Honors Microeconomics
Mock Exam
Course Introduction
Honors Microeconomics provides an in-depth exploration of the principles that govern individual decision-making and the functioning of markets. Emphasizing analytical rigor, the course covers consumer and producer theory, market structures, game theory, and welfare economics. Students engage with advanced models and real-world applications to understand how economic agents interact, how equilibrium is established, and how public policy can impact resource allocation. Critical thinking and quantitative skills are developed through challenging problem sets, case studies, and discussions of current microeconomic issues. This course is designed for students seeking a deeper, more theoretical understanding of microeconomics in preparation for further study or research in economics.
Recommended Textbook
Microeconomics 7th Edition by R. Glenn Hubbard
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18 Chapters
4654 Verified Questions
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Page 2
Chapter 1: Economics: Foundations and Models
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240 Flashcards
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Sample Questions
Q1) ________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.
A)Competition
B)Voluntary exchange
C)Equity
D)A centrally planned economy
Answer: A
Q2) ________ have a horizontal and a vertical axis and are used in economics to illustrate relationships between two economic variables.
A)Two-dimensional graphs
B)One-dimensional graphs
C)Pie Charts
D)Bar graphs
Answer: A
Q3) When voluntary exchange takes place, both parties gain from the exchange.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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Sample Questions
Q1) Refer to Figure 2-7.Assume a technological advancement greatly reduces the cost to produce batteries for its automobiles.This is best represented by the
A)movement from E to F in Graph A.
B)movement from G to H in Graph B.
C)movement from K to L in Graph C.
D)movement from H to J in Graph B.
Answer: A
Q2) The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.
A)minimum attainable
B)maximum attainable
C)only
D)equitable
Answer: B
Q3) The payment received by suppliers of entrepreneurial skills is called interest. A)True
B)False
Answer: False
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) An increase in the number of firms in a market will cause the quantity of a good supplied to increase.
A)True
B)False
Answer: False
Q2) The ________ effect refers to the change in quantity demanded for a good that results from the effect of a change in the good's price on consumers' purchasing power.
A)ceteris paribus
B)population
C)substitution
D)income Answer: D
Q3) If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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Sample Questions
Q1) Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear.If the market price of The Waco Kid's cowboy hats is $40,
A)The Waco Kid will produce four hats.
B)producer surplus from the first hat is $40.
C)producer surplus will equal $28.
D)there will be a surplus; as a result, the price will fall to $24.
Q2) Refer to Figure 4-1.If the market price is $2.00, what is the consumer surplus on the first burrito?
A)$0.50
B)$1.00
C)$2.00
D)$7.50
Q3) In a competitive market equilibrium,
A)total consumer surplus equals total producer surplus.
B)marginal benefit and marginal cost are maximized.
C)consumers and producers benefit equally.
D)the marginal benefit equals the marginal cost of the last unit sold.
Q4) What is marginal benefit? Which curve is also referred to as a marginal benefit curve?
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Chapter 5: Externalities, Environmental Policy, and Public Goods
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Sample Questions
Q1) Refer to Figure 5-6.What does D represent?
A)the social welfare curve
B)the demand curve reflecting marginal social benefits
C)the demand curve reflecting marginal private benefits
D)the positive externalities curve
Q2) What are some of the limitations of the Coase theorem in practice?
Q3) Refer to Figure 5-6.What is the deadweight loss resulting from producing at the market equilibrium?
A)B + C
B)E + C
C)F
D)C
Q4) Refer to Figure 5-9.An efficient way to get the firm to produce the socially optimal output level is
A)for government to set a quota on the quantity of toilet paper that the toilet paper industry can produce.
B)to impose a tax to make the industry bear the external costs it creates.
C)to grant a subsidy to enable the industry to internalize the external costs of production.
D)to assign property rights to the firms in the industry.
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that A)wine and spirits are luxury goods.
B)wine is a luxury good and spirits are inferior goods.
C)wine and spirits are highly price elastic.
D)wine is a luxury good and spirits are necessities.
Q2) Suppose Pump-U-Up lowers the price of its gym membership by 10 percent and as a result, Sweat-It-Out experienced a 16 percent decline in its gym membership.What is the value of the cross-price elasticity between the two gym memberships?
A)-1.6
B)-0.625
C)0.625
D)1.6
Q3) Suppose the price of gasoline in July 2017 averaged $2.35 a gallon and 15 million gallons a day were sold.In October 2017, the price averaged $3.05 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.
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Chapter 7: The Economics of Health Care
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Sample Questions
Q1) The Pre-Existing Condition Insurance Plan is a federally administered part of the Affordable Care Act, and is designed for people with pre-existing medical conditions to obtain insurance.By offering health insurance to all U.S.citizens with pre-existing medical conditions, the Pre-Existing Condition Insurance Plan eliminates ________ for both the insurer and the insured, and eliminates ________ for the issuer of the insurance policy.
A)the principal-agent problem; moral hazard
B)asymmetric information; adverse selection
C)adverse selection; the principal-agent problem
D)moral hazard; adverse selection
Q2) In the United States in 2016, the percentage of people who received health insurance through a government program was about
A)10%.
B)16%.
C)36%.
D)64%.
Q3) Identify and explain 4 of the difficulties in making cross-country comparisons in health care outcomes.
Q4) What is the principal-agent problem?
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Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
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Sample Questions
Q1) How does the owner of a corporation relate to the business?
A)The owners of the business have a separate legal distinction from the business.
B)The owners of the business have no separate legal distinction from the business.
C)The personal assets are part of the corporation's assets.
D)None of these describe the legal relationship of corporate owners to the business.
Q2) How can a proprietorship or partnership raise funds for expansion?
A)borrow from someone or an institution willing to lend the funds
B)reinvest profit back into the business
C)take on a partner or more partners
D)Any of these would generate funds for expansion.
Q3) The only type of business that faces unlimited liability is a sole proprietorship. A)True
B)False
Q4) Define a partnership.
Q5) What role do well-functioning financial markets play in a market economy?
Q6) What is the difference between retained earnings and dividends?
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) Refer to Table 9-6.Which country has an absolute advantage in producing hats?
A)Denmark
B)Belize
C)both countries
D)neither country
Q2) The process of countries becoming more open to foreign trade and investment is known as
A)autarky.
B)foreign exchange.
C)globalization.
D)protectionism.
Q3) Beginning in ________, the government of China adopted market-based reforms of the economy and began exporting significant quantities of goods to the United States and other countries.
A)1949
B)the 1970s
C)the 1990s
D)2001
Q4) What is the difference between imports and exports?
Q5) Distinguish between a voluntary export restraint and a quota.
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Chapter 10: Consumer Choice and Behavioral Economics
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Sample Questions
Q1) An advantage of Microsoft Windows is its compatibility with the widest range of hardware and software.The dominance of Windows is self-reinforcing: hardware and software manufacturers ensure that their products are compatible with Windows in order to have access to the large number of Windows users.Which situation best describes this scenario?
A)endowment effects
B)endorsement effects
C)economies of scale
D)network externalities
Q2) The income effect of a price increase causes a decrease in the quantity of a normal good demanded.
A)True
B)False
Q3) Refer to Figure 10-3.At a price of ________, there is a surplus of tickets.
A)$0
B)between $0 and $10
C)$10
D)$25
Q4) What is an indifference curve? Why can indifference curves never cross?
Q5) Explain the concept of network externalities.
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Chapter 11: Technology, Production, and Costs
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Sample Questions
Q1) As output increases, average fixed cost gets smaller and smaller.
A)True
B)False
Q2) Suppose the total cost of producing 40,000 flash drives is $120,000, and the fixed cost is $30,000.
a.What is the variable cost?
b.When output is 40,000, what are the average variable cost and the average fixed cost?
c.Assuming the cost curves have the usual shape, is the dollar difference between the average total cost and the average variable cost greater when the output is 40,000 flash drives or when the output is 60,000 flash drives? Explain.
Q3) Which of the following statements is true?
A)As output increases, average fixed cost becomes smaller and smaller.
B)Average fixed cost does not change as output increases.
C)The marginal cost curve intersects the average fixed cost curve at its minimum point.
D)When marginal cost is greater than average fixed cost, average fixed cost increases.
Q4) In economics, what is the difference between the short run and the long run?
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Chapter 12: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?
A)Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run.
B)Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run.
C)Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run.
D)Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run.
Q2) If the market price is $25, the average revenue of selling five units is A)$5.
B)$12.50.
C)$25.
D)$125.
Q3) Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.
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Page 14
Chapter 13: Monopolistic Competition: the Competitive
Model in a
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Sample Questions
Q1) A firm cannot control all of the factors that allow it to make economic profits.Which of the following is an example of an uncontrollable factor?
A)product differentiation
B)input prices
C)producing at a lower average total cost than competing firms
D)hiring competent managers
Q2) Which of the following is a disadvantage of trademarking a firm's product?
A)A trademark differentiates a firm's product.
B)A trademark conveys information about the product to the public.
C)A trademark may become so widely used to denote a particular type of product that the trademark may no longer be a legally protected brand name.
D)A trademark does not affect demand for the firm's product.
Q3) The demand curve of a monopolistically competitive firm
A)is horizontal because the firm must cut its price to sell more.
B)is perfectly elastic.
C)is downward-sloping because it sells an identical product.
D)is downward-sloping because it must cut its price to sell more.
Q4) Discuss the role of product differentiation and advertising in monopolistic competition.
Page 15
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) Marginal revenue for an oligopolist is
A)identical to the demand for the firm's product.
B)difficult to determine because the firm's demand curve is typically unknown.
C)downward sloping beneath the firm's demand curve.
D)horizontal on a price-quantity diagram.
Q2) Assume that the four-firm concentration ratio in an industry is 85 percent.Which of the following statements uses one of the five competitive forces to argue that this industry may be more competitive than its concentration ratio suggests?
A)The high concentration may be due to patents owned by the largest firms but competition will increase when patent rights expire.
B)If high concentration is the result of large firms owning much of the available supply of a key input, the industry will become more competitive when new sources of the input are discovered by other firms.
C)Even though concentration is high, large firms in the industry may act competitively by spending large sums on advertising.
D)The threat of entry into this industry can cause firms in the industry to lower their prices and profits in order to deter entry.
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Page 16
Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) Refer to Figure 15-3.Suppose the monopolist represented in the diagram above produces positive output.What is the profit-maximizing/loss-minimizing output level?
A)630 units
B)800 units
C)850 units
D)880 units
Q2) Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market.This reflects which of the following barriers to entry?
A)control of a key resource
B)network externalities
C)entry blocked by government action
D)economies of scale creating a natural monopoly
Q3) A monopolist faces
A)a perfectly elastic demand curve.
B)a perfectly inelastic demand curve.
C)a horizontal demand curve.
D)a downward-sloping demand curve.
Q4) Explain why the monopolist has no supply curve?
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) A firm's efforts to increase profit through price discrimination can be undermined by A)arbitrage by buyers.
B)consumer ignorance.
C)differences in elasticity of demand.
D)seller market power.
Q2) Refer to Figure 16-7.The owners of the Lizard Lounge are considering the following four pricing options:
A.A single price scheme where the cocktail price equals the monopoly price.
B.A single price scheme where the cocktail price equals the competitive price.
C.A two-part tariff: a monopoly cocktail price and a cover charge that will generate total revenue equal to the area X.
D.A two-part tariff: a competitive cocktail price and whatever cover charge that will generate a total revenue equivalent to the area X + Y + Z. Which pricing scheme(s)achieve the economically efficient outcome?
A)schemes a and c
B)scheme b
C)schemes b and d
D)scheme d only
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Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) If the demand for labor is unchanged, population growth will increase the supply of labor and increase the equilibrium wage.
A)True
B)False
Q2) An increase in wages raises the opportunity cost of leisure and leads to an increase in the quantity of labor supplied.
A)True
B)False
Q3) A recent study by economists at the Federal Reserve Bank of New York estimates that over the period from 1970 to 2013, the average college graduate earned ________ more per year than the average person who had only a high school degree.
A)$5,750
B)13,275
C)$23,500
D)$44,400
Q4) In equilibrium, what determines the price of capital and what determines the price of natural resources?
Q5) What is personnel economics?
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Chapter 18: Public Choice, Taxes, and the Distribution of Income
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Sample Questions
Q1) The government of Silverado raises revenue through a general income tax paid by all its residents to operate the city's marina.The marina is used by private boat owners.This method of raising revenue to operate the marina is
A)consistent with the benefits-received principle.
B)consistent with the ability-to-pay principle.
C)inconsistent with the benefits-received principle.
D)inconsistent with the ability-to-pay principle.
Q2) Which of the following is the source of revenue for Medicare and Social Security in the United States?
A)individual income taxes
B)sales taxes
C)social insurance taxes
D)property taxes
Q3) Which of the following is the largest source of revenue for the U.S.federal government?
A)the individual income tax
B)social insurance taxes
C)sales taxes
D)property taxes
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