Introduction To Economic Test CHPT 9,10 &14.docx NEW

UNIVERSITY OF BELIZE
Belmopan Campus
Introduction to Economic
Test 2
Chapter 9,10 & 14
Submission Date: Thursday 7th May 2020
Name(s): ____David G. Valdez_______________ _________________

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Instructions:
 This test includes content from chapter 9, 10 & 14 and values a maximum of 100 points.
 Test to be done individually.
 Answer all questions.
 Where you are asked to give an example/illustration, such must not be taken from your
textbook.
 When doing research, reference correctly.
 Writing style: Font 12, line space-1 ½, justify paragraphs.
 A maximum of 1% will be deducted from overall grade for unprofessional presentation
of paper.
 Test to be submitted via hard copy.
 There will be a 1% deduction per day for late submission of paper.
 All work must be proofread thoroughly before submitting. Your writing skills will also
be graded (i.e. Grammar, punctuations, spelling, sentence, paragraph structure, etc.)
1
Definition
Kindly provide definition for the following below. 2pts each
1. Economic Profit: An economic profit or loss is the difference between the revenue received
from the sale of an output and the costs of all inputs used and any opportunity costs. In
calculating economic profit, opportunity costs and explicit costs are deducted from revenues
earned.
2. Price War: A price war is a competitive exchange among rival companies who lower the
price points on their products, in a strategic attempt to undercut one another and capture greater
market share. A price war may be used to increase revenue in the short term, or it may be
employed as a longer-term strategy.
3. Monopoly: A market structure characterized by a single seller, selling a unique product in the
market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods
with no close substitute. He enjoys the power of setting the price for his goods
4. Price leader: A price leader is a company that exercises control in determining the price of
goods and services in a market. The price leader’s actions leave the other competitors with few
or no options other than to adjust their prices to match the price set by the price leader.
5. Frictional Unemployment: Frictional unemployment is the result of employment transitions

within an economy. Frictional unemployment naturally occurs even in a growing, stable
economy. Workers leaving their jobs or new workers entering the workforce both add to
frictional unemployment.
Multiple Choice 4pts each
2
1. Refer to the ABOVE diagram. A price of $0.50 in this market will result in:
a) Equilibrium of 200
b) A shortage of 160
c) A surplus of 160
d) None of the above
2. Which of the following is inconsistent with “Monopoly”?

a) Only few sellers are in the market
b) There are barriers to enter the market
c) Marginal Revenue is less than Price
d) Firm is a Price Maker
3. Which of the following is most likely a Variable Cost for a business?

a) Rent payments for a warehouse
b) Cost of equipment installed in the factory
c) Payment of electricity
d) Loan payment on funds borrowed for a newly constructed building
4. Who is an “Unemployed” person?

a) Someone who is physically and mentally unable to work
b) Someone who is available and looking for work but is not employed
c) Someone who does not have the time to hold a full-time job
d) Someone who works but does not get paid
5. “Mary Magdalene prefers staying at home and looking after her children”, she is
considered to be:
a) Not in the Labor Force
b) Unemployed
c) Discouraged worker
d) In the Labor Force but unwilling to work
6. Inflation can be defined as…

a) Rise in the overall income of consumers
b) Reduction in the price of goods and services
c) Rise in the overall Price Level in an economy
d.) Decrease in the overall quantity demanded
7. Nominal GDP can be defined as …

a) GDP at current prices
b) The value of GDP using real numbers
c) GDP at constant prices
d) GDP evaluated using frictional unemployment
Problem Solving
3
output TVC TFC TC AVC AFC AC MC MR=P TR TR - TC
TVC+TF (Profit or
(Q) TVC/Q TFC/Q AFC+AVF TVC/Q P*Q
C Loss)
0 0 330 330 0 0 0 0 160 0 -330
1 100 330 430 100 330 430 100 160 160 -270
2 150 330 480 75 165 240 50 160 320 -160
3 180 330 510 60 110 170 30 160 480 -30
4 260 330 590 65 83 148 80 160 640 50
5 380 330 710 76 66 142 120 160 800 90
6 540 330 870 90 55 145 160 160 960 90
7 764 330 1094 109 47 156 224 160 1120 26
8 1060 330 1390 133 41 174 296 160 1280 -110
9 1464 330 1794 163 37 199 404 160 1440 -354
1. Calculate the following: 4pts each
1. Total Cost
2. Average Variable cost
3. Average cost
4. Marginal Cost
5. Total Revenue
6. Profit
7. Graph MC, AC, AVC
4
2. Calculate Price Index and Real GDP 14pts
Year Price Price Index Nominal Real GDP

Level (base yr. 2000) GDP
2000 200 100 $2000 20
Billion
2001 209 104.5 $2360 22.58
Billion
2002 218 109 $2600 23.85
Billion
2003 227 113.5 $3000 26.43
Billion
2004 236 118 $3260 27.63
Billion
2005 245 122.5 $3600 29.38
Billion
2006 254 127 $4000 31.50
Billion
Calculations:
Price Index formula = (Cost of market in a given year/Cost of market basket at base) X 100
(200/200) x100=100
(209/200) x100=104.5
(218/200) x100= 109
(227/200) x100=113.5
(236/200) x100= 118
(245/200) x100= 122.5
(254/200) x100= 127
Real GDP= Nominal GDP/ Price Index
= $2,000/100=20
=2360/104.5=22.58
=2600/109=23.85
=3000/113.5= 26.43
5
= 3260/118= 27.63
=3600/122.5=29.38
=4000/127= 31.50
3. Calculate the following using 2008 Financial Year. 20 pts

a. GDP
b. GNP
c. NNP
d. NI
6
A. GDP formula = C+I+G+(X-M)
= 10,057.90+1,993.50+2,882.40+(-669.20)
= 14,264.60
B. GNP Formula= C+I+G+(X-M) + Net factor Income earned from

abroad
= 14,264.60 + 789.30 – 665.10
= 14,264.60+ 124.20
= 14,388.80
C. NNP Formula= GNP- Depreciation

= 14,388.8 – 1,832.30
= 12,556.50
D. NI Formula= Total revenues – total expenses

= 12,418.40
7
Reference:
Kagan, J. (2019). Frictional Unemployment. Retrieved from

https://www.investopedia.com/terms/f/frictionalunemployment.asp
Kenton, W. (2019). Price War. Retrieved from
https://www.investopedia.com/terms/p/price-war.asp
Kenton, W. (2017) What Is a Monopoly? Retrieved from
https://www.investopedia.com/terms/m/monopoly.asp
Tardi, C. (2019). What is Price Leadership? Retrieved from
https://www.investopedia.com/terms/p/price-leadership.asp
Tuovila, A. (2019). Economic Profit (or Loss). Retrieved from
https://www.investopedia.com/terms/e/economicprofit.asp

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UNIVERSITY OF BELIZE

Name(s): David G. Valdez_ _______

5. Frictional Unemployment: Frictional unemployment is the result of employment transitions

Multiple Choice 4pts each

2. Which of the following is inconsistent with “Monopoly”?

3. Which of the following is most likely a Variable Cost for a business?

4. Who is an “Unemployed” person?

6. Inflation can be defined as…

7. Nominal GDP can be defined as …

1. Calculate the following: 4pts each

Year Price Price Index Nominal Real GDP

3. Calculate the following using 2008 Financial Year. 20 pts

B. GNP Formula= C+I+G+(X-M) + Net factor Income earned from

C. NNP Formula= GNP- Depreciation

D. NI Formula= Total revenues – total expenses

Kagan, J. (2019). Frictional Unemployment. Retrieved from

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