Microeconomic Theory Review Questions
Course Introduction
Microeconomic Theory explores the foundational concepts and analytical tools used to understand the behavior of individual consumers, firms, and markets. The course delves into the principles of supply and demand, consumer choice, production and costs, market structures (such as perfect competition, monopoly, and oligopoly), and welfare analysis. Emphasis is placed on developing mathematical and graphical models to analyze how economic agents make decisions, how prices are determined, and how markets allocate resources. By mastering these core microeconomic theories, students gain insights into real-world economic phenomena and policy implications.
Recommended Textbook Microeconomics 9th Edition by William Boyes
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22 Chapters
2413 Verified Questions
2413 Flashcards
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Page 2
Chapter 1: Economics: The World Around You
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90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/48925
Sample Questions
Q1) Rational self-interest depends on:
A)the level of education attained by individuals.
B)the general family background.
C)the social status of an individual.
D)the amount of information available with an individual.
E)the financial status of the individual.
Answer: D
Q2) Both microeconomic and macroeconomic theories:
A)clearly state the public policies that should be undertaken to avoid or solve a particular problem under consideration.
B)deal with the aggregate.
C)deal with what ought to be as opposed to what is.
D)are forms of positive economics.
E)deal with individual entities in an economy.
Answer: D
Q3) A haircut at an upscale beauty salon would be regarded as a good in economics.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Choice, opportunity Costs, and Specialization
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95 Verified Questions
95 Flashcards
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Sample Questions
Q1) Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?
A)Shifting from the production of one product to the production of another product
B)Shifting all resources to the production of one product
C)Employing idle resources
D)Using fewer resources in production
E)Increasing the technological know-how used in production
Answer: E
Q2) If an individual can produce a good or service with a lower opportunity cost than another individual,then he or she is said to have the comparative advantage.
A)True
B)False
Answer: True
Q3) Gains from trade can be realized if each country specializes in its comparative advantage good.
A)True
B)False
Answer: True
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Chapter 3: Markets, Demand and Supply, and the Price System
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98 Verified Questions
98 Flashcards
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Sample Questions
Q1) Other things remaining unchanged,which of the following is a determinant of the quantity supplied of a good?
A)The cost of inputs used in production
B)The price of the product
C)The income levels of consumers
D)The price expectations of producers
E)The preferences of consumers
Answer: B
Q2) The market supply curve for any product:
A)always depends on the market demand for that product.
B)depends on the general income level of the consumers in the market.
C)is a summation of individual firms' supply curves.
D)equals the total revenue generated through sale of the commodity.
E)is affected by the prices of related products.
Answer: C
Q3) In general,the purpose of markets is to facilitate the exchange of goods and services between buyers and sellers.
A)True
B)False
Answer: True
Page 5
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Chapter 4: The Market System and the Private and Public Sector
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) When the government's spending is less than tax revenue,it implies that:
A)the government budget is balanced.
B)the government is running a deficit.
C)there is a budget surplus.
D)there is a higher chance of default by the government.
E)the government needs to borrow from the central bank.
Q2) Which of the following is not considered a financial intermediary?
A)A commercial bank
B)A savings and loan association
C)The U.S.Department of Commerce
D)A credit union
E)An investment bank
Q3) A person obtains income is obtained by selling the services of the resources that he or she owns.
A)True
B)False
Q4) Empirical evidence on the U.S.economy suggests that household spending and income have an inverse relationship.
A)True
B)False
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Chapter 5: Elasticity: Demand and Supply
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) Refer to Figure 5.1.The demand curve E is most likely to represent the demand for:
A)alcohol by an alcoholic.
B)a life-saving drug.
C)holiday travel packages.
D)a particular brand of breakfast cereal.
E)air conditioning during a hot summer.
Q2) Suppose 50 loaves of bread are demanded at a particular price.If that price rises by 2 percent,the quantity demanded decreases to 49.5 loaves of bread.This implies:
A)demand is elastic.
B)demand is unit-elastic.
C)the price elasticity of demand is equal to 2.
D)demand is inelastic.
E)consumers are very responsive to a price change.
Q3) Since the slope of a downward sloping demand curve is constant,the price elasticity of demand does not change when moving along this line.
A)True
B)False
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Chapter 6: Consumer Choice
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) According to indifference curve I<sub>1</sub> in Figure 6.1,for each extra apple the consumer eats,he or she must simultaneously sacrifice ____ of listening to music to keep total utility constant.
A)1 hour
B)2 hours
C)3 hours
D)4 hours
E)5 hours
Q2) If MU<sub>X </sub>/ P<sub>X</sub> < MU<sub>Y </sub>/ P<sub>Y</sub> then this consumer:
A)will buy less of X and more of Y.
B)will buy more of X and more of Y.
C)is in equilibrium.
D)will buy more of X and less of Y.
E)will buy less of X and less of Y.
Q3) The law of diminishing marginal utility does not hold good when the good is free or priced at zero dollars.
A)True
B)False
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Page 8
Chapter 7: Supply: The Costs of Doing Business
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Using Figure 7.1 determine the average total cost of producing the first unit of the output.
A)$10.
B)$20.
C)$30.
D)$40.
E)$50.
Q2) The law of diminishing returns applies:
A)in the long run because all inputs are variable.
B)in the short run because some inputs remain fixed.
C)in both the short run and the long run.
D)to fixed inputs in the long run.
E)to fixed inputs in the short run.
Q3) Overhead costs are identical to fixed costs.
A)True
B)False
Q4) When more and more doses of fertilizers are added to a fixed plot of agricultural land,the crop yield initially declines but eventually rises.
A)True
B)False
Page 9
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Chapter 8: Profit Maximization
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Steve is about to start up a business in a monopolistically competitive market.Which of the following can he expect?
A)He can expect market entry to be difficult as there exist entry barriers.
B)He can expect to enjoy a huge market power.
C)He can expect to face a highly inelastic demand curve.
D)He can expect to find close substitutes of the product he is planning to produce.
E)He can expect to face an infinitely elastic demand curve.
Q2) A firm maximizes its profit at a level of output,where the additional revenue earned by selling an extra unit of the output is equal to the additional cost borne for producing that extra unit of the output.
A)True
B)False
Q3) Identify the characteristics of a monopoly firm.
A)Barred entry and homogeneous product
B)Unique product and large number of sellers
C)Standardized product and price taker
D)Barred entry and price taker
E)Barred entry and price maker
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Chapter 9: Perfect Competition
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) For a farmer,the long run would be the current growing season,where she can vary the amount of irrigation,pesticides,and fertilizer on a fixed number of acres planted.
A)True
B)False
Q2) Which of the following faces a horizontal demand curve?
A)A monopolistic firm
B)An oligopolistic firm
C)A perfectly competitive firm
D)A monopolistically competitive firm
E)A duopolistic firm
Q3) In the short run a perfectly competitive firm can earn normal profits or above normal profit but it cannot incur losses.
A)True
B)False
Q4) At long run equilibrium of a perfectly competitive firm the following condition holds good: Long Run Average-Total-Cost = Long Run Marginal Cost = Average Revenue = Marginal Revenue = Price.
A)True
B)False
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Chapter 10: Monopoly
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) If at the profit-maximizing level of output,a monopolist's average-total-cost curve lies above its demand curve,then:
A)the firm should shut down in the short run.
B)the firm is earning economic losses.
C)the firm is earning economic profits.
D)the firm should increase its output.
E)the firm should decrease its output.
Q2) Grocery coupons and mail-in rebates are forms of price discrimination.
A)True
B)False
Q3) The long-run equilibrium price-output combination for a monopolist is economically inefficient because:
A)it does not operate on the minimum point of its marginal-cost curve.
B)it does not produce the level of output at which price equals marginal cost.
C)consumer surplus is maximized but not producer surplus.
D)producer surplus is maximized but not consumer surplus.
E)it operates on the downward sloping portion of the average-total-cost curve.
Q4) A deadweight loss arises under perfect competition.
A)True
B)False
Page 12
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Chapter 11: Monopolistic Competition and Oligopoly
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Because of their brand names,Kodak,IBM,Honda,Daimler-Chrysler,and other well-known firms are able to charge significantly higher prices for their products than their competitors without losing any business.Expenditures made by firms to create brand names:
A)are always inefficient.
B)provide reliability to consumers.
C)lead to monopolies.
D)necessarily lead to deadweight losses.
E)would not exist if information was less costly for firms to obtain than consumers.
Q2) In an oligopoly market,firms do not produce identical product.
A)True
B)False
Q3) Consumers who purchase brand-name pharmaceuticals because they believe the brand name has some value,may be right even if a brand-name pharmaceutical and a generic product are chemically identical.
A)True
B)False
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Chapter 12: Antitrust and Regulation
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100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/48914
Sample Questions
Q1) According to the per se rule,activities that were potentially monopolizing tactics were illegal.
A)True
B)False
Q2) Which of the following statements is true of price fixing?
A)It represents a high level of competition in an industry.
B)It is allowed only under the provisions of the Federal Trade Commission Act.
C)It is,by definition,illegal,as there is no justification for it.
D)It occurs only in monopolistically competitive industries.
E)It is legal in United States.
Q3) What is the total societal surplus prior to regulation described in Figure 12.2?
A)Area 0FGQ<sub>1</sub>.
B)Area BEP<sub>1</sub>.
C)Area CEP<sub>1</sub>.
D)Area FGEP<sub>1</sub>.
E)Area BEC.
Q4) Antitrust policies are a set of measures which are taken to liberate the economy from unnecessary governmental controls.
A)True
B)False
Page 14
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Chapter 13: Market Failures, Government Failures, and Rent
Seeking
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) One reason that some whales were hunted close to extinction is that no one can claim ownership of a whale until it is killed.If property rights to the whale population were established:
A)then whales would surely be hunted to extinction.
B)the owners would have the incentive to ensure a sustainable yield of whales,so the whale population could recover.
C)no one would hunt whales.
D)the price of whales would be kept artificially low so that trade in whales would become unprofitable.
E)the whales would be hunted to extinction only when the price is high and it is profitable to trade in whales.
Q2) Figure 13.1 represents a situation of:
A)positive externalities.
B)negative externalities.
C)excess capacity.
D)optimal provision of a public goods.
E)comparative advantage.
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Chapter 14: Resource Markets
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) The value of the marginal product of a resource is equal to:
A)the marginal revenue of the firm,if the product market is perfectly competitive.
B)the market price of the product divided by the price of the resource.
C)the market price of the product divided by the marginal product of the resource.
D)the marginal revenue product of the resource,if the product market is perfectly competitive.
E)the marginal product of the resource divided by the price of the resource.
Q2) After hiring 151 units of the variable input (say labor) a firm determines the MFC to be $0.33 and the MRP to be $0.30.The firm should:
A)increase the output of its product.
B)increase the use of labor.
C)decrease the use of labor.
D)produce 151 units.
E)produce 33 units of the output.
Q3) Households' expenditure on goods and services are sources of revenue for the firms.
A)True
B)False
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Page 16
Chapter 15: The Labor Market
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117 Verified Questions
117 Flashcards
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Sample Questions
Q1) People tend to remain in those occupations that require continuous time and financial commitments to remain productive.
A)True
B)False
Q2) In Figure 15.5,the equilibrium wage rate and the level of employment in Market A are _____ and _____ respectively.
A)$8; 15 hours.
B)$10; 10 hours.
C)$10; 20 hours.
D)$12; 25 hours.
E)$6; 20 hours.
Q3) Refer to Figure 15.5.If a minimum wage of $10 is set by the government,then in market
A:
A)a shortage of 20 labor hours is created.
B)the quantity demanded for labor rises to 20 labor hours.
C)a shortage of 15 labor hours is created.
D)a surplus of 20 labor hours is created.
E)a surplus of 10 labor hours is created.
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17
Chapter 16: Capital Markets
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Which of the following is sometimes used as a synonym to describe a bond?
A)Stock
B)Fixed-income security
C)Capital asset
D)Retained earning
E)Depreciation
Q2) The demand curve for the shares of a company's stock slopes upward,since the higher the price of the stock,everything else the same,the higher the quantity of stock demanded.
A)True
B)False
Q3) The S&P 500 index includes the stocks of 500 largest companies in the U.S.
A)True
B)False
Q4) Bonds and stocks act as complementary goods such that a rise in the price of one raises the demand for the other.
A)True
B)False
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Page 18
Chapter 17: The Land Market and Natural Resources
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55 Verified Questions
55 Flashcards
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Sample Questions
Q1) The category of resources economists call "land" refers to all of the following,except:
A)nonrenewable natural resources.
B)renewable natural resources.
C)oceans.
D)minerals.
E)buildings.
Q2) The supply curve of land in the market for uses of land is:
A)perfectly inelastic.
B)nonexistent.
C)perfectly elastic.
D)positively sloped.
E)negatively sloped.
Q3) For any particular period of time,say a year,the supply of exhaustible resources:
A)decreases infinitely with increase in price.
B)remains unaffected by any change in price.
C)increases infinitely with increase in price.
D)increases to a certain extent with increase in price.
E)decreases to a certain extent with increase in price.
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Chapter 18: Aging, Social Security and Health Care
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) Which of the following reasons justifies the increase in the expenditure on prescription drugs in the U.S.?
A)Lack of sufficient investment in research and development of new drugs
B)Proper functioning of the Medicare and Medicaid programs
C)Insufficient supply of prescription drugs leading to a shortage
D)Increasing returns to scale experienced by the drug manufacturers
E)Decrease in the time required to introduce a new drug into the market
Q2) The money raised from the social security taxes is used:
A)to invest in foreign bonds.
B)to invest in domestic interest bearing assets.
C)to meet recurring government expenditures.
D)to fund the unemployment insurance program.
E)to fund the scholarship programs in foreign universities.
Q3) The social security tax proceeds are often used to purchase government bonds.
A)True
B)False
Q4) Demand for medical care remaining constant,if the supply of medical care is decreased,the price of medical care increases.
A)True
B)False
Page 20
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Chapter 19: Income Distribution,Poverty and Government Policy
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) If everyone had the same income,then the Lorenz curve would:
A)be the line of income equality.
B)bow down below the line of income equality.
C)be a parallel line lying below the line of income equality.
D)bow up above the line of income equality.
E)be a curve that intersects the line of income equality at its mid-point.
Q2) Identify the correct statement.
A)The break-even income is directly related to the negative income tax.
B)The break-even income is inversely related to the income floor.
C)The break-even income is inversely related to the negative income tax.
D)The break-even income is less than the guaranteed income.
E)The break-even income is always equal to the guaranteed income.
Q3) The higher the HiLo ratio,the more the top income quintile earns relative to the bottom quintile.
A)True
B)False
Q4) The poverty threshold is often determined in terms of the expenditure on meals that meet a predetermined nutritional standard.
A)True
B)False
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Chapter 20: World Trade Equilibrium
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112 Verified Questions
112 Flashcards
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Sample Questions
Q1) Which of the following countries receives the largest share of U.S.exports?
A)Mexico
B)Germany
C)Japan
D)Canada
E)United Kingdom
Q2) According to Table 20.3,what is the greatest amount Korea is willing to pay for 1 calculator?
A)1 pound of rice
B)5 pounds of rice
C)2 pounds of rice
D)2.5 pounds of rice
E)Half a pound of rice
Q3) The export supply curve is the portion of the domestic supply curve below the no-trade equilibrium price.
A)True
B)False
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Chapter 21: International Trade Restrictions
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109 Flashcards
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Sample Questions
Q1) Protecting infant industries from foreign competition may make sense,but only until the industry matures.
A)True
B)False
Q2) According to empirical observations,the cost of restricting international trade in the U.S.is much greater than the benefits generated from restriction.In the light of the above observation,which of the following statements is true?
A)The benefits of protecting domestic jobs typically outweigh the costs.
B)Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer.
C)U.S.GDP would be over $14 billion higher with import restrictions than without restrictions.
D)Protection of the U.S.textile and sugar industries means that all consumers pay a lower price for clothing and sugar.
E)Protection of the domestic industries enable the producers to charge lower prices for their products.
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23
Chapter 22: Exchange Rates and Financial Links Between Countries
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132 Flashcards
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Sample Questions
Q1) To ensure interest rate parity,a decrease in the interest rate on Euroyen relative to Eurodollar deposits will require a greater expected appreciation of the Japanese yen against the U.S.dollar.
A)True
B)False
Q2) Suppose the price of an ounce of silver is 100 nuevos soles in Peru and $400 in the United States.This implies:
A)the Peruvian nuevo sol is worth four times the value of a U.S.dollar.
B)the Peruvian nuevo sol is worth one-fourth the value of a U.S.dollar.
C)Peru's economy must be four times larger than the U.S.economy.
D)the U.S.economy must be four times larger than that of Peru.
E)the U.S.dollar is worth four times the value of a Peruvian nuevo sol.
Q3) Assume that a British investor buys a one-year U.S.Treasury bill that pays 6 percent annual interest.Given a yield of 4 percent on a comparable British Treasury bill,the U.S.dollar must depreciate 2 percent against the British pound during the year for interest rate parity to hold.
A)True
B)False
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