Economics Principles
Mock Exam
Course Introduction
Economics Principles introduces students to the fundamental concepts and analytical tools used in the study of economics. The course explores both microeconomics, focusing on how individuals and firms make decisions in markets, and macroeconomics, examining broader issues such as inflation, unemployment, and economic growth. Key topics include supply and demand, market equilibrium, the role of government, international trade, and the impact of policy on economic outcomes. By the end of the course, students gain a foundational understanding of how economies function and how economic agents interact within various market structures.
Recommended Textbook
Microeconomics Theory and Applications 12th Edition by Edgar K. Browning
Available Study Resources on Quizplus
20 Chapters
1871 Verified Questions
1871 Flashcards
Source URL: https://quizplus.com/study-set/3553
Page 2
Chapter 1: An Introduction to Microeconomics
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/70552
Sample Questions
Q1) If a production possibility frontier is drawn concave to the origin with the quantity of shoes on the X-axis and the quantity of T-shirts on the Y-axis,a movement upward along the PPF reflects:
A)an increasing opportunity cost of T-shirts.
B)an increasing opportunity cost of both shoes and T-shirts.
C)a decreasing opportunity cost of T-shirts.
D)a decreasing opportunity cost of both shoes and T-shirts.
Answer: A
Q2) Which of the following is generally considered to be a microeconomic question?
A)The relationship between the money supply and nominal GDP
B)The responsiveness of aggregate demand to change in government expenditure.
C)The relationship between productivity of workers and wages received by them
D)The relationship between inflation and unemployment
Answer: C
Q3) Microeconomics is also known as price theory because:
A)everything has a price.
B)prices have important effects on individual and firm decisions.
C)prices are the only determinant of economic outcomes.
D)prices change constantly.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Supply and Demand
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/70553
Sample Questions
Q1) Which of the following market outcomes can be explained by the supply-demand model?
A)An increase in the demand for cigarettes after an increase in its price
B)A decrease in household consumption following an increase in average monthly income
C)An increase in supply in spite of a decline in input prices
D)An increase in the per capita consumption of medical care in a country due to an epidemic
Answer: D
Q2) Which of the following is not likely to result from a price ceiling that is below the equilibrium price?
A)Some form of non-price rationing
B)A shortage that market forces cannot be expected to eliminate
C)Improvements in product quality
D)Waiting in lines to obtain some of the good
Answer: C
Q3) Explain how a change in price affects total expenditure by filling in each cell with the change in price that must have occurred.
Answer: 11ea857e_d75f_1e19_a433_572da5c8f312_TB1826_00_TB1826_00
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: The Theory of Consumer Choice
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/70554
Sample Questions
Q1) Suppose you have two indifference curves U<sub>1</sub> and U<sub>2</sub> representing the consumption of two normal goods.If U<sub>2</sub> is twice as far from the origin as U<sub>1</sub>,then _____.
A)consuming a bundle on U<sub>1</sub> is preferred two times more than consuming a bundle on U<sub>2</sub>
B)consuming a bundle on U<sub>1</sub> has a higher utility than consuming a bundle on U<sub>2</sub>
C)consuming a bundle on U<sub>2</sub> is preferred two times less than consuming a bundle on U<sub>1</sub>
D)consuming a bundle on U<sub>2</sub> has a higher utility than consuming a bundle on U<sub>1</sub>
Answer: D
Q2) Jen does not care one way or another about blue jeans.In other words,blue jeans are a(n)_____ for Jen.
A)normal good
B)economic "bad"
C)economic "neuter"
D)inferior good
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Individual and Market Demand
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/70555
Sample Questions
Q1) Limitations of using experimentation to estimate demand elasticities include:
A)difficulty in determining which product's elasticity to estimate.
B)difficulty in isolating the impact of price from all other factors affecting demand.
C)difficulty in getting customers to buy the product whose elasticity is being estimated.
D)difficulty in being able to filter out valid facts from the information set.
Q2) Suppose the government levies a tax on sugar at the rate of $0.50 per pound.Then the government returns the tax revenues to a family in the form of a cash grant equivalent to the average tax paid per family.If the family's cash refund just equals the total amount of tax they paid on sugar,which of the following statements would be true?
A)The family would consume less sugar and be better off.
B)The family would consume the same amount of sugar and be worse off.
C)The family would consume less sugar and be worse off.
D)The family would consume less sugar but their well-being would remain unchanged.
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Using Consumer Choice Theory
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/70556
Sample Questions
Q1) Which of the following groups are better off under an annual fee system of garbage disposal?
A)Households that generate the average amount of trash
B)Households that generate less than the average amount of trash
C)All households that opt for the annual fee system
D)Households that generate more than the average amount of trash
Q2) Suppose Microsoft stock will provide either a return of 10 or 20 percent over the next year and that the probability of the former outcome is 0.25 while the probability of the latter is 0.75.The expected return on Microsoft stock over the next year is thus _____%.
A)15
B)12.5
C)17.5
D)20
Q3) In the model of inter-temporal choice,will a person who initially consumes exactly their income in each period have more or less current consumption after a decrease in the interest rate?
Q4) Describe the relationship among total utility,marginal utility,and preferences toward risk.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Exchange, Efficiency, and Prices
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/70557
Sample Questions
Q1) What would you expect to see in the market for healthcare if the government decided that healthcare allocation would be done on the basis of altruism? Why?
Q2) A competitive equilibrium:
A)results in an efficient and equitable allocation.
B)is characterized by equal marginal rates of substitution.
C)occurs when resources are equally allocated between different producers.
D)is not necessarily utility-maximizing.
Q3) A secondary market for the resale of baseball tickets,known as scalping:
A)prevents mutually beneficial exchanges.
B)is likely to increase revenues for the team owner since season ticket holders can resell their tickets instead of not attending a game.
C)is likely to increase season-ticket sales since some people who wouldn't have otherwise seen the game,will buy tickets.
D)lowers the ability of the season ticket holders to attend a baseball game with their families.
Q4) Explain why a competitive equilibrium produces an efficient allocation of goods.
Q5) What did the moral philosopher Adam Smith mean by his invisible hand theorem?
Q6) Are non-price allocation mechanisms efficient? Explain.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Production
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/70558
Sample Questions
Q1) Graphically,the _____ indicates whether returns to scale are increasing,constant,or decreasing.
A)spacing of isoquants along a ray from the origin
B)slope of the isoquant
C)curvature of the isoquant
D)steepness of the isoquant
Q2) With capital (K)on the vertical axis and labor (L)on the horizontal axis,graphically illustrate increasing,constant,and decreasing returns to scale.
Q3) A firm that is operating in a technologically inefficient way:
A)is getting the maximum output from its inputs.
B)is making zero economic profits.
C)is not making as much money as it potentially can.
D)should shut down immediately to reduce its losses.
Q4) The ratio of total product to the total quantity of the input being used is _____.
A)equal to marginal product
B)constant as the levels of the input vary
C)equal to average product
D)equal to the marginal rate of technical substitution
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: The Cost of Production
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/70559
Sample Questions
Q1) A firm incurs a total cost of $500 per day for producing 10 semi-electronic toys.When its production increases to 15 toys,the total cost rises to $700.The firm observes that at each level of output between 10 toys and 15 toys,the marginal cost of production is below the average cost of production.Which of the following can be definitely concluded about the firm's cost curves when its output is anywhere between 10 toys and 15 toys?
A)The marginal cost curve is positively sloped for this range of output
B)The total fixed cost curve is negatively sloped for this range of output.
C)The average cost curve is negatively sloped for this range of output.
D)The average variable cost curve is positively sloped for this range of output.
Q2) Which of the following is true?
A)Diseconomies of scale imply increasing returns to scale.
B)Increasing returns to scale implies diseconomies of scale.
C)Increasing returns to scale implies economies of scale.
D)Economies of scale imply increasing returns to scale.
Q3) Do you think the marginal cost curve of a petroleum refinery will be U-shaped? Explain your answer.
Q4) Explain why the long-run average cost curve is usually U-shaped although all inputs are variable in the long run?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Profit Maximization in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/70560
Sample Questions
Q1) The short-run supply curve for the firm operating in a perfectly competitive industry is:
A)its marginal cost curve.
B)its marginal cost curve above the minimum of average variable cost.
C)its marginal cost curve above the minimum of average total cost.
D)the average variable cost curve above average revenue curve.
Q2) The competitive firm maximizes its profit by operating at the point where _____ and price is greater than average variable cost.
A)average cost is at a minimum
B)total revenue is at a maximum
C)profit per unit is at a maximum
D)marginal cost equals price
Q3) Abe's Taxi Company operates in a perfectly competitive market.Gasoline is a variable input in the taxi services industry.As the price of gasoline decreases,the short-run marginal cost curve for Abe's Taxi Company:
A)shifts up and to the left.
B)shifts down and to the right.
C)remains unchanged.
D)becomes flatter.
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Using the Competitive Model
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/70561
Sample Questions
Q1) When the efficient rate of output is produced in the short run:
A)marginal cost is greater than marginal benefit.
B)the producer surplus is as large as possible.
C)the total surplus is as large as possible.
D)marginal benefit is greater than marginal cost.
Q2) Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:
A)cabs and fares are both above the efficient level.
B)cabs is less than the efficient quantity and fares are above free-market levels.
C)cabs is above the efficient level and fares are depressed below the free-market level.
D)cabs and fares are both below the efficient level.
Q3) In Figure 10-3,the total producer surplus after trade is _____.
A)P<sub>3</sub>ELP<sub>2</sub> B)ELK
C)P<sub>2</sub>LP<sub>0</sub>
D)P<sub>2</sub>LMP<sub>1</sub>
Q4) Is the outcome of a competitive market efficient? Explain with the help of a graph.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Monopoly
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/70562
Sample Questions
Q1) A firm that has monopoly power _____.
A)can profitably set price above marginal cost
B)sells goods at higher prices due to economies of scale
C)faces a horizontal demand curve
D)produces easily substitutable goods
Q2) When the value of the Lerner index is zero for a firm:
A)its demand curve is steeply sloped.
B)its demand curve is non-linear.
C)the demand for its product is unit elastic.
D)the demand for its product is perfectly elastic.
Q3) Which of the following is not necessarily true at the profit-maximizing quantity for a monopolist?
A)The marginal revenue is equal to the marginal cost of production.
B)The slope of the marginal revenue curve equals the slope of the marginal cost curve.
C)The difference between total revenue and total cost is maximized.
D)The difference between price and average cost is maximized.
Q4) Given the profit function = R - C,derive a monopolist's profit-maximizing price and quantity.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Product Pricing With Monopoly Power
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/70563
Sample Questions
Q1) What is peak-load pricing and why is it advantageous compared to charging a single price?
Q2) Refer to Figure 12-2.Comparing the result of perfect competition with that of a perfectly price-discriminating monopolist,there is an efficiency loss equal to:
A)area VWE.
B)area HEF.
C)area JHFK.
D)zero.There will be no efficiency loss in either case.
Q3) Comparing a price-discriminating monopoly firm with a single-price monopoly,one tends to find that price discrimination:
A)increases the inefficiency of the market.
B)reduces economic profits.
C)typically increases total output.
D)results in lower input prices.
Q4) Why is it difficult to implement first-degree price discrimination?
Q5) Derive the first-order conditions for profit maximization for a monopolist practicing price-discrimination.
Q6) What is a two-part tariff? Make up a numerical example to support your definition.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Monopolistic Competition and Oligopoly
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/70564
Sample Questions
Q1) In the dominant firm model,if the elasticity of market demand is 0.75,the dominant firm's market share is 0.25,and the elasticity of supply of the competitive fringe is 2,then the dominant firm's elasticity of demand is _____.
A)3
B)5
C)7
D)9
Q2) In the dominant firm model of oligopoly,the dominant firm assumes that the other firms in the market:
A)will charge a higher price than it does.
B)will together produce a lower quantity of output than it does.
C)behave like competitive firms.
D)behave like monopolistic firms.
Q3) Answer the following:
a)Draw the diagram of a monopolistically competitive firm which makes positive economic profits and one which is in long-run equilibrium.In each case,identify the area that represents the profit earned by the firm in the short run and the long run.
b)Why is the demand curve downward-sloping?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Game Theory and the Economics of Information
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/70565
Sample Questions
Q1) Compare the benefits and the costs of advertising.
Q2) All-you-can-eat restaurants tend to attract "undesirable" customers,i.e. ,mostly people who overeat.According to this statement,the problem encountered by such restaurants can be described as:
A)a prisoner's dilemma.
B)a moral hazard.
C)an adverse selection.
D)an agency dilemma.
Q3) An analysis of the relationship between advertising and price indicates that advertising:
A)can lower the price of the product.
B)increases price dispersion.
C)has no impact on a product's price.
D)makes the demand for the product highly price elastic.
Q4) Higher-priced products exhibit less relative price dispersion because:
A)consumers do more research on goods they really like.
B)the high price alone signals that the product is of good quality.
C)consumers do more research on more expensive goods.
D)producers invest heavily in the advertisement and promotion of such products.
Page 16
Q5) Define adverse selection and moral hazard and give examples of each.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Using Noncompetitive Market Models
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/70566
Sample Questions
Q1) Which of the following is not a problem associated with regulation of a natural monopoly?
A)Regulation using average-cost pricing reduces a firm's incentive to keep costs down.
B)Regulation stifles the incentive that firms have to innovate.
C)Regulators do not have full information about a firm's demand and cost functions.
D)Regulation increases collusion and cartelization among firms.
Q2) Based on Figure 15-2,one can conclude that the deadweight loss due to the monopoly is _____.
A)$150
B)$300
C)$450
D)$600
Q3) In game theory,the concept of _____ can be used to arrive at an equilibrium in a game with no dominant strategies.
A)multiple iterations
B)non-cooperation
C)iterated dominance
D)best response
To view all questions and flashcards with answers, click on the resource link above.
17
Chapter 16: Employment and Pricing of Inputs
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/70567
Sample Questions
Q1) Refer to Figure 16-2.The firm will move from point B to point C when:
A)the price of capital increases.
B)the total output produced increases.
C)the total output produced falls.
D)the price of labor increases.
Q2) When a competitive labor market is in equilibrium:
A)the marginal product of labor equals the wage rate paid to labor.
B)workers are paid their marginal value product.
C)the labor employed by each firm is equal.
D)the marginal revenue is equal to the wage rate.
Q3) A monopsony differs from a monopoly in that:
A)the market capitalization of a monopsony firm is smaller than a monopoly firm.
B)the input price under a monopsony is higher than the input price in a monopoly.
C)a monopsony has market power in the input market while a monopoly has market power in the product market.
D)a monopsony faces a downward-sloping input demand curve while a monopoly faces an upward-sloping input demand curve.
Q4) Using calculus,show the profit-maximizing employment of inputs for an output market monopoly.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Wages, Rent, Interest, and Profit
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/70568
Sample Questions
Q1) When a firm earns a rate of return on an investment that _____,it makes a pure economic profit.
A)is above its accounting costs
B)is equal to its average variable cost
C)is above the cost of borrowed funds
D)just covers the firm's fixed costs
Q2) In the market for loanable funds,an increase in the interest rate leads to _____ if the income effect dominates the substitution effect.
A)a decrease in demand
B)an increase in supply
C)an increase in demand
D)a decrease in supply
Q3) State governments in the U.S.can borrow at lower interest rates than corporations because:
A)corporations borrow money by issuing short-term debt securities.
B)the government's investment need calls for smaller loans.
C)the cost of administering loans to the government is low.
D)the interest on bonds issued by the government is not subject to tax.
Q4) How can the presence of a union in a labor market be beneficial?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Using Input Market Analysis
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/70569
Sample Questions
Q1) An employer's cartel will seek to:
A)restrict the employment of the input and lower its price below its marginal revenue product.
B)restrict the employment of the input and raise its price to the marginal factor cost.
C)decrease the price of the input by employing more units of the input.
D)restrict the employment of the input and increase its productivity.
Q2) Which of the following facts indicate that the official wage paid by the National Collegiate Athletic Association [NCAA] to the athletes is below the market-clearing level?
A)Athletes practicing for greater number of hours before the seasonal tournaments
B)Schools awarding more athletic scholarships to the students
C)Athletes receiving cars,apartments,and cash payments
D)Athletes receiving offers for promotional advertisement campaigns
Q3) Mention some of the factors which hinder input buyer's cartel.
Q4) What determines who bears the burden of the social security tax?
Q5) Explain how you would investigate whether wage differences are due to discrimination.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: General Equilibrium Analysis and Economic Efficiency
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/70570
Sample Questions
Q1) Which of the following is a true statement?
A)Every point along a contract curve in an Edgeworth production box indicates an equal distribution of all resources across all the firms.
B)Every point along a contract curve in an Edgeworth production box directly corresponds to a specific point on a production possibility frontier.
C)Every point along an isoquant defines a competitive equilibrium.
D)Every point along a production possibility frontier represents an efficient output mix.
Q2) What is the difference between partial and general equilibrium analysis?
Q3) Without trade the price of one unit of product Y is 1/3 that of one unit of X in a small country.
Products X and Y trade on the world market at equal prices.If the small country starts trading with the rest of the world:
A)the small country would import product Y.
B)the small country would export both product X and product Y.
C)the domestic price of product X would equal the world price.
D)the relative price of X and Y would not change in the small country.
Q4) Why is efficiency considered to be a reasonable goal for economic performance?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Public Goods and Externalities
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/70571
Sample Questions
Q1) Suppose that an economy has four people,A,B,C,and D,whose reported marginal benefits from a public good are $30,$40,$50,and $60,respectively.If the marginal cost of producing the public good is $200,then the quantity of the public good should be:
A)increased even if none of the individuals can be excluded.
B)increased only if individual A can be excluded.
C)decreased if none of the individuals can be excluded.
D)decreased unless individual A or B can be excluded.
Q2) Which of the following is a point of similarity between public goods and the goods that generate an external benefit?
A)Both are overproduced
B)A free rider problem arises in case of both the goods
C)Both result in inefficient allocation of resources
D)Both can be produced at zero marginal cost
Q3) Which of the following aspects of the free-rider problem is overcome by government financing of a public good?
A)The problem of overproduction
B)The external cost associated with production
C)The tendency of people to withhold payment
D)The high search cost associated with the consumption of the good
To view all questions and flashcards with answers, click on the resource link above.
Page 22