Applied Microeconomics
Midterm Exam
Course Introduction
Applied Microeconomics explores the use of microeconomic theories and methodologies to analyze real-world issues and policy problems. The course covers topics such as consumer behavior, firm production and pricing strategies, market structures, and the role of government in markets. Emphasis is placed on applying economic models to sectors like labor, health, education, and the environment, using empirical evidence and case studies to inform decision-making. Students develop critical skills in interpreting data, evaluating policy outcomes, and addressing contemporary microeconomic challenges.
Recommended Textbook
Principles of Microeconomics 2nd Edition by Lee Coppock
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19 Chapters
3303 Verified Questions
3303 Flashcards
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Page 2
Chapter 1: Five Foundations of Economics
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175 Verified Questions
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Sample Questions
Q1) The opportunity cost of working rather than going to school is
A) the cost of food and housing.
B) the cost of clothing and transportation.
C) zero because the person is earning an income by working.
D) the higher wages that come with additional education.
E) the annual wages earned by working.
Answer: D
Q2) Economics is concerned with the trade-offs that emerge because of scarcity.The term "trade-offs" refers to
A) the decision about whether households or businesses should bear the entire burden of the scarcity problem.
B) the buying and selling that occur as unwanted goods are exchanged for goods that are desired.
C) the alternatives given up when making choices.
D) recycling and transforming old goods into new goods to reduce scarcity problems.
E) forcing businesses to produce some goods and services and not others.
Answer: C
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3
Chapter 2: Model Building and Gains From Trade
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) For both parties to benefit from specialization and trade,the trading parties must agree on
A) a price somewhere between their opportunity costs of production.
B) a plan not to trade with other parties.
C) who has the absolute advantage in production.
D) the appropriate level of investment for the future.
E) the source of comparative advantage.
Answer: A
Q2) Why do economists use models?
A) Models are used to add complexity to a simple world.
B) Models allow us to study a simplified version of a complex world.
C) Models allow us to control exogenous factors.
D) Models make the world harder to understand.
E) Models allow us to examine more factors than what actually exists in our world.
Answer: B
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4
Chapter 3: The Market at Work: Supply and Demand
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) When both supply and demand shift to the right,equilibrium
A) price always rises.
B) price always falls.
C) quantity always falls.
D) quantity always rises.
E) quantity is indeterminate.
Answer: D
Q2) Using a supply and demand graph,show what happens to the equilibrium price and quantity for the following goods if,holding all else constant,income increases.
a.a normal good
b.an inferior good
Answer: a.
11ea78d5_7013_1f7f_8379_3d56f233a172_TB4871_00 b.
11ea78d5_7013_1f80_8379_233356df579f_TB4871_00
Q3) Using a supply and demand model,show what happens to the equilibrium price and equilibrium quantity in the market for cigarettes when the government imposes a tax on their production.
Answer: 11ea78d5_7013_4691_8379_b71e1e3d124d_TB4871_00
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Page 5
Chapter 4: Elasticity
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175 Flashcards
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Sample Questions
Q1) When incomes fall by 20 percent,quantity demanded of specialty baked goods falls by 50 percent.Specialty baked goods are
A) inferior goods.
B) necessities.
C) substitutes for mass-produced bread.
D) luxuries.
E) complements to butter.
Q2) Which of the following statements are true about demand and the price elasticity of demand?
A) When the demand curve has a negative slope,the price elasticity of demand is infinite.
B) When the demand curve has a negative slope,the price elasticity of demand is zero.
C) When the demand curve has a negative slope,the price elasticity of demand is positive.
D) When the demand curve has a negative slope,the price elasticity of demand is negative.
E) When the demand curve has a negative slope,the price elasticity of demand is positive
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6
Chapter 5: Market Outcomes and Tax Incidence
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Social welfare is measured as the sum of
A) tax revenue and deadweight loss.
B) deadweight loss and consumer surplus.
C) producer surplus and tax revenue.
D) consumer surplus and tax revenue.
E) consumer surplus and producer surplus.
Q2) Excise taxes are taxes that are
A) applied to all goods and activities.
B) usually applied to inferior goods.
C) usually applied to income and capital gains.
D) never applied to goods or activities.
E) applied to a particular good or activity.
Q3) Excise taxes are popular sources of revenue for governments because
A) they have very high levels of deadweight loss.
B) they are easy to understand.
C) consumers are rarely aware that they are paying them.
D) they are very stable sources of revenue.
E) they require very little paperwork.
Q4) Draw a set of supply and demand curves and explain,with reference to the graph,why the producer surplus could be "described as the total producer gain."
Page 7
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Chapter 6: Price Controls
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173 Flashcards
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Sample Questions
Q1) If a price floor is imposed at $15 per unit when the equilibrium market price is $12,there will be
A) no surplus or shortage.
B) a surplus.
C) a shortage.
D) a downward pressure on prices.
E) an upward pressure on prices.
Q2) What would be the quantity supplied if a price floor is set at $100?
A) 100
B) 154,100
C) 1,541
D) 21,474
E) 1,300
Q3) What will happen in a market where a nonbinding price ceiling is removed?
A) There will be downward pressure on the price in the legal market.
B) The products sold will improve in quality and become more plentiful.
C) Sellers will face a reduced incentive to sell the products.
D) The price and quantity will not change in the legal market.
E) There will be increased pressure to buy and sell the goods on the black market.
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Page 8
Chapter 7: Market Inefficiencies: Externalities and Public Goods
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172 Verified Questions
172 Flashcards
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Sample Questions
Q1) The tragedy of the commons occurs for goods that are A) rival and excludable.
B) rival and nonexcludable.
C) nonrival and nonexcludable.
D) nonrival and excludable.
E) never produced by the government.
Q2) If four boats operate,then each boat will make a profit of
A) $775.00.
B) $500.00.
C) $275.00.
D) $675.00.
E) $68.75.
Q3) Christopher's roommate is studying to be a chef and likes to try new recipes.He leaves his delicious creations in the refrigerator for anyone who wants to eat them.The food he leaves is always gone within a day.This is an example of A) the third-party problem.
B) the tragedy of the commons.
C) an internal cost.
D) the free-rider problem.
E) a positive externality.
Page 9
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Chapter 8: Business Costs and Production
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175 Flashcards
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Sample Questions
Q1) If there are gains from specialization in a workplace,hiring another employee means that the marginal product of labor will
A) decrease.
B) remain the same.
C) increase.
D) be zero.
E) be negative.
Q2) What would cause a firm's production function to change?
A) expanding the size of the factories
B) increasing the quantity of labor and capital
C) increasing the quantity of capital
D) increasing the quantity of labor
E) the adoption of new technology
Q3) Where would we find a firm's minimum efficient scale of production?
A) at the lowest point on its long-run average total cost curve
B) at the highest point on its long-run average total cost curve
C) in the middle of its long-run average total cost curve
D) at the highest point on its long-run average fixed cost curve
E) in the middle of its long-run average variable cost curve
Q4) What is the concept of diminishing marginal product?
Page 10
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Chapter 9: Firms in a Competitive Market
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174 Flashcards
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Sample Questions
Q1) If this firm is maximizing profits,total revenue is represented by the area
A) B * C
B) A * C
C) (A- B) * C
D) A * B.
E) (A + B) * C .
Q2) What should the firm do when it faces the following conditions:
Average total cost = $60
Average variable cost = $40
Marginal cost = $35
Marginal revenue = $35
A) lower the price
B) shut down
C) increase production
D) decrease production
E) raise the price
Q3) Draw a perfectly competitive,profit-maximizing firm that is incurring a short-run loss and will shut down.Be sure to include the marginal revenue curve,the marginal cost curve,the average total cost curve,and the average variable cost curve.
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Chapter 10: Understanding Monopoly
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) If the government forces a firm to produce at the point that generates the greatest welfare for society,that firm would make ________ in profits.
A) $1,500
B) -$720
C) $720
D) -$240
E) $240
Q2) The profit-maximizing price and quantity are ________,respectively.
A) $34 and 20
B) $26 and 20
C) $18 and 20
D) $18 and 30
E) $13 and 20
Q3) Draw a figure to illustrate how the emergence of a monopoly leads to deadweight loss for society as a whole,and explain the circumstances that fix the amount of that deadweight.
Q4) Using a graph,explain the concepts of the price effect and output effect.
Q5) Draw graphs of a normal monopoly and a natural monopoly and discuss their differences.
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Chapter 11: Price Discrimination
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175 Flashcards
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Sample Questions
Q1) In a price-discrimination setting,people with the most inelastic demand
A) pay the lowest price for the same good.
B) pay the same price as everybody else.
C) pay the highest price for the same good.
D) pay either a higher or a lower price.
E) do not buy the good.
Q2) According to economists,extreme couponing is not worth the effort if the ________ exceeds the ________ from the coupons,when time is taken into account.
A) waste; benefit
B) opportunity cost; savings
C) savings; benefit
D) savings; time
E) efficiency; cost
Q3) How do grocery stores practice price discrimination?
Q4) A firm cannot price discriminate if it
A) operates in a competitive environment.
B) has a downward-sloping demand curve.
C) has a business that is regulated.
D) has perfect information about market demand.
E) can prevent resale of its product.
Page 13
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Chapter 12: Monopolistic Competition and Advertising
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173 Flashcards
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Sample Questions
Q1) In the long run,the positive economic profits of Wings N Things,a monopolistic competitor,are
A) not driven out because competition is not perfect.
B) not driven out because the demand curve slopes downward.
C) eliminated due to the entry of firms into the industry.
D) eliminated due to the departure of firms from the industry.
E) not driven out because firms cannot enter the industry.
Q2) Show,graphically,how advertising affects demand in a market and describe the effects of advertising on demand.
Q3) One drawback to advertising might be that it could easily
A) raise costs but not increase demand.
B) raise revenue but not increase demand.
C) decrease revenue and raise demand.
D) decrease costs and decrease demand.
E) cause a monopolistically competitive firm to become a monopoly.
Q4) List five products that are typically sold in monopolistically competitive markets.
Q5) Why would advertising for the firm be effective under monopolistic competition but not under perfect competition?
Q6) Explain what is meant by "differentiated" products.
Page 14
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Chapter 13: Oligopoly and Strategic Behavior
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175 Flashcards
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Sample Questions
Q1) Firm A prices its products so low that it drives competitors out of the market.After all of its competitors have been driven out of the market,Firm A raises prices significantly.The fact that Firm A ________ is sufficient evidence of anticompetitive behavior.
A) lowered prices
B) raised prices significantly
C) drove competitors out of the market
D) competed with other firms on price
E) lowered its price below average variable cost in an effort to drive competitors out of the market and then subsequently increased price
Q2) According to the kinked demand curve theory,the behavior of firms in an oligopoly creates a demand curve that is ________ at prices above the cartel price and ________ at prices below the cartel price.
A) downward-sloping; upward-sloping
B) more inelastic; upward-sloping
C) perfectly inelastic; downward-sloping
D) more inelastic; more elastic
E) more elastic; more inelastic
Q3) Why must a tit-for-tat strategy be a long-run strategy?
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Page 15
Chapter 14: The Demand and Supply of Resources
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Sample Questions
Q1) What is the marginal product of the second worker?
A) 9 units
B) 8 units
C) 10 units
D) 7 units
E) 18 units
Q2) Yolanda owns a temp agency.She sees demand for her workers increase because firms prefer a more contingent workforce.The value of the marginal product of labor of her temps
A) stays the same.
B) increases because the temps produce more per hour.
C) decreases because the temps know they are going to get jobs.
D) increases because the price of their services is higher.
E) falls because job uncertainty lowers productivity.
Q3) The supply schedule indicates that the labor supply curve is
A) backward-bending.
B) upward-sloping.
C) downward-sloping.
D) vertical.
E) horizontal.
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Chapter 15: Income,inequality,and Poverty
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Sample Questions
Q1) ________ occurs when those who collect welfare benefits are then discouraged from working.
A) Income mobility
B) Poverty threshold
C) A samaritan's dilemma
D) An in-kind transfer
E) Winner-take-all
Q2) Why might a less developed country have a greater degree of income inequality?
A) Greater income mobility in these nations creates large gaps in income,as individuals rapidly increase in their standard of living.
B) Class systems always persist in less developed countries,where wealth is redistributed to the preferred class.
C) Reduced access to advanced technology produces a more equitable distribution of income.
D) Less developed nations often have widespread poverty,with wealth concentrated among only a few individuals.
E) Less developed nations receive large amounts of foreign aid,which isn't taken into account with calculations of income inequality.
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Chapter 16: Consumer Choice
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Sample Questions
Q1) A(n)________ is a line of equal utility.
A) maximization point
B) interference point
C) consumer optimum
D) indifference curve
E) substitution curve
Q2) When does a change in price produce a real-income effect?
A) only if purchasing power is impacted significantly
B) only if purchasing power is impacted negatively
C) only if there is a substitution effect
D) only if there is an optimum effect
E) always
Q3) A new ________ that is parallel to the first one,but just tangent to the new indifference curve,will reveal the real-income effect.
A) maximization point
B) perfect substitute curve
C) perfect complement curve
D) budget constraint line
E) indifference curve
Q4) Why is it necessary to engage in marginal thinking with more than two goods?
Page 18
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Chapter 17: Behavioral Economics and Risk Taking
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Sample Questions
Q1) A rational,risk-averse person will
A) sometimes refuse a fair gamble.
B) always accept a fair gamble.
C) consider all gambles unfair.
D) always refuse a fair gamble.
E) randomly refuse or accept a fair gamble.
Q2) If the contestant changes buckets from the original bucket to the other bucket remaining,the expected value of the game is ________; if the contestant does not change buckets and sticks with the original bucket chosen,the expected value of the game is ________.Assume that the market price of gold is $1,000 per ounce.
A) $4,000; $4,000
B) $2,333.33; $3,666.67
C) $3,666.67; $2,333.33
D) $5,000; $1,000
E) $1,000; $5,000
Q3) Give some examples of how rationality is bounded in economic decision-making.
Q4) Explain how temptation affects intertemporal decision-making.Incorporate risk aversion in your answer.
Q5) Summarize the main point of prospect theory.
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Chapter 18: Health Insurance and Health Care
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172 Flashcards
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Sample Questions
Q1) A key component in the Affordable Care Act passed in the United States is the requirement that individuals must either obtain basic medical insurance coverage or pay a tax.Which of the following problems was this mandate designed to reduce?
A) moral hazard
B) adverse selection
C) diminishing returns
D) market failure
E) principal agent problem
Q2) ________ would be minimized if hospital policy based a physician's salary on how healthy patients were following treatment by that doctor rather than the number of patients treated per year.
A) Moral hazard
B) Adverse selection
C) Diminishing returns
D) Market failure
E) The principal-agent problem
Q3) Many consider the profit motive of physicians and hospitals a moral hazard,and if patient care isn't valued over profit,the patient may receive poor-quality treatment.Is this a fair assumption?
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Page 20
Chapter 19: International Trade
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Sample Questions
Q1) In 2011,60 percent of goods imported by the United States came from just seven nations.Which of the following nations was NOT one of those seven?
A) Australia
B) South Korea
C) Japan
D) Mexico
E) Canada
Q2) Trade deficit is
A) the sum of a nation's total exports and total imports.
B) the difference between a nation's total exports and total imports.
C) when a nation exports more than it imports.
D) when a nation imports more than it exports.
E) when a nation no longer feels it has the need for trade partners.
Q3) Based on the scenario,which of the following is true?
A) Dirk has an absolute advantage in producing basketballs,but not footballs.
B) Dirk has an absolute advantage in producing footballs,but not basketballs.
C) Dirk has an absolute advantage in producing both goods.
D) Dirk has an absolute advantage in producing neither good.
E) Rosa has a comparative advantage in producing both goods.
Q4) List three trade-restrictive policies.
Page 21
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