Introduction to Microeconomics
Mock Exam
Course Introduction
Introduction to Microeconomics explores the fundamental principles that govern individual economic agents, including consumers, firms, and markets. Students will learn about demand and supply, market equilibrium, elasticity, consumer behavior, production and costs, market structures, and the role of government in addressing market failures. By analyzing how decisions are made in resource allocation and pricing under various conditions, students gain the analytical tools necessary to understand everyday economic interactions and broader policy issues.
Recommended Textbook
ECON Micro 2 2nd Edition by William A.
McEachern
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21 Chapters
3947 Verified Questions
3947 Flashcards
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Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) A hypothesis is
A) an assumption about behavior
B) a prediction of what will occur given certain assumptions
C) a prediction of what will occur regardless of assumptions
D) a forecast of future events
E) useful only if the assumptions are realistic
Answer: B
Q2) Behavioral assumptions
A) make economic models more complex than if these assumptions were removed
B) pertain only to consumers
C) hold all other things constant
D) are ways to test a hypothesis
E) describe how individuals are expected to behave
Answer: E
Q3) An example of a positive economic statement is,"An increase in the price of a product causes consumers to purchase more of that product."
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economics Systems
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Sample Questions
Q1) Which of the following is not a characteristic of pure capitalism?
A) private property rights
B) competitive markets
C) laissez-faire policies
D) central planning
E) a reliance on prices to direct resources to their best uses
Answer: D
Q2) Just as resources are scarce for the individual,
A) they are also scarce for the economy as a whole
B) they are never scarce for the economy as a whole
C) they are randomly abundant for other individuals
D) there will be zero resources available for the economy as a whole
E) the economy a whole is never faced with having to make rational choices about using resources
Answer: A
Q3) Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.
A)True
B)False
Answer: True
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Chapter 3: Economic Decision Makers
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Q1) Bradley earns $150,000 a year.For the first $50,000 he earns,the tax rate is 10%.For the next $50,000 he earns,Bradley has to pay a tax rate of 8%,and for the last $50,000 he earns the tax rate is 5%.Based on this information,which of the following is correct?
A) The tax system is proportional
B) Bradley pays $25,000 in taxes each year
C) The tax system is progressive
D) The tax system is regressive
E) Bradley pays too much tax
Answer: D
Q2) One role of government is to correct market failure.
A)True
B)False
Answer: True
Q3) Under a regressive income tax system,individuals with higher incomes pay higher marginal tax rates.
A)True
B)False
Answer: False
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5
Chapter 4: Demand, supply, and Markets
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Q1) If the price of the good described in Exhibit 4-1 is $1.60,then an economist would expect the
A) price to decrease to $1.40
B) price to decrease to $1.50
C) quantity supplied to increase to 50 units
D) quantity demanded to increase to 80 units
E) quantity demanded to increase to 90 units
Q2) A shortage occurs whenever
A) quantity demanded exceeds quantity supplied at the equilibrium price
B) price is less than equilibrium price
C) quantity demanded is less than quantity supplied
D) goods are scarce
E) some of the people who need the product are not willing and able to buy it at the equilibrium price
Q3) The most important characteristic of the equilibrium price is that it
A) guarantees that producers earn profit
B) clears the market,leaving neither a surplus nor a shortage
C) maximizes the quantity demanded
D) minimizes the quantity demanded
E) guarantees that all buyers who desire the product will get it
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Chapter 5: Elasticity of Demand and Supply
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Q1) Elasticity measures
A) whether a price increase causes quantity demanded to increase or decrease
B) the strength of an economy's tendency to recover from recession
C) the responsiveness of decision makers to changes in prices,income,or other variables
D) the profitability of investment in an industry
E) the long-run flexibility of prices in the economy
Q2) Along a linear demand curve,
A) both the slope and price elasticity are constant
B) the price elasticity is constant,but the slope varies
C) total revenues are constant
D) the slope is constant,but the price elasticity varies
E) total revenues are negative
Q3) Use the information in Exhibit 5-1 to calculate the value of price elasticity of demand for Good B.
A) -2/3
B) -1/6
C) -1/2
D) -11/17
E) -17/11
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Chapter 6: Consumer Choice and Demand
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Q1) When moving from point c to point a in Exhibit 6-18.The value of total utility is:
A) Increasing from $13 to $$22
B) Increasing from $22 to 25
C) Decreasing from $6 to $3
D) Decreasing from $25 to $13
E) Decreasing from $22 to $6
Q2) Negative marginal utility means that
A) total utility is also negative
B) marginal utility increases as additional units are consumed
C) the price of the product increases as additional units are consumed
D) the total revenue spent on the product decreases as more of the product is purchased
E) total utility decreases as additional units are consumed
Q3) When the price is P in Exhibit 6-11,the shaded area represents
A) a shortage
B) producer surplus
C) a price floor
D) consumer surplus
E) a price ceiling
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Page 8
Chapter 7: Production and Cost in the Firm
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Q1) The least-cost way of producing a particular rate of output is represented by a point of tangency between a short-run average cost curve and the A) total cost curve
B) short-run average total cost curve
C) average variable cost curve
D) long-run average cost curve
E) marginal cost curve
Q2) The reason economists assume that firms try to maximize economic profit is
A) over time,firms that don't earn profits will have difficulty securing financing to survive B) firms in the real world always maximize profit
C) profit is easier to calculate than revenues
D) if a firm fails to earn a profit in its first year,it will go out of business
E) profit maximization is easier for firms than revenue maximization
Q3) In Exhibit 7-8,when output is 10,
A) total cost equals $10
B) fixed cost equals $1
C) variable cost equals $10
D) marginal cost equals $10
E) fixed cost equals $10
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Page 9
Chapter 8: Perfect Competition
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Sample Questions
Q1) Which of the following markets best approximates the perfectly competitive market structure?
A) automobile manufacturing
B) insurance
C) world commodity markets
D) airlines
E) manufacture of stereo equipment
Q2) Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market.At its present rate of output,Claude's marginal cost is $39,average variable cost is $45,and average total cost is $60.To improve his profit/loss situation,Claude should
A) increase output
B) reduce output but not to zero
C) maintain the present rate of output
D) shut down
E) raise the price
Q3) If the total revenue curve lies completely below the total cost curve,economic profit is zero.
A)True
B)False
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Page 10
Chapter 9: Amonopoly
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Sample Questions
Q1) Which of the following is true of monopoly?
A) There are no barriers to entry.
B) The firm is a price taker.
C) There are no close substitutes for the product being produced.
D) There are many firms in the industry.
E) The firm faces a horizontal demand curve.
Q2) Firms can earn economic profits even in the long run if
A) they charge the highest price possible
B) there is a cost-reducing technological change
C) there are significant barriers to entry
D) marginal revenue equals marginal cost
E) price is less than average variable cost at all rates of output
Q3) The demand curve a monopolist uses in making an output decision is
A) the same as the demand curve facing a perfectly competitive firm
B) vertical because there are no close substitutes for its product
C) horizontal because there are no close substitutes for its product
D) the same as the market demand curve
E) perfectly inelastic
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Chapter 10: Monopolistic Competition and Oligopoly
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Q1) Collusion among firms to raise price is rare in monopolistically competitive markets because
A) there are too many firms
B) there are too few firms
C) there is only one firm
D) products are homogeneous
E) price leadership is used instead
Q2) If zinc suppliers are successful in forming an international zinc cartel,they will experience
A) lower output and higher prices,which discourage the entry of new firms into the industry
B) lower output,higher prices,and the need to organize an effort to prevent the entry of new firms into the industry
C) higher output and higher prices,which discourage the entry of new firms into the industry
D) higher output,higher prices,and the need to organize an effort to prevent the entry of new firms into the industry
E) none of the above
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Page 12
Chapter 11: Resource Markets
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Sample Questions
Q1) In Exhibit 11-2,opportunity cost in equilibrium equals
A) $40
B) $60
C) $100
D) $700
E) $300
Q2) A curve that shows the cost to the firm of hiring an additional unit of a resource is known as a
A) marginal product curve
B) marginal revenue product curve
C) total revenue product curve
D) marginal revenue curve
E) marginal resource cost curve
Q3) A profit-maximizing firm will hire extra units of a resource when A) marginal resource cost exceeds marginal revenue product
B) marginal resource cost is equal to marginal revenue product
C) marginal resource cost is less than marginal revenue product
D) temporary resource price differentials exceed the marginal resource cost
E) the average resource cost and marginal resource cost curves are equal
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Page 13
Chapter 12: Labor Markets and Labor Unions
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Sample Questions
Q1) Craft unions attempt to increase wages in their profession by
A) increasing labor demand
B) decreasing labor demand
C) decreasing labor supply
D) increasing labor supply
E) exclusive dealing contracts
Q2) An increase in labor supply will increase the equilibrium wage rate.
A)True
B)False
Q3) If Marie buys a sailboat,which increases the productivity of her leisure time,she
A) increases her productivity of nonmarket work
B) increases her productivity of market work
C) will spend less time in nonmarket work
D) will spend less time in leisure activities
E) will spend more time in market work to pay for the boat's maintenance
Q4) Featherbedding is a union practice designed to increase employment of union members.
A)True B)False
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Chapter 13: Capital, interest, and Corporate Finance
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Sample Questions
Q1) The GreenAcres mowing company wants to buy the new "Titan3000" lawn mowers.Assume that the lawn mowers are expected to last indefinitely,that operating expenses are negligible,and that the price per acre of mowed lawn is expected to remain constant in the future.The lawn mowing market is perfectly competitive with a market price of $25 per acre.The price of a "Titan300" lawn mower is $5,000.Exhibit 13-8 shows the number of acres that can be mowed with the new lawn mowers.The marginal rate of return for the second lawn mower is:
A) 75%
B) 50%
C) 45%
D) 35%
E) 20%
Q2) Saving is
A) helpful for production but not necessary
B) not useful for production because they imply a decrease in consumption
C) required for production
D) not useful for production because it is not a resource
E) not useful for production because savers must be paid interest
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Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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Q1) If an employment situation is characterized by adverse selection,
A) there are too many applicants for each job
B) there are too few applicants for each job
C) there are exactly the right number of applicants for each job
D) there is an excess supply of overqualified applicants for each job
E) there is an excess supply of underqualified applicants for each job
Q2) If the minimum efficient scale in woodstove production is 100,000 units per year,
A) the average cost of producing 50,000 stoves is greater than the average cost of producing 100,000
B) the average cost of producing 50,000 stoves is equal to the average cost of producing 100,000
C) the total cost of producing 50,000 stoves is greater than the total cost of producing 100,000
D) the firm should not produce more than 100,000 woodstoves
E) MC exceeds AC at 100,000 stoves
Q3) One result of asymmetric information in the market for used cars is that few lemons are sold.
A)True
B)False
Page 16
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Chapter 15: Economic Regulation and Antitrust Policy
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Sample Questions
Q1) Over time,regulatory machinery may shift toward the special interests of producers,who,in effect,"capture" the regulating agency.
A)True
B)False
Q2) When ruling on a price-fixing case under the per se rule,the U.S.courts need only examine
A) market structure
B) market conduct
C) market performance
D) market structure and conduct
E) market structure,conduct,and performance
Q3) Which of the following is not a criticism of monopolies?
A) They restrict output.
B) They set price above the perfectly competitive level.
C) They tend to be less innovative than firms in a competitive market.
D) They exert a disproportionate amount of political influence.
E) They reduce allocative efficiency through perfect price discrimination.
Q4) Antitrust policy has no relationship to socially desirable market performance.
A)True
B)False
17
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Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) The purpose of a political action committee is
A) to help elect officials sympathetic to its members' special interests
B) to help elect officials who will enact fair legislation
C) to raise money for public interest groups
D) to exchange trade secrets
E) to allow special-interest groups to be elected
Q2) With special-interest legislation,
A) benefits are concentrated but costs are widespread
B) both benefits and costs are concentrated
C) benefits are widespread but costs are concentrated
D) both benefits and costs are widespread
E) there is no predictable relationship between costs and benefits
Q3) Suppose you want to buy a boat,but you know that interest paid on a boat loan is not tax deductible.Therefore,you take out a home equity loan,the interest on which is still tax deductible.This procedure is an example of
A) illegal tax avoidance
B) illegal tax evasion
C) legal tax avoidance
D) legal tax evasion
E) the answer cannot be determined from the information given
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Chapter 17: Externalities and the Environment
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Q1) In the production of electricity with fixed-production technology,the socially efficient price is $2 and the socially efficient level of output is 400 units;the market equilibrium price is $1.50 and the market equilibrium quantity is 600 units.The marginal external cost is:
A) $0.20
B) $0.50
C) $1.50
D) $2.00
E) $3.50
Q2) Exhibit 17-6 illustrates the presence of
A) positive externalities
B) positive and negative externalities
C) negative externalities
D) the Coase theorem
E) a private market with a socially efficient equilibrium
Q3) Some U.S.cities still dump raw sewage directly into rivers or oceans.
A)True
B)False
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Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) Data on the U.S.income distribution suggest that
A) black-white income differentials have decreased
B) black-white income differentials have increased
C) the distribution of income among blacks is more uneven than the overall distribution of income
D) the distribution of income among blacks is less uneven than the overall distribution of income
E) the distribution of income among blacks follows approximately the same pattern as the overall distribution of income
Q2) In 2002,the official poverty level for a family of four was approximately
A) $1,000
B) $5,193
C) $18,392
D) $24,000
E) $33,062
Q3) Social Security and Medicare,programs that benefit the elderly primarily,make up the greatest share of federal redistribution programs since 1962.
A)True
B)False
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Page 20
Chapter 19: International Trade
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Sample Questions
Q1) If the country illustrated in Exhibit 19-3 is initially trading without restrictions at a world price of $1.00,the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area
A) a
B) b + d
C) c + i + e + f
D) c
E) d
Q2) U.S.consumers would be better off if they bought only U.S.-produced goods.
A)True
B)False
Q3) An effective import quota is one that increases the amount of tariff revenues received.
A)True
B)False
Q4) It is possible for one country to have a comparative advantage in the production of all products.
A)True
B)False
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Chapter 20: International Finance
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Sample Questions
Q1) The demand curve for euros shows
A) a direct relationship between the dollar price of a euro and the quantity of euros demanded
B) an inverse relation between the dollar price of a euro and the quantity of euros demanded
C) that the higher the dollar price of a euro,the greater the quantity demanded
D) that the more expensive it is to buy euros,the larger the quantity of European goods demanded by Americans
E) that the dollar price of the euro is being held fixed by the European Union
Q2) United States net unilateral transfers have been
A) positive every year since 1950
B) negative every year since 1950
C) positive every year since 1950 except 1991,during the Persian Gulf War
D) negative every year since 1950 except 1991,during the Persian Gulf War
E) positive about half the time and negative about half the time since 1950
Q3) Current account transactions are records of the income and expenditures from exports and imports,plus international financial investments and borrowing.
A)True
B)False
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Page 22
Chapter 21: Developing and Transitional Economies
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Sample Questions
Q1) Compared to industrial market countries,developing countries usually have
A) exports consisting mostly of agricultural products and raw materials
B) faster population growth
C) higher unemployment
D) higher rates of illiteracy
E) All of the answers are correct
Q2) A reliable system of property rights and enforceable contracts are prerequisites for creating incentives that support a healthy market economy.
A)True
B)False
Q3) Throughout the world,poverty is greater among women than men,particularly women who head households.
A)True
B)False
Q4) If the best and brightest engineers and doctors migrate from a poor country to a developed country,both countries benefit from the brain drain.
A)True
B)False
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