FACULTY OF BUILT ENVIRONMENT

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ATGB2343 Introduction to Economics

2021/2022 Semester 1
Mid-Term test

INSTRUCTION :
1. You must submit your answer within the time frame allowed (2 hours) for this online midterm test.
2. The deadline or the submission of your answer is half an hour from the end time of this online midterm test.
3. PENALTY will be imposed on students who submit their answer late, as follows:
i. The midterm test marks will be reduced by 10 marks for answer scripts submitted within 30 minutes
after the deadline
ii. The midterm test marks will be downgraded to zero (0) marks for any answer scripts submitted after
one hour from the end time of the midterm test.
iii. Extenuation Mitigating Circumstances (EMC) encountered, if any, must be submitted to the lecturer
within 48 hours after the date of this midterm test. All EMC application must be supported with valid
reasons and evidence. The UC EMC Guideline apply.
4. Please answer all questions.
Part A: 20 questions of Multiple Choice Questions (20 questions x 4 marks = 80 marks)
Part B: 3 subjective questions (20 marks)

STUDENT’S DECLARATION OF ORIGINALITY

By submitting this online midterm test, I declare that this submitted work is free from all form of plagiarism and for
all intent purposes is my own properly derived work. I understand that I have to bear the consequences if I fail to
do so.

Name of student (NG ZE KAI) :

Student ID (2108198) :

Programme (DBL Group 1) :

(e.g. DBD12(Group 1)

Tutor / Marker :

For Examiner’s Use Only

Question
Marks

Section A

Section B

TOTAL

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PART A: Multiple Choice Questions

Q1A. In the circular flow model,

A. households supply resources to firms through the factor market.
B. households buy goods and services in the product market.
C. money flows from firms to households through the factor market.
D. All the above.
E. None of the above.

Q2A. Economics define as the

A.science of efficiency.
B.science of scarcity.
C.study of market.
D.study of human activity.

Q3A. If an economy experiences unemployment, it would show up as a

A. on the production possibilities curve, but on one of the axes.
B. outside the production possibilities curve.
C. inside the production possibilities curve.
D. on the production possibilities curve.
E. on a production possibilities curve that is shifting to the right.

Q4A. Which of the following measures of cost is best described as ‘the increase in total cost that arises from an
extra unit of production’?
A. Variable cost
B. Average variable cost
C. Average total cost
D. Marginal cost

Q5A. Among the four factors of production is entrepreneurship. It’s the only factor that
A. does not contract to provide its services for a specific price.
B. conceives of an essential idea of production.
C. assume all the risks and uncertainties involved in production.
D. earns profit.
E. all the above.

Q6A. In May, ABC Jubin Store offers an RM 5.00 ceramic tiles, RM 2.00 less than its regular price. ABC Jubin Store
discovers that its total revenue from ceramic tile sales increases. This reflects the fact that
A. price elasticity of demand within the RM 5.00 to RM 7.00 price range is less than 1.0.
B. price elasticity of demand within the RM 5.00 to RM 7.00 price range is greater than 1.0.
C. price elasticity of demand within the RM 5.00 to RM 7.00 price range is equal to 1.0.
D. ABC Jubin Store should raise the price of its ceramic tiles to decrease its total revenue.
E. the percentage change in quantity demanded of ceramic tiles had to be less than the percentage change in its
price (from the RM 7.00 regular to RM 5.00 special).

Q7A. Which of the following statement regarding AVC (Average Variable Costs) is CORRECT
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A. at lower levels of output, production is relatively inefficient and costly
B. as less resources are added, a point will reach where diminishing returns are incurred
C. AVC raise initially reaches a maximum and then decline again
D. expansion of output will yield lesser output and decrease in amount of output will increase the AVC

Q8A. About those goods that have negative income elasticities. Economists refer to them as
A. normal goods.
B. inferior goods.
C. superior goods.
D. complementary goods.
E. substitute goods.

Q9A. What is the basic economic problem common to all societies?

A. the allocation of scarce resources.
B. the elimination of inflation.
C. the need to achieve full employment.
D. the need to reduce taxation.

Q10A. The following statement regarding Marginal Cost (MC) and Marginal Product (MP) are correct EXCEPT
A. An increase in MP will generate a decline in MC
B. A decrease in MP will increase MC
C. When MP is at its maximum, MC is at its minimum
D. When MP is falling, MC is also decreasing

Q11A. A bricklayer lays a half-brick wall at a productivity of 2.5m2 per hour. He works for six hours a day and being
paid at a rate of RM 12.00/m2. What is the opportunity cost if this bricklayer takes a sick leave on a working day? *
A. Wages of RM12.
B. Wages of RM15.
C. Wages of RM30.
D. Wages of RM180.

Q12A. Which of the following describes the opportunity cost to society of building a new district hospital? *
A. the closure of the old district hospital it replaces.
B. the extra cost of providing the equipment and medical staff to run the new district hospital efficiently.
C.the goods and services that could have been produced instead of the new district hospital
D. the increase in taxation to pay for the new district hospital.

Q13A. Clay and water are two main materials used to make bricks in a factory. What is the fixed cost in the
production of bricks?
A. clay cost
B. water bill
C. rental
D. wages of labour

Q14A. At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which
pushed the price __________ toward its equilibrium value.
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A.surplus; downward
B.surplus; upward
C.shortage; downward
D.shortage; upward

Q15A. What does price elasticity of demand measure?

A. changes in price caused by changes in demand.
B. the value of sales at a given price.
C. the responsiveness of demand to price changes.
D. the rate of change of sales.

Q16A. Price floors are usually designed to help (i) ______________________, while price ceilings are intended to
help (ii) ______________________.
A.(i) producers, (ii) consumers.
B.(i) consumers, (ii) producers.
C.(i) those burdened with deficiency payments, (ii) those receiving deficiency payments.
D.(i) the relatively poor, (ii) the relatively rich.
E.(i) those receiving deficiency payments, (ii) those burdened with deficiency payments.

Q17A. In the short run:

A. a firm cannot vary its output.
B. all factors of production can be varied.
C. a firm can change its fixed inputs.
D. output can be changed by using different levels of variable inputs

Q18A. Which of the following expressions represents a cross-price elasticity of demand?

A.percentage change in quantity demanded of apples divided by percentage change in quantity supplied of apples
B.percentage change in quantity demanded of apples divided by percentage change in price of pears
C.percentage change in price of apples divided by percentage change in quantity demanded of apples
D.percentage change in quantity demanded of apples divided by percentage change in income

Q19A. The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000
cubic feet of gas 1,000 miles. This is an example of:
A.economies of scale
B.diseconomies of scale
C. diminishing marginal returns.
D. an increasing marginal product of labor.

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Q20A. Supply curve

A. reflects a negative relationship between price and quantity supplied
B. A. reflects a positive relationship between price and quantity supplied
C. depicts the collective behaviour of buyers in the market
D. shows that producers will offer more of a product for sale at a low product price than at a high product price

PART B : Subjective Questions

Q21A. Arkitek Asaseni Sdn Bhd rents a building to start its operation in June 2019. In the short run, it can vary its
output (the number of drawing design) only by varying the number of staff it employs. Over the years, Mr Wan, the
owner of Arkitek Asaseni Sdn Bhd has tried hiring different numbers of workers. The data about the average
productivity of each worker (also known as the Average Product of Labor) for each number of workers are given in
the table below

Number of workers Average productivity Total Product Marginal Product

1 5 5 5

2 7 14 9

3 10 30 16

4 11 44 14

5 10 50 6

6 9 54 4

Answer the following questions:

Q21A (a) Identify at which worker does the Law of Diminishing Marginal Returns start working and explain.

Q21A(b) Explain why every firm, as it hires more people in an attempt to increase its output, will sooner or later hit
the range of diminishing marginal returns.

Q21A (c) By looking at the table above, predict what will happen when the 5th and 6th person been hired. Explain.

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ATGB2343 INTRODUCTION TO ECONOMICS