Foundations of Microeconomics Mock Exam
Course Introduction
Foundations of Microeconomics introduces students to the fundamental principles that govern how individuals, firms, and societies make choices regarding the allocation of scarce resources. The course covers key concepts such as supply and demand, market equilibrium, elasticity, consumer and producer behavior, and the implications of market structures like perfect competition and monopoly. Students will also explore the role of government intervention, efficiency, market failures, and the basics of welfare economics, providing a solid analytic framework for understanding everyday economic issues and policy debates.
Recommended Textbook
Principles of Microeconomics 2nd Edition by Lee Coppock
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19 Chapters
3303 Verified Questions
3303 Flashcards
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Page 2
Chapter 1: Five Foundations of Economics
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Actions and activities are encouraged with which type of incentive?
A) positive
B) negative
C) neutral
D) complementary
E) unintended
Answer: A
Q2) Economics professors are well aware of the importance of incentives.Which of the following situations shows the use of a positive incentive?
A) Students who show up late to class will not be allowed in the classroom.
B) Students who do not have a doctor's note will not be allowed to take an exam at a different time.
C) Students can choose whether they want to attend class-there is no attendance policy.
D) Students can choose to get a higher grade by doing extra credit work.
E) The professor decides to teach the class by reading out of the textbook to the entire class.
Answer: D
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Page 3
Chapter 2: Model Building and Gains From Trade
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) Ceteris paribus means
A) in sets of two.
B) constant opportunity cost.
C) other things being equal.
D) buyer beware.
E) there is no reason to argue about people's tastes.
Answer: C
Q2) Which of the following is a normative statement?
A) The current exchange rate is 0.7 British pounds per U.S.dollar.
B) In January,the average temperature in Fargo,North Dakota,is 56 degrees.
C) Winters in Arkansas are too cold.
D) On average,people save 15 percent when they switch to GEICO.
E) University of Virginia graduates earn more than Duke University graduates.
Answer: C
Q3) Draw a production possibilities frontier (PPF)that shows a pizza shop's production trade-offs between producing pizzas and stromboli.Suppose the pizza shop upgrades to a larger,more automated oven.On the same graph,show how the PPF changes.(The oven is used to bake both pizzas and stromboli. )
Answer: 11ea78d5_7007_387d_8379_658f02e25570_TB4871_00
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Page 4
Chapter 3: The Market at Work: Supply and Demand
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) If consumers expect the price of a good to decrease in the future and all else is held constant,we would assume that the demand curve would
A) shift from D<sub>1</sub> to D<sub>3</sub>.
B) remain at D<sub>1</sub>.
C) shift from D<sub>1</sub> to D<sub>2</sub>.
D) shift from D<sub>2</sub> to D<sub>1</sub>.
E) shift from D<sub>2</sub> to D<sub>3</sub>.
Answer: A
Q2) When a hurricane rips through Florida,the price of oranges rises because the
A) demand curve shifts to the left.
B) supply curve shifts to the right.
C) demand curve shifts to the right.
D) supply curve shifts to the left.
E) supply and demand curves both shift to the left.
Answer: D
Q3) Using a supply and demand model,show what happens to the equilibrium price and equilibrium quantity in the market for cigarettes when the government imposes a tax on their production.
Answer: 11ea78d5_7013_4691_8379_b71e1e3d124d_TB4871_00
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Page 5
Chapter 4: Elasticity
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) The percentage change in price is 5 percent,while the price elasticity of supply is 0.The percentage change in quantity supplied
A) is 1.5 percent.
B) does not change.
C) is 2 percent.
D) is -3 percent.
E) is -7 percent.
Q2) When the quantity demanded is less sensitive to a change in price,then the absolute value of the price elasticity of demand is
A) smaller.
B) larger.
C) close to infinity.
D) close to 1.
E) unaffected by the change in sensitivity.
Q3) Toyota uses a just-in-time production method to respond to consumer demand for its vehicles.In essence,it relies on various cues to signal when new vehicles should be made rather than stocking inventory.This allows Toyota to respond very quickly to changes in consumer demand.Explain whether this system makes elasticity of supply relatively price elastic or price inelastic.
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Page 6
Chapter 5: Market Outcomes and Tax Incidence
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) The difference between the willingness to pay for a good and the amount that is paid to get it is also known as
A) consumer expenditure.
B) surplus spending.
C) consumer benefit.
D) producer profit.
E) consumer surplus.
Q2) Another name for a consumer's willingness to pay is the A) limiting cost.
B) expense cap.
C) hidden budget.
D) reservation price.
E) maximum outlay.
Q3) Taxing goods with very inelastic demand generates less deadweight loss than taxing goods with very elastic demand because
A) the change in consumer behavior is smaller.
B) the amount of the tax is larger.
C) consumers have to pay these taxes out of pocket.
D) the government does not bother collecting the revenue.
E) the change in consumer behavior is greater.
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Chapter 6: Price Controls
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) What will happen in a market where a binding price floor is removed?
A) The products sold will become scarcer.
B) There will be upward pressure on the prices.
C) There will be downward pressure on the prices.
D) The price or quantity of the product sold in the legal market will not change.
E) There will be increased pressure to buy and sell the good on the black market.
Q2) Suppose Lewis lives in a community with no price controls.What would he expect will happen if his town borders a community where there is a binding price floor on most products?
A) Prices in the legal market in the community with a binding price floor will rise.
B) Prices in the legal market in the community with a binding price floor will fall.
C) There will be surpluses in the community with a binding price floor.
D) More consumers will purchase the product in the community with the price floor.
E) The black market in his community will be larger than the black market in the community with the binding price floor.
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Chapter 7: Market Inefficiencies: Externalities and Public Goods
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172 Verified Questions
172 Flashcards
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Sample Questions
Q1) Copyright laws exist to
A) eliminate negative externalities.
B) eliminate public goods.
C) limit free-riding.
D) solve the tragedy of the commons.
E) protect consumers.
Q2) Christopher's roommate is studying to be a chef and likes to try new recipes.He leaves his delicious creations in the refrigerator for anyone who wants to eat them.The food he leaves is always gone within a day.This is an example of
A) the third-party problem.
B) the tragedy of the commons.
C) an internal cost.
D) the free-rider problem.
E) a positive externality.
Q3) Club goods are
A) nonrival,like public goods,and excludable,like private goods.
B) nonrival,like private goods,and excludable,like common-resource goods.
C) nonrival,like common-resource goods,and excludable,like public goods.
D) rival,like private goods,and nonexcludable,like public goods.
Page 9
E) rival,like common-resource goods,and nonexcludable,like private goods.
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Chapter 8: Business Costs and Production
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175 Verified Questions
175 Flashcards
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Sample Questions
Q1) A firm's short-run cost curves show us
A) the lowest-cost level of output.
B) the highest-profit level of output.
C) what will happen if the firm doubles its capital.
D) how many other firms are in the industry.
E) how many employees the firm has.
Q2) Where would we find a firm's minimum efficient scale of production?
A) at the lowest point on its long-run average total cost curve
B) at the highest point on its long-run average total cost curve
C) in the middle of its long-run average total cost curve
D) at the highest point on its long-run average fixed cost curve
E) in the middle of its long-run average variable cost curve
Q3) In the short run,average total costs and average variable costs converge as output increases because
A) marginal cost is below average total cost.
B) marginal cost is below average fixed cost.
C) average fixed costs continually increase.
D) average fixed costs continually decrease.
E) total cost continually increases.
Q4) What causes diseconomies of scale for a firm?
Page 10
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Chapter 9: Firms in a Competitive Market
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174 Verified Questions
174 Flashcards
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Sample Questions
Q1) Suppose a perfectly competitive paper firm can produce six tons of paper at an output level where marginal revenue is equal to marginal cost.The price per ton of paper is $100 and the average total cost is $75.What is the total profit or loss that the paper firm is earning?
A) $150.00
B) $450.00
C) $600.00
D) -$150.00
E) -$450.00
Q2) The entry and exit of firms ensure that the market ________ curve is much ________ in the long run than in the short run.
A) demand; more elastic
B) demand; more inelastic
C) supply; closer to vertical
D) supply; more inelastic
E) supply; more elastic
Q3) Graph a perfectly competitive profit-maximizing firm making short-run profits.Be sure to include the marginal revenue curve,the marginal cost curve,the average total cost curve,and the average variable cost curve.
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Page 11
Chapter 10: Understanding Monopoly
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176 Verified Questions
176 Flashcards
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Sample Questions
Q1) Explain why problems raising capital constitute a natural barrier and not a government-created one.
Q2) If a firm is producing a quantity of 100 and charging a price of $25,it
A) should raise production to 150 units but lower the price to $10 to maximize profits.
B) should raise production to 150 units and continue to charge $25 to maximize profits.
C) should keep production at 100 units but lower the price to $13 to maximize profits.
D) should keep production at 100 units and lower the price to $10 to maximize profits.
E) is already maximizing profits and should not change the price or quantity produced.
Q3) Which of the following is characteristic of a firm in a competitive market?
A) It cannot earn long-run economic profits.
B) It cannot control its costs.
C) It does not operate at a socially efficient output level.
D) It cannot control output quantity.
E) It can set the price at which its product sells.
Q4) Using a graph,explain the concepts of the price effect and output effect.
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Chapter 11: Price Discrimination
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175 Flashcards
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Sample Questions
Q1) A campus financial aid office uses what tool to separate students into distinct groups based on family income?
A) National Aid for Federal Teaching Assistance (NAFTA)
B) College Student Aid Federal Fund (CSAFF)
C) Free Application for Federal Student Aid (FAFSA)
D) Federal Aid to Student Organization (FATSO)
E) Federal Stafford Loan Program Report (FSLPR)
Q2) Which of the following conditions is a requirement for price discrimination?
A) There is no reselling allowed in the market.
B) People have homogenous preferences.
C) Firms face different costs of production.
D) There are multiple firms in the market.
E) There is only one firm in the market.
Q3) For a monopoly that charges a single price of $6,what would the producer surplus be?
A) $160
B) $120
C) $80
D) $40
E) $0
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Chapter 12: Monopolistic Competition and Advertising
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173 Verified Questions
173 Flashcards
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Sample Questions
Q1) Markup would generally be highest under A) a monopoly.
B) a cartel.
C) an oligopoly.
D) monopolistic competition.
E) a competitive market.
Q2) One could argue correctly that
A) all firms in any industry can earn short-run but not necessarily long-run positive economic profit.
B) all firms in any industry can earn long-run but not necessarily short-run positive economic profit.
C) all firms in any industry can earn both short-run and long-run positive economic profit.
D) no firm in any industry can earn long-run positive economic profit because all price changes made by any firm will be followed by all of the other firms.
E) all firms in any industry can earn short-run positive profit if economies of scale exist.
Q3) Would a perfectly competitive firm want to advertise? Why or why not?
Q4) Define market power.
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Chapter 13: Oligopoly and Strategic Behavior
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175 Verified Questions
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Sample Questions
Q1) When more firms enter into a market that was previously characterized as a duopoly,it will
A) be easier for firms in the market to form a successful cartel.
B) be more difficult for firms in the market to form a successful cartel.
C) be just as difficult for firms in the market to form a successful cartel as it was before the new firms entered.
D) be impossible for firms in the market to form a successful cartel,whereas before the new firms entered,it would have been possible.
E) still be impossible for firms in the market to form a successful cartel.
Q2) In what way does e-mail exhibit a network externality? In your answer,be sure to define network externality.
Q3) The ________ effect occurs when the market price either decreases or increases by the respective entrance or exit of a rival firm in the market.
A) competitive
B) price
C) output
D) market
E) oligopoly
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15
Chapter 14: The Demand and Supply of Resources
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Sample Questions
Q1) What is the value that belongs in cell F5?
A) $-50
B) $-100
C) $150
D) $-200
E) $300
Q2) A profit-maximizing firm in a competitive market that is producing on a production curve where the marginal product of labor is diminishing also has
A) an upward-sloping labor demand curve.
B) a downward-sloping labor demand curve.
C) a perfectly elastic labor supply curve.
D) a perfectly inelastic labor supply curve.
E) a perfectly inelastic labor demand curve.
Q3) What is the marginal product of the third worker?
A) 7 units
B) 8.33 units
C) 25 units
D) 75 units
E) 8 units
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Page 16
Chapter 15: Income,inequality,and Poverty
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Sample Questions
Q1) Using the concept of the samaritan's dilemma,explain why it might be advisable to place a limit on the time that one can receive government help.
Q2) As an employer,Giselle wants productive employees who will stay with the firm for an extended period of time,so she should pay
A) less because human capital theory suggests better-paid employees work harder and stay longer.
B) less because of the existence of compensating differentials.
C) more because human capital theory suggests better-paid employees work harder and stay longer.
D) more because of the existence of compensating differentials.
E) more because efficiency wage theory suggests that the employer will be able to secure more productive employees.
Q3) Earnings gaps can be explained by all of the follow factors,EXCEPT
A) life-cycle wage pattern.
B) wage discrimination.
C) personal savings.
D) location and lifestyle.
E) human capital.
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17
Chapter 16: Consumer Choice
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Sample Questions
Q1) On a single graph,draw the supply and demand curves for both water and diamonds.Make sure the price of diamonds is higher than the price of water.
a.Label the total utility of water.
b.Label the total utility of diamonds.
Q2) Joanna is deciding between consuming Good X and Good Y.At her current level of consumption,her marginal utility per dollar for Good X is greater than the marginal utility per dollar for Good Y.To achieve the consumer optimum,Joanna needs to
A) consume more of Good Y until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X.
B) consume more of Good X until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X.
C) consume more of both Good X and Good Y until the marginal utility per dollar for Good Y is greater than the marginal utility for Good X.
D) consume more of Good X or less of Good Y until the marginal utility per dollar for Good X and Good Y is equal.
E) continue at her current level of consumption.
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18
Chapter 17: Behavioral Economics and Risk Taking
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Sample Questions
Q1) If Aaron chooses to make a fair proposal,the likely outcome of the game will be that Jane will ________ and Aaron will receive a payoff of ________.
A) reject; $999
B) reject; $500
C) accept; $500
D) reject; $500.
E) reject; $0
Q2) The ________ game is an economic experiment in which two players decide how to divide a pot of money.
A) prisoner's dilemma
B) hawk-dove
C) behavioral economics
D) ultimatum
E) hot-hand dilemma
Q3) Wallace says that he likes asters (flowers)as well as pansies (flowers).He is shown a picture of a spider forming a web in a group of asters.Next,he is shown a bee retrieving pollen from a second group of pansies.Which group of flowers are most people going to say that they like,asters or pansies? Why,according to which behavioral effect?
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Chapter 18: Health Insurance and Health Care
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Sample Questions
Q1) How do malpractice lawsuits affect the supply curve for doctors?
A) They cause a shift to the left.
B) They cause a shift to the right.
C) Lawsuits result in a movement along the curve.
D) The supply curve experiences a change in slope.
E) Malpractice lawsuits have no effect on the supply curve.
Q2) What form does the adverse selection problem take in the healthcare market?
A) Buyers can buy as much health care as they want.
B) Sellers can sell as much health care as they want.
C) Buyers and sellers face delays when interacting.
D) Sellers are less likely to provide care because they know it is expensive.
E) Buyers that are less healthy are more likely to seek insurance because they anticipate needing medical care.
Q3) Major advances in technology and medicine since 1950 have created a trade-off between ________ and ________.
A) cost; life expectancy
B) innovation; malpractice
C) ethics; efficacy
D) treatment; care
E) health; well-being
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Chapter 19: International Trade
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Sample Questions
Q1) Natasha's opportunity cost of producing one house is ________ pound(s)of cheese.
A) 1/250 of a
B) 1/20 of a
C) 20
D) 250
E) 500
Q2) A society could achieve a higher level of productivity if
A) each person in the society is a jack-of-all-trades.
B) it takes advantage of each individual's comparative advantage.
C) it does not trade with other nations.
D) it does not tax imported goods.
E) it does not limit exports.
Q3) Would consumers benefit more from a tariff or a quota on imports?
Q4) Graphically illustrate the deadweight loss that results when a country imposes a tariff.Explain the meaning of the deadweight loss.
Q5) Graphically illustrate the lost consumer surplus associated with imposing a quota on imports.What happens to this lost surplus?
Q6) Explain what is likely to happen to the value of the trade balance during the business cycle.
Page 21
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