Public Policy and Microeconomics
Final Exam
Course Introduction
This course examines the intersection of public policy and microeconomic theory, focusing on how economic principles underpin the analysis and design of government interventions in markets. Students will explore key microeconomic concepts such as consumer and producer behavior, market equilibrium, market failures, externalities, and public goods, applying them to real-world policy issues. The course emphasizes the evaluation of policy tools such as taxes, subsidies, regulations, and price controls through a microeconomic lens, providing a rigorous framework for assessing the effectiveness and efficiency of various policy approaches in addressing social and economic challenges.
Recommended Textbook
Microeconomics 10th Edition by William Boyes
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22 Chapters
2295 Verified Questions
2295 Flashcards
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Page 2
Chapter 1: The Wealth of Nations: Ownership and Economic
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) Scarcity is a result of an unfair distribution of income.
A)True
B)False Answer: False
Q2) To say that something is scarce means that:
A)it is no longer available in stores.
B)it must be conserved at any cost.
C)even the government cannot supply it.
D)sufficient amounts of it available only at a zero price.
E)not enough is available to satisfy people's wants at a zero price.
Answer: E
Q3) Which of the following is an example of capital?
A)Education
B)Natural resources
C)Machinery
D)Training
E)Money
Answer: C
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Chapter 2: Scarcity and Opportunity Costs
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87 Verified Questions
87 Flashcards
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Sample Questions
Q1) If the general education level within a country rises significantly over time, it is likely that:
A)the country will move to a different point along its current production possibilities curve.
B)the country's production possibilities curve will not change in any way.
C)the country's production possibilities curve will shift in.
D)the country's production possibilities curve will shift out.
E)the country's production possibilities curve will become convex to the origin.
Answer: D
Q2) In economics, the concept of opportunity cost is:
A)negated by ensuring that the government has a role in a capitalist society.
B)defined to be the highest-valued alternative that must be forgone when a choice is made.
C)best illustrated by knowing why consumers choose one good over another.
D)quantifiable only if you know the real dollar price of the goods and services you are giving up to consume something.
E)the methodology that government economists use to determine the total amount of the national debt.
Answer: B
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Page 4
Chapter 3: Markets and the Price System
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Refer to Table 3.5. If government imposes a price floor of $2:
A)the price floor will not have an effect.
B)the price will fall to $1 because producers will be forced to incur losses.
C)demand will increase.
D)a surplus will result equal to 20 units.
E)a shortage will result equal to 20 units.
Answer: A
Q2) Assume that the market for gasoline in Figure 3.6 is in equilibrium. What is the most likely consequence of a government-imposed price ceiling at $10 per unit?
A)The profit made by gasoline producers will increase.
B)The demand for gasoline will decrease.
C)The quantity of gasoline supplied to the market will decrease.
D)There will be a surplus of gasoline in the market.
E)The demand curve for gasoline will shift to the right.
Answer: C
Q3) A price control always benefits consumers.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Aggregate Economy
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61 Flashcards
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Sample Questions
Q1) According to the World Bank, developing countries greatly outnumber industrial countries.
A)True
B)False
Q2) Empirical evidence suggests that the federal budget has remained more or less in surplus between 1990 and 2002.
A)True
B)False
Q3) Which of the following flows from the government to the households?
A)Goods and services
B)Resources of production
C)Taxes
D)Government services
E)Loans
Q4) Which of the following institutions form the private sector in an economy?
A)Only households
B)Households and the government
C)Households, businesses, and foreign firms
D)Households and businesses only
E)Foreign investors and foreign governments
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Chapter 5: Using Economics to Understand the World
Around You
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68 Verified Questions
68 Flashcards
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Sample Questions
Q1) The items held constant in the study of economic theory is known as the determinants of demand and the determinants of supply.
A)True
B)False
Q2) Which of the following is true?
A)If minimum wage is set below the equilibrium wage, it leads to a labor surplus.
B)If anything interferes with the voluntary exchanges that make up a market, equilibrium does not occur.
C)Minimum wage helps deal with the problem of unemployment in the market for unskilled labor.
D)Producers are willing to employ more labor at a minimum wage.
E)Minimum wage leads to a situation of labor deficit in a market.
Q3) Economic growth is represented by an inward shift of the production possibility curve.
A)True
B)False
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Chapter 6: Elasticity: Demand and Supply
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133 Flashcards
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Sample Questions
Q1) If the price elasticity of supply is zero, the supply curve is a horizontal line parallel to the quantity axis.
A)True
B)False
Q2) Consider a medical breakthrough that led to the discovery of a simple microchip, which when inserted inside the human ear could prevent certain chronic diseases. The price elasticity of demand for that microchip would most likely be _____.
A)highly elastic
B)highly inelastic
C)undefined
D)negative only for high prices
E)positive only for high prices
Q3) If a product has an inelastic demand, then:
A)there is probably a long time period under consideration.
B)as price increases, total revenue to producers decreases.
C)an increase in the price will decrease total consumer expenditures.
D)there are probably many complements for the good.
E)there are probably few substitutes for the good.
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Chapter 7: Demand: Consumer Choice
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142 Verified Questions
142 Flashcards
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Sample Questions
Q1) If MU<sub>X</sub> / P<sub>X</sub> < MU<sub>Y</sub> / P<sub>Y</sub> then this consumer:
A)will buy less of X and more of Y.
B)will buy more of X and more of Y.
C)is in equilibrium.
D)will buy more of X and less of Y.
E)will buy less of X and less of Y.
Q2) The theory of bounded rationality states that it is likely for consumers to have perfect information.
A)True
B)False
Q3) Suppose that apples and bananas both cost the same, but the marginal utility of bananas is twice as high as that for apples. The consumer should purchase more bananas and fewer apples in order to maximize utility.
A)True
B)False
Q4) Individuals behave so as to maximize their utility.
A)True
B)False
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Chapter 8: Supply: the Costs of Doing Business
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Economies of scale exist when the long-run average-total-cost curve is positively sloped.
A)True
B)False
Q2) Refer to Table 8.2. The average fixed cost of the first unit of output is:
A)$46.
B)$98.
C)$100.
D)$50.
E)$140.
Q3) Every firm has to bear its fixed costs even when it produces nothing.
A)True
B)False
Q4) In the long run, the total variable cost of a firm:
A)is equal to its total fixed cost.
B)is equal to its total cost.
C)is equal to its average fixed cost.
D)is more than its total fixed cost.
E)is less than its total cost.
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Chapter 9: Profit Maximization
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Refer to Figure 9.2. If the current production level is 90 and the firm wishes to maximize profit, it should:
A)continue to produce at the current level.
B)decrease the quantity produced to 75.
C)decrease the quantity produced to 50.
D)decrease the quantity produced to 35.
E)increase production until MR = MC.
Q2) The demand curve faced by a perfectly competitive firm is:
A)perfectly inelastic.
B)relatively elastic.
C)unit elastic.
D)perfectly elastic.
E)relatively inelastic.
Q3) In monopolistic competition, there are no brands, all the producers produce only identical, generic products.
A)True
B)False
Q4) The opportunity cost of going to movies is the price of entry into the movies.
A)True
B)False
Page 11
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Chapter 10: Perfect Competition
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) Refer to Table 10.1. The firm depicted in the table is a(n):
A)monopolist.
B)oligopolist.
C)monopolistically competitive firm.
D)perfectly competitive firm.
E)monopsonist.
Q2) A firm's total revenue is $400 for 8 units of output, $600 for 12 units of output, and $1,100 for 22 units of output. Evidently this firm is operating in a(n):
A)perfectly competitive market.
B)monopolistic market.
C)monopsonist market.
D)monopolistically competitive market.
E)oligopolistic market.
Q3) When a perfectly competitive firm's demand curve lies above its average total cost curve, the firm incurs an economic loss at that level of output.
A)True
B)False
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12
Chapter 11: Monopoly
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) One of the popular myths about monopoly is that:
A)a monopolist is the single seller of a particular commodity.
B)a monopolist can charge any price for his/her good.
C)a monopolist is a price maker.
D)a monopolist may earn positive profits even in the long run.
E)a monopolist faces the market demand curve.
Q2) Refer to Table 11.5. How would a price-discriminating monopolist allocate his or her product between market X and market Y if marginal cost is $40 in both markets?
A)4 units in market X; 1 unit in market Y
B)3 units in market X; 2 units in market Y
C)2 units in market X; 3 units in market Y
D)Nothing in market X; 5 units in market Y
E)5 units in market X; nothing in market Y
Q3) According to Figure 11.8, the deadweight loss of monopoly is:
A)the area ABC.
B)the area BCD.
C)the area ACD.
D)the area P<sub>3</sub>P<sub>2</sub>AC.
E)the area P<sub>3</sub>P<sub>4</sub>DC.
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Page 13
Chapter 12: Monopolistic Competition and Oligopoly
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) An efficient way to move toward the Nash equilibrium is called:
A)an agreement.
B)a convention.
C)a principle.
D)a resolution.
E)a convergence.
Q2) Consider the monopolistically competitive firm described in Figure 12.4. The profit-maximizing output level and price are _____ and _____, respectively.
A)F; A
B)F; E
C)J; B
D)L; D
E)N; P
Q3) Both monopolistically and perfectly competitive firms earn only normal profits in the long run.
A)True
B)False
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Chapter 13: Markets and Government
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113 Verified Questions
113 Flashcards
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Sample Questions
Q1) A market failure occurs when:
A)the market outcome is viewed as unfair by a majority of consumers.
B)a market fails to provide the good at a zero price.
C)quantity demanded exceeds quantity supplied.
D)the market outcome is not the socially efficient outcome.
E)prices are determined by the interaction of the forces of demand and supply and not through central planning.
Q2) For which of the following goods will the free rider problem arise?
A)Private golf course
B)Cable television
C)Privately owned apartment
D)National defense
E)Movie theatres
Q3) To minimize the asymmetric information problem, the government is called on to require and enforce full disclosure of information.
A)True
B)False
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15
Chapter 14: Antitrust and Regulation
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88 Verified Questions
88 Flashcards
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Sample Questions
Q1) According to Figure 14.2, the total social surplus after the regulation is the:
A)area BEC.
B)area AECJ.
C)area IGQ<sub>1</sub>Q<sub>2</sub>.
D)area 0FIQ<sub>2</sub>.
E)area BAJ.
Q2) Consider a market consisting of seven firms with market shares of 40, 20, 10, 10, 8, 7, and 5 percent, respectively. Which of the following statements is true?
A)The four-firm concentration ratio would be 0.03.
B)The Herfindahl index would be 1,000.
C)The Herfindahl index would be 2,228.
D)The Herfindahl index would be 1,500.
E)The Herfindahl index would be 2,338.
Q3) Actions against alleged violators of the antitrust statutes may be initiated by the Justice Department, by the Federal Trade Commission, and by private plaintiffs.
A)True
B)False
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Page 16
Chapter 15: Resource Markets
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) In Table 14.4, if marginal revenue product is equal to the product of MPP and MR, what wage rate would be consistent with a profit-maximizing firm hiring six laborers?
A)$6
B)$10
C)$12
D)$18
E)$24
Q2) If the government sets a minimum wage which is more than the equilibrium wage, the firms tend to demand more labor.
A)True
B)False
Q3) In the market for resources, demand and supply:
A)do not behave in the same way as they do in product markets.
B)behave in exactly the same way as they do in product markets.
C)curves usually do not intersect at equilibrium.
D)are both controlled by firms.
E)are both controlled by households
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Chapter 16: The Labor Market
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116 Verified Questions
116 Flashcards
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Sample Questions
Q1) One of the major impacts of restricting immigration is that the:
A)prices of the products produced by unskilled laborers will decline.
B)prices of the products produced by unskilled labor will increase.
C)supply of labor in agriculture will increase.
D)supply of labor in the industrial sector will rise.
E)government's expenditure on education and health will rise.
Q2) A compensating wage differential is a wage difference attributable to the difference in the marginal productivity of workers.
A)True
B)False
Q3) An individual is induced to change his/her occupation if:
A)the sunk cost of the current occupation is high.
B)the expected net gains from the alternative occupation is negative.
C)the outlook for future income, in the current occupation, increases.
D)he/she has devoted a lot of money, time and effort in the current occupation.
E)the marginal cost of remaining in the current occupation is very high.
Q4) Illegal immigrants to the U.S. usually charge higher wages than their American counterparts.
A)True
B)False
Page 18
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Chapter 17: The Capital Market
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110 Flashcards
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Sample Questions
Q1) Yield on a bond refers to:
A)the coupon-rate of the bond.
B)the money earned by selling a bond.
C)the return from a bond after its maturity.
D)the difference between the face value of a bond and the bond price.
E)the annual return until the bond matures.
Q2) The largest stock exchange in the world is:
A)the Munich Stock Exchange.
B)the London Stock Exchange.
C)the New York Stock Exchange.
D)the Tokyo Stock Exchange.
E)the Shanghai Stock Exchange.
Q3) The fixed amount that the issuer of a bond agrees to pay the bondholder each year until the bond matures is called:
A)rent.
B)coupon.
C)interest.
D)load.
E)dividend.
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Page 19
Chapter 18: The Land Market and Natural Resources
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Sample Questions
Q1) Privatization of common property leads to overexploitation of natural resources.
A)True
B)False
Q2) As extraction of a nonrenewable resource increases, the supply curve shifts up because:
A)more substitutes become available.
B)competition among the existing suppliers intensifies.
C)the marginal cost of extracting any given amount increases.
D)the resource finds alternative usage.
E)the resource becomes less productive.
Q3) Lobbying efforts by individuals and firms:
A)increases productive efficiency in the economy.
B)merely transfer income and wealth from one individual or group to another.
C)enables the firms to experience economies of scale.
D)improves the overall standard of living in the economy.
E)helps the economy to produce the efficient level of output.
Q4) Like profit-seeking, rent seeking is also a productive activity and contributes to the growth of the economy.
A)True
B)False
Page 20
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Chapter 19: Current Issues: Income, Income Distribution, Poverty,
and Government Policy
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85 Flashcards
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Sample Questions
Q1) Refer to Table 19.2. Which of the following tax policies is regressive by nature?
A)Alpha
B)Beta
C)Gamma
D)Delta
E)Eta
Q2) If those who are poor at any one time are poor only temporarily, then their plight is only temporary. This statement is based on which of the following assumptions?
A)Many spells of poverty are relatively short-lived.
B)Government spending in the economy is inadequate.
C)All phases of the business cycle are temporary.
D)Education infrastructure in the economy is poor.
E)Once people fall below the poverty line, it is almost impossible for them to rise above it.
Q3) Before-tax incomes are a better measure of income as compared to after-tax incomes.
A)True
B)False
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Page 21
Chapter 20: World Trade Equilibrium
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Sample Questions
Q1) If the world price is below the domestic "no-trade" equilibrium price, then with international trade:
A)the domestic shortage can be eliminated by rationing.
B)the domestic surplus can be consumed at home.
C)the domestic surplus can be exported to the rest of the world.
D)the domestic quantity demanded is equal to that supplied by the world.
E)the domestic shortage can be met by foreign imports.
Q2) Countries tend to export different goods and services because of:
A)differences in their comparative advantage.
B)differences in their tastes and technological needs.
C)differences in income.
D)similarities in resource endowment.
E)differences in the exchange rates.
Q3) Refer to Scenario 20.1. Which of the following statements is true?
A)Brazil has an absolute advantage in producing only coffee.
B)Brazil has an absolute advantage in producing only sugar.
C)Chile has an absolute advantage in the production of both coffee and sugar.
D)Chile has an absolute advantage in producing only coffee.
E)Brazil has an absolute advantage in the production of both coffee and sugar.
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Page 22
Chapter 21: International Trade Restrictions
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Sample Questions
Q1) When restrictions alter the pattern of international trade, the _____ benefit and the _____ suffer(s).
A)domestic consumers; domestic producers
B)domestic consumers; government
C)domestic producers; domestic consumers
D)foreign producers; domestic producers
E)foreign producers; domestic consumers
Q2) Tariff accounts for 32% of the total government revenue in the U.K. and only 1.2% in India.
A)True
B)False
Q3) Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.
A)True
B)False
Q4) In the United States, a "buy American" act was passed in 1933 to create larger markets for domestic goods.
A)True
B)False
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Chapter 22: Exchange Rates and Financial Links Between Countries
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Sample Questions
Q1) Suppose the 12-month interest rate on a U.S. Treasury bill is 16 percent, and the one-year interest rate on a comparable British Treasury bill is 6 percent. The exchange rate today is $2.00 per pound. What must be the expected exchange rate at maturity for interest rate parity to hold?
A)$1.00 = 0.50 pound
B)$1.00 = 0.75 pound
C)1 pound = $2.20
D)1 pound = $1.80
E)1 pound = $2.50
Q2) Refer to Figure 22.2. An increase in the equilibrium quantity of British pounds from 300 to 350 would most likely mean that:
A)the demand for British pounds has decreased.
B)the supply of British pounds has decreased.
C)increased demand for dollars has caused the dollar to depreciate and the pound to appreciate.
D)increased demand for dollars has caused the dollar to appreciate and the pound to depreciate.
E)the equilibrium exchange rate is $1.60 per British pound.
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