) rate?

C. The figure below depicts the marginal revenue and costs of aperfectly competitive firm selling its product a Ᵽ5 per unit.

Quantity produced

MR TR TC MC ATC Profit

0 0 16 - 1 5 20 20.0 2 10 24 12.0 3 15 27 9.0 4 20 30 7.5 5 25 32 6.4 6 30 34 5.7 7 35 35 5.0 8 40 37 4.6 9 45 40 4.4

10 50 44 4.4 11 55 49 4.5 12 60 56 4.7 13 65 66 5.1 14 70 80 5.7 15 75 95 6.3

30. Calculate the marginal revenue at each level of output.

31. Calculate the marginal cost.

32. Calculate the profit.

33. Determine what output level when profit is maximized.

34. Graph the marginal revenue and marginal cost curves.Mark in the profit-maximizing output.

Quantity produced

FC VC TC TR Profit/Loss

0 100 0 100 1 100 200 180 2 100 280 80 4 300 400 720 320 5 100 440 900 360 6 100 700 1080 7 100 780 8 100 900 1080 1440 360

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WORKTEXT 12 : PROFIT MAXIMIZATION

D. Suppose the following diagram depicts the revenue and costcurves of firm X selling good Y. Identify and interpret each curve.

35. Curve A _______________

36. Curve B _______________

37. Curve C _______________

38. Curve D _______________

39. Curve E _______________

40. Curve F _______________

E. JNE Electronics is planning to introduce a new 7-inch androidtablet in the market. The fixed costs for production are Ᵽ480,000.The variable costs for producing each tablet are Ᵽ4,000. The firmwants to sell each tablet for Ᵽ7,000. Find the following.

41. The total cost 𝐶 (𝑥) of producing 𝑥 tablets.

42. The total cost of producing 350 units of tablets.

43. The total revenue of selling 265 units of tablet.

44. The total revenue of selling 500 units of tablet.

45. The total profit 𝑃 (𝑥) from the production and sale of xtablets.

46. The profit or loss from the production and sale of 450units.

47. The profit or loss from the production and sale of 110units.

48. The break-even quantity.

49. The break-even amount for revenue and cost.

50. Graph the revenue and cost equations and mark in thebreak-even point.

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WORKTEXT 13 : MARKET FAILURE

EXERCISE 1

True or False. Determine whether each of the following statements is true or false. Write the answer on the blank after the number.

1. Market failure is a condition in which the allocation ofgoods and services is efficient. ________

2. Non-competitive market and externalities are examplesof market failure. ________

3. People can consume public goods without paying forthem. ________

4. Public goods may not cause market failure. ________

5. A monopoly sets a higher price and sells a lowerquantity than a market with competition and free entry.________

6. Market failure is present when the market produces asocially inefficient outcome. ________

7. External costs are called negative externalities andexternal benefits are called positive externalities.________

8. Positive externalities are accompanied by anunderallocation of resources to a certain good.________

9. The result of nonexcludability and rivalry is often thetragedy of the commons. ________

10. Common resources are rival in consumption but notexcludable. ________

11. Public goods are excludable but non-rival. ________

12. Both public goods and common resources involveexternalities. ________

13. Asymmetric information between sellers and buyers cancause markets to fail. ________

14. Government attempts to address market failures in theprivate economy. ________

15. In adverse selection, goods with bad quality drives goodquality out of the market. ________

EXERCISE 2


15. When the market produces a socially and economicallyinefficient outcome, there is

A. government failure. B. externality.C. market equilibrium D. market failureE. scarcity.

16. Market failure occurs when theA. economy experiences recession.B. government levies taxes on households and firmsC. government intervenes in the decision-making process.D. market is controlled by the government.E. market system does not achieve economic efficiency.

17. Which of these is not considered as a category of marketfailure?

A. Externalities B. Public goodsC. Monopolies D. Economic policyE. Information asymmetry

18. When a transaction between a buyer and seller directlyaffects a third party, the effect is called

A. externality. B. market failure.C. tragedy of the commons. D. adverse selection.E. distortion.

19. Production or consumption costs inflicted on a third partywithout compensation are called

A. Adverse selection B. Moral problemC. Negative externalities D. Positive externalitiesE. Information asymmetry

20. When a chemical manufacturer dumps its wastes into a lake,swimmers and fisherfolks suffer external costs. This externalcost is called

A. Social costs B. Negative externalitiesC. Positive externalities D. Sunk costsE. Equal externality

21. The right of a person to claim and exercise ownership of anitem is called a

A. public property right. B. private property right.C. valid contract. D. bundle of legal right.E. privacy right.


Lingayen Campus

WORKTEXT 13 : MARKET FAILURE Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


60


22. When a particular resource is not owned or managed bysomebody, it will usually

A. be owned by the government B. Be underused.C. be managed by a monopolist D. be overusedD. Have a negative opportunity cost

23. When Armando buys and drinks a bottle of pineapple juice, itis not available for Cesar to purchase and consume. Thischaracteristic of private good is

A. rivalry. B. excludability.C. non-rivalry. C. non-excludability.E. substitutability.

24. A public good is described as a goodA. that is rival and excludable.B. that is owned by the private individuals.C. that is neither produced by the government nor the firms.D. that does not create a free-rider problem.E. that is provided by the government.

25. Which of these is not a public good?A. Public education B. Military defenseC. Cigarettes D. HighwaysE. Global positioning system (GPS)

26. Juan loves watching reality shows like Pinoy Big Brother onhis local TV station, but he never gives any money to support thestation during its fundraising activities. In this case, we call Juanas a

A. public good taker. B. monopsonist.C. consumer. D. household.D. free rider.

27. Giving free vaccines to school-aged children to fight a certaindisease creates what form of externality for the community?

A. Negative externality B. Neutral externalityC. Zero externality D. Positive externalityE. Infinite externality

28. An engineer sees a house and lot with a “for sale” sign so hecontacts the owner and decides to buy it. This is case is anexample of what category of market failure?

A. Public good B. Natural monopolyC. Asymmetric information D. ExternalityE. Tragedy of the commons

29. When a situation allows people to alter their behavior afterthey sign a contract or reach an agreement, imposing costs onthe other party, what type of information problem occurs?

A. Moral hazardB. Adverse selectionC. DistortionD. Negative externalityE. Allocative inefficiency

30. It is a situation where a lack of information causes low-qualityitems to dominate a market and high-quality items to be drivenout of the market.

A. Moral hazardB. Adverse selectionC. DistortionD. Negative externalityE. Allocative inefficiency

EXERCISE 3

For each of the following cases, identify the category of market being described. Refer to the following for the answer and write the letter of your choice on the space indicated after the item.

A. ExternalityB. Common PropertyC. Public GoodD. MonopolyE. Asymmetric Information

31. Secondhand smoke has caused anti-smokingadvocates to pass smoking bans in public places._________________

32. Highways become littered with garbage because noone has to pay for littering and no one owns the roads._________________

33. A particular lumber firm overharvests trees in a forestarea which greatly reduces the amount of availableresources to other lumber companies._________________

34. Animal and plants become endangered Animals andplants become endangered because no one ownsthem. _________________

35. Commercial fishermen who sell tunas depletes thestock of available fish in the sea. _________________

36. A family improves its garden creating a beautifullylandscaped front lawn that provides benefits to peoplejust passing by. _________________

37. A car buyer does not know much about the usedToyota car being offered for sale. _________________

38. Elephant farmers ensure that the elephants breed andreproduce so that they can be sold for their tusks tozoos in developed nations. _________________

39. A free rider enjoys the benefits of a free-to-air televisionwithout paying for that good. _________________

40. A bank does not have the information whether peopleapplying for a loan are high or low risk._________________

41. A film production studio is experiencing above-normalprofits. _________________

42. Some children engage in a behavior that result inincreased costs for their parents like leaving householdappliances on when they leave the house._________________

43. A utility company abuses its market power byrestricting output in an attempt to maximize profit._________________

44. A ship owner builds a light house to protect its shipsfrom a dangerous reef. _________________

45. A coal power plant dumps its leftover hot water into thenearby sea, killing the naturally occurring fish._________________

61


EXERCISE 4

Classification. Classify each of the following cases as private cost, external cost, private benefit, or external benefit. Write PB for private benefit, EB for external benefit, PC for private cost and EC for external cost.

46. The safety gets by the residents as result of havingsecurity system in a subdivision. ___________

47. The price you pay for a CCTV camera for your homesafety. ___________

48. The advantage a teacher acquires from connecting to afree public WIFI. ___________

49. The money Roxanne pays for downloading aproductivity application to Play Store. ___________

50. The pleasure receives by Sarah from watching a horrormovie. ___________

51. The satisfaction derives by a consumer in eating in aneat-all-you-can restaurant. ___________

52. The annoyance experiences by nearby residentsbecause of a noisy videoke bar. ___________

53. The displeasure gets a commuter from second-handcigarette smoking. ___________

54. The fulfilment receives by a computer technician indownloading software applications in a torrent site.___________

55. The budget incurred by a company for the TQM trainingof its employees. ___________

56. The health benefits receive by a salesman fromenrolling to a fitness gym. ___________

57. The negative effect experiences by local peoplebecause of water pollution due to black sand mining.

58. The cost incurs by music lovers for subscribing to amusic streaming service. ___________

59. The learning aids obtain by students using E-learningsystem. ___________

60. The knowledge and skill gained by mothers in alivelihood training program. ___________

EXERCISE 5

Classification. Determine whether the following are positive externality or negative externality. Write P for positive externality and N for negative externality.

61. A fast food chain uses Styrofoam cups for its valuemeals. ___________

62. The government provides more funds to subsidizesenior high school education. ___________

63. A loud party in a house causes those not involved in theparty to lose sleep. ___________

64. A commercial fishing company that makes sardinesdepletes the stock of available fish in the ocean.___________

65. A driver consumes too much alcohol which leads to anaccident that kills others. ___________

66. A second-hand cigarette smoke aggravates the healthproblems of some people in a particular area.___________

67. A lumber company significantly harvests trees in aparticular area. ___________

68. A landlord encourages to become actively involved in alocal community. ___________

69. A mining company dumps its by-products into a nearbyriver thus polluting the body of water. ___________

70. The company stores nuclear waste from its nuclearplant for more than 35 years. ___________

71. A liquor store is opened that increases crime rate in aneighborhood. ___________

72. An influenza vaccine is provided to children to improvetheir immunity against the disease. ___________

73. A company provides funds for its employees to acquirespecialized training or degree. ___________

74. A barangay implements a project that beautify thecommunity surroundings. ___________

75. A private organization coordinates the control of aninfectious disease preventing others in a communityfrom getting sick. ___________

EXERCISE 6

Classification. The following are externalities that impose cost or benefit on a third party. Identify whether the following externalities are negative or positive and determine the economic side effects (cost or benefit) on the third party.

76. A school provides an extension activity to a poorcommunity.____________________________________________

____________________________________________

77. An internet service provider increases significantly theinternet connectivity in the area.____________________________________________

____________________________________________

78. A coal power plant generates electricity____________________________________________

____________________________________________

62


79. A software developer creates a new useful navigationapp.____________________________________________

____________________________________________

80. A fisherman uses dynamite to catch fish.____________________________________________

____________________________________________

81. Many celebrities increase their dependence on drugs.____________________________________________

____________________________________________

82. A factory dumps its by-products into a nearby lake.____________________________________________

____________________________________________

83. People increase the use of corn-based ethanol as thetransportation fuel raises.

____________________________________________

____________________________________________

84. A new industrial plant is opened in a rural area.____________________________________________

____________________________________________

85. A series of livelihood trainings are provided to women ina community.____________________________________________

____________________________________________

EXERCISE 7

Determine whether the following are private goods or public goods. Write PR for private goods and PU for public goods.

86. Clothing _________

87. Household appliances _________

88. National defense _________

89. Street lighting _________

90. Government websites _________

91. Public elementary education _________

92. Natural parks _________

93. Movies _________

94. Social securities _________

95. Tuna in the ocean _________

96. Public roads _________

97. Music streaming service _________

98. Google Play download _________

99. Cosmetics _________

100. Jewelries _________

101. Milk _________

102. Free-to-air television _________

103. Pizza _________

104. National weather service _________

105. Firework displays _________

EXERCISE 8

Determine whether the following goods and services are excludable, non-excludable, rival and non-rival. Write EX for excludable, NE for non-excludable, RI for rival and and NR for non-rival.

106. Satellite television _________

107. FM radio broadcasts _________

108. T-shirts _________

109. Smartphones _________

110. Private amusement parks _________

111. Fitness Centers _________

112. Petroleum products _________


114. Globe Prepaid service_________

115. Watches _________

116. Public elementary education _________

117. Windows 10 Operating System _________

118. Timber _________

119. Water resources _________

120. Fish stocks in the ocean _________

121. Metal ores _________

122. Cable television _________

123. Sports Club Membership _________

124. Chocolate drink _________

125. Slimming pills_________

63


EXERCISE 9

Determine whether the following asymmetric information problems describe an adverse selection or a moral hazard. Write AS for adverse selection and MH for moral hazard.

126. An accountant with a healthcare insurance fails tomaintain a healthy lifestyle. ___________

127. High-quality used cars are traded in among friends of abusiness tycoon. ___________

128. An entrepreneur with a family history of cardiovasculardiseases buys several life insurance policies.___________

129. An economist with health insurance takes more risks oncigarette smoking than he would otherwise.___________

130. A bank increases the interest rate that drops low-riskborrowers out of the market. ___________

131. A college professor receives a permanent status asassurance of permanent employment from a privateuniversity. ___________

132. An athlete carelessly drives because he knows that hehas an automobile insurance. ___________

133. A woman who expects to have a large family in the nearfuture accepts a job with a firm that offers complete childcare benefits. ___________

134. A teacher buys a second hand clothing because itcommands very low price. ___________

135. A smoker is willing to do risky jobs because of hisaccidental death insurance. ___________

EXERCISE 10

Problem Analysis. Analyze each problem and answer the questions that follow.

A. Consider the following cases in which the markets are inequilibrium, but there are externalities. In each case, determinewhether there is an external benefit or cost and estimate its size.Likewise, decide between a tax or a subsidy as a basic way tocompensate for the externality. Fill out the table below with youranswers.

136. In the market for cigarette, the private benefit one moresack of rice is Ᵽ1,500 and the social cost of one moresack of rice is Ᵽ1,800

137. In the market for automobiles, the private benefit of onemore small electric car is Ᵽ800,000 and the social costof one more small electric car is Ᵽ1,300,000.

138. In the market for smartphones, the marginal socialbenefit of one more dress per person is Ᵽ4,500 and themarginal private benefit is Ᵽ9,000. Provide anexternality story that makes sense of these numbers.

139. In the market for restaurant meals, the private benefitof one more good restaurant meal is Ᵽ100 is and themarginal social benefit is Ᵽ200.

140. Finally, in the market for novels where storiesdramatically change the world for the better, the privatebenefit of one more really good novel is Ᵽ50,000 is andthe marginal social benefit is Ᵽ500,000

Case External Cost/Benefit

Size of External Benefit or Cost

Tax or Subsidy

Rice Electric Cars T-shirts

Restaurant meal Novels

4. A company proposes a new comedy bar that offersentertainment on stage from comedians and serves alcoholicdrinks like beer, wine, liquor, and cocktails — for consumptionon the premises. Before approving the building permit, the cityplanning office conducted a study of the bar’s impact on theneighboring community.

141. One result of the study is that bars attract traffic, whichadversely affects the community. The city plannerestimates that the cost to the community from the extratraffic is Ᵽ100 per entrance ticket. What kind of anexternality is this? Why?

142. Graph the market for bar entrance tickets, labeling thedemand curve, the social-value curve, the supplycurve, the social-cost curve, the market equilibriumlevel of output, and the efficient level of output. Alsoshow the per-unit amount of the externality.

143. Upon further review, the city planner uncovers asecond externality. Rehearsals for the comedy showsand live bands tend to run until late at night, withcomedians, singers, and other bar employees comingand going at various hours. The planner has found outthat the increased foot traffic improves the safety of thesurrounding streets, an estimated benefit to thecommunity of Ᵽ50 per bar ticker. What kind ofexternality is this? Why?

144. On a new graph, illustrate the market for theater ticketsin the case of these two externalities. Again, label thedemand curve, the social-value curve, the supplycurve, the social-cost curve, the market equilibriumlevel of output, the efficient level of output, and the per-unit amount of both externalities.

145. Describe a government policy that would result in anefficient outcome.

64

WORKTEXT 14 : GOVERNMENT INTERVENTION

EXERCISE 1


1. The economic activities of government affect businessand household sector. __________

2. Government provides public goods and services tohouseholds but not for businesses. __________

3. Government provides a legal system to protect privateproperty rights. __________

4. Government buys goods from the product market andemploys resources from the resource market.__________

5. Enforcing antitrust laws is part of economic role ofgovernment in stabilizing the economy. __________

6. Government subsidies are only given to business firms.__________

7. Government provides private goods that individuals orprivate businesses would not provide. __________

8. The government maintains competition by encouragingmonopolistic form of market. __________

9. Transfer payment is a form of government spending.__________

10. The government can lessen income inequality throughdirect market intervention and taxation. __________

11. Majority of the portion of household income is paid intaxes. __________

12. Government plays limited roles in market economies.__________

13. Public goods and services are goods and services thatwould not be adequately provided by the government.__________

14. Imposing higher personal income tax rates on peoplewith higher incomes is an example of stabilization role ofthe government. __________

15. Government failure exists when governmentintervention in the economy causes an inefficientallocation of resources. __________

EXERCISE 2


16. The government extensively involves in economic activities.The government is sometimes referred to as

A. economic sector. B. private sector.C. business firm. D. free-riderE. public sector.

17. Integrating into the circular flow model, the governmentsector

A. employs economic resources from the resource market.B. sells goods and services to the firms.C. pays income through the product market.D. provides economic resources to the firms.E. pays taxes to the firms and households.

18. Government provides public goods and services. Which ofthese is a public good?

A. National defense B. TaxesC. Telecommunication service D. SmartphonesE. Condominiums

19. If the government ensures the rights of private ownership,and allows the enforcement of contracts of business enterprises,then it is executing its role in

A. providing public goods. B. maintaining competition.C. stabilizing the economy. D. correcting market failureE. providing social and legal framework.

20. The government imposes a series of prohibitions andrequirements that collectively limits a certain telecommunicationcompany’s ability to engage in anticompetitive actions. Thisinitiative of the government manifests what economic function?

A. Maintain competition B. Stabilize the economyC. Correct market failures D. Redistribute incomeE. Provide public goods and services

21. The government attempts to moderate the economic effectsof inflation and unemployment. What is this economic role of thegovernment?

A. Allocative role B. Distributive roleC. Stabilization role D. Regulatory roleE. Competitive role


Lingayen Campus

WORKTEXT 14: GOVERNMENT INTERVENTION Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


65


22. This role of the government is to ensure proper utilization ofscarce resources to be able to maximize economic welfare.

A. Allocative role B. Distributive roleC. Stabilization role D. Regulatory roleE. Competitive role

23. The government can most likely redistribute income byA. taxing those people with larger incomes.B. by regulating monopolies.C. By protecting private property rights.D. by reducing unemployment and inflation.E. eliminating negative externalities.

24. There is __________ if the government does not perform itseconomic functions effectively and efficiently.

A. market failure B. free-riderC. adverse selection D. government failureE. externality

25. Dumped wastes into a river by a chemical manufacturercaused water pollution affecting swimmers and fisherfolks.Government’s economic function in this case is to

A. correct negative externality. B. levy taxes to fisherfolks.C. improve positive externality. D. free ride with the problem.E. reduce subsidies of the chemical manufacturer.

26. The government uses the personal income tax to take alarger proportion of the income of the high-income earners thanof the low-income earners. This is an economic role ofgovernment that

A. stabilizes the economy. B. maintains economy.C. corrects market failures. D. redistributes income.E. provides public goods and services.

27. The government uses this tool as a means to raise revenuespurposely used to provide public goods and services.

A. Government spending B. TaxationC. Transfer payment D. BorrowingE. Regulation

28. The government may borrow from lending institutions such asthe International Monetary Fund and World Bank if it experiencesa __________, where expenditure is greater than the availablebudget.

A. budget surplus B. trade deficitC. budget deficit D. trade surplusE. government failure

29. Government failure occurs whenA. governments levy taxes on households and business firms.B. perfectly competitive markets do not achieve economic

efficiency. C. markets become less efficient in allocating resources.D. government intervention causes a more inefficient allocation

of goods and resources. E. governments attempts to promote economic growth.

30. The government attempts to stabilize the economy byA. engaging in fiscal and monetary policies.B. exporting and importing goods and services.C. subsiding positive externalities.D. providing anti-trust law.E. regulating the pricing practices of monopolies.

EXERCISE 3

The following depicts the three-sector circular flow of income model integrating government. Explain each of the flows given their corresponding number. Write your answer on the space provided for after the number.

31. Flow 1 __________________________________

32. Flow 2 __________________________________

33. Flow 3 __________________________________

34. Flow 4 __________________________________

35. Flow 5 __________________________________

36. Flow 6 __________________________________

37. Flow 7 __________________________________

38. Flow 8 __________________________________

39. Flow 9 __________________________________

40. Flow 12 _________________________________

66


EXERCISE 4

Classification. For each of the cases below, identify the economic function of the government being described. Refer to the following for the answer and write the letter of your choice on the space indicated after the case.

A. Provide public goods and servicesB. Maintain competitionC. Stabilize the economyD. Correct market failuresE. Redistribute incomeF. Provide social and legal framework

41. Government passes new building codes to protect theinterest of homebuyers. __________

42. Government subsidizes the senior high schooleducation of indigent students. __________

43. Government imposes progressive taxes as a way toredistribute income. __________

44. Government imposes a carbon tax to aggressivelyreduce carbon emissions thus reducing greenhousegases. __________

45. Government establishes standards of workplace safetyand enforces them through inspections and penalties.__________

46. Government taxes the rich higher rates while taxes thelow-income groups at lower tax rates. __________

47. Government levies increased tax rates among tobaccocigarette producers to discourage smoking. __________

48. Government establishes a monetary system andcontrols the amount of money circulating in theeconomy. __________

49. Government determine the benefits that individualhouseholds and businesses receive from nationaldefense. __________

50. Government alters the distribution of income throughmarket intervention. __________

51. Government regulates the prices charged by telecomcompanies that distribute internet services tosubscribers. __________

52. Government sets the legal status of businessenterprises. __________

53. Government builds new roads and bridges. __________

54. Government sues a particular consumer electronicscompany for monopoly practices. __________

55. Government coordinates the control of an infectiousdisease preventing others in a community from gettingsick. __________

56. Government takes action to close down a miningcompany that pollutes lakes and river in a municipality.__________

57. Government allocates more budget to reduce incidenceof poverty in rural areas. __________

58. Government buys new combat helicopters and policecars for military defense. __________

59. Government stabilizes the economy through control ofthe money supply. __________

60. Government makes polices that determine certain rulesthat a firm must engage in. ___________

EXERCISE 5

Classification. For each of the following items, determine what economic role of the government is described. Write A for allocative role, D for distributive role, R for regulatory role and S for stabilization role.

61. The government creates more job opportunities forunemployed. __________

62. The government sets a price ceiling for a certainagricultural product. __________

63. The government extends conditional cash transferprogram among poor households. __________

64. The government largely eradicates the deterioratinghepatitis disease by administering free vaccines to allchildren. __________

65. The government allocates of resources to be able tomaximize economic welfare. __________

66. The government has placed an excise tax on productsmanufactured with CFCs and other ozone-depletingsubstances. __________

67. The government creates anti-trust laws. __________

68. The government uses fiscal and monetary measures tomoderate inflation. __________

69. The government builds new drug rehabilitation centers.__________

70. The government makes two alternative policies forreducing greenhouse gases. __________

71. The government imposes greater taxes on firmsproducing toxic chemicals. __________

72. The government corrects the underallocation ofresources by subsidizing firms which increase supply ofa particular product. __________

73. The government improves the social security benefitsand increases the pension of the elderly. __________

74. The government proposes legislation that raises taxesfor higher-income taxpayers, in order to allocate morefunds for public education. __________

75. The government subsidizes the construction of a sportsarena. __________

67


EXERCISE 6

Classification. Below are the economic functions of government, followed by newspaper headlines. Identify what economic function is referred to, directly or by implication, in each headline. Choose the letter of your choice as follows. Write your answer on the space provided for after the number.

A. Provide public goods and servicesB. Maintain competitionC. Stabilize the economyD. Correct market failuresE. Redistribute incomeF. Provide social and legal framework

76. Congress approves subsidized funding for mass railtransit. __________

77. Department of Agriculture extends input subsidies tocorn farmers. __________

78. NTC requires telecom companies to lower the price ofprepaid services. __________

79. DPWH subsidizes the building of a new publicexpressway. __________

80. SSS increases the pension of retired private workers.__________

81. President claims increased spending for housingdevelopment. __________

82. DOTC requires motorists to wear helmets when driving.__________

83. Philippine National Police (PNP) increasesneighborhood patrols in line with drug-related cases.___________

84. DTI disseminates information that helps people becomewise consumers. ___________

85. Lawmakers block merger of two telecommunicationcompanies. ___________

86. Philippine government plans to levy excise tax on fattyfoods. ___________

87. Administration earmarks for projects that will provideelectricity to more households in the Philippines.___________

88. Finance secretary urges entrepreneurs to create andinnovate new products. ___________

89. DOH allocates budget to fight Zika virus.___________

90. DENR secretary suspends a mining company becauseof water pollution. ___________

EXERCISE 7

Analyze the following cases and determine whether they are considered government failure or not. Write Y if it’s a government failure and N if it’s not in the space provided for after the number.

91. The Commission of Audit found out that governmentemployees used Ᵽ3 million of unjustified premium-classairline travel during a five-day international conference.___________

92. Tons of rice were wasted because of overimportation ofrice of NFA from Vietnam. ___________

93. Shortsighted political behavior is prevalent amongmany lawmakers because of pork-barrel politics.___________

94. The government legalizes and then taxes some drugsleading to a quick expansion of the supply of drugs anda substantial loss of social welfare arising from overconsumption.

95. Politicians support the programs and policies thatmaximize the economic welfare of the poor.___________

96. An expansion of feeding programs in poor barangays isprovided for disadvantaged children. ___________

97. Legislators encourage government spending from porkbarrel in their own constituencies even if the projectsare assessed to be inefficient. ___________

98. The soil conservation program of the governmentencourages farmers to use farm fields which requiremore intense utilization of fertilizer and irrigationcausing an adverse impact on the environment.___________

99. The decision of the government to raise sin taxes onliquor and cigarettes leads to the development of greymarkets. ___________

100. A price floor is set by the government for agriculturalproducts that guarantees farmers a high price,encourages overproduction and wasteful surpluses.___________

101. A recent bill reforming the government’s antipovertyprograms limited many household recipients to onlythree years of benefits. ___________

102. A road widening project is quickly implemented toreduce traffic congestion by ignoring long termconsiderations of the project. ___________

103. A government subsidy provided to the textile industrydistorts the proper functioning of the textile market.___________

104. A city strictly implements a policy that prohibitscigarette smoking in all public places. ___________

105. Poor people are provided with healthcare card that canbe used for healthcare costs including medicines,ambulance transportation, dental care and eye care.___________

68

WORKTEXT 15 : TAXATION

EXERCISE 1


1. Taxation is a means for the government to raise itsrevenue purposely used to promote welfare and providepublic services to its citizenry. ________

2. Tax is not an enforced contribution. ________

3. A tax is progressive when the average rate of tax isincreasing with income. ________

4. Tax should be levied equitably, according to theory ofability to pay. ________

5. A rich man should pay more than a poor man in aregressive tax structure. ________

6. Raising taxes always increases government revenues.________

7. The primary purpose of taxation is to accumulate fundsfor the functioning of the government machineries.________

8. National taxes include the taxes, fees, and othercharges that may be levied by the local governmentunits. ________

9. An excise tax is a tax on the use, consumption, orstorage of property. ________

10. In direct taxation, a tax is demanded from the personwho also absorbs the burden of the tax. ________

11. Consumption taxes are levied on net income over anannual tax period. ________

12. The power to tax can only be done by the executivebody of the government. ________

13. Under progressive rate structure, the amount of taxesdue decreases as the tax base increases. ________

14. Tax avoidance usually entails taxpayers deliberatelymisrepresenting the true state of their affairs to the taxauthorities to reduce their tax liability. ________

15. Tax evasion is legally permissible while tax avoidance ispunishable by law. ________

EXERCISE 2


16. Tax isA. proportionate in character. B. a voluntary payment.C. levied for private purposes D. payable in cheque.E. levied on persons but not on property

17. The government levies taxes in order to achieve which offollowing objective?

A. To use as a tool for implementation of its policiesB. For fair distribution of wealthC. To counter the effects of inflation or depressionD. To protect local industries against foreign competitionE. All of these.

18. All of these are the four main purposes or effects of taxation,except

A. revenue. B. redistribution.C. repricing. D. recollection.E. representation.

19. Which is not the basic principle of taxation according toAdam Smith in his famous book “Wealth of Nations”?

A. Equality B. CertaintyC. Convenience of payment D. Economy of collectionE. Productivity

20. Which of these taxes applies the principle of progressivity?A. Income tax on individuals. B. Sin tax on cigarettesC. Excise tax on oil products. D. Amusement taxD. Value-added tax on grocery items

21. The government imposes higher taxes on import of luxurygoods to protect local industries against foreign competition.This objective of taxation is primarily for

A. protection. B. revenue collection.C. redistribution. D. sumptuary.E. production of goods and services.

22. What policy principle is considered if tax system raisesenough funds, in the short run and the long run, to finance publicservices?

A. Equity B. AdequacyC. Simplicity D. ExportabilityE. Neutrality


Lingayen Campus

WORKTEXT 15 : TAXATION Econ 112 – Advanced Microeconomics

NAME: _______________________________________ SCORE: ___________________________________


69


23. A government raises money to finance highway constructionand repairs by imposing a gasoline tax because the amount ofgasoline people purchase is a reasonable proxy for the benefitthat drivers receive from publicly maintained roads. The gas taxfollows what principle of taxation?

A. Benefits principleB. Ability-to-pay principleB. Public expenditure principleD. Progressive principleE. Equal-distribution principle

24. Government raises funds from taxes to spend on nationaldefense, public highways, education and healthcare. This mainpurpose of taxation manifests

A. revenue.B. redistribution.C. repricing.D. recollection.E. representation.

25. When the tax base is Ᵽ30,000, the tax liability is Ᵽ 2,550.When the tax base is Ᵽ200,000, the tax liability is Ᵽ50,000. Thistax has a rate structure that is

A. regressive. B. progressive.C. proportional. D. constant.E. neutral.

26. Which of the following is a direct tax?A. Value-added tax B. Inheritance taxC. Excise tax D. Custom dutyE. None of these

27. In what tax structure does the government take a smallershare of high-income taxpayers than of low-income tax payers?

A. Regressive tax B. Progressive taxC. Flat tax D. Proportional taxE. Common tax

28. Excise taxes include taxes onA. personal property. B. real property.C. liquor products D. individual income.D. labor service.

29. All of these are examples of ad valorem tax exceptA. real property tax. B. value-added tax.C. sales tax. D. tariff.E. income tax.

30. A tax specifically levied on certain generally sociallyproscribed goods and service like tobacco and alcoholicbeverages is called

A. estate tax. B. ad valorem tax.C. sin tax. D. value-added taxE. severance tax.

31. The Valued-added Tax (VAT) isA. a type of income tax.B. a direct tax.C. A local tax collected in the PhilippinesD. A minor revenue generator.E. is a sales tax levied on the value added at each stage of

production.

32. Imposition of sin taxes on cigarettes, liquor and otheralcoholic beverages is

A. progressive and direct. B. regressive and indirect.C. sumptuary and direct. D. proportional and local.E. valued-added and ad-valorem.

33. Taxes are levied to address negative externalities. Which ofthese represents one example?

A. Tax incentives for agro-based projects are given.B. Tax exemptions are provided to educational institutions.C. Rich people’s incomes are taxed at higher rates.D. Higher taxes on import of luxury goods are levied.E. Tobacco is taxed to discourage cigarette smoking.

34. This refer to national internal revenue taxes imposed andcollected by the national government through the Bureau ofInternal Revenue (BIR).

A. Provincial taxes B. Local taxesC. Municipal taxes D. National taxesE. Special taxes

35. Local taxes include the taxes, fees, and other charges thatmay be levied by which local government unit? Which is not alocal tax?

A. Franchise TaxB. Professional TaxC. Community taxD. Tax on transfer of real property ownershipE. Corporate income tax

36. It is a legal identity document in the Philippines and alsoknown as “residence certificate”.

A. NBI B. VATC. Bandala D. EncomiendaE. Cedula

37. Which of the following is exempted for paying taxes?A. Local water districtsB. Cooperatives duly registered under RA 6938C. Non-stock and non-profit educational institutionsD. Publisher of books prescribed by DepEdE. All of these

38. What is committed if a purchaser avoids tax liability bypurchasing goods in a country that has little or no sales tax andthen transporting the goods back to one’s home country?

A. Tax consumption B. Tax evasionC. Tax advantage D. Tax exemptionE. Tax avoidance

39. Daisy Rosal earned Ᵽ900,000 as income from her flowershop business and received Ᵽ250,000.00 as Christmas gift fromher bachelor uncle in 2015. She had no other receipts for theyear. She spent Ᵽ300,000 for the business operation of herflower shop. For tax purposes, her gross income for 2015 is

A. Ᵽ1,150,000. B. Ᵽ1,400,000.C. Ᵽ900,000. D. Ᵽ1,200,000.E. Ᵽ250,000

40. Jameson earned Ᵽ240,000 as an executive assistant in2015. How much tax did Jameson pay in 2015?

A. Ᵽ47,500 B. Ᵽ22,500C. Ᵽ32,500 D. Ᵽ12,500E. Ᵽ17,500

70


EXERCISE 3

Classification. For each of the item below, choose the letter that best describes the following essential characteristics of taxes. Write the answer on the space provided after the item.

A. Enforced contribution.

B. Generally payable in money.

C. Proportionate in character

D. Levied on persons, transaction and property

E. Levied by the state which has jurisdiction over theperson or property.

F. Levied by the law-making body of the stateG. Levied for public purposesH. Fiscal adequacyI. Equality or theoretical justice.J. Compatibility with economic goals.

41. Tax payment is not voluntary in nature, and theimposition is not dependent upon the will of the persontaxed. ____________

42. Payment by cheques, promissory notes, or in kind is notaccepted. ____________

43. Payment of taxes should be based on the ability to payprinciple; higher income of the tax payer, the biggeramount of the tax paid. ____________

44. There are taxes that are imposed or levied on acts,rights or privileges. ____________

45. As a general rule, only persons, properties, acts, right ortransaction within the jurisdiction of the taxing state aresubjects for taxation. ____________

46. This means that law must be enacted first by theCongress in the Philippines. ____________

47. Taxes are imposed to support the government inimplementation of projects and programs.____________

48. The sources of revenue taken as a whole should besufficient to meet the expenditures of the government,regardless of business, export taxes, trade balances,and problems of economic adjustments. ____________

49. Taxes levied must be based upon the ability of thecitizen to pay. ____________

50. Tax laws should be consistent with economic programsof the government which pertain to basic servicesintended for the masses. ____________

EXERCISE 4

Classification. For each of the following taxes determine whether they are direct or indirect. Write D for direct tax and I for indirect tax.

51. Individual income tax __________

52. Excise tax __________

53. Corporate tax __________

54. Stamp tax __________

55. Capital gains tax __________

56. Real property tax __________

57. Customs duty __________

58. Insurance premium tax __________

59. Inheritance tax __________

60. Transfer tax __________

EXERCISE 5

Classification. For each of the following taxes classified according to graduation or rate, determine whether they are progressive, regressive or proportional. Write PG for progressive, RG for regressive and PP for proportional.

61. Personal income tax __________

62. Value-added tax __________

63. Community tax __________

64. Sales tax on luxury goods __________

65. Franchise tax __________

66. Real property tax__________

67. Consumption tax __________

68. Poll tax __________

69. Lump-sum tax __________

70. Land value tax __________

EXERCISE 6

Classification. For each of the following taxes classified according to subject, determine whether they are personal, property or excise. Write PO for poll tax, PR for property tax and EX for excise tax.

71. Community tax __________

72. Real estate tax __________

71


73. Estate tax __________

74. Corporate tax __________

75. Tariff __________

76. Inheritance tax __________

77. Personal property tax __________

78. Personal income tax __________

79. Estate tax __________

80. VAT __________

EXERCISE 7

Classification. For each of the following taxes determine whether they are national or local. Write N for national taxes and L for local taxes.

81. Custom duty __________

82. Cedula __________

83. Value-added tax __________

84. National internal revenue tax __________

85. Real property tax __________

86. Sin tax __________

87. Individual income tax __________

88. Excise tax__________

89. Donor’s tax __________

90. Amusement tax __________

EXERCISE 8

Classification. For each of the following cases determine whether they represent tax evasion or tax avoidance. Write TE for tax evasion and TA for tax avoidance.

91. Maggie is a well-known celebrity where she earns Ᵽ345million for the year 2015. In an attempt to lower herincome tax obligation, Maggie intentionally reports onher tax return only Ᵽ156 million. __________

92. A landlord with an apartment business engages inaccounting irregularities by not declaring the actual rentpayments of Ᵽ800,700 in 2014. __________

93. An entrepreneur fails to report over Ᵽ156 million ofincome for year 2014 and more than Ᵽ210 million ofincome for year 2015. __________

94. Peter Ramirez reports personal travel expenses asbusiness expenses, such as taking her spouse on abusiness trip and claiming that his spouse's expensesas business expenses. __________

95. Mr. Pascual earned of Ᵽ5 million. However, he kept itas cash in his bank locker and hid it from tax authoritiesand he paid all related expenses from this cash.__________

96. Mrs. Santos earned Ᵽ16 million. However, he recordedⱣ9 million expenses using legal tactics to reduce hernet income and offering the remaining income of Ᵽ7million for taxes. __________

97. An importer of liquor products misdeclares the quantityand product description to reduce his payment forcustom duties. __________

98. A consumer electronics supplier purchases goods froma country that has no sales tax and then transports thegoods back to his domestic country to avoid tax liability.__________

99. A taxpayer contributes and pays his taxes to BIRbefore the April 15 tax deadline because this lower histax bills. __________

100. The sole proprietor of a supermarket willfully attemptsto evade paying his income taxes by skimming grossreceipts of his supermarket business. __________

72

A. BOOKS AND E-BOOKS

Boyes, William and Melvin, Michael, FUNDAMENTALS OF ECONOMICS, 6th Edition, South-Western Cengage Learning,

Mason USA, 2014

Brue, S.L. et al. ESSENTIALS OF ECONOMICS, 3rd Edition, New York McGraw Hill Irwin, 2014

Cowen, Tyler and Tabrrok, Alex, MODERN PRINCIPLES OF ECONOMICS, 2nd Edition, Worth Publishing, USA, 2013

De Guzman, Rachelle, D., et. Al.,. GENERAL ECONOMICS, TAXATION AND LAND REFORM, IPM Publishing, Bulacan,

Philippines, 2013..

Fajardo, Feliciano, R. ECONOMICS, 3RD ED. Rex Printing Company, Inc. Quezon City, 2001

Krugman, Paul and Wells, Robin, ECONOMICS, 3rd Edition, Worth Publishing, USA, 2013

Mankiw, N. Gregory, PRINCIPLES OF ECONOMICS, 6th Edition, South-Western Cengage Learning, Mason USA, 2012

Nicholson, Walter and Snyder Christopher, MICROECONOMIC THEORY: BASIC PRINCIPLES AND EXTENSIONS, 10th

Edition, Thomson Learning Academic Resource Center, 2008

Roger, Arnold A., ECONOMICS, 11the Edition, South-Western Cengage Learning, Mason USA, 2014

Rosser, Mike, BASIC MATHEMATICS FOR ECONOMISTS, Routledge Taylor and Francis Group, New York City, USA.

Samuelson, Paul A. ECONOMICS McGraw Hill, New York, 2011

Tucker, Irvin B. MICROECONOMICS FOR TODAY, 7th Edition, South-Western Cengage Learning, Mason, USA, 2011

Varian, Hal R. INTERMEDIATE ECONOMICS: A MODERN APPROACH W.W Norton and Company, Inc., New York, 2010

Viray, Marcelino, et al. PRINCIPLES OF ECONOMICS (w/ TAR) National Book Store, Mandaluyong City, 2010

B. ONLINE SOURCES

http://www.ecb.europa.eu/mopo/strategy/ecana/html/index.en.html

www.pearsonhighered.com/educator).

www.myeconlab.com

http://visualizingeconomics.com/

https://www.khanacademy.org/

http://www.businessweek.com/blogs/econochat

http://gregmankiw.blogspot.com/

http://welkerswikinomics.com/blog/

http://econblog.aplia.com/

http://economistsview.typepad.com/

http://www.economicshelp.org/blog/

http://www.ritholtz.com/blog/

http://www.economicpopulist.org/

http://freakonomics.com/

http://wikipedia.com/

REFERENCES

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