The fundamental problem of economics is, in short,

You are exempted from paying your tuition and other fees under the free tuition law. Before this law, you would have to spend Php40,000 per year to get your college degree. However, if you choose to work instead, you could have earned Php240,000 per year. With the free tuition scheme in place, the economic cost of one year in college is

True or false. You don’t know any Twice songs, but you know that Twice is popular right now. You were able to get a ticket to her concert because you are a friend of the concert organizer. Meanwhile, some diehard fans who waited in line failed to get tickets. This situation is efficient.

“If you commute to work earlier than the rush hour, you can avoid the heavy traffic. Therefore, everyone should commute earlier so that everyone can avoid the heavy traffic.” What is the fallacy?

The government officials insist on building 14,000 classrooms and 1,200 km of new road. Under what circumstances will this be possible?

Suppose the US economy was on its PPF but the actions of US Immigration and Customs Enforcement (ICE), such as the raids and rounding-up of non-white/latino-looking individuals, disrupted the harvest of a number of crops. Which of the following will most likely happen in the short term?

The mayor of a city argues during a strategy meeting on flood mitigation: “Flooding will stop once we expand the city’s drainage system.” What is the fallacy?

In 2024, onion prices rose sharply in Metro Manila after bad weather. In a mixed economy, how would this problem be most likely addressed?

A small island nation, isolated from global trade, has fertile land suitable for growing either rice or sugarcane. The islanders need both for survival and trade. If they decide to allocate more land to rice production, they will have less land for sugarcane. This scenario best illustrates which fundamental economic concept?

A recent high school graduate has been accepted into a prestigious university with a full scholarship covering tuition and fees, which would normally cost Php 100,000 per year. However, if the graduate chooses to work instead, they could earn Php 300,000 per year. With the full scholarship in place, what is the economic cost of one year at the university for this student?

A popular band announces a surprise concert with limited tickets. A local radio station, known for its community engagement, decides to give away all tickets through a lottery system, ensuring everyone has an equal chance regardless of their willingness to pay or their fan loyalty. Many die-hard fans who would have paid a high price for tickets fail to get them, while some casual listeners who won tickets decide not to attend. Is this situation efficient from an economic perspective?

A city council member proposes that if each household in the city reduces its water consumption by 20% during a drought, the city's total water reserves will last significantly longer. Therefore, she argues, if every household reduces its water consumption by 20%, the city will avoid a water crisis. What is the fallacy in her reasoning?

A developing country's economy can produce either agricultural goods or manufactured goods. Currently, at Point X on its PPF, it produces 500 units of agricultural goods and 200 units of manufactured goods. If the country decides to move to Point Y, where it produces 600 units of agricultural goods and 150 units of manufactured goods, what is the opportunity cost of producing the additional agricultural goods?

A country is currently operating on its Production Possibility Frontier (PPF), producing consumer goods and capital goods. A new technological breakthrough significantly improves the efficiency of producing capital goods, but has no direct impact on consumer goods production. Which of the following will most likely happen to the country's PPF in the short term?

Following a severe economic recession, a country experiences widespread factory closures and high unemployment rates. The government is debating policies to stimulate the economy. In terms of the Production Possibility Frontier (PPF), where is the economy most likely operating during this recession?

During a public debate on healthcare, one politician states, "Implementing universal healthcare will lead to a 15% increase in the national budget deficit." Another politician argues, "Every citizen deserves access to quality healthcare, regardless of their income." Which statement is an example of positive economics?

A local bakery produces artisanal bread. The baker uses flour, water, yeast, and salt, along with a specialized oven and her own labor. The bread is then sold to customers. In this scenario, which of the following represents an "input"?

Which of the following best describes the invisible hand?

Which of the following best depicts the concept off the visible hand?

Which of the following is a market failure?

Based on your answer to #3, what type of market failure is present?

Which of the following best illustrates how prices serve as a balance wheel in a market economy?

True or False? rices depend solely on consumers' desire to buy.

Andres works as a rider for Foodpanda. He uses his tips to order merienda for delivery to his children at home. Which role(s) does Andres play in the market?

Consider Carla who is preparing to launch a YouTube vlog. She can both write the script and edit the video. Alternatively, she could hire a freelance video editor to handle the editing. Which set-up would probably lead to a faster completion of the vlog?

Which of the following is a good example of a public good?

The principle of gains from trade show that __ can make everyone better-off

True or False? When there is a market failure, the government must intervene.

A student has a limited budget for textbooks and leisure activities. If the price of textbooks increases, the student must decide whether to buy fewer textbooks, reduce leisure spending, or a combination of both. This situation directly arises from:

Consider a large metropolitan area like Tokyo, where millions of people consume a vast array of goods and services daily. Despite the absence of a central planning authority dictating what, how, and for whom goods are produced, the city's residents generally have access to the products they need. This coordination is primarily achieved through:

A small business owner, driven by the desire to maximize his profits, invests in new, more efficient machinery and offers competitive prices for his products. As a result, his business thrives, creating jobs and providing affordable goods to the community. This outcome, where individual self-interest leads to societal benefit, is a core idea of:

Country A is highly efficient at producing textiles, while Country B is highly efficient at producing electronics. Both countries need both goods. If Country A focuses solely on textiles and Country B on electronics, and they then trade with each other, what is the most likely outcome for both countries?

Imagine a society where people produce various goods but have no common medium of exchange. If a farmer wants to trade his surplus wheat for a pair of shoes, he must find a shoemaker who specifically wants wheat. This cumbersome process highlights the importance of what feature of a modern economy?

A developing nation is considering two economic strategies: Strategy X focuses on maximizing current consumption by producing mostly consumer goods. Strategy Y emphasizes investing heavily in infrastructure, education, and new technologies. Which strategy is more likely to lead to a significant outward shift of the nation's Production Possibility Frontier (PPF) in the long run?

In a country undergoing economic reform, the government is debating whether to establish clear legal frameworks for private ownership of land and businesses. Proponents argue that this will encourage investment and economic growth. This argument emphasizes the importance of:

A factory located near a residential area emits significant air pollution as a byproduct of its production process. This pollution negatively affects the health of nearby residents, but the factory does not pay for these health costs. This situation is an example of:

A city is considering whether to invest in a new public park with walking trails and recreational facilities. Once built, it would be difficult to prevent any resident from using the park, and one person's enjoyment of the park does not diminish another's. This park is an example of:

A government observes a widening gap between the incomes of the wealthiest and poorest citizens. To address this, it implements a policy where higher earners pay a larger percentage of their income in taxes, and these funds are used to provide financial assistance to low-income families. This government action primarily aims to fulfill which economic function?

The United States economy is characterized by private businesses making most production and consumption decisions, but the government also plays a significant role in regulating industries, providing social safety nets, and influencing overall economic activity. This economic system is best described as a:

Consider the market for bread. Holding other things constant, what happens when the price of bread rises?

Which of the following will shift the demand curve for milk tea?

Which of the following causes a movement along the supply curve of rice?

Which of the following will likely not cause a shift in the supply of labor?

True or False? If the demand for ride-sharing services increases, while supply remains constant, both equilibrium price and quantity will increase.

Strawberries are needed to make strawberry jam. If the recent typhoon decreases the supply of strawberry, all other things constant, how will this affect the market for strawberry jam?

Suppose that Coke and Sprite are substitutes. What happens to the demand for these products when Coke’s price decreases while Sprite’s price remains the same, holding other things constant?

True or False? The government raised the price of rice by reducing tariff exemptions on imported rice. As a result, a household buys less rice overall, even though they don’t switch to other staples. This mainly shows the income effect rather than the substitution effect.

True or False? When the price of shoes rises, a shoemaker produces and sells more shoes. It must be that the supply curve shifted to the left.

A new smartphone model is released to the market. Initially, its price is very high, and only a few units are sold. Over time, as the price gradually decreases, the quantity of smartphones purchased by consumers significantly increases. This observation is consistent with:

The price of beef rises significantly. As a result, many consumers decide to buy more chicken and pork instead of beef. This change in consumer behavior is primarily an example of the:

Due to a global economic downturn, many households experience a substantial decrease in their disposable income. Consequently, they reduce their purchases of luxury items like high-end cars and designer clothing, even if the prices of these items remain unchanged. This phenomenon illustrates the:

A popular celebrity endorses a new brand of athletic shoes, leading to a surge in their popularity. Even without a change in the price of the shoes, consumers are now willing to buy a much larger quantity. This situation would be represented graphically as:

Which of the following factors, if it changes, would cause a shift in the demand curve for electric vehicles (EVs), rather than a movement along it?

As the price of crude oil increases in the global market, oil-producing companies find it more profitable to extract oil from more expensive and difficult-to-access reserves, leading to an increase in the total quantity of oil supplied. This behavior is consistent with:

A major hurricane destroys a significant portion of the coffee crop in a leading coffee-producing country. Assuming all other factors remain constant, what is the most likely immediate impact on the global supply curve for coffee?

A new, highly efficient automated manufacturing process is developed for producing smartphones, significantly reducing the cost of production per unit. Assuming no change in consumer preferences or income, what is the most likely impact on the market for smartphones?

In the market for fresh strawberries, if the current market price is above the equilibrium price, what will most likely happen?

Consider the market for solar panels. Suppose there is a significant technological breakthrough that drastically reduces the cost of producing solar panels (shifting supply rightward). At the same time, a new government initiative offers substantial tax credits for households installing solar panels (shifting demand rightward). What is the most likely outcome for the equilibrium price and quantity of solar panels?

During a severe heatwave, the demand for bottled water surges, leading to a sharp increase in its price. This price increase effectively allocates the limited supply of bottled water to those who are most willing and able to pay for it. This mechanism is known as:

A news report states that "the quantity of new homes sold increased last month due to lower mortgage interest rates." This statement describes:

If the government imposes a price ceiling on a staple food item below its equilibrium price, what is the most likely immediate consequence in the market for that food item?

Due to an unexpectedly good harvest, the supply of corn significantly exceeds the demand at the prevailing market price. What will happen in the corn market to restore equilibrium?

Over the past decade, the price of flat-screen televisions has fallen dramatically, while the quantity sold has increased substantially. Which of the following best explains this observation?

The local public transportation authority raises bus fares by 10%. In response, the number of bus riders decreases by 15%. What can be concluded about the price elasticity of demand for bus rides?

If the price of a popular video game decreases from 50, and the quantity demanded increases from 10,000 units to 15,000 units, what is the approximate price elasticity of demand using the midpoint method?

A concert promoter is considering raising ticket prices for an upcoming show. If the demand for tickets is found to be elastic, what will happen to the total revenue from ticket sales if the price is increased?

Which of the following goods is likely to have the most inelastic demand?

A sudden increase in the market price of fresh fish leads to a small, immediate increase in the quantity of fish supplied by local fishermen, as they can only deploy their existing boats and nets. However, over several months, more fishermen invest in new boats and equipment, leading to a much larger increase in the quantity supplied. This scenario illustrates that the price elasticity of supply for fresh fish is:

A country experiences an exceptionally good harvest of its staple crop, leading to a significant increase in the quantity supplied. If the demand for this staple crop is inelastic, what will be the likely impact on the total revenue earned by farmers?

The government imposes a per-unit tax on the production of cigarettes. If the demand for cigarettes is highly inelastic and the supply is relatively elastic, who will bear the larger burden of the tax?

A government implements a minimum wage law, setting the wage rate above the equilibrium wage for unskilled labor. What is the most likely economic consequence of this policy in the market for unskilled labor?

In response to rapidly rising rental costs, a city government imposes a rent ceiling below the equilibrium rent. Which of the following is a likely consequence of this policy in the housing market?

When a price ceiling is imposed on a popular product, leading to a shortage, consumers often have to wait in long lines to purchase the limited supply. This method of allocating scarce goods is known as:

A government is considering imposing a tax on sugary drinks to reduce consumption and generate revenue. If the demand for sugary drinks is found to be highly elastic, what would be the likely outcome of this tax?

In the immediate aftermath of a sudden increase in gasoline prices, consumers may not significantly reduce their driving habits as they still need to commute to work or school. However, over several months, they might purchase more fuel-efficient cars, carpool more often, or move closer to their workplaces. This suggests that the demand for gasoline is:

A state government imposes a sales tax on restaurant meals. If the supply of restaurant meals is perfectly inelastic, who will bear the entire burden of this tax?

Historically, many governments have implemented policies to support farm incomes, such as price supports or restricting agricultural imports. These policies are often justified by the observation that:

If the supply of a product is perfectly inelastic, and there is an increase in demand for that product, what will be the primary effect on the market?

No matter how many pencils he buys, Paul always pays the same price per pencil. The supply curve for pencils facing Paul is:

(2 pts) Due to rising global oil prices, the pump price of gasoline increased from ₱65 per liter to ₱78 per liter. Consequently, the volume of gasoline purchased per day declined from 500,000 liters to 450,000 liters. Is the demand for gas (a) price elastic,(b) inelastic or (c) unit elastic? Show your computations.

Suppose 𝜀𝑃 = − 0.16. If the quantity demanded increased by 4%, we can conclude that:

If the price of a good _____, sellers can expect an increase total revenue when demand for the good is price _________.

Suppose that consumer demand for soft drinks is perfectly elastic while producers follow a preset production and distribution schedule. Who will likely bear the burden of a new tax on sugarsweetened beverages?

PAL recorded a large increase in revenues after introducing a large number of bargain fares as a response to Cebu Pac’s strategy. Which of the following is a possible explanation?

Both PAL and Cebu Pac offer cheaper fares the farther away the travel dates are and higher fares the closer the travel dates are. What are the airlines possibly assuming?

If the government imposes a price ceiling that is above the equilibrium price,

The following are nonprice rationing mechanisms, excepting

The price elasticity of supply tends to be more inelastic as production facilities reach their maximum capacity

Setting a minimum wage rate above the free-market equilibrium wage rate will likely increase the number of employed low-skilled workers.

In the Philippines, demand for rice tends to be more price elastic than that for pasta.

If the demand for a good is inelastic relative to supply, consumers bear more of the tax burden

Fish production may be very price elastic in the long run as new fish farms are constructed and new fishermen are hired.

An insurance company is in the business of receiving insurance premiums so that it insures its customers during adverse events by paying out insurance claims (or insurance coverage) to them. The CEO of an insurance company adopts common economic principles in its corporate strategy for the current fiscal year. Within the context of economics, what is the most likely course of action by the CEO of the insurance company for the current fiscal year?

What would happen if the quantity demanded for noodles doubled at each price?

The world demand for crude oil is estimated to have a short-run price elasticity of 0.05. If the initial price of oil were $100 per barrel, what would be the effect on oil price and quantity of an embargo that curbed world oil supply by 5 percent? For this problem, assume that the oil supply curve is completely inelastic. Perfectly inelastic supply curve would mean that supply curve is vertical. Quantity change is equal to 5%