Intermediate Microeconomics
Final Exam
Course Introduction
Intermediate Microeconomics focuses on the theoretical foundations of consumer and producer behavior in various market environments. Building on introductory economics concepts, the course delves into utility maximization, cost minimization, market structures, pricing strategies, and the role of government intervention. Students analyze how individuals and firms make decisions under constraints, explore the efficiency and welfare implications of different market outcomes, and apply mathematical tools to model economic scenarios. The course equips students with analytical skills essential for understanding and evaluating real-world economic issues and for further study in economics.
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) Suppose when the price of laptops falls,university students buy more laptops.This implies that
A)there is a positive relationship between laptop prices and quantities purchased by university students.
B)there is a negative relationship between laptop prices and quantities purchased by university students.
C)there is a direct relationship between laptop prices and quantities purchased by university students.
D)there is a one-to-one relationship between laptop prices and quantities purchased by university students.
Answer: B
Q2) Which of the following statements is false?
A)An inverse relationship has a negative slope value.
B)A direct relationship has a positive slope value.
C)A curved line has slope values that change at every point.
D)A straight line has a slope of zero.
Answer: D
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Chapter 2: Choices and Trade-Offs in the Market
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Sample Questions
Q1) The payment received by suppliers of entrepreneurial skills is called wages.
A)True
B)False
Answer: False
Q2) Refer to Figure 2-1.Point B is
A)technically efficient.
B)unattainable with current resources.
C)inefficient in that not all resources are being used.
D)the equilibrium output combination.
Answer: A
Q3) Refer to Figure 2-7.Which country has a comparative advantage in the production of cotton?
A)Indonesia
B)They have equal productive abilities.
C)Pakistan
D)neither country
Answer: A
Q4) What is economic growth?
Answer: Economic growth refers to the ability of the economy to increase the production of goods and services.
Page 4
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) Refer to Figure 3-7.Assume that the graphs in this figure represent the demand and supply curves for women's clothing.Which panel best describes what happens in this market when the wages of seamstresses rise?
A)Panel (a)
B)Panel (b)
C)Panel (c)
D)Panel (d)
Answer: B
Q2) Which of the following will shift the demand curve for a good?
A)a change in the technology used to produce the good
B)an increase in the price of the good
C)a decrease in the price of a complementary good
D)a decrease in the price of the good
Answer: C
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) With the increased usage of mobile services,what has happened to the price elasticity of demand for land-line telephone services?
A)It has become more price inelastic.
B)It has become more price elastic.
C)It has become more income elastic.
D)The absolute value of the price elasticity coefficient has probably gone down.
Q2) List the five key determinants of price elasticity of demand and explain how each determinant indicates if demand tends to be elastic or inelastic.
Q3) Suppose the demand curve for hybrid cars shifts to the right.This will cause a relatively small increase in the price of hybrid cars if
A)demand is elastic and supply is inelastic.
B)demand is inelastic and supply is elastic.
C)both demand and supply are inelastic.
D)both demand and supply are elastic.
Q4) If,when price changes by 35 per cent,the quantity demanded changes by 7 per cent,then the absolute value of the price elasticity of demand is 5.
A)True
B)False
Page 6
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Chapter 5: Economic Efficiency, Government Price Setting and Taxes
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Sample Questions
Q1) If the quantity of fishing poles demanded is represented by the equation Q<sub>D</sub> = 60 - P,then the corresponding price of fishing poles is represented by the equation
A)P = 0.6Q<sub>D</sub> + 10.
B)P = 60 - Q<sub>D</sub>.
C)P = -60 + Q<sub>D</sub>.
D)P = Q<sub>D</sub> + 60.
Q2) Refer to Figure 5-1.Arnold's marginal benefit from consuming the fourth burrito is A)$0.
B)$1.00.
C)$2.50.
D)$3.00.
Q3) If,in a competitive market,marginal benefit is less than marginal cost,
A)the net benefit to consumers from participating in the market is less than the net benefit to producers.
B)the government must force producers to raise prices in order to achieve economic efficiency.
C)the quantity sold is greater than the equilibrium quantity. D)the quantity sold is less than the equilibrium quantity.
Page 7
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Chapter 6: Consumer Choice and Behavioural Economics
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Sample Questions
Q1) The economic model of consumer behaviour predicts that A)consumers will try to earn as much income as they can over their lifetimes. B)consumers will choose to buy the combination of goods and services that make them as well off as possible from those combinations that their budgets allow them to buy. C)consumers will try to accumulate as many goods and services as they can before they die.
D)consumers will divide their time between consumption and leisure activities in order to maximise social welfare.
Q2) Refer to Figure 6-5.Suppose the price of Pilates sessions rises to $30 while income and the price of Yoga sessions remain unchanged.The substitution effect of this price change is represented by the movement from
A)A to B.
B)A to C.
C)A to D.
D)D to B.
Q3) A sunk cost is a cost that has already been paid and cannot be recovered.
A)True
B)False
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Chapter 7: Technology, Production and Costs
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300 Flashcards
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Sample Questions
Q1) If the marginal cost curve is below the average variable cost curve,then
A)average variable cost is increasing.
B)average variable cost is decreasing.
C)marginal cost must be decreasing.
D)average variable cost could either be increasing or decreasing.
Q2) If average total cost is falling,marginal cost must also be falling.
A)True
B)False
Q3) An isoquant shows
A)the combinations of two goods that yield the same total satisfaction.
B)the combinations of two inputs that yield the same total product.
C)the combinations of two inputs that cost the same total quantity of money.
D)the combination of two goods that cost the same amount of money.
Q4) If a firm decreases its plant size and finds that its long-run average costs have decreased,then
A)its labour is more productive in a smaller plant.
B)its diseconomies of scale are less.
C)the firm should reduce its plant size even more.
D)the firm is now profitable.
Q5) What are economies of scale? What are diseconomies of scale?
Page 9
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Chapter 8: Firms in Perfectly Competitive Markets
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Sample Questions
Q1) At the profit-maximising level of output for a perfectly competitive firm,
A)price equals marginal cost.
B)average revenue equals average variable cost,and price equals marginal cost.
C)marginal revenue equals marginal cost,and average total cost equals average fixed cost.
D)price equals average revenue,and marginal cost equals average variable cost.
Q2) A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?
A)The number of firms and the industry's output increase.
B)The number of firms and the industry's output decrease.
C)The number of firms remains constant and the industry's output increases.
D)The number of firms remains constant and the industry's output decreases.
Q3) Refer to Figure 8-2.The firm breaks even at an output level of
A)Q<sub>1</sub><sub> </sub>units.
B)Q<sub>2</sub><sub> </sub>units.
C)Q<sub>3</sub><sub> </sub>units.
D)Q<sub>4</sub><sub> </sub>units.
Q4) Under what conditions should a competitive firm shut down in the short run?
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Chapter 9: Monopoly Markets
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Sample Questions
Q1) How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.
Q2) Refer to Table 9-2.What is the profit-maximising quantity and price for the monopolist?
A)Quantity = 8 cases,Price = $9
B)Quantity = 7 cases,Price = $10
C)Quantity = 9 cases,Price = $8
D)Quantity = 10 cases,Price = $7
Q3) Which of the following is not a requirement for a successful price discrimination strategy?
A)A firm must have the ability to charge a price greater than marginal cost.
B)Some consumers must have a greater willingness to pay for the product than other consumers,and the firm must be able to know what prices consumers are willing to pay.
C)The firm must be able to prevent arbitrage.
D)Transactions costs must be the same for all consumers.
Q4) Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus,producer surplus,and deadweight loss?
Q5) What happens to a monopoly's revenue when it sells more units of its product?
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Chapter 10: Monopolistic Competition
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Sample Questions
Q1) Refer to Figure 10-12.What is the monopolistic competitor's profit-maximising output?
A)Q<sub>1</sub> units
B)Q<sub>2</sub> units
C)Q<sub>3</sub> units
D)Q<sub>4</sub> units
Q2) Refer to Figure 10-12.What is the allocatively efficient output for the firm represented in the diagram?
A)Q<sub>1</sub> units
B)Q<sub>2</sub> units
C)Q<sub>3</sub> units
D)Q<sub>4</sub> units
Q3) A monopolistically competitive industry that earns economic profits in the short run will
A)continue to earn economic profits in the long run.
B)experience the entry of new rival firms into the industry in the long run.
C)experience the exit of existing firms out of the industry in the long run.
D)experience a rise in demand in the long run.
Q4) What are the key factors that determine the profitability of a firm in a monopolistically competitive market?
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Chapter 11: Oligopoly: Firms in Less Competitive Markets
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186 Flashcards
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Sample Questions
Q1) Producing a homogeneous product occurs in which of the following industries?
A)oligopoly,monopolistic competition and perfect competition
B)perfect competition only
C)oligopoly and perfect competition
D)monopolistic competition and perfect competition
Q2) All of the following are examples of oligopolistic markets except
A)the broadcasting industry
B)aircraft manufacture
C)university bookstores
D)seafood restaurant chains
Q3) Which of the following is an example of a way in which a firm in oligopoly can escape the prisoner's dilemma?
A)producing more of its product
B)advertising that it will match its rival's price
C)reneging on a previous tacit agreement with rival firms to charge identical high prices
D)ignoring the pricing decisions of the other firms
Q4) A prisoner's dilemma leads to a noncooperative equilibrium.
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) A firm might prefer a commission system of compensation when the nature of the work is repetitive and monotonous and can be performed by an individual.
A)True
B)False
Q2) One reason why firms would choose a salary system rather than a commission compensation system is that their employees might become less concerned about the quality of their work.
A)True
B)False
Q3) Why do professional basketball players earn more than police officers? Illustrate this situation graphically.
Q4) Let MP = marginal product,P = output price,and W = wage,then the equation that represents the condition where a competitive firm would hire another worker is
A)P × MP = W.
B)P × MP < W.
C)P × MP > W.
D)P × W > MP.
Q5) What is a monopsony?
14
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Chapter 13: International Trade
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Sample Questions
Q1) Countries that engage in trade will tend to specialise in the production of goods and services in which they have ________ and will ________ these goods and services.
A)a comparative advantage;import
B)an absolute advantage;export
C)a comparative advantage;export
D)an absolute advantage;import
Q2) Which of the following is not a source of comparative advantage?
A)relative abundance of labour and capital
B)technology
C)climate and natural resources
D)a strong foreign currency exchange rate
Q3) The process of countries becoming more open to foreign trade and investment is known as outsourcing.
A)True
B)False
Q4) The simple trade model demonstrates that countries can expand consumption by specialising in the production of goods and services in which they have a comparative advantage.In reality we do not see complete specialisation in production.State three reasons why this is case.
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Chapter 14: Government Intervention in the Market
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122 Flashcards
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Sample Questions
Q1) The market demand for a public good can be determined by
A)adding up the total private benefits and external benefits that each quantity provides the citizens of a country.
B)adding up how much each citizen expects to consume at each possible price.
C)adding up how much each consumer is willing to pay for each unit of the public good.
D)estimating the value of the benefit that each unit provides and multiplying that by the number of consumers.
Q2) Economists often analyse the interaction of individuals and firms in markets.Economists also examine the actions of individuals and firms as they attempt to use government to make themselves better off at the expense of others,a process that is referred to as
A)rent seeking.
B)logrolling.
C)government failure.
D)the public choice initiative.
Q3) Why might a young,healthy person choose not to buy health insurance?
Q4) Will equilibrium in a market always result in an outcome that is economically efficient? Explain.
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Page 16
Chapter 15: Externalities, Environmental Policy and Public Goods
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Sample Questions
Q1) When there is an externality in a market,
A)the externality will move the market to an economically efficient equilibrium.
B)the externality will cause the market price to be less than or greater than the equilibrium price.
C)the government should use price controls to enable the market to reach equilibrium.
D)government intervention may increase economic efficiency.
Q2) The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.
A)True
B)False
Q3) If the social benefit of consuming a good or a service exceeds the private benefit, A)a negative externality exists.
B)the market achieves economic efficiency.
C)a positive externality exists.
D)the sum of consumer surplus and producer surplus is maximised.
Q4) How does a negative externality in production reduce economic efficiency?
Q5) What is an externality?
Q6) State the Coase theorem.
Page 17
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Chapter 16: The Distribution of Income and Social Policy
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Sample Questions
Q1) The federal corporate income tax is
A)regressive.
B)proportional.
C)progressive.
D)unfair.
Q2) As the value of the Gini coefficient approaches zero,
A)income distribution becomes less unequal.
B)income distribution becomes more unequal.
C)the percentage of the population under the poverty line increases.
D)the percentage of the population under the poverty line decreases.
Q3) What is meant by 'tax incidence'?
Q4) When the demand for a product is less elastic than the supply,
A)consumers pay the majority of the tax on the product.
B)firms pay the majority of the tax on the product.
C)firms pay the entire tax on the product.
D)consumers pay the entire tax on the product.
Q5) If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.
A)True
B)False
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