Microeconomic Analysis Test Bank
Course Introduction
Microeconomic Analysis delves into the theoretical foundations and practical applications of how individuals, firms, and markets interact to allocate scarce resources. The course covers core concepts such as consumer and producer behavior, market structures (perfect competition, monopoly, oligopoly), game theory, and general equilibrium. Emphasis is placed on the mathematical modeling and analysis of decision-making processes, examining how prices and outputs are determined, and exploring the implications of market failure and government intervention. Through rigorous analytical tools, students develop a deep understanding of the mechanisms that drive market dynamics and economic outcomes at a micro level.
Recommended Textbook
Intermediate Microeconomics and Its Application 11th Edition by Walter Nicholson
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17 Chapters
577 Verified Questions
577 Flashcards
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Chapter 1: Economic Models
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44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/50706
Sample Questions
Q1) If the prevailing price of shirts is $10 and at this price demanders demand 100 shirts while suppliers are willing to supply 110 shirts,there is a(n)
A) shortage at the $10 price.
B) surplus at the $10 price.
C) equilibrium in this market.
D) shortage if price were to rise above $10.
Answer: B
Q2) Economists typically use ____ analysis,whereas clergy members typically use ____ analysis.
A) positive; positive
B) normative; normative
C) positive; normative
D) normative; positive
Answer: C
Q3) The problem of scarcity
A) arises only in poor countries.
B) exists because the price of goods is too high.
C) exists because of limited resources.
D) will eventually be solved by better planning.
Answer: C
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Chapter 2: Utility and Choice
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) As an individual moves northwest along his or her indifference curve substituting more and more Y for X,his or her MRS of X for Y
A) increases.
B) decreases.
C) stays the same.
D) changes in a way that cannot be determined.
Answer: A
Q2) The X-intercept of the budget constraint represents
A) how much of good Y can be purchased if no good X is purchased and all income is spent.
B) how much of good X can be purchased if no good Y is purchased and all income is spent.
C) total income divided by the price of X.
D) a and c.
Answer: D
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Chapter 3: Individual Demand Curves
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56 Flashcards
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Sample Questions
Q1) An increase in quantity demanded is represented by
A) a shift outward of the entire demand curve.
B) a shift inward of the entire demand curve.
C) a movement along the demand curve in a southeasterly direction in response to a decline in the good's price.
D) a movement along the demand curve in a northwesterly direction in response to a decline in the good's price.
Answer: C
Q2) The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices)
A) elastic, unit elastic, inelastic.
B) unit elastic, inelastic, elastic.
C) inelastic, unit elastic, elastic.
D) elastic, inelastic, unit elastic.
Answer: A
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5
Chapter 4: Uncertainty
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Sample Questions
Q1) Continuing with the same vacation-insurance company from the preceding question,is there any vacation-day price that would both strictly increase the family's expected utility (compared to no insurance)and strictly increase the profits of the risk-neutral insurance company?
A) Yes, two days.
B) Yes, three days.
C) Yes, four days.
D) No.
Q2) Suppose a lottery ticket costs $1 and the probability that a holder will win nothing is 99.9%.What must the jackpot be for this to be a fair bet?
A) 10
B) 100
C) 1,000
D) 10,000
Q3) Risk aversion is best explained by A) timidity.
B) increasing marginal utility of income.
C) constant marginal utility of income.
D) decreasing marginal utility of income.
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Page 6
Chapter 5: Game Theory
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23 Verified Questions
23 Flashcards
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Sample Questions
Q1) Consider the game between the teens from the previous question.The pure-strategy Nash equilibrium is (equilibria are)
A) Both Declare.
B) Both Ignore/Rebuff.
C) There are two: in one, both Declare, and in the other, both Rebuff/Ignore.
D) There are two: in both, the teens do the opposite of each other.
Q2) Consider the game between the teens from the previous question.Instead of being a simultaneous game,suppose it is sequential,with teen A moving first.What is the subgame-perfect equilibrium of this new game?
A) Both Declare.
B) Both Ignore/Rebuff.
C) It is a mixed strategy equilibrium.
D) Teen A Declares and Teen B follows A's action.
Q3) In what way or ways can strategies more complicated than simple actions?
A)They can be conditioned on a first mover's action.
B)They can involve random choices.
C)Both a and b.
D)Neither a or b.
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7
Chapter 6: Production
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Sample Questions
Q1) The marginal physical product of labor is defined as
A) a firm's total output divided by total labor input.
B) the extra output produced by employing one more unit of labor while allowing other inputs to vary.
C) the extra output produced by employing one more unit of labor while holding other inputs constant.
D) the extra output produced by employing one more unit of capital while holding labor input constant.
Q2) As a result of doubling all its inputs,if a firm can more than double its output,its production function exhibits
A) constant returns to scale.
B) increasing returns to scale.
C) decreasing returns to scale.
D) increasing marginal productivity to at least one input.
Q3) A rise in the average productivity of labor
A) always reflects technical progress.
B) reflects technical progress if other input usage hasn't changed.
C) reflects technical progress only if labor input hasn't changed.
D) reflects technical progress only if the quantity of output is increased.
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Page 8
Chapter 7: Costs
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39 Flashcards
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Sample Questions
Q1) The shape of a firm's long-run average cost curve is determined by
A) the degree to which each input encounters diminishing marginal productivity.
B) the underlying nature of the firm's production function when all inputs are able to be varied.
C) how much the firm decides to produce.
D) the way in which the firm's expansion path reacts to changes in the rental rate on capital.
Q2) Short-run total cost is the sum of
A) short-run fixed cost plus short-run variable cost, and short-run marginal costs.
B) short-run fixed cost and short-run marginal costs.
C) short-run variable cost and short-run costs.
D) short-run fixed cost and short-run variable cost.
Q3) In the long run
A) all inputs are fixed.
B) all inputs are variable.
C) some inputs are fixed.
D) production levels never change.
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9
Chapter 8: Profit Maximization and Supply
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Sample Questions
Q1) Which of the following conditions would result in the short run marginal cost curve not correctly reflecting the supply behavior of a profit maximizing firm?
A) The firm is a price taker.
B) Price exceeds average total cost.
C) The elasticity of demand facing the firm is -3.
D) the firm can vary several inputs in the short run.
Q2) A firm's total revenue is equal to
A) total quantity produced times marginal cost.
B) total quantity produced times market price.
C) marginal revenue times total quantity produced.
D) market price divided by total quantity produced.
Q3) If a firm's marginal revenue is below its marginal cost,an increase in production will usually
A) increase profits.
B) leave profits unchanged.
C) decrease profits.
D) increase marginal revenue.
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Chapter 9: Perfect Competition in a Single Market
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51 Flashcards
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Sample Questions
Q1) Suppose there are 100 firms each with a short run total cost of STC = q<sup>2</sup> + q + 10,so that marginal cost is MC = 2q +1.If market demand is given by Q<sub>D</sub> = 1050 - 50P,profit to the firm will be
A) 5
B) 6
C) 9
D) 15
Q2) Under perfect competition,if an industry is characterized by positive economic profits in the short run
A) firms will leave the market in the long run and the short-run supply curve will shift outward.
B) firms will enter the market in the long run and the short-run supply curve will shift outward.
C) firms will enter the market in the long run and the short-run supply curve will shift inward.
D) firms will leave the market in the long run and the short-run supply curve will shift inward.
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Chapter 10: General Equilibrium and Welfare
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Sample Questions
Q1) Suppose two coffee snobs who must have their coffee and cream in exact proportions (each cup is 10 coffee per 1 unit cream)are invited to a weekend long event (during which they can easily consume 8 cups of coffee).Suppose Snob A is given 8 units of cream and Snob B is given 80 units of coffee.The post trading result (one in which any trade that makes both parties better off than their initial allocation)will guarantee each person
A) nothing
B) at least 1 cup of properly made coffee.
C) at least 2 cups of properly made coffee.
D) exactly 4 cups of properly made coffee.
Q2) The rate of product transformation refers to
A) how a consumer can trade one good for another while still maximizing his or her utility.
B) how a firm can substitute one input for another and still maintain the same production level.
C) how production of one good can be substituted for another while still using a fixed supply of inputs efficiently.
D) how quickly a firm can produce a final good while starting with only natural resources.
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Page 12
Chapter 11: Monopoly
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27 Flashcards
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Sample Questions
Q1) A monopolist has total cost TC = Q<sup>2</sup> + 10Q + 100 and marginal cost MC = 2Q + 10.It faces demand Q = 130- P (so its marginal revenue is MR = 130 - 2Q).Its profit-maximizing output is
A) 30
B) 25
C) 20
D) 10
Q2) For the practice of price discrimination to be successful,the monopoly must
A) be able to prevent resale of its product.
B) face similar demand curves for various markets.
C) have similar costs among markets.
D) have a downward sloping marginal cost curve.
Q3) The supply curve for a monopoly is given by
A) the firm's marginal cost curve above the average variable cost curve.
B) the one point on the demand curve that corresponds to the quantity for which price is equal to marginal cost.
C) the entire demand curve above the point where price is equal to average cost.
D) the monopolist does not have a well-defined supply curve.
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Chapter 12: Imperfect Competition
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Sample Questions
Q1) In a Cournot equilibrium each firm chooses an output level that
A) maximizes joint profits.
B) maximizes the price received.
C) maximizes profits given what the other firm produces.
D) maximizes revenue given what the other firm produces.
Q2) In the cartel model
A) firms believe that price increases result in a very elastic demand, while price decreases result in an inelastic demand for their products.
B) each firm acts as a price taker.
C) one dominant firm takes the reactions of all other firms into account in its output and pricing decisions.
D) firms coordinate their decisions to act as a multiplant monopoly.
Q3) Consider the market for nonalcoholic beers from the previous question.Cudweisers' price in a Nash equilibrium (assuming Bertrand competition in these differentiated beers)is about
A) 0.99
B) 1.09
C) 1.71
D) 2.55
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Page 14
Chapter 13: Pricing in Input Markets
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40 Flashcards
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Sample Questions
Q1) A firm's demand for labor is known as a "derived demand" because
A) the firm gains utility from hiring more labor.
B) the amount of labor hired depends upon how much output the firm can sell.
C) the wage rate paid to workers is derived from the market for labor.
D) it is derived from the demand for capital.
Q2) The substitution effect of a change in wage rate on a firm's demand for labor input will be more significant
A) the greater the change in output.
B) the more sharply curved are the firm's isoquants.
C) the flatter are the firm's isoquants.
D) the larger the quantity of labor employed.
Q3) When an individual's wage rises,the income effect tends to
A) increase hours worked.
B) decrease hours worked.
C) leave hours worked unchanged.
D) it is impossible to predict what will happen to hours worked.
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15
Chapter 14: Capital and Time
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30 Flashcards
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Sample Questions
Q1) If real extraction costs do not change,the relative price of a finite resource would be expected to
A) fall over time.
B) remain constant over time.
C) rise at a rate given by the nominal rate of interest.
D) rise at a rate given by the real rate of interest.
Q2) The annual rental rate for a machine is
A) the yearly depreciation and maintenance costs for the machine.
B) the yearly interest costs associated with owning the machine.
C) the initial purchase price of the machine divided by the number of years the machine is expected to last.
D) the sum of the yearly depreciation, maintenance, and interest costs associated with owning the machine.
Q3) The present value of $1 payable in the future decreases
A) the higher r is and the sooner it is to be paid.
B) the lower r is and the sooner it is to be paid.
C) the higher r is and the longer time until it is paid.
D) the lower r is and the longer time until it is paid.
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Page 16
Chapter 15: Asymmetric Information
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Sample Questions
Q1) Which of the following are potential problems faced by a firm that wants to provide warranties for its lawnmowers? (Select all that apply.)
A) a moral hazard problem might arise, in that homeowners may be less careful with the mower, since they can always return it if it breaks.
B) the warranty may select for homeowners that don't have a lot of mowing to do, or have smooth lawns, because they won't have to pay as much for a warranty.
C) the warranty will increase demand by assuring customers of the product's quality.
D) the warranty will reduce demand because only makers of low-quality goods would need to reassure consumers in this way.
Q2) The "lemons model" predicts quality deterioration in the used car market because A) used cars require increasing maintenance.
B) suppliers and demanders have different information about cars' quality.
C) used cars are generally of a lower quality than new cars.
D) people will usually buy new cars if they are available.
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17
Chapter 16: Externalities and Public Goods
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Sample Questions
Q1) Common property
A) is owned by specific people.
B) is inexhaustible.
C) refers strictly to land resource.
D) refers to goods "owned" by society at large and freely usable by anyone.
Q2) Suppose the market for oranges is perfectly competitive and unregulated.Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges.Suppose Q<sub>D</sub> = 1000 - 100P and Q<sub>S </sub>= -100 + 100P.The total dollar value damage to society is
A) 400
B) 450
C) 500
D) 550
Q3) Special interest groups often
A) represent broad questions of public interest.
B) pursue rent seeking behavior.
C) do not use lobbying techniques.
D) have no effect on the political process.
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18
Chapter 17: Behavioral Economics
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Sample Questions
Q1) Return to the market for cigarettes from the previous question.What per-unit tax could the government levy to eliminate the deadweight loss from the behavioral bias?
A) 0
B) 1
C) 50
D) 100
Q2) Return to the case of Jan,the hyperbolic discounter from the previous question.What values of B and C will lead her to be consistent with a plan not to undertake the action?
A) C < B < 2C.
B) B < C.
C) B > 2C.
D) B < C < 2B.
Q3) Limits to self-interested payoff maximization that have been studied by behavioral economists include
A) limited cognitive ability.
B) limited willpower.
C) limits to self interest.
D) all of the above.
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