Microeconomic Theory Solved
Exam Questions
Course Introduction
Microeconomic Theory explores the fundamental principles that govern the behavior of individuals and firms in making decisions regarding the allocation of limited resources. The course examines consumer choice, production and cost theories, market structures ranging from perfect competition to monopoly, and the role of government intervention. Emphasis is placed on understanding how prices are determined in various markets, how firms optimize output and pricing, and how individuals respond to changes in incentives, all through the rigorous use of mathematical models and economic reasoning.
Recommended Textbook
ECON Micro 2 2nd Edition by William A. McEachern
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21 Chapters
3947 Verified Questions
3947 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Which of the following is an example of a normative statement?
A) If the money supply falls,interest rates will rise.
B) Teenage unemployment would be lower if there were no minimum wage.
C) The quantity of shirts sold increases as the price of shirts decreases.
D) The federal government's total spending should be reduced.
E) If interest rates go up,then construction activity will fall.
Answer: D
Q2) Someone who committed the association-is-causation fallacy might conclude that
A) event B,which follows event A,was caused by the event A
B) event B,which follows event A,was not necessarily caused by event A
C) the simplest model is the best predictor
D) what is true for the individual is also true for the group
E) what is true for the individual is not necessarily true for the group
Answer: A
Q3) Profit is the payment made for land resources.
A)True
B)False
Answer: False
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3
Chapter 2: Economic Tools and Economics Systems
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185 Flashcards
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Sample Questions
Q1) In Exhibit 2-4,what is the opportunity cost of moving from point c to point b?
A) 3 units of food
B) 22 units of education
C) 1 unit of food
D) 12 units of education
E) 62 units of education
Answer: B
Q2) In Exhibit 2-3,if all the economy's resources are used efficiently to produce good B,then the economy is at point
A) g
B) b
C) h
D) i
E) e
Answer: A
Q3) One flaw of pure capitalism is that a person who owns no resources could starve.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) Which of the following is not based on the benefits-received principle of taxation?
A) charging a fee for use of public golf courses
B) differences between residential and out-of-state college tuition
C) the excise tax on gasoline
D) toll booths on a highway
E) charging a fee per bag to haul away garbage
Answer: B
Q2) The four types of economic decision makers are:
A) Firms,corporations,households,and the government
B) Households,firms,government,and the rest of the world
C) Households,corporations,partnerships,and the government
D) Government,corporations,households,firms
E) The rest of the world,corporations,firms,government
Answer: B
Q3) As the real wage increases,the opportunity cost of working outside the home increases.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) A price ceiling set below the equilibrium price will result in a shortage.
A)True
B)False
Q2) If demand decreases and supply increases,price will
A) always increase
B) always decrease
C) increase only if supply increases more than demand decreases
D) increase only if supply increases less than demand decreases
E) decrease only if supply increases more than demand decreases
Q3) If the price of the good described in Exhibit 4-1 is $1.50,then
A) there is a shortage
B) there is a surplus
C) the market is in equilibrium
D) the quantity supplied is 30 units
E) the quantity demanded is 30 units
Q4) Disequilibrium occurs when quantity demanded equals quantity supplied.
A)True
B)False
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Chapter 5: Elasticity of Demand and Supply
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Sample Questions
Q1) Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S.demand for wheat is
A) inelastic
B) elastic
C) unit elastic
D) downward sloping
E) perfectly elastic
Q2) If output in the calculator market increases by 5 percent when the price increases by more than 5 percent,then
A) supply is inelastic
B) supply is elastic
C) a small increase in price will cause a leftward shift of the supply curve
D) a small increase in price will cause a rightward shift of the supply curve
E) a large increase in price will cause a large shift of the supply curve
Q3) If there is no change in equilibrium price after a $1 per unit tax is imposed on suppliers,demand must be perfectly inelastic.
A)True
B)False
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Chapter 6: Consumer Choice and Demand
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Sample Questions
Q1) Which area in Exhibit 6-13 represents the maximum amount that consumers are willing to pay for 10 opera tickets?
A) area a
B) area b
C) area c
D) areas a + b + c
E) areas a + b
Q2) The consumers' surplus derived from the last unit of a good purchased
A) tends to be less than 0
B) tends to be equal to 0
C) tends to equal the price of the good
D) tends to be greater than the price of the good
E) depends on the marginal utility of the first unit purchased
Q3) If by purchasing a little more milk and a little less ice cream you could increase your total utility,
A) the MU of milk must be greater than that of ice cream
B) the MU of ice cream must be greater than that of milk
C) the MU/P of milk must be greater than that of ice cream
D) milk must be cheaper than ice cream
E) the MU of milk will increase
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Chapter 7: Production and Cost in the Firm
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Sample Questions
Q1) Empirical studies of production suggest that the long-run average cost curve
A) is U-shaped
B) has an inverted L shape
C) is L-shaped
D) is horizontal
E) shows diminishing marginal returns
Q2) A firm's opportunity costs of using resources provided by the firm's owners are called
A) sunk costs
B) fixed costs
C) explicit costs
D) implicit costs
E) entrepreneurial costs
Q3) Opportunity cost usually
A) cannot be measured
B) applies to labor but not to capital
C) is involved in calculating economic profit
D) is greater than the cash payment made to a resource
E) is less than the cash payment made to a resource
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9
Chapter 8: Perfect Competition
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Sample Questions
Q1) Long-run equilibrium for a perfectly competitive firm occurs when
A) P = MC = MR = ATC
B) MC = MR = AFC = ATC
C) MC = MR = P > ATC
D) P > MC > MR > ATC
E) TR > TC
Q2) In the short run,a perfectly competitive firm will always shut down if,at all output levels above zero,
A) price is less than average total cost
B) total revenue is less than total cost
C) they cannot pay variable costs with total revenue
D) variable cost is greater than fixed cost
E) price is less than fixed cost
Q3) If a market is such that,at the market equilibrium quantity,the benefit of the last unit produced just equals its marginal cost
A) it has earned a positive economic profit
B) it has achieved productive efficiency
C) it has achieved allocative efficiency
D) it has achieved economies of scale
E) there are further trades than can increase producer surplus
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Chapter 9: Amonopoly
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Sample Questions
Q1) Total cost for the profit-maximizing (nondiscriminating) monopoly in Exhibit 9-11 will be
A) $95,200
B) $84,000
C) $77,000
D) $53,200
E) $42,000
Q2) When a monopolist practices perfect price discrimination, A) consumers receive no consumer surplus
B) there is allocative inefficiency
C) there is a deadweight loss
D) profit is lower than for the nondiscriminating monopolist
E) total revenue is less than for the nondiscriminating monopolist
Q3) At the profit-maximizing (or loss-minimizing) level of production,the monopoly in Exhibit 9-14 will have total revenue of
A) $308
B) $187
C) $216
D) $306
E) $272
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Chapter 10: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) Assume that the firm in Exhibit 10-7 is maximizing profit.Its total revenue is
A) $5,320
B) $5,700
C) $4,750
D) $8,120
E) $8,100
Q2) A prisoner's dilemma is a situation in which
A) a change in marginal cost may not lead to a change in price
B) a firm's competitors follow a price increase but ignore a price decrease
C) oligopolists behave irrationally
D) oligopolists attempt to maximize sales rather than profits
E) an oligopolists demand curve may become perfectly inelastic
Q3) At the profit-maximizing output,the monopolistically competitive firm in Exhibit 10-3 is in
A) long-run equilibrium because price equals average total cost
B) long-run equilibrium because price is less than average total cost
C) short-run equilibrium because price is greater than average total cost
D) short-run equilibrium because there is an economic loss
E) short-run equilibrium because there is zero economic profit
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Page 12
Chapter 11: Resource Markets
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210 Flashcards
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Sample Questions
Q1) The marginal revenue product of land curve indicates
A) the additional output generated by an additional unit of land,other things constant
B) the additional cost to the firm when it employs an additional unit of land,other things constant
C) the additional profit the firm earns when it employs an additional unit of land,other things constant
D) the additional revenue the firm earns when it employs an additional unit of land,other things constant
E) the amount of land required to produce an additional unit of output,other things constant
Q2) The demand for corn syrup is derived from:
A) The demand for corn
B) The supply of corn syrup
C) The supply of corn
D) The demand for goods made with corn syrup
E) The supply of goods made with corn syrup
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13
Chapter 12: Labor Markets and Labor Unions
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Sample Questions
Q1) An increase in the wage rate will decrease the demand for labor.
A)True
B)False
Q2) If two accountants have had the same education,amount of experience,and work at the same type of job for the same profit-maximizing firm,which charges its clients a uniform hourly fee,
A) they should earn the same amount of money
B) the one whose job is riskier should be paid more
C) the one whose job is riskier should be paid less
D) the one who has a higher marginal product (due to ability) should be paid more
E) the one who has a higher marginal product (due to ability) should be paid less
Q3) People who can earn higher market wages
A) have a greater net utility associated with nonmarket work
B) supply more hours to market work than people with lower wages
C) are less likely to perform nonmarket work
D) are more likely to view leisure as an inferior good
E) experience less disutility associated with market work
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Chapter 13: Capital, interest, and Corporate Finance
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183 Flashcards
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Sample Questions
Q1) Corporations can obtain investment funds by
A) buying government securities
B) selling stock
C) increasing dividends
D) purchasing more capital
E) buying back stock
Q2) If a change in technology improves the marginal productivity of capital,the
A) supply of capital will increase
B) supply of capital will decrease
C) demand for loanable funds will increase
D) demand for loanable funds will decrease
E) supply of loanable funds will increase
Q3) All types of capital
A) are forms of resources that can be used in future production
B) require a physical existence
C) earn an economic rent
D) yield profits for their owners
E) require obtaining more education and job skills
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Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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178 Flashcards
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Sample Questions
Q1) According to Coase,firms
A) exist because the entrepreneur must prevent shirking
B) should not exist
C) should not exist if all participants in a market have perfect information
D) exist because of the transaction costs of coordinating many resources through markets
E) increase production costs and should therefore be limited
Q2) At the December meeting of the American Economic Association,2,500 new Ph.D.s look for college teaching jobs.If the average wage offer is $40,000 and Tedium University makes that offer,it is likely to
A) be ignored
B) attract only average Ph.D.s
C) attract applicants from top schools
D) attract Ph.D.s with strong dissertations
E) attract applicants of below-average quality
Q3) Economies of scope exist when it is less expensive to produce two or more product lines in a single firm than it is to produce them separately.
A)True
B)False
Page 16
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Chapter 15: Economic Regulation and Antitrust Policy
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Sample Questions
Q1) A requirement that buyers of one service also purchase another service from the same seller is called
A) exclusive dealing
B) an interlocking merger
C) a second good contract
D) a tying contract
E) a legal agreement
Q2) If an industry consists of only two firms with equal market shares,then the Herfindahl index is
A) 50
B) 100
C) 2,500
D) 5,000
E) 10,000
Q3) Public utilities are either government-owned or government-regulated firms.
A)True
B)False
Q4) U.S.antitrust policy is focused primarily on market conduct.
A)True
B)False
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Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) A good that is both rival and exclusive is called
A) a private good
B) a public good
C) a quasi-private good
D) an external good
E) an open access good
Q2) Public goods legislation involves
A) widespread benefits and concentrated costs
B) widespread benefits and widespread costs
C) concentrated benefits and widespread costs
D) concentrated benefits and costs
E) regulating natural monopolies to avoid price gouging
Q3) Legal attempts to arrange one's financial decisions so as to pay the least tax possible are known as
A) tax evasion
B) logrolling
C) tax avoidance
D) rent seeking
E) underreporting
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Page 18
Chapter 17: Externalities and the Environment
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Sample Questions
Q1) Government allocation of pollution rights cannot be efficient if polluters cannot be easily identified and monitored.
A)True
B)False
Q2) When a citizens' group opposes expansion of the prison located in town,the basis of the opposition is that the larger prison will produce
A) a negative externality for the community
B) a positive externality for the community
C) more jobs in the community
D) tax revenue for the community
E) improved criminal justice options
Q3) Firms that emit toxins into the air tend to
A) underproduce because the private cost of production exceeds the social cost
B) overproduce because the social cost of production exceeds the private cost
C) produce the same as nonpolluting firms
D) produce at the socially optimal amount
E) cover pollution costs in the product's price
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Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) The largest U.S.welfare program is
A) Aid to Families with Dependent Children
B) Medicaid
C) Social Security
D) unemployment compensation
E) food stamps
Q2) Census data on the income distribution among families in the United States in recent years show
A) a rising share earned by the top fifth and a declining share earned by the bottom fifth
B) a rising share earned by the bottom fifth and a declining share earned by the top fifth
C) both the share earned by the top fifth and the share earned by the bottom fifth rising
D) both the share earned by the top fifth and the share earned by the bottom fifth falling
E) falling total income in the top fifth
Q3) Food stamps and Medicaid are in-kind transfer programs.
A)True
B)False
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Chapter 19: International Trade
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Sample Questions
Q1) As a result of a tariff on an imported good,
A) domestic producers are better off because they sell more goods at the same price
B) domestic producers are better off because they sell more goods at a higher price
C) domestic producers are better off because they sell the same quantity of goods at a higher price
D) domestic consumers are better off because there are more domestically produced goods available
E) domestic consumers are neither better off nor worse off because imports do not change
Q2) The term autarky refers to
A) equilibrium after trade begins between two countries
B) the gains received from trade
C) self-sufficiency
D) political isolationism
E) the recognition that mutually beneficial trade is not possible between two countries
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Chapter 20: International Finance
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Sample Questions
Q1) A decrease in the U.S.demand for foreign exchange will:
A) Increase the price of foreign exchange
B) Increase the value of the U.S.dollar
C) Decrease the value of the U.S.dollar
D) Make foreign goods more expensive in U.S.dollars
E) Make U.S.goods less expensive in foreign exchange
Q2) In the early 1970s,in an attempt to solve the problem of the overvalued U.S.dollar,world leaders
A) increased the price of gold in terms of other currencies
B) appreciated the dollar,which made foreign exchange cheaper to U.S.residents
C) appreciated the dollar,which made foreign exchange more expensive to U.S.residents
D) devalued the dollar,which made foreign exchange cheaper to U.S.residents
E) devalued the dollar,which made foreign exchange more expensive to U.S.residents
Q3) With a flexible exchange rate system,government officials have little direct role in the foreign exchange market.
A)True
B)False
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Chapter 21: Developing and Transitional Economies
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Sample Questions
Q1) Which of the following does the country of Fuggedaboutit not have to be concerned about?
A) choosing a system of resource ownership
B) allocating resources
C) earning a profit for its owners
D) providing individual incentives
E) answering the three economic questions
Q2) There is a tremendous range in productive performance around the world.
A)True
B)False
Q3) Education makes people more receptive t new ideas and methods,which leads to economic development.
A)True
B)False
Q4) Differences in stages of development among countries are reflected in a number of ways besides per capita income.
A)True
B)False
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Page 23