Principles of Microeconomics Pre-Test Questions
Course Introduction
Principles of Microeconomics introduces students to the fundamental concepts and analytical tools used to study the behavior of individuals and firms in making decisions regarding the allocation of limited resources. The course covers topics such as supply and demand, market equilibrium, elasticity, consumer choice theory, production and costs, market structures, and the role of government in addressing market failures. Through real-world examples and problem-solving, students develop an understanding of how markets operate and the impact of economic policy decisions on society.
Recommended Textbook
Microeconomics 10th Edition by Stephen Slavin
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20 Chapters
4504 Verified Questions
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Page 2
Chapter 1: A Brief Economic History of the United States
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263 Verified Questions
263 Flashcards
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Sample Questions
Q1) In the decades before the Civil War, the South _________________________.
A)opposed the extension of slavery into the territories
B)supported the extension of slavery into the territories
C)cooperated with the North to establish both free and slavery territories
D)None of the choices are true
Answer: B
Q2) In the 1970s, the main economic problem was
A)stagflation.
B)huge budget surpluses.
C)a slow growing money supply.
D)an economy that was expanding too rapidly.
Answer: A
Q3) Cyrus McCormick and Eli Whitney were important in the technology of A)steel.
B)automobiles.
C)agriculture.
D)oil.
E)chemicals.
Answer: C
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Page 3
Chapter 2: Resource Utilization
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Sample Questions
Q1) Which of the following is not an institutional constraint that limits our nation's production possibilities?
A)Blue laws that restrict bars and liquor stores from opening on Sunday
B)Restrictions on child labor
C)The fact that Americans dislike working at night or on the weekends
D)Workers who are "in between" jobs
Answer: D
Q2) Which statement is true?
A)The economic problem is limited to poverty.
B)Scarcity is no longer an economic problem in the United States.
C)If we all had more money there would be less scarcity.
D)None of these statements are true.
Answer: D
Q3) Assuming the inner curve is our current production possibilities frontier, points J, N and K represent
A)an inefficient use of resources.
B)an output that is not possible to produce.
C)points of unemployed resources.
D)points of fully employed resources.
Answer: D
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Chapter 3: The Mixed Economy
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Sample Questions
Q1) Statement I. The circular flow model oversimplifies the exchanges in our economy. Statement II. Most of the money received by households in the form of wages, rent, interest, and profits flows back to business firms in the form of consumer expenditures.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.
Answer: C
Q2) Karl Marx and Friedrich Engels believed that after the capitalists were overthrown, eventually
A)the state would get stronger.
B)the state would wither away.
C)the capitalists would regain power.
D)a fascist state would emerge.
Answer: B
Q3) The famous phrase "the invisible hand" is associated with the economist
Answer: Adam Smith
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5
Chapter 4: Supply and Demand
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Sample Questions
Q1) When the demand for loanable funds rises, the amount of money borrowed will
A)rise
B)decline
C)be unchanged
Q2) The supply curve shows the relationship between
A)the demand and supply schedules.
B)price and quantity supplied.
C)income and quantity supplied.
D)quantity demanded and quantity supplied.
Q3) "The higher the price of a good or service, the greater the quantity that people are willing to sell" is
A)the law of demand
B)the law of supply
C)neither the law of demand or the law of supply
Q4) A demand schedule can be presented
A)only as a table.
B)only as a graph.
C)as a table and a graph.
D)as neither a table or a graph.
Page 6
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Chapter 5: Demand, Supply, and Equilibrium
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Sample Questions
Q1) An inferior good is
A)generally of low quality.
B)purchased in the underground economy.
C)is damaged or referred to as a "second".
D)purchased in declining quantities as income rises.
Q2) Suppose it was discovered that the consistent consumption of chocolate raised IQ by ten points. As a result,
A)both equilibrium price and quantity for chocolate will rise.
B)both equilibrium price and quantity for chocolate will fall.
C)equilibrium price will rise and equilibrium quantity will fall for chocolate.
D)equilibrium price will fall and equilibrium quantity will rise for chocolate.
Q3) A decrease in the demand for a service means that the
A)demand curve shifts to the right.
B)demand curve shifts to the left.
C)supply curve shifts to the right.
D)supply curve shifts to the left.
Q4) An increase in demand is an increase in the quantity people are willing and able to purchase at _______.
Q5) A decrease in supply is a decrease in the quantity that sellers are willing and able to sell at ______.
Page 7
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Chapter 6: The Price Elasticities of Demand and Supply
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Sample Questions
Q1) Demand is elastic
A)when the percentage change in quantity is greater than the percentage change in price.
B)when price increases lower total revenue.
C)when price decreases raise total revenue.
D)All of the choices are correct.
Q2) In general taxes on goods and services
A)are borne mainly by consumers.
B)are borne mainly by sellers.
C)are borne equally by consumers and sellers.
D)may be paid mainly or entirely by buyers or it may be paid mainly or entirely by sellers, or may be paid equally by buyers and sellers.
Q3) The most important determinant of the elasticity of demand is ___________.
Q4) About how much of the tax is paid by consumers in the form of higher prices?
A)20 cents
B)50 cents
C)$1
D)$4.85
E)$5
Q5) When supply is perfectly elastic, the entire tax burden falls on the ____.
Page 8
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Chapter 7: Theory of Consumer Behavior
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Sample Questions
Q1) If the price was $8, her consumer surplus would be
A)$27.
B)$19.
C)$8.
D)$3.
E)None of the choices are correct.
Q2) It is irrational for anyone to buy something whose price exceeded its __________________.
Q3) If the marginal utility you derived from the first "steak burger" you ate was $4.00 and yet the cost of the "steak burger" was $2.00. Your marginal utility was definitely A)positive.
B)zero.
C)negative.
D)less than a second steak burger you plan to eat.
Q4) Utility (is/is not) _______ inherent in a particular good or service.
Q5) If you consume a product up to the point that your marginal utility becomes negative, your total utility will be ____.
Q6) If your marginal utility becomes negative, your total utility ____________.
Q7) A person who bought four hotdogs would be enjoying a __________________.
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Chapter 8: Cost
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Sample Questions
Q1) The decision to go out of business
A)may be made only in the short run.
B)may be made only in the long run.
C)may be made in either the short run or the long run.
Q2) If you wanted to produce an output of 3,000, in the long run you would choose a plant whose size was represented by
A)ATC1.
B)ATC2.
C)ATC3.
D)ATC4.
E)ATC5.
Q3) As output rises, average fixed cost _________.
Q4) The time at which all costs become variable costs is called the ___________.
Q5) The basic characteristic of the short run is that
A)a firm does not have sufficient time to change the amounts of any of the resources it employs.
B)the firm does not have sufficient time to cut its rate of output to zero.
C)the firm does not have sufficient time to change the size of its plant.
D)the time frame is sufficient to allow new firms to enter the industry.
Q6) _____________ is the additional output produced by the last worker hired.
Page 10
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Chapter 9: Profit, Loss, and Perfect Competition
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Sample Questions
Q1) Which statement is false?
A)The firm's short-run supply curve runs along the MC curve from the shutdown point to the break-even point.
B)The MC curve intersects the ATC curve at the latter's minimum point.
C)Total revenue = price x output sold.
D)None of these statements are false.
Q2) Which of the following is NOT a basic characteristic of perfect competition?
A)Considerable non-price competition
B)No barriers to the entry or exit of firms
C)A standardized or identical product
D)A large number of buyers and sellers
Q3) The firm's short-run supply curve begins at an output of A)30.
B)45.
C)60. D)65.
Q4) A perfect competitor produces a(n) __________ product and has __________ competitors.
Q5) A firm is operating at peak efficiency at the _______________.
Q6) How much is the firm's output at the shutdown point?
Page 11
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Chapter 10: Monopoly
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Sample Questions
Q1) When maximizing profit, the perfect competitor ______ produces at the output at which MC = MR; the monopolist ____ produces at the output at which MC = MR.
A)always; always
B)sometimes; sometimes C)always; sometimes D)sometimes; always
Q2) A monopolist operates at the minimum point of its ATC curve
A)only in the short run.
B)only in the long run.
C)in both the short run and the long run.
D)in neither the short run nor the long run.
Q3) The monopolist operates on a _____________ scale than the perfect competitor.
Q4) In the 1950s, the National Football League (NFL) had a virtual monopoly because
Q5) If the firm is maximizing profits, total profit will be
A)-$160
B)$160
C)-$4
D)$10
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Chapter 11: Monopolistic Competition
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Sample Questions
Q1) A monopolistic competitor takes a loss only in the _____________.
Q2) Monopolistic competition leads to ___________ prices, but ___________ product variety.
Q3) You could conclude that
A)new firms will enter the industry.
B)existing firms will leave the industry.
C)the industry is in the long run.
Q4) Which statement is true?
A)Many monopolistic competitors are very large firms.
B)Many monopolistic competitors practice perfect price discrimination.
C)Monopolistic competitors don't really compete.
D)None of these statements are true.
Q5) Product differentiation takes place in the _____________.
Q6) Assume a monopolistically competitive firm is producing at an output level at which marginal revenue is $15 and marginal cost is $18. The profit-maximizing firm should
A)raise output.
B)lower output.
C)keep output constant.
D)The firm should take none of these actions.
Page 13
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Chapter 12: Oligopoly
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Sample Questions
Q1) At one end of the competitive spectrum is cutthroat competition. At the other end is (the)
A)cartel.
B)open collusion.
C)covert collusion.
D)price leadership.
E)weak competition.
Q2) Which statement about oligopolies is true?
A)Most oligopolies in the U.S.engage in outright collusion.
B)Most oligopolies operate at the minimum point of their ATC curves.
C)Most of our GDP is produced by oligopolies.
D)Collusion is illegal in the U.S.and does not exist.
Q3) Which of the following is a shortcoming of concentration ratios?
A)The measurement generally does not include foreign imports.
B)The measurement is based on all firms of the industry, no matter how small.
C)The measurement is only based on the top ten firms in an industry.
D)The measurement includes foreign imports.
Q4) The two measures of the degree of competitiveness (or of oligopoly) are called (1) __________________ and (2) _________________.
Q5) The oligopolist ___________ a profit in the long run.
Page 14
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Chapter 13: Corporate Mergers and Antitrust
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Sample Questions
Q1) A vertical merger takes place when
A)a firm acquires a conglomerate.
B)a firm acquires a competitor.
C)a firm integrates its production backward toward its source of supply or forward in its marketing chain.
D)firms merge in order to diversify.
Q2) A merger between Bank of America and Citibank would be a ____ merger.
A)horizontal
B)vertical
C)conglomerate
D)diversifying
Q3) In 1997, the Justice Department brought a lawsuit against ________ because its growing market power had enabled the company to crush competitors, eliminate competition and innovation.
A)Microsoft
B)Walt Disney
C)Exxon
D)Standard Oil
Q4) Pharmaceutical fraud, such as marketing a drug for an unapproved use, is considered a form of _____________.
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Chapter 14: Demand in the Factor Market
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Sample Questions
Q1) Total Revenue Product with six units of labor would be
A)$200.
B)$340.
C)$1,000.
D)$1,200.
Q2) In general, the MRP _____ as output increases.
A)declines
B)rises
C)stays the same
Q3) The Bulldog Beanery Coffee Shop is a perfectly competitive firm currently employing 30 workers. The marginal revenue product of the 30th worker is $7/hour. The wage rate is $8/hour. To increase profits, this firm should
A)decrease employment until the MRP of labor equals $8.00.
B)increase the price of coffee so that the marginal revenue product increases to $8.00 per hour.
C)increase employment until the MRP of labor equals $8.00.
D)continue hiring 30 workers because the firm earns a surplus of $1.00 on each worker hired.
Q4) If the wage rate were $335, how many workers would be hired?
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Chapter 15: Labor Unions
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Sample Questions
Q1) Since the mid-1980s labor union membership has been between ______ million members.
A)15-18
B)21-24
C)24-27
D)27-30
Q2) If unions are successful in negotiating a wage higher than the market equilibrium wage, and also guarantee employers that they can hire as many labor hours as they desire per week at the union wage,
A)the quantity of labor demanded will exceed the quantity supplied at the union wage.
B)the quantity of labor demanded will equal the quantity supplied at the union wage.
C)the quantity of labor demanded will fall short of the quantity supplied at the union wage.
D)all workers who join the union will be guaranteed a job.
Q3) The AFL was headed by ___________ from 1886 until 1924.
Q4) The three main provisions of the Taft-Hartley Act were (1) __________; (2) _________; and (3) ____________.
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Chapter 16: Labor Markets and Wage Rates
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Sample Questions
Q1) José Conseco, then a major league baseball star who had just signed a very large contract, said, "I don't think it's what I'm worth. It's what the market holds, what the organizations are willing to pay a player." He was really talking about
A)the substitution effect.
B)the income effect.
C)the primary labor market.
D)the secondary labor market.
E)economic rent.
Q2) If Justine's money wages tripled from 2015 to 2020 and the consumer price index tripled, we would know that Justine's real wages
A)fell substantially.
B)fell slightly.
C)stayed the same.
D)rose slightly.
E)rose substantially.
Q3) Mr. Hussein was paid $8 an hour in 1989, the base year. In 1996, the CPI stood at 120 and he was earning $12 an hour. How much were Mr. Hussein's real wages in 1996 and by what percentage had they changed since 1989?
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Page 18
Chapter 17: Rent, Interest, and Profit
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Sample Questions
Q1) If the interest rates rise, the present values of future dollars will ______.
Q2) Which statement is false?
A)The supply of urban land increases in response to increases in demand.
B)Most economists think rent should be abolished.
C)Pierre-Joseph Proudhon and Henry George took similar stands on rent.
D)Economic rent is the payment above the minimum necessary to attract a resource to the market.
Q3) A shortage of competition is central to the entrepreneur in the ________ theory of profit.
A)risk taker
B)innovator
C)monopolist
D)exploiter of labor
Q4) Joseph Schumpeter said that profits were a reward for _________; Frank Knight said that profits were a reward for _________.
Q5) Which statement is true?
A)Usury laws hurt some borrowers, but don't interfere with the price mechanism.
B)Usury laws hurt some borrowers and interfere with the price mechanism.
C)Usury laws interfere with the price mechanism, but don't hurt borrowers.
D)Usury laws neither interfere with the price mechanism, nor hurt borrowers.
Page 19
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Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) Suppose that the poverty line had been set at $37,500 in 2008. Estimate what the poverty rate would have been in that year.
A)10%
B)25%
C)40%
D)55%
E)70%
Q2) Which goes exclusively to the poor?
A)Medicaid
B)Medicare
C)Social Security
D)Unemployment insurance benefits
Q3) What is the percentage of income received by the middle three quintiles on line Z?
Q4) About 1 out of every _____ black Americans is poor.
A)12
B)7
C)4
D)2
Q5) _________% of the people on welfare live below the poverty line.
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Chapter 19: International Trade
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Sample Questions
Q1) Which of these is the basis of international trade?
A)Absolute advantage
B)Comparative advantage
C)Both comparative advantage and absolute advantage
D)Neither comparative advantage nor absolute advantage
Q2) When a country exports fewer goods and services than it imports, this is called
A)the terms of trade.
B)the exchange rate.
C)a balance of trade deficit.
D)a balance of trade surplus.
Q3) A balance of trade deficit exists when
A)net exports are negative.
B)net exports are positive.
C)exports equal imports.
D)exports exceed imports.
Q4) Which statement is false?
A)If we restrict our imports, our exports will decline.
B)Trade restrictions cause economic inefficiency.
C)International finance is based on the gold standard.
D)None of the statements is false.
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Chapter 20: International Finance
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Sample Questions
Q1) In 1980, if the foreign exchange rate was $1 was equivalent to 4 German marks, then one mark was worth _________.
Q2) Most of the money that we pay to foreigners to finance our current accounts deficit
A)flows back to the U.S.in investment funds.
B)stays abroad where it circulates as currency.
C)ends up in the hands of drug dealers.
D)is used by foreign governments as reserves.
Q3) Depreciation of the dollar will tend to
A)decrease the prices of both American imports and exports.
B)increase the prices of both American imports and exports.
C)decrease the prices of the goods Americans import, but increase the prices to foreigners of the goods Americans export.
D)increase the prices of the goods Americans import, but decrease the prices to foreigners of the goods Americans export.
Q4) We were on the gold exchange standard from the year ________ to the year ________.
Q5) Technically, our balance of payments always has a balance of _________.
Q6) In 2009, we ran a capital account surplus of $___________ billion.
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