Microeconomics for Business Pre-Test Questions
Course Introduction
Microeconomics for Business examines the fundamental principles of microeconomic theory and their practical application in business decision-making. The course covers key concepts such as supply and demand, market equilibrium, price elasticity, production and cost analysis, and various market structures including perfect competition, monopoly, and oligopoly. Emphasis is placed on understanding how individuals and firms make decisions regarding resource allocation, pricing strategies, and output production in response to changing market conditions. Students will also learn to analyze the impact of government interventions, such as taxes and regulations, on business operations and market outcomes. Through case studies and real-world examples, the course equips students with the analytical tools needed to solve business problems and make informed managerial decisions.
Recommended Textbook
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson
Available Study Resources on Quizplus
17 Chapters
558 Verified Questions
558 Flashcards
Source URL: https://quizplus.com/study-set/404 Page 2
Chapter 1: Economic Models
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/7056
Sample Questions
Q1) A major problem that may occur with models that predict the values of economic variables in the future is that
A)researchers are pessimistic about the future.
B)the model may fail to acknowledge that economic actors will change their behavior in response to changing situations.
C)the model may make predictions that conflict with widely held opinions.
D)no one cares about these predictions.
Answer: B
Q2) The Ricardian notion that of diminishing returns implies that
A)as more input is used more output will be made.
B)as more input is used less output will be made.
C)as more input is used the increase in output will increase.
D)as more input is used the increase in output will decrease.
Answer: D
Q3) Positive economic analysis
A)involves the study of firms with positive profits.
B)involves how resources are actually used in an economy.
C)involves judgments on how resources should be used in an economy.
D)is usually thought to be a waste of time.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Utility and Choice
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7057
Sample Questions
Q1) Suppose a cup of coffee at the campus coffee shop is $2.50 and a cup of hot tea is $1.25 and that a student's beverage budget is $20 per week.What is the market tradeoff between coffee and tea?
A)1 coffee to 1 tea
B)2 coffee to 1 tea
C)1 coffee to 2 tea
D)2 coffee to 2 tea
Answer: C
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)b and c.
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Demand Curves
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/7058
Sample Questions
Q1) The price elasticity of demand for any good must be less than or equal to zero unless A)the good is a necessity.
B)the good is a luxury.
C)the good is a Giffen good.
Answer: C
Q2) Suppose a person's utility is only a function of their consumption of diet soda and they do not care which brand,Diet Coke (DC)or Diet Pepsi (DP)they consume.Suppose further that .If PDC rises but it remains less than PDP then the consumption of DC
A)Falls from a positive amount to zero
B)Falls from a positive amount to another positive amount.
C)rises.
D)stays at zero.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
5
Chapter 4: Uncertainty
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/7059
Sample Questions
Q1) Suppose a lottery ticket costs $1 and the probability that a holder will win nothing is 99%.What must the jackpot be for this to be a fair bet?
A)10
B)100
C)1,000
D)10,000
Q2) With moral hazard,fair insurance contracts are not viable because A)individuals' aversion to risk is reduced.
B)insurance company's administrative costs are increased.
C)individuals fear unscrupulous agents.
D)probabilities of loss are increased over what is expected.
Q3) 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
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Game Theory
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/7060
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) If the Prisoners' Dilemma is repeated over and over again with the same two players having an indefinite time horizon,
A)the unique equilibrium is to play the Nash equilibrium of Rat each period.
B)players can cooperate on Silent if they are not too patient.
C)players can cooperate on Silent if they are patient enough.
D)players can only cooperate on Silent in the initial stages of the game.
Q3) Return to the version of the game between the fishermen in which they fish independently. If the marginal cost for just fisherman A went up,what would be the likely effect on the Nash equilibrium?
A)A would catch more fish,and B would catch fewer.
B)A would catch fewer fish,and B would catch more.
C)A would catch more fish,but B's catch would not change.
D)A would catch fewer fish,but B's catch would not change.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Production
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/7061
Sample Questions
Q1) If production is given by Q = KL,doubling both inputs
A)more than doubles output.
B)exactly doubles output.
C)increases output but does not double it.
D)leaves output unchanged.
Q2) 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.
Q3) A firm's rate of technical substitution is represented graphically by
A)the slope of the line connecting the origin with the relevant point on the isoquant.
B)the negative of the slope of the line connecting the origin with the relevant point on the isoquant.
C)the slope of the isoquant at the relevant point.
D)the negative of the slope of the isoquant at the relevant point.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Costs
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/7062
Sample Questions
Q1) Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)1/2,where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on
A)the wage rate only.
B)the rental rate only.
C)both the wage and rental rates.
D)neither the wage nor rental rates.
Q2) The expansion path for a constant-returns-to-scale production function
A)is a straight line through the origin with a slope greater than 1 if w > v.
B)is a straight line through the origin with a slope greater than 1 if w < v.
C)is a straight line through the origin,though its slope cannot be determined by w and v alone.
D)has a positive slope but is not necessarily a straight line.
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.
To view all questions and flashcards with answers, click on the resource link above.
9
Chapter 8: Profit Maximization and Supply
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/7063
Sample Questions
Q1) A firm's marginal revenue is defined as
A)the ratio of total revenue to total quantity produced.
B)the additional output produced by lowering price.
C)the additional revenue received due to technical innovation.
D)the additional revenue received when selling one more unit of output.
Q2) Suppose a farmer is a price taker for soybean sales with cost functions given by ?
TC = .1q<sup>2</sup> + 2q + 30
MC = .2q + 2
If P = 6 ,the profit-maximizing level of output is
A)10
B)20
C)40
D)80
Q3) In order to maximize profits,a firm should produce at the output level for which
A)average cost is minimized.
B)marginal revenue equals marginal cost.
C)marginal cost is minimized.
D)price minus average cost is as large as possible.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Perfect Competition in a Single Market
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/7064
Sample Questions
Q1) In the short run
A)new firms may enter an industry.
B)existing firms may change the quantity they are supplying.
C)price and quantity supplied are absolutely fixed.
D)quantity supplied is absolutely fixed.
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.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: General Equilibrium and Welfare
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7065
Sample Questions
Q1) Markets can fail to achieve efficiency when A)there are prices consumers do not think are fair.
B)there are wages workers do not think are fair.
C)trade puts people out of work.
D)there are markets with imperfect competition.
Q2) Markets can fail to achieve efficiency when A)there are prices consumers do not think are fair.
B)there are wages workers do not think are fair.
C)trade puts people out of work.
D)there are buyers or sellers without adequate information about the quality of goods.
Q3) Suppose goods X and Y are produced along a production possibilities frontier 4X<sup>2</sup> + Y<sup>2</sup> = 500 and they are perfect substitutes such that U = X + Y.The slope of the production possibilities frontier is \(\frac
{
-
X ^ { 2 } } }\) .What is this slope at the utility-maximizing point?
A)0
B)-1
C)-4
D)-5
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Monopoly
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7066
Sample Questions
Q1) Perfect price discrimination
A)is a common occurrence in situations with many buyers.
B)occurs fairly often in situations with only a few buyers.
C)is only observed in competitive markets.
D)rarely occurs because firms do not have sufficient power to differentiate among specific buyers.
Q2) From the point of view of economic efficiency,output in a monopolized market is
A)too high.
B)perfect.
C)too low.
D)undesirable.
Q3) Which of the following is not a legal barrier to entry in a monopolized market?
A)A patent.
B)An exclusive franchise.
C)Decreasing average cost.
D)An exclusive license.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Imperfect Competition
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/7067
Sample Questions
Q1) Suppose there are two firms,Boors and Cudweiser,each selling identical-tasting nonalcoholic beer.Consumers of this beer have no brand loyalty so market demand can be expressed as P = 5 - .001(QB + QC). Boors' marginal revenue function can be written MR = 5 - .001(2QB + QC)and symmetrically for Cudweiser. Boors operates with out-of-date technology and has constant cost of $2 per unit \(( M C = A C = 2 )\) whereas Cudweiser has constant cost of $1 per unit. Assuming the firms behave as Cournot competitors,Boor's best-response function is
A)QB = 2,000 - .5QC
B)QB = 1,500 - .5QC
C)QC = 2,000 - .5QB
D)QC = 1,500 - .5QB
Q2) Consider the market for nonalcoholic beers from the previous question. Boors' price in a Nash equilibrium (assuming Bertrand competition in these differentiated beers)is about
A)1.71
B)2.55
C)3.55
D)4.29
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Pricing in Input Markets
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/7068
Sample Questions
Q1) Suppose the market for labor is perfectly competitive and the demand for labor is \(L = 100 - 10 w\) and market supply is \(L = - 20 + 10 w\) .If a minimum wage is imposed at w = 8,the deadweight loss of the imposition of the minimum wage is A)10
B)20
C)30
D)40
Q2) The size of the reduction in quantity of labor hired by a firm due to an increase in the wage rate depends upon all of the following except
A)what percentage of total costs are made up of labor costs.
B)how much quantity demanded in the output market will be reduced by a higher price.
C)the capital to labor ratio before the wage increase.
D)how easily other inputs can be substituted for labor.
Q3) 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.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Capital and Time
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/7069
Sample Questions
Q1) Accelerated depreciation laws may increase firms' investment in equipment because
A)machines will wear out more rapidly.
B)profits will be increased.
C)the rental rate on capital will be lowered.
D)the price of machines will fall.
Q2) A firm that wished to calculate the present value of its future nominal profits should use the ____ to do so.
A)real interest rate
B)nominal interest rate
C)nominal interest rate minus the expected inflation rate
D)real interest rate minus the expected inflation rate
Q3) 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.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Asymmetric Information
Available Study Resources on Quizplus for this Chatper
28 Verified Questions
28 Flashcards
Source URL: https://quizplus.com/quiz/7070
Sample Questions
Q1) Return to the situation with the executive from the previous question. Now assume that shareholders cannot observe effort,so cannot specify how hard the executive works in the contract but must induce it through the incentive scheme. Which of the following wage contracts would work out best for shareholders in equilibrium?
A)A flat wage w = 2,500 with no profit share.
B)A share of 35% of the gross profits.
C)A share of 55% of the gross profits.
D)A share of 70% of the gross profits.
Q2) How do participants in an auction respond to the problem of the "winner's curse"?
A)They bid more aggressively to win the auction and avoid the "curse".
B)They exit the auction because winning can only be a bad sign of the object's worth.
C)All bid less aggressively,so that the winner ends up not regretting having won.
D)The winner regrets having won the auction.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: Externalities and Public Goods
Available Study Resources on Quizplus for this Chatper
34 Verified Questions
34 Flashcards
Source URL: https://quizplus.com/quiz/7071
Sample Questions
Q1) The "free-rider problem" of public goods refers to
A)individuals' refusal to pay taxes.
B)individuals' attempts to hide their preferences for collective goods and to avoid paying for them.
C)individuals' overuse of collective goods.
D)the inelasticity of individuals' demands for public goods.
Q2) Suppose residents of Toadhop live on the Quabache River,a river prone to flooding.Suppose there are 1000 (type A)people who value flood control more than the 1000 (type B)people. Type A Demand Q<sub>D</sub> = 100 - P
Type B Demand Q<sub>D</sub> = 50 - P
Where Q measures the quality of flood control.If the price of a unit of flood control is $100,000 and the citizens of Toadhop gather for a townhall meeting to find the socially optimal level of flood control,and they are successful,how much will type B individuals contribute per unit of flood control?
A)25
B)50
C)75
D)100
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Behavioral Economics
Available Study Resources on Quizplus for this Chatper
23 Verified Questions
23 Flashcards
Source URL: https://quizplus.com/quiz/7072
Sample Questions
Q1) People are sometimes seen to give up money to make an allocation more fair. What experiment could be used to determine if this is because people truly care about fairness or because people want to avoid the consequences of others' spite?
A)The Ultimatum Game could be run to see if an even split is proposed.
B)The Dictator Game could be run to see if an even split is proposed.
C)The Battle of the Sexes could be run to see if players choose the rival's preferred outcome.
D)The repeated Prisoners Dilemma could be run to see if players can tacitly collude on Silent.
Q2) Which is not a factor that makes cognitive mistakes more likely?
A)uncertainty.
B)time pressure.
C)repetition.
D)large number of choices.
To view all questions and flashcards with answers, click on the resource link above.
19