Republic of the Philippines

Mindanao State University at Naawan

College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

Part I

Sample Questions in

Economics and Agricultural Marketing

Section 1. Introduction C. What, where, when and how the

production will take place
1. Of the following economics may best be defined as
D. Where to obtain goods, how much must
the study of:
be paid for them, when they must
A. How to allocate the family income
9. Which of the following is normative statement?
B. How to maximize profit
A. A guaranteed annual income will have a
C. How resources are used to produce goods
disincentive effect on work
and services to be allocated among
B. If price controls are removed the energy
individuals in the society
shortage will be somewhat alleviated.
D. Why resources are scarce as they are
C. Price controls on oil and gasoline are only
2. Economics differs from other social sciences because
fair.
of its focus on
D. The minimum wage law causes
A. Social choices
unemployment among teenagers.
B. Social interactions
10. Which of the following can be classified under
C. Scarcity
macroeconomic problem?
D. Social behavior
A. The Philippines balance of payment
3. The term “ceteris paribus” means
B. The yearly inflation rate
A. Other things held constant
C. The annual salaries of government
B. Absence of government intervention
employees
C. Scarcity or limited
D. All of the above
D. Closed economy
11. The economic problem “What to produce?” refers to
4. Theories in science:
A. The amounts and type of commodities
A. Are never based on hunches
produced is an economy
B. Once simplified relations, apply forever
B. The beneficiaries from the choices made in
C. Are simplified relations describing reality
a society
D. Are unconditional predictions about the
C. The tastes and preferences of economic
future
agents
5. Which of the following is the most basic of the
D. The way in which resources are combined
subjects with which the study of economics must
in order to produce the commodities
seek to deal?
12. The economic problem “How to produce?” refers to
A. Markets
A. The amounts and type of commodities
B. Money
produced is an economy
C. Profit seeking
B. The beneficiaries from the choices made in
D. Scarcity
a society
6. Scarcity in economics refers basically to:
C. The tastes and preferences of economic
A. Monopolization of existing supplies of
agents
good
D. The way in which resources are combined
B. Monopolization of resources to produce
in order to produce the commodities
goods
13. The economic problem “For whom to produce?”
C. Monopolization of outlets to sell goods
refers to
D. None of the above
A. The amounts and type of commodities
7. Which one of the following is not an economic good?
produced is an economy
A. Sunlight
B. The beneficiaries from the choices made
B. A space satellite
in a society
C. Free parking on the street
C. The tastes and preferences of economic
D. A free city concert in the park
agents
8. Basic economic questions that any economy must
D. The way in which resources are combined
address
in order to produce the commodities
A. Who must be the leader, where she/he
14. “Distribution in economics refers to:
must say, how much she/he will be paid
A. Retailing, wholesaling and transportation
and what must she/he do
B. What to produce
B. What and how much to produce, hot ow
C. How to produce
produce them, and for whom the benefits
D. For whom to produce
of production must go

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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

C. The economy to specialize in the production

of one good
15. Which of the following best illustrates the notion of
D. The production possibilities frontier to
economic cost?
become a straight line
A. In the production of corn on farm, the
farmer typically spends for the use of land,
22. The production possibilities frontier is concave
labor and capital.
(bowed out) from below because:
B. To watch a movie in Rockwell, one has to
A. Of the principle of increasing opportunity
spend even more for transport
cost
C. In deciding to spend an evening with
B. Of the law of diminishing returns
friends, one is giving up time that could
C. Of the principle of division of labor
have been used for studies.
D. Productive resources are scarce and
D. In eating at a fast chain, one typically
transferable among industries
spends anywhere from P60-P80
23. Which of the following be held constant in drawing
16. Which of the following describes the term
up a production possibilities frontier?
“opportunity cost”?
A. The total quantities of resources
A. Price paid for goods and services
B. The quality of money
B. Costs of producing goods and services
C. Price
C. Value of best foregone alternative
D. The allocation of resources among alternate
D. Benefits derived from a good or service
uses
17. What is the opportunity cost to you of driving to a
24. The law of increasing (relative) opportunity cost
free rock concert in some outlying farm area?
expresses the fact that:
A. There is none since the concert is free
A. The government overspends and causes
B. The soft drinks you buy from the vendor on
inflation
the grounds
B. Society cannot be on its production
C. Enjoyment of the music
possibilities frontier
D. The cost of the gasoline
C. Society must sacrifice ever-increasing
18. Factors of production are:
amounts of one good to get equal.
A. Inputs
D. Labor unions tend to push up money wages
B. Outputs
25. A shift in the production possibilities frontier results
C. Only land and capital
from
D. Do not include labor
A. Unemployment
19. Assuming an economy is producing only rice and
B. Inflation
vegetables, being on the possibilities frontier means
C. Changes in production techniques
that:
D. Changes in the combination of goods
A. It is impossible to produce any more
produced
vegetables
26. The production possibilities of a country can be said
B. It is impossible to produce more rice
to shift outward as a result of which of the
C. More vegetables can be produced only by
following?
doing without some rice
A. Expenditures on new plants & equipment
D. If the society becomes more productive in
are constantly being made
producing rice, then we can have more rice
B. The population increases
but not more vegetables
C. Better methods of production are
20. If the economy is operating inside the production
developed
possibilities frontier, then
D. All of the above
A. All the resources are used efficiently
B. The economy cannot produce more of one
good without giving up more of the other Use the accompanying figure and the list of below to
good answer question 27 to 30.
C. The economy experienced technical change
Cattle (000 heads)
D. The resources are not fully utilized in
production
21. Technological improvements will cause
A. An inward shift in the production
possibilities frontier
B. An outward shift in the production
possibilities frontier

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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

D. Lesser percentage change in quantity

demanded relative to percentage change in
prices
3. A shortage of hybrid rice seeds raises prices of seeds
by virtue of:
A. The law of diminishing returns
B. The law of elastic demand
C. The downward-sloping demand curve
D. All of the above
4. A change in which of the following will not change
the demand for rental housing?
A. Family size
27. Point g in the figure indicates that: B. Rental size
A. There are some unemployed resources in C. Incomes of consumers
the economy D. Growth in the community
B. Increasing cost to producing cattle
C. It is beyond the economy’s productive
capacity
D. Increasing costs to producing corn
5. Advertisements of Rejoice hot oil shampoo have
28. Point h indicates that:
solicited an increase in the number of consumers
A. There are some unemployed resources in
that use the product. From this we can conclude
the economy
that:
B. Increasing cost to producing cattle
A. The demand of Rejoice hot oil shampoo
C. It is beyond the economy’s productive
will increase
capacity
B. The quantity supplied for Palmolive
D. Increasing costs to producing corn
shampoo increase
29. Moving from points f to e to a indicates that:
C. The quantities demand for Rejoice hot oil
A. There are some unemployed resources in
shampoo will increase
the economy
D. Both A and B can occur
B. Increasing cost to producing cattle
6. During summer, sore eyes become a common
C. It is beyond the economy’s productive
problem which causes an increase in the demand for
capacity
eye glasses. In this case, demand is determined by:
D. Increasing costs to producing corn
A. Changes in the tastes and preferences
30. The opportunity cost of producing 2 million cans of
B. Changes in technology
corn:
C. Changes in income
A. Cannot be determined since prices are not
D. Expectation about the future
given in the graph
7. An increase in price will lead to a lower quantity
B. Is 10,000 heads to cattle
demanded because:
C. Is 20,000 heads to cattle
A. Suppliers will supply only the smaller
D. Is 22,000 heads to cattle since that is what
amount
could be produced if no corn were grown
B. Some individuals purchase more of the
Section 2. Demand, Supply, and Market Equilibrium good
C. Individuals cut back their purchases of the
1. Which of the following is not a requirement for a good
perfectly competitive market? D. A and B
A. Many buyers 8. One reason that the quality demanded of a good
B. Many sellers tend of rise as its price falls is:
C. Free entry and exit A. The decrease in price shift the demand
D. Advertising curve upward
2. The demand curve is typified by a(an): B. People feel a bit richer and increase their
A. Positive relationship between price and demand for the good
quantity demanded C. Demand has to increase to restore
B. Inverse relationship between price and equilibrium after a price fall
quantity demanded D. At lower price suppliers are willing to supply
C. Greater percent change in quantity more
demanded relative to percentage change 9. The quality of coffee bought in the market is likely to
in prices increase when:

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confidential and solely for the use of recipient and may not be reproduced or circulated without the consent of
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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

A. The price of tea increases B. Increases in the price of factors of

B. The price of coffee increases production important to this good
C. Coffee is linked to cancer by new research C. Decreases in the price of factors of
D. The general income level of the population production important to this good
drop D. None of the above
10. Which of the following will not cause a shift in the 17. A market supply curve:
demand curve of beef? A. Can be obtained by adding the supply
A. A rise in the price of some goods which curves of all the biggest sellers in the
consumers regards as substitute for beef market
B. A change in the price of beef B. Always slopes downward
C. An increase in incomes of beef consumers C. Tells how sellers as a group will be behave
D. A change in people’s tastes with respect to in a perfectly competitive market
beef D. Can only be derived if the market is
11. If there is a negative relationship between the price nationalized
of good A and the demand for good B., then: 18. The market supply of a product is said to increase
A. Goods A and B are substitutes when:
B. Goods A and B are complements A. Movie stars endorse it on TV
C. Good B is an inferior good B. Its supply curve shifts to the right
D. Good B is a normal good C. Its supply curve shift upwards
D. The price of the product increases
19. Advertising agencies use popular movie stars to
endorse products because it is expected that doing
so will:
12. Studies revealed that margarine is and inferior good. A. Increase the supply of the product in the
Therefore, an increase in income will results in: market, thus raising its demand
A. An increase in demand for margarine B. Add prestige to the product, allowing the
B. A shift to the left of the demand curve for seller to increase its price
margarine C. Influence consumer tastes and preferences
C. A shortage of margarine towards the product
D. An increase in the supply of margarine D. Strengthen the advertising industry
13. Market research has determined that during hard
economic times, sales of local canned 20. What is the difference between a change in supply
sardines improve. This indicates that: and a change in quality supplied?
A. Local canned sardines are inferior goods A. Nothing, they mean the same thing
B. Canned sardine companies have effective B. The first implies a shift of the supply curve
advertising campaigns upwards, while the second implies a change
C. Imported sardines are bought only by rich in the slope of the supply curve
people C. The first implies a shift in the entire supply
D. Petroleum prices have no effect on the curve, while the second is just a movement
market for sardines along the same supply curve
14. A drought would probably: D. The first is a movement along the same
A. Cause wheat suppliers to move up their supply curve, while the second implies a
supply curves to a higher price shift of the entire supply curve
B. Induce greater demand for wheat, yielding 21. A price at which the quantities people wish to
a higher price produce exceeds the quantities that people wish to
C. Cause people to reduce their demand for buy (assume normal goods)
wheat A. Will cause a shift in the demand curve
D. Induce a leftward shift in wheat’s supply B. Will cause a shift in the supply curve
curve C. Lies above the equilibrium price
15. Diminishing returns implies: D. Lies below the equilibrium price
A. Upward-sloping demand curves 22. In a competitive marker, price is determined
B. Downward-sloping demand curves exclusively by:
C. Upward-sloping supply curves A. The costs of producing the good in question
D. Downward-sloping supply curves B. The supply of the good
16. For any given price of good X an increase in supply of C. The decisions of both buyers and sellers in
good X can be expected to be systematically caused the market
by: D. The interaction of tastes and demand
A. Increase in the prices of other commodities

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confidential and solely for the use of recipient and may not be reproduced or circulated without the consent of
the authors.
 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

For questions 23-24, refer to the following: 30. In the figure, if E was the old equilibrium in the
market for wheat, and E’ the new one, describe what
Given the demand and supply equations for banana:
most likely caused the change
23. The equilibrium price of banana is A. Consumer income rose, causing a supply
A. 5 shift
B. 4 B. Bad weather caused a supply shift
C. 22.50 C. Consumer income rose, causing a demand
D. 9 shift
24. The equilibrium quantity of banana is: D. Supply and demand both shifted
A. 20
B. 16
C. 23
D. 22.50
25. If the demand schedule is written as P = 100 - 4Q,
and the supply schedule as P = 40 + 2Q, the
equilibrium price and quantity are:
A. P = 60, Q = 10
B. P = 10, Q = 6
C. P = 40, Q = 6
D. P = 20, Q = 20
26. Which of the following statements is incorrect? 31. Which of the following statements is incorrect?
(Assume upward sloping supply curve) Assume upward-sloping supply curves. (Hint: try to
A. If supply curve shifts right and demand draw diagram)
remains constant, equilibrium price will A. If supply shifts and demand remains
rise constant, equilibrium price will rise
B. If demand curve shifts right and supply B. If demand shifts left and supply increase,
remains constant, equilibrium price will rise equilibrium price will rise
C. If supply curve shifts right and demand C. If supply shifts right and demand shift left,
curve shifts left, equilibrium price will fall equilibrium price will fall
D. Demand curve shifts right and supply curve D. If demand shifts right and supply shifts left,
shifts left, equilibrium price will rise price will rise
32. If you were a government official and wanted to
27. If market demands shift sharply to the left as market raise the price of soybean without imposing a price
supply moves to the right, we would expect: support, which of the following actions would you
A. The same price to prevail take?
B. Price and quantity to fall A. Take soybean from government storage and
C. Price to fall while quantity may or may not sell it on the open market
change B. Encourage the farmers to use more
fertilizer on their soybean-growing land
D. Quantity to fall while price may or may not
C. Try to lower the price of milk
change
D. Encourage farmers to grow less soybean
28. In a standard supply-and-demand diagram, what
33. If the economy is fully employed, an upward shift in
happens when demand decreases?
the demand schedule for asparagus alone:
A. Price declines and quantity demanded rises
A. Cannot change the output for asparagus
B. Price rises and quantity demanded declines
B. Will lead to a gradual fall in the price of
C. Price and quality supplied rise
asparagus
D. Price and quantity supplied decline
C. Will lead to an increase in the quantity of
29. A reason why long run supply curve slopes upward
asparagus supplied with consequent
and to the right is:
reductions in the supply of other
A. People is not willing to pay a higher price
commodities
for more goods
D. Will lead to inflation with no alteration in
B. Expanded production may require the use
the output of other commodities
of superior resources
34. Given the supply curve for pork chops, a reduction in
C. Expanded industry output might cause a
the price of tender loin will tend to:
labor shortage and subsequently a rise in
A. Shift the demand curve for pork chops to
the wage rate and the cost of production
the right
D. Extra production brings in more efficient,
B. Shift the demand curve for tender loin to
lower-cost producers
the right
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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

C. Raise the price of pork chops D. Cannot be determined

D. Lower the price of pork chops 7. If a store sells 500 bottle of perfume a month when
35. A false reason to explain why a supply curves slopes the price is P6 and only sells 460 bottles a month
upward and to the right is: when the price rises to P7, then the price elasticity of
A. Introduction of new technology demand is:
B. People are willing to pay a higher price for A. 0.54 and inelastic
more goods B. 1.85 and elastic
C. Expanded production may require the use C. 1.85 and inelastic
of inferior resources D. 0.54 and elastic
D. Expanded production brings in less efficient, 8. You hate washing dishes so you load up on paper
higher-cost producers plates every time you shop. No matter how many
paper plates you hoard, you always pay the same
Section 3. Elasticities of Demand and Supply
price per plate. To you the supply curve of paper
1. Which of the following is LEAST likely to have an plates in each period is:
elastic demand? A. Perfectly inelastic
A. Gasoline B. Elastic
B. Imported wine C. Perfectly elastic
C. Cars D. Unitary elastic
D. Jewelries 9. If TRITRAN raises bus fares causing riders to each the
2. “Coffee to me is an essential – I’ve got to have it no elastic range of their demand curve for bus rides,
matter what the price”. This implies that for that TRITRAN’s:
particular individual from whom this statement was A. Revenues would rise
quoted, his demand for coffee is B. Revenues would fall
A. Cross price elastic C. Revenues would remain unchanged
B. Price elastic D. Revenues would fall and number of people
C. Price inelastic riding buses would rise
D. Perfectly price elastic 10. Which of the following would make the demand for
3. If the cross-price elasticity of demand between meat a product elastic?
and fish is 2.50, we can say that: A. It is unique
A. Meat and fish have elastic demand B. It is very cheap
B. Meat is a normal good C. It has many possible uses
C. Meat and fish are substitute goods D. It is considered a necessity
D. A and B are correct 11. Why are farm revenues higher in years of lower
production due to bad weather?
For questions 4 and 5 refer to the information below: A. Demand is more elastic than supply
Price Quantity demanded B. Supply is perfectly elastic
P2.00 100 C. Demand is inelastic; a leftward shift in
P3.00 90 supply will increase total revenue
P4.00 70 D. Supply is elastic; a leftward shift is supply
P5.00 50 will increase total revenue
12. Rank the demand curves in the diagram in order of
4. If price increased from P2.00 to P4.00 the elasticity greatest to least elasticity at the common interaction
of demand would be: point.
A. -0.05 A. A,B,C
B. --4.14 B. B,C,A
C. –20 C. B,A,C
D. –0.53 D. C,A,B
5. Therefore, the demand for the good in number 4 is
said to be:
A. Inelastic
B. Elastic
C. Unitary
D. Perfectly elastic
6. From your answer in number 5, an increase in price
would results in:
A. Increase in total revenue
B. Decrease in total revenue
C. Maximum total revenue
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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

B. Total revenue changes when declining

13. Rank the points, A,B, and C in order of greatest price induces rising quantity along the
elasticity od demand demand curve
A. C,A,B C. A percentage reduction in quantity induces
B. B,A,C an increase in price along the demand curve
C. A,B,C D. A fall in price induces a percentage change
D. They are of equal elasticity in the supply curve
20. Suppose a specific tax is applied to YAKULT drink.
After the application of the tax it was observed that
the consumers share 25% of the tax. What can you
conclude about the price of elasticities of supply and
demand?
A. Demand is perfectly inelastic and supply is
perfectly elastic
B. The elasticity of demand is equal to the
elasticity of supply
C. Demand is relatively more elastic than
supply
14. If consumers have budgeted a fixed amount of D. Supply is relatively more elastic than
money to buy a certain commodity, and within a demand
certain range of prices will spend neither more nor
less than this amount on it, then their demand curve
Section 4. Production Analysis
in this price range would probably be designated as:
A. Perfectly elastic 1. Which of the following is NOT true of perfectly
B. Perfectly inelastic competitive industry?
C. Highly elastic but nit perfectly so A. There are a large number of sellers and
D. Unitary elastic buyers
15. An increase in supply will lower price unless: B. Products and resources are freely mobile
A. Supply is perfectly elastic C. There is perfect flow of market information
B. Demand is perfectly elastic in the industry
C. Demand is highly inelastic D. A large number of brand names of the
D. Both demand and supply are highly inelastic product are available
16. A vertical supply curve has which of the following 2. A purely competitive industry is characterized by:
properties? A. Many small firms
A. Constant slope and varying elasticity B. Intensive advertising
B. Constant elasticity and varying slopes C. Government intervention
C. Varying slope and varying elasticity D. The existence of franchises and patents
D. Constant slope and constant elasticity 3. The following characterizes a monopolistic industry,
17. A straight-line demand curve has which of the except:
following properties? A. The existence of franchises and patents
A. Constant slope and varying elasticity B. Complete control of technology
B. Constant elasticity and varying slopes C. Complete control of inputs
C. Varying slope and varying elasticity D. All of the above
D. Constant slope and constant elasticity 4. The short- run is:
18. The coefficient-of-demand elasticity is: A. A period of time shorter than one year
A. The change in total revenue divided to B. The planning period wherein some
change in price resources are fixed
B. The percentage change in quantity C. The planning period wherein all resources
demanded divided by the percentage are fixed
change in price D. The planning period wherein all resources
C. Constant for all ranges of every demand are variable
curve, regardless of shape 5. The production function is a technical law which:
D. The quality demanded divided by the A. Relates peso inputs to peso outputs
change in price B. Indicates the best way to combine factors
19. Elasticity of demand is important because it shows to produce any given output
how: C. Indicates the best output to produce
A. Higher prices result from shifts in the supply D. Relates physical outputs to physical inputs
curve 6. A total product curve indicates

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confidential and solely for the use of recipient and may not be reproduced or circulated without the consent of
the authors.
 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

A. Input and price 15. When average product is declining, the marginal
B. Input and variable cost product could be:
C. Input and output A. Declining
D. Output and price B. Zero
7. Marginal product, mathematically, is the slope of C. Negative
the: D. Any of the above
A. Average product curve
16. An isoquant is best described as:
B. Marginal product curve
A. The locus of points that gives the
C. Total product curve
combination of inputs that gives maximum
D. Input curve
profit
8. In the first stage of production:
A. Marginal product is increasing B. The locus of points that gives the
B. Total product is increasing at an increasing combination of inputs where total product
rate is maximum
C. Average product is increasing C. The locus of points that gives the
D. Average product is greater than marginal technically efficient combinations of inputs
product that yield the same level of output
9. The boundary line between stage II and stage III of D. All of the above
production given one variable input is set where: 17. The marginal physical product of labor is:
A. Total product is diminishing A. The output which it could produce unaided
B. Marginal product is equal to average by machinery or any other factors of
product production
C. Average product is maximum B. The extra revenue which a firm will get by
D. Marginal product is equal to zero
selling the output of an additional worker
10. Which of the following is NOT TRUE of the total
C. The amount of extra output that is
product curve?
produced when one extra worker is added
A. At stage 3, Total Product is decreasing
B. When Total Product is maximum, MP = 0 to a fixed amount of other factors
C. At the inflection point, MP is at its D. The amount of extra output that is
maximum produced when one worker is added and
D. If TP is increasing, MP<0 other factors of production are increased
11. The Law of Diminishing Marginal Productivity: proportionately
A. Specifies that the output obtained from the 18. The main difference between the short run and the
successive input utilization increases over long run is that:
time A. The long run always refers to a time period
B. Specifies that output obtained from the of one year or longer
successive utilization of an input decreases B. In the short run, one or more inputs is
over time fixed
C. Specifies that as producers utilize C. In the long run, only one variable can be
successive units of an input, the fixed
incremental output derived from each D. In the short run all inputs are variable
additional unit decreases 19. Diminishing returns is observed as a firm increases
D. All of the above production by adding variable inputs to at least one
12. The total amount of product produced divided by fixed input because:
the number of units of input used A. The ability or quality of the variable inputs
A. Total product hired decrease as more are hired
B. Average product B. The firm must lower the price of its
C. Marginal product product when it produces more units of
D. None of the above output
13. The addition to total output resulting from C. The per unit cost it must pay for variable
employing an additional unit of resource is input increases as more inputs are hired
A. Average product D. As more variable inputs are hired, the
B. Total product amount of fixed inputs per variable input
C. Marginal product they have to work with deceases
D. A production function 20. According to the “Law of Diminishing Marginal
14. When the total product falls, Returns", eventually:
A. The average product is zero A. Output must fall and then rise as additional
B. The marginal product is zero units of inputs are employed
C. The average product is declining B. Additional inputs will no longer generate
D. The marginal product is negative average output

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The document is intended to be used for informational purposes or study material. This document is strictly
confidential and solely for the use of recipient and may not be reproduced or circulated without the consent of
the authors.
 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

C. The additional output generated by 9. If we consider the cost associated with producing
additional unit of an input will decrease another unit of output, we are thinking of
D. The additional inputs necessary to produce A. TFC
an additional unit of input will decrease B. ТС
C. МС
Section 5. Cost of Production
D. AVC
1. The cost that a firm incurs in purchasing or hiring 10. The traditional AVC, ATC, and MC curves are U-
any factor of production is referred to as shaped because in the short run,
A. Explicit cost A. There is a phase of increasing productivity
B. Implicit cost (falling unit costs) and a phase of
C. Variable cost decreasing productivity (increasing unit
D. Fixed cost cost) of the variable factor (s)
2. All of the following curves are U-shaped except B. All costs are variable
A. The average variable cost (AVC) curve C. A range of output levels can be produced by
B. The average fixed cost (AFC) curve the firm at which per unit costs are at their
C. The average cost (AC) curve minimum levels
D. The marginal cost (MC) curve D. All of the above statements are true
3. When the law of diminishing returns begins to
operate, the total variable cost (TVC) curve begins to
For questions 11-13, refer to the following table:
A. Fall at an increasing rate
Quantity of Output TC
B. Fall at a decreasing rate
C. Rise at a decreasing rate 0 60
D. Rise at an increasing rate
1 150
4. Marginal cost and average cost are related in this
way: 2 220
A. When MC is less than AC, AC is falling
B. MC is greater than AC, AC is falling 3 285
C. When MC is equal to AC, MC is at a 4 355
minimum
D. None of the above. 5 430
5. The cost that does not vary with output is
6 510
A. Total variable cost (TVC)
B. Total fixed cost (TFC) 7 600
C. Total cost (TC)
8 710
D. Average variable cost (AVC)
6. An example of a fixed cost is 9 840
A. The labor cost incurred in employing casual
unskilled workers 10 990
B. Raw materials expenses
C. Interest payments on a loan used to buy
equipment 11. Total fixed cost is equal to
D. Electric bill A. 0
7. In the short-run, one would observe that as quantity B. 150
of output increases: C. 60
A. TFC will increase D. 90
B. AFC will intersect the X-axis 12. Marginal cost at the fourth level of output is equal to
C. AFC is decreasing and asymptotic to the X- A. 70
axis B. 650
D. (AC- AVC) will also increase C. 60
D. 88.75
13. Average variable cost at the 8th level of output is
A. 710
8. we consider the proportion of total expenditure
B. 650
shared by each unit of output, we are thinking of
C. 60
A. TC
D. 81.25
B. MC
14. When AVC is rising, which of the following is not
C. AVC
always true:
D. AC
A. TFC is constant

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B. TC is increasing A. Diseconomies of scale

C. AC is increasing B. Increasing fixed costs
D. MC is increasing C. Diminishing marginal productivity
15. When the average variable cost of an output exceeds D. Economies of scale
the marginal cost, assuming there is at least one 23. The firm's short run marginal cost curve is rising
fixed input, the average product: when:
A. Has been maximized A. Marginal product is increasing
B. Has been minimized B. Marginal product is decreasing
C. Of the input is less that the marginal C. Total fixed cost is increasing
product D. Average fixed cost is decreasing
D. Of the input is greater than the marginal 24. When average variable cost is at a minimum:
product A. Marginal cost is at a maximum
16. Economies of scale: B. The average product of the variable input is
A. Occur when the increase in inputs causes a at a minimum
less-than proportionate increase in output C. The marginal product of the input is at a
B. Are represented by the declining portion of minimum
the long run average fixed cost curve D. The average product of the variable input
C. Exist when the long run average cost is is at a maximum
decreasing at a decreasing rate 25. Which of the following statements is true given the
D. Exist when the long run average cost is total cost function:
increasing at an increasing rate Total cost = 10Q + 5Q? + 100
17. Which of the following would be likely to result in A. Total cost at Q = 4 is 120
diseconomies of B. Average total cost at Q = 10 is 70
A. Specialization of labor C. Total cost at Q = 5 is 175
B. Management problem D. Average fixed cost is zero at Q = 100
C. Adoption of new technology 26. If the price of a fixed factor of production increases
D. The development of auxiliary services in by 50 percent, what effect would this have on the
the neighborhood marginal cost schedule of a firm?
18. Implicit costs are: A. None
A. Equal to total fixed costs B. Marginal cost would increase by 50 percent
B. Comprised entirely of variable costs C. Marginal cost would increase by less than
C. Payments for self-employed resources 50 percent
D. Always greater in the short run than in the D. Marginal cost would increase by more than
long run 50 percent
19. At any level of output: 27. Which of the following would contribute most to a
A. Average variable cost will exceed average firm experiencing "economies of scale?"
total cost in the short run A. Rising long run average costs
B. Marginal cost will exceed average variable B. The law of diminishing marginal returns
cost by the level of average fixed cost C. Specialization of production within a firm
C. Average variable cost will exceed average D. Deterioration of information and control
fixed cost by the level of average total cost within a firm
D. Average total cost will exceed average 28. Economies and diseconomies of scale occur mainly
variable cost by the level average fixed because:
cost A. Of the law of diminishing returns
20. When marginal cost is increasing: B. Firms in an industry must be relatively large
A. Total cost must be increasing in order to use the most efficient productive
B. Average total cost must be increasing techniques
C. Average total cost must be decreasing C. Of the inherent difficulties involved in
D. Average fixed cost might be increasing or managing and coordinating a large
decreasing business enterprise
21. As output increases, average fixed costs: D. The short run average total cost curve rises
A. Increase when marginal product is greater than
B. Decrease average total cost
C. Remain constant 29. Economies and diseconomies of scale explain why
D. First increase then decrease the:
A. Short run average fixed cost curve declines
22. The short rum marginal cost curve eventually rises so long as output increases
because of:

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B. Marginal cost curve must intersect the B. Plan to continue operating temporarily
minimum point of the firm's average total C. Plan to shut down
cost curve D. Increase the price it is charging
C. Long run average total cost curve is 6. Which of the following describes any firm at its
typically U-shaped maximum-profit equilibrium?
D. Short run average variable cost curve is U- A. The slopes of the Total Revenue and the
shaped Total Cost curves are the same
30. When a firm is experiencing diseconomies of scale: B. Marginal revenue always equals Average
A. It should increase the amount of labor it Revenue
hires C. The slope of the total profit curve is 1
B. It should lower its price to the competitive D. Marginal Cost always equals Total revenue
level 7. The demand curve faced by the firm in a perfectly
C. Its average total costs will decline if it competitive output market is
reduces its scale of operation A. Upward-sloping
D. It should increase the size of its plant to B. Downward- sloping
decrease the average total costs C. Vertical
D. Horizontal
Section 6. Price and Output Determination
8. If Price exceeds average variable cost but is smaller
1 The demand curve faced by a purely competitive than average cost at its best level of output, the firm
firm: is
A. Has unitary elasticity A. Making a profit
B. Yields constant total revenue B. Incurring a loss but should continue to
C. Is identical to the market demand curve produce in the short-run
D. Is one where average revenue equals C. Incurring a loss and should stop producing
marginal revenue immediately
2. The amount by which the firm's total revenue D. Breaking -even
change when its output/sales are changed by one 9. A basic difference between the firm in perfect (or
unit is called pure) competition and the monopoly firm, according
A. Marginal cost (MC) to economic analysis, is this:
B. Average cost (AC) A. The perfect competitor can sell as much as
C. Average revenue (AR) he wishes to some given price, whereas
D. Marginal revenue (MR) the monopolist must lower his price
3. The short run supply curve of a firm in perfect whenever he wishes to increase the
competition is the same thing as: amount of his sales by a significant amount
A. The rising segment of its marginal cost B. The monopolist can always charge a price
curve above the minimum average variable that brings him substantial profit, whereas
cost the perfect competitor can never earn such
B. The rising segment of its marginal cost a profit
curve, above the minimum average cost C. The monopolist seeks to maximize profit,
C. The rising segment of its average cost curve whereas the perfect competitor's rule is to
D. Its entire marginal cost curve equate price and average cost
4. A supplier in a purely competitive market is D. None of the above
characterized by all except one of the following? 10. At a price situation where AVC< P< AC, the firm will
A. It produces such that marginal cost equals decide to continue producing because:
price A. There are still customers willing to buy the
B. It produces a positive amount in the short firm's produce
run if it can recover variable costs B. No, the statement is wrong and the firm
C. It can sell all it wants to at the prevailing should cease production
market price C. Even at a loss, s/he can recover part of its
D. It can influence the price of its product variable cost and its fixed cost
prevailing in the market D. Even at a loss, s/he can recover part of its
5. If a firm in circumstances of perfect competition fixed cost and its variable cost
finds that at its best possible operating position Total 11. In the perfectly competitive sense, which of the
Revenue-is not sufficient to cover Total Variable following is NOT true if P= ACmin:
Costs, it should: A. The firm should continue producing
A. Continue to operate if, at this same level of B. The firm is producing at output where P =
output, price per unit is sufficient to cover MR = MC = AC min:
Average Cost C. The firm is just breaking even

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9023 Naawan, Misamis Oriental, Philippines

D. The firm is incurring losses C. At the point on the demand curve where
12. A firm's shut down point is the minimum value of: total revenue is maximized
A. Total variable cost D. Where marginal revenue exceeds marginal
B. Average variable cost cost by the largest amount
C. Total cost 20. In moving down the elastic segment of the
D. Average cost monopolist's demand curve, total revenue is:
13. A perfectly competitive firm produces output and A. Increasing, and marginal revenue is
earns profit if: negative
A. Price of output is greater than average cost B. Decreasing, and marginal revenue is
B. Price of output is less than average cost but positive
greater than average variable cost C. Decreasing, and marginal revenue is
C. Price of output equals average cost negative
D. Price of output is less than average variable D. Increasing, and marginal revenue is
cost positive
14. Profit maximizing output implies that: 21. Given a downward sloping linear demand curve,
A. The slope of the total revenue curve is when total revenue is decreasing, then marginal
equal to the slope of the total cost curve revenue is:
B. Marginal revenue = marginal cost A. Positive & demand is elastic
C. (Total revenue - total cost) is maximum B. Negative & demand is elastic
D. All of the above C. Positive & demand in inelastic
15. In the standard model of pure competition, a profit- D. Negative & demand is inelastic
maximizing entrepreneur will close down in the 22. If a monopolist is operating at an output level where
short run if: marginal revenue is positive, the firm:
A. Marginal cost is greater than average A. Has maximized total revenue
revenue B. Could raise revenues by raising prices
B. Average cost is greater than average C. Can always increase profits by lowering its
revenue price
C. Average fixed cost is greater than average D. Is operating on the elastic portion of its
revenue demand curve
D. Total revenue is less than total variable 23. It is a common belief that monopolies charge any
costs price they want without affecting sales. Instead, the
16. A profit-maximizing firm in the short run will expand output level for a profit-maximizing monopoly is
output: determined by:
A. Until marginal cost begins to rise A. Marginal cost = demand
B. Until total revenue equals total cost B. Marginal revenue = demand
C. Until marginal revenue equals average C. Average total cost = demand
variable cost D. Marginal cost = marginal revenue
D. As long as marginal revenue is greater than 24. Suppose a monopolist calculates that at present
marginal cost output and sales, marginal cost is P10.00 and
17. A firm should continue to operate at a loss in the marginal revenue is P15.00. He or she could
short run if: maximize profits by:
A. The owner enjoys helping his/her A. Decreasing price and increasing output
customers B. Increasing price and decreasing output
B. The firm will show a profit C. Decreasing price and leaving output
C. It can recover its variable costs and some unchanged
fixed costs D. Decreasing output and keeping prices
D. The firm cannot produce any products more unchanged
profitably 25. Which of the following does not necessarily apply to
18. The demand curve faced by a monopolist is: a pure monopoly?
A. Perfectly inelastic A. The product the firm produces must have
B. The same as the market demand curve no close substitutes
C. Upward sloping B. The firm must be the sole producer of a
D. Perfectly elastic product
19. A monopolist which is maximizing short run profits C. The firm must earn economic profits
will produce: D. There must be high barriers to entry facing
A. On the elastic portion of the demand curve potential competitors
B. On the inelastic portion of the demand
curve

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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

26. In response to a cost-reducing technological A. Both price and quantity produced will
breakthrough in the production of its product, a increase
profit-maximizing monopolist will normally: B. Both price and quantity produced will
A. Increase price and reduce production decrease
B. Not change its level of output or price C. Price will increase and quantity produced
C. Decrease the price it charges for its will decrease
product D. Price will decrease and quantity produce
D. Increase its output and practice price will increase
discrimination 32. The economic incentive for a monopolist to practice
27. If marginal costs decrease, a typical monopolist will: price discrimination depends on:
A. Reduce price and reduce quantity of output A. Prejudices of business managers
B. Reduce price and increase quantity of B. Differences among sellers' costs
output C. A desire to evade government regulations
C. Increase price and reduce quantity of D. Differences among buyers' demand
output elasticities
D. Increase price and increase quantity of 33. Which of the following is not true of price
output discrimination?
28. Which of the following is a major criticism of a A. It exists when price differences depend
monopoly as a source of economic inefficiency? critically on different buyers evaluation of a
A. A monopolist fails to expand output to the product
level where the consumers' valuation of an B. Successful price discrimination will provide
additional unit is just equal to its the firm with higher total revenue than a
opportunity cost nondiscrimination monopolist
B. A monopolist has no incentive to produce C. Successful price discrimination implies that
efficiently because even the inefficient the producer can separate customers into
monopolist can be assured of economic easily identifiable groups
profits D. Price discrimination will generally result in
C. A monopolist will always make profits and a lower level of output than would be the
that means that prices are too high case under a single-price monopoly
D. A monopolist has an unfair advantage 34. In order to practice price discrimination, a firm must
because it can purchase labor at a lower meet each of the conditions listed below, except:
price than competitive firms in other A. The firm must have some degree of
industries monopoly power
29. Given the same cost data, a monopolistic producer B. The firm must be able to separate its
will charge: customers into two or more groups with
A. A lower price, but produce a smaller output, different demand elasticities for the
than a competitive firm product the firm produces
B. A higher price and produce a smaller C. Purchasers of the firm's product cannot
output than a competitive firm resell it
C. The same price and produce the same D. The firm's production schedule must face
output as a competitive firm economies of scale
D. A higher price and produce a larger output 35. The imposition of a per unit tax causes the
than a competitive firm monopolist's
30. Compared to the competitive firm, monopoly: A. Average cost curve alone to shift up
A. Is able to use barriers to entry to maintain B. Average cost and marginal cost curves to
positive economic profits in the long run shift up because the per unit tax is like a
B. Produces an equal amount of output, but fixed cost
charges higher prices to cover all costs in C. Average cost and marginal cost curves to
the market shift up, because the per unit tax is like a
C. Is efficient from society's perspective variable cost all of the above
because it has big plants and it uses the
Section 7. Production, Pricing and Demand for Inputs
newest possible production technology
D. Will always become competitive in the long 1. The demand for a productive resource is said to be
run because positive economic profits will “derived” because the demand for the input:
induce competitors into the market A. Depends on the demand for the product it
31. If a perfectly monopolized industry should become is used to make
purely competitive without any change in cost B. Depends on the demand for a
conditions: complementary input
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 Republic of the Philippines
Mindanao State University at Naawan
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9023 Naawan, Misamis Oriental, Philippines

C. Is derived from the state of the economy B. Price of the input equals price of the output
D. Is derived from government policy C. Price of the input equals the marginal
2. The marginal revenue product of an input in a product of the input
competitive market decreases as a firm increases the D. Price of the input equals the marginal
quantity of an input used because of the: revenue product of the input
A. Law of diminishing returns 9. According to the marginal productivity theory, the
B. Law of diminishing marginal utility labor demand for a competitive seller is:
C. Homogeneity of the product A. The same as the marginal resource cost
D. Free mobility of resources schedule
3. Marginal resource cost is: B. The same as the marginal productivity
A. The increase in a firm's total cost caused by schedule
hiring one additional unit of an input C. The same as the marginal revenue product
B. A firm's cost of hiring one group of inputs, schedule
such as capital & labor D. Independent of the value of the product
C. The firm's demand curve for a productive being produced
resource 10. A firm's demand curve for labor:
D. Determined by the marginal physical A. Is the marginal physical product curve
product schedule for an input B. Will shift to the left if the price of the
4. Marginal revenue product describes the: product the labor is producing should fall
A. Output produced by the last unit of the C. Is perfectly elastic if the firm is selling its
input used product in a purely competitive market
B. Revenue received for the last unit of output D. Reflects a direct (positive) relationship
produced between the number of workers hired and
C. Price a consumer paid for the last unit of the money wage rate
output produced 11. The demand for labor will decrease in response to:
D. Revenue received for the output produced A. Increased productivity
by the last unit of input employed B. Better training of all laborers
5. Marginal resource cost is: C. A decrease in the supply of labor
A. The increase in variable costs resulting from D. Decreased demand in markets for
one more unit of output consumer goods and services
B. The increase in fixed costs resulting from 12. A change in the factor's price will have a greater
one more unit of output effect on the quantity of the factor demanded the:
C. Perfectly inelastic for a monopsonist A. Smaller the change in the factor's price
D. The same as wage rate when the firm is B. Smaller the factor's share of the total cost
hiring labor under purely competitive of production
conditions C. More elastic is the demand for the product
6. If the marginal revenue product of labor is less than the factor helps to make
the wage rate: D. More inelastic is the demand for the
A. The firm is making profits product the factor helps to make
B. The firm is incurring losses 13. In a competitive market, a decrease in the demand
C. More labor should be employed for a productive resource, ceteris paribus, will cause
D. Less labor should be employed all of the following except a(n):
7. A profit-maximizing firm should hire an input as long A. Decrease in the price of the resource
as the: B. Increase in the price of the resource
A. Firm can increase its total revenue C. Decrease in the total income earned by all
B. Price of the input does not exceed the price units of the resource
of the other inputs used in the firm's D. Decrease in the number of units of the
production resource that are employed
C. Marginal revenue product of the input is at 14. If two inputs are complementary and employed in
least as much as the cost of hiring the fixed proportions, an increase in the price of one
input input will:
D. Marginal revenue product of the input is A. Decrease in the demand for the other
greater than the marginal revenue product input
of other inputs the firm is using B. Increase in the demand for the other input
8. A competitive employer will hire inputs up to the C. Increase in the quantity demanded foe the
point where the: other input
A. Marginal product of the input reaches a D. Have no effect on the demand for the other
maximum input

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9023 Naawan, Misamis Oriental, Philippines

15. Suppose capital is readily substitutable for labor and A. Decreases in wage rates will result in
that the price of capital falls. We can conclude that greater payrolls
the: B. Increases in wage rates will result in
A. Substitution effect will tend to reduce the greater payrolls
demand for labor C. Decreases in wage rates will increase both
B. Output effect will reduce the demand for employment and worker incomes
labor D. Increases in wage rates will result in smaller
C. Demand for labor will necessarily decline payrolls
D. Demand for labor will necessarily increase 22. A cost minimizing firm using two outputs, x and y,
16. If capital and labor are used in rigidly fixed will employ inputs so that:
proportions and the price of capital falls, it can be A. MPx = MPy
concluded that: B. Px/MPx = Py/MPy
A. The substitution and output effect will work C. MPx/Px = MPy/Py
in opposite directions so no judgment can D. Px= Py
be made as to the effect on labor demand 23. If a firm is hiring inputs under purely competitive
B. Labor demand will tend to increase conditions, then any level of output
C. The elasticity of demand for both labor and A. MU of A/price of A = MU of B/price of B
capital will increase B. MRP of A = MRP of B
D. Labor demand will necessarily decline C. The price of A equals the price of B
17. Other things being equal, the demand for a factor of D. MP of A/price of A = MP of B/price of B
production will be less elastic if the demand for final 24. The marginal cost of a productive resource is equal
product it produces is: to the price of the resource if a firm is:
A. Elastic A. A price taker in the output market
B. Inelastic B. A price taker in the resource market
C. Unitary elastic C. Able to influence the price of the product by
D. Perfectly elastic producing more or less of it
18. If the factor of production has many close D. Able to influence the price of the factor by
substitutes, we would expect that its price elasticity buying more or less of it
of demand would be: 25. If all firms in an industry are price takers in the
A. Unitary market for resource A, then all of the following are
B. Less than one true except:
C. Greater than one A. The price of resource A is determined by
D. Unimportant market supply and demand
19. A labor union representative observed that if the B. Each firm will hire units of the resource until
union members' wages were increased by some the price of the factor equals its marginal
proportion, the workers would eventually suffer a revenue product
greater than proportional decline in unemployment. C. The marginal cost of resource A to firms in
This statement could be best explained if: the industry is equal to the price of resource
A. The new wages are to take effect D. Changes in industry output will not affect
immediately the price of resource A
B. Union labor can easily be replaced with 26. If all firms in an industry are price takers in the
capital market for resource A, then:
C. Union labor is an insignificant portion of the A. The price of resource A will increase if a
total cost of production single firm increases its output
D. The demand for the final product the B. More efficient firms will produce at levels
worker produce is relatively inelastic where the marginal revenue product of the
20. Other thing being equal, the elasticity of demand for last unit of resource A is higher
labor will be greater the: C. Less efficient firms will produce where the
A. More rapid the decline in its marginal marginal revenue product of the last unit of
productivity resource A is higher
B. Smaller the proportion of total costs D. The marginal product of the last unit of
accountable by labor costs resource A will be the same in all firms in
C. Smaller the elasticity of demand for the the industry
product it produces 27. The individual firm which hires labor under
D. Larger the number of close substitute competitive conditions faces a labor supply curve
resources available which:
21. Other things being the same, if the demand for labor A. Slopes upward to the right
is inelastic: B. Is perfectly elastic

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9023 Naawan, Misamis Oriental, Philippines

C. Is perfectly inelastic A. 25 pesos

D. Is of unit elasticity B. 15 percent
28. Other things held constant, imperfect competition in C. 25 percent
resource markets results in: D. 10 pesos
A. Maximization of society's net welfare 5. When the net factor from abroad is deducted from
B. Efficiency in the allocation of inputs GNP, the remainder is:
C. Less labor hired than if resource markets A. Gross domestic product
were competitive B. Net national product
D. Lower prices and higher output in product C. National income
markets for goods and services D. Disposable income
29. Imposing a minimum wage higher than the 6. Using the value-added approach, GNP is obtained as
equilibrium wage in a competitive industry would: the sum of the value added of each agricultural firm,
A. Increase the demand for labor in the taking care not to include:
industry A. Transfer payments
B. Increase the income of some workers B. Cost of intermediate inputs
already employed in that industry C. Indirect business taxes
C. Decrease the quantity of labor supplied to D. Personal taxes
that industry 7. Which of the following is not a component of GNP?
D. Increase employment in that industry A. Consumption expenditures
30. Wage differentials occur for all of the following B. Exports less imports
except: C. Investment
A. Homogeneous workers D. Intermediate sales
B. Labor market imperfections 8. Nominal GNP in 2005 was estimated at P500 billion.
C. Noncompeting groups of workers If the consumer price index in 2005 using 2000 prices
D. Equalizing differences to offset is equal to 125, then real GNP for 2005 must be:
nonmonetary differences in jobs A. P400 billion
B. P265 billion
C. P125 billion
D. None of the above
9. Based from question #8, if the population for 2005
Section 8. National Income Accounting
were 90 million people, then the real per capita GNP
1. Gross National Product (GNP) includes: for 1990 is equal to:
A. Services of farmers coursed through the A. P4,444
markets B. P444
B. Gains from illegal transactions arising from C. P8,333
rice importation D. P833
C. Government transfer payments 10. Still continuing from question #8, if nominal GNP in
D. Receipts from sales of second hand tractors 2010 is placed at P600 billion, we can say that the
2. Economists prefer to use real GNP rather than growth rate in nominal GNP between 2005 and 2010
current GNP as a measure of aggregate output is:
because: A. 6%
A. Current GNP always understates actual B. 20%
output changes C. 8.3%
B. Real GNP adjusts current GNP for inflation D. 16.67%
C. Real GNP adjusts for the unequal 11. Double counting of national product would result
distribution of income from adding:
D. All of the above A. Value added by flour mills and value added
3. An example of transfer payments is: by bakeries
A. Pension of retired government B. Total sales of flour mills and total sales of
agriculturists bakeries
B. Expenditures on rice C. Value added by flour mills and total sales of
C. Wages and salaries of technicians working bakeries
on government farms D. None of the above
D. Salaries of agribusiness executives 12. The following are conceptual weaknesses of GNP as
4. Suppose that the consumer price index for 2005, a measure of economic welfare except:
2010 and 2015 are 100, 110 and 125, respectively. A. It omits non-marketed goods and services
This implies that the general price level in 2015 is B. It gives no indication about the income
higher than that of 2005 by: distribution

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C. It measures only the monetary value of B. Value of all goods and services produced
production and not utility or welfare during a particular time period when prices
D. It fails to indicate some production activities are held constant
corrected for ill effects of other production, C. Value of all investment goods and services
like pollution produced during a particular time period
13. The sum of all expenditures for final goods and when all prices are held constant
services and changes in inventory of final goods is D. Market value of all investment goods and
equivalent to: services produced a particular time period
A. All income paid out as wages and salaries 20. The Paradox of Thrift illustrates how society's
B. Disposable income decision to save more:
C. The amount of money in circulation A. Increases national output
D. The total of all value added B. Raises investment spending
14. The difference between GNP and Net National C. Reduces national output
Product (NNP) is accounted for by: D. Reduces consumption spending
A. Indirect business taxes
Section 9. Consumption, Savings and Investment
B. Government transfers
C. Personal taxes 1. The marginal propensity to consume is the ratio of:
D. Depreciation A. Extra consumption to extra income
15. Which of the following adjusts in order to assure B. Total consumption to total income
that the expenditures on final products would equal C. Extra consumption to total income
the sum of incomes to the factors of production: D. Total consumption to extra income
A. Wages and salaries 2. Which of the following is considered an investment?
B. Rent A. Farmer A buys a second hand tractor from
C. Interest farmer B
D. Profit B. Mang Pedro deposits P50,000 in his savings
16. In the upper loop "flow of product" approach, GNP is account
obtained as the sum of: C. Mrs. Santos constructs a new
A. Expenditures on final goods and services condominium worth P2 billion
B. Sum of wages paid to labor only D. Mr. Gil buys P10 millions of stocks from Mr.
C. Sum of incomes of factors of production Reyes
D. Sum of expenditures on intermediate goods 3. Savings and investment are, respectively:
and services A. An injection and a leakage
B. A leakage and an investment
C. Wealth and income
D. Income and wealth
4. If the consumption is P60 billion when disposable
17. All of the following will increase measured GNP
income is P100 billion, the marginal propensity to
except for:
consume is:
A. A large number of families suddenly
A. 0.6
decided to more frequently eat out rather
B. 0.4
than at home
C. 0.5
B. Within the year, thousands of men marry
D. Cannot be determined from the
their housemaids and stop paying them
information given
salaries
5. A family spends P2,000 on consumption goods when
C. Marijuana trade is legalized by the
its income is zero and P6,000 when its income is
government
P6,000. Assuming a linear consumption function,
D. All of the above will increase measured GNP
what is the family's autonomous consumption equal
18. Which of the following would be considered a
to:
leakage from the circular flow:
A. P6,000
A. Exports
B. Р3,000
B. Imports
C. P2,000
C. Investments
D. P1,000
D. Consumption
6. If aggregate saving is zero, aggregate consumption
19. An economy's real GNP measures the:
must be:
A. Market value of all goods and services
A. Less than income
produced during a particular time period
B. Zero
C. Equal to income
D. Greater than income
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For questions # 7 to 11, consider the following table. B. New expenditures lead to new government
Suppose you were given the data below on income (Y) tax revenues which finance output-
and consumption (C) expenditures in billion pesos. increasing government projects
C. New expenditures tend to stimulate more
Y 0 100 200 300 400 505 600 700 800 900
taxes, thereby increasing output even more
C 30 120 210 300 390 480 570 660 750 840 D. New expenditures tend to raise the level of
exports, which in turn stimulates the
economy into even greater production
7. The consumption function of the above is: 16. When intended saving (S) is greater than investment
A. Y = 30 +.75Y I, then:
B. C = 30 +.9Y A. GNP will tend to increase
C. C= 300 +.9Y B. GNP will tend to remain unchanged
D. C=0 + .9Y C. GNP will fall
8. What is the equilibrium income? D. None of the above
A. P300 billion 17. It is the slope of the savings function. This is referred
B. P200 billion to as:
C. P400 billion A. Marginal propensity to consume
D. P250 billion B. Diminishing marginal savings
9. The savings function (S) is: C. Marginal propensity to save
A. S = -30 +.1Y D. Diminishing marginal leakages
B. Y = 30 + .25Y 18. The multiplier shows the magnitude by which the
C. S= 0+.1Y changes in response to a one-peso change in
D. Y= -30 + .1Y investment spending.
10. What is the value of S at the equilibrium level of A. Level of output
income? B. Growth rate of output
A. -P30 billion C. Inflation rate
B. 0 D. Unemployment rate
C. P30 billion 19. Which of the following is not a component of
D. P60 billion aggregate demand?
11. The value of the multiplier is: A. Consumption
A. 4 B. Savings
B. 10 C. Investment
C. 5 D. Government spending
D. 6.67 20. Savings is the accumulation of __________ through
12. The exact relationship between the marginal the postponement of _____________.
propensity to consume (MPC) and the marginal A. Wealth, consumption
propensity to save (MPS) is: B. Income, consumption
A. MPC = MPS C. Investment, consumption
B. MPC + MPS = 1 D. Consumption, investment
C. MPC + MPC = 0 Section 10. Unemployment and Inflation
D. MPC - MPS = 1
13. The larger the MPS: 1. Unforeseen inflation usually hurts:
A. The smaller the multiplier A. Debtors
B. The larger the multiplier B. Profit seekers
C. The larger the MPC C. Risk taking speculators
D. The greater the investment D. Fixed income classes
14. The point where the C + I line intersects the 45 2. The inflation rate shows:
degree line is called the: A. The average price level during a particular
A. Break even income period of time
B. Equilibrium income B. The price level in a given year expressed in
C. Deflationary gap terms of a base year
D. Inflationary gap C. The percentage rate per period that prices
15. Which of the following best explains the expenditure are increasing
multiplier effect: D. A measure of the change in real output
A. New expenditures become another round from one year to the next
of incomes, which in turn become another 3. The CPI is designed to measure the degree to which:
round of expenditures and incomes, and so A. Income are distributed among the poor and
on rich over time
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B. The cost of purchasing a bundle of D. Country's population less the physically

consumer goods has changed with time handicapped
C. Consumption patterns have changed with 13. The real wage is equivalent to the nominal wage
time because of prices adjusted for:
D. Consumer prices have risen, relative to A. Inflation
wages B. Allowances and other benefits D. Income
4. People who do not have jobs as a result of sluggish and business taxes
economic activity are considered as part of: C. Income taxes
A. Structural unemployment D. Income and business taxes
B. Cyclical unemployment 14. The ____________ is the unemployment rate that
C. The underemployed workforce exists in normal times when there is neither a
D. Frictional unemployment recession nor a boom.
5. The Phillips curve shows the relationship between A. Natural unemployment rate
inflation and: B. Cyclical unemployment rate
A. The interest rate C. Frictional unemployment rate
B. The wage rate D. Structural unemployment rate
C. Unemployment 15. An extremely high inflation is known as:
D. The budget deficit A. Stagflation
6. Inflationary pressure may be reduced by: B. Hyperinflation
A. Raising income taxes C. Super inflation
B. Increasing money supply D. Mega inflation
C. Raising government spending 16. A negative inflation rate or declining prices is known
D. All of the above as:
7. Cost push inflation may be caused by: A. Disinflation
A. Lower business spending B. Deflation
B. Higher budget deficits C. Reinflation
C. Higher labor costs D. Price shock
D. Lower government spending 17. The labor force is:
8. Demand pull inflation may result from: A. The working age population
A. Higher wage rates B. Country's population
B. Higher taxes C. Sum of the employed plus unemployed
C. Lower budget deficits D. Country's population less the physically
D. Lower taxes handicapped
9. Inflation causes: 18. ______________ unemployment occurs as new
A. A loss to fixed income earners workers enter the labor force and must look for
B. A decline in the purchasing power of money work, or as workers change jobs for one reason or
C. A loss to lenders and a benefit to creditors another and need some time to find another job.
D. All of the above A. Natural unemployment
10. The most important consequence of an inflationary B. Structural unemployment
gap is: C. Frictional unemployment
A. Production increases D. Cyclical unemployment
B. Price increases 19. The decision to work or not to work can be analyzed
C. An increase in real NNP with the concept(s) of the:
D. A rise in consumption expenditures A. Substitution and income effects
11. An inflationary gap exists when: B. Backward-bending labor supply curve
A. Full employment income is higher than C. Both of the above
equilibrium income D. none of the above
B. Full employment income is the same as the 20. The building of skills of a firm's employees while they
equilibrium income work for the firm is known as
C. Full employment income is lower than A. Practicum
equilibrium income B. On the job training
D. Aggregate expenditure is less than full C. Investment in human capital
employment income D. Skills formation
12. The labor force participation rate is the ratio of
Section 11. Fiscal Policy
people in the work force to the:
A. Working age population 1. A deflationary gap can be eliminated by:
B. Country's population A. Decreasing investment
C. Sum of the employed plus unemployed B. Decreasing government spending
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C. Decreasing taxes C. S+T+ Imports = 1+ G + Exports

D. Decreasing autonomous consumption D. S+ Imports + T = G + Exports – Imports
2. Fiscal policy refers to government policies related to: 12. Short term fluctuations in real GDP are also called:
A. Wages and prices A. Economic growth
B. Government expenditures and taxation B. Business cycles
C. Money supply, credit and interest rates C. Economic development
D. Investments D. Business periods
3. Which of the following is in line with a tight fiscal 13. If lump sum taxes were to be reduced by 20 when
policy? the marginal propensity to consume is 2/3, the
A. Lower government spending equilibrium income would:
B. Lower income taxes A. Fall
C. Low money supply growth B. Rise by 20
D. Limits on imports C. Rise by 40
4. If the national government's revenues exceed D. Cannot be determined from the data
expenditures, the government has a: 14. With everything else unchanged, an increase in
A. Balance budget government spending without a corresponding
B. Budget surplus increase in tax revenues will:
C. Budget deficit A. Reduce equilibrium income
D. Financing account B. Increase the government budget deficit
5. The government's total revenues are divided into: C. Make it unlikely that elective officials will be
A. Tax and non-tax revenues reelected
B. Income tax and tax on property D. Cause the foreign exchange rate to go down
C. VAT and income tax 15. An equal increase in government spending and taxes
D. Tax and import duties is likely to:
6. The bulk of Philippine government expenditures is A. Leave GNP unchanged because the taxes
accounted for by: cancel out government expenditures
A. Maintenance and other operating expenses B. Lower GNP by more than the given
B. Debt service increase, depending on the value of the
C. Personal services multiplier
D. Capital outlay C. Raise GNP by the amount of the given
7. The balanced budget multiplier is equal to: increase
A. 1/(1-mpc) D. Indeterminate given the above information
B. 1 16. If the multiplier is 2.5 and if I rise by 20 while G falls
C. --mpc/(1-mpc) by 10 (ceteris paribus), by how much will the
D. 0 equilibrium level of income change?
8. According to the real business cycle theory, shifts in A. 10
potential GDP are a primary cause of fluctuations in: B. 25
A. Nominal GDP C. –25
B. Real GDP D. 50
C. Real GDP per capita 17. A tax cut shifts the Aggregate Expenditure schedule
D. Changes in technology (C + I +G):
9. A decline in real GDP that lasts for at least six A. Not at all
months is called a: B. Upward because it shifts the C component
A. Peak upward
B. Trough C. Upward because it shifts the C component
C. Recession downward
D. Recovery D. Downward because its shifts the C
10. The lowest point of real GDP at the end of a component downward
recession is known as: 18. _____________ refers to the income that
A. Peak households are free to spend and save.
B. Trough A. Personal income
C. Recession B. Disposable income
D. Recovery C. Transfer payments
D. National output
11. The economy complete with the government and 19. ____________ tax imposes a higher tax on high
foreign sectors is in equilibrium when: incomes relative to low incomes
A. Money demand = money supply A. Regressive
B. There is full employment of resources B. Progressive

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C. Proportional A. Increase or decrease government

D. Lump sum expenditures
B. Increase or decrease taxes
Section 12. Money and Banking/Monetary Policy
C. Buy and sell government bonds
1. Money in a modern economy performs such D. Buy and sell investment goods and services
function(s) as: 10. Balance of Payments deficits are always reflected as:
A. Medium of exchange A. An increase in foreign exchange reserves
B. Measure of value B. A reduction in foreign exchange reserves
C. Standard of deferred payment C. An increase in money supply
D. All of the above D. None of the above
2. When bank lending interest rates are low, the 11. Which of the following is consistent with a tight
primary effect is to: monetary policy?
A. Encourage investment A. Low interest rates
B. Discourage investment B. High reserve requirements
C. Encourage savings C. An increase in money supply
D. Discourage consumption D. Subsidized interest rates to borrowers
3. The money multiplier indicates the change in 12. The disadvantage of a barter system is that it
______________ from a unit change in the requires:
______________. A. Immediate payment
A. Output; money supply B. A double coincidence of wants
B. Money supply; monetary base C. The use of commodity money
C. Interest rate; money supply D. It is pegged to the gold standard
D. Inflation rate; monetary base 13. The narrowest measure of money supply is called
4. Which function of money represents its role as an M1. It consists of currency plus:
instrument for buying and selling goods and A. Checking deposits
services? B. Time deposits
A. Medium of exchange C. Savings deposits
B. Store of value D. The amount of outstanding Government
C. Unit of account bonds
D. Standard of deferred payment 14. The need to have money for unforeseen
5. A devaluation refers to: circumstances is known as:
A. An increase in the value of foreign currency A. Transactions demand for money
in terms of domestic currency B. Precautionary demand for money
B. A decrease in the value of foreign currency C. Speculative demand for money
in terms of domestic currency D. All of the above
C. An increase in the value of domestic 15. It refers to how fast money is turned over in the
currency in terms of foreign currency economy.
D. None of the above A. Velocity
6. Money supply will normally increase when: B. Quantity theory of money
A. The BSP increases the reserve requirement C. Monetary base
B. The government sells bonds to the public D. Currency to deposit ration
C. The BSP lowers the rediscount rate 16. If the money multiplier is 4 and the monetary base
D. All of the above increases by P100 million, money supply would
7. Monetary policy refers to government policies increase by:
related to: A. P400 million
A. Wages and prices B. P25 million
B. Government expenditures and taxation C. P75 million
C. Money supply, credit and interest rates D. P100 million
D. Investments 17. The quantity theory of money relates the price level
8. When the economy's money supply is high relative and real output to:
to demand, this implies that credit conditions are A. The quantity of money and the velocity of
easier and therefore: money
A. Interest rate is low B. The quantity of money and the money
B. Interest rate is high multiplier
C. Consumption is low C. The money base and the money multiplier
D. Savings is low D. The currency to deposit ratio and the
9. By open market operations we mean the actions of velocity of money
the government to:
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18. The need to have money for day to day expenses B. Firm's product policy
refers to the: C. Degree of market knowledge
A. Transactions demand for money D. Goals of the society
B. Precautionary demand for money 9. Makes possible the smooth performance of both the
C. Speculative demand for money exchange and physical functions
D. All of the above A. Buying
19. The ____________ is the rate the BSP charges B. Selling
commercial banks when they borrow from the C. Market intelligence
former institution. D. Transportation
A. Interbank rate 10. Desire for a product together with the capacity to
B. Rediscount rate buy that product
C. Overnight lending rate A. Demand
D. Prime rate B. Income effect
C. Effective demand
D. Income elasticity of demand
Section 13. Marketing 11. Given assumption for the Law of Demand to work
A. Price is the only determining factor
1. The series of services involved in moving the product B. Income, price of related products and
from the point of production to the point of population affect quantity demanded
consumption. C. Expectation of future prices and income
A. Marketing operations determine quantity demanded
B. Marketing D. All of the Above
C. Marketing channels 12. A movement along a demand curve means
D. Marketing functions A. A change in price
2. A system of buyers and sellers with facilities for B. A change in quantity
trading with each other C. A change in demand
A. Pure competitive market D. A change in quantity demanded
B. Public market 13. The effect of a price change is always negative as
C. Market consumers tend to substitute other goods resulting
D. Supermarket to a decrease in quantity demanded
3. One who buys commodities from the market A. Substitution effect
A. Consumer B. Income effect
B. Customer C. Giffen paradox
C. Mother D. Inferior good
D. Decision-maker 14. Other things being equal, an increase in the per
4. Study of the various agencies and business structure capita income of consumers will result in
which perform the marketing processes. A. A change in quantity demanded
A. Commodity approach B. A change in demand
B. Institutional approach C. An increase in demand
C. Functional approach D. A decrease in demand
D. Structure-conduct-performance approach 15. Arises because a change in the price of one
5. Example of a merchant middleman commodity, all other factors remaining constant,
A. Wholesaler changes the consumer's real income
B. Retailer A. Income effect
C. Broker B. Substitution effect
D. Both A and B C. Price effect
6. The behavior pattern of a firm in the industry D. Demand
A. Market conduct 16. If the elasticity of demand is less than 1, an increase
B. Market structure in own price of a commodity will result in
C. Market performance A. An increase in total revenue
D. Pure competitive B. A decrease in total revenue
7. Acts as the grease in the marketing machinery C. No change in total revenue
A. Selling D. A decrease in the value of the elasticity of
B. Transportation demand
C. Market intelligence 17. When the price of palay increases, total revenue of
D. All of the above the farmer also increases. From this, we can
8. A dimension of market conduct correctly conclude that the demand for palay is
A. Degree of product differentiation A. Perfectly inelastic

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B. Elastic A. Competing or alternative commodities

C. Unitary elastic become more profitable
D. Inelastic B. A technological improvement results in a
18. A-0.60 income elasticity of demand for corn implies decrease in per unit cost
A. Less quantity demanded of com as income C. The cost of producing the commodity
increases increases
B. More quantity demanded for corn as D. All of the above
income increases 25. The supply of an agricultural good will be inelastic if
C. Corn is a normal good A. A slight change in cost incurred results in
D. A decrease of 60 kg of corn consumed for greater increase in output
every 1 % increase in income B. There is less time for the firm to expand
19. A farmer is contemplating of increasing the price of C. It is difficult to shift resources
his mango from P18 to P22 per kg when his harvest D. B and C
totaled to 100 kgs. What will you advise him if the 26. Which of the following explains the differences in
own price elasticity of demand for mango is 0.78? the individual supply elasticities and market supply
A. Do not increase price as a 1% in price will elasticity?
result to a 0.78% decrease in quantity A. Ease with which resources are shifted from
demanded the production of one good
B. Discontinue production as this will lead to B. Capital investments required in the shift
less mangoes sold in the market C. Length of time to complete production
C. Proceed with the price increase as D. All of the above
inelasticity of demand indicates higher 27. That price at which the quantity per unit of time that
revenue with price increases buyers want is just equal to the quantity that sellers
D. None of the above want to sell
20. When the price of papaya increases by 30%, quantity A. Equilibrium price
demanded decreases by 2%. What is the absolute B. Buying price
value of the elasticity of demand? C. Selling price
A. 2 D. None of the above
B. 1.5 28. Reason why farm prices are more volatile than non-
C. 30 food prices
D. 0.67 A. Inelastic demand
21. The coefficient of cross price elasticity of demand for B. Inelastic supply
competitive products is positive since C. Unpredictable changes in food supply
A. An increase in the price of one good results D. All of the above
in an increase in quantity demanded of 29. Improvement in production technology, given a
other good constant demand function, will result in
B. An increase in the price of one good results A. Increase in supply and subsequently lower
in a decrease in quantity demanded for one price of the product
good B. Increase in supply without any change in
C. An increase in the quantity of one good the price of the product
leads to an increase in the price of other C. Increase in supply and an increase in the
good price of the product
D. An increase in the quantity demanded of D. None of the above
one good results to a decrease in the price 30. An improvement in production technology and a
of other good simultaneous increase in population will result in:
22. Under what condition will demand be likely elastic A. An increase in the equilibrium price
A. A newly marketed product B. A decrease in the equilibrium price
B. Perishable product C. No change in the equilibrium price
C. A product has many uses D. The change in price largely depends on the
D. All of the above magnitude of the shift of the supply and
23. The short run supply curve of a perfectly competitive demand function
firm is the 31. An increase in the population, without a change in
A. Sum of all individual supplies the supply function, will result in
B. Portion of MC curve above minimum AC A. An increase in price of the product as a
C. Portion of MC above minimum AVC result of the increase in its demand
D. Portion of MC above AFC B. An increase in the demand for the product
24. The supply curve for a given commodity will shift to and a subsequent decrease in its price
the right if

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9023 Naawan, Misamis Oriental, Philippines

C. A decrease in the demand for the product C. Administered pricing

and a subsequent increase in it price D. None of the above
D. None of the above 40. Prices established in organized markets approximate
32. Amount of money needed to acquire goods and their equilibrium prices when
accompanying services. A. Number of transaction is large
A. Utility B. There is government intervention
B. Value C. There are few buyers and sellers
C. Price D. There is no market information
D. Money 41. . Products that are produced in approximately fixed
33. One of the essential functions of price proportions like coconut oil and desiccated coconut
A. Tells producers what and how much to from coconut
produce A. Joint products
B. Allocates productive resources to the B. Complements
production of goods and services C. Substitutes
consumers demand D. Competing products
C. Guides goods and services through the 42. The major factor that influence the existence of
channels of trade market channels
D. All of the above A. Product delivery
34. Price will tend to rise in response to B. Structure
A. A sharp decrease in population with no C. Increased efficiency
change in supply D. Organized transaction
B. A cost reducing technology, demand 43. To facilitate the proper functioning of the market
unchanged channel subsystem it is important that channel
C. An increase in income with no change in members must have a mutual understanding of their
supply A. Type of clients served
D. None of the above B. Territory served
35. Type of price fluctuation associated with the long C. Marketing functions performed
term changes in the factors affecting demand and D. All of the above
supply. 44. Service output requirement
A. Cycles A. Delivery time
B. Trend B. Lot size
C. Seasonal price variation C. Product variety
D. Annual price variation D. All of the above
36. For a cyclical behavior of price and quantity to occur 45. Direct marketing is advisable if
as exemplified by the Cobweb mode, what condition A. The total sales volume is small
must be satisfied? B. The market is scattered
A. A time lag between the decision to C. The product commands a high value per
produce and actual production unit
B. Production plans are based on future prices D. The product is highly perishable
C. Current prices are mainly a function of 46. The type of organization which handles the product
future supply through two or more steps in the processing or
D. All of the above marketing processes.
37. Gives rise to a convergent Cobweb cycle in price and A. Backward integration
quantity B. Vertical integration
A. Elastic supply C. Horizontal integration
B. Elastic demand D. Forward integration
C. Inelastic supply 47. Convenience goods
D. B and C A. Require intermediaries
38. The price differentials in perfectly competitive B. Unique and customized
markets are those caused by differences in C. Staples
A. Time, form and location of the product D. A and C
B. Promotion and advertisement 48. Demand for the finished products, e.g. dressed
C. Marginal cost and revenue chicken is called:
D. Input and output prices A. Primary demand
39. A simple bargaining process between individual B. Derived demand
buyers and sellers for each transaction. C. Consumer demand
A. Collective bargaining D. A and C
B. Individual negotiation

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 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

49. A series of figures representing the absolute margins C. Limits the time and expense of bargaining
of different types of middlemen or assignable to about price and quality for each transaction
different marketing functions divided by the retail D. Only A and B
price. 57. For a single consuming center for a farm product,
A. Percentage margin the price received by the farmers will be
B. Constant margin A. Pa- ta = Pb-tb
C. Percentage mark-up B. Pa-Pb = ta-tb
D. Breakdown on the consumer peso C. Pf = Pm-f (D)
50. A component of the marketing margin that refers to D. None of above
the returns to the various factors of production used
Given the following on the price structure of potatoes
in providing the processing and marketing services
per 100 kgs. (59-61)
rendered between the farmers and consumers
A. Marketing costs QUALITY
B. Net return
C. Processing costs SIZE GRADE AA GRADE AB GRADE BB
D. Marketing charges (P 100 Kgs.)
51. Reason why marketing costs differ among
agricultural products Large 1400 1300 1200
A. Increased processing
Medium 1300 1200 1200
B. Bulkiness
C. Perishability Small 1200 1100 1000
D. All of the above
52. Marketing efficiency measures
A. Pricing efficiency and operational efficiency If the transportation costs are P300 and P400 from area
B. Economic efficiency and technological A and B respectively, and other marketing costs are P750
efficiency and P850 respectively.
C. Marketing margins, input-output
measurements and evaluation of loss and 58. The total costs of marketing will be:
waste in the market A. P1050 and P1250 for Markets A and B,
D. Both A and B respectively
53. Different components of marketing margin: B. P700 for Market A and P1600 for Market B
A. Marketing costs (or return to the factors of C. P1150 for Market A and P1250 for Market
production in providing the processing and D. None of the above
marketing services); marketing charges (or 59. The producer will supply market B with
returns to the various agencies or A. All sizes and quality of potatoes
institutions involved in marketing) B. No small, grade BB potatoes
B. Marketing costs and transportation costs C. Only: large Grade AA, Grade AB and
C. Transportation costs and processing costs medium Grade AA
D. Marketing costs and storage costs D. Only small Grade BB
54. Cost of storing agricultural products 60. The producer will supply market A with
A. Depreciation, repairs, insurance against loss A. All sizes and quality potatoes
B. Quality deterioration and shrinkage in B. Only large, Grade AA, Grade AB and Grade
volume BB, medium Grade AA, AB
C. Amount of capital invested in the stored C. All sizes and quality of potatoes except
products plus handling fee small Grade BB potatoes
D. All of the above D. Only small Grade BB
55. The most important risk involved in the storage of
food products For numbers 61-65, use the given equation for milkfish:
A. Physical loss
B. Price change b = 3.14 Y = 10.7 X = 2
C. Product deterioration
61. The estimated intercept is
D. Insect and rodent damage
A. 18.26
56. Grading and standardization can result in economic
B. 7.56
efficiency since it
C. 4.42
A. Increases the level of competition in the
D. 8.70
market
62. The resulting trend equation for milkfish using the
B. Increases the meaningfulness of price
above information is
quotations
A. Y= 4.42 + 3.14X
Disclaimer: This is NOT FOR SALE. The content and information of this document is not owned by the college.
The document is intended to be used for informational purposes or study material. This document is strictly
confidential and solely for the use of recipient and may not be reproduced or circulated without the consent of
the authors.
 Republic of the Philippines
Mindanao State University at Naawan
College of Agriculture and Forestry
9023 Naawan, Misamis Oriental, Philippines

B. Y = 10.7 + 3.14X C. 170 kgs

C. 7.56 + 3.14X D. None of the above
D. Y = 4, 41 + 10.7X
63. Using this equation, the predicted average farm
A yellow corn farmer sold his produce to an assembler
price of milkfish in year 1994 where
wholesales at P4.00 per kg and later sold this to a miller
1980 = 1, 1981 = 2... is
at P4.40 per kg. After milling the corn, the miller sold this
A. 51.52
as a wholesaler at P5.10 per kg. The latter disposed this
B. 57.80
to a retailer at P5.60 per kg who later sold the milled
C. 54.66
corn to livestock producers at P6.00 per kg.
D. 164.92
64. The slope (b) explains the 70. The price spread for this commodity is
A. Average price increase per year amounting A. P0.40/kg
to p4.42 B. P1.60/kg
B. Average price increase per year amounting C. P6.80/kg
to p3.14 D. P2.00/kg
C. Average price increase per year amounting 71. The farmer's share is
to p7.56 A. 93%
D. None of the above B. 67%
65. This particular problem made us of a technique to C. 7%
project or predict future prices and this is known as D. 8%
A. Simple linear regression analysis 72. The wholesaler's percentage mark-up is
B. Demand analysis A. 8.9%
C. Statistical analysis B. 9.8%
D. Seasonal indices C. 1.96%
D. 7.1%
For question 66-69, please refer to the following figure:
73. The percentage margin at the miller's level is
A. 21.6%
B. 25%
C. 9.8%
D. 13.7%

66. The given marketing channel has _________ product

flows
A. 11
B. 9
C. 5
D. 8
67. The simplest product flow is
A. F-CB-R-C
B. F-WR-R-C
C. AW-WR-C
D. F-WR-C
68. The ultimate link to the consumers in this system is
the
A. Retailer
B. Wholesaler-retailer
C. Both A and B
D. None of the above
69. Assuming that the farmer handles 1000 kgs. The
total volume handled by the contract buyer will be
A. 580 kgs
B. 250 kgs

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confidential and solely for the use of recipient and may not be reproduced or circulated without the consent of
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