BEC - Economics

Question 1

The elasticity of demand is measured by?

Answer 1

the % change in quantity is greater than the % change in price

Question 2

What is the effect on the quantity of a commodity supplied relative to demand as a result of a government-mandated price ceiling or price floor?

Answer 2

Price ceiling = Quantity Shortage

Price floor = Quantity Surplus

Question 3

A supply schedule (or supply curve) shows the relationship between the quantity of a commodity that will be supplied during a period of time and…

Answer 3

The selling price of the commodity.

Question 4

A company has a policy of frequently cutting prices to increase sales. Product demand is significantly elastic. What impact would this have on the company’s situation?

Answer 4

Quantity increases proportionally more than the price declines.

Question 5

The demand for a commodity would increase when the price of a

Answer 5

Substitute commodity increases and complimentary commodity decreases.

Question 6

According to the law of diminishing returns:

Answer 6

The marginal product (output) falls as more units of a variable input are added to fixed inputs.

Question 7

Allen buys only beer and pizza. When the price of beer is $2.00 per bottle and the price of pizza is $10.00, Allen maximizes his total utility (satisfaction) by buying 5 beers and 4 pizzas. If the marginal utility of the 5th beer is 100 utils, which one of the following would be the marginal utility of the 4th pizza?

Answer 7

When total utility is maximized, the marginal utility (MU) of the last dollar spent on each and every item acquired must be the same. Thus, total utility is maximized when: MU of beers/price of beers = MU of pizza/price of pizza. Using the values given: 100 utils/$2.00 = MU of pizza/$10.00. The equation for beers = 100/$2 = 50 utils per dollar. The MU of pizza also must be 50 utils per dollar. Therefore, 50 = MU of pizza/$10 = 500 utils.

Question 8

As an individual acquires (or consumes) more units of a commodity over a given time period, what is the effect on the individual’s total utility and marginal utility?

Answer 8

As an individual acquires or consumes more units of a commodity, the total satisfaction or utility derived increases with each unit; however, the additional (marginal) utility derived from each additional unit acquired or consumed decreases.

Question 9

The demand curve for a product reflects?

Answer 9

The impact that price has on the amount of a product purchased.

Question 10

What is the assumption for long-run analysis and short-run analysis?

Answer 10

In the long run, it is assumed that all inputs to the production process can be varied, including the number and size of production facilities.
In the short run, it is assumed that most inputs are variable and that only some inputs are fixed.

Question 11

in a conventional graph, the ‘intercept’ is the point at which:

Answer 11

the dependent variable intersects the Y axis, and where the independent variable has the lowest value, usually zero

Question 12

elasticity of supply?

Answer 12

%change in quantity supplied/%change in price

Question 13

how do you prevent deflation?

Answer 13

you increase the money supply by lowering the reserve requirement, or lowering interest rates which stimulates demand and increases the general price level

Question 14

what does an import quota do?

Answer 14

it restricts the quantity of a commodity that can be brought into the country from foreign providers. The biggest beneficiary is the domestic suppliers of the commodity.

Question 15

3 generic strategies by Michael Porter?

Answer 15

cost leadership, differentiation, and focus

Question 16

which framework is for gauging the attractiveness of the competitive environment of an industry?

Answer 16

five forces

Question 17

what analysis method is for evaluating a macro-environment?

Answer 17

PEST analysis: political, economic, social, and technological characteristics

Question 18

what are the five forces?

Answer 18

1-threat of new competition entering the market2-threat of substitute goods or services3-bargaining power of buyers of the industry good or service4-bargaining power of suppliers of the inputs used in the industry5-intensity of rivalry

Question 19

what does SWOT stand for?

Answer 19

strengths and weaknesses of the entity, and the opportunities and threats faced by the entity

Question 20

a positive GDP gap exists when:

Answer 20

potential GDP exceeds real GDP. This means that the economy is operating at less than full capacity- which implies unemployment and under-utilized plant and equipment

Question 21

2 largest export countries?

Answer 21

Germany and China- each about 9%

Question 22

US share of worldwide GDP is:

Answer 22

approximately 25%

Question 23

which type of employment is not considered in calculating full employment?

Answer 23

cyclical- the other 3 types can exist and still have “full employment”

Question 24

freely fluctuating exchange rates:

Answer 24

automatically correct a lack of equilibrium in the balance of payments

Question 25

who controls fiscal and monetary policy?

Answer 25

The Fed controls monetary policy(money supply), and Congress controls fiscal policy(gov spending and taxes)

Question 26

calculate marginal propensity to consume:

Answer 26

change in spending over change in disposable income

Question 27

calculate avg propensity to consume:

Answer 27

% of disposable income spent on consumable goods

Question 28

the preventive measure for deflation?

Answer 28

increase the money supply. this stimulates demand and increases the general price level

Question 29

how does deflation distort reported income?

Answer 29

depreciation is NOT reflective of current fixed-asset replacement costs?

Question 30

what is SWOT concerned with?

Answer 30

the relationship between an entity and its environment

Question 31

what is the 5 forces concerned with?

Answer 31

the nature, operating attractiveness, and probably long-run profitability of a competitive industry

Question 32

what is the basis for a natural monopoly?

Answer 32

economics of scale- or an increasing return to scale.

Question 33

in a perfectly competitive market, what is the best level of output for the firm?

Answer 33

Marginal revenue = marginal cost.

Question 34

the direct exchange rate expresses the domestic price (in dollars) of:

Answer 34

one unit of foreign currency. 1 euro to $1.15

Question 35

PEST is acronym for:

Answer 35

political, economic, social, and technological

Question 36

What does PESTEL add to PEST?

Answer 36

E= environmental factors L= legal factors

Question 37

The aggregate demand and aggregate supply curves intersect at a price and quantity that are?

Answer 37

Either at, above, or below potential GDP

Question 38

Government-imposed trade barriers may restrict:

Answer 38

Imports & Exports

Question 39

The concept of comparative advantage in international business activity is based on:

Answer 39

Differences in relative opportunity costs

Question 40

In the long run, the imposition of an import quota on a commodity is likely to provide the greatest direct benefit to:

Answer 40

Domestic suppliers of the commodity. This limitation on foreign quantity will enable domestic suppliers to sell more of the commodity produced domestically and at a higher price.