Introduction to Microeconomics Solved
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Course Introduction
Introduction to Microeconomics is a foundational course that explores the principles governing individual economic agents, including consumers, firms, and resource owners. Students will learn about supply and demand, market equilibrium, elasticity, consumer behavior, production costs, and various market structures such as perfect competition, monopoly, and oligopoly. Emphasis is placed on understanding how individuals and businesses make decisions regarding the allocation of scarce resources and how these decisions interact within markets to determine prices and the distribution of goods and services. The course provides the essential analytical tools and critical thinking skills necessary for analyzing real-world economic issues at the micro level.
Recommended Textbook
Principles of Microeconomics 9th Edition by John Sayre Alan Morris
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Chapter 1: The Economic Problem
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Q1) What are the factors of production?
A)Land,labour,money,and enterprise.
B)Land,labour,money,and capital.
C)Land,labour,capital,and enterprise.
D)Competition,command,custom,and cooperation.
Answer: C
Q2) If each country is self-sufficient (no trade)and each allocates one half of its resources to producing each of the two products,what will be the output in each country?
A)40 bread and 20 figs in Rome and 20 bread and 40 figs in Cathay.
B)40 bread and 0 figs in Rome and 20 bread and 0 figs in Cathay.
C)0 bread and 20 figs in Rome and 0 bread and 40 figs in Cathay.
D)20 bread and 10 figs in Rome and 10 bread and 20 figs in Cathay.
Answer: D
Q3) Which pair of the four Cs plays the dominant role in Canada today?
A)Custom and competition.
B)Cooperation and competition.
C)Command and competition.
D)Command and cooperation.
Answer: C
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Chapter 2: Demand and Supply: An Introduction
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Q1) What is the distinction between supply and quantity supplied?
Answer: Supply refers to the whole range of quantities that are supplied at various prices as depicted by a supply schedule or supply curve.The quantity supplied refers to a particular quantity at a particular price,i.e. ,a point on a supply curve.
Q2) Refer to the above information to answer this question.If the developer decides to set the price at $1.8 million for each apartment,what is the quantity demanded?
A)14.
B)15.
C)16.
D)17.
E)18.
Answer: A
Q3) What is the effect of an increase in the price of a product?
A)An increase in supply.
B)A decrease in supply.
C)An increase in the quantity supplied.
D)A decrease in the quantity supplied.
Answer: C
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Chapter 3: Demand and Supply: An Elaboration
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Q1) What is a price ceiling? What happens to the relationship between quantity demanded and supplied with an effective price ceiling?
Answer: A price ceiling is a government imposed limit on how high a price can be charged.With an effective price ceiling,quantity demanded exceeds quantity supplied.
Q2) Refer to the graph above to answer this question.What is the result if the government establishes minimum wage of $7 in this market?
A)Firms would employ 22,000 workers.
B)There would be a shortage of 3,000 workers.
C)1,000 of the employed workers would be prepared to work for $1 an hour less.
D)There would be 3,000 unemployed workers.
E)19,000 workers would be willing and able to work.
Answer: D
Q3) Distinguish between shortage and scarcity.
Answer: A shortage exists when quantity supplied is less than quantity demanded.Scarcity is a condition where wants are always greater than what can be produced because of limited resources.
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Chapter 4: Elasticity
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Q1) Refer to the information above to answer this question.Which of the following statements is correct?
A)Demand is inelastic if the price changes from $5 to $7.
B)Demand is inelastic if the price changes from $4 to $7.
C)Demand is inelastic if the price changes from $6 to $10.
D)Demand is unitary elastic if the price changes from $1 to $10.
E)None of the choices are correct.
Q2) What is the formula used to calculate income elasticity?
A)Change in income divided by change in quantity.
B)Percentage change in income divided by percentage change in quantity.
C)Change in quantity divided by change in income.
D)Percentage change in quantity divided by percentage change in income.
E)Percentage change in price divided by percentage change in income.
Q3) Refer to the information above to answer this question.What is the price elasticity of demand for product X between years 1 and 2?
A)0.31.
B)1.0.
C)3.2.
D)22.2.
Q4) The following graph shows the demand and supply for i-Pods.
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Chapter 5: Consumer Choice
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Q1) Refer to the above information to answer this question.If the price of both water and diamonds is $100 per unit,and Lisa has $500 to spend,how many units of each would she purchase?
A)5 waters.
B)4 waters and 1 diamond.
C)3 waters and 2 diamonds.
D)2 waters and 3 diamonds.
E)1 water and 4 diamonds.
Q2) Refer to Table 5.16 to answer this question.If Ketta has a budget of $15 and the price of croissants is $3,but the price of coffees is $2,what will be her optimal purchase?
A)5 croissants.
B)3 coffees and 2 croissants
C)3 coffees and 3 croissants
D)4 coffees and 3 croissants.
E)6 coffees and 1 croissant.
Q3) A new bakery has just opened,and in an attempt to attract awareness,it is offering free unlimited samples of its chocolate chip cookies.Assuming you can only consume the cookies in-store (you cannot take them home),how many pieces of cookie would you have?
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Chapter 6: A Firms Production Decisions and Costs in the
Short Run
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Q1) Which of the following statements about the marginal product of labour is correct?
A)It may either rise or fall as more labour is used.
B)It always rises as more labour is used.
C)It always falls as more labour is used.
D)There is no relationship between marginal product and labour.
Q2) If we assume that the level of output remains unchanged,which of the following could cause a decrease in average total,average variable,and marginal costs?
A)A decrease in the price of resources.
B)An increase in the price of resources.
C)An increase in the firm's capacity output.
D)A decrease in the firm's capacity output.
E)A decrease in the firm's fixed cost.
Q3) Refer to the information above to answer this question.What is the total variable cost of producing 50 units of output?
A)$150.
B)$260.
C)$410.
D)Cannot be determined.
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Chapter 7: Costs in the Long Run
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Q1) The fact that a one-minute television commercial costs a large firm no more than a small firm is an example of which of the following?
A)Increasing returns to scale.
B)Pecuniary economies of scale.
C)Technical economies of scale.
D)Management specialization.
Q2) What factor is important in determining the shape of short run cost curves (marginal cost,average cost)but plays no role in determining the shape of long-run cost curve? What are the most important factors in determining the shape of the long-run cost curve? Explain.
Q3) Suppose that a firm's output increases from 500 to 1,000 units and its total cost increases from $50,000 to $100,000,and if the price of inputs and technology remain unchanged,calculate the change in average total cost and state whether constant returns to scale,economies of scale or diseconomies of scale exist in this case.
A)Increase of $100 and economies of scale
B)Increase of $100 and diseconomies of scale
C)Increase of $100 and constant returns to scale
D)No change and constant returns to scale
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Chapter 8: Perfect Competition
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Q1) What is break-even output?
A)The output at which the total revenue just covers a firm's total fixed cost.
B)The output at which the total revenue just covers a firm's total variable cost.
C)The output at which the total revenue just covers a firm's fixed and variable costs including normal profits.
D)The output at which the firm is making zero normal profits.
Q2) Which of the following conditions means that the perfectly competitive firm is maximizing its profits?
A)That the price equals average revenue.
B)That the price is equal to marginal revenue.
C)That the price is equal to marginal cost.
D)That the price is equal to average cost.
Q3) Explain why average revenue is equal to marginal revenue for a perfectly competitive firm?
Q4) What is the term for the price at which the firm makes zero economic profits?
A)Shutdown price.
B)Average price.
C)Fixed price.
D)Break-even price.
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Chapter 9: An Evaluation of Competitive Markets
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Q1) Refer to the above information to answer this question.Given the marginal private benefits and marginal private costs of providing daycare spaces,what is the equilibrium quantity of daycare spaces provided in the market?
A)3,000.
B)5,000.
C)7,000.
D)8,000.
E)9,000.
Q2) Refer to Figure 9.9 to answer the question.Suppose this graph represents a polluting industry and that the government wishes to decrease its output by 10 units.Which of the following will produce this result?
A)Imposing an excise tax of $2.
B)Imposing an excise tax of $1.
C)Granting a subsidy of $2 to producers.
D)Granting a subsidy of $1 to producers.
E)Granting a subsidy of $2 to consumers.
Q3) Explain three ways in which the government can reduce pollution.
Q4) Distinguish between external cost and external benefit.
Q5) List and briefly explain five types of market failures.
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Chapter 10: Monopoly
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Questions
Q1) What are the main features of a monopoly?
Q2) Which of the following statements is true regarding unregulated monopolies?
A)They are productively,but not allocatively,inefficient.
B)They are allocatively,but not productively,inefficient.
C)They are both productively and allocatively inefficient.
D)They are neither productively and allocatively inefficient.
Q3) Refer to the above graph to answer this question.If the monopolist is unregulated and wishes to maximize its total revenue,what will be its price and output?
A)$0 and 80.
B)$10 and 70.
C)$10 and 140.
D)$40 and 80.
E)$45 and 70.
Q4) Using a graph,contrast monopoly and perfect competition in terms of profit-maximizing price and output.
Q5) "A monopolist sets its price such that total revenue is maximized." Evaluate this statement.
Q6) In terms of both totals and averages/marginals,identify the profit-maximizing output for the monopolist.
Page 12
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Chapter 11: Imperfect Competition
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Q1) Refer to the information above to answer this question.Which of the following statements is correct if Calvin and Hobbs reach a secret agreement between themselves concerning advertising budgets and this agreement holds because neither cheats?
A)Both will have a low advertising budget and both will earn profits of $600.
B)Both will have a low advertising budget and both will earn profits of $400.
C)Both will have a high advertising budget and both will earn profits of $800.
D)Both will have a high advertising budget and Calvin will earn a profit of $300 and Hobbs will earn a profit of $800.
Q2) Both the kinked demand curve and the price leadership variants of oligopoly theory assume that firms collude with each other.
A)True
B)False
Q3) The assumption that firms attempt to maximize sales revenue underlies much of the analysis in microeconomics.
A)True
B)False
Q4) Identify three important aspects of the oligopoly market.
Q5) What are the main features of an oligopoly?
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Chapter 12: The Factors of Production
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Q1) Refer to the information above to answer this question.Which of the following statements is correct?
A)This firm is hiring labour in a perfectly competitive market and selling its product in an imperfectly competitive market.
B)This firm is both hiring its labour and selling its product in perfectly competitive markets.
C)This firm is hiring its labour in a perfectly competitive market but no comment is possible about the market conditions under which it is selling its product.
D)This firm is selling its product in a perfectly competitive market but no comment can be made about the market conditions under which it is hiring its labour.
Q2) An employer operating under conditions of a perfectly competitive labour market will hire labour up to the point where the marginal product of labour equals the wage rate.
A)True
B)False
Q3) Joseph Schumpeter argued that the engine of growth and development is the capitalist system.What arguments did Schumpeter offer to support his views?
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Chapter 13: International Trade
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Q1) Refer to the information above to answer this question.Assuming no trade,what are the equilibrium price and quantity of wine in Germany?
A)$6 and 10.
B)$7 and 5.
C)$8 and 7.
D)$9 and 7.
Q2) Distinguish between the European Union (EU)and North American Free Trade Agreement (NAFTA).
Q3) Refer to the information above to answer this question.What is the opportunity cost of one unit of rice cakes in Mental?
A)0.25 units of soya milk.
B)0.5 units of soya milk.
C)2 units of soya milk.
D)10 units of soya milk.
E)20 units of soya milk.
Q4) David Ricardo first introduced the theory of comparative advantage.
A)True
B)False
Q5) List five ways to restrict imports.
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