Intermediate Microeconomics
Chapter Exam Questions
Course Introduction
Intermediate Microeconomics explores the theoretical foundations of how individuals and firms make decisions regarding the allocation of scarce resources. The course covers consumer and producer behavior, market structures such as perfect competition, monopoly, and oligopoly, and examines the functioning of markets through the lens of supply and demand analysis. Students will develop tools for analyzing the impact of government policies, market failures, and externalities, gaining a deeper understanding of price determination and welfare analysis. Emphasis is placed on rigorous analytical techniques and graphical models to facilitate critical thinking and problem-solving in economic contexts.
Recommended Textbook
Principles of microeconomics v 3.0 by Rittenberg
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Chapter 1: Economics: The Study of Choice
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Sample Questions
Q1) The primary emphasis in macroeconomics is on:
A) how firms set prices.
B) aggregates in the economy.
C) marginal analysis and normative economics.
D) international trade and environmental economics.
Answer: B
Q2) Microeconomics is a branch of economics that examines the impact of choices on aggregates in the economy.
A)True
B)False
Answer: False
Q3) Economic models are:
A) created and used in order to duplicate virtually every aspect of the real world.
B) useless if they are simple.
C) made generally of wood, plastic, and/or metal.
D) built using assumptions.
Answer: D
Q4) Distinguish between microeconomics and macroeconomics.
Answer: not answered
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Chapter 2: Confronting Scarcity: Choices in Production
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Sample Questions
Q1) The cost of the Great Depression between 1929 and 1942 was a loss of:
A) more than the United States ultimately spent on World War II.
B) over $15 trillion in today's dollars.
C) the output that otherwise would have been produced by the 50 percent of the nation's workers who had lost their jobs.
D) both B and C are true.
Answer: A
Q2) Specialization arises because
A) some people don't like doing some tasks.
B) differences in the costs of production give some producers a comparative advantage in the production of particular goods or services.
C) the government directs resources into certain activities.
D) inefficient production forces producers to trade.
Answer: B
Q3) Society can operate on the production possibilities curve only if it has achieved efficiency.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Demand and Supply
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Sample Questions
Q1) Technology is a demand shifter.
A)True
B)False
Answer: False
Q2) A shift in the demand curve to the left, all other things unchanged:
A) will cause the supply curve to shift to the left, too.
B) will cause a movement upward along the supply curve and a higher equilibrium price.
C) will cause a movement downward along the supply curve and a lower equilibrium quantity.
D) will result in a lower equilibrium price and greater equilibrium quantity.
Answer: C
Q3) If the price of mozzarella cheese (an ingredient in pizzas) declines due to a major technological breakthrough in the dairy industry, there would be:
A) a decrease in the supply of pizza.
B) an increase in the supply of pizza.
C) an increase in the quantity of pizza supplied.
D) no change in the supply of pizza.
Answer: B
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Chapter 4: Applications of Supply and Demand
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Sample Questions
Q1) Health-care spending as a percentage of total U.S.output generally rose between 1960 and 2015.
A)True
B)False
Q2) (Exhibit: Third-party payers) At a price of $60 with a third party payer, the total cost of health-care services compared to the price that would prevail if there were no third-party payers has:
A) decreased from $180 million to $80 million.
B) increased from $80 million to $180 million.
C) decreased from $180 million to $80 million, and consumers pay $60 million
D) increased to $180 million, and insurance pays $60 million.
Q3) In the stock market:
A) changes in expectations will affect suppliers but not demanders.
B) expectations that cause the demand curve to shift in one direction are usually associated with a supply shift in the same direction.
C) the demand for stocks in recent years can be affected by demographic and income changes.
D) all of the above are true.
Q4) What are the basic provisions of the Affordable Health Care Act of 2010?
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Chapter 5: Elasticity: a Measure of Response
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Sample Questions
Q1) The price elasticity of a good will tend to be greater:
A) the longer the relevant time period.
B) the fewer number of substitute goods available.
C) if it is a staple or necessity with few substitutes.
D) All of the above are true.
Q2) (Exhibit: Demand for Macintosh Computers) The change in the firm's total revenue resulting from a change in price from T to P suggests that demand is:
A) nonelastic.
B) price elastic.
C) price inelastic.
D) unit price elastic.
Q3) The income elasticity of demand for eggs has been estimated to be 0.57.If income grows by 5 percent in a period, how will that affect demand for eggs in that period, all other things unchanged?
A) demand will increase by more than 5.7 percent
B) demand will increase by about 2.9 percent
C) demand will decrease by more than 5.7 percent
D) demand will decrease
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Chapter 6: Markets, Maximizers, and Efficiency
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Sample Questions
Q1) A key element that a public good displays is:
A) government production.
B) government provision.
C) payment through taxes
D) nonexclusion.
Q2) (Exhibit: Markets and Efficiency) Using Panel (a), which of the following statements is (are) true?
A) Consumers face a price that bears no relation to marginal cost.
B) Consumers face a price of apples that signals their marginal cost.
C) Consumers will buy apples as long as their marginal cost exceeds their marginal benefits.
D) All of the above statements are true.
Q3) When an alternative to the current allocation of resources exists that would increase society's welfare:
A) there is market failure.
B) the efficiency condition is met.
C) decisionmakers have faced the marginal benefits and marginal costs of their decisions.
D) producers have maximized total cost.
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Page 8
Chapter 7: The Analysis of Consumer Choice
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Sample Questions
Q1) The fact that a Giffen good might exist:
A) negates the law of demand.
B) does not negate the law of demand.
C) means that the law of demand is fine in theory but not valid in the real world. D) negates the law of increasing cost.
Q2) (Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $2 per unit and the price of good Y is $1 per unit, and you consume 3 units of good X and 3 units of good Y.To maximize utility, assuming that the goods are divisible, you would consume:
A) less of both X and Y.
B) more of both X and Y.
C) less of X and more of Y.
D) more of X and less of Y.
Q3) For a consumer to be in equilibrium, the marginal utilities of all goods must be equal. A)True B)False
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Chapter 8: Production and Cost
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Sample Questions
Q1) A relationship between output and the quantity of a variable factor of production used in a period, given the levels of all other factors of production is a(n):
A) budget constraint.
B) planning curve.
C) indifference curve.
D) total product curve.
Q2) The curve that shows the additional cost of each additional unit of output is called the:
A) average cost curve.
B) total cost curve.
C) marginal product curve.
D) marginal cost curve.
Q3) (Exhibit: Short-Run Costs) The vertical difference between curve B and curve C at any quantity of output is:
A) marginal cost.
B) fixed cost.
C) average fixed cost.
D) average variable cost.
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Chapter 9: Competitive Markets for Goods and Services
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Sample Questions
Q1) Discuss and explain what happens when a firm in perfect competition is making positive economic profit. Use graphs to support your answer. Do the same for a firm that is producing where P < ATC yet P > minimum AVC. Explain what a firm will do if P < minimum AVC.
Q2) The marginal revenue received by a firm in a perfectly competitive market: A) is greater than the market price. B) is less than the market price. C) is equal to its average revenue. D) increases with the quantity of output sold.
Q3) (Exhibit: Total Revenue and Cost) The most profitable level of output occurs at quantity:
A) F.
B) K.
C) L.
D) M.
Q4) The firm's supply curve in perfect competition is the MC curve.
A)True
B)False
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Chapter 10: Monopoly
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Sample Questions
Q1) A restricted-input monopoly is most likely to result if a single firm:
A) is the only seller in a small town or community.
B) is investor owned, but granted the exclusive right by the government to operate in a market.
C) experiences long-run increasing economies of scale over a wide range of output. D) has gained control over a strategic factor of production.
Q2) A monopoly is a market characterized by:
A) a product with no close substitutes.
B) a single buyer and several sellers.
C) a large number of small firms.
D) a small number of large firms.
Q3) (Exhibit: Monopoly Model) The profit-maximizing price is the one indicated by the distance:
A) WZ.
B) JD.
C) KE.
D) LF.
Q4) A newspaper article stated that a monopoly will charge the highest price that the market will bear? Do you agree? Why or why not?
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Chapter 11: The World of Imperfect Competition
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Sample Questions
Q1) Advertising that provides information about prices may increase competition.
A)True
B)False
Q2) Firms in a duopoly situation may collude to choose the monopoly solution to the determination of quantity to produce and the price at which to sell their products.
A)True
B)False
Q3) The HHI for _______ where _______ have (has) _______ of the market is
.
A) monopolistic competition; four firms each; 25%; 10,000
B) oligopoly; three firms each; 50%; 5,000
C) oligopoly; two firms each; 50%; 5,000
D) monopoly; one firm; 100%; 100,000
Q4) Price discrimination leads to a _______ price in the market with a _______ demand.
A) higher; less elastic
B) higher; more elastic
C) higher; perfectly elastic
D) lower; less elastic
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Chapter 12: Wages and Employment in Perfect Competition
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Sample Questions
Q1) Markets in which households supply factors of production demanded by firms are:
A) goods markets.
B) factor markets.
C) product markets.
D) output markets.
Q2) Which of the following statements is true?
A) Marginal product is the change in total revenue divided by a one-unit change in a factor.
B) Marginal revenue is the change in total output divided by the change in output.
C) Marginal revenue product is marginal product times marginal revenue.
D) Marginal factor cost is equal to average total cost.
Q3) A leftward shift in the labor supply curve would result if:
A) people value leisure less highly.
B) people have less nonlabor income.
C) transit costs to and from work increase.
D) the population increases.
Q4) A change in nonwage income will shift the labor supply curve.
A)True
B)False
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Chapter 13: Interest Rates and the Markets for Capital and Natural Resources
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Sample Questions
Q1) The model of the market for capital assumes:
A) the interest rate is determined in the market for loanable funds.
B) that given the demand curve for capital, the interest rate then determines the quantity of capital firms demand.
C) the supply curve of loanable funds is likely to be upward sloping.
D) all of the above.
Q2) The demand curve for capital has a negative slope.
A)True
B)False
Q3) The interest rate is determined in the market for loanable funds.
A)True
B)False
Q4) Explain how changes in the interest rate affect the present value of a future payment.
Q5) The amount by which the current price of a resource exceeds the minimum price necessary to make the resource available is economic rent.
A)True
B)False
15
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Chapter 14: Imperfectly Competitive Markets for Factors of Production
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Sample Questions
Q1) In a monopsony labor market, a minimum wage will necessarily increase unemployment.
A)True
B)False
Q2) An industrial union, operating in an otherwise competitive labor market, that cannot either increase the demand for or decrease the supply of labor is likely to try to:
A) lower the wage, with the result that employment falls.
B) raise the wage, with the result that employment rises.
C) lower the wage, with the result that employment rises.
D) raise the wage, with the result that employment falls.
Q3) When buyers have a degree of market power, it is called:
A) monopoly power.
B) price discrimination.
C) differentiation power.
D) monopsony power.
Q4) A situation in which a monopoly seller faces a monopsony buyer is called bilateral monopoly.
A)True
B)False
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Chapter 15: Public Finance and Public Choice
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Sample Questions
Q1) The following statement is attributed to Justice Oliver Wendell Holmes: "Taxes are what we pay for a civilized society." Do you agree or disagree with his statement? Why or why not? What do you consider to be the most relevant considerations involved in evaluating this statement?
Q2) If the marginal benefit received from a good is greater than the marginal opportunity cost of production, then:
A) society's well-being can be improved if production decreases.
B) society's well-being cannot be improved by changing production.
C) the market is producing too much of the good.
D) the market is producing too little of the good.
Q3) Which of the following statements is true?
A) Government purchases fell dramatically during World War II.
B) Government purchases rose during the Korean War and did not drop very far back afterward.
C) Government purchases have remained at about 30 percent of GDP since the Korean War.
D) Government purchases have remained at about 40 percent of GDP since World War II.
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Chapter 16: Antitrust Policy and Business Regulation
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Sample Questions
Q1) A cost imposed on society by consumer protection laws is:
A) a decline in product availability.
B) the promotion of society's well-being.
C) the use of fewer resources in administration and enforcement.
D) a higher rate of technological advances.
Q2) Although the Justice Department once relied on the Herfindahl-Hirschman Index to evaluate mergers, it no longer does so.
A)True
B)False
Q3) The _______ Act blocked _______ mergers where a(n) _______ in competition could be shown.
A) Clayton; horizontal; change
B) Celler-Kefauver; vertical; reduction
C) FTC; all; increase
D) Robinson-Patman; vertical; reduction
Q4) Antitrust policy refers to government:
A) attempts to prevent the acquisition of monopoly power.
B) attempts to encourage the exercise of monopoly power.
C) encouragement of collusion in the marketplace.
D) attempts to limit private enterprise.
Page 18
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Chapter 17: International Trade
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Sample Questions
Q1) A policy aimed at promoting the development of specific industries within a country that may increase domestic welfare through trade with the rest of the world is known as a(n):
A) infant-industry policy.
B) key-industry policy.
C) strategic trade policy.
D) welfare-trade policy.
Q2) (Exhibit: Production Possibilities Schedule for Two Commodities) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated.Further assume that the only input is labor and that it remains fully employed.If there were unrestricted trade and specialization according to the law of comparative advantage:
A) the United States would export Y and Canada would export X.
B) the United States would export X and Canada would export Y.
C) the United States would export both X and Y.
D) the United States and Canada would each be self-sufficient in both X and Y.
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Chapter 18: The Economics of the Environment
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Sample Questions
Q1) Pollution is not a result of scarcity.
A)True
B)False
Q2) Marketable pollution permits work best with thousands of separate polluters because monitoring pollution emissions is not necessary.
A)True
B)False
Q3) Economists examine pollution from the perspective of the preferences of people.
A)True
B)False
Q4) If the marginal benefit received from pollution is equal to its marginal cost, then:
A) society's well-being can be improved if the quantity of pollution increases.
B) society's well-being can be improved if the quantity of pollution decreases.
C) society's well-being cannot be improved by changing the quantity of pollution.
D) the market is producing too much pollution.
Q5) Pollution implies scarcity.
A)True
B)False
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Chapter 19: Inequality, Poverty, and Discrimination
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Sample Questions
Q1) In 2015, approximately 5 percent of the families headed by married couple families in the United States fell below the poverty line.
A)True
B)False
Q2) Gary Becker concluded that discrimination occurs because of people's preferences or attitudes.
A)True
B)False
Q3) Recent proposals to reform welfare in the United States include work provisions and time limits on benefits.
A)True
B)False
Q4) In determining the poverty rate in the United States, only cash income is counted.
A)True
B)False
Q5) People with more education tend to experience lower poverty rates.
A)True B)False
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