Intermediate Microeconomics
Test Preparation
Course Introduction
Intermediate Microeconomics delves into the theoretical foundations of how individual agents consumers and firms make decisions within various market structures. The course explores topics such as consumer choice, production and cost functions, competitive and non-competitive markets, game theory, and market failures.
Emphasizing analytical rigor and graphical modeling, students learn to apply microeconomic principles to real-world scenarios, deepening their understanding of price formation, resource allocation, and the welfare implications of economic policies. This course builds on introductory concepts, preparing students for advanced study and practical application in economics and related fields.
Recommended Textbook
Microeconomics 7th Edition by R. Glenn Hubbard
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18 Chapters
4654 Verified Questions
4654 Flashcards
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Chapter 1: Economics: Foundations and Models
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240 Verified Questions
240 Flashcards
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Sample Questions
Q1) Consider the following economic agents:
A.the government
B.consumers
C.producers
Who, in a market economy, decides what goods and services will be produced with the scarce resources available in that economy?
A)the government
B)producers
C)consumers
D)consumers and producers
E)the government, consumers, and producers
Answer: D
Q2) Refer to Figure 1-4.Which of the following statements is false?
A)The slope of the tangent at E is positive.
B)The slope of the tangent at F is negative.
C)The slope of the tangent at E and the slope of the tangent at F are equal.
D)Neither the slope of the tangent at E nor the slope of the tangent at F are equal to zero.
Answer: C
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Chapter 2: Trade-Offs, Comparative Advantage, and the Market System
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Sample Questions
Q1) Refer to Table 2-8.China has a comparative advantage in the production of A)wheat.
B)digital cameras.
C)both products.
D)neither product.
Answer: A
Q2) Refer to Figure 2-5.If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?
A)2 million tons of steel
B)zero
C)9 million tons of paper
D)16 million tons of paper
Answer: B
Q3) Refer to Table 2-6.What is Serena's opportunity cost of making a necklace?
A)2 necklaces
B)1/2 of a bracelet
C)1/2 of a necklace
D)3/4 of a bracelet
Answer: B
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Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
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242 Verified Questions
242 Flashcards
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Sample Questions
Q1) What would happen in the market for laser eye surgery if insurance companies started to cover a portion of the price of voluntary procedures?
A)Demand will increase, but this will not shift the supply curve.
B)Supply will increase, but this will not shift the demand curve.
C)Demand and supply will both increase.
D)Demand will increase and supply will decrease.
Answer: A
Q2) Refer to Figure 3-4.At a price of $15, how many units will be sold?
A)300
B)400
C)600
D)700
Answer: B
Q3) If an increase in income leads to a decrease in the demand for popcorn, then popcorn is
A)an inferior good.
B)a neutral good.
C)a necessity.
D)a normal good.
Answer: A
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Chapter 4: Economic Efficiency, Government Price Setting, and Taxes
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) Refer to Figure 4-6.What area represents the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?
A)B
B)B + C
C)B + E
D)E
Q2) Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.
A)True
B)False
Q3) The total amount of producer surplus in a market is equal to A)the difference between quantity supplied and quantity demanded.
B)the area above the market supply curve and below the market price.
C)the area above the market supply curve.
D)the area between the demand curve and the supply curve below the market price.
Q4) What area on a supply and demand graph represents consumer surplus?
Q5) What is "tax incidence"? What determines tax incidence in a competitive market?
Q6) What do economists mean by an efficient tax?
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Chapter 5: Externalities, Environmental Policy, and Public Goods
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262 Verified Questions
262 Flashcards
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Sample Questions
Q1) Refer to Figure 5-10.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?
A)(PE × QE)
B)(PF × QF)
C)value equal to the area of EFH
D)value equal to the area of QFFGQE
Q2) Who was the economist who first proposed that governments use taxes and subsidies to correct for externalities?
A)Ronald Coase
B)A. C. Pigou
C)Adam Smith
D)David Hume
Q3) Private costs
A)are borne by producers of a good while social costs are borne by government.
B)are borne by consumers of a good while social costs are borne by government.
C)are borne by producers of a good while social costs are borne by society at large.
D)are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.
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Chapter 6: Elasticity: the Responsiveness of Demand and Supply
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Sample Questions
Q1) Jenna runs a small boutique in Capitola.She tells one of her suppliers that she is willing to pay $6 for a pair of wool hand warmers and not a dime more.On the basis of this information, what can you conclude about her price elasticity of demand for wool hand warmers?
A)It is elastic.
B)It is perfectly elastic.
C)It is perfectly inelastic.
D)The price elasticity coefficient is 0.
Q2) The price elasticity of demand for beef is estimated to be 0.60 (in absolute value).This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to A)decrease by 12 percent.
B)decrease by 26 percent.
C)decrease by 32 percent. D)decrease by 60 percent.
Q3) What is the relationship between price elasticity of demand and total revenue?
Q4) Suppose a 4 percent increase in income results in a 2 percent decrease in the quantity demanded of a good.Calculate the income elasticity of demand for the good and determine what type of good it is.
Page 8
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Chapter 7: The Economics of Health Care
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171 Verified Questions
171 Flashcards
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Sample Questions
Q1) Typically, the higher the level of income per person in a country, the higher the level of spending per person on health care.This relationship between income and spending indicates that health care is a
A)normal good.
B)inferior good.
C)luxury.
D)necessity.
Q2) Refer to Figure 7-1.The efficient equilibrium quantity is ________ thousand vaccinations.
A)100
B)200
C)300
D)>300
Q3) In the United States, private health insurance companies
A)are all for-profit firms.
B)are all not-for-profit firms.
C)can be either for-profit or not-for-profit firms.
D)are all government-run firms.
Q4) What is the main difference between a single-payer health care system and socialized medicine?
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Chapter 8: Firms, the Stock Market, and Corporate Governance
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261 Verified Questions
261 Flashcards
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Sample Questions
Q1) If you own a bond with a seven percent coupon rate and new bonds are paying five percent, what will happen to your bond's market price?
Q2) If you want to know the present value of a future payment received in one year, what formula can you use?
A)Present value equals future payment times the current market rate of interest.
B)Present value equals future payment divided by one plus the rate of interest.
C)Present value equals one plus the rate of interest expressed as a decimal divided by future payment.
D)Present value equals future payments times one plus the rate of interest.
Q3) What is the formula you should use to determine a bank account's future value in one year?
A)Future value equals the present value plus the rate of interest.
B)Future value equals the present value minus the rate of interest.
C)Future value equals the present value multiplied by one plus the rate of interest expressed as a decimal.
D)Future value equals the present value divided by one plus the rate of interest expressed as a decimal.
Q4) What type of business has the potential for double taxation of profits and why?
Page 10
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Chapter 9: Comparative Advantage and the Gains From International Trade
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188 Verified Questions
188 Flashcards
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Sample Questions
Q1) Which of the following is not a source of comparative advantage?
A)relative abundance of labor and capital
B)technology
C)climate and natural resources
D)a strong foreign currency exchange rate
Q2) Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.
A)True
B)False
Q3) Assume that Bulgaria has a comparative advantage in producing sandals and Finland imports sandals from Bulgaria.We can conclude that
A)Bulgaria also has an absolute advantage in producing sandals relative to Finland.
B)Bulgaria has a lower opportunity cost of producing sandals relative to Finland.
C)Finland has an absolute disadvantage in producing sandals relative to Bulgaria.
D)labor costs are higher for sandal producers in Finland than in Bulgaria.
Q4) What is a tariff?
Q5) What is dumping? Who benefits and who loses from dumping?
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Chapter 10: Consumer Choice and Behavioral Economics
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304 Verified Questions
304 Flashcards
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Sample Questions
Q1) Which of the following statements describes economists' attitudes regarding the influence of social factors on the choices consumers make?
A)Economists formerly believed they were very important but now they believe they are not important.
B)Economists believe social factors affect consumer choice in markets for public goods but not in markets for private goods.
C)Liberal economists believe social factors are very important; conservative economists do not believe social factors have any influence on consumers.
D)Economists traditionally believed they were unimportant, but many economists now believe social factors are important.
Q2) Refer to Table 10-1.What is Keegan's optimal consumption bundle?
A)3 pita wraps and 3 bubble teas
B)3 pita wraps and 4 bubble teas
C)4 pita wraps and 2 bubble teas
D)5 pita wraps and 0 bubble teas
Q3) The increase in consumption of a good when its price falls is caused by two effects.What are these two effects? Explain the difference between these effects.
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Chapter 11: Technology, Production, and Costs
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327 Verified Questions
327 Flashcards
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Sample Questions
Q1) Refer to Figure 11-5.Curve G approaches curve F because
A)marginal cost is above average variable costs.
B)average fixed cost falls as output rises.
C)fixed cost falls as capacity rises.
D)total cost falls as more and more is produced.
Q2) An isoquant is a curve that shows all the combinations of two inputs that will produce the same level of output.
A)True
B)False
Q3) Is it possible for technological change to be negative? If so, give an example.
Q4) Refer to Figure 11-1.The marginal product of the 3rd worker is A)57.
B)19.
C)15.
D)11.
Q5) Refer to Figure 11-5.The vertical difference between curves F and G measures
A)average fixed costs.
B)marginal costs.
C)fixed costs.
D)sunk costs.
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Chapter 12: Firms in Perfectly Competitive Markets
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297 Flashcards
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Sample Questions
Q1) The demand curve for each seller's product in perfect competition is horizontal at the market price because
A)each seller is too small to affect the market price.
B)the price is set by the government.
C)all the sellers get together and set the price.
D)all the demanders get together and set the price.
Q2) A perfectly competitive firm faces a demand curve that is A)horizontal.
B)vertical.
C)perpendicular to the quantity axis.
D)perfectly inelastic.
Q3) If a firm shuts down in the short run, it avoids its variable cost but not its fixed cost.
A)True
B)False
Q4) In a decreasing-cost industry, the entry of new firms lowers average cost at each level of output.
A)True
B)False
Q5) What is meant by the term "long-run competitive equilibrium"?
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Chapter 13: Monopolistic Competition: the Competitive
Model in a
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272 Verified Questions
272 Flashcards
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Sample Questions
Q1) Refer to Figure 13-8.What is the firm's profit-maximizing price?
A)$12
B)$13
C)$14
D)$16
Q2) Refer to Figure 13-17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?
A)Its average cost of production will fall and its profit will rise.
B)It will be taking advantage of economies of scale and will be able to lower the price of its product.
C)It will move from a zero profit situation to a profit situation.
D)It will move from a zero profit situation to a loss situation.
Q3) Refer to Figure 13-3.What is the marginal revenue of the sixth unit of output?
A)$4
B)$5
C)$9
D)$54
Q4) What are the formulas for total revenue, average revenue, and marginal revenue.
Page 15
Q5) Why are many companies concerned about brand management?
Q6) What is the difference between zero accounting profit and zero economic profit?
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Page 16
Chapter 14: Oligopoly: Firms in Less Competitive Markets
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Sample Questions
Q1) Why does a prisoner's dilemma lead to a noncooperative equilibrium?
A)because each player had agreed before the game started to minimize the harm that he can inflict on the other players
B)because each player is uncertain how other players will play the game
C)because players must choose from a limited number of non-dominant strategies
D)because each rational player has a dominant strategy to play a certain way regardless of what other players do
Q2) In a sequential game, one firm will act first and then other firms will respond.
A)True
B)False
Q3) Refer to Table 14-3.Is there a dominant strategy for Ecuador and, if so, what is it?
A)Yes, it has a dominant strategy depending on what Saudi Arabia does.
B)No, there is no dominant strategy.
C)Yes, the dominant strategy is to produce a low output.
D)Yes, the dominant strategy is to produce a high output.
Q4) What is an oligopoly? Give two examples of oligopolistic industries in the United States.
Q5) Explain why OPEC is caught in a prisoner's dilemma?
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Chapter 15: Monopoly and Antitrust Policy
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Sample Questions
Q1) Market power refers to
A)the ability of consumers to dictate what products should be produced.
B)the ability of a firm to advertise its product and succeed in selling more output.
C)the ability of a firm to sell at a lower price than rival sellers.
D)the ability of a firm to charge a price higher than the marginal cost of production.
Q2) Whenever a firm can charge a price greater than marginal cost,
A)the firm must be a monopolist.
B)there is some loss of economic efficiency.
C)consumers have the ability to choose a close substitute.
D)the firm will earn economic profits.
Q3) Explain why market power leads to a deadweight loss.Is the total deadweight loss from market power in the United States large or small?
Q4) Identify four reasons for high entry barriers.Briefly explain each reason.
Q5) A monopoly is characterized by all of the following except
A)there are only a few sellers, each selling a unique product.
B)entry barriers are high.
C)there are no close substitutes to the firm's product.
D)the firm has market power.
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Chapter 16: Pricing Strategy
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Sample Questions
Q1) Draw a graph that shows producer surplus, consumer surplus, and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve, the marginal revenue curve, the marginal cost curve, and the profit-maximizing quantity on the graph.
Q2) One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that
A)the firm must set different prices for different regions where the product is sold. B)the firm must be willing to offer price discounts for senior citizens and children. C)the firm must be able to divide the market in a way that makes arbitrage impossible. D)the firm must choose a marketing strategy that appeals to different segments of the economy.
Q3) Entrepreneurs who earn arbitrage profits are able to do so by extracting the total consumer surplus from buyers.
A)True B)False
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Chapter 17: The Markets for Labor and Other Factors of Production
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Sample Questions
Q1) Which of the following economists is best known for exploring the application of economic analysis to human resources issues?
A)Edward Lazear
B)Claudia Goldin
C)David Hamermesh
D)Alan Krueger
Q2) Which of the following variables will not cause the market supply curve of labor to shift?
A)increases in population
B)a favorable change in consumer tastes
C)a change in the labor participation rate of women
D)an increase in the number of people between the ages of 16 and 65
Q3) At low wages, the labor supply curve for most people slopes upward because
A)the supply of labor is perfectly inelastic at low wages.
B)as wages increase the opportunity cost of leisure increases.
C)as wages increase income also increases unless hours worked decrease.
D)the demand for labor is perfectly elastic at low wages.
Q4) What is the substitution effect of a wage increase? What is the income effect of a wage increase? Under what conditions will a worker's labor supply curve become downward sloping?
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Chapter 18: Public Choice, Taxes, and the Distribution of Income
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258 Verified Questions
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Sample Questions
Q1) How would the elimination of a sales tax affect the market for a product that had been subject to the tax?
A)The demand for the product would rise and the equilibrium price would fall by the amount of the tax.
B)The equilibrium price for the product would fall by less than the amount of the tax.
C)The reduction in government revenue from the tax would be made up by an increase in property taxes.
D)The supply of the product would become more elastic.
Q2) Rent-seeking behavior, unlike profit-maximizing behavior in competitive markets, wastes society's scarce resources.
A)True
B)False
Q3) A tax bracket is
A)the percent of taxable income paid in taxes at a specific income bracket.
B)the income range within which a particular tax rate applies.
C)the type of tax structure for which a range of taxes applies.
D)the range, from the high to the low tax rate, of a particular type of tax.
Q4) Explain the effect of price elasticities of supply and demand on tax incidence.
Page 21
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