Microeconomics Test Preparation
Course Introduction
Microeconomics is the branch of economics that focuses on the behavior and decision-making processes of individual consumers, firms, and industries. This course explores how scarce resources are allocated through the interactions of buyers and sellers in various types of markets. Topics include the theory of supply and demand, elasticity, consumer choice, production and cost analysis, market structures such as perfect competition, monopoly, and oligopoly, and the role of government interventions. Students will develop analytical tools to understand how prices are determined, how markets function, and how economic agents respond to incentives and constraints, laying the foundation for more advanced studies in economics and business.
Recommended Textbook
Economics for Today 4th Asia Pacific Edition by Allan Layton
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19 Chapters
2245 Verified Questions
2245 Flashcards
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Chapter 1: Thinking like an economist
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89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/21216
Sample Questions
Q1) An economic theory claims that a rise in petrol prices will cause petrol purchases to fall,ceteris paribus.The phrase 'ceteris paribus' means that:
A)other relevant factors like consumer incomes must be held constant.
B)the petrol prices must first be adjusted for inflation.
C)the theory is widely accepted but cannot be accurately tested.
D)consumers' need for petrol remains the same regardless of the price.
Answer: A
Q2) Which of the following would eliminate scarcity as an economic problem?
A)Moderation of people's competitive instincts.
B)Discovery of sufficiently large new energy reserves.
C)Resumption of steady productivity growth.
D)Economic scarcity cannot be eliminated.
Answer: D
Q3) Scarcity:
A)does not exist.
B)implies that people must make a choice.
C)exists only in developed countries.
D)exists only in developing countries.
Answer: B
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Page 3
Chapter 2: Production possibilities and opportunity cost
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123 Flashcards
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Sample Questions
Q1) If more of one good can be produced without producing less of another output,the economy must have been operating efficiently.
A)True
B)False
Answer: False
Q2) Increase in current consumption is necessary for economic growth.
A)True
B)False
Answer: False
Q3) The most efficient point on the production possibilities curve is the midpoint on the curve.
A)True
B)False
Answer: False
Q4) Marginal analysis:
A)compares some benefits of a change with all the costs of the change.
B)compares total benefits of a change with total costs of the change.
C)examines the impact of changes from a current situation.
D)examines only the non-important issues.
Answer: C
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Chapter 3: Market demand and supply
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123 Flashcards
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Sample Questions
Q1) What happens when a cyclone destroys the banana plantation?
A)The damaging effect of the cyclone means that farmers are only able to supply fewer bananas at each possible price and supply decreases.
B)There is no effect of cyclone on market prices.
C)The damaging effect of the cyclone means that farmers are able to produce apples instead of bananas with no effect on the supply of bananas.
D)The prices for bananas will increase permanently.
Answer: A
Q2) In Exhibit 3-6,Panel A,the movement from A to C describes a/an:
A)ambiguous change in price and a decrease in quantity.
B)increase in price and an ambiguous change in quantity.
C)increase in both price and quantity.
D)decrease in both price and quantity.
E)change in supply that dominates a change in demand.
Answer: D
Q3) A shortage occurs when a good is in great demand.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Markets in action
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123 Flashcards
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Sample Questions
Q1) In Exhibit 4-4,a movement from A to B is best described as a/an:
A)increase in the quantity supplied and an increase in the demand.
B)increase in the quantity supplied and a decrease in demand.
C)decrease in the quantity supplied and an increase in demand.
D)decrease in the quantity demanded and a decrease in supply.
E)decrease in both quantity demanded and quantity supplied.
Q2) Which of the following is a property of a public good?
A)A public good is free from externalities.
B)Many individuals benefit simultaneously.
C)A public good is not subject to free riders.
D)A public good is established by law.
Q3) Which of the following would be a private cost to a cigarette smoker?
A)Cost to the employer of the higher health insurance premiums due to the hiring of a smoker.
B)Cost to the employer of the extra effort lost due to the increased missed days of work as a result of smoking.
C)Cost to the city of extra park cleanup due to the presence of cigarette butts.
D)Price of the pack of cigarettes.
E)Cost to the government to pay the hospital expenses of indigent smokers.
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Page 6
Chapter 5: Elasticity of demand and supply
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Sample Questions
Q1) In the long run,price elasticities of demand are usually:
A)less than they are in the short run because people can adjust.
B)the same as they are in the short run because tastes don't change.
C)greater than they are in the short run because prices rise over time.
D)less than they are in the short run because real prices fall over time.
E)greater than they are in the short run because consumers have time to adjust.
Q2) If Pete raises the price of his muffins from $2 to $3 and his sales revenue increases from $35 000 to $38 000,then:
A)the demand for Pete's muffins in this range is price elastic.
B)the demand for Pete's muffins in this range is price inelastic.
C)the demand for Pete's muffins in this range is unit elastic.
D)the percentage change in quantity demanded must exceed the percentage change in product price.
E)this is impossible since this would violate the law of demand.
Q3) A lower price elasticity of demand coefficient occurs when:
A)the good has less substitutes.
B)the fall in price is fully compensated by increase in quantity.
C)the fall in price causes the total revenue to increase.
D)there is a strong competition among producers.
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Page 7
Chapter 6: Production costs
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Sample Questions
Q1) For a typical firm,the long-run average total cost curve:
A)is a tangent to the minimum point of each possible short-run average total cost curve.
B)is a tangent to each possible short-run average total cost curve at one point.
C)intersects each possible short-run average total cost curve at two points.
D)passes through the minimum points of all possible short-run average total cost curves.
Q2) As output increases:
A)ATC rises at first and then falls.
B)AFC falls at first and then rises.
C)AVC cuts ATC when MC is at its minimum.
D)AFC declines and the gap between ATC and AVC declines.
Q3) When marginal product is rising,marginal cost will be:
A)falling.
B)rising.
C)rising or falling.
D)constant.
E)indeterminate.
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Chapter 7: Perfect competition
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) A firm operating in a perfectly competitive market is a price taker because:
A)the firm has a significant market share.
B)every firm sells slightly different product.
C)it can set a price higher than the average market price.
D)it cannot influence the price.
Q2) The body charged with increasing or maintaining competition in the Australian economy is:
A)the ACCC.
B)the Treasury.
C)the Reserve Bank of Australia.
D)the Australian Prudential Regulation Authority.
E)the Productivity Commission.
Q3) A constant-cost industry is an industry in which expansion of total output results in higher prices to consumers
A)True
B)False
Q4) The firm maximises profit by producing the output where the marginal revenue is higher than marginal cost.
A)True
B)False
Page 9
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Chapter 8: Monopoly
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Source URL: https://quizplus.com/quiz/21223
Sample Questions
Q1) The monopoly can emerge naturally because:
A)as a firm becomes larger, the cost of production grows.
B)of the relationship between average cost and the scale of an operation.
C)new firms have excess capacity.
D)firms are not interested in entering the monopoly industry.
Q2) A monopolist will operate in the short run if which of the following is above average variable cost?
A)Marginal cost.
B)Marginal revenue.
C)Price.
D)Average total cost.
Q3) Price discrimination often permits some consumers,who otherwise would be excluded from a market,to buy a good or service.
A)True
B)False
Q4) In Exhibit 8-3,how much vaccine should GeneTech produce to maximise its profit?
A)300 doses per hour.
B)400 doses per hour.
C)Between 400 and 500 doses per hour.
D)500 doses per hour.
10
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Chapter 9: Monopolistic competition and oligopoly
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) The fact that a monopolistically competitive firm is not as efficient as a perfectly competitive firm may be outweighed by which of the following?
A)The price charged is still equal to marginal revenue.
B)Goods in a monopolistically competitive market are usually cheaper.
C)There are still many perfect substitutes.
D)Consumers are given more choice.
Q2) Mutual interdependence means that:
A)firms always work together in an oligopoly.
B)firms need the help of other firms to make an economic profit.
C)firms in an oligopoly must consider the actions of the other firms when making strategic decisions.
D)collusion always occurs in an oligopoly.
Q3) Critics of advertising argue that:
A)its main purpose is to explain the best characteristics of rival products.
B)its main purpose is to provide consumers with much needed information.
C)its main purpose is to persuade consumers into buying something they do not need.
D)it saves consumers time and money.
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Chapter 10: Policy issues: resource taxes and climate change
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124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/21225
Sample Questions
Q1) According to Exhibit 10-1,if the price is $300 per tonne and the royalty is $100 per tonne,then the:
A)marginal revenue will be between $200 and $300 per tonne.
B)marginal revenue will be $200 not $300 per tonne.
C)marginal revenue will be less than $150 per tonne.
D)marginal revenue will be $300 per tonne.
Q2) The industry supply curve typically:
A)includes all costs including social costs.
B)does not include the external costs.
C)only includes external costs.
D)includes internal and external costs.
Q3) Which of the following statements is true?
A)The resource profits have declined in the past 10 years.
B)Rising mineral prices during the resources boom created a larger share of profits for mining firms but a smaller share of the net proceeds to all Australians.
C)Mineral royalties keep pace with the rising profitability of mining firms.
D)The resource taxes and royalties as a share of resource profits have increased in the past 10 years.
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Chapter 11: Measuring the size of the economy
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124 Flashcards
Source URL: https://quizplus.com/quiz/21226
Sample Questions
Q1) All final goods and services that make up GDP can be expressed in the form:
A)GDP = C + I - G + (X + M).
B)GDP = C + I + G + (X + M).
C)GDP = C + I + G + (X - M).
D)GDP = C + I + (X - M).
E)GDP = C + I +
Q2) In recent years,people have benefited from greater amounts of leisure time.This trend:
A)has caused GDP to rise.
B)has caused GDP to fall.
C)made GDP fluctuate randomly
D)is not accounted for in GDP.
Q3) Which of the following is a shortcoming of GDP?
A)It measures non-market transactions.
B)It includes an estimate of illegal transactions.
C)It includes an estimate of the value of household services.
D)It does not include the value of the black market.
Q4) Exports are a domestic spending for foreign products.
A)True
B)False
Page 13
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Chapter 12: Business cycles and economic growth
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124 Flashcards
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Sample Questions
Q1) A country can still enjoy sustained increases in living standards even if it does not enjoy technological progress.
A)True
B)False
Q2) The 'golden rule' of saving is:
A)the rate of saving that produces the minimum level of consumption per capita in the long-steady state.
B)the rate of saving that produces the maximum level of production per capita in the long-steady state.
C)the rate of saving that produces the maximum level of consumption per capita in the long-steady state.
D)The rate of saving that produces the minimum level of investment per capita in the long-steady state.
Q3) Which of the following is a coincident indicator?
A)CPI data.
B)Industrial production.
C)Building approvals.
D)Retail sales.
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14
Chapter 13: Inflation and unemployment
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Hyperinflation causes:
A)nominal interest rates to fall, leading to unproductive investment decisions by firms.
B)real interest rates to fluctuate, leading to uncertainty in investment decisions.
C)nominal interest rates to rise, but leaves the real interest rate constant.
D)nominal interest rates to fluctuate, leading to lower nominal wages.
Q2) During the 1970s,inflation in Australia:
A)reached its lowest rate (0.2 per cent) since the end of the Second World War.
B)approached hyperinflation proportions.
C)declined to 0.5 per cent as a result of the first oil price shock.
D)reached a peak of 16 per cent in 1976, then subsided during the 1980s.
Q3) Demand-pull inflation:
A)is a shortage in demand.
B)is a lack of demand for local goods.
C)is an excess in nominal demand across many markets.
D)is an oversupply of imported goods.
Q4) Cost-push inflation is a result of an increase in overspending.
A)True
B)False
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Page 15
Chapter 14: A simple model of the macro economy
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) As the aggregate demand curve shifts from AD to AD in Exhibit 14-3,the economy experiences:
A)cost-push inflation.
B)demand-pull inflation.
C)wage-push inflation.
D)hyperinflation.
Q2) The aggregate demand curve shows how real GDP purchased varies with changes in:
A)unemployment.
B)output.
C)the price level.
D)the interest rate.
Q3) Keynes's macroeconomic theory explains that by shifting the aggregate demand the economy experiences less problems with unemployment but more problems with inflation.
A)True
B)False
Q4) The theory that supply creates its own demand is called Say's Law.
A)True
B)False
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Chapter 15: The monetary and financial system
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Sample Questions
Q1) Credit cards fail to meet the store-of-value criterion.
A)True
B)False
Q2) A T-note is:
A)an expensive note.
B)a T-shape note.
C)a Treasury note.
D)a Today's note.
Q3) The relationship between bond prices and the interest rate is:
A)an undefined relationship.
B)a steady relationship.
C)a direct relationship.
D)an inverse relationship.
Q4) The precautionary demand for money:
A)varies inversely with the income level.
B)varies inversely with the price level.
C)is used as an insurance agent against unexpected needs.
D)states that nominal income must exceed real income.
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Chapter 16: Macroeconomic policy I: monetary policy
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Source URL: https://quizplus.com/quiz/21231
Sample Questions
Q1) The RBA believes that by keeping inflation low and steady it can assist with:
A)the achievement of low prices over the medium to long term.
B)the achievement of slow and steady economic growth over the medium to long term.
C)the achievement of full unemployment and slow and steady economic growth over the medium to long term.
D)the achievement of full employment and high economic growth over the medium to long term.
Q2) The monetarist transmission mechanism,through which monetary policy affects the price level,real GDP and employment,depends on the:
A)indirect impact of changes on the interest rate.
B)indirect impact of changes on profit expectations.
C)direct impact of changes in fiscal policy on aggregate demand.
D)direct impact of changes in the money supply on aggregate demand.
Q3) Monetarists advocate the monetary rule,which states that the money supply should be stable year after year,in order to stabilise the business cycle.
A)True
B)False
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Chapter 17: Macroeconomic policy II: fiscal policy
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123 Flashcards
Source URL: https://quizplus.com/quiz/21232
Sample Questions
Q1) If the MPC is 0.6 and if the goal is to increase real GDP by $200 million,then by how much would government spending have to change to generate this increase in real GDP?
A)$240 million.
B)$200 million.
C)$180 million.
D)$80 million.
Q2) If government reduces taxes by $10 billion and the MPC is equal to 0.8,the spending is expected to increase by:
A)$0.8 billion.
B)$5 billion.
C)$8 billion.
D)$10 billion.
Q3) An advocate of supply-side fiscal policy would advocate which of the following?
A)More taxes on research and development activities.
B)Stricter regulation.
C)Increase in resource prices.
D)Reduction in taxes.
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Chapter 18: International trade and finance
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133 Flashcards
Source URL: https://quizplus.com/quiz/21233
Sample Questions
Q1) Which of the following transactions would be recorded as a credit in the Australian current account?
A)A Japanese bank's purchase of Coles Myer stock.
B)A Japanese consumer's purchase of an Australian piece of beef.
C)An Australian tourist's payment to a Japanese hotel.
D)An Australian consumer's purchase of a Toshiba VCR.
Q2) Assume that the opportunity cost of producing wheat is lower in Australia compared with Malaysia.Further assume that the opportunity cost of producing cars is higher in Australia compared with Malaysia.Which country should specialise in producing cars?
A)Australia and Malaysia.
B)Australia.
C)Malaysia.
D)Both countries have to specialise in producing wheat.
Q3) Suppose a perfume sells for NZ$100 in Christchurch and the exchange rate is NZ$1.1 per Australian dollar.The perfume costs:
A)NZ$90.
B)A$110.
C)A$100.
D)A$90.
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Page 20
Chapter 19: Applying graphs to economics
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Sample Questions
Q1) Direct relationships are illustrated using upward-sloping lines and curves.
A)True
B)False
Q2) Straight line CD in Exhibit 1A-4 shows which of the following?
A)Increasing values for X increases the value of Y.
B)Decreasing values for X decreases the value of Y.
C)There is no association between X and Y.
D)Variables X and Y are negatively related.
Q3) Basic economic analysis typically concerns:
A)the relationship between two variables, one of which has negative values.
B)the relationship between two variables, both of which have negative values.
C)the relationship between two variables, both of which have positive values.
D)the relationship between two variables, one variable always increases and the other variable always decreases.
Q4) In Exhibit 1A-3,the slope of straight line AB is:
A)variable.
B)zero.
C)negative.
D)positive.
E)not determinable from the information provided.
Page 21
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