Applied Microeconomics
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Course Introduction
Applied Microeconomics focuses on the practical application of microeconomic theories and principles to real-world situations and decision-making processes. The course explores how individuals, firms, and governments allocate scarce resources, examining topics such as consumer behavior, production and cost analysis, market structures, pricing strategies, and the impact of public policy. Students engage with case studies, empirical data, and analytical tools to address contemporary economic issues, fostering skills in problem-solving and critical thinking essential for careers in economics, business, and public policy.
Recommended Textbook
Microeconomics Principles and Applications 6th Edition by Robert E. Hall
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18 Chapters
2377 Verified Questions
2377 Flashcards
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Page 2
Chapter 1: What Is Economics
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) Which of the following is the study of economic policy recommendations?
A)positive economics
B)law and economics
C)microeconomics
D)development economics
E)normative economics
Answer: E
Q2) The idea of opportunity cost suggests that the cost of a particular choice should be measured by the
A)price of the good chosen
B)price of the good divided by income
C)value of the best alternative sacrificed
D)amount of the good consumed
E)sum of the costs of all foregone opportunities
Answer: C
Q3) Land,labor,and money are the three categories of economic resources.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Scarcity, choice, and Economic Systems
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Sample Questions
Q1) If the U.S.government decides to distribute surplus cheese to food banks for the homeless,the government is addressing the question of
A)which goods and services should be produced with society's scarce resources
B)what production methods should be used to produce goods and services
C)how will output be allocated among the individuals in the society
D)what prices will be charged for goods and services
E)determining the optimal degree of specialization
Answer: C
Q2) Which of the following could explain the shift in the production possibilities frontier shown in Figure 2-7 from AC to AB?
A)technical improvements in both petroleum and clothing production
B)a productive improvement in clothing production that has no effect on petroleum production
C)a decrease in the size of the labor force that can produce either petroleum products or clothing
D)major oil reserves in Alaska are declared off-limits to producers in order to protect the environment
E)major oil reserves are discovered off the coast of Africa
Answer: E
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Chapter 3: Supply and Demand
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Sample Questions
Q1) Which of the following would shift the demand curve for the normal good regular vanilla ice cream to the left?
A)reports of health risks as a result of eating vanilla ice cream
B)an increase in the price of frozen yogurt
C)a decrease in the price of hot fudge sauce
D)an increase in the price of regular vanilla ice cream
E)an increase in buyers' incomes
Answer: A
Q2) A substitute good is one that
A)appeals to a wide spectrum of consumers
B)is used together with another good
C)is exchanged on the black market
D)is produced by the same firm as another good
E)can be used in place of another good,fulfilling the same basic purpose
Answer: E
Q3) Supply curves usually slope upward because producers face increasing opportunity costs when increasing output.
A)True
B)False
Answer: True
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Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) A price ceiling will increase the amount that is traded in the market while a price floor will reduce the amount that is traded in the market
A)True
B)False
Q2) Which of the following might explain why the government would create a price ceiling for a certain good?
A)The equilibrium price that would result in the market would be considered too high
B)The equilibrium price that would result in the market would be considered too low
C)The equilibrium quantity that would result in the market would be considered too high
D)The equilibrium quantity that would result in the market would be considered too low
E)The government never has a reason to create price floors or price ceilings
Q3) A government-imposed price ceiling set below the market's equilibrium price for a good will produce an excess supply of the good.
A)True
B)False
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6
Chapter 5: Elasticity
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Sample Questions
Q1) For which of the following goods is the income elasticity of demand likely to be largest?
A)poultry products
B)meals at restaurants
C)lemonade
D)used books
E)paperback mystery novels
Q2) The more available substitutes there are for a good,the
A)larger the number of consumers
B)smaller the number of consumers
C)smaller the supply side response
D)more elastic the demand for that good
E)less elastic the demand for that good
Q3) Figure 5-7 shows Sally's demand for movie theater tickets (quantity of movies per year).At a price of $9 per ticket,the price elasticity of demand is A).5
B)1.0
C)1.5
D)2
E)cannot tell from information given
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Chapter 6: Consumer Choice
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Sample Questions
Q1) If macaroni and cheese is an inferior good,then
A)the income effect and the substitution effect work in opposite directions
B)as the budget line shifts to the right,consumers demand more macaroni and cheese
C)when the price of macaroni and cheese rises,the quantity demanded also rises
D)the quantity demanded rises as purchasing power rises
E)individuals will not consume macaroni and cheese
Q2) If income doubles and the prices of all goods remain the same,the budget line will shift outward by 50 percent along each axis.
A)True
B)False
Q3) Suppose that Trey spends all of his income on vacation trips and textbooks.If the price of a trip is $200 and the price of a textbook is $50,then the slope of his budget line (assuming vacation trips are measured on the vertical axis)would be
A)-4
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8
Chapter 7: Production and Cost
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Sample Questions
Q1) Average variable cost is
A)the change in cost as output decreases
B)the change in cost as output increases
C)TC / quantity of output
D)TVC / quantity of output
E)AFC + AVC
Q2) The "short run" may vary in length from industry to industry.
A)True
B)False
Q3) Along its long-run average total cost curve,a firm employs
A)a different amount of fixed inputs at each point
B)the same amount of fixed inputs at each point
C)a declining amount of fixed inputs at each point as it moves to higher output levels
D)an increasing amount of fixed inputs at each point as it moves to higher output levels
E)no fixed inputs
Q4) Total fixed costs decrease as output expands.
A)True
B)False
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Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) When a firm faces a downward-sloping demand curve,marginal revenue
A)is constant regardless of how much output the firm produces
B)is less than price
C)increases as the firm produces more output
D)decreases if the firm produces less output
E)is equal to the price per unit of output
Q2) Which of the following rules is most consistent with profit maximization?
A)expand output when MR < MC
B)reduce output when MR > MC
C)expand output when TR > TC
D)reduce output when TR > TC
E)expand output when MR > MC
Q3) A firm's total revenue
A)is the profit it earns by producing and selling a particular quantity of output
B)varies as output varies along the demand curve the firm faces
C)is constant at all points along a fixed demand curve
D)is determined by subtracting total profit from total cost
E)always decreases as its output increases,because costs rise
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10
Chapter 9: Perfect Competition
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Sample Questions
Q1) Flora's Flowers operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $10,AVC = $5,and the price per unit is $15.In this situation,
A)Flora earns positive profits in the short run
B)Flora will shut down in the short run
C)Flora's supply curve will shift to the left
D)Flora's supply curve will shift to the right
E)the market price will rise in the long run
Q2) In the long run in perfect competition,firms will operate at
A)minimum average total cost.
B)an average total cost that is just slightly above the minimum.
C)an average total cost that is about 10% above the minimum.
D)an average total cost that is below price.
Q3) In a perfectly competitive industry,
A)the market price is determined at the intersection of the market supply and demand curves
B)the typical firm will just break even in the short run
C)a rise in the market price will attract new entrants
D)economics profits are a signal for new consumers to enter
E)each firm faces the downward sloping market demand curve
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Chapter 10: B:Perfect Competition
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Sample Questions
Q1) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
Q2) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q3) Which of the following is not a characteristic of a perfectly competitive market
A)buyers and sellers are well informed about the market
B)standardized product
C)many buyers and few sellers
D)easy exit out of the industry
E)easy entry into the industry
Q4) In perfect competition,technological advances will allow economic profits for A)all firms.
B)only the firm developing the new technology.
C)early adopters.
D)none of the firms,as the advance will be immediately adopted by all of them.
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Chapter 11: Monopolistic Competition and Oligopoly
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192 Flashcards
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Sample Questions
Q1) In which of the following situations is cheating on a collusive agreement is most likely?
A)Prices are publicly posted.
B)There are few sellers in the market.
C)The market demand curve is elastic.
D)There are economies of scale.
E)Prices are difficult for competitors to observe.
Q2) Compared to the market demand curve,a demand curve facing a monopolistically competitive firm would be
A)more elastic.
B)vertical.
C)horizontal.
D)the same as the market demand curve.
E)less elastic.
Q3) Tacit collusion among firms does not involve explicit agreements on pricing and output levels.
A)True
B)False
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13
Chapter 11: Monopoly
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Sample Questions
Q1) Brittany provides manicures at the only salon in town.Her marginal cost is constant at $5 per client,her fixed cost is $25 per day,and she is able to do 8 manicures per day.On a given day,half of her clients are willing to pay $15 for a manicure;half are willing to pay only $10.If she charges $15 for those willing to pay a higher price and $10 to her other clients,then her maximum daily profit equals
A)$55
B)$100
C)$60
D)$35
E)$75
Q2) Patents and copyrights
A)are illegal in the United States
B)reduce barriers to entry in markets
C)protect small firms from large firms
D)lead to increased output and decreased prices
E)provide incentives for firms to engage in research and development
Q3) Price discrimination always harms consumers.
A)True
B)False
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Page 14
Chapter 12: Labor Markets
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97 Flashcards
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Sample Questions
Q1) A firm's labor demand curve is derived from the supply of the goods and services it produces.
A)True
B)False
Q2) For a firm producing in a perfectly competitive product market,the marginal revenue product of labor eventually
A)falls due to diminishing marginal returns to labor
B)rises due to diminishing marginal returns to labor
C)falls due to a falling product price
D)falls due to a rising product price
E)rises due to falling marginal productivity of labor
Q3) The relationship between the marginal product of labor (MP),the product price (P),and marginal revenue product of labor (MRP)in a perfectly competitive market is
A)MP = P x MRP
B)MP = MRP / P
C)MRP = P + MP
D)MRP = P / MP
E)MP = P + MRP
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15
Chapter 13: B: Labor Markets
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Sample Questions
Q1) Occupational licensing
A)provides access to employment opportunities for many new workers
B)typically benefits employees in the licensed occupation
C)enables the supply curves of labor to shift more readily in response to wage changes
D)is illegal in the United States
E)usually results in higher employment levels in the licensed occupation
Q2) Consider two perfectly competitive labor markets for jobs that require different skills but are otherwise equivalent.One job currently pays a higher wage than the other job.This wage differential
A)cannot persist in the long run
B)can persist only if there are significant differences in the nonmonetary characteristics of the two jobs
C)can persist if workers in the lower-wage job lack the ability to gain the skills needed for the higher-wage job
D)will be eliminated as labor supply to the higher-wage job increases
E)is likely unrelated to different workers' endowments of talent and intelligence
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Chapter 14: Capital and Financial Markets
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114 Flashcards
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Sample Questions
Q1) You are thinking of buying a 10-year bond on the secondary bond market.The face value of the bond is $10,000,the interest rate is 5 percent (0.05)per year,and the bond was issued exactly eight years ago.What is the value of the bond today?
A)$5,295.43
B)$9,070.30
C)$10,000.00
D)$20,000.00
E)$100,000.00
Q2) A higher interest rate will lead a firm to purchase less capital because the higher interest rate
A)lowers the marginal product of capital goods
B)causes technological change to cease
C)lowers the present value of capital goods
D)causes economies of scale to be exhausted
E)causes the capital market become monopolized
Q3) The supply curve for a particular bond is horizontal.
A)True
B)False
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Chapter 15: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) Pareto improvements that require the use of side payments typically are easy to coordinate and tend to enhance economic efficiency.
A)True
B)False
Q2) A price ceiling in a perfectly competitive market
A)leads to the same result as if the market were monopolized
B)results in a welfare loss
C)is effective only if it is set above the equilibrium price
D)may result from collusion among the firms selling in that market
E)may result from collusion among the consumers buying in that market
Q3) If the supply curve is perfectly inelastic and an excise tax is imposed
A)all of the tax is paid by buyers
B)all of the tax is paid by sellers
C)the market price will rise by the amount of the tax
D)the market price will fall by the amount of the tax
E)the tax is divided equally between buyers and sellers
Q4) Taking money from a wealthy individual in order to feed a destitute family would be a Pareto improvement.
A)True
B)False
Page 18
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Chapter 16: Governments Role in Economic Efficiency
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Sample Questions
Q1) An economic function of criminal law is to
A)reduce opportunities for Pareto improvements
B)reduce the number of involuntary exchanges
C)define property rights
D)increase prices in the economy
E)protect involuntary exchanges in the economy
Q2) The rights of a co-owner to a share of a firm's profits are
A)protected under tort law
B)protected under contract law
C)not protected under any form of law
D)protected under antitrust law
E)less valuable than the costs of pursuing action against the company
Q3) The two defining characteristics of pure private goods are
A)nonrivalry and excludability
B)positive externalities and efficiency
C)nonexcludability and nonrivalry
D)efficiency and profitability
E)rivalry and excludability
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19
Chapter 17: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Tariffs
A)benefit consumers by lowering prices
B)harm producers by decreasing competition in the product market
C)harm consumers by increasing the quantity of goods available
D)skew the terms of trade in favor of importing nations
E)benefit domestic producers because they can charge higher prices and sell more output
Q2) The terms of trade
A)equal the ratio of opportunity costs of production in two countries
B)equal the ratio of marginal production costs in two countries
C)is the quantity of one good that is exchanged for one unit of another good
D)are determined by absolute advantage
E)equal the ratio of average production costs in two countries
Q3) Differences in climate among nations
A)could lead to economic efficiency
B)reduce opportunities for gains from international trade
C)lower the terms of trade in favor of warm-climate nations
D)may create opportunities for international trade
E)raise the terms of trade in favor of warm-climate nations
Page 20
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