Multiple choices

1. The reality is that human needs are not fully satisfied with existing resources, this is
the problem related to:
A. Opportunity cost
B. Scarcity
C. Normative economics
D. Who will consume?

2. Opportunity cost:
A. Is the benefit from the second best option
B. Is the value of the best possible alternative perform.
C. Are indirect costs.

3. Hoa can choose to go to the movies or play tennis. If Hoa decides to go to the
movies, then there is the value of playing tennis
A. greater than the value of watching a movie.
B. equal to the value of watching a movie.
C. is less than the value of watching a movie.
D. Zero

4. Which of the following is not considered part of the opportunity cost of going to
college?
A. Tuition
B. Meal expenses
C. Income that could have been earned without going to school
D. All of the above

5. A change in which of the following factors will not change the demand curve for
housing rentals, assuming other factors remain unchanged?
A. Consumer income.
B. Family size.
C. House rental price.
D. The population of the community increases.

6. Assuming other factors remain unchanged, drought (adverse weather) may occur
A. reduces the price of substitute goods
rice.
B. causes higher demand for rice leading to a
higher price.
C. causes the supply curve for rice to shift
turn right.
D. causes the supply curve for rice to shift
turn left

7. An increase in input costs to produce good X, assuming other factors remain

unchanged, will cause
A. the demand curve for good X shifts to the right.
B. the supply curve of good X shifts to the left.
C. the supply curve of good X shifts to the right.
D. both the supply and demand curves for good X shift to the left.

8. The demand curve for good A shifts to the right, assuming other factors remain
unchanged, due to
A. consumer income increases.
B. the price of good A decreases.
C. the expectation that the price of good A will increase in the future.
D. consumers anticipate a decrease in future income

9. Suppose fish and beef are two substitute goods.

Assuming the supply of beef is fixed, a decrease in fish prices will
lead to
A. the demand curve for fish shifts to the right.
B. the demand curve for fish shifts to the left.
C. the price of beef decreases.
D. the price of beef increases.

10. An increase in fertilizer prices (assuming other factors remain unchanged) will
cause
A. the price of oranges increased.
B. demand for fertilizer decreases.
C. fertilizer supply increases
D. The price of oranges decreased

11. Price ceilings will lead to the following problems, except:

A. consumers have to line up to buy goods.
B. excess supply of that good.
C. quantity demanded is greater than quantity supplied.
D. the black market and corruption increased.

12. Which of the following is unlikely to increase demand for the good in question,
assuming other factors remain unchanged?
A. The price of a complementary good decreases.
B. The price of a substitute good decreases. (decrease demand for the good in
question)
C. An advertising campaign for that product is launched.
D. Consumer income increases.

13. Assuming other factors remain constant, technological advances will cause shifts
A. the demand curve is up and to the right.
B. the production possibilities frontier is close to the origin.
C. supply curve upward.
D. supply curve to the right.

14. Market prices below equilibrium tend to result

A. shortage of goods.
B. a surplus of goods.
C. buyer's market.
D. a decrease in demand for the good in question.
15. When income increases, the demand for a good decreases. Assuming other factors
remain unchanged, that good is a commodity.
A. essential.
B. inferior.
C. common.
D. superior.

16. The law of demand states that, other things being equal, if the price of a good
falls, then
A. demand for that good will increase.
B. demand for that good will decrease.
C. the quantity demanded of that good will decrease.
D. the quantity demanded for that good will increase.

17. Which of the following events will cause the supply of coffee to increase?
A. Fertilizer prices decreased.
B. There is research showing that drinking coffee is beneficial for people with low
blood pressure.
C. People's income increased (coffee is a normal good).
D. Population increased.

18. If rice is an inferior good then

A. when income increases, the demand for rice will decrease.
B. demand for rice has an inverse relationship with income.
C. the income elasticity of demand for rice is negative.
D. the given options are correct.

19. When both supply and demand for an item increase at the same time,
A. the equilibrium price is certain to decrease.
B. the equilibrium price is certain to increase.
C. equilibrium quantity will certainly increase.
D. equilibrium quantity is certain to decrease

20. It has been observed that the price of laser printers has decreased. There is
definitely a reason for this happening
A. demand decreases while supply increases.
B. demand increases while supply decreases.
C. both demand and supply decrease.
D. both demand and supply increase.

21. Which of the following does not shift the supply curve for chicken eggs?
A. The government increases taxes on egg suppliers.
B. An animal protection campaign urges people to stop eating eggs.
C. Poultry feed prices decrease.
D. H5N1 virus reduces poultry numbers.

22. In the market for a good, it is observed that the equilibrium price increases and the
equilibrium quantity decreases, which can be due to (assuming all other factors
remain constant)
A. demand for that good increases.
B. demand for that good decreases.
C. the supply of that good decreases.
D. the supply of that good increases.

23. Knowing that gasoline is an inelastic product, when gasoline prices decrease,
when other factors remain unchanged
A. total spending on gasoline decreases. (inelastic -> Q thay đổi ít khi P thay đổi)
B. total spending on gasoline increases.
C. the demand curve for gasoline shifts to the left.
D. the demand curve for gasoline shifts to the right.

24. An increase in consumer income causes the quantity demanded of good Y to

decrease, assuming other factors remain unchanged, which shows that good Y is
A. inferior goods.
B. superior goods.
C. normal goods.
D. Essential goods.

25. Which of the following factors does not shift the demand curve for Toyota cars?
A. People's income increases.
B. Gasoline prices increased by 50%.
C. Toyota car prices decrease.
D. The price of Ford cars decreased

26. Which of the following is correct when describing price adjustments when the
market is in a state of surplus (assuming other factors remain unchanged and there is
no government intervention)
A. If price increases, quantity demanded will decrease while quantity supplied will
increase.
B. If price increases, quantity demanded will increase while quantity supplied will
decrease.
C. If price decreases, quantity demanded will increase while quantity supplied will
decrease.
D. If price falls, quantity demanded will decrease while quantity supplied will
increase.

27. Which of the following is true when the model returns a price adjustment when
the market is in a shortage (assuming other factors remain unchanged and there is no
government intervention)
A. If price increases, quantity demanded will increase while quantity supplied will
decrease.
B. If price increases, quantity demanded will decrease while quantity supplied will
increase.
C. If price falls, quantity demanded will decrease while quantity supplied will
increase.
D. If price falls, quantity demanded will increase while quantity supplied will
decrease.

28. In the market for a commodity, if the price is higher than the equilibrium price,
then
A. there is a surplus in the market.
B. prices must increase in the market.
C. no goods are sold.
D. there is a shortage in the market

29. Choose the most correct option.

A. The market demand curve is the sum of individual demand curves and can be
broken.
B. Consumer surplus is determined by the area below the demand curve and above the
price level.
C. Producer surplus is determined by the area above the supply curve and below the
price level.
D. All of the above options

30. If the price of beef is at the equilibrium point then

A. beef is a normal good.
B. equilibrium quantity equals quantity demanded and equals quantity supplied
C. consumers want to buy more at the current price.
D. producers want to sell more at the current price.

31. Market shortage means

A. demand increases when price increases.
B. quantity supplied is greater than quantity demanded.
C. quantity demanded is greater than equilibrium quantity.
D. quantity demanded is greater than quantity supplied.

32. Can limit market surplus through

A. discount.
B. increase supply.
C. the government increases prices.
D. decrease quantity demanded

33. Excess amount on the market

A. is the difference between quantity demanded and quantity supplied when quantity
demanded is less than quantity supplied
B. is the difference between the quantity demanded and the equilibrium quantity.
C. is the difference between quantity supplied and equilibrium quantity.
D. is the difference between quantity demanded and quantity supplied when quantity
demanded is greater than quantity supplied

34. If X and Y are two substitute goods in consumption, assuming other factors
remain unchanged, when the price of resources to produce X increases, then
A. the price of Y decreases but the price of X increases.
B. the price of Y increases but the price of X decreases.
C. the price of X decreases but the price of Y remains unchanged.
D. prices of X and Y both increase.

35. If X and Y are two complementary goods in production, assuming other factors
remain unchanged, when the price of X decreases, the supply of Y
A. increase and cause the price of Y to increase.
B. increase and cause the price of Y to decrease.
C. decrease and cause the price of Y to increase.
D. decrease and cause the price of Y to decrease.

36. Crude oil is the most important input factor for production
gasoline export. Assuming other factors remain unchanged, if
Crude oil prices increase, we can conclude that
A. the equilibrium quantity of gasoline decreases because the supply of gasoline
increases.
B. the price of gasoline increases due to increased demand for gasoline.
C. the price of gasoline decreases because the demand for gasoline increases.
D. the price of gasoline increases because the supply of gasoline decreases.

37. Price elasticity of demand is measured by a ratio

A. between a change in quantity demanded and a change in price.
B. between a change in price and a change in quantity demanded.
C. between the percentage change in price and the percentage change in quantity
demanded.
D. between the percentage change in quantity demanded and the percentage change in
price.

38. Expecting the price of a good to increase will cause

A. The current equilibrium price is certain to increase.
B. The current equilibrium quantity is certain to increase.
C. Price does not change.
D. Quantity does not change.

39. The fixed cost is

A. Constant
B. Variable
C. Unknow

40. The opportunity cost belong to

A. Implicit cost
B. Explicit cost
C. Constant cost

41. Which is the characteristic of PCM

A. Indentical good
B. Many firms
C. Free entry and exit
D. All the above answer

42. Which is the condition for all market to maximize profit

A. MR=MC
B. MR<MC
C. MR>MC

43. Which is the role of firm in Perfect Competitive Market

A. Price maker
B. Price taker
C. Price owner

44. The demand of good that firm face in PCM is

A. Downward slopping curve
B. Horizontal line
C. Vertical line

45. In monopoly,
A. There are many firms
B. There is only one firm
C. Both A & B

46. Which is the specific principle in monopoly

A. MR=MC
B. MR=P
C. MC<P
D. MC>P

47. In one country

A. They will export good that have low opportunity cost
B. They will import good that have low opportunity cost
C. They will export good that have high opportunity cost

48. The wage for workers with fixed-term contract is

A. Fixed cost
B. Variable cost
C. Constant cost

49. The minimum wage in the labor market is a type of

A. Price ceiling
B. Price floor
C. Price manipulator

50. The producer in monopolistic market is

A. Price taker
B. Price maker
C. Price creater

51. If the price elasticity of demand is unit then a fall in price:

A. Reduces revenue
B. Leaves revenue unchanged
C. Increases revenue
D. Reduces costs

52. If demand is price inelastic:

A. An increase in price must raise profits
B. An increase in price decreases revenue
C. An increase in price increases revenue
D. A decrease in price reduces sales
53. Which is the example for specific tax
A. VAT
B. PIT
C. Import and export tax
D. Fixed tax per one unit of car

II. Short answer

True/ False-Explain:

1. The demand of good that firm faces in PCM is a horizontal line

2. The total surplus is attained as the equilibrium
3. The demand curve is the upward line with positive slope
4. The shortage is attained when the quantity of supply is higher than the quantity of
demand
5. Fixed cost is constant
- Fixed cost remains constant simply because they do not change often month-on-month.
Fixed cost doesn’t mean it won’t change, but it changes over a longer period.
6. Variable cost tend to increase for a higher quantity

7. Mrs Ly consumption is as follow:

Income (USD) Demand (Units)

1000 5
2000 6
3000 8

Compute the income elasticity by mid-point method when the income rise from
- 1000 to 2000USD
- 2000 to 3000USD
+ Income elasticity when the income rise from 1000 to 2000 USD
Q2−Q1
Q 2+Q 1
2
E = P 2−P1
P 2+ P 1
2
Q 3−Q 2
(Q3+ Q2)/2
E = P 3−P 2
(P3+ P 2)/2

8. Complete the table below

Q VC TC AFC AVC ATC

0 50 n.a n.a n.a
1 10 60 50 10 60
2 30 80 25 15 40
3 60 110 16.67 20 36.67
III. Computation

1. The give demand-supply function are as below

Q(D)=210-2P
Q(S)=10P-30

1. Define the equilibrium then compute for price and quantity

In equilibrium, price and quantity are equalized across supply and demand.
In equilibrium: 210 – 2P = 10P – 30
 10P + 2P = 210 + 30
 P = (210 + 30)/(10 + 2) = 20
=> Q = 10P – 30 = 10.20 – 30 = 170

2. Calculate the price elasticity of demand at the market equilibrium price. State the
meaning of result. What kind of elasticity, should firm raise the price
Elasticity of demand at the market equilibrium price
P P
E= .(Q¿¿ d )' = . ∂ ¿ ¿ ¿ ¿
Q Q
We have
20 −4
E= .(−2) = <1
170 17
=> Inelastic demand -> Firm should raise the price

3. When the government set a price floor of P=9$. Is there surplus or shortage
Price floor is only effective if it is higher than equilibrium level
In this case, 9 < 20
-> Price floor is not effective. There is neither surplus or shortage.

4. If government imposes a tax of 3$/unit on producer, what will happen to the new
equilibrium. Compute total tax that government receive, producer and consumer have
to pay for
Ps = Qs + 30 =
Gorvernment imposes a tax of 3$/unit => P’s = (30 + Q)/10 + 3 = 0,1Qs + 6
Qs = 10Ps – 60
New equilibrium: 10P – 60 = 210 – 2P
 12P = 270
 P = 270/12 = 22,5
=> Q = 210 – 2.22,5 = 165
Tax government received = 165x3 = 495
Tax buyer pays: 22,5 – 20 = 2,5
Tax producer pays: 3 – 2,5 = 0,5

2 . The market for car has following features

2
TC=2+2 Q+Q
1. Determine the fixed cost and variable cost
Fixed cost: 2
Variable: 2Q + Q2
2. Assume that this market is PCM, with the price per one car is P= 1000000$.
Compute the equilibrium ( optimal) quantity
For all markets, the condition for profit maximization : MR = MC
In PCM, P = MR => P = MC
∂ TC
+) MC = =2 Q+2
∂Q
At PCM, P = MR = 1000000
For all markets, MR = MC
=> P = MC
<-> 1000000 = 2Q + 2
<-> Q = (1000000 – 2)/2 = 499999
3. Compute the profit

π=TR−TC
= 1000000.(499999) – (2 + 2.499999 + (499999)2 )
= Số to
4. Find the output level to maximize profit when P=36
36 = 2Q + 2
 Q = 17

5. What the firm’s short-run supply function

The supply curve of a perfectly competitive firm is the marginal cost curve (MC) that
lies above the closing point, or for every value of price greater than the minimum
average variable cost (Ps = MC with P > AVCmin )

The function of supply and demand

P(D)=40-Q
P(S)=10+Q
1. Calculate the consumer surplus and producer surplus
2. If government impose a tax on each good, what effect does it make to such surpluses.
Compute DWL

1. Solve for equilibrium

Qd = 40 – P
Qs = P – 10
Qd = Qs  40 – P = P – 10
 P = 25
=> Q = 40 – 25 = 15
A is the intercept of the demand curve
A (0;40)
-> APe = 40 – 25 = 15
PeE = 15
Consumer surplus = S(ApeE)
= ½ APe. PeE = 15.15/2 = 112.5
B is the intercept of the supply curve
B (0;10)
BPe = 25– 10 = 15
Producer surplus = S(BpeE)
= 1/2 Bpe. PeE
= ½ . 15. 15 = 112.5

Government impose a tax

P is split into 2 cost.
=> New supply function: P = Qs + 10 + t
Solving for equilibrium, find P and Qe’
irrespective of their traces.
DWL = S(HIE)
= ½ HI. IK (K is the intercept of HI and PeE)
= 1/2. Ps.Pb.Qe’E
(số cho thì tính nha)

IV. Analysis
1. Practically, Imagine that you are business manager of Apple. Using the definition of
elasticity, should you raise the price to maximize the revenue
Có
2. The cost of production of t-shirts is higher than it in the past. What effect does it
make to the market
Supply giảm
3. Government impose a environment fee in each clothes consumer buy. What effect
does it make to the market
Demand giảm
4. Considering that apple and orange are substituted products. If the price of apple
decrease, what will happen to the orange market. How to deal with it
Price of apple decrease => Decreased demand for orange market
How to deal: ờm tùy :) phân hóa sản phẩm, thị trường mới …

5. Explain that why in PCM, change of quantity does not affect price.
Firm is price taker, firm cannot control the price. There are many firms, change in their
own quanity only contribute to a small change in price.