Principles of Microeconomics Final
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Course Introduction
Principles of Microeconomics introduces students to the fundamental concepts and analytical tools used to understand how individuals, households, firms, and governments make decisions regarding the allocation of scarce resources. The course covers topics such as supply and demand, market equilibrium, consumer and producer behavior, elasticity, production and costs, market structures, and the impact of government policies on markets. Emphasis is placed on applying economic reasoning to real-world problems, examining market failures, and exploring the broader implications of economic choices for society.
Recommended Textbook
Microeconomics Canada in the Global Environment 9th Edition by Michael Parkin
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Page 2
Chapter 1: What Is Economics
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Q1) Which of the following statements is correct?
A)Canada produces more manufactured goods than services.
B)Canada produces more agricultural goods than services.
C)Canada produces more services than goods.
D)The percentage of the Canadian population that produces goods is greater than the percentage of the Chinese population that produces goods.
E)Canada produces more agricultural goods than manufactured goods.
Answer: C
Q2) You have the choice to go skiing during spring break, staying at the university to study, or spending the week visiting your family.If you decide to go skiing, the opportunity cost of the holiday is
A)staying at the university to study because you need to improve your grades.
B)staying at the university because your parents are paying your tuition.
C)staying at the university or spending the week visiting your family, depending on what you would have done otherwise.
D)nothing because you enjoy skiing.
E)visiting your family because not visiting means that you will feel guilty.
Answer: C
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Chapter 2: The Economic Problem
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Sample Questions
Q1) To describe preferences, economists use the concept of A)opportunity cost.
B)scarcity.
C)marginal benefit.
D)marginal cost.
E)price.
Answer: C
Q2) The marginal benefit curve from a good
A)shows the benefit a firm receives from producing one more unit of that good.
B)shows the most a consumer is willing to pay for one more unit of that good.
C)is upward-sloping.
D)is bowed outward.
E)is vertical.
Answer: B
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Page 4
Chapter 3: Demand and Supply
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Q1) The opportunity cost of good A in terms of good B is equal to the A)money price of good A minus the money price of good B.
B)money price of good B minus the money price of good A.
C)ratio of the money price of good A to the money price of good B.
D)ratio of the money price of good B to the money price of good A.
E)money price of good A plus the money price of good B.
Answer: C
Q2) Refer to Table 3.5.3.In a television interview, Joe Cool shows off his designer sport t-shirt, setting off a new craze that doubles business at the sportswear establishments.This would be represented as a
A)movement up along the demand curve.
B)rightward shift of the demand curve.
C)leftward shift of the demand curve.
D)rightward shift of the supply curve.
E)leftward shift of the supply curve.
Answer: B
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Chapter 4: Elasticity
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Sample Questions
Q1) When the price of a good increased by 5 percent, the quantity demanded of it decreased 10 percent.The price elasticity of demand is ________.A price rise will ________ total revenue.
A)2.0; decrease
B)0.5; decrease
C)2.0; increase
D)0.5; increase
E)-2.0; decrease
Q2) If the price elasticity of demand is zero, then demand is
A)elastic.
B)inelastic.
C)perfectly inelastic.
D)perfectly elastic.
E)unit elastic.
Q3) Luxury goods tend to have income elasticities of demand that are
A)greater than 1.
B)greater than zero but less than 1.
C)less than the income elasticities of demand for necessary goods.
D)negative.
E)first positive and then negative as income increases.
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Chapter 5: Efficiency and Equity
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Q1) Sally and Eric are the only people in an economy.Sally buys 3 bottles of water when the price is $2 a bottle and 4 bottles of water when the price is $1 a bottle.Eric buys 10 bottles of water when the price is $0.50 a bottle and 5 bottles of water when the price is $1 a bottle.In the market for water, the quantity demanded
A)increases as the price rises.
B)is 4 bottles at a price of $1 a bottle.
C)increases as the price falls.
D)is 8 bottles at a price of $2 a bottle.
E)is 15 bottles at a price of $0.50 a bottle.
Q2) Consider the demand and supply curves in Figure 5.3.3.If the market is at the competitive equilibrium, which area in the diagram indicates producer surplus?
A)ABC
B)AEC
C)EBC
D)0BCD
E)0ECD
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Chapter 6: Government Actions in Markets
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Sample Questions
Q1) If enforcement of the law is aimed at buyers of an illegal good, the result will be
A)an increase in the supply of the good.
B)a decrease in the supply of the good.
C)a decrease in the demand for the good.
D)a rise in the price of the good.
E)no change in the equilibrium quantity.
Q2) Refer to Figure 6.3.2.The buyers' share of the tax is A)zero.
B)$0.50.
C)$1.00.
D)$1.50.
E)$2.00.
Q3) Which one of the following statements is false?
A)An effective minimum wage sets the wage rate above the equilibrium wage rate.
B)An effective rent ceiling sets the rent below the equilibrium rent.
C)An effective rent ceiling leads to a housing shortage.
D)An effective minimum wage is inefficient.
E)A minimum wage is a price ceiling in the labour market.
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Chapter 7: Global Markets in Action
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Sample Questions
Q1) In a market that moves from a situation of no trade to a situation where a good is imported, in the importing country the price of the good ________, and producer surplus ________.
A)rises; increases B)falls; decreases C)does not change; increases D)does not change; decreases E)rises; decreases
Q2) Refer to Fact 7.3.2.If Canada imposes an import quota on Australian beef, the price that Canadian consumers pay for beef will ________ and the quantity of beef produced in Canada will ________.
A)not change; decrease
B)not change; increase C)rise; not change D)rise; increase E)fall; decrease
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Chapter 8: Utility and Demand
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Sample Questions
Q1) If a consumer's income increases and if all goods are normal goods,
A)the quantity bought of each good decreases.
B)the quantity bought of some normal goods increases and of other normal goods decreases, but we can't make an accurate prediction.
C)some goods become inferior because it isn't possible to buy all goods.
D)the quantity bought of each good increases.
E)the supply of all goods increases and the marginal utility from all goods decreases.
Q2) The paradox of value
A)is that values are the same for different people.
B)is that economists can calculate marginal utility, even though utility is unmeasurable.
C)is resolved by an appeal to the law of diminishing total utility.
D)remains unresolved by economists.
E)is resolved by an appeal to the difference between marginal utility and total utility.
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Chapter 9: Possibilities, Preferences, and Choices
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Sample Questions
Q1) The budget line depends on
A)income only.
B)prices only.
C)income and prices.
D)preferences only.
E)preferences and prices.
Q2) Refer to Fact 9.2.1.What is the marginal rate of substitution?
A)3.6
B)1
C)36
D)10
E)10 + 36
Q3) Larry consumes only beer (B)and chips (C).The equation of his budget line (with beer measured on the vertical axis)is
A)QB = Y/PB - (PC/PB)QC.
B)QB = Y - (PC/PB)QC.
C)QB = Y/PC - (PB/PC)QC.
D)QB = Y/PB - (PC/PB)QB.
E)QC = Y/PC - (PB/PC)QB.
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Chapter 10: Organizing Production
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Q1) Refer to Table 10.2.1.If the price of labour is $10 per unit and the price of capital is $20 per unit, which method is economically efficient?
A)1 only
B)2 only
C)3 only
D)all of the above
E)1 and 3 only
Q2) A market in which the Herfindahl-Hirschman Index (HHI)lies between 1,000 and 1,800 is regarded as being
A)a monopoly.
B)an oligopoly.
C)a perfectly competitive market.
D)a moderately competitive market.
E)a potential matter of concern for regulators.
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Chapter 11: Output and Costs
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Sample Questions
Q1) Economies of scale refer to the range of output over which
A)long-run average cost rises as output increases.
B)marginal cost exceeds average cost.
C)long-run average cost falls as output increases.
D)the marginal product of labour decreases.
E)marginal product equals average product.
Q2) A firm's total product curve describes
A)the minimum cost of producing a given amount of output.
B)the maximum output that a given quantity of labour can produce.
C)how the maximum attainable output varies as the size of the firm's plant varies, given the quantity of labour employed.
D)how the management of the firm makes decisions over the short run.
E)how the amount of labour varies as the amount of output varies.
Q3) The total output produced with any quantity of labour is equal to the sum of the
A)average products of each of the workers hired.
B)marginal costs of each of the workers hired.
C)marginal products of each of the workers hired.
D)average costs of each of the workers hired.
E)fixed products of each of the workers hired.
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Page 13
Chapter 12: Perfect Competition
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Sample Questions
Q1) Choose the statement that is incorrect.
A)Resources are used efficiently when marginal social benefit equals marginal social cost.
B)Competitive equilibrium achieves an efficient outcome.
C)Competitive equilibrium maximizes the gains from trade.
D)When firms in perfect competition are away from long-run equilibrium, either entry or exit is taking place and the market is still efficient.
E)Producer surplus is maximized at the competitive equilibrium.
Q2) Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A represents the firm's
A)total fixed cost curve.
B)average fixed cost curve.
C)average variable cost curve.
D)total revenue curve.
E)marginal revenue curve.
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14
Chapter 13: Monopoly
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Sample Questions
Q1) Canada Post has a monopoly on residential mail delivery.Pfizer Inc.makes LIPITOR, a prescription drug that lowers cholesterol.Rogers Communications is the sole provider of cable television service in some parts of Ontario.The monopolies which profit from price discrimination are
A)Canada Post and Rogers Communications.
B)only Pfizer.
C)only Canada Post.
D)Canada Post, Pfizer, and Rogers Communications.
E)only Rogers Communications.
Q2) Which of the following is true for a perfect price-discriminating monopoly?
A)P = MR for each unit sold.
B)P = ATC for each unit sold.
C)P = MC for each unit sold.
D)P > MC for each unit sold.
E)P > MR for each unit sold.
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Chapter 14: Monopolistic Competition
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Q1) Which one of the following is true for perfect competition, monopolistic competition, and single-price monopoly?
A)Each firm produces an identical good.
B)Each firm makes zero long-run economic profit.
C)The profit maximizing quantity occurs at the quantity at which MC = MR.
D)There is easy entry and exit.
E)Demand is perfectly elastic.
Q2) A firm's markup is
A)the firm's total profit.
B)the firm's total cost.
C)the amount by which price exceeds marginal cost.
D)the amount by which price exceeds average variable cost.
E)the amount by which price is less than marginal cost.
Q3) Advertising costs in monopolistic competition increase a firm's
A)total fixed cost.
B)marginal cost.
C)total variable cost.
D)average variable cost.
E)marginal revenue.
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Page 16
Chapter 15: Oligopoly
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Sample Questions
Q1) Refer to Fact 15.2.1.What is the Nash equilibrium?
A)Both firms cheat on the agreement.
B)One firm cheats and one firm complies.
C)Both firms comply with the agreement.
D)New firms enter the market.
E)Both firms charge the price that would exist in a perfectly competitive market.
Q2) Refer to Fact 15.1.1.If Monster and Red Bull successfully formed a cartel, the priced charged for energy drinks would ________ and economic profit would ________.
A)rise; increase
B)rise; decrease
C)fall; increase
D)fall; decrease
E)remain unchanged; remain unchanged
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Chapter 16: Externalities
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Q1) Refer to Figure 16.3.1.The figure shows the marginal private benefit curve, the marginal social benefit curve, and the market supply curve.If production is left to the private market, then at the equilibrium quantity the marginal social benefit from consumption is A)less than the marginal cost to producers.
B)less than the marginal social cost of production.
C)equal to the marginal cost to producers.
D)equal to the marginal private benefit from consumption.
E)greater than the marginal cost to producers.
Q2) Refer to Figure 16.2.1.The figure shows the marginal private cost curve, the marginal social cost curve and the market demand curve.If a constant per unit tax is imposed that generates an efficient allocation of resources, then producers receive a per unit price of A)zero.
B)P .
C)P .
D)P .
E)P .
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18
Chapter 17: Public Goods and Common Resources
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Sample Questions
Q1) Rational ignorance suggests that
A)all voters are ignorant.
B)all voters will be ignorant on issues that are not of special interest to them.
C)all voters will pursue information about each issue before voting.
D)low voter turnout is due to a lack of understanding of the importance of the political platforms.
E)it is easier to aim at the median voter because it is a less costly strategy for the politicians.
Q2) Refer to Figure 17.2.3.The graph provides information about a waste disposal system in a city of 1 million people.If the city installs the efficient capacity, then each person pays ________ in taxes.
A)$125
B)$62.50
C)$250
D)zero
E)$31.25
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Chapter 18: Markets for Factors of Production
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Sample Questions
Q1) A progressive income tax
A)taxes lower income people a larger percentage than higher income people.
B)taxes income at an average rate that increases with income.
C)receives more tax from rich people, but taxes them at the same rate as poor people.
D)taxes everyone at the same rate.
E)is rarely used in advanced economies.
Q2) Refer to Table 18.2.2.If the price of apples is $0.50 per kilogram, the value of marginal product of the 5th student is
A)$0.50 an hour.
B)$72.50 an hour.
C)$14.50 an hour.
D)$12.50 an hour.
E)$10 an hour.
Q3) Income maintenance programs include all of the following programs except A)social security programs.
B)workers' compensation.
C)Canada Pension Plan.
D)employment insurance.
E)the minimum wage.
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