Introduction to Microeconomics Test Bank
Course Introduction
Introduction to Microeconomics provides students with a foundational understanding of how individuals, households, and firms make decisions within an economic system. The course examines the principles of supply and demand, price determination, consumer and producer behavior, market structures, and the role of government in addressing market failures. Through real-world examples and analytical tools, students gain insights into resource allocation, production efficiency, and the impact of market forces on everyday economic decisions. This course equips learners with the analytical skills necessary to interpret economic phenomena and evaluate policy options 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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Sample Questions
Q1) What do most of the disagreements among economists involve?
A)The appropriate goals and policies for the economy.
B)Generalizing about facts.
C)Gathering data.
D)The use of statistics.
E)The use of mathematics.
Answer: A
Q2) Which of the following statements describes the law of increasing costs?
A)As the quantity produced of any particular item decreases,its per unit cost of production rises.
B)As the quantity produced of any particular item increases,its per unit cost of production rises.
C)The prices of consumer goods and services always rise and never fall.
D)If you wait to make a purchase,you will pay a higher price.
E)The total cost of production rises as output goes up.
Answer: B
Q3) Allocative efficiency is also referred to as productivity.
A)True
B)False
Answer: False
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Chapter 2: Demand and Supply: An Introduction
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Q1) What is the effect of consumers' expecting that the future price of a product will increase?
A)It will cause an increase in the quantity demanded.
B)It will cause an increase in demand.
C)It will cause a decrease in demand.
D)It will cause a decrease in the quantity demanded.
E)It will cause a decrease in supply.
Answer: B
Q2) Refer to the graph above to answer this question.What is the effect if the price is $800?
A)There is a surplus of 30.
B)There is a shortage of 30.
C)160 will be purchased.
D)There is a shortage of 60.
E)The price will increase.
Answer: D
Q3) Define demand.
Answer: Demand refers to the quantities that consumers are willing and able to buy per period of time at various prices.
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Chapter 3: Demand and Supply: An Elaboration
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Sample Questions
Q1) Refer to the information above to answer this question.What are the implications if the wheat market is in equilibrium?
A)The market price would be $10 per bushel and there would be a shortage of 20 bushels of wheat.
B)The market price would be $12 per bushel and there would be a shortage of 10 bushels of wheat.
C)The market price would be $14 per bushel and 20 bushels of wheat would be demanded.
D)The market price would be $16 per bushel and there would be a surplus of 10 bushels of wheat.
E)The market price would be $18 per bushel and there would be a surplus of 20 bushels of wheat.
Answer: C
Q2) Under what circumstances might an illegal market exist?
A)When a price ceiling is imposed.
B)When a price floor is imposed.
C)When price is not at equilibrium.
D)When there is a big surplus of a product.
Answer: A
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Chapter 4: Elasticity
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Sample Questions
Q1) What is price elasticity of demand?
A)The responsiveness of price to a change in the quantity demanded.
B)The responsiveness of quantity demanded to a change in price.
C)Price divided by quantity demanded.
D)Price multiplied by quantity demanded.
Q2) What do products such as movies,tomatoes and restaurant meals have in common?
A)They are all inferior goods.
B)They all are likely to have incomes elasticities less than one.
C)The demand for all three goods is price elastic.
D)The demand for all three goods is price inelastic.
E)They all have a small number of substitute goods.
Q3) Refer to the graph above to answer this question.Which of the following statements is correct?
A)The price elasticity of demand between points A and C on D<sub>3</sub> is 0.267.
B)The price elasticity of demand between points A and C on D<sub>3</sub> is 0.375.
C)The demand between points A and C on D<sub>3</sub> is elastic.
D)The slope of demand curve D<sub>1</sub> and its price elasticity are the same.
Q4) What is the main determinant of the price elasticity of supply?
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Chapter 5: Consumer Choice
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Q1) Refer to the above graph to answer this question.If the price of rice crackers are $3,beer is $2,and Carla has a budget of $15,how much of each will she purchase if she wishes to maximize her total utility?
A)2 crackers and 4 beers.
B)3 crackers and 3 beers.
C)3 crackers and 4 beers.
D)4 crackers and 3 beers.
E)5 crackers.
Q2) The term "marginal" means the difference between averages.
A)True
B)False
Q3) Define the following: a)utility b)marginal utility c)the law of diminishing marginal utility.
Q4) What is meant by the term margin?
A)A measure of desire.
B)The extra or additional unit.
C)A measure of the ability to purchase.
D)The difference between the total and the average.
Q5) Differentiate between marginal utility and total utility.
Q6) Explain what is meant by the term consumer surplus.
Page 7
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Chapter 6: A Firms Production Decisions and Costs in the Short Run
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Q1) Refer to the information above to answer this question.What is the value of marginal cost when MP is maximized?
A)$4.
B)$5.
C)$50.
D)$80.
E)$120.
Q2) What is the term for the total of all costs that vary with the level of output?
A)Average variable cost.
B)Marginal cost.
C)Variable cost.
D)Total variable cost.
E)Total cost.
Q3) Refer to the graph above to answer this question.What output is the most productive output?
A)40.
B)70.
C)80.
D)90.
Q4) Why would a firm not produce above economic capacity indefinitely?
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Chapter 7: Costs in the Long Run
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Sample Questions
Q1) Economies of scale is the situation in which average costs increase as a firm grows in size.
A)True
B)False
Q2) All of the following,except one,would result in lower average cost.Which is the exception?
A)An increase in output if the firm was operating below its capacity output.
B)Building a larger plant if the firm was experiencing increasing returns to scale.
C)Down-sizing the scale of operations if the firm was experiencing diseconomies of scale.
D)Down-sizing the scale of operations if the firm was experiencing constant returns to scale.
Q3) The right size of firm is determined by the minimum point on its short-run average cost curve.
A)True
B)False
Q4) "The SRAC and LRAC curves are both typically U-shaped for the same reason." Explain why this statement is incorrect.
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Chapter 8: Perfect Competition
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Sample Questions
Q1) A firm will maximize its profits at the output at which the difference between its average revenue and average cost is greatest.
A)True
B)False
Q2) What does break-even output mean?
A)The output at which the price is equal to the average revenue.
B)The output at which the price is equal to the marginal revenue.
C)The output at which the price is equal to the average cost.
D)The output at which the price is equal to marginal cost.
Q3) Refer to the above information to answer this question.What is the name of the market in which all buyers and sellers have no control over the price?
A)1.
B)2.
C)3.
D)4.
E)5.
Q4) Explain why average and marginal revenues are the same for the perfectly competitive producer.
Q5) Differentiate between a firm and an industry.
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Chapter 9: An Evaluation of Competitive Markets
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Sample Questions
Q1) What is productive efficiency?
A)Production of a combination of products that best satisfies consumers' demands.
B)The maximization of inputs for a given level of output.
C)The production of an output at the lowest possible average cost.
D)The minimization of output for a given level of inputs.
Q2) Refer to the diagram above.When quantity supplied and quantity demanded are equal,the sum of consumer surplus and producer surplus is equal to A)$600.
B)$1,200.
C)$1,400.
D)$2,000.
E)$2,400.
Q3) Differentiate between a quasi-public good and a public good?
Q4) When does allocative efficiency occur?
A)When the price of the product is equal to its short-run average cost.
B)When the price of the product is equal to its long-run average cost.
C)When the price of the product is equal to its marginal cost.
D)When the price of the product is below its marginal cost.
Q5) Distinguish between external cost and external benefit.
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Chapter 10: Monopoly
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Sample Questions
Q1) All of the following statements,except one,are true about a monopolist.Which is the exception?
A)Its demand curve is downward-sloping.
B)Average revenue and price are the same.
C)Marginal revenue and price are the same.
D)Marginal revenue and marginal cost are equal at the profit maximizing output.
Q2) Refer to the graph above to answer this question.What is the maximum profit?
A)0.
B)$2,000.
C)$3,000.
D)$4,000.
Q3) Refer to Figure 10.10 to answer this question.What is the level of profits at the profit-maximizing output?
A)0.
B)$20.
C)$150.
D)$450.
E)$600.
Q4) Differentiate between a demand curve for a perfectly competitive firm and that for a monopolist.
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Chapter 11: Imperfect Competition
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Sample Questions
Q1) In which of the following market structures is entry easiest?
A)Monopolistic competition.
B)Oligopoly.
C)Monopoly.
D)Duopoly.
Q2) Who challenged the fundament assumption of profit maximization?
A)John Galbraith.
B)George Stigler.
C)Adam Smith.
D)John Maynard Keynes.
Q3) If we assume that price leadership prevails in a particular industry,what might prevent the leader from announcing a dramatic increase in the price of the product sold?
A)The fear that the AC of the other firms within the industry would decrease.
B)The fear that new firms would be tempted to enter the industry.
C)The fear that one of the other firms would break ranks and increase their price even more.
D)The fear that such action would provide proof that the firms are engaged in overt collusion.
Q4) Why do firms advertise?
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Chapter 12: The Factors of Production
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Q1) Refer to the above information to answer this question.At its optimal output,what quantity of labour will Nearly Done Inc.employ if the market wage rate is $8?
A)1.
B)6.
C)7.
D)8.
E)9.
Q2) All of the following statements,except one,are correct concerning the labour market for high-profile professional athletes.Which is the exception?
A)The supply is inelastic.
B)The wage rate is demand-driven.
C)There is an element of economic rent in their pay.
D)There is no transfer earnings involved in their pay.
Q3) Using a graph,contrast a firm operating in a perfectly competitive (pc)labour market and in a monopsony labour market.
Q4) The size of Canada's labour force has doubled over the last 30 years.
A)True
B)False
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Chapter 13: International Trade
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Q1) Refer to the graph above to answer this question.Assuming free trade,what is the opportunity cost of 1 more aircraft?
A)0.033 railcars.
B)33.33 railcars.
C)30 railcars.
D)50 railcars.
E)3,000 railcars
Q2) Refer to the information above to answer this question.Suppose that each country was producing combination D before trade but then specializes in the product in which it has a comparative advantage.What would be the total gains from trade?
A)40 million units of rice cakes.
B)100 million units of rice cakes.
C)60 million units of soya milk and 40 million units of rice cakes.
D)40 million units of soya milk and 60 million units of rice cakes.
E)20 million units of soya milk.
Q3) If comparative cost is the basis for trade,why are the developing nations,which have very low wage rates,not the world's greatest trading nations?
Q4) List five ways to restrict imports.
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