INTERMEDIATE MICROECONOMICS A
MODERN APPROACH 10TH EDITION
COMPREHENSIVE EXAM SCRIPT WITH
SOLUTIONS
◉ Consumer good.
Answer: A finished good that is sold for consumption
◉ Capital good.
Answer: Ant tangible asset that an organisation uses to produce
goods or services such as office buildings, machinery etc.
◉ Specialisation.
Answer: Where individuals, businesses and whole economies are
not self-sufficient but concentrate on producing certain goods and
services, then trading their surplus.
◉ Division of labour.
Answer: The assignment of different parts of a manufacturing
process or task to different specialised people in order to improve
efficiency
,◉ Productivity.
Answer: Output of a good or service, per factor of production, per
period of time
◉ Functions of money.
Answer: A medium of exchange-it should be accepted universally for
the payment of goods, services and debt
Unit of account-It allows the value of goods, services and other
assets to be compared so that the prices of products reflect the value
that society places on them
Standard of deferred payment-Money can be used to pay back debt
Store of value-It must be possible to use for future transactions and
so it must be non-diminishable
◉ Resource allocation.
Answer: The way in which a society's factors of production are
divided amongst their alternative uses
◉ Objectives of households.
Answer: Households make decisions about how to allocate
expenditure based on the utility they derive from consuming a good
or service
◉ Objectives of firms.
,Answer: Firms make decisions about what to produce and how
much to produce (how to use their factors of production) in order to
receive a return/profit for their endeavours.
◉ Objectives of the government.
Answer: Government's objectives are to maximise social welfare and
will do this through decision making regarding taxation to fund
public expenditure, enforcement of laws and regulation that provide
a system for the market to work in. May aim to achieve
'macroeconomic performance indicators'
◉ Utility maximisation.
Answer: The aim of trying to achieve the highest level of satisfaction
possible from the consumption/production of a good
◉ Profit maximisation.
Answer: The aim of trying to achieve the highest levels of profit
possible
◉ Incentives for households.
Answer: Their decisions will depend on the benefits gained form
consumption relative to the costs involved. Both including the price
and the opportunity cost of consumption A04: Time delays may
mean consumers may take time to respond to changes in price and
firms may take time to respond to consumer's changes in tastes.
, Workers may also not seek the highest wage possible as they may do
a job to fulfil a sense of vocation or for the non-pecuniary benefits.
◉ Incentives for firms.
Answer: Firms decisions will depend on the potential profits that
supplying a product can create. EG. if the price of a product rises, a
firm has an incentive to provide more of it assuming that this
increases the return they can make from producing it. A04: Not all
firms are profit maximisers
◉ Incentives for governments.
Answer: Governments base their decisions on how they can further
meet the political ideals of those in power, which are typically based
on improving people's quality of life. A04: Government officials may
be driven by self interest and not what is best for society
◉ Market economy.
Answer: An economy in which the market forces of demand and
supply determine the allocation of resources
◉ Centrally planned economy.
Answer: An economy in which the state determines the allocation of
resources
MODERN APPROACH 10TH EDITION
COMPREHENSIVE EXAM SCRIPT WITH
SOLUTIONS
◉ Consumer good.
Answer: A finished good that is sold for consumption
◉ Capital good.
Answer: Ant tangible asset that an organisation uses to produce
goods or services such as office buildings, machinery etc.
◉ Specialisation.
Answer: Where individuals, businesses and whole economies are
not self-sufficient but concentrate on producing certain goods and
services, then trading their surplus.
◉ Division of labour.
Answer: The assignment of different parts of a manufacturing
process or task to different specialised people in order to improve
efficiency
,◉ Productivity.
Answer: Output of a good or service, per factor of production, per
period of time
◉ Functions of money.
Answer: A medium of exchange-it should be accepted universally for
the payment of goods, services and debt
Unit of account-It allows the value of goods, services and other
assets to be compared so that the prices of products reflect the value
that society places on them
Standard of deferred payment-Money can be used to pay back debt
Store of value-It must be possible to use for future transactions and
so it must be non-diminishable
◉ Resource allocation.
Answer: The way in which a society's factors of production are
divided amongst their alternative uses
◉ Objectives of households.
Answer: Households make decisions about how to allocate
expenditure based on the utility they derive from consuming a good
or service
◉ Objectives of firms.
,Answer: Firms make decisions about what to produce and how
much to produce (how to use their factors of production) in order to
receive a return/profit for their endeavours.
◉ Objectives of the government.
Answer: Government's objectives are to maximise social welfare and
will do this through decision making regarding taxation to fund
public expenditure, enforcement of laws and regulation that provide
a system for the market to work in. May aim to achieve
'macroeconomic performance indicators'
◉ Utility maximisation.
Answer: The aim of trying to achieve the highest level of satisfaction
possible from the consumption/production of a good
◉ Profit maximisation.
Answer: The aim of trying to achieve the highest levels of profit
possible
◉ Incentives for households.
Answer: Their decisions will depend on the benefits gained form
consumption relative to the costs involved. Both including the price
and the opportunity cost of consumption A04: Time delays may
mean consumers may take time to respond to changes in price and
firms may take time to respond to consumer's changes in tastes.
, Workers may also not seek the highest wage possible as they may do
a job to fulfil a sense of vocation or for the non-pecuniary benefits.
◉ Incentives for firms.
Answer: Firms decisions will depend on the potential profits that
supplying a product can create. EG. if the price of a product rises, a
firm has an incentive to provide more of it assuming that this
increases the return they can make from producing it. A04: Not all
firms are profit maximisers
◉ Incentives for governments.
Answer: Governments base their decisions on how they can further
meet the political ideals of those in power, which are typically based
on improving people's quality of life. A04: Government officials may
be driven by self interest and not what is best for society
◉ Market economy.
Answer: An economy in which the market forces of demand and
supply determine the allocation of resources
◉ Centrally planned economy.
Answer: An economy in which the state determines the allocation of
resources
