Introduction to Microeconomics Exam Practice Tests
Course Introduction
Introduction to Microeconomics explores the foundational principles governing individual and firm decision-making in the allocation of scarce resources. The course introduces students to core concepts such as supply and demand, elasticity, consumer and producer surplus, market structures, and the role of government in markets. Through real-world examples and graphical analysis, students develop a critical understanding of how markets function, how prices are determined, and how economic agents respond to incentives within different competitive frameworks. This course provides a foundation for further studies in economics and develops analytical skills applicable to various disciplines.
Recommended Textbook
Microeconomics Brief Edition 2nd Edition by Campbell R. McConnell
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13 Chapters
1963 Verified Questions
1963 Flashcards
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Page 2
Chapter 1: Limits, Alternatives, and Choices
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) As a consequence of the condition of scarcity:
A) there is never enough of anything.
B) production has to be centrally planned.
C) things that are plentiful have relatively high prices.
D) individuals and communities have to make choices from among alternatives.
Answer: D
Q2) The purpose of the ceteris paribus assumption used in economic analysis is to:
A) make sure that all relevant factors are considered.
B) avoid making normative statements.
C) avoid making positive statements.
D) restrict the analysis to the effect of a single economic factor.
Answer: D
Q3) From an economic perspective,when a student decides to attend another year of college,the student has concluded that the marginal:
A) costs of attending college have increased that year.
B) benefits of attending college have decreased that year.
C) benefits of attending college are greater than the marginal costs.
D) costs of attending college will be subsidized by someone else such as parents or the government.
Answer: C
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Chapter 2: The Market System and the Circular Flow
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) As of 2012,approximately how many households are in the United States?
A) 60 million
B) 115 million
C) 200 million
D) 290 million
Answer: B
Q2) According to the text,U.S.corporations generate approximately what percentage of total sales revenue?
A) 11 percent
B) 20 percent
C) 72 percent
D) 82 percent
Answer: D
Q3) The "invisible hand" concept to describe the guiding function of prices was developed by:
A) Jeremy Bentham.
B) Adam Smith.
C) Milton Friedman.
D) David Ricardo.
Answer: B
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Chapter 3: Demand, Supply, and Market Equilibrium
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179 Verified Questions
179 Flashcards
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Sample Questions
Q1) The supply curve shows the relationship between:
A) price and quantity supplied.
B) production costs and the amount demanded.
C) total business revenues and quantity supplied.
D) physical inputs of resources and the resulting units of output.
Answer: A
Q2) If the demand curve for product B shifts to the right as the price of product A declines,then:
A) both A and B are inferior goods.
B) A is a superior good and B is an inferior good.
C) A is an inferior good and B is a superior (or "normal")good.
D) A and B are complementary goods.
Answer: D
Q3) In the past few years the demand for donuts has greatly increased.This increase in demand might best be explained by:
A) an increase in the cost of making donuts.
B) an increase in the price of coffee.
C) consumers expecting donut prices to fall.
D) a change in buyer tastes.
Answer: D
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Chapter 4: Elasticity of Demand and Supply
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Sample Questions
Q1) The price of gold is volatile because the supply is highly inelastic,so changes in demand have a large effect on price.
A)True
B)False
Q2) Which will cause a demand curve to be relatively elastic?
A) Few substitutes exist.
B) The time interval considered is long.
C) The good is considered a necessity.
D) Purchases of the good require a small portion of consumers' budgets.
Q3) Price elasticity of supply decreases the longer the time period.
A)True
B)False
Q4) If a 10 percent increase in the price of product X causes the demand for product Y to decrease by 15 percent,then:
A) X and Y are substitutes.
B) X and Y are complements.
C) X and Y are independent goods.
D) the demand for X is elastic.
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6
Chapter 5: Market Failures: Public Goods and Externalities
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) What are the two characteristics that distinguish public goods from private goods?
A) Liability rules and lawsuits
B) The Coase theorem and efficiency
C) Positive and negative externalities
D) Nonrivalry and nonexcludability
Q2) The market demand curve for a pure public good shows the total value that all individuals place on each unit of the good.
A)True
B)False
Q3) Private goods are characterized by:
A) rivalry and excludability.
B) rivalry and nonexcludability.
C) nonrivalry and excludability.
D) nonrivalry and nonexcludability.
Q4) The types and quantities of public goods produced are determined through the political process.
A)True
B)False
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Chapter 6: Businesses and Their Costs
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156 Verified Questions
156 Flashcards
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Sample Questions
Q1) A business organization that owns and operates one or more plants is:
A) a firm.
B) an industry.
C) a partnership.
D) an S corporation.
Q2) Which of the following best expresses the law of diminishing returns?
A) Because large-scale production allows the realization of economies of scale,the real costs of production vary directly with the level of output.
B) Population growth automatically adjusts to that level at which the average product per worker will be at a maximum.
C) As successive amounts of one resource (labor)are added to fixed amounts of other resources (capital),beyond some point the resulting extra output will decline.
D) Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.
Q3) Average fixed costs diminish continuously as output increases.
A)True
B)False
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Chapter 7: Pure Competition
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155 Verified Questions
155 Flashcards
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Sample Questions
Q1) Under which market model are the conditions of entry the most difficult?
A) Monopolistic competition
B) Pure competition
C) Pure monopoly
D) Oligopoly
Q2) A firm sells a product in a purely competitive market.The marginal cost of the product at the current output is $4.00 and the market price is $4.50.What should the firm do?
A) Shut down if the minimum possible average variable cost is $3.00.
B) Decrease output if the minimum possible average variable cost is $3.00.
C) Increase output if the minimum possible average variable cost is $3.75.
D) Decrease output if the minimum possible average variable cost is $3.75.
Q3) The retail trade for clothing would be an example of which market model?
A) Monopolistic competition
B) Pure competition
C) Pure monopoly
D) Oligopoly
Q4) In pure competition,the industry demand curve is infinitely price elastic.
A)True
B)False
Page 9
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Chapter 8: Pure Monopoly
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150 Flashcards
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Sample Questions
Q1) Firms are prohibited from entering into contracts,combinations,and conspiracies that restrain trade by:
A) Section 2 of the Sherman Act.
B) Section 8 of the Clayton Act.
C) Section 1 of the Sherman Act.
D) the Wheeler-Lea Act.
Q2) Natural monopolies result from:
A) patents.
B) copyrights.
C) control over an essential natural resource.
D) extensive economies of scale in production.
Q3) One major barrier to entry under pure monopoly arises from:
A) the availability of close substitutes for a product.
B) ownership of essential resources.
C) the price taking ability of the firm.
D) diseconomies of scale.
Q4) A purely competitive firm is a price maker,but a monopolist is a price taker.
A)True
B)False
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Chapter 9: Monopolistic Competition and Oligopoly
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179 Flashcards
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Sample Questions
Q1) An example of a monopolistically competitive industry would be:
A) steel.
B) soybeans.
C) electricity.
D) retail clothing.
Q2) Monopolistic competition is characterized by firms:
A) producing differentiated products.
B) making economic profits in the long run.
C) producing at optimal productive efficiency.
D) producing where price equals marginal cost.
Q3) Which set best describes the basic features of monopolistic competition?
A) Easy entry,few firms,and standardized products
B) Barriers to entry,few firms,and differentiated products
C) Easy entry,many firms,and differentiated products
D) Barriers to entry,many firms,and standardized products
Q4) In which market model is there mutual interdependence?
A) Monopolistic competition
B) Pure competition
C) Pure monopoly
D) Oligopoly
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Chapter 10: Wage Determination
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) The demand for labor would most likely become more elastic as a result of:
A) a decrease in the elasticity of the demand for the product that the labor produces.
B) an increase in the time for employers to make technological changes or purchase new equipment.
C) a decrease in the proportion of labor costs to total costs.
D) an increase in the proportion of labor cost to total costs.
Q2) A college graduate who works at a firm is also working part-time on a master's degree in business and expects to be paid a higher wage after earning the degree.The basic reason for this wage differential is:
A) efficiency wages.
B) compensating differences.
C) investment in human capital.
D) nonmonetary aspects of work.
Q3) The carpenters' union is an industrial union.
A)True
B)False
Q4) If MRP < Wage rate,a firm should hire more workers.
A)True
B)False
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Chapter 11: Income Inequality and Poverty
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) Those who favor inequality in the distribution of income contend that it will lead to stronger incentives to work,save,and invest,and thus to a greater national income and output.
A)True
B)False
Q2) Which of the following is not one of the causes of the unequal distribution of income in the United States?
A) Ability differences
B) Job preferences and job risks
C) Education and training
D) The dispersion of market power
Q3) Which is one cause of the unequal distribution of income in the United States?
A) Income mobility over time
B) Differences in preferences for work and leisure
C) The high levels of noncash transfers
D) The low benefit-reduction rate
Q4) Social Security is financed by a payroll tax on employees and employers.
A)True
B)False
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Chapter 12: Public Finance: Expenditures and Taxes
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) The efficiency loss of a tax is the idea that:
A) in addition to taking income from the citizenry,taxes also increase the rate of inflation.
B) taxes cause a decline in output for which marginal benefit exceeds marginal cost.
C) taxes diminish incentives to work.
D) government spends dollars less efficiently than do households and businesses.
Q2) Although state and local taxes are highly progressive,federal taxation is predominantly regressive.
A)True
B)False
Q3) The property tax may be regressive even though wealthy people own much more taxable property than do poor people.This possibility arises because:
A) marginal and average tax rates on property tend to converge.
B) wealthy people can evade property taxes while poor people cannot.
C) property taxes on rental property and business property are shifted.
D) statutory property tax rates decline as the value of property rises.
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Chapter 13: International Trade and Exchange Rates
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) In comparing a tariff and an import quota,we find that:
A) the tariff and quota both generate the same amount of revenue for the U.S.Treasury.
B) the tariff generates revenue for the U.S.Treasury,but the quota does not.
C) the quota generates revenue for the U.S.Treasury,but the tariff does not.
D) neither the tariff nor the quota generates revenue for the U.S.Treasury.
Q2) A major goal of the World Trade Organization is to:
A) increase the protection of producers against foreign trade competition.
B) encourage bilateral trade agreements between nations.
C) liberalize international trade among nations.
D) maximize tariff revenue for governments.
Q3) Increasing opportunity costs makes specialization among trading nations complete.
A)True
B)False
Q4) Tariffs and import quotas meant to increase domestic employment also eliminate domestic jobs in export industries.
A)True
B)False
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