Intermediate Microeconomics
Final Exam
Course Introduction
Intermediate Microeconomics builds on foundational economic principles to analyze the behavior of individuals and firms in various market settings. The course explores the theory of consumer choice, production and cost functions, market structure, and the allocation of resources through competitive and non-competitive markets. Key concepts such as utility maximization, profit maximization, market equilibrium, and the welfare implications of different market outcomes are examined in detail. Through graphical and mathematical models, students learn to apply economic reasoning to real-world issues, interpret policy implications, and deepen their understanding of how microeconomic forces shape everyday life.
Recommended Textbook Microeconomics 2nd Edition by Daron Acemoglu
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Chapter 1: The Principles and Practice of Economics
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Q1) Suppose that Jinelle,an engineer,has to choose between two jobs.Which of the following statements is true?
A) When deciding between jobs, she should consider both the wage and the non-wage attributes of each job.
B) When deciding between jobs, she should focus only on the costs of each job and ignore the benefits.
C) When deciding between jobs, she should only focus on the benefits of each job and ignore the costs.
D) When deciding between jobs, she should consider the wage attributes and ignore the non-wage attributes of each job.
Answer: A
Q2) Refer to the scenario above.If Maria's opportunity cost of time increases to $80 per hour,the cost of taking the train is ________.
A) $320
B) $720
C) $800
D) $970
Answer: B
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Chapter 2: Economic Methods and Economic Questions
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Q1) Which of the following statements is true about the mean of a series?
A) The mean is equal to zero when all the values are identical.
B) The mean is a commonly used technique for summarizing data.
C) The mean is less than all the individual observations in the data set.
D) The mean is calculated as the sum of all values multiplied by the number of values.
Answer: B
Q2) Which of the following statements is true about data?
A) Empiricism does not necessarily involve data.
B) Consistency of models can be checked using data.
C) Facts that describe the world are not considered data.
D) Convincing data analysis in economics relies on using a small sample.
Answer: B
Q3) Which of the following statements is true of models?
A) The predictions of a model are referred to as data.
B) A model is formulated after developing a hypothesis.
C) Models are always based on assumptions that are known to be true.
D) It is more important for a model to be simple and useful than to be precisely accurate.
Answer: D
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Chapter 3: Optimization: Doing the Best You Can
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Q1) Which of the following statements is true of marginal analysis?
A) Marginal analysis is a tool used in optimization using total value.
B) Marginal analysis compares the consequences of doing one more step of something.
C) Marginal analysis of alternatives will mostly give an outcome different from optimization using total value.
D) Marginal analysis involves the calculation of the total net benefits of all the available alternatives.
Answer: B
Q2) ________ is the incremental cost generated by moving from one feasible alternative to the next feasible alternative.
A) Total cost
B) Indirect cost
C) Marginal cost
D) Opportunity cost
Answer: C
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Chapter 4: Demand, supply, and Equilibrium
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Q1) Which of the following statements correctly describes a perfectly competitive market?
A) All participants in a perfectly competitive market are price-takers.
B) Haggling and bargaining is commonly observed in a perfectly competitive market.
C) In a perfectly competitive market, individual sellers and buyers can influence the market price.
D) Buyers in a perfectly competitive market pay different prices according to their individual demand.
Q2) In a perfectly competitive market,the market clearing price is ________ the equilibrium price.
A) always equal to B) unrelated to
C) always lower than
D) always higher than
Q3) The demand curve for most goods is normally ________.
A) upward sloping
B) downward sloping
C) parallel to the y-axis
D) parallel to the x-axis
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Chapter 5: Consumers and Incentives
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Q1) When the price of milk is $3 per bottle,Steve consumes 20 bottles of milk.When the price increases to $6,Steve's consumption falls to 15 bottles.Therefore,Steve's arc elasticity of demand for milk is ________.
A) 0.25
B) 0.43
C) 0.50
D) 0.75
Q2) What are the determinants of the price elasticity of demand?
Q3) The consumption bundle that maximizes a consumer's satisfaction given her income is located ________.
A) at the point of tangency of the consumer's demand curve and indifference curve.
B) at any point of intersection of the consumer's demand curve and indifference curves.
C) at the point of tangency of the consumer's budget constraint and indifference curve
D) at any point of intersection of the consumer's demand curve and indifference curves
Q4) Define a budget set.Is it the same as a budget constraint?
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Chapter 6: Sellers and Incentives
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Sample Questions
Q1) When the price of a good is $100,50 units are supplied.When the price increases to $300,250 units are supplied.Calculate the price elasticity of supply of the good.
Q2) If firms in a perfectly competitive market are realizing economic losses in the short run,________.
A) entry will occur, the market supply curve will shift out, and the market price will rise
B) entry will occur, the market supply curve will shift out, and the market price will fall
C) exit will occur, the market supply will shift in, and the market price will rise
D) exit will occur, the market supply will shift in, and the market price will fall
Q3) In the long run,a firm should exit from a market when ________.
A) price is less than average total cost
B) price is equal to average total cost
C) price is equal to marginal cost
D) price is more than marginal cost
Q4) Is it possible for an input to have a negative marginal product?
Q5) Differentiate between perfectly elastic supply and perfectly inelastic supply.
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Page 8
Chapter 7: Perfect Competition and the Invisible Hand
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Sample Questions
Q1) Refer to the figure above.What is the maximum possible social surplus?
A) $100
B) $150
C) $225
D) $375
Q2) Refer to the figure above.Suppose the price in this market is $5.At what level of output does the firm maximize its profits?
A) 0 units
B) 1,000 units
C) 300 units
D) 700 units
Q3) Refer to the scenario above.In the completed graph,what is the equilibrium price for Walter Payton rookie cards in this market? Explain your choice.
A) $120
B) $130
C) Either $140 or $150
D) $160
Q4) Is the invisible hand likely to work better in a market with price controls or without price controls? Explain your answer.
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Chapter 8: Trade
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Sample Questions
Q1) Refer to the figure above.What is the producer surplus after Lithasia opens up to free trade?
A) $2
B) $3
C) $6
D) $9
Q2) Refer to the figure above.If Barylia does not engage in international trade,what is the production of calculators in the country?
A) 10 units
B) 20 units
C) 40 units
D) 60 units
Q3) Even though points inside a production possibilities curve are attainable,why are they not preferred?
Q4) Points outside a production possibilities curve are ________.
A) feasible and maximize efficiency
B) not feasible because of resource constraints
C) feasible but not preferred, because they are inefficient
D) not feasible, because they do not utilize all of the available resources
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Chapter 9: Externalities and Public Goods
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Sample Questions
Q1) The local community of the town of Montesia decides to plant trees every month as part of its green initiative.Which of the following is true?
A) The marginal social cost of planting trees is lower than the marginal private cost of planting trees.
B) The marginal private benefit from planting trees is higher than the marginal social benefit of planting trees.
C) There is an external benefit from planting trees.
D) There is a deadweight loss in planting trees.
Q2) Refer to the scenario above.The socially optimal price for this good is ________,while the market price of it is equal to ________.
A) $14; $10
B) $20; $10
C) $20; $14
D) $14; $20
Q3) Cleanliness experts say that cleaning a house hygienically helps prevent the spread of germs in the area.What is the inefficiency created by not recognizing the linkage between cleaning the house and preventing the spread of germs? Explain with a suitable diagram.
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Chapter 10: The Government in the Economy: Taxation and Regulation
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Sample Questions
Q1) What are transfer payments? Give two examples.
Q2) When does the burden of a tax imposed on a good fall more heavily on consumers?
Q3) Refer to the table above.This is an example of a ________ tax system.
A) progressive
B) regressive
C) proportional
D) cardinal
Q4) Refer to scenario above.Suppose that,after the price ceiling is imposed,the seller serves customers on a first-come,first-served basis.This means that the seller's surplus depends on the order in which customers are served.What are the minimum and the maximum possible surpluses for the seller?
A) Minimum $0, maximum $12.00
B) Minimum $0.60, maximum $11.40
C) Minimum $1.80, maximum $11.00.
D) Minimum $2.75, maximum $9.25.
Q5) Citizens can safely conduct their economic activities when government ________.
A) plays no role in the economy
B) forcefully competes with other organizations for economic control
C) determines the allocation of society's resources
D) provides law and order and enforces property rights
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Chapter 11: Markets for Factors of Production
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Sample Questions
Q1) Refer to the scenario above.If the firm decides to employ two workers,how many robots should it use?
A) None
B) 1
C) 2
D) 3
Q2) Advances in statistical software are an example of ________ technological changes.
A) skill-biased
B) labor-saving
C) unskilled-biased
D) labor-complementary
Q3) The value of the marginal product of labor for a firm is the ________.
A) firm's product price multiplied by the marginal product of labor
B) wage facing the firm multiplied by the marginal product of labor
C) firm's average total cost multiplied by the marginal product of labor
D) firm's product price multiplied by its marginal revenue
Q4) What is the difference between labor-saving technology and labor-complementary technology?
Q5) What are the factors that affect the supply curve of labor?
Page 13
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Chapter 12: Monopoly
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Sample Questions
Q1) Refer to the figure above.This monopolist initially produced 6 units,and now has a new plan to produce 8 units of this good.The quantity effect of this plan on the revenue of the monopolist is ________.
A) $3
B) +$6
C) $1
D) +$7
Q2) Which of the following statements is true?
A) A monopolist faces an upward-sloping demand curve.
B) A perfectly competitive firm faces an upward-sloping demand curve.
C) A monopolist can increase the price of its product and not lose all of its business.
D) A perfectly competitive firm can increase the price of its product without losing its business.
Q3) Which of the following is true of a decrease in product prices?
A) The quantity effect always dominates the price effect.
B) The price effect always dominates the quantity effect.
C) When the quantity effect dominates the price effect, total revenue decreases.
D) When the price effect dominates the quantity effect, total revenue decreases.
Q4) What are the problems associated with price regulation?
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Chapter 13: Game Theory and Strategic Play
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Sample Questions
Q1) Refer to the scenario above.This game is ________.
A) a zero-sum game for both players
B) not a zero-sum game for either players
C) a zero-sum game for the kicker, but not for the goalie
D) a zero-sum game for the goalie, but not for the kicker
Q2) Refer to the scenario above.This is an example of ________.
A) a zero-sum game
B) an extensive-form game
C) the free-rider problem
D) the tragedy of commons
Q3) ________ helps an individual make economic decisions when the individual's behavior determines the payoffs to others.
A) Empiricism
B) Macroeconomics
C) Game theory
D) Public economics
Q4) What does the term "commitment" refer to in game theory?
Q5) Why do some people tip generously at restaurants to which they never plan to return?
Q6) What is backward induction?
Page 15
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Chapter 14: Oligopoly and Monopolistic Competition
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Sample Questions
Q1) ________ is a market structure with only two competing firms
A) A duopoly
B) Perfect competition
C) A monopoly
D) Monopolistic competition
Q2) The market for apples is an example of a(n)________.
A) perfectly competitive market
B) monopolistically competitive market
C) monopoly
D) oligopoly
Q3) Firms in an oligopoly often do not collude with one another because ________.
A) collusion lowers profit
B) collusion increases the cost of production
C) collusion is illegal
D) collusion increases competition
Q4) The quantity demanded for a duopolist's product is zero if ________.
A) it charges a lower price than its rival
B) it charges a higher price than its rival
C) it charges the same price as its rival
D) it can produce the product at a low cost
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Chapter 15: Trade-Offs Involving Time and Risk
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Sample Questions
Q1) Refer to the scenario above.What is the expected value of the gamble?
A) $0
B) $50
C) $75
D) $100
Q2) An investment option is profitable if its ________.
A) net present value is zero
B) net present value is positive
C) net present value is negative
D) present value is negative
Q3) Refer to the scenario above.What is the sum of the present values of the returns from this investment?
A) $12,887.64
B) $14,634.90
C) $19,524.69
D) $29,524.19
Q4) Why do preference reversals occur?
Q5) What are the different categories of risk preferences? Explain.
Q6) Define utility.What are individual units of utility called?
Q7) Define the discounted value of a future payment.
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Chapter 16: The Economics of Information
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Q1) Refer to the scenario above.Which of the following problems is likely to arise in the market for used cell phones in Barylia?
A) The tragedy of the commons
B) The paradox of thrift
C) Adverse selection
D) Moral hazard
Q2) Which of the following is an example of adverse selection?
A) Overgrazing of a common piece of land
B) A passenger traveling in a subway without a ticket
C) A customer buying a defective appliance from a used goods market
D) The generation of hazardous waste by the production of a good
Q3) A firm is likely to pay high efficiency wages when ________.
A) it is easy to monitor workers
B) it is not easy to monitor workers
C) there is excess supply of labor in the labor market
D) the minimum wages are set above the equilibrium wage rate
Q4) Distinguish between two kinds of asymmetric information.
Q5) Some health insurance companies pay only 70 percent to 80 percent of the medical costs incurred by their customers.What is the reason for this?
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Chapter 17: Auctions and Bargaining
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Sample Questions
Q1) Refer to the scenario above.Which of the following statements will hold true if the starting bid is $300?
A) Everyone except Bob will take part in the auction.
B) Everyone will take part in the auction.
C) Only Bob will take part in the auction.
D) Everyone except Joe will take part in the auction.
Q2) Which of the following is a difference between an English auction and a Dutch auction?
A) Bids are placed publicly in an English auction, while bids are placed privately in a Dutch auction.
B) The bidder who values the good the most wins in an English auction, while the bidder who values the good the least wins in a Dutch auction.
C) An English auction is an ascending price auction, while a Dutch auction is a descending price auction.
D) An English auction is a descending price auction, while a Dutch auction is an ascending price auction.
Q3) Who has a higher bargaining power if the demand for the good being transacted is price elastic?
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Chapter 18: Social Economics
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Sample Questions
Q1) You are participating in a reality show in which you and several other competitors have been taken to an unknown place and asked to make your way to a destination using a map.You were doing a good job until you reached a crossroad.Confused as to which way to take,you decided to take the road that most of your competitors chose.
a)What is the term that is used to refer to such behavior?
b)Why do people often behave in this way?
Q2) Refer to the scenario above.This is similar to ________.
A) a tit-for-tat game
B) a trust game
C) a zero-sum game
D) the prisoners' dilemma
Q3) Refer to the scenario above.What will be the outcome of this game?
A) Both players will choose black.
B) Both players will choose white.
C) Arthur will choose white, and Catherine will choose black.
D) Catherine will choose white, and Arthur will choose black.
Q4) Differentiate between the two types of altruism.
Q5) Under what circumstances will the equilibrium in a trust game be efficient?
Q6) Why do people donate less when it is costlier to give?
Page 20
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