ECO 105-Principles of Economics (BBA) SPECIAL ASSESSMENT PART I. SELECTED/SHORT
ID: 1137291 • Letter: E
Question
ECO 105-Principles of Economics (BBA) SPECIAL ASSESSMENT PART I. SELECTED/SHORT RESPONSE (60 marks) TRUE OR FALSE (10 marks) 1. The Latin phrase economists use that means "all else equal" is ceteris paribus 1. -2. If coffee and tea are substitutes, then an increase in the price of coffee will result in an increase in the demand for tea. Perfect competition results in less efficient market outcomes. 4. Monopolistic competition is an industry market structure with many firms each able to differentiate their product. 5. The income of U.S. citizens working abroad counts in U.S. GNP. 2. MUTIPLE CHOICE (30 marks) 1) The economy is currently at Point A. The opportunity cost of moving from Point A to Point 8 is the 120 90 40 60 80 Plasma televisions A) 90 LCD televisions that must be forgone to produce 20 additional plasma televisions. B) 30 LCD televisions that must be forgone to produce 60 additional plasma televisions. C) 120 LCD televisions that must be forgone to produce 40 additional plasma televisions. D) 30 LCD televisions that must be forgone to produce 20 additional plasma televisions. Special AssessmentExplanation / Answer
1) True or false
a) Answer: False
Ceteris paribus in Latin means other things equal
b)Answer: True
When there are two substitute products any increase in price of one substitute will automatically increase the demand for other substitute.
C) Answer: True
In the perfect competition the market outcome is low as there will be same product produced or sold by many sellers.
d) Answer: True
One of the characteristics of monopolistic competition is that there will be many sellers who will be able to differentiate the product.
e) Answer: True
The GNP is calculated by considering the income earned by citizens of that country in abroad.
2) As the opportunity cost is moving from A to B the LCD television will decline from 120 to 90 which means 30 LCD TV must be forgone. As in the horizontal axis when the opportunity cost is moving from A to B the plasma TV is increased from 40 to 60 which means there is an increase in production by 20 plasma TV.
Answer: 30 LCD TV must be forgone to produce 20 additional plasma TV
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