Honours Microeconomics Final Exam Questions
Course Introduction
Honours Microeconomics offers an in-depth exploration of microeconomic theory, designed for students seeking a rigorous and analytical approach to the subject. The course examines foundational concepts such as consumer and producer theory, market structures, general equilibrium, and welfare economics, with a strong emphasis on mathematical modeling and formal proofs. Students will engage with advanced topics, including game theory, information economics, and market failure, to develop a comprehensive understanding of individual and firm decision-making within various market environments. This course prepares students for further study in economics and related fields by fostering critical thinking and quantitative reasoning skills.
Recommended Textbook
Microeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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Chapter 1: What Is Economics
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Sample Questions
Q1) Consider the data in Table 1A.4.1.Suppose z increases from 4 to 5.What will happen to the graph of the relationship between x and y?
A)It will shift to the right.
B)It will shift to the left.
C)It will become positively sloped.
D)both A and C
E)both B and C
Answer: A
Q2) Which of the following relates factors of production to the sources of income correctly?
A)Land earns interest.
B)Land earns rent.
C)Labour earns rent.
D)Capital earns profit.
E)Entrepreneurship earns rent.
Answer: B
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Page 3
Chapter 2: The Economic Problem
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Sample Questions
Q1) Mexico and Canada produce both oil and apples using labour only.A barrel of oil is produced with 4 hours of labour in Mexico and 8 hours of labour in Canada.A bushel of apples is produced with 8 hours of labour in Mexico and 12 hours of labour in Canada.Canada has
A)an absolute advantage in oil production.
B)an absolute advantage in apple production.
C)a comparative advantage in oil production.
D)a comparative advantage in apple production.
E)a comparative advantage in oil production and a comparative advantage in apple production.
Answer: D
Q2) To gain from comparative advantage, countries must not only trade, they must also A)save.
B)invest.
C)engage in research and development.
D)engage in capital accumulation.
E)specialize.
Answer: E
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Page 4
Chapter 3: Demand and Supply
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Sample Questions
Q1) If the market for Twinkies is in equilibrium, then
A)Twinkies must be a normal good.
B)producers would like to sell less at the current price.
C)consumers would like to buy less at the current price.
D)the quantity supplied equals the quantity demanded.
E)the supply of Twinkies will never increase and the demand for Twinkies will never decrease.
Answer: D
Q2) Refer to Table 3.1.1.In 2014, the relative price of cola in terms of tea is
A)1.00.
B)1.20.
C)0.83.
D)1.25.
E)unknown without more information.
Answer: C
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Chapter 4: Elasticity
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Sample Questions
Q1) Refer to Table 4.2.2.The income elasticity of demand for Jolt is
A)+0.67.
B)-0.67.
C)+1.5.
D)-1.5.
E)It cannot be calculated because the price of Coke is not constant.
Q2) Which one of the following will yield a measured price elasticity of demand of 5.0? A 10 percent rise in price results in a
A)10 percent decrease in quantity demanded.
B)5 percent decrease in quantity demanded.
C)2 percent decrease in quantity demanded.
D)50 percent decrease in quantity demanded.
E)0.5 percent decrease in quantity demanded.
Q3) If the price elasticity of demand is 2, then a 1 percent fall in price
A)doubles the quantity demanded.
B)decreases the quantity demanded by half.
C)increases the quantity demanded by 2 percent.
D)decreases the quantity demanded by 2 percent.
E)increases the quantity demanded by 0.5 percent.
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Page 6
Chapter 5: Efficiency and Equity
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Sample Questions
Q1) A negative externality results in
A)underproduction.
B)zero production.
C)overproduction.
D)efficient production.
E)zero deadweight loss.
Q2) Consider the demand and supply curves in Figure 5.3.3.If the market is at the competitive equilibrium, which area in the diagram indicates producer surplus?
A)ABC
B)AEC
C)EBC
D)0BCD
E)0ECD
Q3) If production is not at an efficient level, which of the following must be true?
A)Marginal social benefit exceeds marginal social cost.
B)Marginal social cost exceeds marginal social benefit.
C)Production will increase.
D)Production will decrease.
E)none of the above
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Page 7
Chapter 6: Government Actions in Markets
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Sample Questions
Q1) Refer to Figure 6.1.1.If the demand for rental housing increases and the demand curve shifts rightward from D to D , and there is a strictly enforced rent ceiling of $150 per room,
A)the number of rooms rented will increase to 2,000.
B)the number of rooms rented is 1,500.
C)there is a housing shortage of 500 rooms.
D)the number of rooms rented decreases to 1,000.
E)both B and C
Q2) Table 6.2.1 gives the supply and demand schedules for teenage labour in Genoa City.Suppose a new fast food restaurant opens and increases the quantity demanded of teenage labour by 400 hours per week at each wage rate.If the teenage labour market is unregulated, there is an increase in teenage employment to
A)1,000 hours per week and a wage of $5 per hour.
B)1,000 hours per week and a wage of $7 per hour.
C)800 hours per week and a wage of $6 per hour.
D)600 hours per week and a wage of $7 per hour.
E)400 hours per week and a wage of $7 per hour.
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Chapter 7: Global Markets in Action
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Sample Questions
Q1) A tariff ________ the domestic price of the good and an import quota ________ the domestic price of the good.
A)lowers; lowers
B)lowers; raises
C)raises; lowers D)raises; raises
E)does not change; does not change
Q2) Consider a country that sells some of its goods as exports.Who does NOT benefit?
A)domestic consumers
B)domestic producers
C)workers in the domestic industry
D)foreign consumers
E)everyone benefits
Q3) Dumping occurs when a foreign firm
A)pollutes international waters.
B)disposes of waste material internationally.
C)sells inferior output to foreigners.
D)sells its exports at a lower price than its cost of production.
E)sells its output at a lower price in a foreign country than in the country where it produces the good.
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Chapter 8: Utility and Demand
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Sample Questions
Q1) Beverly is currently in consumer equilibrium.An increase in her income
A)increases her total utility.
B)decreases her total utility.
C)increases her marginal utility from all goods.
D)decreases her marginal utility from all goods.
E)increases her consumption of all goods.
Q2) The paradox of value
A)is that values are the same for different people.
B)is that economists can calculate marginal utility, even though utility is unmeasurable.
C)is resolved by an appeal to the law of diminishing total utility.
D)remains unresolved by economists.
E)is resolved by an appeal to the difference between marginal utility and total utility.
Q3) Refer to Table 8.1.1.The value of C is A)0.
B)13.
C)17.
D)50.
E)3.
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10
Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) Leah consumes at a point on her budget line where her marginal rate of substitution is less than the magnitude of the slope of her budget line.As Leah moves along her budget line toward her best affordable point, she will move
A)down and left.
B)down and right.
C)up and left.
D)up and right.
E)straight up.
Q2) Jay has an income of $10 to buy peanuts and popcorn.The price of peanuts is $1 a bag and the price of popcorn is $2 a bag.He chooses to consume 5 bags of peanuts and 2 bags of popcorn.What can we say about this consumption choice?
A)It is not the best affordable choice. He should consume more peanuts, more popcorn, or more of both.
B)It is the best affordable choice, and his marginal rate of substitution equals the slope of the budget line.
C)The consumption choice is on the budget line.
D)The consumption choice is outside the budget line.
E)both B and C
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11
Chapter 10: Organizing Production
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Sample Questions
Q1) Most establishments in Canada
A)employ between 5 and 99 people.
B)employ more than 100 people.
C)employ fewer than 5 people.
D)employ more than 500 people.
E)are partnerships.
Q2) Emma owns a firm that produces umbrellas.Currently, Emma produces 2,500 umbrellas a day.Emma cannot produce more umbrellas in a day unless she purchases another machine or else hires more workers.Emma is ________ efficient.
A)economically
B)economically and technologically
C)technologically
D)not
E)capital and labour
Q3) A firm's goal is to
A)maximize revenue.
B)maximize cost while minimizing revenue.
C)maximize profit.
D)minimize costs.
E)minimize risk.
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Chapter 11: Output and Costs
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Sample Questions
Q1) If diseconomies of scale are present,
A)average total cost is decreasing.
B)the long-run average cost curve has a negative slope.
C)economies of scale are also present.
D)the long-run average cost curve has a positive slope.
E)the average total cost shifts downward.
Q2) The law of diminishing marginal returns states:
A)As the size of a plant increases, marginal product eventually decreases.
B)As the size of a firm's plant increases, average cost eventually decreases.
C)As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes.
D)As a firm uses more of a variable factor of production, its average cost eventually decreases.
E)As a firm uses more of a variable factor or production, total product eventually decreases.
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Chapter 12: Perfect Competition
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Sample Questions
Q1) If a perfectly competitive firm's marginal revenue is less than its marginal cost, the firm
A)cannot increase its economic profit.
B)must be making an economic profit.
C)will decrease its output to increase economic profit.
D)will increase its output to increase economic profit.
E)must raise the price.
Q2) Refer to Figure 12.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run, market
A)demand will increase.
B)demand will decrease.
C)supply will increase.
D)supply will decrease.
E)supply and market demand will decrease.
Q3) If a firm faces a perfectly elastic demand for its product, then
A)it is not a price taker.
B)it will want to lower its price to increase sales.
C)it will want to raise its price to increase total revenue.
D)its marginal revenue curve is horizontal at the market price.
E)it will always make zero economic profit.
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Chapter 13: Monopoly
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Sample Questions
Q1) Table 13.4.1 shows the demand schedule faced by a perfect price-discriminating monopoly.If 3 units are sold, total revenue is
A)$15.00.
B)$16.00.
C)$18.00.
D)$19.50.
E)$5.00.
Q2) If a firm practises perfect price discrimination, A)its marginal cost curve is horizontal.
B)it will maximize total revenue.
C)it does not produce the quantity at which marginal revenue equals marginal cost.
D)it will produce the quantity at which the marginal revenue curve intersects the average total cost curve.
E)it will produce the quantity at which the marginal cost curve intersects the demand curve.
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Chapter 14: Monopolistic Competition
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Sample Questions
Q1) In monopolistic competition, each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.
A)small; do not directly affect B)small; directly affect C)large; do not directly affect D)large; directly affect E)large; may or may not directly affect
Q2) Refer to Fact 14.2.1.Samuel Adams makes the market for beer inefficient if A)the loss that arises from having greater product variety offsets the gain that arises because the quantity produced is less than the efficient quantity. B)more firms enter the market.
C)the loss that arises because the quantity produced is less than the efficient quantity is not offset by the gain that arises from having greater product variety. D)firms exit the market.
E)the marginal social cost of production equals the marginal social benefit received by consumers.
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16
Chapter 15: Oligopoly
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Sample Questions
Q1) Consider a cartel consisting of several firms that is maximizing economic profit.If one firm cheats on the cartel agreement by cutting its price and increasing its output, the best response of the other firms is to
A)cancel the cheating firm's membership in the cartel.
B)continue to sell at the agreed-upon price.
C)raise their price to recapture lost profit.
D)cut their prices also.
E)cut output to keep total cartel output at its original level.
Q2) Sarah's Soothing Diapers, Inc.and Orville's Odorless Diapers, Inc.are duopolists, who have agreed to collude.Orville has decided that he will comply with the collusive agreement as long as Sarah cooperated in the previous period.But if Sarah cheated in the previous period, Orville will punish Sarah by cheating in the current period.Orville's strategy is referred to as a A)Nash strategy.
B)tit-for-tat strategy.
C)trigger strategy.
D)monkey-see, monkey-do strategy.
E)dominant firm strategy.
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Page 17
Chapter 16: Externalities
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Sample Questions
Q1) Refer to Table 16.2.2.The efficient output of fertilizer is
A)1 tonne.
B)2 tonnes.
C)3 tonnes.
D)4 tonnes.
E)5 tonnes.
Q2) Refer to Table 16.3.1.The table shows marginal private benefit and the marginal social benefit from the consumption of chemical fertilizer and the marginal social cost of the production of fertilizer.Choose the correct statement.
A)The marginal external benefit is $20 per unit.
B)The marginal external cost is $10 per unit.
C)There are no externalities associated with this market.
D)The marginal external benefit is $10 per unit.
E)There is not enough information provided to determine whether or not there are externalities.
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18
Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) A good that is nonrival and excludable is a
A)private good.
B)public good.
C)government good.
D)natural monopoly good.
E)common resource.
Q2) Which of the following quotations describes a nonexcludable and nonrival good?
A)"Mom, Ashley is looking at me."
B)"Mom, Morgan won't let me watch the Backyardigans because she is watching Dora the Explorer."
C)"Mom, Harrison won't let me in his room."
D)"Mom, Taylor told me on the phone that he is also watching the Backyardigans on TV at his house, but I'm not allowed to go over there."
E)"Mom said everyone in this house gets to enjoy the flowers in the garden."
Q3) An example of common resource is
A)fish in the ocean.
B)air traffic control.
C)the Ambassador Bridge which goes between Windsor Ontario and Detroit.
D)the Internet.
E)national defence.
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Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) A Lorenz curve illustrates the distribution of income by graphing the A)cumulative percentage of income received and the cumulative percentage of households.
B)chance of a family earning a specific income.
C)wealth earned by a cumulative percentage of households.
D)cumulative frequency of specific incomes.
E)percentage change in income for a percentage change in population.
Q2) The demand curve for labour will shift leftward as a result of
A)a decrease in the wage rate.
B)an increase in the wage rate.
C)a decrease in the price of a substitute factor of production.
D)an increase in the price of a substitute factor of production.
E)an increase in the price of the firm's output.
Q3) After-tax income equals
A)total income minus tax payments by households to governments.
B)total income minus tax payments by households to firms.
C)total income plus tax payments by households to governments.
D)market income plus cash payments to households by governments.
E)market income minus tax payments by households to governments.
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