Microeconomic Theory
Final Test Solutions
Course Introduction
Microeconomic Theory explores the fundamental principles governing the behavior of individuals and firms in their decision-making processes. The course covers core topics such as consumer choice, production and cost analysis, market structures (including perfect competition, monopoly, and oligopoly), and the role of government in addressing market failures. Students will learn to analyze the allocation of resources using mathematical and graphical tools, understand the concept of equilibrium in different market settings, and evaluate the impact of public policies on market outcomes. By integrating theory with real-world applications, the course equips students with analytical skills essential for understanding and predicting micro-level economic phenomena.
Recommended Textbook
Principles of Microeconomics 5th Edition by Robert Frank
Available Study Resources on Quizplus 14 Chapters
1737 Verified Questions
1737 Flashcards
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Chapter 1: Thinking Like an Economist
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Pat can either drive to work,which takes half an hour and uses $1.50 worth of gas,or take the bus,which takes an hour and costs $1.00.How should Pat get to work?
A) Pat should always take the bus because it costs $0.50 less.
B) Pat should always drive because it saves half an hour.
C) Pat should drive if saving a half hour is worth $0.50 or more.
D) Pat should take the bus if a half hour of time is worth $0.50 or more.
Answer: C
Q2) Janie must either mow the lawn or wash clothes,earning her a benefit of $30 or $45,respectively.She dislikes both equally and they both take the same amount of time.Janie will therefore choose to _________ because the economic surplus is
A) mow the lawn;greater
B) wash clothes;greater
C) mow the law;smaller
D) wash clothes;smaller
Answer: B
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Chapter 2: Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) If Scout has an absolute advantage over Dill:
A) Scout has more money than Dill.
B) the problem of scarcity applies to Dill,but not to Scout.
C) the problem of scarcity applies to Scout,but not to Dill.
D) Scout can accomplish more in a given period of time than can Dill.
Answer: D
Q2) Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen.Data for their sales last month are shown in this table: \[\begin{array} { | l | l | l | }
\hline & \text { Cars Sold } & \text { Trucks Sold } \\
\hline \text { Larry } & 10 & 5 \\
\hline \text { Joe } & 9 & 9 \\
\hline \text { Ralph } & 3 & 12 \\
\hline
\end{array}\]
For Larry,the opportunity cost of selling a truck is:
A) 10 fewer cars sold.
B) 1/2 car not sold.
C) 1 fewer car sold.
D) 2 fewer cars sold.
Answer: D
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Page 4
Chapter 3: Supply and Demand
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5,and that Curly has now begun operating a hot dog cart.We can assume that:
A) Curly's reservation price is $5.00 or more.
B) Curly's reservation price is exactly $4.50.
C) Curly's reservation price is greater than $4.50 but no more than $5.
D) Curly's reservation price is exactly $5.
Answer: C
Q2) Which of the following is NOT a condition for maximizing total economic surplus in a particular market?
A) All private costs of production must be included.
B) All social costs of production must be included.
C) All private benefits of consumption must be included.
D) Government regulation of the market is needed.
Answer: D
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5
Chapter 4: Elasticity
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130 Flashcards
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Sample Questions
Q1) If the demand for a good is elastic,that good is likely to have:
A) many close complements.
B) few close complements.
C) many close substitutes.
D) few close substitutes.
Q2) Economists have found that the price elasticity of demand for water is higher in the summer than in the winter.Why?
A) Winter is longer than summer,and price elasticity is lower over longer time horizons.
B) Winter is longer than summer,and price elasticity is higher over longer time horizons.
C) Winter water use tends to be for necessities like cleaning and cooking,and summer water use tends to be for both necessities and non-necessities,like gardening and recreation.
D) People take more vacations in the summer and so use less water at home.
Q3) Demand tends to be _______ in the short run than in the long run.
A) more elastic
B) more inelastic
C) more volatile
D) less important
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Chapter 5: Demand
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103 Flashcards
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Sample Questions
Q1) You are trying to decide how to spend your last lunch dollar.You should use that dollar to buy more of
A) the item that costs the least.
B) the item that you have already consumed the most of.
C) the item that will give you the greatest marginal utility per dollar spent.
D) the item from which you have gained the greatest total utility already.
Q2) The absolute price of a good in dollar terms is the A) market price
B) equilibrium price
C) nominal price
D) marginal price
Q3) The tendency for consumers to purchase more of a good or service as its price falls is called
A) the law of supply.
B) the law of increasing cost.
C) the Low-Hanging Fruit principle.
D) the law of demand.
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Page 7
Chapter 6: Perfectly Competitive Supply
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108 Flashcards
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Sample Questions
Q1) Marginal cost is calculated as:
A) total revenue minus total costs.
B) the change in output divided by the change in total costs.
C) the percentage change in total costs divided by the percentage change in output.
D) the change in total costs divided by the change in output.
Q2) Jenny sells lemonade by the street during the summer time.Several other kids also sell lemonade in Jenny's neighborhood.
Refer to the information above.Suppose that the first week of summer,Jenny charged 25 cents for an 8-ounce cup of lemonade,her next-door neighbor Sam charged 50 cents for an 8-ounce cup of lemonade,and Alex across the street charged 15 cents for an 8-ounce cup of lemonade.What is most likely to happen?
A) Everyone will start to charge 50 cents to maximize revenue.
B) A price war will break out,and all of the kids will gradually increase their prices.
C) Each kid will keep his or her price at the original amount,because they had chosen those prices to maximize profits.
D) Eventually prices will equalize at all three lemonade stands.
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Chapter 7: Efficiency, Exchange, and the Invisible Hand in Action
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) When either the costs of production or the benefits of consumption to individuals differ from those of society:
A) the equilibrium output will be the socially optimal output.
B) the equilibrium is not efficient.
C) the allocation of resources remains correct.
D) the invisible hand had completely failed.
Q2) If the demand curve fails to capture all of the benefits of consumption,then the:
A) equilibrium price is efficient but the quantity will be too large.
B) the equilibrium price is inefficiently low.
C) government needs to impose regulations that require more consumption.
D) the equilibrium price is inefficiently high.
Q3) Some people have argued that the government should provide medical care to everyone.Under this system:
A) the price of medical care will allocate resources efficiently.
B) the price of medical care will ration resources efficiently.
C) prices will not ration medical care so there will be no scarcity.
D) prices will not ration medical care so some other rationing method will be used.
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Page 9
Chapter 8: Monopoly, Oligopoly, and Monopolistic Competition
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) Consider an industry with two firms producing similar products. Mega Corp's total costs are TC = $5,000 + 100 × Quantity. Big Inc's total costs are TC = $4,000 + 200 × Quantity.
Refer to the information given above.If each firm produces 10 units,Mega Corp will have total costs of _____ and Big Inc will have total costs of _____.
A) $6,000;$6,000
B) $5,000;$4,000
C) $5,100;$4,200
D) $15,000;$14,200
Q2) Imagine that you are an entrepreneur,making designer t-shirts in your garage.Your accountant has estimated that your firm's total costs can be expressed by the function TC = 300 + 10 × Q,where Q represents the number of t-shirts you make. Your fixed costs are _______ and your marginal cost is _____.
A) $300;$10
B) $300/Q;$30
C) $300;$10 times quantity
D) $300/Q;$10
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Page 10
Chapter 9: Games and Strategic Behavior
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) A purely self-interested diner is more likely to tip:
A) never.
B) only when dining in a very up-scale restaurant.
C) only when dining in a restaurant at which he often eats.
D) always,to assure good service.
Q2) Emotions like guilt and sympathy:
A) are irrelevant to economic decision-making.
B) reduce the likelihood that a transaction will maximize total economic surplus.
C) can solve commitment problems,increasing players' payoffs.
D) can solve commitment problems,but generally reduce players' payoffs.
Q3) A payoff matrix is used to show:
A) the payoff to being a monopolist relative to a competitive firm.
B) the demand curve faced by two competing firms.
C) each player's payoffs in each possible combination of strategies.
D) the sequence of strategies played in a game over time.
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11
Chapter 10: Externalities and Property Rights
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127 Flashcards
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Sample Questions
Q1) If the market equilibrium quantity is less than the socially optimal quantity,one can infer that:
A) the private supply curve for the activity is below the socially optimal supply curve.
B) the private demand curve for the activity is above the socially optimal demand.
C) there is a positive externality associated with this good.
D) there is a negative externality associated with this good.
Q2) If the market equilibrium quantity is greater than the socially optimal quantity,one can infer that:
A) the private supply curve for the activity is to the left of the socially optimal supply curve.
B) the private demand curve for the activity is below the socially optimal demand.
C) there is a positive externality associated with this good.
D) there is a negative externality associated with this good.
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12
Chapter 11: The Economics of Information
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145 Flashcards
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Sample Questions
Q1) The major prediction of the lemons model is that A) the presence of asymmetric information reduces the average quality of goods for sale.
B) people will generally choose the 'low hanging fruit'.
C) a used car in good condition can be sold for a higher-than-average price.
D) used cars are generally in better than average condition.
Q2) Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000,with 25% of jobs offering $30,000 per year,50% offering $40,000 per year and 25% offering $50,000 per year and that in all other respects,the jobs are equally satisfying.Assume that in this market,a job offer remains open for only a short time so that continuing to search requires an applicant to reject any current job offer.
Who will accept an offer of $30,000?
A) Graduates who have been searching the longest
B) Graduates who enjoy taking risks
C) Graduates who are either risk-neutral or risk-averse
D) Only graduates who are risk-averse
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Page 13
Chapter 12: Labor Markets, Poverty, and Income Distribution
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) Moe has just been offered a job that pays much more than other jobs requiring the same skills,education,and hours.Moe can infer that
A) the job will be more prestigious.
B) the job will involve adverse working conditions.
C) the employer is not greedy.
D) the job will also offer generous benefits.
Q2) Matt is offered a job driving the campus shuttle bus from 4 P.M.to 6 P.M.each Monday.His reservation wage for this job is $7/hour.
Now suppose the director offers Matt $50/hour,but also announces that the earnings from the job will be divided equally among Matt and four other students.Will Matt still accept this job?
A) No,because the other students are free riders.
B) No,because it is not fair for Matt to do the work and then have to share the wage.
C) Yes,because $50 divided by five is greater than Matt's reservation wage.
D) Yes,because Matt believes in the Rawlsian theory of justice.
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Chapter 13: The Environment, Health, and Safety
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) For a fixed percent reduction in pollution emissions to be economically efficient,it would have to be the case that
A) the marginal cost of pollution control is the same across all firms.
B) enforcement is vigorous.
C) all firms be the same size.
D) large polluters reduce emissions by more than small polluters.
Q2) The system of government insurance that pays benefits to workers injured on the job is referred to as
A) social security.
B) welfare.
C) OSHA.
D) workers' compensation.
Q3) The growth of lawsuits seeking compensation from firms when a worker is injured should serve to
A) reduce the firm's incentive to improve safety.
B) increase the worker's incentive to get injured.
C) increase the firms' incentive to improve safety.
D) reduce moral hazard.
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Chapter 14: Public Goods and Tax Policy
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) The current U.S.income tax system requires taxpayers to pay a higher marginal tax rate on higher levels of taxable income.Suppose that the tax rate is 10% on the first $15,000 of taxable income,15% on the next $45,000 of taxable income,30% on the next $60,000 of taxable income,and 35% on taxable income above $120,000.
Suppose that the tax code also includes provisions that allow taxpayers to reduce the income on which they are taxed,and that those provisions most often apply only to the wealthiest taxpayers.These provisions tend to make the tax code
A) more regressive.
B) more efficient.
C) less progressive.
D) less regressive.
Q2) The combination of pork barrel spending and logrolling leads to A) inefficiently large government spending.
B) the largest net benefit for society.
C) the quick termination of projects that are wasteful of irrelevant.
D) under provision of public goods.
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