Introduction to Microeconomics Exam Bank
Course Introduction
Introduction to Microeconomics explores the fundamental principles that govern individual and firm behavior in various market structures. The course examines concepts such as supply and demand, elasticity, consumer choice, production costs, and profit maximization. Students learn how prices are determined in competitive and non-competitive markets, the role of government intervention, and the allocation of scarce resources. Through real-world examples and economic modeling, the course provides a solid foundation for understanding how microeconomic forces influence everyday decisions and broader economic outcomes.
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ECON MICRO 6th Edition by William A. McEachern
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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Sample Questions
Q1) Economic theory allows economists to predict the behavior of a specific person or firm.
A)True
B)False
Answer: False
Q2) Rational self-interest is equivalent to pure selfishness.
A)True
B)False
Answer: False
Q3) If the marginal cost of adding a new line of products is $10 million,then Amazon should add the product
A)if marginal costs fall.
B)if marginal benefits fall.
C)if marginal benefits are less than $10 million.
D)if marginal benefits are more than $10 million.
E)if Amazon does not operate at a loss.
Answer: D
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Page 3
Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) The division of labor facilitates productivity increases for all of the following reasons,except for one.Which of the following is the exception?
A)It allows people to perform those tasks for which they have the greatest natural ability.
B)Workers get better at tasks the more they repeat them.
C)The more experience workers gain by specializing in a task, the more likely they will enjoy performing that task.
D)Greater experience at a task leads to the introduction of more sophisticated production techniques.
E)It often permits the introduction of labor-saving machinery.
Answer: B
Q2) What is the opportunity cost of an item?
A)the dollar cost of what is purchased.
B)the value of all alternatives not chosen.
C)the value of the best alternative not chosen.
D)less than the dollar cost of what is purchased.
E)more than the dollar cost of what is purchased.
Answer: C
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4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) The main source of revenue for local governments is:
A)property taxes.
B)income and sales taxes.
C)individual income taxes.
D)corporate taxes.
E)foreign taxes.
Answer: A
Q2) Which of the following resources generates the largest share of household income in the United States?
A)Labor
B)Land
C)Physical capital
D)Entrepreneurial ability
E)Dividends
Answer: A
Q3) It is difficult to exclude individuals from the use of public goods and services.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Demand, supply, and Markets
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Sample Questions
Q1) The law of supply indicates that _____
A)when prices rise, the quantity demanded rises.
B)when prices rise, the quantity demanded falls.
C)when prices fall, the quantity supplied rises.
D)when prices fall, the quantity supplied falls.
E)when prices rise, the quantity demanded stays the same.
Q2) Refer to the market supply schedule for pizza in Table 4.2.When the price is $15,what is the quantity supplied in the pizza market?
A)28 million pizzas
B)24 million pizzas
C)20 million pizzas
D)16 million pizzas
E)12 million pizzas
Q3) The introduction of a new cost-effective production technique is likely to _____
A)shift the demand curve leftward.
B)make the demand curve flatter.
C)shift the supply curve leftward.
D)make the supply curve steeper.
E)shift the supply curve rightward.
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Page 6
Chapter 5: Elasticity of Demand and Supply
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Q1) The availability of substitutes makes the demand for a good less elastic.
A)True
B)False
Q2) If the price of Coca-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans,then the demand for Coca-Cola is _____
A)unit elastic.
B)perfectly elastic.
C)perfectly inelastic.
D)elastic.
E)inelastic.
Q3) A good that takes up a very large percentage of a consumer's budget will tend to have _____
A)an elastic demand.
B)a perfectly elastic demand.
C)an inelastic demand.
D)an upward-sloping demand curve.
E)many close substitutes.
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7
Chapter 6: Consumer Choice and Demand
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Sample Questions
Q1) Suppose Shawn dines at a restaurant that serves clams at a fixed price and crab legs at a varied,market-determined price.The marginal utility of an order of crab legs is 100 units,and the marginal utility of an order of clams is 50 units.Shawn orders crab legs in one week,but he orders clams in the next week.This means that in the second week
A)the price of crab legs has increased three times more than that of clams.
B)the price of clams has dropped three times less than that of clams.
C)the price of clams has dropped four times less than that of clams.
D)the price of clams has increased four times more than that of clams.
E)the price of crab legs has increased more than twice that of clams.
Q2) The law of diminishing marginal utility states that _____
A)total utility falls as more of a good is consumed, other things constant.
B)total utility falls as marginal utility falls, other things constant.
C)marginal utility increases as total utility falls, other things constant.
D)marginal utility falls as more of a good is consumed, other things constant.
E)marginal utility falls as less of a good is consumed, other things constant.
Q3) The consumption of goods and services has both a money price and a time price.
A)True
B)False
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Page 8
Chapter 7: Production and Cost in the Firm
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Sample Questions
Q1) Fixed costs are defined as _____
A)the total costs of a firm's production.
B)the additional costs of the last unit produced.
C)costs that increase proportionately as the quantity produced increases.
D)costs that do not vary as quantity produced increases.
E)implicit costs only.
Q2) A firm's long-run average cost curve is also called its _____
A)profit curve.
B)explicit cost curve.
C)opportunity cost curve.
D)production curve.
E)planning curve.
Q3) Total fixed cost divided by the level of output yields the _____
A)average variable cost per unit.
B)average fixed cost per unit.
C)marginal cost per unit.
D)average total cost per unit.
E)marginal productivity per unit of fixed resource.
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Chapter 8: Perfect Competition
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Sample Questions
Q1) Refer to Exhibit 8.7,which shows the demand and the cost curves of a perfectly competitive firm.When the market price is $3.00,_____
A)total profit is zero.
B)total profit is $30.00.
C)total loss is $30.00.
D)total profit is $10.00.
E)total loss is $10.00.
Q2) Refer to Exhibit 8.13,which shows a perfectly competitive market.Firms could not cover average variable cost at _____
A) $6.
B) point m.
C) point e.
D) area A.
E) area B
Q3) If a perfectly competitive firm raises its price,its sales decrease to zero.
A)True
B)False
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Chapter 9: Monopoly
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Q1) Refer to Exhibit 9.7,which shows the cost and revenue curves faced by a profit-maximizing monopolist.If the monopolist engages in perfect price discrimination,its profit-maximizing output will be _____
A)700 units.
B)810 units.
C)884 units.
D)976 units.
E)1,000 units.
Q2) When would the deadweight loss be lower?
A)when economies of scale are substantial enough
B)when the monopolist is less efficient
C)when the monopolist devotes resources to securing and maintaining a monopoly position
D)when the monopolist engages in rent-seeking behavior
E)when the monopolist is largely insulated from the rigors of competition
Q3) A monopolist that earns a profit in the short run will always earn a profit in the long run.
A)True
B)False
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Page 11
Chapter 10: Monopolistic Competition and Oligopoly
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Sample Questions
Q1) What does each firm have to consider in the oligopolistic industry?
A)diminishing marginal returns
B)a rising long-run average cost curve
C)low barriers to entry
D)many competitors.
E)interdependence
Q2) A common feature of monopolistic competition,pure monopoly,and perfect competition is that _____
A)entry is free in each market structure.
B)producers in each market structure earn economic profit in the long run.
C)producers in each market structure sell differentiated products.
D)firms in these market structures act as price takers.
E)the profit-maximizing condition in each market is the same.
Q3) In monopolistic competition,firms earn zero economic profit in the long run.
A)True
B)False
Q4) The incentives for oligopolists to cheat on collusive agreements are strongest during periods of increasing industry sales.
A)True
B)False
Page 12
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Chapter 11: Resource Markets
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Sample Questions
Q1) Refer to Exhibit 11.4,which shows the demand and supply curves of a resource.The economic rent in equilibrium equals _____
A)$6.
B)$120.
C)$1,000.
D)$300.
E)$1,300.
Q2) Refer to Exhibit 11.6,which shows the demand and supply curves of a resource.The equilibrium quantity of the resource exchanged in the market is _____
A)more than 10 units.
B)less than 10 units.
C)10 units.
D)less than 5 units.
E)between 0 and 10 units.
Q3) For a firm in a perfectly competitive product market,the marginal resource cost curve is likely to be horizontal if the resource market is also competitive.
A)True
B)False
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Chapter 12: Labor Markets and Labor Unions
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Sample Questions
Q1) Along a backward-bending labor supply curve,the _____
A)income effect always dominates the substitution effect.
B)substitution effect always dominates the income effect.
C)substitution effect is always equal to the income effect.
D)substitution effect dominates the income effect at high wage rates.
E)substitution effect dominates the income effect at low wage rates.
Q2) The income and substitution effects of a change in the wage rate _____
A)always work in the same direction.
B)always work in opposite directions.
C)work in opposite directions only if the wage decreases.
D)work in the same direction only if the wage increases.
E)work in the same direction only if the wage decreases.
Q3) A college student working in a minimum-wage job has a _____ opportunity cost of _____ than a college dean.
A)lower; market work
B)lower; leisure
C)higher; market work
D)higher; nonmarket work
E)higher; leisure
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Page 14
Chapter 13: Capital, interest, entrepreneurship, and Corporate Finance
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Sample Questions
Q1) Secondhand securities are those securities that _____
A)are available in the stock exchange at very low prices.
B)do not guarantee any dividends to their holders.
C)give low dividends to their shareholders.
D)are issued by new companies without any brand value.
E)have already been issued by a corporation.
Q2) The administration costs of a loan,as a proportion of the total cost of the loan,typically _____
A)decrease as the size of the loan increases, lowering the interest rate.
B)decrease as the size of the loan increases, increasing the interest rate.
C)increase as the size of the loan increases, lowering the interest rate.
D)increase as the size of the loan increases, increasing the interest rate.
E)increase as the size of the loan increases, leaving the interest rate unchanged.
Q3) Securities markets allocate funds more readily to _____
A)successful firms in financial difficulty.
B)firms in financial difficulty.
C)firms in the stock market.
D)firms in the bond market.
E)successful firms than to firms in financial difficulty.
Page 15
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Chapter 14: Transaction Costs, asymmetric Information, and Behavioral Economics
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Sample Questions
Q1) Neuroeconomics assumes that people have unbounded willpower.
A)True
B)False
Q2) The asymmetric information problem _____
A)is only a problem for buyers of a product.
B)is only a problem for sellers of a product.
C)involves known characteristics or known actions.
D)involves hidden characteristics or hidden actions.
E)involves natural selection.
Q3) The term bounded rationality is used to explain _____
A)the output level at which economies of scale are fully exploited.
B)the competition among rival suppliers that ensures a steady supply of a resource.
C)the cost advantage derived from producing two or more goods in one firm rather than outside.
D)the managerial incompetence that reduces the profitability of certain firms.
E)the limit on the amount of information a manager can comprehend about a firm's operation.
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Page 16
Chapter 15: Economic Regulation and Antitrust Policy
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Sample Questions
Q1) The rule of reason _____
A)applies to business practices that are illegal regardless of their economic rationale or their consequences.
B)applies to business practices that are legal regardless of their consequences.
C)is based on the idea that business practices cannot be proven to be illegal, and a consent decree is required to halt the practices.
D)considers why a certain business practice was adopted and what the effects on competition are before determining whether the practice is illegal.
E)focuses on market structure rather than on the behavior of firms in determining whether antitrust violations have occurred.
Q2) Which of the following is a likely result of the deregulation of certain industries like airlines,electricity,telecommunications,and other industries?
A)wage increases
B)deregulation goes further against public interest
C)consolidation of the industry under large firms
D)a lack of innovation in these industries
E)new entry and new ways of doing business in these industries
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Page 17
Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) In the long run,the beneficiaries of farm price supports are _____
A)bureaus.
B)consumer-taxpayers.
C)large farmers.
D)the young owners of specialized resources.
E)the early owners of specialized resources.
Q2) Refer to Exhibit 16.4,which shows the market for a good.Suppose the government introduces a variety of policies that set floor prices for the good at $c.The quantity supplied at the price floor is _____
A)i units.
B)j units.
C)k units.
D)l units.
E)m units.
Q3) Legislation that provides a subsidy to tobacco growers is an example of _____
A)quasi legislation.
B)competing-interest legislation.
C)traditional public-goods legislation.
D)special-interest legislation.
E)populist legislation.
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Chapter 17: Externalities and the Environment
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Q1) Environmental problems result when social costs and benefits are different from private costs and benefits.
A)True
B)False
Q2) The optimal level of air pollution by a firm is _____
A)the level at which the marginal private cost of improving air quality equals zero.
B)the level at which the marginal social cost of improving air quality equals the marginal social benefit.
C)the level at which the average social cost of improving air quality equals the average social benefit.
D)the level at which the total social cost of improving air quality equals the total social benefit.
E)the level at which the marginal social cost of improving air quality is minimized.
Q3) When a system of pollution rights is in effect,polluters have no economic incentive to reduce the amount of pollution they generate.
A)True
B)False
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Chapter 18: Poverty and Redistribution
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Sample Questions
Q1) Food stamps are part of an in-kind transfer program.
A)True
B)False
Q2) When household incomes are ranked from lowest to highest,the middle income is known as the _____
A)median income.
B)mean income.
C)means-tested income.
D)official poverty level.
E)transfer income.
Q3) A preliminary conclusion about welfare reform is that _____
A)work requirements have led to substantial declines in welfare caseloads.
B)work requirements cause welfare caseloads to increase.
C)such reform can only be instituted when the growth rate of an economy is high.
D)such reform can be instituted even when the there is a high level of national debt.
E)welfare rolls decline faster when an economy is in recession because more people need welfare benefits during those times.
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Chapter 19: International Trade
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Q1) Tariffs and quotas _____
A)reduce consumer surplus and increase producer surplus in the importing country.
B)increase consumer surplus and reduce producer surplus in the importing country.
C)reduce both consumer surplus and producer surplus in the exporting country.
D)are imposed when there are differences in the opportunity cost of production across countries.
E)are imposed when production is subject to economies of scale.
Q2) The American Tire Company has been experiencing a steady loss of market over the past 40 years due to imports of lower-priced tires.Which of the following arguments would American Tire most likely present to Congress when it lobbies for trade restrictions?
A)the infant industry argument
B)the declining industry argument
C)the national defense argument
D)the antidumping argument
E)the jobs and income argument
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Chapter 20: International Finance
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Sample Questions
Q1) The International Monetary Fund was founded in _____
A)Paris.
B)Brentwood.
C)Washington.
D)New York.
E)Bretton Woods.
Q2) If Europe and the United States were the only two regions in the world,then the U.S.government would buy euros to improve the U.S.balance of payments.
A)True
B)False
Q3) The demand for U.S.dollars by foreign nations increases as _____
A)more Americans travel abroad.
B)foreigners increase their purchase of American goods.
C)Americans increase their purchase of foreign goods.
D)Americans increase their investments in foreign stocks or bonds.
E)Americans send more gifts abroad.
Q4) The Bretton Woods agreement established the gold standard.
A)True
B)False
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Chapter 21: Economic Development
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Q1) Which of the following is likely to facilitate the adoption of new technology across nations?
A)consumer preferences
B)a common heritage
C)higher birth rates
D)a relatively stable price ratio
E)a high percentage of younger people in the population
Q2) If the country of Zorg has a birth rate of greater than 2.2 births per woman,it is likely that Zorg is an industrial market country.
A)True
B)False
Q3) Which countries have successfully pursued export promotion?
A)Argentina, India, and Peru
B)sub-Saharan African countries
C)Hong Kong, South Korea, Singapore, and Taiwan
D)North Korea
E)all countries globally
Q4) Wages are high in poor countries because businesses are run efficiently.
A)True
B)False
Page 23
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