Microeconomic Theory
Midterm Exam
Course Introduction
Microeconomic Theory provides a comprehensive examination of the foundational principles guiding individual and firm behavior in markets. The course explores concepts such as consumer choice, production and cost functions, market structures, and the allocation of resources through price mechanisms. Analytical tools such as utility maximization, profit maximization, and game theory are employed to understand how decisions are made under constraints. Emphasis is placed on the role of incentives, the workings of competitive and non-competitive markets, and the impact of government intervention on market outcomes. This course equips students with the theoretical framework necessary to analyze real-world economic problems at the micro level.
Recommended Textbook
Principles of Microeconomics 5th Edition by Robert Frank
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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
Source URL: https://quizplus.com/quiz/59315
Sample Questions
Q1) Normative economics is concerned with how people _____ make decisions while positive economics is concerned with how people _____ make decisions.
A) in the real world;in models
B) should;do
C) in power;in ordinary life
D) in ordinary life;in power
Answer: B
Q2) Alex received a four-year scholarship to State U.that covered tuition and fees,room and board,and books and supplies.As a result:
A) attending State U.for four years is costless for Alex.
B) Alex has no incentive to work hard while at State U.
C) the cost of attending State U.is the amount of money Alex could have earned working for four years.
D) the cost of attending State U.is the sum of the benefits Alex would have had attending each of the four other schools to which Alex had been admitted.
Answer: C
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3
Chapter 2: Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Lou and Alex live together and share household chores.They like to cook some meals ahead of time and eat leftovers.Suppose that in one hour Lou and Alex can do the following: \[\begin{array} { | l | l | l | }
\hline & \text { Alex } & \text { Lou } \\
\hline \text { Whole Hour Cleaning } & 3 \text { rooms } & 5 \text { rooms } \\
\hline \text { Whole Hour Cooking } & 3 \text { meals } & 4 \text { meals } \\
\hline 1 / 2 \text { hour, Each Activity } & 1.5 \text { rooms; } 1.5 \text { meals } & 2.5 \text { rooms; } 2 \text { meals } \\ \hline \end{array}\]
For Alex,the opportunity cost of cleaning one room is ____ meal(s);for Lou the opportunity cost of cleaning one room is _____ meal(s).
A) 4;4
B) 1;4/5
C) 1;5/4
D) 3;5
Answer: B
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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 the price of gasoline increases and that sport utility vehicles get poor gas mileage compared to other available cars.One would expect:
A) the demand for gasoline to decrease.
B) the demand for sport utility vehicles to decrease.
C) the demand for sport utility vehicles to increase.
D) the quantity of sport utility vehicles demanded to decrease.
Answer: B
Q2) Which of the following is NOT a characteristic of governmental rent controls?
A) Equitable distribution of apartments.
B) Excess demand for apartments.
C) Fewer newly built apartment buildings.
D) Very low vacancy rates.
Answer: A
Q3) An outcome is socially optimal if it:
A) follows from a market equilibrium.
B) follows from collective action.
C) leaves no money on the table.
D) maximizes total economic surplus.
Answer: D
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Page 5
Chapter 4: Elasticity
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) If the quantity demanded of a good is Q when the price for the good is P,the price elasticity of demand for that good at that point is:
A) (P/Q)*(1/slope)
B) (Q/P)*(1/slope)
C) (P/Q)*(slope)
D) Q*P*(1/slope)
Q2) An increase in the price of hamburger from $3 to $4 leads to an increase in quantity supplied from 100 units to 150 units.At the original price,the price elasticity of supply for hamburgers is _____ and at this point the supply curve is _______.
A) 2/3;elastic
B) 2/3;inelastic
C) 3/2;elastic
D) 3/2;inelastic
Q3) The price elasticity of demand for a good is the response of:
A) demand to a one percent change in price of that good.
B) demand to a one percent change in price of the related good.
C) quantity demanded to a one percent change in price of that good.
D) quantity demanded to a one percent change in price of the related good.
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6
Chapter 5: Demand
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103 Verified Questions
103 Flashcards
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Sample Questions
Q1) The term marginal utility denotes the amount by which ______ changes when consumption changes by _____ unit(s).
A) total utility,1
B) demand,5
C) demand,1
D) total utility,5
Q2) According to the textbook,the homes of the wealthy in Seattle average in excess of 10,000 square feet while the homes of the wealthy in New York City average less than 5,000 square feet.The difference is primarily due to
A) greater "tastes" for space in Seattle.
B) a ban on construction of new homes in excess of 5,000 square feet in NYC.
C) a significantly higher price for land and construction in NYC.
D) greater "tastes" for crowding in NYC.
Q3) For the two good case,the rational spending rule requires that
A) total expenditures on the two goods be equal.
B) total utility from the two good be equal.
C) average utility from the two goods be equal.
D) the ratio of marginal utility to price be equal for the two goods.
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7
Chapter 6: Perfectly Competitive Supply
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Which of the following is NOT true of a perfectly competitive firm?
A) It faces a perfectly elastic demand curve.
B) It is unable to influence the market price of the good it sells.
C) It seeks to maximize revenue.
D) Relative to the size of the market,the firm is small.
Q2) An increase in consumer demand for espresso would lead to a(n)____,while an increase in the number of firms producing espresso would lead to a(n)_______.
A) increase in quantity supplied;decrease in supply.
B) increase in supply;increase in quantity supplied.
C) increase in quantity supplied;increase in supply.
D) increase in supply;increase in supply.
Q3) Which of the following is a condition that is necessary for a market to be perfectly competitive?
A) The firms face inelastic demand for their product.
B) Market demand for the product is perfectly elastic.
C) Firms can easily buy and sell the productive resources necessary to compete in the market.
D) Consumers display strong brand loyalty.
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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) According to the textbook,individual incentives have led to:
A) the optimal number of stock market analysts because it is a competitive market with no entry barriers.
B) too many stock market analysts because market analysis does not produce social benefits.
C) too many stock market analysts because the individual incentive to forecast faster exceeds the social benefit of a faster forecast.
D) too few stock market analysts because the efficient market hypothesis predicts that no analyst will do better than random chance in the long run.
Q2) Explicit costs:
A) are the only costs that matter to business owners.
B) usually exceed implicit costs.
C) are difficult to measure.
D) appear on the firm's balance sheet.
Q3) Barriers to entry are created by:
A) government regulation only.
B) government regulation and natural characteristics of a market.
C) natural characteristics of a market only.
D) restrictions on foreign trade.
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Chapter 8: Monopoly, Oligopoly, and Monopolistic Competition
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) In order to effectively price discriminate,a seller must be able to:
A) resell the product.
B) identify customers with different reservation prices.
C) avoid detection because discrimination is illegal.
D) reduce costs when producing the discounted item.
Q2) Airlines that charge higher prices for customers who purchase their tickets at the last minute are:
A) not price discriminating because the product is not the same.
B) price discriminating by identifying passengers with higher reservation prices.
C) perfect price discriminators.
D) using the hurdle method of price discrimination.
Q3) De Beers accounts for approximately 80% of diamond sales worldwide.The source of their market power is:
A) its exclusive ownership of South African diamond mines.
B) its patent on diamond production.
C) the perfectly inelastic demand for diamonds.
D) Western engagement customs.
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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 commitment problem exists when:
A) players cannot make credible threats or promises.
B) players cannot make threats.
C) there is a prisoner's dilemma.
D) players cannot make promises.
Q2) 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.
Q3) The tit-for-tat strategy only works for prisoner's dilemma games that:
A) have only one Nash equilibrium.
B) are played only one time.
C) have no Nash equilibrium.
D) are repeated.
Q4) A strategy that limits defection in a repeated prisoner's dilemma game is:
A) a Nash equilibrium.
B) tit-for-tat.
C) a cartel.
D) an ultimatum bargaining game.
Page 11
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Chapter 10: Externalities and Property Rights
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) When some fraction of the benefit of an activity is received by people not participating in the activity,it is called a(n):
A) winner's curse.
B) positive externality.
C) external cost.
D) efficient allocation.
Q2) The tragedy of the commons refers to the:
A) overuse of resources that have no price.
B) overuse of resources that have no cost.
C) under production of external benefits.
D) pollution of our natural resources.
Q3) If the equilibrium quantity is equal to the socially optimal quantity,one can infer that:
A) the supply curve for the activity is below the socially optimal supply curve.
B) there is no externality associated with this good.
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 Verified Questions
145 Flashcards
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Sample Questions
Q1) Suppose that you notice that relationships that are formalized by marriage or other contractual arrangement tend to be more stable than relationships that are not formalized.A search-theory based explanation for this observation is that A) formalization increases the cost of continuing to search for a better partner. B) formal relationships are entered into only after a complete search of alternatives. C) formal arrangements are a necessary part of any optimal search strategy. D) remaining in long-term relationships is generally a dominant strategy.
Q2) The probability that Mo will like a particular movie is 90% and has a value of $40.Not liking the movie has a value of -$10.The expected value of going to that movie is A) $40.
B) $36.
C) $35.
D) $30.
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Chapter 12: Labor Markets, Poverty, and Income Distribution
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145 Verified Questions
145 Flashcards
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Sample Questions
Q1) If demand for the product you make were to suddenly decline you would expect the equilibrium price of the product to fall,
A) causing an increase in the VMP of each worker.
B) causing a decrease in the VMP of each worker.
C) but no change in the VMP of each worker because product prices don't affect worker productivity.
D) causing the marginal productivity of each worker to fall.
Q2) The degree of income inequality produced by competitive markets,in Professor Rawls' view,is
A) minor.
B) greater than the amount people would prefer.
C) consistent with the ideal amount.
D) acceptable.
Q3) In competitive labor markets,____ demand labor and ____ supply labor.
A) firms;labor unions
B) labor unions;firms
C) workers;firms
D) firms,workers
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14
Chapter 13: The Environment, Health, and Safety
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140 Verified Questions
140 Flashcards
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Sample Questions
Q1) Pollution permit policies achieve an _____ outcome because
A) inefficient;wealthier firms can dominate the market.
B) efficient;the supply of permits is elastic.
C) inefficient;the supply of permits is set by the government,and so is inelastic.
D) efficient;firms have an incentive to minimize costs.
Q2) 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.
Q3) The advantage to selling pollution permits rather than using a fixed percent reduction for all firms is
A) government raises additional revenue.
B) reductions in pollution are accomplished by those firms that can do so at least cost.
C) enforcement costs are eliminated.
D) pollution is driven to zero.
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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) When private firms cancel investment programs because of increases in the interest rate caused by government borrowing it is called
A) the reason for a balanced budget amendment.
B) crowding out.
C) monetary policy.
D) fiscal policy.
Q2) If voters A,B,and C have the following demand curves for a public library Pa = 52Q,Pb = 7 - .5Q,and Pc = 2 - 4Q,then social demand for a public library is
A) P = 6 - 12Q.
B) P = 15 - 6Q.
C) P = 21 - 1.5Q.
D) P = 14 - 6.5Q.
Q3) When a negative externality is present in a market,the government
A) must regulate it.
B) should regulate it if the public supports regulation.
C) should never regulated it.
D) should regulate it if the benefits of regulation exceed the costs.
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