Principles of Microeconomics
Test Preparation
Course Introduction
Principles of Microeconomics is an introductory course that examines the fundamental concepts and analytical tools used to understand how individuals, households, and firms make decisions regarding the allocation of limited resources. The course covers topics such as supply and demand, market structure, consumer and producer behavior, elasticity, and the role of government in the economy. Through theoretical models and real-world examples, students gain insight into price determination, market efficiency, and the impact of policy interventions on economic outcomes. This foundational knowledge prepares students to analyze economic issues at the level of individual markets and to better understand the workings of the broader economy.
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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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) Macroeconomics is the study of
A) the behavior of large firms in the marketplace
B) the economic behavior of individual decision makers
C) the behavior of the economy as a whole
D) how to use the fewest natural resources to produce goods and services
E) government's role as a stabilizing influence on the economy
Answer: C
Q2) Economic information
A) is usually scarce and costly to acquire
B) is usually available free to any decision maker
C) is usually not required for rational decision making
D) must be complete before any decision is made
E) is usually useful only to governments
Answer: A
Q3) "There should be less discrimination against women" is an example of a positive statement.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Economic Tools and Economics Systems
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185 Verified Questions
185 Flashcards
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Sample Questions
Q1) The production possibilities frontier represents the boundary between attainable and unattainable prices of commodities.
A)True
B)False
Answer: False
Q2) It is impossible for one person to have a comparative advantage in all tasks.
A)True
B)False
Answer: True
Q3) Which of the following provide the best evidence of specialization?
A) a firm that produces a line of related products,such as eight kinds of breakfast cereal
B) an architect who is willing to practice in only one geographic area
C) a physician that practices in a specialty area such as cardiology or orthopedic surgery
D) a family that eats at Wendy's every Thursday night
E) a retailer that sells goods but provides no services
Answer: C
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4
Chapter 3: Economic Decision Makers
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196 Verified Questions
196 Flashcards
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Sample Questions
Q1) A common assumption that economists make about the behavior of elected officials is that they try to
A) maximize the size of their government salaries
B) maximize the size of their control over the budget process
C) maximize the number of votes they receive in the next election
D) minimize the government's expenditures in order to balance the budget
E) conform to the wishes of special interest groups so that the government behaves as a single,consistent decision maker
Answer: C
Q2) Which of the following is not a not-for-profit institution?
A) Columbia Broadcasting System (CBS)
B) American Red Cross
C) Salvation Army
D) a public library
E) a typical college or university
Answer: A
Q3) Import quotas on sugar result in lower sugar prices in the United States.
A)True
B)False
Answer: False
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Chapter 4: Demand, supply, and Markets
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222 Verified Questions
222 Flashcards
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Sample Questions
Q1) An increase in the price of butter,a substitute good,would be most likely to cause
A) a rightward shift of the demand curve for margarine
B) a leftward shift of the demand curve for margarine
C) the quantity of margarine demanded to increase
D) the quantity of margarine demanded to decrease
E) a decrease in the price of margarine
Q2) The income effect of a decrease in the price of potatoes (an inferior good) is a(n)
A) decrease in the demand for potatoes
B) decrease in the quantity demanded of potatoes
C) increase in the demand for potatoes
D) increase in the quantity demanded of potatoes
E) new demand curve because everything else is no longer constant
Q3) In Exhibit 4-14,a movement from point M to point N represents:
A) An increase in supply
B) A decrease in supply
C) An increase in quantity supplied
D) A decrease in quantity supplied
E) An increase in quantity demanded
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Chapter 5: Elasticity of Demand and Supply
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238 Verified Questions
238 Flashcards
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Sample Questions
Q1) As producers have more time to adjust to a price change,price elasticity of supply
A) increases
B) decreases
C) remains the same
D) rises and then falls
E) falls and then rises
Q2) An inferior good is one for which demand increases as
A) price decreases
B) price increases
C) income increases
D) income decreases
E) the price of a related good decreases
Q3) The demand for a good is elastic if
A) an increase in price leads to a decrease in total revenue
B) an increase in price leads to an increase in total revenue
C) an increase in price causes no change in total revenue
D) total revenue is maximum
E) total revenue is minimum
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Chapter 6: Consumer Choice and Demand
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) If Joel buys ten floppy disks,which are worth a total of $30 to him,and he pays $1 a disk,how much consumer surplus does he derive?
A) $24
B) $15
C) $20
D) $10
E) $2 from each floppy disk
Q2) In Exhibit 6-1,what is the total utility of three pretzels?
A) 5
B) 15
C) 40
D) 55
E) 70
Q3) When total utility is falling,marginal utility is
A) increasing
B) decreasing
C) positive
D) negative
E) 0
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Page 8
Chapter 7: Production and Cost in the Firm
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202 Verified Questions
202 Flashcards
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Sample Questions
Q1) As output rises,marginal product eventually diminishes and
A) marginal cost increases
B) average cost falls
C) total cost falls
D) fixed cost is increasing
E) average product is negative
Q2) The law of diminishing marginal returns states that
A) long-run average cost declines as output increases
B) if the marginal product is above the average product,the average will rise
C) as units of a variable input are added to a given amount of fixed inputs,the marginal product of the variable input eventually diminishes
D) as a person consumes more of a good,the marginal satisfaction from that good eventually diminishes
E) if marginal product is positive,total product rises
Q3) If a firm is experiencing diminishing marginal returns,its marginal product is declining.
A)True
B)False
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Chapter 8: Perfect Competition
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250 Verified Questions
250 Flashcards
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Sample Questions
Q1) Which of the following statements about the perfectly competitive firm represented in Exhibit 8-16 is false?
A) Short-run losses are maximized at output level q* because MR = MC there.
B) The firm should shut down in the short run.
C) If the firm shuts down in the short run,it will suffer a loss equal to the amount of its fixed cost.
D) If the firm operates in the short run,it will suffer a loss greater than the amount of its fixed cost.
E) If the firm operates in the short run,it will suffer a loss equal to the amount of its fixed cost plus the uncovered portion of its variable cost.
Q2) Profit maximization depends upon demand conditions,as well as upon productivity and costs.
A)True B)False
Q3) The golden rule of profit maximization states that firms maximize profit by producing at the rate of output at which price equals average total cost.
A)True B)False
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Chapter 9: Amonopoly
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257 Verified Questions
257 Flashcards
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Sample Questions
Q1) Consider Exhibit 9-8.What is the profit-maximizing quantity?
A) 1 unit
B) 2 units
C) 3 units
D) 4 units
E) 5 units
Q2) U.S.patent laws establish property rights for inventors of new products
A) forever
B) until a superior invention comes along
C) for 3 years
D) for 10 years
E) for 20 years
Q3) If the monopolist in Exhibit 9-11 engages in perfect price discrimination,profit-maximizing output would be
A) 700 units
B) 810 units
C) 884 units
D) 976 units
E) 1,000 units
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Page 11
Chapter 10: Monopolistic Competition and Oligopoly
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219 Verified Questions
219 Flashcards
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Sample Questions
Q1) Monopolistically competitive firms do not achieve allocative efficiency in the long run because
A) marginal cost equals marginal revenue
B) marginal cost is greater than marginal revenue
C) marginal cost is less than marginal revenue
D) price is less than marginal cost
E) price is greater than marginal cost
Q2) In a cartel,
A) all firms produce the same amount of output and earn the same profit
B) all firms produce the same amount of output but earn different amounts of profit because their costs differ
C) firms produce different amounts of output but earn the same profit
D) firms with higher average cost produce more so that all firms earn the same profit
E) firms with lower average cost often earn higher profits
Q3) Consensus becomes easier to achieve as the number of firms in a cartel grows
A)True
B)False
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Chapter 11: Resource Markets
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210 Verified Questions
210 Flashcards
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Sample Questions
Q1) Which of the following represents the resource supply curve faced by a firm that hires resources in a perfectly competitive resource market?
A) its ATC curve
B) its AVC curve
C) its MRP curve
D) its MRC curve
E) its AFC curve
Q2) In Exhibit 11-1,economic rent at equilibrium equals
A) $40
B) $80
C) $160
D) $16
E) $8
Q3) Marginal revenue product is obtained by multiplying the price of the product by the marginal resource cost.
A)True
B)False
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Chapter 12: Labor Markets and Labor Unions
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211 Verified Questions
211 Flashcards
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Sample Questions
Q1) If the quantity of labor Sam supplies to a job is zero over the realistic range of wages,Sam
A) is either unwilling or unable to perform the job
B) has not been hired to do the job
C) has not been hired to do the job at the going market wage rate
D) is unable to perform the job
E) is unwilling to perform the job
Q2) When industrial unions negotiate with an entire industry,wage gains come at the cost of
A) longer working hours
B) worse working conditions
C) reduced total employment
D) worse products
E) longer hours
Q3) If a union is able to increase the demand for union-made goods,
A) wages will increase but employment will decrease
B) wages will increase and employment will increase
C) wages will decrease but employment will increase
D) wages will decrease and employment will decrease
E) the demand for non-union labor will increase
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Chapter 13: Capital, interest, and Corporate Finance
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) Exhibit 13-5 shows data on the various dough-mixing machines that a donut shop is considering buying.Assume that any dough-mixing machine is expected to last indefinitely,that operating expenses are negligible,and that the price of donuts is expected to remain constant in the future.The marginal rate of return on the machine with the three-quart bowl is
A) 1 percent
B) 5 percent
C) 10 percent
D) 20 percent
E) 55 percent
Q2) The procedure of determining the present value of payments to be received in the future is known as
A) compounding
B) amortizing
C) perpetuating
D) nominalizing
E) discounting
Q3) The production of capital is a form of roundabout production.
A)True
B)False
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Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) According to the search model,the marginal cost of acquiring information about a product
A) is greater for a doctor than a nurse's aide
B) is the same for high-income consumers as for low-income consumers
C) is greater for expensive items than for cheap items
D) is greater for cheap items than for expensive items
E) diminishes as more information is acquired
Q2) 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
Q3) A signal is
A) a proxy measure of job conditions
B) a proxy measure of a job applicant's skills
C) used by employers to indicate that a job interview is over
D) an indication of an excess supply of labor
E) an indication of an excess supply of qualified labor
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Page 16
Chapter 15: Economic Regulation and Antitrust Policy
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) According to William Shepherd's examination of competitive trends in the U.S.economy,a tight oligopoly
A) is a single firm that controls the entire market and can block entry
B) is an industry in which the top four firms supply more than 60 percent of the market,have stable market shares,and cooperate with each other C) is an industry in which the top four firms supply more than 60 percent of the market,have unstable market shares,and do not cooperate with each other D) is an industry in which a single firm has over half the market share and no close rival E) is an industry in which a single firm has over one-third of the entire market,the market share is stable,and the firm cooperates with other firms in the industry
Q2) A private firm that sustains a financial loss because of an antitrust violation may be able to recover three times the actual damages.
A)True
B)False
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Chapter 16: Public Goods and Public Choice
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) Generally,people are more satisfied with private market outcomes than with public voting outcomes because
A) each consumer in the private market can choose the quantity he or she desires
B) most people are near the median
C) the prices are lower
D) markets are involuntary
E) there are too many choices to make in the public sector
Q2) In order to dispose of nuclear waste created by power plants around the country,the government buys land in Glowing Gulch,Idaho.Citizens of that town organize to block construction of the nuclear waste facility.Which of the following statements is false?
A) The benefits of the nuclear waste facility are widespread.
B) The costs of the nuclear waste facility are concentrated.
C) The citizens of Glowing Gulch are a special-interest group.
D) Consumers of the power generated at the nuclear plants are not likely to organize to support construction of the nuclear waste facility.
E) The citizens of Glowing Gulch are equally concerned about all public issues.
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Chapter 17: Externalities and the Environment
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187 Verified Questions
187 Flashcards
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Sample Questions
Q1) An individual who drives a car without a muffler in an attempt to increase fuel economy is creating
A) a positive externality
B) a public good
C) a negative externality
D) a winner's curse
E) vertical inequity
Q2) In order to increase society's total welfarer,a production process that produces a negative externality should be
A) taxed
B) provided by the government
C) ignored
D) subsidized
E) exported
Q3) Environmental problems result when social costs and benefits are different from private costs and benefits.
A)True
B)False
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Chapter 18: Income Distribution and Poverty
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) The requirement that firms doing business with the federal government set numerical hiring,promotion,and training goals to reduce discrimination was
A) included in the Civil Rights Act of 1964
B) signed by President Johnson
C) first proposed in the Nixon administration
D) first proposed in the Carter administration
E) first proposed in the Equal Rights Amendment
Q2) The problem with allocating income according to productivity is that some people have difficulty earning income.
A)True
B)False
Q3) Poor welfare recipients face higher marginal tax rates than do the richest families.
A)True
B)False
Q4) Transfer payments have reduced poverty among the elderly,but poverty among females has not fallen.
A)True
B)False
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Page 20
Chapter 19: International Trade
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) In Exhibit 19-4,if the world price of a baseball is $3 and a tariff of $1 per baseball is imposed in the United States,how much tariff revenue will the United States government collect?
A) $4,000
B) $16,000
C) $20,000
D) $24,000
E) $48,000
Q2) The basis of the benefits of specialization is
A) comparative advantage
B) absolute advantage
C) size of country
D) identical production costs between two countries
E) self-sufficiency
Q3) Comparative advantage is determined by
A) the amount of resources needed to produce a good
B) the money cost of producing any good
C) the opportunity cost of producing any good
D) absolute advantage and production possibilities combined
E) the level of demand for a good
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Chapter 20: International Finance
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224 Verified Questions
224 Flashcards
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Sample Questions
Q1) If the same basket of goods costs $400 in the United States and 200 pounds in Britain,then according to the purchasing power parity theory,
A) goods and services must cost half as much in Britain as in the U.S.
B) the exchange rate should approach $2/pound
C) the exchange rate should approach $0.50/pound
D) goods and services must cost twice as much in Britain as in the U.S.
E) we cannot say anything about prices in the two countries unless we know the exchange rate
Q2) The international financial system operated under a gold standard
A) from the 1500s through the present
B) from 1879 through the present
C) from 1879 to 1914
D) from 1914 to 1939
E) never
Q3) The purchasing power parity (PPP) theory suggests the prices of identical items will equalize internationally.An illustration that supports this theory is the fact that the price of a McDonald's "Big Mac" is the same around the world.
A)True
B)False
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Page 22
Chapter 21: Developing and Transitional Economies
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Social capital is
A) the shared values and trust that promote cooperation in the economy
B) the buildings and equipment used to produce goods and services
C) a government regulation aimed at improving health and safety
D) the accumulated knowledge,skill,and experience of the labor force
E) the owner's own or borrowed money invested in a business
Q2) If Eddie Li is a skilled worker employed in a low-skill job,he is
A) underemployed
B) unemployed
C) overemployed
D) fully employed
E) All the answers are correct
Q3) Throughout the world,poverty is greater among women than men,particularly women who head households.
A)True
B)False
Q4) Developing countries must confront industrial countries' trade restrictions,such as tariffs and quotas.
A)True
B)False
Page 23
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