Economics I Exam Bank
Course Introduction
Economics I introduces students to the fundamental principles of microeconomics, emphasizing how individuals, businesses, and governments make choices in a world of scarce resources. Topics include supply and demand, market equilibrium, elasticity, consumer and producer behavior, the theory of the firm, and various types of market structures. Students will also examine the impact of government intervention in markets and explore real-world economic issues through case studies and practical applications, building a strong foundation for further study in economics.
Recommended Textbook Principles of Microeconomics 9th Edition by John Sayre Alan Morris
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Page 2
Chapter 1: The Economic Problem
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Q1) Gwen had only $10 yesterday.She was uncertain whether to go out for lunch or to buy beer.In the end,she bought beer.Which of the following statements is correct?
A)The choice of the beer and not lunch is an example of constant costs.
B)The cost of buying beer is less than lunch.
C)The opportunity cost of beer is lunch.
D)The opportunity cost of beer is $10.
Answer: C
Q2) Refer to the table above to answer this question.If Erewhon is producing 23 units of cheese,approximately how many units of wine can it produce?
A)5 units of wine
B)9 units of wine
C)14 units of wine
D)19 units of wine
Answer: C
Q3) Is it more cost effective to remove snow from city highways with labour or capital? Explain.
Answer: It depends on the opportunity cost,if the city's opportunity cost for labour is lower then the city will use labour to remove snow from city highways.
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Page 3
Chapter 2: Demand and Supply: An Introduction
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Q1) Refer to Figure 2.15 to answer this question.What will be the effect if the price is now $1,200?
A)There would be a surplus of 30.
B)There would be a shortage of 30.
C)160 would be purchased.
D)There would be a surplus of 60.
E)The price will increase.
Answer: D
Q2) If the price of a product is below equilibrium,which of the following statements is true?
A)The quantity demanded will exceed the quantity supplied.
B)The quantity supplied will exceed the quantity demanded.
C)A surplus of the product exists.
D)None of the choices are correct.
Answer: A
Q3) An increase in the price of a product causes a decrease in the real income of consumers.
A)True
B)False
Answer: True
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Chapter 3: Demand and Supply: An Elaboration
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Q1) Refer to the information above to answer this question.What will be the equilibrium price and quantity if a $2 per unit excise tax is imposed on this product?
A)$11 and 40.
B)$11 and 80.
C)$10 and 50.
D)$10 and 70.
E)$7 and 40.
Answer: C
Q2) Refer to the information above to answer this question.All of the following statements except one are correct.Which is the exception?
A)The equilibrium price and quantity are $10 and 70.
B)At a price of $7,there is a surplus of 60.
C)At a price of $11,there is a surplus of 20.
D)At a price of $9,there is a shortage of 20.
Answer: B
Q3) Invariably,price floors cause shortages and price ceilings cause surpluses.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Elasticity
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Q1) Suppose that the value of the price elasticity of demand for a product is 2 and its price increases by 16%.What will happen to the quantity demanded?
A)It will increase by 8%.
B)It will increase by 32%.
C)It will decrease by 8%.
D)It will decrease by 32%.
E)It cannot be determined without further information.
Q2) Suppose that the price of a product increased from $18 to $22,and the quantity supplied increased from 200 to 240.What is the value of the supply elasticity?
A)0.28.
B)0.91.
C)1.0.
D)1.1.
E)3.6.
Q3) What is the relationship between the form of elasticity (e.g.unitary)and total revenue?
Q4) How can the cross-price elasticity be used to determine whether two goods are complements or substitutes?
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Chapter 5: Consumer Choice
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Q1) The consumer surplus derived from products that have an inelastic demand is greater than that from products with an elastic demand.
A)True
B)False
Q2) Refer to the graph above to answer this question.The graph shows Becky's demand for blueberries which can be purchased in any quantities and sold at any price.What is Becky's total willingness to pay for 6 kilograms of blueberries if the price of each kilogram of blueberries is $2?
A)$2.
B)$18.
C)$6.
D)$12.
E)Cannot be determined.
Q3) Refer to Figure 5.5 to answer this question.If partial units cannot be purchased,what is the value of total consumer surplus at a price of $5?
A)$10.
B)$12.
C)$20.
D)$35.
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Page 7
Chapter 6: A Firms Production Decisions and Costs in the
Short Run
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Q1) Refer to the information above to answer this question.As one reads down the AVC column,what is the pattern in the numbers?
A)They continuously rise.
B)They continuously fall.
C)They fall until the fifth unit of labour used and then remain unchanged.
D)They rise until the fifth unit of labour used and then remain unchanged.
E)They fall until the fifth unit of labour used and then rise with the seventh unit of labour used.
Q2) Refer to the graph above to answer this question.At what output is marginal product at the maximum point?
A)40.
B)70.
C)80.
D)90.
Q3) Which of the following is a variable cost?
A)The leasehold cost of a building.
B)Insurance on the factory's physical plant.
C)Raw materials.
D)The cost of a marketing research report.
Page 8
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Chapter 7: Costs in the Long Run
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Questions
Q1) Suppose that a firm's total cost of producing an output of 400 units a day is currently $2,000.If technology and the price of inputs remain unchanged,what level of output would be produced if total cost rises to $4,000 and increasing returns to scale exist?
A)5 units.
B)More than 400 but less than 800 units.
C)800 units.
D)More than 800 units.
Q2) Adam Smith observed that the division of labour is limited by the size of the market.Which one of the following statements is not consistent with this observation?
A)A limited-sized market can prevent firms from achieving economic capacity.
B)A limited-sized market can prevent firms from achieving their minimum efficient scale.
C)A limited-sized market can prevent firms from achieving minimum short-run average cost.
D)A limited-sized market can prevent firms from achieving minimum long-run average cost.
E)A limited-sized market can prevent firms from achieving excess capacity.
Q3) Discuss the difference between increasing returns and economies of scale.
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Page 9
Chapter 8: Perfect Competition
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Q1) In what situation should a firm shut down in the short run?
A)When its total revenue is less than its total fixed costs at all output levels.
B)When its total revenue exceeds its total variable costs at all output levels.
C)When the price is below its lowest average variable cost at all output levels.
D)When the price is below its lowest average total cost at all output levels.
Q2) What long-run effect will a decrease in market demand have on a decreasing-cost industry?
A)The price will increase,and the number of firms in the industry will increase.
B)The price will increase,and the number of firms in the industry will decrease.
C)The price will decrease,and the number of firms in the industry will increase.
D)The price will decrease,and the number of firms in the industry will decrease.
Q3) Refer to the information above to answer this question.If the manufacturer can sell her guitars for $100,what will be her profit or loss at the optimal output?
A)She will break even.
B)A loss of $150.
C)A profit of $140.
D)A profit of $150.
E)A profit of $240.
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Chapter 9: An Evaluation of Competitive Markets
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Q1) Differentiate between productive efficiency and allocative efficiency.
Q2) Explain how a competitive market might experience a breakdown in competition.
Q3) Which of the following is true concerning a public good?
A)It is both non-rival and non-excludable.
B)It is non-rival but not necessarily non-excludable.
C)It is non-excludable but not necessarily non-rival.
D)It is neither non-rival nor non-excludable.
Q4) Suppose that a market is in equilibrium.The area between the demand curve and the market price is
A)total economic surplus.
B)producer surplus.
C)consumer surplus.
D)the deadweight loss.
E)the degree of overconsumption.
Q5) What is the term for the production of that combination of products which best satisfies consumers' demands?
A)Allocative efficiency.
B)Productive efficiency.
C)Marginal efficiency.
D)Optimal efficiency.
Page 11
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Chapter 10: Monopoly
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Q1) Refer to the graph above.Area C represents:
A)the loss of surplus by consumers resulting from a monopoly.
B)the cost to society of increasing output from Qm to Qc.
C)consumer surplus redistributed to the monopolist.
D)the loss of surplus by producers resulting from a monopoly.
Q2) Which of the following statements is true regarding the marginal revenue curve of the monopolist?
A)It is twice as steep as the average revenue curve.
B)It could also be called a price curve.
C)It is a horizontal line.
D)It is the same as its average revenue curve.
Q3) Which of the following statements regarding a monopolist is correct?
A)A monopolist will only produce an output where the demand is elastic.
B)A monopolist will only produce an output where the demand is inelastic.
C)A monopolist will only produce an output where the demand is unitary elastic.
D)A monopolist will only produce an output where the demand is perfectly elastic.
Q4) "A monopolist can charge whatever price it wishes because it is the only firm in the market,therefore it will set the highest price it can charge." Evaluate this statement.
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Page 12
Chapter 11: Imperfect Competition
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Q1) What are the main features of an oligopoly?
Q2) What is a concentration ratio?
A)A ratio that measures the percentage of an industry's total output that is produce by the largest few firms.
B)A ratio that measures the percentage of a firm's total output compared to its nearest rival.
C)A ratio that measures the percentage of the economy's total output that a particular industry produces.
D)A ratio that measures the size of each industry.
Q3) All,except one,of the following statements about the kinked demand curve theory of oligopoly are correct.Which is the exception?
A)It explains why the prices charged by rival firms are often similar.
B)It explains why rival firms that charge similar prices may not be in collusion.
C)It explains why the prices charged by rival firms sometimes go for months,or even years,without changing.
D)It explains,particularly well,how the prevailing price in the industry first got established.
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Chapter 12: The Factors of Production
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Q1) All of the following statements,except one,are correct concerning the explanation of wage rate differentials.Which is the exception?
A)All individuals possess the same amount of human capital.
B)Different jobs involve different degrees of risk.
C)Some jobs have unpleasant characteristics that are absent in other jobs.
D)Some jobs have very attractive non-pecuniary benefits.
Q2) What has happened to the size of Canada's labour force over the last thirty years?
A)It has decreased slightly.
B)It has grown by about 10%.
C)It has grown by about 50%.
D)It has almost doubled.
Q3) Graphically,what is necessary for economic rent to exist?
A)A perfectly inelastic demand curve.
B)An elastic demand curve.
C)A perfectly elastic supply curve.
D)An inelastic supply curve.
E)Both a perfectly elastic supply and demand curve.
Q4) Differentiate between a product market and a factor market.
Q5) What is a 'common property' resource?
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Chapter 13: International Trade
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Sample Questions
Q1) Refer to above table to answer this question.What is the cost of producing one broomstick in Potter?
A)2 swords.
B)0.5 swords.
C)0.33 swords.
D)3 swords.
Q2) What is the term for an agreement by an exporting country to restrict the amount of exports to another country?
A)Tariff.
B)Trade agreement.
C)Voluntary export restrictions.
D)Quota.
Q3) All the following,except one,are examples of trade restrictions.Which is the exception?
A)Import subsidies.
B)Quotas.
C)Tariffs.
D)Exchange controls.
E)Voluntary export restrictions.
Q4) What are Canada's main exports?
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