Introduction to Microeconomics Pre-Test Questions
Course Introduction
Introduction to Microeconomics explores the fundamental principles that govern individual and firm decision-making in a market economy. The course covers concepts such as supply and demand, elasticity, consumer choice, production and costs, market structures (including perfect competition, monopoly, and oligopoly), and the role of government in addressing market failures. Students will develop an understanding of how prices are determined, how resources are allocated, and how economic agents respond to incentives, providing a solid foundation for analyzing real-world economic issues and policies.
Recommended Textbook
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) One guideline that should be used whenever possible in developing a model is to
A)keep the model as simple as possible
B)make the model as complex as possible so that it will be more accurate than other models
C)rely on as many assumptions as possible
D)not be concerned about including unnecessary details
E)make certain that the model is an accurate,complete depiction of reality
Answer: A
Q2) Even though households may have unlimited wants,they have to allocate their spending carefully because they
A)do not want their credit card bills to be too high
B)worry about their taxes
C)have limited intelligence
D)have limited incomes
E)basically want to become wealthy
Answer: D
Q3) Macroeconomics focuses on the economy as a whole.
A)True
B)False
Answer: True
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Chapter 2: Scarcity, choice, and Economic Systems
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Sample Questions
Q1) Using the information in Figure 2-11,Jill's opportunity cost of fetching each additional pail is
A)2 boards sawed
B)1/2 of a board sawed
C)8 boards sawed
D)1/5 of a board sawed
E)10 boards sawed
Answer: A
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
Q3) An economy's production possibilities frontier is fixed in the long run.
A)True
B)False
Answer: False
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Chapter 3: Supply and Demand
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Sample Questions
Q1) "Supply curves are upward sloping" is a graphical way of saying
A)supply equals demand
B)price and quantity supplied are inversely related
C)price and quantity demanded are directly related
D)price and quantity supplied are directly related
E)price and quantity demanded are inversely related
Answer: D
Q2) If an increase in a person's income causes that person to buy more apples,then apples are
A)neutral with respect to price
B)complements
C)inferior goods
D)normal goods
E)substitute goods
Answer: D
Q3) Supply curves usually slope upward because producers face increasing opportunity costs when increasing output.
A)True
B)False
Answer: True
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Chapter 4: Working With Supply and Demand
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Sample Questions
Q1) Price floors and price ceilings
A)lead to the same prices and quantities that would be found in a competitive market
B)lead to technical efficiency
C)cause the demand curve to shift to the left
D)usually result from government intervention
E)cause the supply curve to shift to the right
Q2) A stock variable
A)measures a process that takes place over a period of time
B)is used often used to measure the quantity demanded of a good at various prices
C)is related to inventory controls
D)measures a quantity in existence at a moment in time
E)is a definition unique to economics
Q3) Federal subsidies to higher education have the effect of
A)increasing the number of people seeking higher education and lowering tuition
B)increasing the number of people seeking higher education and raising tuition
C)decreasing the number of people seeking higher education and lowering tuition
D)decreasing the number of people seeking higher education and raising tuition
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Chapter 5: Elasticity
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Sample Questions
Q1) Which of the following statements about straight-line demand curves is true?
A)The price elasticity of demand becomes larger in absolute value as price falls.
B)The price elasticity of demand becomes smaller in absolute value as price falls.
C)The price elasticity of demand is constant along the curve.
D)The price elasticity of demand and the slope of the demand curve are the same.
E)Demand is price elastic everywhere along the curve.
Q2) If the price of a certain brand of sneakers falls from $27.50 to $22.50,and the quantity demanded by consumers increases from 15 to 25 pairs per week,then the price elasticity of demand is
A)0.25
B)1.00
C)2.75
D)1.50
E)2.50
Q3) If a change in price does not lead to any change in revenue,then demand over that range of prices is inelastic.
A)True
B)False
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Chapter 6: Consumer Choice
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Sample Questions
Q1) Alice has spent all of her income on ten different goods,and knows that the marginal utilities per dollar spent on the ten goods are equal.Which of the following statements is correct?
A)She could possibly increase her total utility by redistributing her income among the ten items.
B)She has violated the assumption of rationality.
C)The law of diminishing marginal utility does not apply to her.
D)Any reallocation of income among the ten items will reduce her total utility.
E)She must be at a point inside of her budget line.
Q2) Suppose that the price of a pizza is $10 and that the price of a blouse is $30.At her present level of consumption,Magda's ratio of marginal utility of pizza to marginal utility of blouses is 1/4.To maximize total utility,she should
A)buy more pizzas and fewer blouses
B)buy fewer pizzas and more blouses
C)continue to buy the same quantities of pizza and blouses
D)spend more time consuming pizza
E)spend more time buying blouses
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Page 8
Chapter 7: Production and Cost
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Sample Questions
Q1) The vertical distance between a firm's average total cost curve and its average variable cost curve is its
A)marginal cost
B)sunk cost
C)total variable cost
D)total fixed cost
E)average fixed cost
Q2) The Marginal Cost curve will
A)cut ATC at the minimum of ATC but cut AVC at a point to the left of the minimum of AVC.
B)cut ATC at the minimum of ATC but cut AVC at a point to the right of the minimum of AVC.
C)cut AVC at the minimum of AVC but cut ATC at a point to the left of the minimum of ATC.
D)cut AVC at the minimum of AVC but cut ATC at a point to the right of the minimum of ATC.
E)cut both ATC and AVC at their respective minimums
Q3) Total fixed costs decrease as output expands.
A)True
B)False
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Chapter 8: How Firms Make Decisions: Profit Maximization
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Sample Questions
Q1) In order to maximize its profit in the short run,an airline should offer an additional flight whenever
A)its marginal revenue exceeds its sunk costs
B)it marginal revenue exceeds its average total cost
C)the average seat price exceeds its sunk costs
D)the average seat price exceeds its average total cost
E)the additional revenue exceeds the additional costs
Q2) Figure 8-9 shows the demand schedule faced by an artist for reproductions of his paintings.What is the marginal revenue from expanding from selling reproductions to 400?
A)$3,000
B)$1
C)$0
D)-$1,000
E)-$3,000
Q3) In order to maximize profits,a firm should decrease output whenever total cost exceeds total revenue.
A)True
B)False
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Page 10
Chapter 9: Perfect Competition
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Sample Questions
Q1) If demand increases in a perfectly competitive market,
A)the market price will fall
B)firms already in the market will supply more output
C)new firms will enter the market
D)the short-run market supply curve will shift to the right
E)each firm's marginal cost curve will shift to the right
Q2) In a perfectly competitive market,a new firm can enter without any cost.
A)True
B)False
Q3) For market prices that are below the shut-down point of every firm in the market,the short-run market supply curve
A)slopes upward
B)slope downward
C)follows the horizontal axis
D)rises at a 45-degree angle
E)follows the vertical axis
Q4) In the long run,an entrepreneur who owns a perfectly competitive firm will earn no income from that firm.
A)True
B)False
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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) Diminishing marginal returns are the reason why some industries have positively-sloped long-run average cost curves.
A)True
B)False
Q3) In a perfectly competitive market,a technological advance allows all firms to earn higher economic profits in the long run.
A)True
B)False
Q4) In perfect competition,technological advances will allow economic profits for A)all firms.
B)only the firm developing the new technology.
C)early adopters.
D)none of the firms,as the advance will be immediately adopted by all of them.
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Chapter 11: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Cartels frequently break down in the long run because
A)they are illegal
B)tacit collusion is illegal
C)contracts and agreements are legally binding
D)cooperative behavior usually lowers profits for the entire industry
E)members have an incentive to increase output
Q2) A firm's minimum efficient scale occurs where the long-run average total cost curve reaches its minimum.
A)True
B)False
Q3) The U.S.market for locomotives is divided between two producers;General Electric has 70 percent of the market and General Motors has 30 percent.This market is an example of
A)a bilateral monopoly
B)monopolistic competition
C)a collusive monopoly
D)a duopoly
E)a cartel
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13
Chapter 11: Monopoly
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Sample Questions
Q1) A market that involves only one seller of a good or service is known as A)a monopoly
B)perfect competition
C)monopolistic competition
D)an oligopoly
E)perfect monopolistic competition
Q2) Brittany provides manicures at the only salon in town.Her marginal cost is constant at $5 per client,her fixed cost is $25 per day,and she is able to do 8 manicures per day.On a given day,half of her clients are willing to pay $15 for a manicure;half are willing to pay only $10.If she charges $15 for those willing to pay a higher price and $10 to her other clients,then her maximum daily profit equals
A)$55
B)$100
C)$60
D)$35
E)$75
Q3) Marginal revenue,average revenue,and price are all equal for a monopolist.
A)True
B)False
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Page 14
Chapter 12: Labor Markets
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Sample Questions
Q1) A firm's labor demand curve is derived from the supply of the goods and services it produces.
A)True
B)False
Q2) If labor is the only variable input,a firm's labor demand curve is
A)labor's marginal product curve
B)the upward-sloping portion of its marginal revenue product of labor curve
C)the downward-sloping portion of its marginal revenue product of labor curve
D)the marginal revenue product of labor curve above the reservation wage rate
E)the marginal revenue product of labor curve above the average variable cost curve
Q3) Figure 12-9 shows the number of baseballs a manufacturer can produce per day with different quantities of labor.Each baseball sells for $5.If the wage rate is $380 per day,the firm
A)should hire two workers
B)should hire five workers
C)cannot justify hiring any workers
D)should hire four workers
E)should hire three workers
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Chapter 13: B: Labor Markets
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Sample Questions
Q1) A labor market is divided into two segments.All workers have the same qualifications and find jobs in either segment equally attractive.Initially,both segments are in competitive equilibrium.Then the development of employer prejudice reduces employment of minorities in one segment.In the long run,there will likely be a change in
A)wage rates and the composition of the work force in both segments
B)neither wage rates nor the composition of the work force in either segments
C)wage rates,but not the composition of the work force,in both segments
D)the composition of the work force,but not wage rates,in both segments
E)the wage rate,but not the composition of work force,in the discriminating segment only
Q2) Even if employers are not prejudiced,employee or customer discrimination will tend to be reinforced by market forces and may lead to permanent wage differences between the favored and unfavored groups.
A)True B)False
Q3) 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) A shipping company can buy either a new truck or a used truck.Each truck will generate $4,000 in net revenue per year.But the new truck has a useful life of three years,whereas the used truck has a useful life of only two years.If the interest rate is 5 percent (0.05)per year,what is the difference in value between the two trucks? (Assume that each year's revenue is received at the end of the year. )
A)$0
B)$4,000.00
C)$3,455.35
D)$1,185.19
E)$8,000.00
Q2) Consider the following three bonds,Bond F,Bond J and Bond P.Bonds F and P mature in 1 year while Bond J matures in 2 years.Bond F and J have a face value of $10,000 while Bond P has a face value of $12,000.If the interest rate is 15%,rank the three bonds from highest present value to lowest present value.
A)Bond F,Bond P,Bond J
B)Bond P,Bond F,Bond J
C)Bond J,Bond F,Bond P
D)Bond P,Bond J,Bond F
E)Bond F,Bond J,Bond P
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Chapter 15: Economic Efficiency and the Competitive Ideal
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Sample Questions
Q1) Consider a market with a price ceiling.If the price ceiling is raised which of the following would happen?
A)The consumer surplus would increase,the producer surplus would decrease and the dead weight loss would decrease
B)The consumer surplus would increase,the producer surplus would decrease and the dead weight loss would increase
C)The consumer surplus,the producer surplus and the dead weight loss would all decrease
D)The consumer surplus,the producer surplus and the dead weight loss would all increase
E)The consumer surplus would decrease,the producer surplus would increase and the dead weight loss would decrease
Q2) In Figure 14-1,which area represents consumer surplus?
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Chapter 16: Governments Role in Economic Efficiency
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Sample Questions
Q1) A candy bar is an example of a good that is
A)both rival and excludable
B)non-rival but excludable
C)both non-rival and non-excludable
D)rival but non-excludable
E)rival but usually produced inefficiently
Q2) Suppose that Pat has the legal right to fly an extremely noisy airplane over Chris's apartment and that he values that right at $1,000 per year.Chris would be willing to pay $800 per year to avoid the noise.In this case,
A)Pat will be required to eliminate the overflight
B)Chris will move to a new apartment
C)Pat and Chris have a powerful incentive to eliminate the overflight because both would benefit from it
D)some governmental agency will step in to require Pat to choose a different flight pattern
E)there is no basis for an agreement to eliminate the overflight
Q3) Pollution is a form of market failure called a public externality.
A)True
B)False
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Page 19
Chapter 17: Comparative Advantage and the Gains From International Trade
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Sample Questions
Q1) If Country A exports a good to Country B,who is made worse off?
A)The producers in Country A and the consumers in Country B
B)The consumers in Country A and the consumers in Country B
C)The producers in Country A and the producers in Country B
D)The consumers in Country A and the producers in Country B
E)Only the consumers in Country A will be worse off from this trade agreement
Q2) A tariff is
A)a law restricting the quantity of a good that may be imported
B)a tax imposed on imports
C)a penalty imposed on consumers for supplying goods to a market
D)the terms of trade between two nations
E)the ratio of opportunity costs in two nations
Q3) Assume that Spain can produce a commodity using fewer resources than any other country.Spain will export this commodity even if other countries have a lower opportunity cost of producing it.
A)True
B)False
Q4) If countries have different resource endowments,trade is usually not possible.
A)True
B)False
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