Principles of Microeconomics
Test Preparation
Course Introduction
Principles of Microeconomics introduces students to the fundamental concepts and analytical tools used in the study of individual markets and decision-making processes. Topics covered include supply and demand, market equilibrium, elasticity, consumer and producer behavior, market structures such as perfect competition and monopoly, and the impact of government policies on economic outcomes. The course equips students with the ability to analyze real-world economic issues, evaluate the effects of market interventions, and understand the role of incentives, trade-offs, and opportunity costs in shaping choices made by households and firms.
Recommended Textbook
Microeconomics 10th Edition by Stephen Slavin
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20 Chapters
4504 Verified Questions
4504 Flashcards
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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) The United States truly became a mass consumption society in A)the early 1900s.
B)the 1920s.
C)the 1940s.
D)the 1960s.
E)the 1980s.
Answer: B
Q2) All of the nation's banks were closed in the first week of March, in the year A)1929.
B)1930. C)1931.
D)1932.
E)1933.
Answer: E
Q3) The federal government facilitated suburbanization by providing _______________ and __________________.
Answer: low-cost, easy-term mortgages; highways
Q4) Farms with sales of more than $250,000 account for __________ percent of U.S. agricultural sales.
Answer: 75
Page 3
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Chapter 2: Resource Utilization
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267 Verified Questions
267 Flashcards
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Sample Questions
Q1) If the economy is at point R, most likely this economy is experiencing _________.
Answer: a recession
Q2) A small economy produces only pizzas and jeans. If resources are used inefficiently in the economy,
A)it will be possible to produce more pizzas without decreasing the production of jeans.
B)the economy will be operating at a point on its production possibilities curve.
C)the economy will be operating at a point outside its production possibilities curve.
D)it will not be possible to produce more jeans or pizzas.
Answer: A
Q3) What is the opportunity cost of going from point E to point D?
Answer: 5 CAT scans
Q4) Place point X on the graph to indicate full employment, point Y to indicate economic growth and point Z to indicate a bad depression.
Answer: 11ea7e53_a681_2c77_9a0a_41c7783d2b9a_TB5854_00
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Page 4
Chapter 3: The Mixed Economy
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Sample Questions
Q1) Which statement is the most accurate?
A)China is a completely economically backward nation.
B)China's economic growth has been extremely low for the last 20 years.
C)China is subjected to periodic famine.
D)Since 1978, Chinese leaders have relaxed rigid party control of the economy and permitted more individual initiative.
Answer: D
Q2) Karl Marx and Friedrich Engels said
A)"The theory of the Communists may be summed up in the single sentence: Abolition of private property."
B)"The vice of capitalism is that it stands for the unequal sharing of blessings; whereas the virtue of socialism is that it stands for the equal sharing of misery."
C)"It is not the employer who pays wages-he only handles the money.It is the product that pays wages."
D)"Capital is past savings accumulated for future production."
Answer: A
Q3) Under private enterprise, production is guided by
Answer: the price mechanism
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Page 5
Chapter 4: Supply and Demand
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256 Flashcards
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Sample Questions
Q1) Usury laws are a form of price ____________ and the minimum wage law is a form of price ___________________.
A)floor; floor
B)ceiling; ceiling
C)ceiling; floor
D)floor; ceiling
Q2) When market price is below equilibrium price
A)a shortage is generated.
B)a surplus is generated.
C)quantity demanded is greater than quantity supplied.
D)then both a shortage is generated and quantity demanded is greater than quantity supplied, but a surplus is not generated.
E)then both a surplus is generated and quantity demanded is greater than quantity supplied, but a shortage is not generated.
Q3) Draw in a new demand curve, D1, on the graph, showing a decrease in demand.What happens to price and quantity?
Q4) When supply falls and demand remains the same, equilibrium price _______ and equilibrium quantity __________.
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Chapter 5: Demand, Supply, and Equilibrium
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227 Flashcards
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Sample Questions
Q1) If the price of Diet Pepsi rises, what happens to the price of Diet Coke?
A)It will rise.
B)It will fall.
C)It will remain the same.
D)There is no way of telling what will happen to the price of Diet Coke.
Q2) Which of the following will NOT change the supply of personal computers?
A)An increase in consumers' incomes.
B)A technological breakthrough that makes it much less costly to produce computer chips.
C)A decrease in the wage paid to electrical engineers.
D)None of the choices are correct.
Q3) If price rises,
A)there may have been an increase in demand.
B)there may have been an increase in supply.
C)there may have been a decrease in demand.
D)there must have been a decrease in equilibrium quantity.
Q4) If people have trouble selling their houses, they should ________ the price of the houses until they make the sale.
Q5) A decrease in supply is shown graphically by a shift of the supply curve to the
Page 7
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Chapter 6: The Price Elasticities of Demand and Supply
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Sample Questions
Q1) Which is the most accurate statement?
A)The most important determinant of the degree of elasticity of demand is the availability of substitutes.
B)The demand for gasoline is very elastic.
C)The advertiser wants to push her product's demand curve to the right and make it more elastic.
D)Supply is most elastic in the market period.
Q2) How much is the tax?
A)10 cents
B)20 cents
C)30 cents
D)40 cents
E)50 cents
Q3) A firm that changes its price and sees no change in the total revenues it receives is facing demand that is
A)price inelastic.
B)revenue inelastic.
C)unit elastic.
D)price elastic.
Q4) A tax increase _________ supply.
Page 8
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Chapter 7: Theory of Consumer Behavior
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Statement I: Marginal utility and consumer surplus are identical concepts. Statement II: Utility is simply a measure of what the buyer is willing to pay for a good or service.
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.
Q2) If the price were $5 each, her consumer surplus would be A)$31.
B)$20.
C)$18.
D)$7.
E)$6.
Q3) Statement I: Utility is measured by a product's usefulness. Statement II: If you purchased eight ballpoint pens at 75 cents each, you would be enjoying a consumer surplus.
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.
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Page 9
Chapter 8: Cost
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242 Flashcards
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Sample Questions
Q1) It cost FedEx $100 million to set up a website to provide customers with package tracking information and 20 cents to enter the data for each package. What would be the AVC and ATC of tracking (a) 1 million packages? (b) 100 million packages?
Q2) The shutdown decision is made in the _______________.
Q3) Which of the following cost curves will NOT shift downward if the price of a variable input decreases?
A)Total cost
B)Average cost
C)Marginal cost
D)Average fixed cost
Q4) The relationship between the maximum amounts of output a firm can produce and various quantities of inputs is called a __________________.
Q5) At an output of 3, AVC is
A)$250.
B)$300.
C)$333.
D)$400.
E)$667.
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Chapter 9: Profit, Loss, and Perfect Competition
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365 Verified Questions
365 Flashcards
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Sample Questions
Q1) In the long run a perfect competitor's output is _________ equal to its most efficient output.
A)sometimes
B)always
C)never
Q2) When a profit maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue
A)all of the time.
B)some of the time.
C)on rare occasions.
D)none of the time.
Q3) Profit (or loss) per unit at the profit maximizing (or loss minimizing) level of output
A)is MN.
B)is LM.
C)is LN.
D)cannot be found on this graph.
Q4) How much is the firm's output at the shutdown point?
Q5) Label the maximum profit output in the above graph.
Q6) If the price were $90, how much would the firm's output be in the short run?
11
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Chapter 10: Monopoly
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234 Flashcards
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Sample Questions
Q1) If the firm is maximizing profits or minimizing losses, it is producing _____ units of output and charging a price of _____.
A)50; $10
B)50; $18.40
C)60; $12
D)60; $16.80
Q2) In the United States the CEOs of our largest companies earn over _____ times the earnings of their average employee.
Q3) Considering that there are over a half million doctors in the United States, it is still possible for a doctor to have a __________ monopoly in her or his neighborhood.
Q4) Calculate the firm's total profit.
Q5) If the firm were a perfect competitor in the long run, how much would its output be?
Q6) Natural monopolies are monopolies that are based on
A)patents.
B)control over a strategic natural resource.
C)extensive economies of scale in production.
D)copyrights.
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Page 12
Chapter 11: Monopolistic Competition
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164 Verified Questions
164 Flashcards
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Sample Questions
Q1) In the long run the monopolistic competitor
A)charges the same price but produces a greater output than the perfect competitor.
B)charges a higher price but produces a smaller output than the perfect competitor.
C)charges a higher price and produces a higher output than the perfect competitor.
D)charges a lower price and produces a lower output than the perfect competitor.
E)charges a lower price but produces a higher output than the perfect competitor.
Q2) Each of the following is an example of price discrimination except
A)senior citizen discounts at movie theaters.
B)expensive blood tests in a medical lab for well-to-do medical patients.
C)higher-priced movie tickets on "date-night."
D)student rates for subscriptions to the Wall Street Journal.
Q3) Which of the following is NOT a characteristic of monopolistic competition?
A)Some degree of control over price
B)A tendency to rely on non-price competition
C)A horizontal demand curve
D)Some degree of product differentiation
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Chapter 12: Oligopoly
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186 Verified Questions
186 Flashcards
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Sample Questions
Q1) An industry with a concentration ratio of 60 would have at least ____ firms.
A)2
B)4
C)5
D)7
Q2) The strong ____________ of oligopolistic firms is shown by the vulnerability of their sales to the actions of their rivals.
Q3) As foreign imports become a greater percentage of sales in oligopolized industries, the concentration ratio
A)becomes more accurate as a measure of concentration.
B)becomes less accurate as a measure of concentration.
C)continues at the same level of accuracy.
Q4) If the firm were a perfect competitor in the long run, what price would it charge?
Q5) How much is the concentration ratio in this industry?
Q6) Theoretically, what is the highest possible Herfindahl Index?
A)100
B)1,000
C)10,000
D)100,000
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Chapter 13: Corporate Mergers and Antitrust
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) The illegal acts conducted by companies caught up in recent corporate scandals generally contain the word(s)
A)fraud.
B)tax evasion.
C)conflict of interest.
D)money laundering.
Q2) Combinations in restraint of trade are prohibited by
A)the Sherman Act.
B)the Clayton Act.
C)the Federal Trade Commission Act.
Q3) Statement I. In 1997 the European Commission indirectly blocked a merger between Boeing and McDonnell Douglas by threatening to impose fines when doing business in Europe. Statement II. Some companies, such as Barnes & Noble, have backed out of proposed acquisitions to avoid antitrust legal battles.
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.
Q4) The largest mergers have been in the ___________ industry.
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Chapter 14: Demand in the Factor Market
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197 Verified Questions
197 Flashcards
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Sample Questions
Q1) If the productivity of capital rises, its MPP will _____ and its MRP will ____.
A)rise; rise
B)fall; fall
C)rise; fall
D)fall; rise
Q2) If a firm's marginal revenue product of labor is $100 and it pays a wage rate of $85,
A)the firm should reduce the wage it pays.
B)the firm is maximizing its profits.
C)the law of diminishing marginal productivity is being observed.
D)the firm can raise its profits by increasing the number of workers.
Q3) When the price of a resource _________, the demand for a complementary resource ___________; when price of a resource _________, the demand for a complementary resource _________.
A)rises, rises; falls, falls
B)rises, falls; falls, falls
C)rises, falls; falls, rises
D)rises, rises; falls, rises
Q4) A decrease in the wage rate will change the amount of ________ employed, and it may also change __________.
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Chapter 15: Labor Unions
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Sample Questions
Q1) Statement I. Right-to-work laws were made illegal under the Taft-Hartley Act. Statement II. The National Labor Relations (Wagner) Act put the force of the federal government behind collective bargaining, at the same time lending unions certain legitimacy.
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.
Q2) The monopsonist faces the entire _____ curve of labor.
A)supply
B)demand
C)demand curve and supply
Q3) Less than _______% of work time is lost due to strikes in the U.S.
Q4) Right to work laws
A)are part of the legislation that was the foundation for the growth of unions in the U.S.
B)are included in the Wagner Act.
C)permit workers to be paid less than comparable worth would allow.
D)are in state laws that limit union power.
Q5) ______% of Wal-Mart employees are union members.
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Chapter 16: Labor Markets and Wage Rates
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157 Verified Questions
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Sample Questions
Q1) In which year were real average hourly wages the highest?
A)1973
B)1983
C)1993
D)2007
Q2) An increase in the minimum wage to $7 would cause ____ million people to lose their jobs.
Q3) A rise in the wage rate would cause
A)an increase in the MRP schedule of labor.
B)a decrease in the MRP schedule of labor.
C)no change in the MRP schedule of labor.
Q4) At relatively low wage rates the ____________ outweighs the ____________.
A)income effect; substitution effect
B)substitution effect; income effect
C)marginal revenue product; resource demand
D)None of these choices are correct.
Q5) The difference between what you earn, say $1 million, and what you would be willing to work for, say, $80 thousand, is called your ______________.
Q6) Economic rent is the difference between _____________ and ________________.
Page 18
Q7) The shape of the supply curve of labor may be described as
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Page 19
Chapter 17: Rent, Interest, and Profit
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Sample Questions
Q1) Which of the following would earn a monopoly profit due to a "natural scarcity" rather than a "contrived scarcity"?
A)Major League Baseball
B)A firm that develops an anti-gravity machine
C)A "fountain of youth" tonic that comes exclusively from the water of a spring in Florida
D)A camera company obtains a patent that it is able to maintain for over 40 years
Q2) Changes in land rents in the United States are chiefly the result of
A)changes in the demand for land.
B)increased land fertility.
C)production of new land.
D)changes in the supply of land.
Q3) Each of the following had a theory of profit except
A)Karl Marx.
B)Joseph Schumpeter.
C)Frank Knight.
D)Pierre-Joseph Proudhon.
Q4) The present value of $1 received n years from now is found by dividing 1 by ______.
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Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) What is the percentage of income received by the lower three quintiles on line J?
Q2) Which person is most likely to be poor? A person who is A)over 65 years of age.
B)black.
C)white and under 6 years of age.
D)living in a female-heading family with children under 18.
Q3) Which statement is true?
A)There is no one single cause of homelessness.
B)Most of the homeless have jobs.
C)There are fewer Americans homeless than ten years ago.
D)People are homeless because they want to be.
Q4) The poverty line
A)is shifted downward from year-to-year.
B)is constant.
C)is raised from year-to-year.
D)is tied to the unemployment rate.
Q5) All the people employed at or just above the minimum wage could be considered the ____________________.
Q6) The percentage of our population below the poverty line is about _______%.
Page 21
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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) Colombia has an absolute advantage in
A)coffee and a comparative advantage in hot dogs.
B)neither coffee nor hot dogs, but a comparative advantage in hot dogs.
C)neither coffee nor hot dogs, but a comparative advantage in coffee.
D)neither coffee nor hot dogs, but a comparative advantage in both hot dogs and coffee.
Q3) Under international trade we export those goods for which we have a relatively low
A)materials cost.
B)wage cost.
C)accounting cost.
D)opportunity cost.
E)overhead cost.
Q4) Italy has a comparative advantage in the production of which product?
Q5) What is the domestic exchange equation of Italy?
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Chapter 20: International Finance
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230 Flashcards
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Sample Questions
Q1) If the dollar depreciates in value against the euro for an American, the cost of French champagne A)rises. B)falls.
C)stays the same.
Q2) If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 200 yen, then the dollar price of yen is A)$.005.
B)$.05.
C)$.50.
D)$5.
Q3) The gold standard had two main drawbacks: (1) ______________ and (2) _____________.
Q4) The Federal Reserve has estimated that over ______ of all the U.S. currency being printed ends up being used as unofficial legal tender abroad.
A)one-fourth
B)one-third
C)one-half
D)two-thirds
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