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  • Principles of Microeconomics ECO101 Revision Questions: Question One

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    Shoug Sa
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    The document provides sample revision questions for the Principles of Microeconomics course. It includes three questions: [1] Defining scarcity principle, no free lunch principle, and marginal cost with examples; [2] Calculating missing values in a production table and determining levels that satisfy the cost-benefit test; [3] Explaining the demand function and drawing it with variables. The questions cover key microeconomics concepts like scarcity, opportunity cost, production analysis, and demand.

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    ECO101-Revision Quistions 1

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    The document provides sample revision questions for the Principles of Microeconomics course. It includes three questions: [1] Defining scarcity principle, no free lunch principle, and marginal cost with examples; [2] Calculating missing values in a production table and determining levels that satisfy the cost-benefit test; [3] Explaining the demand function and drawing it with variables. The questions cover key microeconomics concepts like scarcity, opportunity cost, production analysis, and demand.

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    © All Rights Reserved
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    26 views2 pages

    Principles of Microeconomics ECO101 Revision Questions: Question One

    Uploaded by

    Shoug Sa
    The document provides sample revision questions for the Principles of Microeconomics course. It includes three questions: [1] Defining scarcity principle, no free lunch principle, and marginal cost with examples; [2] Calculating missing values in a production table and determining levels that satisfy the cost-benefit test; [3] Explaining the demand function and drawing it with variables. The questions cover key microeconomics concepts like scarcity, opportunity cost, production analysis, and demand.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Principles of Microeconomics

    ECO101

    Revision Questions

    Question One
    Define and provide real world example for each of the following terms:
    a. The scarcity principle:

    b. No Free-Lunch Principle:

    c. Marginal cost.

    Suggested answer
    You can provide the below definitions:
    a. The Scarcity Principle: having more of any good thing necessarily requires
    having less of something else
    b. It is another expression of opportunity Cost of an activity (or a choice). Even if
    you are not paying for lunch, somebody, somehow, always has to pay for it
    even if you are not paying for lunch, somebody, somehow, always has to pay
    for it The value of what must be foregone in order to undertake that activity
    and we can say that it is the value of the next best alternative to the choice
    taken. It considers explicit and implicit costs.
    c. Marginal cost is the increase in total cost from one additional unit of an activity
    Markers can give partial marks if the question is not fully answered, and they can use
    their professional judgment in such situations.

    Question Two

    1
    The table below contains information about different levels of production and the
    total cost for each level. The marginal revenue (marginal benefit) of producing any
    extra unit equals ($23). MB=MR=$23

    Quantity Total cost Average cost=Total Marginal cost


    cost/quantity
    0 0 - -
    1 24 24/1=24 24-0=24
    2 40 40/2=20 40-24=16
    3 54 54/3=18 54-40=14
    4 66 66/4=16.5 66-54=12
    5 100 100/5=20 100-66=34

    Required:
    a) Find the missing values in the table above.
    b) Determine the levels of production that satisfy the cost-benefit test.

    Quantity Total cost Average cost Marginal cost


    0 0
    1 24 24 24
    2 40 20 16
    3 54 18 14
    4 66 16.5 12
    5 100 20 34

    For the second part, You should indicate that according to the cost-benefit principle
    the first four levels of production are satisfying the cost benefit test because in these
    levels the marginal benefits ($23) outweigh the marginal cost.

    Question Three
    a) Explain what is meant by the demand function.
    b) Draw the demand function showing its variables on the graph.

    Price

    Demand Curve

    Quantity

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