Applied Microeconomics Review
Questions
Course Introduction
Applied Microeconomics explores the practical application of microeconomic theories to real-world scenarios, emphasizing how individuals, firms, and governments make decisions regarding resource allocation, production, and consumption. The course covers topics such as consumer and producer behavior, market structures, pricing strategies, market failures, and the impact of government intervention. Through case studies and empirical analysis, students learn to critically evaluate economic policies and business strategies, applying quantitative and qualitative tools to solve practical economic problems.
Recommended Textbook
ECON Micro 2 2nd Edition by William A. McEachern
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21 Chapters
3947 Verified Questions
3947 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Economists classify all of the following as capital,except one.Which one is not capital?
A) a $20 bill in a firm's petty cash drawer
B) the building where our economics class meets
C) a plumber's wrench
D) a railroad car
E) a factory
Answer: A
Q2) Behavioral assumptions
A) make economic models more complex than if these assumptions were removed
B) pertain only to consumers
C) hold all other things constant
D) are ways to test a hypothesis
E) describe how individuals are expected to behave
Answer: E
Q3) Resources are used only in the production of goods,not services.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Economic Tools and Economics Systems
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185 Verified Questions
185 Flashcards
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Sample Questions
Q1) If Sam can chop up more carrots per minute than Joe can,then
A) Joe has an absolute advantage in carrot chopping
B) Joe must have a comparative advantage in carrot chopping
C) Sam has an absolute advantage in carrot chopping
D) Sam must have a comparative advantage in carrot chopping
E) we can conclude nothing about absolute advantage
Answer: C
Q2) Which of the following is not a gain from division of labor?
A) Workers' abilities are matched to tasks.
B) Workers gain experience from the repetition of the tasks.
C) Workers save time by not moving to different tasks.
D) Workers' morale increases as tasks become more specialized.
E) The introduction of labor-saving machinery is possible.
Answer: D
Q3) Opportunity cost is always measured in dollar terms,rather than in terms of real goods and services.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Economic Decision Makers
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196 Flashcards
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Sample Questions
Q1) Suppose you own a proprietorship that is in serious financial difficulty.The assets of the company are $100,000,but liabilities are $175,000.You also have,however,stock in General Motors worth $200,000.If you file bankruptcy,what amount of personal assets do you stand to lose?
A) $100,000
B) $75,000
C) $200,000
D) $275,000
E) $375,000
Answer: B
Q2) A cottage industry is one that
A) produces rural housing
B) takes advantage of the division of labor
C) uses highly specialized resources in a complex production process
D) produces cottage cheese
E) carries out production in workers' homes
Answer: E
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Chapter 4: Demand, supply, and Markets
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222 Flashcards
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Sample Questions
Q1) The law of demand says that the lower the price of a good,other things constant,
A) the smaller the demand for that good
B) the larger the demand for that good
C) the smaller the quantity demanded of that good
D) the larger the quantity demanded of that good
E) the smaller the real income of consumers and the lower the quantity demanded of that good
Q2) In Exhibit 4-14,a movement from point M to point N represents:
A) An increase in supply
B) A decrease in supply
C) An increase in quantity supplied
D) A decrease in quantity supplied
E) An increase in quantity demanded
Q3) The basic reason that supply curves slope upward is that
A) demand curves slope downward
B) production is characterized by increasing costs
C) profits decline as product prices rise
D) greater output can only result from improved technology
E) price and quantity supplied are inversely related
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Chapter 5: Elasticity of Demand and Supply
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238 Verified Questions
238 Flashcards
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Sample Questions
Q1) Which of the demand curves in Exhibit 5-15 is unit elastic?
A) the curve in graph a
B) the curve in graph b
C) the curve in graph c
D) the curve in graph d
E) the curve in graph e
Q2) If the demand for ptyalin is unit elastic,then
A) total revenue decreases as quantity demanded increases
B) total revenue increases as quantity demanded increases
C) total revenue increases as price increases
D) total revenue remains constant as price increases
E) total revenue decreases as price increases
Q3) What is the price elasticity of demand in Exhibit 5-4?
A) 0
B) -1
C) negative infinity
D) 1
E) -100
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Chapter 6: Consumer Choice and Demand
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) If Ed is willing to pay a maximum of $200 for a tweed sport coat but buys one for $180,that $20 saved is
A) his reservation price
B) the store's producer surplus
C) his total expenditure
D) his marginal utility
E) his consumer surplus
Q2) Exhibit 6-14 shows Reggie's demand for apples.If there are 100 people in this economy,and each has the same demand for apples as Reggie,what is the total quantity demanded in the market for apples at P = $6?
A) 600 pounds of apples
B) 200 pounds of apples
C) the average of all the quantities demanded
D) the average of all the prices
E) the average quantity demanded divided by the average price
Q3) Different people may have different tastes,but their tastes do not change over time.
A)True
B)False
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8
Chapter 7: Production and Cost in the Firm
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) Suppose a soccer coach has been making $25,000 per year but gives up his coaching job in order to make lace doilies.If his revenue from the sale of these doilies is $50,000 and his materials cost $20,000,then his economic profit is
A) $5,000
B) $25,000
C) $30,000
D) $50,000
E) $80,000
Q2) Which of the following is a long-run adjustment?
A) A new economics professor is hired on campus.
B) General Motors increases its orders for steel.
C) Microsoft cuts back its hiring of new graduates.
D) Glow Electric disassembles one of its nuclear power plants.
E) Texaco buys more crude oil to refine into gasoline.
Q3) If a firm's economic profit is positive,its accounting profit must also be positive.
A)True
B)False
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Chapter 8: Perfect Competition
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250 Verified Questions
250 Flashcards
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Sample Questions
Q1) A perfectly competitive firm's profit per unit of output equals
A) price minus average variable cost
B) price minus marginal cost
C) total revenue minus total cost
D) price times quantity
E) price minus average total cost
Q2) Individual firms in a perfectly competitive market can
A) purchase all they want at the market price
B) sell all they produce at the market price
C) earn more profit if they charge a price above the market price
D) earn more profit if they charge a price below the market price
E) earn no profit in the short run
Q3) A perfectly competitive firm is allocatively efficient because price is identical to marginal cost at every quantity
A)True
B)False
Q4) A perfectly competitive firm has a horizontal supply curve in the short run.
A)True
B)False
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Chapter 9: Amonopoly
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257 Verified Questions
257 Flashcards
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Sample Questions
Q1) The welfare loss of monopoly is also called
A) converted consumer surplus
B) deadweight loss
C) economic profit under monopoly
D) producer surplus
E) contestable profit
Q2) In Exhibit 9-11,the level of output that would achieve allocative efficiency is
A) 700 units
B) 810 units
C) 884 units
D) 976 units
E) 1,000 units
Q3) Which of the following is true of monopoly?
A) There are no barriers to entry.
B) The firm is a price taker.
C) There are no close substitutes for the product being produced.
D) There are many firms in the industry.
E) The firm faces a horizontal demand curve.
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11
Chapter 10: Monopolistic Competition and Oligopoly
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219 Verified Questions
219 Flashcards
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Sample Questions
Q1) In order to maximize profit or minimize loss,the firm in Exhibit 10-9 should
A) produce 100 units of output and charge $15
B) produce 100 units of output and charge $8
C) produce more than 100 units of output and charge less than $8
D) produce slightly less than 100 units of output and charge more than $8
E) shut down
Q2) A monopolistically competitive firm is currently producing 20 units of output and charging $30 per unit.The marginal revenue of the 20<sup>th</sup> unit produced is $12 and the marginal cost of producing the 20<sup>th</sup> unit is $18.To maximize profit or minimize loss,the firm should:
A) Charge more and sell more output
B) Charge less and sell more output
C) Charge more and sell less output
D) Charge less and sell less output
E) Charge $30 per unit and sell less output
Q3) Monopolistically competitive firms use product differentiation to increase the price elasticity of demand.
A)True
B)False
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Page 12
Chapter 11: Resource Markets
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) Firms that face downward-sloping demand curves for their output are called
A) perfectly competitive
B) price takers
C) price searchers
D) resource price takers
E) resource price searchers
Q2) Suppose a firm is a price searcher in the product market and hires labor in a perfectly competitive labor market.If the wage rate is $20,the marginal product of the last worker hired is 5,and the firm is hiring the profit-maximizing amount of labor,then the marginal revenue from the last unit of output must be
A) $1
B) $1.50
C) $4
D) $5
E) $20
Q3) The demand for a resource is derived from the demand for the final product it helps to produce.
A)True
B)False
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Page 13
Chapter 12: Labor Markets and Labor Unions
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) If an electricians' union is successful in its attempts to restrict entry into that craft,it will shift
A) the supply curve of electricians to the right
B) the supply curve of electricians to the left
C) the demand curve for electricians to the right
D) the demand curve for electricians to the left
E) both the supply and demand curves for electricians
Q2) The United Auto Workers has fought for curbs on imports of foreign-made cars in order to cause
A) a rightward shift in the supply of U.S.cars
B) a leftward shift in the supply of U.S.cars
C) movement to the left along the supply curve for U.S.cars
D) movement to the right along the supply curve for U.S.cars
E) a rightward shift of the demand curve for U.S.cars
Q3) The income and substitution effects of a change in the wage rate
A) always work in the same direction
B) always work in opposite directions
C) work in opposite directions only if the change is a decrease
D) work in the same direction only if the change is an increase
E) work in the same direction only if the change is a decrease
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Chapter 13: Capital, interest, and Corporate Finance
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) As defined by economists,interest is
A) only the amount earned by productive capital as a resource
B) only the amount earned by land as a resource
C) only the amount earned by lending money
D) both the amount earned by productive capital as a resource and the amount earned by lending money
E) both the amount earned by land as a resource and the amount earned by lending money
Q2) The present value of receiving M dollars two years from now when the prevailing interest rate is i is equal to
A) M - i<sup>2</sup>
B) M \(\times\) i<sup>2</sup>
C) M/i
D) M/(1 - i)
E) M/(1 + i)<sup>2</sup>
Q3) A self-employed editor and writer is thinking about purchasing a new computer to use for work.In making this investment decision,the person should take time into account.
A)True
B)False
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Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) One reason a computer manufacturer may make its own microchips rather than buy them is that
A) it can maintain control over the quality during production
B) the total cost of components is the same as the price of chips purchased from a chip manufacturer
C) firms do not make high-quality microchips
D) managers at the computer firm place a high value on their time
E) firms do not produce goods for the market that can be made in-house
Q2) Production through the firm is often more efficient than market exchange when
A) production requires many transactions among many resource owners
B) production requires few transactions between two resource owners
C) the cost of transacting business through market relations is less than the cost of undertaking the same activity within the firm
D) inputs are easily identified,measured,priced,and hired
E) the costs of determining inputs and negotiating contracts are low
Q3) If we assume perfect information,perfect mobility of resources,and no transactions costs,then there is little need for firms.
A)True
B)False
Page 16
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Chapter 15: Economic Regulation and Antitrust Policy
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) Public policy can help achieve more efficient use of an economy's resources by eliminating all monopolies.
A)True
B)False
Q2) Antitrust policy has no relationship to socially desirable market performance.
A)True
B)False
Q3) Which of the following markets would have the highest Herfindahl index? A market with
A) ten firms of widely different sizes
B) ten firms of approximately the same size
C) five firms of widely different sizes
D) five firms of approximately the same size
E) eight firms exactly the same size
Q4) Which of the following is not a criticism of monopolies?
A) They restrict output.
B) They set price above the perfectly competitive level.
C) They tend to be less innovative than firms in a competitive market.
D) They exert a disproportionate amount of political influence.
E) They reduce allocative efficiency through perfect price discrimination.
17
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Chapter 16: Public Goods and Public Choice
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119 Flashcards
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Sample Questions
Q1) The proposed takeover of Tony's Airlines by Plummet Airlines will result in increased profits for Plummet and increased air fares for consumers.This is an example of
A) widespread distribution of benefits and costs
B) concentrated distribution of costs and benefits
C) concentrated distribution of benefits and widespread distribution of costs
D) concentrated distribution of costs and widespread distribution of benefits
E) logrolling
Q2) Which of the following would be considered tax evasion?
A) deducting charitable contributions when figuring income taxes
B) claiming your young children as tax exemptions
C) claiming your dog as a dependent on your tax form
D) buying a house in order to deduct interest payments
E) overestimating your income subject to taxes
Q3) Because of the free-rider problem,it is necessary that public bureaus manufacture defense weapons.
A)True
B)False
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Chapter 17: Externalities and the Environment
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187 Verified Questions
187 Flashcards
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Sample Questions
Q1) In the production of electricity with fixed-production technology,the socially efficient price is $2 and the socially efficient level of output is 400 units;the market equilibrium price is $1.50 and the market equilibrium quantity is 600 units.The total social gain from producing the socially efficient output rather than the private equilibrium output is:
A) $50
B) $200
C) $400
D) $600
E) There is not enough information to calculate it
Q2) Education confers positive externalities because
A) some education is done outside the market (i.e. ,in public schools)
B) curricula are regulated by the government,even in private schools
C) an educated person consuming education gains many benefits he or she did not expect when the process started
D) an educated person who has consumed education usually behaves in a way that benefits others
E) education gives benefits to individuals in excess of the costs they pay to get it
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Chapter 18: Income Distribution and Poverty
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118 Flashcards
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Sample Questions
Q1) Since most welfare programs are administered by the federal government,there is uniformity in both eligibility and the dollar value of benefits in a state by state comparison.
A)True
B)False
Q2) The most recent data indicates households in the top fifth of the income distribution earn nearly ten times as much income as those in the bottom fifth.
A)True
B)False
Q3) In order for Mary to qualify for benefits under a means-tested transfer payment program,
A) she must have worked and contributed to the program
B) she must be able to repay the cash transfer at a later date
C) the head of her household must be able to hold a job
D) she must be totally disabled
E) her household's income and/or assets must fall below a certain level
Q4) Food stamps and Medicaid are in-kind transfer programs.
A)True
B)False
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Chapter 19: International Trade
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161 Flashcards
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Sample Questions
Q1) In Exhibit 19-4,if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States,which area represents the amount of tariff revenue the United States government collects?
A) a
B) b
C) c
D) f
E) e
Q2) According to some economists,the protection granted to infant industries should be
A) terminated after one year.
B) for new firms that eventually would develop significant economies of scale in their production processes
C) restricted to firms that face little competition
D) based on current absolute advantage
E) permanent
Q3) The United States exports more raw materials than finished products.
A)True
B)False
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21
Chapter 20: International Finance
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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) In the early 1970s,in an attempt to solve the problem of the overvalued U.S.dollar,world leaders
A) increased the price of gold in terms of other currencies
B) appreciated the dollar,which made foreign exchange cheaper to U.S.residents
C) appreciated the dollar,which made foreign exchange more expensive to U.S.residents
D) devalued the dollar,which made foreign exchange cheaper to U.S.residents
E) devalued the dollar,which made foreign exchange more expensive to U.S.residents
Q2) If the exchange rate changes from 75 cents per euro to $1 per euro,the euro
A) appreciated,since its value has increased
B) appreciated,since the price of U.S.dollars has increased
C) appreciated,making U.S.goods more expensive in Euros
D) depreciated,since its value has declined
E) depreciated,since its value has increased
Q3) The current international financial system is a managed float system.
A)True
B)False
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Chapter 21: Developing and Transitional Economies
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105 Flashcards
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Sample Questions
Q1) Which of the following is not a developing country classified as a high-income economy because of possessing huge oil reserves?
A) United Arab Emirates
B) Chad
C) Qatar
D) Kuwait
E) Bahrain
Q2) If the country of Heehee makes the transition from central planning to a market economy in a matter of months,it is an example of the big-bang approach.
A)True
B)False
Q3) The bulk of exports from industrial countries are
A) manufactured goods
B) primary products
C) agricultural goods
D) raw materials
E) raw sugar products
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