Applied Microeconomics
Exam Answer Key
Course Introduction
Applied Microeconomics explores the use of microeconomic theories and principles to analyze real-world issues and inform decision-making in various sectors. This course covers topics such as consumer and producer behavior, market structures, game theory, and the role of government in addressing market failures. Through case studies and practical examples, students learn how microeconomic concepts are applied to fields like labor markets, health care, environmental policy, and business strategy, equipping them with analytical tools to solve complex economic problems and make evidence-based recommendations.
Recommended Textbook Microeconomics Student Value 4th Edition by R.
Glenn Hubbard
Available Study Resources on Quizplus
18 Chapters
2548 Verified Questions
2548 Flashcards
Source URL: https://quizplus.com/study-set/3588
Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/71247
Sample Questions
Q1) The cost incurred from the production of an additional unit of a product
A)is a marginal cost to the firm.
B)is called a loss.
C)is called opportunity cost.
D)must be zero for a firm to be efficient.
Answer: A
Q2) According to the Centers for Disease Control and Prevention,the only state in 2009 in which less than 20 percent of the population was considered obese was A)Colorado.
B)Maine.
C)Missouri.
D)Oregon.
Answer: A
Q3) Refer to Figure 1-2.Calculate the area of the triangle A.
A)$8.4 million
B)$6.3 million
C)$3.15 million
D)$2.1 million
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Available Study Resources on Quizplus for this Chatper
153 Verified Questions
153 Flashcards
Source URL: https://quizplus.com/quiz/71237
Sample Questions
Q1) Refer to Figure 2-2.What is the opportunity cost of one dozen roses?
A)0.4 dozen orchids
B)2.5 dozen orchids
C)7.25 dozen orchids
D)16 dozen orchids
Answer: A
Q2) A critical function of the government in facilitating the operation of a market economy is
A)producing goods and services for low income households.
B)setting up and enforcing private property rights.
C)ensuring an equal distribution of income to all citizens.
D)controlling the market prices of food items.
Answer: B
Q3) Refer to Table 2-3.What is George's opportunity cost of mowing a lawn?
A)half a garden cultivated
B)two lawns mowed
C)two-thirds of a garden cultivated.
D)one and a half lawns mowed
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/71236
Sample Questions
Q1) If the price of gasoline increases,what will be the impact in the market for public transportation?
A)The demand curve for public transportation shifts to the right.
B)The quantity of public transportation demanded increases.
C)The demand curve for public transportation shifts to the left.
D)The quantity of public transportation demanded decreases.
Answer: A
Q2) Which of the following would cause both the equilibrium price and equilibrium quantity of barley (assume that barley is an inferior good)to increase?
A)an increase in consumer income
B)a drought that sharply reduces barley output
C)a decrease in consumer income
D)unusually good weather that results in a bumper crop of barley
Answer: C
Q3) A decrease in the price of inputs will cause the supply curve for a product to shift to the right.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Economic Efficiency, government Price Setting, and Taxes
Available Study Resources on Quizplus for this Chatper
138 Verified Questions
138 Flashcards
Source URL: https://quizplus.com/quiz/71235
Sample Questions
Q1) When ________ in a market,the total net benefit to society is maximized.
A)deadweight loss is maximized
B)a competitive equilibrium is achieved
C)consumer surplus is minimized
D)producer surplus is minimized
Q2) Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.
Q3) Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the second ice cream cone?
A)$0.50
B)$1.50
C)$3.00
D)$10.50
Q4) The additional cost to a firm of producing one more unit of a good or service is equal to producer surplus.
A)True
B)False
Q5) What is consumer surplus? Why would policy makers be interested in consumer surplus?
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Externalities, environmental Policy, and Public Goods
Available Study Resources on Quizplus for this Chatper
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/71234
Sample Questions
Q1) Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain.This is an example of
A)a transaction cost.
B)a Pigovian tax.
C)a Pigovian subsidy.
D)the Coase Theorem.
Q2) Refer to Figure 5-4.Suppose the emissions reduction target is currently established at 8 million tons.What is the area that represents the cost of eliminating an additional 1 million tons?
A)A
B)B + C
C)A + B
D)A + B + C
Q3) Refer to Figure 5-1.What is the deadweight loss from producing at the market equilibrium?
A)area C
B)area E
C)area D
D)area F
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Elasticity: the Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/71233
Sample Questions
Q1) If an 8 percent decrease in the price of lobster leads to a 15 percent decrease in the quantity supplied of lobster,then the supply of lobster is
A)unit-elastic.
B)unitarily elastic.
C)elastic.
D)perfectly inelastic.
Q2) If the price elasticity of demand for insulin is equal to zero then the demand curve for insulin is
A)horizontal.
B)downward sloping.
C)curvilinear.
D)vertical.
Q3) The demand for The Federalist Papers is likely to be more elastic than the demand for a best-selling mystery novel.
A)True
B)False
Q4) Most food products have low income and price elasticities of demand.
A)True
B)False
8
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: The Economics of Health Care
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/71232
Sample Questions
Q1) Economists John Cogan,R.Glenn Hubbard,and Daniel Kessler have estimated that ________ the tax preference for employer-provided health insurance would reduce spending by people enrolled in these programs by 33 percent.
A)enacting
B)doubling
C)cutting in half
D)repealing
Q2) In most circumstances,employees pay taxes on the value of health insurance their employers provide them.
A)True
B)False
Q3) Some economists have argued that certain characteristics of the delivery of health care justify government intervention.One of these characteristics is
A)health care is a public good.
B)health care is nonrivalrous and nonexcludable.
C)health care generates negative externalities.
D)health care generates positive externalities.
Q4) How can increases in a country's total income improve health?
Q5) How do adverse selection and moral hazard affect the market for insurance?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
Available Study Resources on Quizplus for this Chatper
141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/71231
Sample Questions
Q1) The financial statements of firms generally are audited by
A)employees of the firm being audited.
B)employees of private accounting firms.
C)employees of the federal government.
D)the board of directors of the corporation being audited.
Q2) A corporation is
A)the easiest type of business to set up.
B)the least expensive type of business to set up.
C)the most difficult type of business to set up.
D)the least profitable type of business to set up.
Q3) When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.
A)primary; primary
B)primary; secondary
C)secondary; primary
D)secondary; secondary
Q4) Who is the seller in a primary market and who is the seller in a secondary market?
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Comparative Advantage and the Gains From International Trade
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/71230
Sample Questions
Q1) Over the past several decades there has been a rapid growth in international trade.This growth has been due to all except one of the following factors.Which factor has not contributed to the growth of international trade?
A)the spread of reliable communications
B)a change in the tariffs charged on many goods
C)a reduction in shipping costs
D)favorable changes in government policies
Q2) Domestically produced goods and services sold to other countries are referred to as A)exports.
B)imports.
C)transfer payments.
D)capital outflow.
Q3) More than half of Caterpillar's sales are made
A)outside the United States.
B)inside the United States.
C)in Latin America.
D)in China.
Q4) What are three primary reasons for the growth of international trade over the past 50 years?
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Consumer Choice and Behavioral Economics
Available Study Resources on Quizplus for this Chatper
154 Verified Questions
154 Flashcards
Source URL: https://quizplus.com/quiz/71246
Sample Questions
Q1) Refer to Table 10-4,which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub)sandwiches and tacos.Assume that the price of the sub sandwiches is $4 and the price of tacos is $2.When Harry's income is $14 he buys two Italian sub sandwiches and three tacos.The last column lists the values of the marginal utility per dollar for tacos when the price of tacos decreases to $1.Complete this statement: As a result of the change in price
A)Harry's purchasing power has increased.He will reduce his consumption of tacos so he can buy one more sub.This is an example of the substitution effect of a price change.
B)Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy fewer tacos.This is an example of the income effect of a price change.
C)Harry's purchasing power has increased.If tacos are a normal good for Harry he will buy more tacos.This is an example of the income effect of a price change.
D)Harry's purchasing power has increased.Harry buys fewer tacos.This is an example of the substitution effect of a price change
Q2) Explain the concept of network externalities.
Q3) What is an indifference curve? Why can indifference curves never cross?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Technology, production, and Costs
Available Study Resources on Quizplus for this Chatper
165 Verified Questions
165 Flashcards
Source URL: https://quizplus.com/quiz/71245
Sample Questions
Q1) Average total cost is
A)total cost divided by the quantity of output produced.
B)total explicit costs divided by the quantity of output produced.
C)variable cost divided by the quantity of output produced.
D)the change in fixed plus variable cost divided by the quantity of output produced.
Q2) Stan owns a software design business.He obtained a bank loan to buy computer equipment for his business.He pays $1,000 per month for interest on the loan.He has 10 employees,each of whom is paid $4,000 per month.Because his business has been successful,next month he will increase employee wages to $5,000.If the revenue from his business remains at its current level,Stan is considering an addition to his office.Which of the following statements regarding Stan's business is false?
A)The payments Stan makes to his employees are variable costs and explicit costs.
B)The monthly payment Stan makes for his bank loan is an implicit cost.
C)The monthly payment Stan makes for his bank loan is a fixed cost.
D)The time and effort Stan spends on his software design business is an implicit cost.
Q3) What is the marginal product of labor and what is the average product of labor.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/71244
Sample Questions
Q1) New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?
A)apple farming in New York state
B)the Enron accounting scandal
C)the medical screening industry
D)new technologies developed in the 1990s
Q2) In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?
A)Continuing to operate resulted in smaller losses than would have been incurred by shutting down.
B)The ranchers were hoping to receive government subsidies.
C)The exit costs were too high.
D)Cattle is an important source of protein and its production is essential for the United States.
Q3) Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
Available Study Resources on Quizplus for this Chatper
143 Verified Questions
143 Flashcards
Source URL: https://quizplus.com/quiz/71243
Sample Questions
Q1) Compared to a perfectly competitive firm,the demand curve facing a monopolistically competitive firm is
A)more elastic because there are many close substitutes for the product of a monopolistically competitive firm.
B)less elastic because monopolistically competitive firms produce similar,but not identical,products.
C)just as elastic because there are many sellers in both markets.
D)more elastic because in the long run,the demand curve is tangent to the firm's average total cost curve.
Q2) If some monopolistically competitive firms exit their market after suffering short-run losses,the demand curves of remaining firms will shift to the right.
A)True
B)False
Q3) What are the key factors that determine the profitability of a firm in a monopolistically competitive market?
Q4) One of the assumptions of monopolistic competition is that firms produce differentiated products.What does this assumption imply about the demand curve facing a representative firm?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Oligopoly: Firms in Less Competitive Markets
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/71242
Sample Questions
Q1) An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.This entry barrier is known as
A)a copyright.
B)a patent.
C)an exclusive marketing agreement.
D)a tariff.
Q2) Why are decision trees useful to managers who plan business strategies?
A)Decision trees explain the level of concentration in an industry.
B)Decision trees can be used to increase the amount of product differentiation; this enables managers to charge higher prices for their products.
C)Decision trees provide a systematic way of thinking through the implications of a strategy.
D)Using a decision tree always leads to a dominant strategy.
Q3) Refer to Table 14-5.Which of the following is true?
A)Power Fuel's dominant strategy is to select a low price.
B)Brawny Juice's dominant strategy is to select a high price.
C)Power Fuel does not have a dominant strategy.
D)Brawny Juice does not have a dominant strategy.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Monopoly and Antitrust Policy
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/71241
Sample Questions
Q1) A firm that is the only seller of a good or service that does not have a close substitute is called
A)a monopoly.
B)an oligopolist.
C)a market maker.
D)a price maker.
Q2) Ordinarily,governments attempt to promote competition in markets.Why do governments use patents to block entry into some markets when this prohibits competition?
A)Patents encourage firms to spend money on research necessary to create new products.
B)Politicians sometimes succumb to pressure from lobbyists to grant favors to businesses for political reasons.
C)Patents are an important source of government revenue.
D)Patents are justified because they are an important means for creating network externalities.
Q3) A monopolist's demand curve is the same as the marginal revenue curve for the product.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Pricing Strategy
Available Study Resources on Quizplus for this Chatper
134 Verified Questions
134 Flashcards
Source URL: https://quizplus.com/quiz/71240
Sample Questions
Q1) Dell Computers allows potential consumers to customize personal computers to their desires.Dell's strategy is successful because offering bundles that more exactly meets a consumer's preference allows Dell to extract more consumer surplus.
A)True
B)False
Q2) Assume that a monopolist practices perfect price discrimination.The firm will produce an output rate
A)that is less than the efficient level of output.
B)that is greater than the efficient level of output.
C)that is equal to the efficient level of output.
D)that converts consumers surplus into a deadweight loss.
Q3) Refer to Figure 16-2.If Sensei charges the competitive price for his classes,what is the maximum amount of admission fee that he can collect from his customers?
A)the area A + B
B)the area A + B + C + D
C)the area A + B + C + D + E
D)the area A + C + D + G + H
Q4) Are restaurant coupons a form of price discrimination? Why or why not?
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: The Markets for Labor and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/71239
Sample Questions
Q1) Along an upward sloping labor supply curve,as the wage rate increases,the opportunity cost of leisure ________,causing individuals to supply a ________ quantity of labor.
A)increases; greater B)increases; lower C)decreases; greater D)remains constant,constant
Q2) The application of economic analysis to human resources issues is called personnel economics.
A)True
B)False
Q3) If you were to ask your employer for a raise,which of the following would be your most effective argument?
A)"I have a job offer at another firm that will pay me more than my current wage."
B)"I am willing to work more hours each week."
C)"Increases in my productivity have resulted in greater revenue and profits for your business."
D)"My marginal product is greater than my current wage."
Q4) Why are there superstar baseball players but no superstar chiropractors?
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Public Choice, taxes, and the Distribution of Income
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/71238
Sample Questions
Q1) Both presidents Kennedy and Reagan proposed significant cuts in income taxes because
A)at the time of their proposals the federal government was experiencing budget surpluses; that is,tax revenue exceeded government expenditures.
B)they wanted to offset their proposals to increase other taxes.
C)state governments had increased their taxes and they believed the tax cuts they proposed would result in most citizens paying about the same total state and federal taxes.
D)they believed that the tax cuts would enhance economic efficiency.
Q2) Refer to Table 18-6.Sylvia is a single taxpayer with an income of $70,000.What is her marginal tax rate and what is her average tax rate?
A)marginal tax rate = 30%; average tax rate = 30%
B)marginal tax rate = 8%; average tax rate = 19.3%
C)marginal tax rate = 30%; average tax rate = 22.5%
D)marginal tax rate = 20%; average tax rate = 30%
Q3) If your income is $92,000 and you pay taxes of $19,475,what is your average tax rate? Show your work.
Q4) What is a Lorenz curve and what is a Gini coefficient?
Q5) What is meant by "tax incidence"?
To view all questions and flashcards with answers, click on the resource link above. Page 20