Honours Microeconomics
Mock Exam
Course Introduction
Honours Microeconomics is an advanced university-level course that provides an in-depth exploration of microeconomic theory and its applications. Covering topics such as consumer and producer behavior, market structures, game theory, welfare economics, and the implications of market failures, the course emphasizes rigorous analytical and mathematical approaches to understanding individual and firm decision-making processes. Students will engage with a variety of theoretical models and real-world case studies, preparing them for further research or professional roles that require a strong foundation in economic analysis and critical thinking.
Recommended Textbook
Microeconomics 3rd Australian Edition by Glenn Hubbard
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16 Chapters
3350 Verified Questions
3350 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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160 Flashcards
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Sample Questions
Q1) Which of the following is a normative economic statement?
A)Rising corn prices have increased the price of corn-based ethanol.
B)With rising home prices and falling mortgage interest rates,the amount of home foreclosures has decreased.
C)The federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power.
D)Farmers should not be allowed to grow and sell genetically-modified crops.
Answer: D
Q2) Jewelry manufacturers produce a range of products such as rings,necklaces,bracelets,and brooches.What fundamental economic question are they addressing by offering this range of items?
A)How to produce goods that consumers want?
B)Why produce a variety of items?
C)What to produce?
D)Who to produce the items for?
Answer: C
Q3) What is a marginal benefit?
Answer: Marginal benefit is the additional benefit received from continuing with an activity.
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Page 3
Chapter 2: Choices and Trade-Offs in the Market
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192 Flashcards
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Sample Questions
Q1) Which of the following statements about an entrepreneur is false?
A)organises the other factors of production into a working unit
B)develops the vision for the firm and funds the producing unit
C)sells his entrepreneurial services in the output market
D)risks the personal funds provided
Answer: C
Q2) Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?
Answer: Yes,a firm can have an absolute advantage without having a comparative advantage.A firm may be able to produce more of a good or service than its competitors,but that does not necessarily mean it can produce the good or service at a lower opportunity cost than its competitors.
Q3) Refer to Figure 2-5.If the economy is currently producing at point C,what is the opportunity cost of moving to point B?
A)10 thousand wrenches
B)13 thousand hammers
C)30 thousand wrenches
D)23 thousand hammers
Answer: A
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Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase?
A)a decrease in the price of flour
B)an increase in the price of flour
C)an increase in the price of rye bread,a substitute for white bread
D)an increase in the price of butter,a complement for white bread
Answer: A
Q2) If the price of refillable butane lighters was to decrease,then
A)the demand for butane would decrease.
B)the demand for butane would increase.
C)the quantity of butane demanded would increase.
D)the quantity of butane demanded would decrease.
Answer: B
Q3) In response to a surplus,the market price of a good will fall;as the price falls,the quantity demanded will increase and quantity supplied will decrease until equilibrium is reached.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) Suppose the value of the price elasticity of demand is -3.What does this mean?
A)A 1 per cent increase in the price of the good causes quantity demanded to increase by 3 per cent.
B)A 1 per cent increase in the price of the good causes quantity demanded to decrease by 3 per cent.
C)A 3 per cent increase in the price of the good causes quantity demanded to decrease by 1 per cent.
D)A $1 increase in price causes quantity demanded to fall by 3 units.
Q2) Refer to Figure 4-4.The inelastic segment of the demand curve
A)is coincident with the horizontal axis.
B)is coincident with the vertical axis.
C)lies below the midpoint of the curve.
D)lies above the midpoint of the curve.
Q3) Inelastic supply occurs whenever the elasticity of supply value is
A)negative and < -1.
B)any positive number.
C)positive and > 1.
D)positive and < 1.
Q4) What does price elasticity of demand measure? When is demand elastic? Inelastic? Unit elastic?
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Chapter 5: Economic Efficiency, Government Price Setting and Taxes
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Sample Questions
Q1) Refer to Figure 5-3.At the equilibrium price of $15,consumers are willing to buy 80 pounds of tiger shrimp.Is this an economically efficient quantity?
A)No,the marginal benefit of the 80th unit exceeds the marginal cost of the 80th unit.
B)Yes,because marginal cost is zero at the 80th unit.
C)Yes,because $15 is the price where the marginal benefit is equal to the marginal cost.
D)No,the marginal cost of the 80th unit exceeds the marginal benefit of the 80th unit.
Q2) Which of the following is not a consequence of minimum wage laws?
A)Low-skilled workers are hurt because minimum wage reduces the number of jobs providing low-skilled workers with training.
B)Employers will be reluctant to offer low-skilled workers jobs with training.
C)Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage.
D)Some workers benefit when the minimum wage is increased.
Q3) What is marginal benefit? Which curve is also referred to as a marginal benefit curve?
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Page 7
Chapter 6: Consumer Choice and Behavioural Economics
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Sample Questions
Q1) Many people leave their servers tips in restaurants,even when they are not likely to visit the restaurant again.This is evidence that
A)people would rather pay for good service at an inexpensive restaurant than pay higher prices and receive poor service at an expensive restaurant.
B)people enjoy eating at restaurants more than eating at home.
C)people treat others fairly even if doing so makes them worse off financially.
D)there has been an improvement in the service people receive in restaurants over time,partly because the restaurant industry has become more competitive.
Q2) We can derive the market demand curve for gold earrings
A)only if the tastes of all gold earring consumers are similar.
B)by adding horizontally the individual demand curves of each gold earring consumer.
C)by adding vertically the quantity demanded of each gold earring consumed at each price.
D)by adding the prices each gold earring consumer is willing to pay for each quantity.
Q3) List three reasons why demand for a product will often increase if the product is endorsed by a celebrity.
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Chapter 7: Technology, Production and Costs
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300 Flashcards
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Sample Questions
Q1) Higher isocost lines correspond to higher A)profits.
B)total costs of production.
C)input prices.
D)sales revenue.
Q2) Refer to Figure 7-14.Suppose Hilda hires labour at $8 per hour and capital costs $10 per unit.What is the minimum cost of producing 200 gooseberry pies?
A)$3600
B)$1120
C)$592
D)$560
Q3) Marginal cost is calculated for a particular increase in output by
A)multiplying the total cost by the change in output.
B)multiplying the change in total cost by the change in output.
C)dividing the total cost by the change in output.
D)dividing the change in total cost by the change in output.
Q4) What is an isoquant? What is the slope of an isoquant?
Q5) In economics,technology only refers to the development of new products.
A)True
B)False
Page 9
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Chapter 8: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) If a firm shuts down it
A)will suffer a loss equal to its fixed costs.
B)will produce nothing but must pay its variable costs.
C)will produce nothing but must pay its fixed and variable costs.
D)will earn enough revenue to cover its variable costs but not all of its fixed costs.
Q2) If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product,the firm will be able to earn economic profits in the long run.
A)True
B)False
Q3) Refer to Figure 8-2.Suppose the firm is currently producing Q<sub>2</sub><sub> </sub>units.What happens if it expands output to Q<sub>3</sub><sub> </sub>units?
A)Its profit increases by the size of the vertical distance df.
B)It makes less profit.
C)It incurs a loss.
D)It will be moving toward its profit-maximising output.
Q4) Explain two different ways to determine the profit-maximising level of output for a firm in a perfectly competitive market.
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Chapter 9: Monopoly Markets
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281 Flashcards
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Sample Questions
Q1) A product's price approaches its marginal cost as market concentration increases.
A)True
B)False
Q2) If a monopolist's price is $50 at the output where marginal revenue equals marginal cost and average total cost is $43,then the incremental profit from the last unit sold is $7.
A)True
B)False
Q3) Perfect price discrimination is also known as A)monopoly.
B)first-degree price discrimination.
C)third-degree price discrimination.
D)yield management.
Q4) The ability of a firm to charge a price greater than marginal cost is called A)monopoly power.
B)price-making power.
C)cost-plus pricing.
D)market power.
Q5) If you own the only bookstore in a small town,do you have a monopoly?
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Chapter 10: Monopolistic Competition
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Sample Questions
Q1) Although advertising raises the price of a monopolistic competitor's product,it does confer a benefit to consumers.Which of the following is a benefit to consumers?
A)Advertising acts as a barrier to entry.
B)Advertising engenders brand loyalty.
C)Advertising could provide consumers with useful information about new products and enable them to comparison shop.
D)Advertised products tend to be of higher quality so consumers feel special when they consume advertised products.
Q2) To maximise their profits and defend those profits from competitors,monopolistically competitive firms must
A)lobby government to erect barriers to entry in their industries.
B)limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions.
C)differentiate their products.
D)achieve economies of scale.
Q3) What is the difference between the terms 'marketing' and 'advertising'?
Q4) Explain the differences between total revenue,average revenue,and marginal revenue.
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Page 12
Chapter 11: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) An entry barrier exists when firms in an industry charge the lowest price possible for their products.
A)True
B)False
Q2) An oligopolist's demand curve is
A)identical to that of a perfectly competitive firm.
B)identical to that of a monopolistically competitive firm.
C)vertical on a price-quantity diagram.
D)unknown because a response of firms to price changes by rivals is uncertain.
Q3) If firms are protected by substantial barriers to entry,short-run profits can turn into long-run profits.
A)True
B)False
Q4) In the kinked demand curve model of oligopoly,under what circumstances would an increase in marginal costs lead to an increase in the price?
Q5) The prisoner's dilemma is used to analyse business situations in which one firm acts first and then other firms respond.
A)True
B)False
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Chapter 12: The Markets for Labour and Other Factors of Production
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Sample Questions
Q1) Economic rent refers to the price of a factor of production which is fixed in supply.
A)True
B)False
Q2) Consider the market for opticians.What is likely to happen to the equilibrium wage and quantity of opticians if more and more people turn to laser eye surgery instead of wearing glasses or contact lens?
A)The equilibrium wage and the equilibrium quantity of opticians rise.
B)The equilibrium wage and the equilibrium quantity of opticians fall.
C)The equilibrium wage rises and the equilibrium quantity of opticians falls.
D)The equilibrium wage falls and the equilibrium quantity of opticians rises.
Q3) Refer to Table 12-4.What are the price and quantity of workers that result in the maximum amount of revenue Apple would earn from selling iPods?
A)$180;1
B)$140;2
C)$120;2
D)$120;4
Q4) The demand for labour is a derived demand.Explain what is meant by the term 'derived demand.'
Page 14
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Chapter 13: International Trade
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131 Flashcards
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Sample Questions
Q1) Refer to Table 13-3.Select the statement that accurately interprets the data in the table.
A)Bryce has a greater opportunity cost than Tina for making candles.
B)Bryce's opportunity cost for making candles is less than Tina's.
C)Tina has a greater opportunity cost than Bryce for making candles.
D)Bryce's opportunity cost for making candles and making soap are both greater than Tina's.
Q2) Refer to Table 13-6.Which country has an absolute advantage in producing clocks?
A)Denmark
B)Belize
C)both countries
D)neither country
Q3) Imports are goods and services bought domestically
A)but produced in other countries.
B)and resold at a profit.
C)and produced domestically.
D)and not subject to tariffs.
Q4) What is dumping? Who benefits and who loses from dumping?
Q5) What are three primary reasons for the growth of international trade over the past 50 years?
Page 15
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Chapter 14: Government Intervention in the Market
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Sample Questions
Q1) Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?
A)public goods
B)private goods
C)quasi-public goods
D)common resources
Q2) Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?
A)Access to the commons can be restricted through community norms and laws.
B)Offer subsidies to consumers.
C)Force people to move away from the commons.
D)Persuade people to use less of the scarce resource through an advertising campaign.
Q3) Refer to Figure 14-2.How much is Bree willing to pay to have 4 street lights installed?
A)$1500
B)$1800
C)$2700
D)$7200
Q4) What is rent seeking and how is it related to regulatory capture?
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Chapter 15: Externalities, Environmental Policy and Public Goods
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Sample Questions
Q1) Which of the following describes how a positive externality affects a competitive market?
A)The externality causes a difference between the private benefit from consumption and the social benefit.
B)The externality causes a difference between the private benefit from production and the social cost of production.
C)The externality causes quantity demanded to exceed quantity supplied.
D)The externality causes a difference between the social cost of production and the social cost of consumption.
Q2) The tragedy of the commons was avoided in the Middle Ages by
A)selling common grounds to individuals.
B)the local police who monitored entry into the commons.
C)social pressure to uphold traditionally accepted limits on family use of the commons.
D)the government,which imposed a tax for the use of the commons.
Q3) A public good that is a good that is both rival and excludable.
A)True
B)False
Q4) Should the level of pollution be reduced to zero and if not,then to what level?
Page 17
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Chapter 16: The Distribution of Income and Social Policy
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Sample Questions
Q1) Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,the government's revenue from the tax is represented by the area
A)(P<sub>a</sub>P<sub>c</sub><sub> </sub>× Q<sub>a</sub>)if the supply curve is S<sub>0</sub> and (P<sub>b</sub>P<sub>c</sub><sub> </sub>× Q<sub>b</sub>)if the supply curve is S<sub>1</sub>.
B)(P<sub>a</sub>P<sub>d</sub><sub> </sub>× Q<sub>a</sub>)if the supply curve is S<sub>0</sub> and (P<sub>b</sub>P<sub>e</sub><sub> </sub>× Q<sub>b</sub>)if the supply curve is S<sub>1</sub>.
C)(P<sub>a</sub>P<sub>e</sub> × Q<sub>a</sub>)under either supply curve.
D)(P<sub>b</sub>P<sub>e</sub> × Q<sub>b</sub>)under either supply curve.
Q2) Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the A)benefits-received principle.
B)social equity principle.
C)ability-to-pay principle.
D)horizontal-equity principle.
Q3) What is the difference between the poverty line and the poverty rate?
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