Introduction to Microeconomics
Mock Exam
Course Introduction
Introduction to Microeconomics explores the fundamental principles that govern individual decision-making and the allocation of scarce resources in markets. This course examines concepts such as supply and demand, market equilibrium, elasticity, consumer and producer behavior, and the role of government intervention. Students will learn how markets function, what causes market failures, and how different economic agents interact within various market structures. By understanding these basics, students will be equipped to analyze real-world economic issues and make informed decisions in both personal and professional contexts.
Recommended Textbook
Principles of microeconomics v 3.0 by Rittenberg
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Chapter 1: Economics: The Study of Choice
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Sample Questions
Q1) The models used in economics:
A) are usually limited to variables that are directly related.
B) are essentially not reliable because they are not testable in the real world.
C) are of necessity unrealistic and have no relationship to the real world.
D) emphasize basic relationships by abstracting from complexities in the everyday world.
Answer: D
Q2) The Case in Point on the Simpsons indicated that time is:
A) a scarce resource.
B) a resource without alternative uses.
C) a ubiquitous resource.
D) not a resource.
Answer: A
Q3) Economic models are:
A) created and used in order to duplicate virtually every aspect of the real world.
B) useless if they are simple.
C) made generally of wood, plastic, and/or metal.
D) built using assumptions.
Answer: D
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Chapter 2: Confronting Scarcity: Choices in Production
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Sample Questions
Q1) For a factor of production to be called capital it must:
A) be produced.
B) occur in the natural environment.
C) be a part of human skill.
D) be a result of a stock issue.
Answer: A
Q2) If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States will:
A) export both sweaters and machinery to Britain.
B) import both sweaters and machinery from Britain.
C) export sweaters to Britain and import machinery from Britain.
D) import sweaters from Britain and export machinery to Britain.
Answer: D
Q3) Which of the following will not lead to economic growth?
A) increased immigration
B) restrictions on international trade
C) introduction of faster computers
D) opening all federal lands to mining
Answer: B
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Chapter 3: Demand and Supply
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Sample Questions
Q1) (Exhibit: Demand and Supply Schedules for a Good) The equilibrium price is ________ and the equilibrium quantity is ________.
A) $2.00; 230 units
B) $3.00; 240 units
C) $4.00; 210 units
D) impossible to determine; impossible to determine
Answer: B
Q2) In the textbook, the prices of the factors of production, returns from alternative activities, technology, seller expectations regarding future prices, and the number of sellers are called:
A) demand shifters.
B) supply prices.
C) market realities.
D) supply shifters.
Answer: D
Q3) A shortage results from a current price being below the equilibrium price.
A)True
B)False
Answer: True
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Chapter 4: Applications of Supply and Demand
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Sample Questions
Q1) Health care is an inferior good.
A)True
B)False
Q2) (Exhibit: The Market for Health Care) The quantity Q is available at price:
A) P .
B) P .
C) P .
D) none of the above are correct.
Q3) (Exhibit: Third-Party Payers) Based on the exhibit, and assuming there are no third-party payers:
A) the equilibrium quantity is 3 million physician office visits per week.
B) the equilibrium quantity is 2 million physician office visits per week.
C) the total amount spent on physician office visits at the equilibrium price is $180 million.
D) the equilibrium quantity is 1 million physician office visits per week.
Q4) A maximum legal price is called:
A) a price support.
B) a price floor.
C) a price ceiling.
D) the parity price.
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Chapter 5: Elasticity: a Measure of Response
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Sample Questions
Q1) The cross price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61.If the price of Pepsi falls by 10 percent in a period, how will that affect the demand for Coke in that period, all other things unchanged?
A) The demand for Coke will increase but by less than 6.1 percent.
B) The demand for Coke will increase by 6.1 percent.
C) The demand for Coke will not change because many people prefer Coke over Pepsi.
D) The demand for Coke will fall.
Q2) If demand is unit price elastic, then quantity changes by the same percentage as the percentage change in the price.
A)True
B)False
Q3) (Exhibit: Estimating Price Elasticity) Between the two prices, P and P , the absolute value of the price elasticity of demand is ________ for D .
A) 0
B) greater than 1
C) equal to 1
D) greater than 0 but less than 1
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Chapter 6: Markets, Maximizers, and Efficiency
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Sample Questions
Q1) According to the Case in Point on wildlife and property rights:
A) the lack of private property rights for wildlife in Kenya has caused the animal population to decline.
B) the lack of private property rights for wildlife in Kenya has caused the animal population to increase.
C) the existence of private property rights for wildlife in Kenya has caused the animal population to decline.
D) the existence of private property rights for wildlife in Kenya has caused the animal population to increase.
Q2) Suppose that external costs are not fully reflected in the market price of a good.This is an indication of market:
A) failure.
B) equilibrium.
C) efficiency.
D) optimality.
Q3) Discuss and explain marginal cost, marginal benefit, the marginal decision rule, and constraint(s) in maximization of an objective or goal.
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Chapter 7: The Analysis of Consumer Choice
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Sample Questions
Q1) (Exhibit: Utility) Total utility is maximized at the _______ unit.
A) first
B) second
C) fourth
D) sixth
Q2) (Exhibit: Total Utility and Marginal Utility from Consumption of Good A. Marginal utility of good A is found by:
A) dividing total utility by the number of units consumed of good A.
B) dividing the change in the number of units of A by the change in total utility of A.
C) computing the change in total utility of A resulting from the consumption of one more unit of A.
D) doing none of the above.
Q3) A demand curve is generated from indifference curves by changing:
A) the price of both goods simultaneously.
B) the price of one good.
C) income.
D) utility.
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Chapter 8: Production and Cost
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Sample Questions
Q1) The lowest cost per unit at each level of output, assuming all factors of production are variable, is the:
A) long-run average cost curve.
B) marginal cost curve.
C) average variable cost curve.
D) average total cost curve.
Q2) The slope of a long-run average cost curve exhibiting economies of scale is:
A) zero.
B) infinite.
C) positive.
D) negative.
Q3) When a firm experiences diminishing marginal returns:
A) its output is falling.
B) marginal product is falling, yet it is still positive.
C) total product is going up, even though marginal product is falling.
D) B and C are true.
Q4) Marginal cost is the slope of the average total cost curve.
A)True
B)False
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Chapter 9: Competitive Markets for Goods and Services
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Sample Questions
Q1) A perfectly competitive firm's short-run supply curve is its short-run marginal cost curve above the average total cost curve.
A)True
B)False
Q2) The Case in Point on the Iridium satellite phone indicated that the improved profitability was the result of:
A) decreased fixed costs.
B) decreased variable costs.
C) increased demand.
D) all of the above.
Q3) A firm's total revenue curve in perfect competition is an upward-sloping straight line.
A)True
B)False
Q4) An increase in demand in a perfectly competitive market will cause a(n):
A) temporary increase in price in a constant-cost industry.
B) economic loss for firms.
C) decrease in supply.
D) decrease in firms' marginal revenue.
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Chapter 10: Monopoly
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Sample Questions
Q1) In contrast to a monopoly firm, a perfectly competitive firm:
A) is a price taker.
B) faces a downward-sloping demand curve.
C) has only a moderate degree of monopoly power.
D) produces more than the efficient level of output.
Q2) In 1999, a judge declared that Microsoft was a monopolist.Assuming that it was maximizing its profits at its chosen level of output, we may conclude that the absolute value of the price elasticity of demand for its systems was:
A) less than 1.
B) equal to 1.
C) greater than 1.
D) There is insufficient information upon which to make a determination.
Q3) The profit-maximizing level of output for any firm is where MR = MC.
A)True
B)False
Q4) When MR is _______ , the price elasticity of demand is _______.
A) greater than zero; elastic
B) less than zero; inelastic
C) equal to zero; unit elastic
D) all of the above are true
Page 12
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Chapter 11: The World of Imperfect Competition
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Sample Questions
Q1) Firms that openly collude are engaging in tacit collusion.
A)True
B)False
Q2) (Exhibit: The Restaurant Market) The exhibit shows curves facing a typical restaurant in a community.Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit.If the restaurant shown here is typical of others in the community, then in the long-run, prices charged by firms in the market are likely to:
A) fall.
B) rise.
C) remain unchanged.
D) There is not enough information given to answer the question.
Q3) Firms in an industry that informally agree to charge the same price as the largest firm is an example of:
A) satisfying.
B) price extortion.
C) overt collusion.
D) tacit collusion.
Q4) Define and explain the role of tacit and overt collusion in the operation of a cartel.
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Chapter 12: Wages and Employment in Perfect Competition
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Sample Questions
Q1) A factor demand curve will shift because of:
A) a change in the number of firms.
B) the slope of the MP curve.
C) the elasticity of demand for the final product.
D) the proportion of the factor's cost relative to total cost.
Q2) When an increase in the use of one factor of production decreases the demand for the other, the two factors are complementary factors of production.
A)True
B)False
Q3) The condition for hiring factors of production- that is, where MFC = MRP- is analogous to the profit-maximizing output condition:
A) TR = TC.
B) MR = MC.
C) AR = ATC.
D) P = MR.
Q4) The amount a firm adds to total cost when one more unit of a factor is added to production is MFC.
A)True
B)False
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Chapter 13: Interest Rates and the Markets for Capital and Natural Resources
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Sample Questions
Q1) According to the Case in Point on A Social Program in Which Everybody Wins, the net present value of the intensive High/Scope Perry Preschool Program:
A) was positive for males assuming an interest rate of 3% but negative for males when assuming an interest rate of 7%.
B) was positive for males assuming an interest rate of 7% but negative for males when assuming an interest rate of 3%.
C) was positive for males assuming an interest rate of 3% or 7%.
D) was negative for males assuming an interest rate of 3% or 7%.
Q2) (Exhibit: Loanable Funds and Capital Markets) A decrease in the demand for capital, as shown in Panel (b) as a movement from D to D , will lead to:
A) the movement from D to D in Panel (a).
B) the movement from D to D in Panel (a).
C) a decrease in the quantity of capital demanded, as shown in Panel (d) when the interest rate rises from r to r .
D) none of the above.
Q3) Explain how changes in the interest rate affect the present value of a future payment.
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Chapter 14: Imperfectly Competitive Markets for Factors of Production
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Sample Questions
Q1) (Exhibit: Monopsony) Given ________ in the labor market, labor receives a wage that is _______ the MRP; in _______ , labor receives a wage that is ________ MRP. A) monopoly; less than; perfectly competitive factor markets; greater than B) monopsony; less than; perfectly competitive factor markets; equal to C) perfect competition; equal to; monopsonistic factor markets; greater than D) perfect competition; less than; monopsonistic factor markets; equal to
Q2) All other things being equal, a monopsonistic firm pays a higher wage and hires fewer workers than do firms in the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market. A)True
B)False
Q3) (Exhibit: Monopsony) Given monopsony in the factor market, how much labor will be hired?
Q4) Define and explain the difference between monopoly power and monopsony power.
Page 16
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Chapter 15: Public Finance and Public Choice
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Sample Questions
Q1) (Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved as illustrated in the Exhibit.When the government intervenes to correct for the external cost, the output will _______ from _______ to _______ .
A) fall; W; R
B) increase; W; R
C) fall; R; W
D) fall; W; 0
Q2) According to public choice theory, being too busy to take the time off to vote may be the result of:
A) rational participation.
B) rational abstention.
C) rent seeking.
D) ignorance in action.
Q3) An example of a government purchase is:
A) a Social Security payment to the elderly.
B) a Social Security payment to the disabled.
C) public school education.
D) expenditure on an unemployment compensation payment.
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Chapter 16: Antitrust Policy and Business Regulation
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Sample Questions
Q1) What are the major considerations in the economic arguments against concentration of industry?
Q2) An example of a vertical merger would be the acquisition of a tire company by a car company.
A)True
B)False
Q3) Situations where whether or not a particular business practice is illegal depends on the circumstances surrounding the action are said to be subject to:
A) the rule of reason.
B) an unfair constraint.
C) monopolistic behavior.
D) oligopolistic behavior.
Q4) Airline deregulation is generally held to have resulted in:
A) fewer frequent flyer programs.
B) lower fares.
C) a decrease in safety.
D) a reduction in passenger miles flown.
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Chapter 17: International Trade
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Sample Questions
Q1) A new domestic industry with a potential for economies of scale is a(n):
A) agglomeration industry.
B) infant industry.
C) monopsonistic industry.
D) competitive industry.
Q2) (Exhibit: Production Possibilities Curve) Which of the following statements is true?
A) Moving from point A to C is an increase in efficiency.
B) Moving from point A to C involves a reduction of 5,000 drill presses to gain 4,000 tractors.
C) A, B, and C are all inefficient points.
D) Point A is the most efficient level of output.
Q3) Compare and contrast the effect of tariffs, quotas, voluntary export restrictions, and nontariff barriers on the consumers and producers in both the importing and exporting country.
Q4) Opportunities created by trade are a result of comparative advantage.
A)True
B)False
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19
Chapter 18: The Economics of the Environment
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Sample Questions
Q1) (Exhibit: Pollution Abatement and Emissions) If the level of emissions is T, then the marginal cost of:
A) abatement is less than the marginal cost of emissions.
B) emissions is less than the marginal cost of abatement.
C) abatement is too high to be efficient.
D) emissions is zero.
Q2) The marginal benefits of emissions curve is a marginal cost of abatement curve when read from right to left.
A)True
B)False
Q3) As the price per unit of pollution emissions _______ , the total quantity demanded of pollution emissions _______ .
A) rises; rises
B) rises; stays the same
C) falls; falls
D) falls; rises
Q4) Using a supply and demand curve for pollution, discuss and contrast how resource allocation is affected when there is no pollution and when there is pollution.
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Chapter 19: Inequality, Poverty, and Discrimination
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Sample Questions
Q1) The percentage of the population living in households whose income falls below the poverty line is the:
A) income distribution.
B) poverty rate.
C) wealth effect.
D) subsidy ratio.
Q2) In the United States over the last couple of decades, the gap between the wages of skilled and unskilled workers:
A) increased.
B) decreased.
C) stayed the same.
D) increased and then decreased.
Q3) Much of the decrease in wage differentials between women and blacks vÌs a vÌs white males is due to the acquisition of human capital by women and blacks.
A)True
B)False
Q4) Affirmative actions are designed to enhance minority opportunities.
A)True
B)False
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