Honors Microeconomics Practice Exam
Course Introduction
Honors Microeconomics provides an in-depth exploration of the fundamental principles of microeconomic theory and their applications. The course covers topics such as consumer and producer behavior, market structures, equilibrium analysis, and welfare economics, with an emphasis on mathematical rigor, critical thinking, and real-world examples. Students will analyze how individuals and firms make decisions in various market environments, evaluate the efficiency of resource allocation, and examine the impact of government interventions. Through problem-solving, case studies, and discussion, this honors-level course prepares students for advanced study in economics and related fields.
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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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) The expression "There's no such thing as a free lunch" means
A) that even if the lunch is free,we pay for it in extra calories
B) that resources used up in producing the lunch are not available to satisfy other wants
C) the same thing as "The best things in life are free"
D) you can eat only if you work first
E) neither sea water nor air is free
Answer: B
Q2) The other-things-constant assumption
A) allows the economist to make useful predictions
B) is a prediction
C) applies only to consumers' decisions,not to those of firms
D) forces the economist to ignore reality,where things are constantly changing
E) implies rational self-interest on the part of all economic actors
Answer: A
Q3) Secondary effects are consequences of economic actions that develop slowly over time as people react to events.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economics Systems
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Sample Questions
Q1) The law of comparative advantage states that the person who should produce a good is the person who
A) has the lowest opportunity cost of producing that good B) can produce that good using the fewest resources
C) will produce that good using the most expensive resources
D) has the most desire for that good E) has produced that good in the past
Answer: A
Q2) If Helen gives up the opportunity to bake 40 cakes for each room she paints and Josh can paint one room in the time it takes him to bake 60 cakes,which of the following is true?
A) The opportunity cost of painting is higher for Helen.
B) The opportunity cost of baking cakes is lower for Josh.
C) The opportunity cost of painting one room is 1/40 of a cake for Helen.
D) The opportunity cost of baking one cake is 60 rooms painted for Josh.
E) The opportunity cost of cakes cannot be computed.
Answer: B
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Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Restricting imports of Brazilian shoes will
A) raise the price of both Brazilian and domestically produced shoes
B) raise the price of Brazilian shoes but lower the price of domestically produced shoes
C) lower the price of Brazilian shoes but raise the price of domestically produced shoes
D) lower the price of both Brazilian and domestically produced shoes
E) benefit the producers of shoes in Brazil
Answer: A
Q2) Which of the following statement is incorrect?
A) Households produce goods and services
B) Households are suppliers of labor
C) Households usually consist of several individuals
D) Households are demanders of goods and services
E) Households are suppliers of capital
Answer: A
Q3) The excise tax on gasoline is based on the ability-to-pay principle of taxation.
A)True
B)False
Answer: False
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Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) If demand decreases and supply increases,price will
A) always increase
B) always decrease
C) increase only if supply increases more than demand decreases
D) increase only if supply increases less than demand decreases
E) decrease only if supply increases more than demand decreases
Q2) An increase in professors' salaries increases the supply of college education.
A)True
B)False
Q3) Suppose there are only two goods,apples and oranges.What happens if the price of each good increases by 15 percent?
A) The consumer will substitute apples for oranges.
B) The consumer will substitute oranges for apples.
C) There is no substitution effect because relative prices have remained constant.
D) Demand for both goods increases.
E) Demand for both goods decreases.
Q4) Disequilibrium occurs when quantity demanded equals quantity supplied.
A)True
B)False
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Chapter 5: Elasticity of Demand and Supply
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Sample Questions
Q1) Which of the following describes a situation in which demand must be elastic?
A) The price of pens rises by 10 cents,and quantity of pens demanded falls by 50.
B) The price of pens rises by 10 cents,and total revenue rises.
C) A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded.
D) Total revenue does not change when the price of pens rises.
E) Total revenue decreases when the price of pencils rises.
Q2) For which of the following is demand most likely to be perfectly inelastic?
A) BMW automobiles
B) Pepsi Cola
C) hot dogs
D) insulin
E) Tylenol
Q3) If its value of cross-price elasticity is negative,a good must be a necessity.
A)True
B)False
Q4) The price elasticity of demand is equal to the slope of the demand curve.
A)True
B)False
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Chapter 6: Consumer Choice and Demand
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Sample Questions
Q1) Which of the following varies along a given demand curve?
A) consumer preferences
B) prices of substitutes
C) prices of complements
D) the price of the good itself
E) income
Q2) In Exhibit 6-19,when the price drops from $10 to $6,the consumer surplus:
A) Decreases from $252 to $147
B) Increases from $45 to $147
C) Decreases by $100
D) Increases by $100
E) Increases from $252 to $375
Q3) The law of diminishing marginal utility states that
A) total utility falls as more of a good is consumed,other things constant
B) total utility falls as marginal utility falls,other things constant
C) marginal utility falls as total utility increases,other things constant
D) marginal utility falls as more of a good is consumed,other things constant
E) marginal utility falls as less of a good is consumed,other things constant
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Chapter 7: Production and Cost in the Firm
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Sample Questions
Q1) In Exhibit 7-3,diminishing marginal returns set in with the addition of the
A) first worker
B) third worker
C) fourth worker
D) fifth worker
E) seventh worker
Q2) Jerry's ice-cream parlor is hosting Andrew's birthday party in one week.Overall,25 to 30 people will attend the party and Andrew's costs are as follows: $200 for rent,$150 for the cake,$3 per person for customized invitations,$15 per person for the meal,$50 for decorations,and $8 per person for party favors.For simplicity,assume that Andrew is considered one of the guests and he receives an invitation too.Assuming that 25 people attend the party,the average variable cost of the party is:
A) $16
B) $1,050
C) $42
D) $350
E) $26
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Chapter 8: Perfect Competition
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Sample Questions
Q1) Suppose a price-taking firm produces 400 units at its optimal output level.At that output rate marginal cost is $200,average total cost is $240,and average variable cost is $170.What can you determine about the market price that would force the firm to shut down in the short run?
A) It equals $200.
B) It is between $170 and $240.
C) It is less than $170.
D) It is between $170 and $200.
E) It equals $240.
Q2) To achieve allocative efficiency,firms
A) strive to minimize fixed costs
B) strive to maximize profits
C) produce at their minimum long-run average cost
D) produce at their minimum long-run marginal cost
E) produce the output consumers want most
Q3) Profit maximization depends upon demand conditions,as well as upon productivity and costs.
A)True
B)False
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10
Chapter 9: Amonopoly
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Sample Questions
Q1) A monopolist's demand curve is
A) its marginal cost curve
B) its marginal revenue curve
C) identical to the market demand curve
D) the same as the demand curve of a firm in perfect competition
E) nonexistent
Q2) Which of the following does a monopoly control,that a perfectly competitive firm does not control?
A) how much to produce
B) technology
C) what price to charge
D) what inputs to use
E) plant size
Q3) The main reason a monopolist can earn long-run economic profit,whereas a perfectly competitive firm cannot,is that
A) monopolists operate under economies of scale
B) perfectly competitive firms have opportunity costs
C) demand for the monopolist's output is inelastic
D) demand for the monopolist's output is elastic
E) there are no barriers to entry in perfect competition
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Chapter 10: Monopolistic Competition and Oligopoly
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219 Flashcards
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Sample Questions
Q1) Monopolistically competitive firms do not achieve allocative efficiency in the long run because
A) marginal cost equals marginal revenue
B) marginal cost is greater than marginal revenue
C) marginal cost is less than marginal revenue
D) price is less than marginal cost
E) price is greater than marginal cost
Q2) There are multiple models of pricing behavior in oligopolistic markets because
A) it is difficult to predict how rival firms will react to any pricing decision
B) the demand curve slopes upward for these firms
C) firms could earn profit in the long run unlike other markets
D) price has a direct impact on profit for a firm in oligopoly
E) the products are not identical in terms of quality,image,location
Q3) Price wars occur more often in monopolistic competition than in other market structures.
A)True
B)False
Q4) A monopolistically competitive firm produces where demand is inelastic.
A)True
B)False
Page 12
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Chapter 11: Resource Markets
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210 Flashcards
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Sample Questions
Q1) Permanent resource price differentials are caused by
A) differences in resource quality
B) differences in the time and training required to perform the job
C) differences in nonmonetary aspects of the job
D) a lack of resource mobility
E) all of the above
Q2) A resource price taker's resource demand curve is
A) horizontal
B) the same as its marginal resource cost curve
C) the same as its marginal revenue product curve
D) the same as its marginal product curve
E) the same as its average variable cost curve
Q3) Which of the following represents a perfectly competitive farmer's demand curve for hired hands?
A) her ATC curve
B) her AVC curve
C) her MRP curve
D) her MRC curve
E) her AFC curve
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Page 13
Chapter 12: Labor Markets and Labor Unions
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211 Flashcards
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Sample Questions
Q1) It is sometimes claimed that garbage collectors are paid more than elementary school teachers.If this is true,one reason might be
A) the difference in working conditions
B) that school teachers are usually women
C) that the supply of teachers is small
D) that the demand for teachers is small
E) that the market does not value teachers
Q2) If an industrial union negotiates the union wage above the market equilibrium,which of the following is incorrect?
A) The wage in the nonunion sector decreases below the market equilibrium
B) The employment in the union sector is increasing
C) The wage in the union sector is higher than market equilibrium
D) The employment in the nonunion sector is increasing
E) The labor supply in the nonunion sector is increasing
Q3) Jobs in rural areas generally pay lower wages than jobs in urban areas because there are limits to labor mobility.
A)True
B)False
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Chapter 13: Capital, interest, and Corporate Finance
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183 Flashcards
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Sample Questions
Q1) If a person saves $1,000,how much will she have at the end of three years if the market interest rate is 6 percent?
A) $1,060
B) $1,135
C) $1,156
D) $1,191
E) $1,600
Q2) The marginal product of the seventh copy machine listed in Exhibit 13-2 is
A) -5 copies
B) 5 copies
C) 25 copies
D) 135 copies
E) 165 copies
Q3) Another term for an investment good is
A) interest
B) savings
C) capital
D) rent
E) production
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Page 15
Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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Sample Questions
Q1) The simpler a production process is,
A) the greater the cost of production
B) the greater the transaction cost of using markets
C) the more likely a firm will use the market to organize production
D) the more likely a firm will used centralized control to organize production
E) the more likely that transaction costs increase by using centralized control of production
Q2) When sellers have better information about product quality than do buyers,lower-quality products tend to become more common in the market.
A)True
B)False
Q3) The adverse selection problem is least likely in which of the following occupations?
A) lawyer
B) barber
C) college professor
D) marketing analyst
E) manager
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Page 16
Chapter 15: Economic Regulation and Antitrust Policy
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Sample Questions
Q1) Suppose the local government is considering using marginal cost pricing to set rates for a cable TV company.Which of the following arguments supports marginal cost pricing?
A) Marginal cost pricing gives the monopoly economic profit and a reason to stay in business.
B) Marginal cost pricing gives the firm a normal economic profit and a reason to stay in business.
C) Marginal cost pricing is allocatively efficient.
D) Average cost pricing requires subsidies,which can be costly.
E) Average cost pricing forces monopolies to operate at a loss.
Q2) Which of the following groups benefits from regulation,according to the special interest theory of regulation?
A) all consumers
B) all producers
C) only certain consumers
D) only certain producers
E) society as a whole
Q3) As concentration in an industry increases,the Herfindahl index falls.
A)True
B)False
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Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) A good that is neither rival nor exclusive is called
A) a private good
B) a public good
C) a quasi-private good
D) an external good
E) an open access good
Q2) Generally,people are more satisfied with private market outcomes than with public voting outcomes because
A) each consumer in the private market can choose the quantity he or she desires
B) most people are near the median
C) the prices are lower
D) markets are involuntary
E) there are too many choices to make in the public sector
Q3) In Niskanen's theory,bureaucrats obtain the budget they want by
A) lowering prices to consumers
B) raising prices to consumers
C) promising to produce more efficiently
D) threatening legislatures with an all-or-nothing choice
E) allowing legislators to cut particular items from their budget
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Page 18
Chapter 17: Externalities and the Environment
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Sample Questions
Q1) The Superfund was designed to clean up
A) the acid rain problem
B) air pollution from automobiles,buses,and trucks
C) water pollution from agricultural sources (i.e. ,pesticides)
D) water pollution from dumping raw sewage
E) toxic waste dumps
Q2) All of the following are sources of negative externalities except one.Which is the exception?
A) a paper mill that pollutes a river
B) a person who throws a beer can out the window of a moving car
C) cars,which emit carbon monoxide
D) a solar water heater which is outside and obscure from view
E) products that contribute to the greenhouse effect
Q3) If you live in a state with a returnable deposit law and you decide to throw out your empty bottles and cans,chances are that someone down the line with a higher opportunity cost than you will find them and return them for deposits.
A)True
B)False
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Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) Poor welfare recipients face higher marginal tax rates than do the richest families.
A)True
B)False
Q2) The Lorenz curve shows the
A) functional distribution of income
B) personal distribution of income
C) relative percentage of income going to each of the resources
D) demand for unskilled versus unskilled labor
E) cumulative percentage of income received by cumulative percentages of households
Q3) In a market economy,income is primarily determined by
A) the productivity of household resources
B) the level of transfer payments
C) government monetary and fiscal policy
D) the geographic distribution of resources
E) the amount of financial assets owned by households
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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Sample Questions
Q1) A tariff is a tax on either imports or exports.
A)True
B)False
Q2) Japan is generally considered an economy closed to foreign trade.
A)True
B)False
Q3) When a country establishes trade restrictions,domestic producers of goods that compete with imported goods
A) always lose in the short run
B) always gain in the long run
C) may lose in the long run if protection stifles innovation and leaves the industry vulnerable
D) may gain in the short run because wages will fall in that industry
E) usually lobby against such restrictions
Q4) The two main categories of U.S.exports are
A) transportation goods and fuel
B) steel and fuel
C) capital goods and industrial supplies and materials
D) fuels and agricultural goods
E) agricultural and transportation goods
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Chapter 20: International Finance
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Sample Questions
Q1) An increase in the U.S.demand for foreign exchange will cause a(n)
A) increase in the price of foreign exchange,which is a depreciation of the U.S.dollar,making foreign goods cheaper to U.S.residents
B) increase in the price of foreign exchange,which is a depreciation of the U.S.dollar,making foreign goods more expensive to U.S.residents
C) decrease in the price of the U.S.dollar,which is an appreciation of the U.S.dollar
D) increase in the price of foreign exchange,which is an appreciation of the U.S.dollar
E) decrease in the price of foreign exchange,which is an appreciation of the U.S.dollar
Q2) Contractionary policies help correct a balance of payments deficit by
A) lowering domestic incomes but raising demand for imports
B) raising domestic incomes but lowering demand for imports
C) raising both domestic incomes and demand for imports
D) lowering both domestic incomes and demand for imports
E) lowering interest rates and increasing aggregate spending
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Chapter 21: Developing and Transitional Economies
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Sample Questions
Q1) Sjen Mavago,the economics minister of the country of X-Marks-the-Spot,has concluded that entrepreneurs are unable to generate the kind of growth the country needs.Her decision to create state enterprises might be motivated by the desire to A) earn profit
B) provide jobs for friends and relatives of government officials
C) take risks
D) encourage a free market
E) limit government's role in the economy
Q2) Which of the following is true about GNP?
A) includes profits earned by a Mercedes factory in Alabama
B) excludes profits earned by General Electric in India
C) measures the market value of all goods and services produced by resources supplied the home country's residents and firms,regardless of the location of the resource
D) stands for Generally Nice Products
E) used by countries to classify the World Bank
Q3) In high- income countries,children do not suffer from malnutrition.
A)True
B)False
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