Microeconomics slides

1. Microeconomics
Nermeen Abdullah
Assistant Lecturer of Economics

2. • Intro
• Economics Definition: the study of how individuals and societies choose to
use the limited and scarce resources to satisfy the unlimited human wants.
• Economics is divided in two main parts:
• Microeconomics
• Macroeconomics
• The scope of economics is summarized in the following questions:
• What? What will be produced (goods and services)
• How? How will it be produced (what resources to be used)
• For whom? Who gets the output (distribution of output)

3. Economic Systems and the Role of
Government
• Command system
• Free market system
• Mixed system, market and government

4. The Production Possibility Frontier (PPF)
• Downward sloping/ Negatively sloped:
Because producing more of one kind
of good requires producing less of
the other good (trade-off)
• Concave to the origin: indicates
increasing opportunity cost (because
of inadaptability of the resources)
• Note that: the opportunity cost of
producing one good rises as more of
that good is produced.

7. 1) MCQ
1) Economics deals primarily with the concept of
(a) poverty.
(b) scarcity.
(c) change.
(d) power.
2) Economics is defined as
(a) the study of business.
(b) the study of how society manages its scarce resources.
(c) the study of central planning.
(d) the study of government regulation.

8. 3) Efficiency means that
(a) society is getting the most it can from its scarce resources.
(b) society is conserving resources in order to save them for the
future.
(c) society’s goods and services are distributed fairly among society’s
members.
(d) society has lessened its dependence on foreign energy sources.
4) The opportunity cost of an item is
(a) the number of hours needed to earn money to buy it.
(b) what you give up to get that item.
(c) always less than the dollar value of the item.
(d) always equal to the dollar value of the item.

9. 5) An economy is said to be efficient if
(a) it is possible to produce more of all goods.
(b) it is possible to produce more of one good without producing less of another.
(c) it is not possible to produce more of one good without producing less of
another.
(d) it is not possible to produce more of one good at any cost.
6) Which of the following concepts is NOT illustrated by the production
possibilities frontier?
(a) efficiency
(b) opportunity cost
(c) equity
(d) tradeoffs

10. 7) On the production possibilities frontier shown,
• which point or points are NOT possible for this economy to produce?
• (a) D
• (b) E, F
• (c) A, B, C
• (d) D, E, F

11. 8) In the table showing the production possibilities, what is the
opportunity cost of increasing the production of toys from 450 to 600?
(a) 30 cars
(b) 20 cars
(c) 10 cars
(d) 0 cars

12. 9) According to the Figure , the opportunity cost of one more bushel of
wheat is
a) higher at B than at D.
b) lower at B than at D.
c) equal at B and D.
d) impossible to determine from the information given.
10) The shape of the production possibilities frontier in the Figure implies
that
a) some resources are better suited for producing wheat than for producing
barley.
b) the opportunity cost of producing more wheat falls as wheat production rises.
c) the farmer's technology is not subject to the principle of increasing costs.
d) the financial cost of producing wheat is higher than the financial cost of
producing barley.

13. 11) The following table shows the production possibilities of cotton and
corn in Egypt:
• The opportunity cost of increased cotton in moving from A to B is
a. 16 units of corn. d. 4 units of corn
b. 31 units of corn. e. 1 unit of corn
c. 15 units of corn.
• From point C, the opportunity cost of 3 more units of cotton would be
a. 4 units of corn. c. 14 units of corn
b. 8 units of corn. d. 16 units of corn
Combination A B C D E
Cotton 12 17 21 23 24
Corn 16 15 13 9 5