Intermediate Microeconomics
Test Bank
Course Introduction
Intermediate Microeconomics builds upon foundational economic principles to analyze the behavior of individual consumers and firms in various market structures. The course explores demand and supply, elasticity, consumer choice, production and cost theories, competitive and non-competitive markets, and welfare economics. Students will learn to apply analytical tools and mathematical models to real-world economic scenarios, deepening their understanding of how markets function and how economic agents make decisions. This course also introduces game theory and examines the impact of government intervention on market outcomes.
Recommended Textbook Microeconomics 5th Edition by Glenn Hubbard
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18 Chapters
4688 Verified Questions
4688 Flashcards
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Page 2
Chapter 1: Economics: Foundations and Models
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233 Verified Questions
233 Flashcards
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Sample Questions
Q1) Refer to Figure 1-2.Calculate the area of the triangle A.
A) $1.3 million
B) $2.6 million
C) $3.4 million
D) $5.2 million
Answer: B
Q2) Economic models do all of the following except
A) answer economic questions.
B) portray reality in all its minute details.
C) make economic ideas explicit and concrete for use by decision makers.
D) simplify some aspect of economic life.
Answer: B
Q3) Which of the following generates productive efficiency?
A) competition among sellers
B) competition among buyers
C) government inspectors
D) government production rules and regulations
Answer: A
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Chapter 2: Trade-Offs, comparative Advantage, and the Market System
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259 Verified Questions
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Sample Questions
Q1) Refer to Table 2-6.Which of the following statements is true?
A) Haley has a comparative advantage in making both products.
B) Serena has a comparative advantage in making both products.
C) Haley has a comparative advantage in making bracelets and Serena in making necklaces.
D) Haley has a comparative advantage in making necklaces and Serena in making bracelets.
Answer: C
Q2) Suppose your expenses for this term are as follows: tuition: $28,000,room and board: $9,000,books and other educational supplies: $2,500.Further,during the term,you can only work part-time and earn $16,000 instead of your full-time salary of $42,000.What is the opportunity cost of going to college this term,assuming that your room and board expenses would be the same even if you did not go to college?
A) $36,500
B) $56,500
C) $65,500
D) $72,500
Answer: B
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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242 Verified Questions
242 Flashcards
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Sample Questions
Q1) Refer to Table 3-2.The table above shows the demand schedules for caviar of two individuals (Ari and Sonia)and the rest of the market.At a price of $55,the quantity demanded in the market would be
A) 42 oz.
B) 136 oz.
C) 178 oz.
D) 233 oz.
Answer: C
Q2) In the United States,consumption per-person of carbonated soft drinks ________ between 2005 and 2013.
A) declined by more than 15 percent
B) increased by approximately 22 percent
C) fell by almost 80 percent
D) remained virtually unchanged
Answer: A
Q3) An increase in the price of inputs will cause the supply curve for a product to shift to the right.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Economic Efficiency, government Price Setting, and Taxes
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208 Flashcards
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Sample Questions
Q1) Refer to Figure 4-1.If the market price is $2.00,what is Arnold's consumer surplus?
A) $0.50
B) $1.00
C) $1.50
D) $3.00
Q2) What do economists mean by an efficient tax?
Q3) Refer to Figure 4-3.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.
Q4) Black markets only exist in developing nations.
A)True
B)False
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6
Chapter 5: Externalities, environmental Policy, and Public Goods
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267 Verified Questions
267 Flashcards
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Sample Questions
Q1) Refer to Figure 5-3.The private profit maximizing output level is
A) Q<sub>m</sub>.
B) Q<sub>n</sub>.
C) Q<sub>o</sub>.
D) Q<sub>o</sub><sub> </sub>- Q<sub>m</sub>.
Q2) Refer to the Article Summary.People who do not use public transportation can still benefit from it,as is shown by the higher home values.As a result,the marginal social benefit from public transportation is ________ the marginal private benefit to those who use public transportation.
A) equal to
B) greater than C) less than
D) unrelated to
Q3) Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.
Q4) One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.
A)True
B)False
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Chapter 6: Elasticity: The Responsiveness of Demand and Supply
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Sample Questions
Q1) There are a limited number of original Picasso paintings.This means that the supply of original Picasso paintings is perfectly inelastic.
A)True
B)False
Q2) Ali's Gyros operates near a college campus.Ali has been selling 120 gyros a day at $4.50 each and is considering a price cut.He estimates that he would be able to sell 200 gyros per day at $3.50 each.
a.Calculate the price elasticity of demand using the midpoint formula.
b.Calculate the change in revenue as a result of the price cut.
Q3) If the price elasticity of demand is unit-elastic,a 10 percent increase in price will result in a 10 percent increase in revenue.
A)True
B)False
Q4) If a good has a negative income elasticity of demand,this indicates that the good is A) a substitute with another good.
B) a complement with another good.
C) inferior.
D) normal.
Page 8
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Chapter 7: The Economics of Health Care
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169 Flashcards
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Sample Questions
Q1) What is the principal-agent problem?
A) It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way.
B) It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.
C) It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat.
D) It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task.
Q2) Of the following high-income countries,which has the lowest number of MRI units per 1 million population?
A) Canada
B) Japan
C) the United Kingdom
D) the United States
Q3) Why might a young,healthy person choose not to buy health insurance?
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Page 9
Chapter 8: Firms, the Stock Market, and Corporate Governance
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278 Verified Questions
278 Flashcards
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Sample Questions
Q1) As a form of business,a partnership
A) has limited liability.
B) has only one owner.
C) cannot issue stock.
D) has the most government rules and regulations affecting it.
Q2) When a business is set up as a sole proprietorship,the owner of the business faces limited liability.
A)True
B)False
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) On a balance sheet,short-term debts such as accounts payable are listed as
A) current assets.
B) current liabilities.
C) stockholder's equity.
D) goodwill.
Q5) Define a partnership.
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Chapter 9: Comparative Advantage and the Gains From International Trade
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189 Verified Questions
189 Flashcards
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Sample Questions
Q1) As a result of the tariff on Chinese tires,U.S.consumers are estimated to have spent ________ on imported tires and ________ on U.S.-produced tires.
A) more; more
B) more; less
C) less; more
D) less; less
Q2) Which of the following is not an example of a trade restriction?
A) tariffs
B) quotas and voluntary export restraints
C) legislation requiring that cars sold in a country have a 50 percent domestic content
D) consumer preferences for goods produced domestically
Q3) Refer to Table 9-1.Select the statement that accurately interprets the data in the table.
A) Sandy has a comparative advantage in dog grooming.
B) Linda has a comparative advantage in dog grooming.
C) Linda has a comparative advantage in dog grooming and dog bathing.
D) Sandy has a comparative advantage in dog bathing.
Q4) What is the difference between imports and exports?
Page 11
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Chapter 10: Consumer Choice and Behavioral Economics
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302 Verified Questions
302 Flashcards
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Sample Questions
Q1) If a consumer receives 22 units of marginal utility for consuming the first can of soda,20 units from consuming the second,and 15 from the third,the total utility of consuming the three units is
A) 57 utility units.
B) 35 utility units.
C) 15 utility units.
D) unknown as more information is needed to determine the answer.
Q2) Firms pay famous individuals to endorse their products because A) apparently demand is affected not just by the number of people who use a product but also by the type of person that uses the product.
B) the firms are irrational and are wasting advertising expenditures.
C) famous people obviously know what are the best goods and services.
D) famous people only consume high quality products.
Q3) The ultimatum game and the dictator game are used in economic experiments to test whether fairness is an important influence on consumer decision-making.
A)True
B)False
Q4) What is marginal utility and what is the law of diminishing marginal utility?
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Page 12
Chapter 11: Technology, production, and Costs
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330 Flashcards
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Sample Questions
Q1) In the long run
A) the firm's fixed costs are greater than its fixed costs in the short run.
B) all of the firm's costs are explicit costs; there are no implicit costs of production.
C) the firm is more profitable than it is in the short run.
D) all of the firm's costs are variable costs.
Q2) If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) the law of supply.
Q3) What is minimum efficient scale? What is likely to happen in the long run to firms that do not reach minimum efficient scale?
Q4) Refer to Table 11-2.What is the marginal product of the 4th worker?
A) 230 bushels
B) 57.4 bushels
C) 50 bushels
D) 12.4 bushels
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Page 13
Chapter 12: Firms in Perfectly Competitive Markets
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298 Verified Questions
298 Flashcards
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Sample Questions
Q1) In a perfectly competitive market the term "price taker" applies to
A) sellers and buyers.
B) firms but not buyers.
C) buyers but not sellers.
D) only the smallest sellers and buyers.
Q2) The supply curve of a perfectly competitive firm in the short run is
A) the firm's average variable cost curve.
B) the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve.
C) the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve.
D) the portion of the firm's marginal cost curve above the minimum point of the average total cost curve.
Q3) Refer to Figure 12-2.Why is the total revenue curve a ray from the origin?
A) because revenue increases at an increasing rate
B) because revenue increases at a decreasing rate
C) because the firm can sell its product at a constant price
D) because the firm must lower its price to sell more
Q4) What is meant by the term "long-run competitive equilibrium?
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Chapter 13: Monopolistic Competition: the Competitive
Model in a More Realistic Setting
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278 Verified Questions
278 Flashcards
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Sample Questions
Q1) A major difference between monopolistic competition and perfect competition is A) the number of sellers in the markets.
B) the degree by which the market demand curves slope downwards.
C) that products are not standardized in monopolistic competition unlike in perfect competition.
D) the barriers to entry in the two markets.
Q2) Consumers benefit from monopolistic competition by
A) being able to choose from products more closely suited to their tastes.
B) paying the lowest possible price for the product.
C) paying the same price as everyone else.
D) being able to purchase high-quality products at low prices.
Q3) Refer to Figure 13-13.What is the profit maximizing output level?
A) Q<sub>1</sub> units
B) Q<sub>2</sub> units
C) Q<sub>3</sub> units
D) Q<sub>4</sub> units
Q4) In the long-run equilibrium,a monopolistically competitive firm earning normal profit produces the allocatively efficient output level.
A)True
B)False
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Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) How does the demand curve for an oligopoly firm differ from the demand curves for firms in competitive market structures?
Q2) A four-firm concentration ratio measures
A) the extent to which industry sales are concentrated among the four largest firms in the industry.
B) the price elasticity of demand among the four largest firms in an industry.
C) the number of firms in an industry.
D) the price elasticity of demand in an industry.
Q3) Refer to Figure 14-4.How will Rainbow Writer respond to Odeon's two possible offers?
A) Rainbow Writer will reject either offer.
B) Rainbow Writer will only accept an offer of $30 per copy of the software package.
C) Rainbow Writer will only accept an offer of $40 per copy of the software package.
D) Rainbow Writer will accept either offer.
Q4) In a Nash equilibrium,all players select non-dominant strategies.
A)True
B)False
Q5) Explain why OPEC is caught in a prisoner's dilemma?
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Page 16
Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.
A)True
B)False
Q2) Experience with patents in the pharmaceutical industry shows that when patents on drugs expire
A) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs.
B) prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents.
C) other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents.
D) firms will find ways to obtain additional patent protection - often by making cosmetic changes in drugs that were patented - so that they can continue charging high prices.
Q3) What is the difference between a monopoly's marginal revenue curve and a perfect competitor's marginal revenue curve?
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) Online companies gather personal information about the customers who shop on their Websites and some of those companies will use the data to estimate price elasticities of the customers.Doing this is a way that these companies might be able to charge a higher price for a product to those customers who have a ________ price elasticity of demand.
A) high
B) low
C) negative
D) unitary
Q2) Most supermarkets charge the same price for the majority of goods sold.This suggest that
A) the government regulates prices of most products sold in supermarkets.
B) supermarkets have colluded to fix prices on most of the goods sold.
C) mark-ups reflect the degree of competition in the supermarket industry.
D) the large supermarket chains are price leaders and smaller grocers take these prices as given.
Q3) The Clayton Act of 1936 outlawed price discrimination that reduced competition.
A)True
B)False
Q4) Are sellers who practice arbitrage taking advantage of buyers?
Page 18
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Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) While labor unions tend to negotiate above-equilibrium wage rates for their members,they also tend to reduce the quantity of labor hired.
A)True
B)False
Q2) In labor economics,the term "customer discrimination" refers to a situation where customers are charged different prices for services rendered by a firm.
A)True
B)False
Q3) Wage differentials between occupations can be explained by all of the following except
A) the fact that some occupations require higher levels of human capital than others.
B) the fact that some occupations are more desirable than others.
C) the market power of different employers.
D) the relative differences between demand and supply in various occupations
Q4) The supply curve of a uniquely talented actor or superstar athlete will be perfectly inelastic.
A)True
B)False
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Chapter 18: Public Choice,taxes,and the Distribution of Income
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Sample Questions
Q1) Is a typical person likely to gather more information when buying a new computer or when voting for a member of the U.S.Senate? Why?
Q2) The federal corporate income tax is
A) regressive.
B) proportional.
C) progressive.
D) unfair.
Q3) In 2012,over 75 percent of the revenue of the U.S.federal government was raised through
A) individual income and social insurance taxes.
B) property and social insurance taxes.
C) sales and corporate income taxes.
D) individual income and property taxes.
Q4) From 1970 to 2006,the poverty rate in East Asia rose slightly but the level of poverty in sub-Saharan Africa fell dramatically.
A)True
B)False
Q5) What is the difference between the voting paradox and the Arrow impossibility theorem?
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