Introduction to Microeconomics
Test Preparation
Course Introduction
Introduction to Microeconomics is a foundational course that explores the principles governing individual economic behavior, the nature of markets, and the role of government in resource allocation. Students will examine how consumers and firms make decisions, how prices are determined through supply and demand, and how various market structures such as perfect competition, monopoly, and oligopoly affect outcomes in the economy. The course also introduces key concepts such as elasticity, production costs, and market failures, providing the analytical tools needed to understand real-world economic issues and policy debates.
Recommended Textbook
ECON MICRO 5th Edition by
William A. McEachern
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21 Chapters
3187 Verified Questions
3187 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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150 Verified Questions
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Sample Questions
Q1) Patrick decided to go to class today instead of going to the movies. He made this decision because:
A)Patrick's additional benefit of going to class exceeds the additional cost of going to class.
B)Patrick's additional benefit of going to the movies exceeds the additional cost of going to class.
C)Patrick's additional benefit of going to class exceeds the additional cost of going to the movies.
D)Patrick's additional benefit of going to the movies exceeds the additional cost of going to the movies.
E)Patrick's additional benefit of going to class equals the additional cost of going to the movies.
Answer: A
Q2) The ceteris paribus assumption is a behavioral assumption.
A)True
B)False
Answer: False
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Chapter 2: Economic Tools and Economic Systems
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159 Verified Questions
159 Flashcards
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Sample Questions
Q1) Don can produce 10 pens or 20 pencils in one hour while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct?
A)Bob has an absolute advantage over Don in the production of pencils.
B)Bob has an absolute advantage over Don in the production of pens.
C)Bob has a comparative advantage over Don in the production of pencils.
D)Don has a comparative advantage over Bob in the production of pens.
E)Don does not have a comparative advantage in the production of either good.
Answer: B
Q2) The opportunity cost of going to college is the same for all students who are receiving full-tuition scholarships.
A)True
B)False
Answer: False
Q3) A point inside the production possibilities curve illustrates a situation in which resources are not fully employed.
A)True
B)False
Answer: True
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4
Chapter 3: Economic Decision Makers
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174 Flashcards
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Sample Questions
Q1) Which form of business organization is the least common in the United States?
A)Sole proprietorship
B)Partnership
C)Corporation
D)Nonprofit organization
E)Conglomerate
Answer: B
Q2) Import quotas on sugar entering the United States result in lower sugar prices in the United States.
A)True
B)False
Answer: False
Q3) Gross Domestic Product is the market value of:
A)all exchanges made during the course of a year.
B)all final goods produced during the course of a year.
C)all monetary transactions during the course of a year.
D)all the goods produced during the course of a year over and above what is required to maintain the population and the stock of capital.
E)all final goods sold during the course of a year.
Answer: B
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Chapter 4: Demand, Supply, and Markets
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Sample Questions
Q1) The income effect refers to the impact of a change in:
A)money income of consumers on the price of a good.
B)the relative price of a good on the demand for other goods.
C)the price of a good on a consumer's real income.
D)the price of a substitute good on a consumer's budget.
E)money income of consumers on the demand for a good.
Q2) Which of the following is likely to increase the supply of wheat?
A)An increase in the cost of fertilizer
B)A decrease in the price of bread
C)A decrease in the price of corn
D)An increase in land prices
E)An expectation that the price of wheat will be higher in near future
Q3) A decrease in the price of peanut butter will cause a leftward shift of the supply curve of peanut butter.
A)True
B)False
Q4) Demand for an inferior good decreases as consumer income increases.
A)True
B)False
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Chapter 5: Elasticity of Demand and Supply
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Sample Questions
Q1) The supply curve for dorm rooms on a university campus is likely to be:
A)downward sloping.
B)relatively flat.
C)vertical.
D)horizontal.
E)upward sloping.
Q2) Demand is inelastic only if the price elasticity of demand has an absolute value:
A)of 1.
B)greater than 1.
C)greater than 0 but less than 1.
D)greater than 0.
E)greater than 5.
Q3) If the price elasticity of supply in the kiwi fruit industry equals 1, supply is:
A)perfectly elastic.
B)relatively elastic.
C)unit elastic.
D)relatively inelastic.
E)perfectly inelastic.
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Chapter 6: Consumer Choice and Demand
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Sample Questions
Q1) As price falls along the demand curve for pretzels, _____.
A)consumer surplus remains unchanged
B)consumer surplus decreases
C)total utility decreases
D)consumer expenditure changes
E)marginal utility increases
Q2) A utility-maximizing consumer equalizes marginal utilities across all goods.
A)True
B)False
Q3) Suppose Lorna buys more sweaters even if the price of sweaters rises. Other things constant, she is acting contrary to the law of _____.
A)equi-marginal utility
B)increasing costs
C)one price
D)diminishing costs
E)demand
Q4) Marginal utility can be objectively measured and compared between one individual and another.
A)True
B)False
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Chapter 7: Production and Cost in the Firm
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Sample Questions
Q1) Which of the following is true of the relationship between average and marginal costs?
A)If the marginal cost is greater than the average cost, the average cost is increasing.
B)If the marginal cost is greater than the average cost, the average cost is decreasing
C)If the marginal cost is greater than the average cost, the marginal cost is increasing
D)If the marginal cost is greater than the average cost, the marginal cost is decreasing
E)If the marginal cost is greater than the average cost, the total cost is decreasing
Q2) Cash payments for steel to be used in the production process would be an example of _____.
A)sunk costs
B)fixed costs
C)explicit costs
D)implicit costs
E)entrepreneurial costs
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Chapter 8: Perfect Competition
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Sample Questions
Q1) Claude's Copper Clappers sells clappers for $60 each in a perfectly competitive market. At its present level of output, Claude's marginal cost is $65, average variable cost is $25, and average total cost is $62. To improve his profit or loss situation, Claude should _____.
A)increase output
B)reduce output but not to zero
C)continue to produce the present level of output
D)shut down
E)raise the price
Q2) Marginal revenue is defined as:
A)total revenue divided by quantity.
B)total revenue minus total cost.
C)the change in total revenue divided by the change in quantity.
D)the change in total revenue divided by quantity.
E)the change in total revenue divided by the change in per unit price.
Q3) In a perfectly competitive market, profit attracts entry of new firms in the market in the long run.
A)True
B)False
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Page 10
Chapter 9: Monopoly
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Sample Questions
Q1) When compared to firms in perfect competition, monopolists tend to charge:
A)lower prices and offer lower quantities of output.
B)higher prices and offer lower quantities of output.
C)lower prices and offer higher quantities of output.
D)higher prices and offer higher quantities of output.
E)higher prices but offer the same quantity of output.
Q2) A profit-maximizing monopolist that produces in the short run will:
A)choose the output level where marginal revenue exceeds marginal cost by the largest amount.
B)increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.
C)choose the output level where average total cost is at its minimum.
D)increase price as long as average revenue exceeds average total cost.
E)choose the output level where average revenue exceeds average total cost by the largest amount.
Q3) A monopolist's marginal revenue curve is flatter than its demand curve.
A)True
B)False
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Chapter 10: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) The prisoner's dilemma is a situation in which:
A)players have difficulty in choosing a strategy based on trust.
B)a firm's competitors ignores its action while making their own decisions
C)oligopolists behave irrationally.
D)oligopolists attempt to maximize sales rather than profits.
E)an oligopolist's demand curve becomes perfectly inelastic.
Q2) An oligopoly is characterized by:
A)a few firms, which have control over market price.
B)many firms and some barriers to entry.
C)a large number of firms and no barriers to entry.
D)a single firm and no barriers to entry.
E)a single firm and significant barriers to entry.
Q3) In the short run, a monopolistically competitive firm continues to increase production _____ if it can at least cover its variable cost.
A)as long as MR > AVC
B)until MR = ATC
C)as long as MC > MR
D)until MR = AR
E)until MR = MC
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Page 12
Chapter 11: Resource Markets
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150 Flashcards
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Sample Questions
Q1) An increase in the price of a resource will cause a movement along the demand curve for that resource.
A)True
B)False
Q2) If a firm is experiencing diminishing marginal returns, then _____.
A)total output decreases as all resources are increased
B)total output decreases as all resources are decreased
C)total output decreases as one variable resource is increased, other things constant
D)additional increments of output diminish as one variable resource is increased, other things constant
E)additional increments of output diminish as all variable resources are increased
Q3) The marginal resource cost is the additional cost of employing one additional unit of the resource.
A)True
B)False
Q4) An increase in the demand for shoemakers will increase the demand for shoes.
A)True
B)False
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Chapter 12: Labor Markets and Labor Unions
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Sample Questions
Q1) If two accountants have had the same education, amount of experience, and they work at the same type of job for the same profit-maximizing firm, which charges its clients a uniform hourly fee, then:
A)they should earn the same amount of money, even though one accountant is more productive than the other.
B)the one whose job is less risky should be paid more.
C)the one whose job is riskier should be paid less.
D)the one who has a higher marginal product should be paid more.
E)the one who has a higher marginal product should be paid less.
Q2) Which of the following happens if the government intervenes in a labor dispute and requires settlement through binding arbitration?
A)A neutral third party makes a decision that both parties must accept.
B)A neutral third party makes a decision that both parties may reject.
C)One party sues the other in court.
D)The two parties negotiate an agreement without assistance and both must accept it.
E)The two parties negotiate an agreement with assistance from their attorneys and both must accept it.
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Page 14
Chapter 13: Capital, Interest, Entrepreneurship, and Corporate Finance
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Sample Questions
Q1) You buy a bond for $1,000 from the federal government at an interest rate of 7 percent. Suppose immediately after you buy the bond, the market rate of interest increases to 10 percent. The market value of your bond:
A)will be $1,100.
B)will be less than $1,000.
C)will be more than $1,700.
D)will remain unchanged at $1,000.
E)will first increase to $1,070 and then decrease to $1,007.
Q2) As large-scale production became more profitable during the Industrial Revolution, the easiest way to finance the required factories and heavy machinery was through:
A)sole proprietorships.
B)limited liability partnerships.
C)purchase of government securities.
D)the corporate structure.
E)family businesses.
Q3) The interest earned on loans to local and state governments is taxed by the federal government.
A)True
B)False
Page 15
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Chapter 14: Transaction Costs, Asymmetric Information, and Behavioral Economics
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) In the job market, a signal is more effective if less-productive workers find it easier to send than do more-productive workers.
A)True
B)False
Q2) In his article "The Nature of the Firm," Ronald Coase argued that:
A)market exchange is less costly than hierarchical exchange.
B)markets are more efficient than hierarchies in producing goods that have few substitutes.
C)firms are formed to take advantage of situations in which hierarchies are more efficient than markets.
D)the primary role of an entrepreneur is to take orders from a central authority.
E)markets tend to become less competitive over time.
Q3) The simpler a production process, _____.
A)the greater the cost of production.
B)the greater the transaction cost of using markets.
C)the more likely a firm is to use a market to organize production.
D)the more likely a firm is to use centralized control to organize production.
E)the lower the cost of hierarchal control and supervision.
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Chapter 15: Economic Regulation and Antitrust Policy
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Sample Questions
Q1) Which of the following is not prohibited by the Clayton Act?
A)Merger through the acquisition of assets, which substantially lessens competition
B)Price discrimination that substantially lessens competition
C)Tying contracts that substantially lessen competition
D)Exclusive dealing that substantially lessens competition
E)Interlocking directorates that substantially lessen competition
Q2) Antitrust laws in the United States:
A)have been enforced in an inconsistent manner.
B)clearly define acceptable behavior.
C)apply only to natural monopolies.
D)involve suing a competitive firm for changing its prices.
E)provide protection to those in regulated industries.
Q3) If firms accused of antitrust violations sign a consent decree, they have:
A)admitted guilt and accepted the lawful penalties.
B)admitted guilt but are relieved of any penalties by agreeing to cease the alleged wrongdoing.
C)agreed to cease the alleged wrongdoing without admitting guilt.
D)denied the accusation and requested a formal hearing or trial.
E)denied the accusation and given proof that it is untrue.
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Page 17
Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) Legislation that benefits a narrow geographical interest is called:
A)competing-interest legislation.
B)pork-barrel spending.
C)populist legislation.
D)public-good spending.
E)quasi legislation.
Q2) Bureaus are:
A)special-interest groups that try to influence legislators.
B)government agencies whose activities are financed by appropriations from legislative bodies.
C)competing-interest groups that battle federal agencies.
D)collections of legislators who actively engage in logrolling.
E)elected officials who try to maximize their political support by appealing to the median voter.
Q3) An example of competing-interest legislation is:
A)a quota that limits imports of steel to the United States.
B)a subsidy to cigarette producers.
C)tax breaks for auto manufacturers.
D)a new bridge in Arizona funded by general tax revenues.
E)public education subsidies.
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Chapter 17: Externalities and the Environment
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Sample Questions
Q1) Control of water pollution from pesticide runoff in the United States is the responsibility of:
A)the U.S. Department of Agriculture.
B)the Environmental Protection Agency.
C)state attorneys general.
D)state departments of agriculture.
E)state environmental protection agencies.
Q2) Private property rights are defined and enforced:
A)only in a capitalist economy.
B)only in a command economy.
C)by the largest firm in an economy.
D)by the market forces of demand and supply.
E)by government, by informal social actions, and by ethical norms.
Q3) Smokers and loud talkers help in generating positive externalities.
A)True
B)False
Q4) When a system of pollution rights is in effect, polluters have no economic incentive to reduce the amount of pollution they generate.
A)True
B)False
Page 19
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Chapter 18: Poverty and Redistribution
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Sample Questions
Q1) Poverty rates are very high along the Northeast corridor from New Hampshire to Virginia.
A)True
B)False
Q2) One of the reasons behind the feminization of poverty is that:
A)social insurance programs do not cover unmarried females.
B)income assistance programs do not cover married females.
C)the number of people in female-headed households has increased at a faster rate than the number of people in other families.
D)technological changes have lowered the income of female workers more than the income of male workers.
E)the number of people in female-headed households has increased at a slower rate than the number of people in other families.
Q3) In every age group, average income in the United States increases with education.
A)True
B)False
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Page 20
Chapter 19: International Trade
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Sample Questions
Q1) Suppose the government of an importing country is considering imposing either a tariff that would result in imports falling to 1 million units per year or an import quota of 1 million units per year.Which of the following would be true in such a case?
A)The U.S. consumers would lose more consumer surplus in the case of tariffs than quotas.
B)The U.S. producers would gain more in the case of quotas than tariffs.
C)The change in quantity demanded would be greater in the case of tariffs than quotas.
D)The tariff revenue would go to U.S. government; quota benefits may go to foreign producers.
E)The U.S. export market would shrink more in the case of quotas than tariffs.
Q2) If wage rates are lower in Mexico than in Germany, labor costs per unit of output can still be higher in Mexico.
A)True
B)False
Q3) In 2012, exports amounted to about 14 percent of U.S. GDP.
A)True
B)False
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Page 21
Chapter 20: International Finance
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Sample Questions
Q1) In 2014, the United States' balance of trade deficit with China was about 10 times as large as the balance of trade deficit with Canada
A)True
B)False
Q2) The purchasing power parity theory helps explain long-run trends in exchange rates, but not short-run fluctuations.
A)True
B)False
Q3) A German national who exchanges euros for dollars at a U.S. airport is:
A)contributing to U.S. exports of merchandise.
B)lending dollars to Germany.
C)participating in the foreign exchange market.
D)engaging in speculative activities.
E)engaging in illegal activities.
Q4) In the United States, imports have exceeded exports every year since 1979.
A)True
B)False
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Chapter 21: Economic Development
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Sample Questions
Q1) In 2014, high-income economies with only about one-fifth of the world's population produced more than half of the world's output.
A)True
B)False
Q2) Which of the following is a difference between bilateral aid and multilateral aid?
A)Multilateral aid is a country-to-country aid, whereas bilateral aid comes from organizations using funds from many countries.
B)Multilateral aid comes from organizations using funds from many countries, whereas bilateral aid is a country-to-country aid.
C)Multilateral aid is a country-to-country aid, whereas bilateral aid comes from philanthropic organizations.
D)Multilateral aid comes from philanthropic organizations, whereas bilateral aid comes from organizations using funds from many countries.
E)Multilateral aid comes from established individuals who plan on helping poor countries, whereas bilateral aid comes from philanthropic organizations.
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