Introduction to Microeconomics Practice Questions
Course Introduction
Introduction to Microeconomics explores the fundamental principles underlying the decision-making processes of individuals, households, and firms in market economies. The course covers key topics such as supply and demand, market equilibrium, elasticity, consumer and producer behavior, forms of market structure (including perfect competition, monopoly, and oligopoly), and the role of government intervention. Through theoretical frameworks and real-world examples, students develop an understanding of how markets allocate resources, how prices are determined, and the impact of policy decisions on economic welfare.
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Microeconomics Principles and Applications 6th Edition by Robert E. Hall
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18 Chapters
2377 Verified Questions
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Page 2
Chapter 1: What Is Economics
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Sample Questions
Q1) Positive economics deals with
A)value judgments
B)how the economy does work
C)how the economy should work
D)how the federal government should operate
E)what the price level should be
Answer: B
Q2) Even if economic theory is based on positive analysis,economists may still disagree with each other because
A)economists tend to have excessive self-interest
B)they ignore politics
C)they are opinionated
D)they may have different values,like everyone else
E)they try to be right all the time
Answer: D
Q3) The opportunity cost of a particular activity is the sum of the benefits that could have been received from all foregone activities.
A)True
B)False
Answer: False
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Chapter 2: Scarcity, choice, and Economic Systems
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Sample Questions
Q1) According to the law of increasing opportunity cost,
A)production points outside the production possibility frontier are unattainable
B)the production possibility frontier becomes flatter as production increases along the horizontal axis
C)the opportunity cost of producing a good rises as production of that good falls
D)production points inside the production possibility frontier are unattainable
E)the opportunity cost of producing a good rises as production of that good rises
Answer: E
Q2) Under a market system of resource allocation,the most important limitations on individual freedom of action are imposed by A)tradition
B)the government
C)the scarcity of resources
D)the stagnation of the economy
E)the rigidity of the economy's rules
Answer: C
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4
Chapter 3: Supply and Demand
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Sample Questions
Q1) When households and businesses interact in resource markets money
A)is not exchanged
B)is flowing toward businesses
C)is flowing toward households
D)is not used at all
E)is flowing to both businesses and households
Answer: C
Q2) Which of the following statements about demand is correct?
A)A change in the price of bicycles will not lead to a shift of the demand curve for bicycles.
B)A change in the price of automobiles will lead to a shift of the demand curve for motorcycles.
C)A change in demand is equivalent to a movement along a given demand curve.
D)When price falls,so does the quantity demanded.
E)When the demand curve shifts to the right,so will the supply curve.
Answer: A
Q3) Both the supply and demand curves can shift due to changes in income.
A)True
B)False
Answer: False
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Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) Federal subsidies to higher education have the effect of
A)increasing the demand for higher education
B)increasing the supply of higher education
C)decreasing the demand for higher education
D)decreasing the supply of higher education
Q2) Which of the following is not an example of a flow variable?
A)The amount of income that a person earns each month
B)The amount of interest that a savings account earns each week
C)The amount of money in a savings account
D)The amount of taxes that a person pays each year
E)All of these are flow variables
Q3) All of the following are examples of stock variables except one.Which one?
A)The amount of currency in circulation
B)The amount of money earned each week
C)The amount of money needed to construct a new building
D)The amount of money in a person's savings account
E)The amount of money at the Fed
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Chapter 5: Elasticity
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Sample Questions
Q1) Demand for goods in broader category definitions,such as "beverages",is usually less elastic than demand for more narrowly defined goods,such as "diet colas."
A)True
B)False
Q2) A public university knows that demand from potential students is elastic.If the university wants to increase tuition revenue,it should
A)raise its tuition rate
B)hold its tuition rate constant and increase faculty salaries
C)increase its financial aid
D)lower its tuition rate
E)increase its enrollment
Q3) If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded,then the price elasticity of demand is 0.50.
A)True
B)False
Q4) An inferior good is defined by an income elasticity less than 1.
A)True
B)False
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Chapter 6: Consumer Choice
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Sample Questions
Q1) A consumer's budget line shows
A)the utility that an individual would receive from consuming various combinations of two goods
B)the combinations of two goods that an individual is able to purchase,given prices and income
C)how income is influenced by prices of goods
D)how changes in income affect utility
E)the relationship between prices and income
Q2) Which panel in Figure 6-2 shows the effect of an increase in the price of oranges,other things constant?
A)panel a
B)panel b
C)panel c
D)panel d
E)panel e
Q3) Consuming goods until the ratio of marginal utilities of the goods is equal to the ratio of their prices is consistent with maximizing total utility.
A)True
B)False
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Page 8
Chapter 7: Production and Cost
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Sample Questions
Q1) The firm depicted in Figure 7-10 currently is producing 200 units of output per day.If it decides to increase its output level to 375 units,then it will
A)adjust from point F to point G in the short run
B)be unable to adjust to point G in the short run because some inputs are fixed
C)be unable to adjust to point G in the long run because some are fixed
D)be unable to adjust to point H in the short run because some inputs are fixed
E)adjust from point F to point H in the long run
Q2) When long-run average total cost decreases as output increases,a firm experiences
A)increasing average fixed cost
B)decreasing total cost
C)economies of scale
D)diseconomies of scale
E)constant returns to scale
Q3) As a firm increases its output in the short run,average fixed cost
A)rises steadily
B)falls and then rises
C)falls steadily
D)rises and then falls
E)remains unchanged
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Page 9
Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) In Figure 8-5,which of the five output levels corresponds to the highest level of profit?
A)level A
B)level B
C)level C
D)level D
E)level E
Q2) The demand curve facing a firm
A)indicates the quantity of output that customers will purchase from that firm,at various prices
B)shows the minimum cost of producing any level of output
C)is drawn assuming that the firm is operating in the short run
D)indicates how much output a profit-maximizing firm will produce,at various prices
E)is downward sloping because consumers have less money to spend,the more output they purchase
Q3) Profit maximization occurs at the quantity where marginal cost equals marginal revenue.
A)True
B)False
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Chapter 9: Perfect Competition
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Sample
Questions
Q1) In the long run,an entrepreneur who owns a perfectly competitive firm will earn no income from that firm.
A)True
B)False
Q2) Figure 9-6 shows the marginal cost and average total cost curves for a perfectly competitive firm.This firm will
A)earn an economic profit
B)suffer an economic loss in this long-run situation
C)suffer an economic loss in the short run and close
D)break even if it expands to 180 units of output
E)suffer an economic loss and continue producing in the short run
Q3) If the firms in a perfectly competitive market are continually operating where their total costs exceed their total revenue in the short run,then in the long run
A)the number of firms in the market will remain unchanged
B)the number of firms in the market will increase
C)the number of firms in the market will decrease
D)existing firms will increase their plant sizes
E)existing firms will increase their output
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Chapter 10: B:Perfect Competition
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Sample Questions
Q1) One of the defining characteristics of a perfectly competitive market is
A)both buyers and sellers are well informed about the market
B)a small number of buyers
C)high barriers to entry
D)a small number of buyers but a large number of sellers
E)buyers are better informed about the market than sellers
Q2) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
Q3) Which of the following is not a characteristic of a perfectly competitive market
A)buyers and sellers are well informed about the market
B)standardized product
C)many buyers and few sellers
D)easy exit out of the industry
E)easy entry into the industry
Q4) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Page 12
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Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) If a cartel is formed in order to maximize the total profits of its members,it will
A)charge the monopoly price,but produce more output than a monopoly would
B)produce the monopoly output,but charge a lower price than a monopoly would
C)charge the same price,and produce the same quantity that a monopoly would
D)charge a higher price and produce more output than a monopoly would
E)charge the monopoly price,but total output may be higher or lower than a monopoly's
Q2) Oligopolies in the United States rarely engage in explicit collusion because
A)it leads to lower profits
B)firms are very wary of each other in this type of market
C)they may have different dominant strategies
D)it is illegal
E)dominant strategies may not exist
Q3) An oligopoly is a market
A)dominated by a single seller
B)dominated by a single buyer
C)dominated by a small number of strategically interdependent firms
D)with many buyers and sellers,no barriers to entry and differentiated products
E)with many buyers and sellers,no barriers to entry and a standardized product
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Chapter 11: Monopoly
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Sample Questions
Q1) If a firm is able to charge each customer the maximum amount that he or she is willing to pay for its good,
A)the firm is engaging in rent-seeking behavior
B)profits for the firm will be lower than for a single-price monopolist
C)the firm will be violating federal law
D)this is perfect price discrimination
E)barriers to entry into the market will fall
Q2) How much profit will the profit-maximizing level of output for the non-discriminating monopolist in Figure 10-3 yield?
A)$10
B)$20
C)$30
D)$40
E)$50
Q3) The monopoly that does not practice price discrimination
A)is a firm with a marginal revenue curve with a slope of zero
B)is a price taker
C)charges the same price for every unit of output it sells
D)operates in a market where all firms charge the same price
E)is always profitable in the short run
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Chapter 12: Labor Markets
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Sample Questions
Q1) In a perfectly competitive labor market,the market labor supply curve
A)will be horizontal
B)will be vertical
C)will be upward sloping
D)will be downward sloping
E)could be downward sloping if firms produce inferior goods
Q2) If a firm produces in a perfectly competitive output market,
A)then it demands its resources in perfectly competitive input markets
B)then it demands labor in a perfectly competitive labor market
C)the type of market in which it demands labor may be perfectly competitive or imperfectly competitive
D)the labor demand curve is the same as its product demand curve
E)the labor demand curve facing the firm is perfectly elastic
Q3) The marginal product of labor
A)measures the contribution to total output of the average worker
B)is a characteristic of production,not of an individual worker
C)measures the personal productivity of the last worker hired
D)measures the extra revenue generated by the last worker hired
E)measures the extra cost attributed to the last worker hired
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Page 15
Chapter 13: B: Labor Markets
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Sample Questions
Q1) If an employer begins to pay higher wages to white workers,then in the short run
A)wages for white workers would fall
B)wages for nonwhite workers would rise
C)profits would rise as nonwhite workers leave the firm
D)output will increase and prices will fall
E)profits would fall as nonwhite workers leave the firm
Q2) Barriers that prevent workers from entering particular labor markets
A)decrease wage rates in those markets
B)increase employment in those markets
C)decrease discrimination in those markets
D)increase profits in those markets
E)increase wage rates in those markets
Q3) Wage differentials are due exclusively to differences in market structure.
A)True
B)False
Q4) The minimum wage is constant across the United States.
A)True
B)False
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Page 16
Chapter 14: Capital and Financial Markets
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Sample Questions
Q1) What would you pay for a newly issued 10-year bond with face value of $10,000 and no coupon payments? Assume the interest rate is 5 percent (0.05)per year.
A)$0
B)$6,139.13
C)$10,000
D)$95,632.41
E)$100,000.00
Q2) Which of the following will lower the present value of a bond?
A)a fall in the interest rate
B)an increase in the principal
C)a shorter time to maturity
D)an increased risk of default
E)none of the above
Q3) If a bond is sold in the secondary market,
A)the issuing firm is buying back its own bond
B)the issuing firm does not obtain any part of the price
C)the seller remits a portion of the price to the issuing firm
D)the yield must be insufficient to justify sale on the primary market
E)the seller is the issuing firm
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Page 17
Chapter 15: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) A price ceiling in a perfectly competitive market
A)leads to the same result as if the market were monopolized
B)results in a welfare loss
C)is effective only if it is set above the equilibrium price
D)may result from collusion among the firms selling in that market
E)may result from collusion among the consumers buying in that market
Q2) If a perfectly competitive market is in equilibrium and then market demand increases,which of the following would happen?
A)producer surplus would definitely increase and consumer surplus may increase or decrease
B)producer surplus would definitely decrease and consumer surplus may increase or decrease
C)consumer surplus would definitely decrease and producer surplus may increase or decrease
D)consumer surplus would definitely increase and producer surplus may increase or decrease
E)producer and consumer surplus would remain unchanged
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Chapter 16: Governments Role in Economic Efficiency
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Sample
Questions
Q1) Each of the following,except one,is a condition necessary for a private market solution to an externality problem.Which is the exception?
A)Legal rights must be clearly established.
B)Legal rights must be easily transferred.
C)The number of people involved must be very small.
D)The amount of money involved must be very small.
E)Side payments must be arranged without cost.
Q2) A pure private good is one
A)that is nonrival and nonexcludable
B)that is rival but excludable
C)that is rival and excludable
D)that is nonrival but excludable
E)one whose production imposes a cost on third parties
Q3) If firms make agreements that reduce the amount of competition in a market,
A)the market price usually falls
B)they would face penalties under antitrust legislation
C)mergers will result
D)there must be diseconomies of scale in the industry
E)they would face penalties under contract law
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Page 19
Chapter 17: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) If Japan can produce each unit of steel using fewer resources than Canada uses,
A)Canada has an absolute advantage in steel production
B)Japan has a comparative advantage in steel production
C)Canada has a comparative advantage in steel production
D)Canada may have an absolute advantage in producing steel
E)Japan has an absolute advantage in steel production
Q2) If Panama has a high opportunity cost of producing salmon steaks,then it should export salmon steaks.
A)True
B)False
Q3) If the opportunity cost of a television set equals 20 cameras in China,but 10 cameras in Japan,then we know
A)all of the following
B)that China has a comparative advantage in producing cameras
C)that Japan has a comparative advantage in producing TV sets
D)that Japan may well have an absolute disadvantage in producing both goods
E)that market exchange of 1 TV set for 15 cameras would produce not only mutually beneficial trade,but would also split the gains from trade equally between the two countries
Page 20
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