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The fundamentals of microeconomics 1. The term ‘Opportunity cost’ means: The profits, which an economic agent could have had out of the best use of resources, alternative to the actually chosen, current use The cost of financing additional, non-essential activities in a business Investment in new, highly risky businesses 2. Fixed costs, in a business, include: All the costs of production, which do not change more than by 10% over one year All the costs of production, which, in a given interval of output (Q), remain constant regardless the exact volume of output The costs, which you have to incur in a business even if you don’t have any profits 3. Perfect competition is a market structure, where: All the goods are being sold at an equilibrium price, and that price is exogenous from the point of view of each market participant Each supplier is in direct competition with all the other suppliers Only the efficient, well-managed businesses can compete 4. The equilibrium price, in a market, has the attribute of: Offering the best possible deal to all the suppliers and all the consumers Staying constant, in the given market, for long periods of time Clearing all the inventories held by the suppliers in a given market 5. Monopolistic price occurs in a market, where... There is only one good being offered to consumers In a given interval of price, demand remains inelastic to price Any given good has just one substitute good 6. The assets of an economic agent include: All the tangible things, and intangible rights, which the economic agent in question can use as his (her) in his (her) economic activity All the profits derived from an economic activity All the claims, on the part of the economic agent, on other economic agents, net of the reciprocal claims 7. When a business incurs net loss after tax, the amount of the loss... Is subtracted from the equity of the business Is added to the equity of the business Is subtracted from the assets of the business 8. If you borrow $10 000 from a bank, for 2 years, at an interest rate of 7% a year, you have to pay back, in total: $10 000 + $7000 = $17 000 $10 000 + 2*7%*$10 000 = $11 400 $10 000 + 7%*$10 000 = $10 700 9. A mortgage is a specific type of loan, which... Involves a guarantee from a third party, i.e. from a person who guarantees for the borrower Gives to the bank a conditional claim on the future income of the borrower Is supposed to be used to purchasing a piece of real estate, and gives to the bank a conditional claim on the same real estate, in case the borrower is in default 10. The assets of a business are worth €400 000, its liabilities are €150 000, and its profit for the last fiscal year is €30 000. The rate of return on equity (ROE) in this business is calculated as... €30 000 / €400 000 €30 000 / (€400 000 - €150 000) (€150 000 - €30 000) / (€400 000 + €150 000) 11. You invested €100 000 in a business. In the first year of operations, you had a net loss of €5000, in the second year you just reached the break-even point, and during the following 3 years you had a net profit of €15 000 a year. Your net cash flow after 5 years is: €100 000 - €5000 + €15 000 €100 000 + €5000 + 3*€15 000 - €100 000 - €5000 + 3*€15 000 12. An isoquant (or indifference curve) is... A curve, which, when traced in a two-dimensional manifold, connects all the points that represent the same arithmetical quotient: ordinate ‘y’ equals constant value divided by the abscise ‘x’ A curve, which sets a frontier between the transactions economically attractive to a buyer, on the one hand, and the unattractive ones A curve, which connects points that correspond to identical profits from a given business 13. What if, in a Marshallian local equilibrium of a market, demand grows whilst other factors remain constant? The equilibrium product decreases, and the equilibrium price increases Both the equilibrium product, and the equilibrium price increase The equilibrium product increases, whilst the equilibrium price decreases 14. Moral depreciation is a loss of value, which... Occurs in all the assets of a business, and is connected to their use in ventures characterized with high risk of loss Occurs only in the fixed assets of a business, and reflects their relative obsolescence, as new generations of technologies emerge in the market Occurs only in the receivables of a business, and reflects the default of its customers to pay in time 15. In a given market, in Marshallian equilibrium, the function of demand, in consumers, is expressed as Q = €2000 / P, where Q is quantity and P is price. It means that... Each consumer spends a budget equal to €2000 Each consumer spends a budget equal to €2000/P Each consumer expects a price equal to €2000 16. In a given market, in Marshallian equilibrium, the function of demand, in consumers, is expressed as Q = 5 + (300/P), where Q is quantity and P is price. The function of supply, in suppliers, is P = 4 + (5000/Q). The equilibrium price in this market has to meet the condition: 5 + (300/P) = 4 + (5000/Q) [300/(Q - 5)] = 4 + (5000/Q) [5 + (300/P)] = [300/(Q - 5)] 17. The Giffen’s paradox tells us that: As price grows, consumers buy more goods, because they expect higher a social prestige As price grows, consumers buy more goods, because they expect higher prices in the future As price grows, consumers buy less goods Please fill in the comment box below. Now, you can look up into the file with explanatory notes (a Power Point presentation). Click this link. Time's up Share this:TwitterFacebookLike this:Like Loading...
