DEPARTMENT OF EDUCATION

Division of Cebu Province

ROSARIO NATINAL HIGH SCHOOL
Rosario, Aloguinsan Cebu
MIDTERM EXAMINATION
Applied Economics
Name:_______________________________________Grade Level________________________Date:__________________
TEST I: MULTIPLE CHOICES (No. X 2 20 PTS)
Directions: Each question in the first section is a multiple-choice question with four answer choices, Underline the word or phrase that
corresponds your answers.
1. Which of the following is NOT a factor of production?
A. the water used to cool a nuclear power plant. C. the wages paid to workers.
B. the effort of farmers raising cattle. D. the management skill of a small business owner.
2. Economics is best defined as the study of how people, businesses, governments, and societies.
A. make choices to cope with scarcity. C. attain wealth.
B. choose abundance over scarcity. D. use their infinite resources.
3. In a free-market economy the allocation of resources is determined by:
A. Votes taken by consumers C. A central planning authority
B. By consumer preferences D. The level of profits of firms
4. A rational person does not act unless:
A. The action is ethical C. The action produces marginal costs that exceed marginal
benefits
B. The action produces marginal benefits that exceed marginal costs D. The action makes money for the person
5. The growth of an economy is indicated by an
A. Increase in savings C. Increase in investment
B. Increase in general prices D. Increase in national income
6. An economic system:
A. Requires a grouping of private markets linked to one another.
B. Is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
C. Requires some sort of centralized authority (such as government) to coordinate economic activity.
D. Is a plan or scheme that allows a firm to make money at some other firm's expense.
7. From society's point of view, the economic function of profits and losses is to:
A. Promote the equal distribution of real assets and wealth. C. Achieve full employment and price level stability.
B. Contribute to a equal distribution of income. D. Reallocate resources from less desired to more desired uses.
8. The invisible hand refers to the:
A. Fact that the U.S. tax system redistributes income from rich to poor.
B. Notion that, under competition, decisions motivated by self-interest promote the social interest.
C. Tendency of monopolistic sellers to raise prices above competitive levels.
D. Fact that government controls the functioning of the market system.
9. Two major virtues of the market system are that it:
A. Allocates resources efficiently and allows economic freedom.
B. Results in an equitable personal distribution of income and always maintains full employment.
C. Results in price level stability and a fair personal distribution of income.
D. Eliminates discrimination and minimizes environmental pollution.
10. The two basic markets shown by the simple circular flow model are:
A. Capital goods and consumer goods. C. Free and controlled.
B. Product and resource. D. Household and business.
11. The two basic markets shown by the simple circular flow model are:
A. Capital goods and consumer goods. C. Free and controlled.
B. Product and resource. D. Household and business.
12. Unemployment means that:
A. People are not willing to work at the going wage rate.
B. At the going wage rate, there are people who want to work but cannot find work.
C. There are some people who will not work at the going wage rate.
D. There is excess demand in the labor market.
13. Which one of the following is a normative statement?
A. The richest 10 per cent of the population has had a bigger percentage increase in incomes over the past 10 years than the poorest 10 per
cent.
B. The proportion of people's income paid in taxes is higher under this government than under the previous one.
C. Inflation is rising.
D. Inequality in the distribution of income is a more serious problem than unemployment.
14. Which of the following issues is related to microeconomics?
A. The impact of oil prices on car production C. The impact of money on inflation
B. The impact of technology on economic growth D. The impact of the deficit on saving
15. Factors of production are:
A. Inputs into the production process. C. Weather, social, and political conditions that affect production.
B. The physical relationships between economic inputs and outputs. D. The mathematical calculations firms make to determine production.
16. Scarcity is a condition that exists when
A. There is a fixed supply of resources. C. There is a large demand for a product.
B. Resources are not able to meet the entire demand for a product. D. All of the above.
17. Factors of production are :
A. Inputs into the production process. C. Weather, social, and political conditions that affect production.
B. The physical relationships between economic inputs and outputs. D. The mathematical calculations firms make to determine
production.
18. Scarcity is a condition that exists when
A. There is a fixed supply of resources. C. There is a large demand for a product.
B. Resources are not able to meet the entire demand for a product. D. All of the above.
19. One of the most important differences between a firm's economic profit and its accounting profit is the subtraction of:
A. Costs incurred when hiring labor, capital, and land. C. Any explicit cost incurred by the entrepreneur for risk taking.
B. Any implicit charges for the use of capital owned by the entrepreneur. D. Any taxes on the retained earnings of the firm.
E. The costs of distributing the firm's output.
20. Which two of the following are characteristics of the „principal-agent‟ problem?
A. Ownership and control in hands of same people C. Ownership and control in hands of different people
B. Shareholders and managers pursue different objectives D. Shareholders and managers pursue same objectives
E. Sole traders are the dominant form of business organization
A. b) and e) C. b) and d)
B. b) and c) D. a) and e) E. a) and c)
21. Economic profit is…
A. The difference between total revenue and explicit costs.
B. The difference between total revenue and the opportunity cost of all the resources used in production.
C. The difference between accounting profit and explicit costs.
D. The difference between accounting profit and the opportunity cost of the market-supplied resources used by the firm.
22. The three fundamental questions of economic organization are:
A. When, for whom, and how. C. How, what, and for whom.
B. Who, how, and when. D. What, who, and why.
23. Money is
A. Backed by gold in Fort Knox C. The same as income.
B. The value of all coins and currency in circulation at any time. D. Anything that is generally accepted as a medium of exchange.
24. Microeconomics focuses on all of the following EXCEPT
A. The effect of increasing the money supply on inflation. C. The purchasing decisions that an individual consumer makes.
B. The effect of an increase in the tax on cigarettes on cigarette sales. D. The hiring decisions that a business makes.
25. Which of the following is not required for a country to be producing at a point on its production possibility frontier?
A. Full employment of labor. C. All producers using the latest technology.
B. Stable prices. D. All producers having productive efficiency.
26. Which of the following statements is true?
A. The production possibility frontier is steeper at the right end than the left because some resources are better suited to making some
products than others.
B. The production possibility frontier is straight because some resources are better suited to making some products than others.
C. The production possibility frontier is steeper at the left end than the right because some resources are better suited to making some
products than others.
D. The production possibility passes the point, which represents total wants in the economy.
27. All the following government policies are likely to increase the quantity of some products that are produced. But with one
policy, this effect is a side-effect rather than the aim. Which policy is that?
A. A policy intended to improve efficiency. C. The introduction of subsidies on some products.
B. A policy intended to reduce unemployment. D. The introduction of taxes on the rich and transfers to the poor.
28. Microeconomics focuses on all of the following EXCEPT
A. purchasing decisions that an individual consumer makes. C. effect of increasing the money supply on inflation.
B. effect on cigarette sales of an increase in the tax on cigarettes. D. hiring decisions made by a business.
29. All the following government policies are likely to increase the quantity of some products that are produced. But with one
policy, this effect is a side-effect rather than the aim. Which policy is that?
A. A policy intended to improve efficiency. C. The introduction of subsidies on some products.
B. A policy intended to reduce unemployment. D. The introduction of taxes on the rich and transfers to the poor.
30. Microeconomics focuses on all of the following EXCEPT
A. purchasing decisions that an individual consumer makes. C. effect of increasing the money supply on inflation.
B. effect on cigarette sales of an increase in the tax on cigarettes. D. hiring decisions made by a business.
31. Which of the following is not an argument against government intervention in a market?
A. If the government reduces output below the free market level, consumer surplus will fall.
B. If the government reduces output below the free market level, producer surplus will fall.
C. If the government raises output above the free market level, consumers will get no benefit from the extra units of output.
D. If the government raises output above the free market level, some units of output will cost more to produce than the value placed on them
by consumers.
32. Suppose a consumer faces a rise in the price of product A while the consumer's income remains unchanged. Which of the
following statements about the income effect is false?
A. There is no income effect because the consumer's income is unchanged.
B. Between them the income and substitution effects cover the entire change in the quantity that the consumer demands.
C. If the product is normal, the income effect works in the same direction as the substitution effect.
D. If the product is inferior, the income effect works in the opposite direction to the substitution effect.
33. According to critical alternative views, what is poverty?
A. A monetary condition brought about by people's own laziness.
B. A monetary condition where people do not have enough to satisfy basic needs.
C. A monetary and non-monetary condition where people lack access to community regulated common resources, opportunities, and income.
D. All of the options given are correct.
34. The supply of a good refers to:
A. Stock available for sale C. Total stock in the warehouse
B. Actual Production of the good D. Quantity of the good offered for sale at a particular price per unit of time
35. In which of the following market structure is the degree of control over the price of its product by a firm very large?
A. Imperfect competition C. Perfect competition
B. Monopoly D. In A and B both
36. Which one of the following is NOT the objective of fiscal policy of government of India?
A. Full employment C. Price stability
B. Regulation of inter-state trade D. Economic growth
37. When the largest 3 or 4 firms in an industry produce 70% or more of the industry's total output, the industry is classified.
A. a competitive monopoly C. a pure monopoly
B. monopolistic competition D. an oligopoly
38. The government has the greatest degree of involvement in which of the following?
A. Traditional Economy C. Command Economy
B. Capitalist Economy D. Socialistic Economy
39. The basic physical and organizational structures and facilities (e.g. buildings, roads, and power supplies) needed for the
operation of a society or enterprise
A. Factors of Production C. Capital Resources
B. Infrastructure D. Economic Resources
40. Factors that cause a producer’s average cost per unit to fall as output rises.
A. Natural monopoly C. Start-up costs
B. Economies of scale D. Barrier to entry

Test II: Application (10 pts each)

1. Differentiate GDP and GNP as an economic indicator
2. Differentiate Unemployment vs Underemployment

Prepared by

JEROME B. BENTING
Subject Teacher