Foundation of Econ - PHA

Economics deals primarily with the concept of

• scarcity

• money

• poverty

• banking

Answer explanation

Economics is the study of how people make choices under conditions of scarcity, where resources are limited but wants are unlimited. It focuses on the allocation of scarce resources to satisfy competing needs and desires.

In the circular-flow diagram

• a.spending on goods and services flow from firms to households

• b. goods and services flow from households to firms

• c. factors of production flow from firms to households.

• d. income from factors of production flows from firms to housholds

Answer explanation

In the circular-flow diagram, households provide factors of production (like labor, land, and capital) to firms, and in return, firms pay income (such as wages, rent, and profits) to households. So, income flows from firms to households in exchange for resources.

Between a trough and a peak, the economy goes through a(n)

• recession

• bust

• expansion

• hyperinflation

Answer explanation

Between a trough (the lowest point in the business cycle) and a peak (the highest point), the economy experiences an expansion—a period of increasing output, employment, and economic growth.

Demand function excludes which of the followings:

• price of inputs

• income of consumer

• expectation

• price of related goods

Answer explanation

price of inputs affects the supply function, not demand, because it relates to the cost of production for producers.

The unemployment rate equals

• labor force/population

• unemployed/employed

• (employed - unemployed)/labor force

• (labor force - employed)/labor force

Answer explanation

The total market value of all final goods and services produced within a given period by factors of production located within a country is

• gross domestic product

• gross national product

• net national product

• net national income

Answer explanation

Gross Domestic Product (GDP) measures the total market value of all final goods and services produced within a country during a specific period, using the factors of production located within that country, regardless of who owns them.

All of the following curves are U-shaped except

• AVC

• ATC

• AFC

• MC

Answer explanation

• AFC (Average Fixed Cost) is not U-shaped; it always declines as output increases because fixed costs are spread over more units.

• AVC (Average Variable Cost), ATC (Average Total Cost), and MC (Marginal Cost) are typically U-shaped due to the law of diminishing marginal returns.

Which of the following does not belong to perfect competition market?

• different product

• many suppliers

• no entry barrier

• many buyers

Answer explanation

Inferior good is the one which:

• Has low quality

• Has low demand

• Has decreased demand when consumer's income increases

• Has increased demand when consumer's income goes up

Answer explanation

An inferior good is a type of good whose demand falls when consumer income rises, and vice versa. Consumers buy less of these goods when they can afford better alternatives.

Example: When income increases, people might switch from instant noodles (inferior good) to fresh meals.

which of the following is not counted in the GNP of the Vietnam?

• a. the wage of a Vietnamese citizen who works in a foreign country for a foreign firm.

• b. the interest earned by a Vietnam bank on loans to a business firm located in singapore

• c. the profit earned by a restaurante located in vietnam but owned by a chinese company

• d. the value of services that are produced by state local governments in vietnam

Answer explanation

Gross National Product (GNP) measures the total market value of final goods and services produced by the nationals (citizens and firms) of a country, regardless of where they are located.