Intermediate Microeconomics
Mock Exam
Course Introduction
Intermediate Microeconomics builds upon foundational economic principles to provide a deeper understanding of how individuals and firms make decisions in various market environments. This course covers topics such as consumer and producer behavior, market structures (including perfect competition, monopoly, and oligopoly), game theory, general equilibrium, and market failures. Through analytical tools and graphical analysis, students will explore how prices are determined, how resources are allocated, and the implications of different market outcomes. The course emphasizes critical thinking and problem-solving skills, preparing students for advanced study in economics and related fields.
Recommended Textbook
Microeconomics Student Value 4th Edition by
R. Glenn Hubbard
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18 Chapters
2548 Verified Questions
2548 Flashcards
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Chapter 1: Economics: Foundations and Models
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Sample Questions
Q1) In the first six months of 2003,branches of Commerce Bank in New York City were robbed 14 times.The New York City Police recommended steps the bank could take to deter robberies,including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice.According to a deputy commissioner of police,"Commerce does very little of what we recommend.They've told our detectives they have no interest in ever putting in the barriers." It would seem that Commerce bank would have a strong incentive to install "bandit barriers" to deter robberies.Why wouldn't they do it?
A)The banks would rather delay installation of any theft deterring equipment in anticipation of new lower cost innovations in the security devices market.
B)The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers."
C)The banks are concerned that "bandit barriers" would send the wrong message to customers -- that the bank is unsafe.
D)The banks probably resent any interference from the police department.
Answer: B
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Chapter
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Sample Questions
Q1) Refer to Figure 2-11.Which two arrows in the diagram depict the following transaction: Carter earns a $400 commission for selling men's designer shoes at Brooks Brothers.
A)J and M
B)K and G
C)K and M
D)J and G
Answer: A
Q2) Refer to Figure 2-10.One segment of the circular flow diagram in the Figure shows the flow of funds from market F to economic agents G.The funds represent spending on goods and services.What is market F and who are economic agents G?
A)F = factor markets; G = households
B)F = product markets; G = households
C)F = factor markets; G = firms
D)F = product markets; G = firms
Answer: D
Q3) List the four broad categories of factors of production.
Answer: labor,capital,natural resources,and entrepreneurship
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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Sample Questions
Q1) Market equilibrium occurs where the quantity supplied is equal to the quantity demanded.
A)True
B)False
Answer: True
Q2) If,in response to a decrease in the price of coffee,the quantity demanded of coffee increases,economists would describe this as
A)an increase in demand.
B)an increase in quantity demanded.
C)a change in consumer income.
D)an increase in consumers' taste for coffee.
Answer: B
Q3) If in the market for bananas the supply curve has shifted to the right,then
A)the supply of bananas increased.
B)the quantity of bananas supplied has increased.
C)the supply of bananas has decreases.
D)the quantity of bananas supplied has decreased.
Answer: A
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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Sample Questions
Q1) Refer to Figure 4-6.What is the value of the deadweight loss after the imposition of the price floor?
A)$600
B)$1,800
C)$2,700
D)$3,300
Q2) Because minimum wage is a price floor
A)it will be set below the market equilibrium price.
B)it will create a deadweight loss.
C)it will increase the number of jobs available in the labor market.
D)it will maximize consumer surplus.
Q3) Refer to Table 4-5.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units.What is the value of economic surplus in this market?
A)$600 thousand
B)$1,050 thousand
C)$1,500 thousand
D)$2,100 thousand
Q4) What is deadweight loss? When is deadweight loss equal to zero?
Page 6
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Chapter 5: Externalities, environmental Policy, and Public Goods
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Sample Questions
Q1) Refer to Figure 5-3.What does D<sub>2</sub> represent?
A)the social welfare curve
B)the demand curve reflecting social benefit
C)the demand curve reflecting private benefit
D)the positive externalities curve
Q2) Refer to Figure 5-5.S<sub>1</sub> represents the supply curve that reflects the private cost of production and S<sub>2</sub> represents the supply curve that reflects the social cost of production.One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity.What is the size of the Pigovian tax that will internalize the cost of the externality?
A)P<sub>0</sub>
B)P<sub>2</sub>-P<sub>0</sub>
C)P<sub>1</sub>-P<sub>0</sub>
D)P<sub>2</sub>-P<sub>1</sub>
Q3) Which of the following could be evidence of a market failure?
A)Resources in an economy are not fully utilized.
B)The market price of a product is above the average cost of production.
C)There are only a handful of firms competing against each other in an industry.
D)Market prices do not reflect true production costs.
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) The price elasticity of demand is equal to
A)the value of the slope of the demand curve.
B)the change in quantity demanded divided by the change in price.
C)the percentage change in price divided by the percentage change in quantity demanded.
D)the percentage change in quantity demanded divided by the percentage change in price.
Q2) When the price of pistachio nuts is $7.50 per lb.the quantity demanded is 48 lbs.When the price of peaches is $9.00 per lb.the quantity demanded is 40 lbs.When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is
A)relatively,but not perfectly,elastic.
B)unit-elastic.
C)completely inelastic.
D)relatively,but not perfectly,inelastic.
Q3) If the slope of a demand curve is equal to -0.1 then A)demand is inelastic.
B)we don't know whether the demand is elastic or inelastic.
C)the demand is elastic at low prices and inelastic at high prices.
D)as price increases by 10 percent quantity demanded decreases by 1 percent.
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Chapter 7: The Economics of Health Care
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Sample Questions
Q1) Compared to the United States,health care spending per person in other high-income countries has been
A)growing at a slower rate.
B)growing at a faster rate.
C)growing at approximately the same rate.
D)declining at approximately the same rate.
Q2) Economists refer to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off as A)bad faith.
B)economic inefficiency.
C)moral hazard.
D)market failure.
Q3) Under the Patient Protection and Affordable Care Act (PPACA),every company with more than 200 employees must offer health insurance to its employees and must automatically enroll them in the plan.
A)True
B)False
Q4) Explain why is it difficult for people who are seriously ill to buy health insurance.
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Chapter
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Sample Questions
Q1) Which of the following is an advantage of starting a new business as a corporation?
A)double taxation
B)ease in setting up
C)low expenses of legally organizing
D)greater ability to raise funds
Q2) Economists refer to the conflict between the interests of shareholders and the interests of top management as
A)a stock-equity problem.
B)a liability problem.
C)a principal-agent problem.
D)a financial intermediary problem.
Q3) What is economic profit?
A)gross revenue minus explicit costs
B)gross revenue minus implicit costs
C)gross revenue minus explicit and implicit costs
D)the same as accounting profit
Q4) Define a sole proprietorship.
Q5) What is corporate governance?
Q6) Who decides who controls a corporation?
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Chapter 9: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) In the 1930s the United States charged an average tariff rate
A)that was less than its average tariff rate in 2007.
B)that cut its exports to other countries by 50 percent.
C)that was less than 2 percent.
D)that exceeded 50 percent.
Q2) Refer to Table 9-2.
a.Which country has an absolute advantage in the production of light bulbs and flash drives?
b.Which country has a comparative advantage in the production of light bulbs?
c.Which country has a comparative advantage in the production of flash drives?
Q3) In the past two decades the United States lost its comparative advantage in automobiles to Japan.What factor was most responsible for the development of Japan's comparative advantage in automobiles?
A)Japanese firms excelled in process technology.
B)Japan has abundant supplies of labor.
C)Japanese firms benefited from external economies.
D)Japan has abundant supplies of natural resources needed to produce automobiles.
Q4) What are three primary reasons for the growth of international trade over the past 50 years?
Page 11
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Chapter 10: Consumer Choice and Behavioral Economics
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Sample Questions
Q1) ________ is an experiment that tests the significance of fairness in consumer decision making.
A)The fairness challenge
B)The consumer choice paradigm
C)The ultimatum game
D)The Giffen paradox
Q2) The additional utility that George receives from consuming one more slice of pizza is called
A)average utility.
B)marginal utility.
C)total utility.
D)diminishing utility.
Q3) Goods with upward sloping demand curves are referred to as
A)Marshall goods.
B)Giffen goods.
C)substitute goods.
D)luxury goods.
Q4) All consumption bundles along a given indifference curve are equally desirable. A)True
B)False
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Chapter 11: Technology, production, and Costs
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Q1) A firm's expansion path
A)is the same thing as its long-run average cost curve.
B)is a curve that shows a firm's cost-minimizing combination of inputs for every level of output,holding input prices constant.
C)shows the targeted growth rate in sales over the long run.
D)is a curve that shows expected profits at various price levels.
Q2) In the long run which of the following is true?
A)Total cost = fixed cost + variable cost.
B)The size of a firm's physical plant can be changed but the firm cannot adopt new technology.
C)There are no fixed costs.
D)The firm can vary its explicit costs but not its implicit costs.
Q3) Which of the following are implicit costs for a typical firm?
A)the cost of labor
B)the opportunity cost of capital owned and used by the firm
C)the cost of energy used in production
D)a business licensing fee
Q4) Use a long-run average cost curve graph to illustrate how diseconomies of scale would not make it beneficial for two companies to go through with a merger.
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Chapter 12: Firms in Perfectly Competitive Markets
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Q1) In a perfectly competitive industry,in the long-run equilibrium
A)the typical firm is producing at the output where its long-run average total cost is not minimized.
B)the typical firm is earning an accounting profit greater than its implicit costs.
C)the typical firm earns zero profit.
D)the typical firm is maximizing its revenue.
Q2) Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.
A)True
B)False
Q3) Refer to Figure 12-7.The graphs depicts a short run equilibrium.How will this differ from the long-run equilibrium? (Assume this is a constant-cost industry.)
A)Fewer firms will be in the market in the long run than in the short run.
B)The price will be higher in the long run than in the short run.
C)The market supply curve will be further to the left in the long run than in the short run.
D)The firm's profit will be lower in the long run than in the short run.
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Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
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Q1) What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?
Q2) Refer to Figure 13-4.What is the profit-maximizing output level?
A)22 cases
B)24 cases
C)30 cases
D)38 cases
Q3) If a perfectly competitive firm maximizes short-run profits,its marginal revenue will be positive and less than its price.
A)True
B)False
Q4) Refer to Figure 13-7.What is the output price?
A)P<sub>4</sub>
B)P<sub>3</sub>
C)P<sub>2</sub>
D)P<sub>1</sub>
Q5) What is meant by "excess capacity"? How does it relate to consumer utility?
Q6) Why are many companies concerned about brand management?
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) Which of the following is not a characteristic of oligopoly?
A)the ability to influence price
B)a small number of firms
C)low barriers to entry
D)interdependent firms
Q2) The four-firm concentration ratio in the breakfast cereal industry is 78 percent.How does the five competitive forces model provide better insight into the degree of competition in the breakfast cereal industry than just observing the concentration ratio?
Q3) Collusion makes firms better off because if they act as a single entity (a cartel)they can reduce output and increase their prices and profits.But some cartels have failed and others are unstable.Which of the following is a reason why cartels often break down?
A)Most cartels do not have a dominant strategy.
B)When a cartel is profitable the amount of competition it faces increases.
C)Members of a cartel may resent having to share their profits equally.
D)Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.
Q4) Firms in an oligopoly are said to be interdependent.What does this mean?
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Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) The government estimated that by allowing the merger between AT&T and T-Mobile to go through,the Herfindahl Hirschman Index for the national market would increase by nearly 700 points to about 3,100.According to the merger standards of the Department of Justice and the FTC,a Herfindahl Hirschman index of 3,100 indicates that the market is ________ concentrated,and the increase of nearly 700 points indicates that the merger ________ be challenged.
A)moderately; may B)moderately; will C)highly; may D)highly; will likely
Q2) The 10-year protection period from generic competition for drug manufacturers is a form of
A)copyright.
B)trademark. C)hallmark.
D)patent.
Q3) A monopolist's demand curve is the same as the marginal revenue curve for the product.
A)True
B)False
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) In the 1950s,Walt Disney began to plan the development of a theme park that would eventually become Disneyland.Disney hired an economist to help determine whether the park would be a financial success.This economist surveyed managers of existing amusement parks for advice.Many of these managers
A)believed that a theme park would be very successful because the Disney name created a market among children and parents who had watched Disney cartoons and movies such as Snow White.
B)recommended that the theme park be located in California because population in the state would increase greatly in the future.Disney followed this advice.
C)recommended that Disney not build the park and leave the amusement park business to those who knew what they were doing.
D)recommended that Disney first build an audience for his park by offering the ABC television network a weekly program that would feature Disney movies,cartoons and original programming.Walt Disney followed this advice.Both the television program and Disneyland were financial successes.
Q2) What is yield management? How is yield management being used in the airline industry?
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Chapter 17: The Markets for Labor and Other Factors of Production
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Q1) Francis Crawford recently received a 20 percent wage increase and desires to work less.We can conclude that at his current wage his supply of labor curve
A)has a positive slope.
B)has a negative slope.
C)is U-shaped.
D)is vertical.
Q2) If the labor demand curve shifts to the left and the labor supply curve remains unchanged,what will happen to the equilibrium wage and the equilibrium level of employment? Illustrate your answer with a graph.
Q3) The term "derived demand" refers to
A)the demand for financial products called derivatives.
B)the demand for a factor of production that is derived from the demand for the good the factor produces.
C)a firm's estimated demand curve derived from sales data.
D)a demand curve that derives from the availability of resources.
Q4) Economic rent refers to the price of a factor of production which is fixed in supply.
A)True B)False
Page 19
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Chapter 18: Public Choice, taxes, and the Distribution of Income
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Sample Questions
Q1) Income inequality increases as the Gini coefficient approaches 1.
A)True
B)False
Q2) The Arrow impossibility theorem
A)explains why people can be rational as well as ignorant at the same time.
B)explains why voting systems do not consistently represent the preferences of voters.
C)explains why candidates for public office must represent the preferences of the political middle.
D)explains why it is impossible,in most cases,to eliminate special-interest legislation after it has become law.
Q3) The federal government defines the poverty line as
A)a level of annual income equal to the amount necessary to purchase the minimal quantity of food required for adequate nutrition.
B)a level of annual income equal to three times the amount of money necessary to purchase the minimal quantity of food required for adequate nutrition.
C)the average income level of welfare recipients.
D)an annual income of $11,800 for a family of four in 2011.
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