Microeconomic Analysis
Exam Answer Key
Course Introduction
Microeconomic Analysis delves into the foundational principles that govern individual and firm decision-making within various market structures. The course examines how consumers and producers allocate scarce resources, the formation of prices through supply and demand interactions, and the outcomes of different competitive environments, such as perfect competition, monopoly, and oligopoly. Emphasis is placed on the evaluation of market efficiency, the impact of government intervention, and the rationale behind public policies. Analytical tools, including mathematical models and graphical analysis, are used to rigorously assess real-world microeconomic issues and predict responses to changes in market conditions.
Recommended Textbook Principles of Microeconomics 1st Edition by Dirk Mateer
Available Study Resources on Quizplus
20 Chapters
2784 Verified Questions
2784 Flashcards
Source URL: https://quizplus.com/study-set/1955 Page 2
Chapter 1: The Five Foundations of Economics
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/38929
Sample Questions
Q1) Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer.With what population would such a system be successful?
A) a population that is willing to take risks and believes that they will not be caught if they don't pay their fare
B) a population that places a high opportunity cost on taking time to purchase a ticket
C) a population that is willing to take risks, believes that they will not be caught if they don't pay their fare, and treats fines for not paying a fare as a nuisance
D) a population that is unwilling to take risks and believes there is a high chance that they will be caught if they don't pay their fare
E) a population that is unwilling to take risks, believes there is a high chance that they will not be caught if they don't pay their fare, and places a low value on doing the right thing
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Model Building and Gains From Trade
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/38930
Sample Questions
Q1) Which of the following is a normative statement?
A) The sky is blue.
B) The sky is green with pink polka dots.
C) Points on the production possibilities frontier (PPF) are efficient.
D) Points outside the PPF are unattainable with current resources.
E) We should strive to push the PPF outward.
Answer: E
Q2) When one producer can create more of a good than another producer using the same quantity of resources,the first producer has:
A) a zero-sum game.
B) gains from trade.
C) an absolute advantage.
D) a comparative advantage.
E) increasing relative costs.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: The Market at Work: Supply and Demand
Available Study Resources on Quizplus for this Chatper
142 Verified Questions
142 Flashcards
Source URL: https://quizplus.com/quiz/38931
Sample Questions
Q1) When supply shifts right and demand shifts left,the:
A) equilibrium price always rises.
B) equilibrium price always falls.
C) equilibrium quantity always falls.
D) equilibrium quantity always rises.
E) equilibrium price is indeterminate.
Answer: B
Q2) In 1993,the government increased the tax on gasoline producers from 14.1 cents per gallon to 18.4 cents per gallon.Our model of supply and demand predicts that:
A) the demand for gasoline decreased.
B) the supply for gasoline increased.
C) the demand for gasoline increased.
D) the supply for gasoline decreased.
E) both the supply and demand for gasoline decreased.
Answer: D
Q3) Using a supply and demand model,show what happens to the equilibrium price and equilibrium quantity in the market for bagels if,holding all else constant,the price of cream cheese decreases.
Answer: 11ea592e_1c2a_679c_af5c_77f13788020f_TB4869_00
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Price Controls
Available Study Resources on Quizplus for this Chatper
135 Verified Questions
135 Flashcards
Source URL: https://quizplus.com/quiz/38932
Sample Questions
Q1) One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments.What will happen if I get elected and am able to pass such a law?
A) The price ceiling will increase the number of apartments available for rent.
B) The price ceiling will cause the demand curve to shift.
C) The price ceiling will cause the supply curve to shift.
D) The price ceiling will decrease the number of students who want to rent an apartment.
E) The price ceiling will cause students to sleep in their cars or to move in with their friends because they won't be able to find a place to live.
Q2) What would be the equilibrium quantity for used cars?
A) 100
B) 154,100
C) 21,474
D) 1,541
E) 153,900
Q3) What is a black market? Under what conditions does such a market emerge? How do the prices charged on the black market compare to the conditions that exist in the legal market?
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: The Efficiency of Markets and the Costs of Taxation
Available Study Resources on Quizplus for this Chatper
152 Verified Questions
152 Flashcards
Source URL: https://quizplus.com/quiz/38933
Sample Questions
Q1) What areas represent the deadweight loss created as a result of the tax?
A) A + B + C + E + F + G
B) A + C
C) A + B + C + E
D) F + G
E) B + C + F + G
Q2) All else being held constant,an increase in the price of a good would necessarily:
A) increase social welfare.
B) decrease producer surplus.
C) decrease consumer surplus.
D) increase consumer surplus.
E) increase the supply of the good.
Q3) Goods that are necessities are very likely to have:
A) highly elastic demand.
B) highly elastic supply.
C) highly inelastic demand.
D) very low demand.
E) very low supply.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Introduction to Macroeconomics and Gross
Domestic Product
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/38934
Sample Questions
Q1) What was the GDP deflator in 2013?
A) 116.67
B) 108.57
C) 100
D) 119.44
E) 102.38
Q2) An index of the average prices of all goods and services throughout the economy is called:
A) the inflation rate.
B) the GDP deflator.
C) the interest rate.
D) the consumer price index.
E) nominal GDP.
Q3) Between quarter 2 and quarter 3,real GDP grew by what percentage?
A) 4%
B) 3%
C) 1%
D) 2%
E) -2%
Q4) Explain why intermediate goods and used goods do not count in GDP.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Unemployment
Available Study Resources on Quizplus for this Chatper
146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/38935
Sample Questions
Q1) Give two examples of government regulations regarding hiring and firing that can contribute to frictional unemployment.
Q2) The definition of long-term unemployment is unemployment that lasts:
A) longer than 28 weeks.
B) longer than 4 weeks.
C) longer than 10 weeks.
D) longer than 14 weeks.
E) longer than 8 weeks.
Q3) If a jobless person has not sought a job in ____________ weeks,that person is not counted in the unemployment statistics.
A) 6
B) 4
C) 5
D) 1
E) 52
Q4) How do the unemployment rates differ between adults and teenagers in the United States,holding all else constant? What are some reasons for this difference?
Q5) Explain the relationship between the unemployment rate and the business cycle.
Q6) List and define the three different types of unemployment.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: The Price Level and Inflation
Available Study Resources on Quizplus for this Chatper
141 Verified Questions
141 Flashcards
Source URL: https://quizplus.com/quiz/38936
Sample Questions
Q1) If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount,then:
A) the CPI will reflect upward bias.
B) the CPI will reflect downward bias.
C) consumers will experience money illusion.
D) consumers will experience a price confusion problem.
E) deflation will occur because consumers no longer buy cheeseburgers.
Q2) Suppose that the consumer price index of a country was 160 at Year X and 164 at the end of Year Y.What was the country's inflation rate during Year Y?
A) 5%
B) 2.5%
C) 64%
D) 164%
E) 32%
Q3) Explain the notion of money illusion in specific detail.
Q4) What is the underlying concept behind future price level uncertainty?
Q5) What is the underlying concept behind the price confusion problem?
Q6) Describe the methodology of finding the consumer price index (CPI).
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Savings, interest Rates, and the Market for Loanable Funds
Available Study Resources on Quizplus for this Chatper
139 Verified Questions
139 Flashcards
Source URL: https://quizplus.com/quiz/38937
Sample Questions
Q1) If the demographics of a nation change and the average age of the nation is approaching middle age,we would expect:
A) savings to increase.
B) savings to decrease.
C) borrowing to decline.
D) consumption variation to increase.
E) savings as a percentage of income to fall.
Q2) Borrowers in the loanable funds market consist of:
A) governments and firms.
B) banks, foreign governments, and bonds.
C) mutual fund firms, stock exchanges, and banks.
D) households and foreign entities.
E) arbitrage companies, banks, and firms.
Q3) The gap between the real and nominal interest rate represents:
A) the inflationary premium.
B) the time preference
C) the difference from what the lender receives and the borrower pays.
D) consumption smoothing.
E) a surplus of loanable funds.
11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Financial Markets and Securities
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/38938
Sample Questions
Q1) U.S.Treasury securities are generally considered:
A) riskier than any other bond.
B) of average risk in relation to other bonds.
C) a riskier investment than a stock.
D) to have a high default risk.
E) less risky than any other bond.
Q2) When borrowers go directly to savers for funds,it is called:
A) indirect finance.
B) direct finance.
C) security finance.
D) bond finance.
E) banking finance.
Q3) The dollar price of the bond mentioned in the scenario is equal to:
A) $9,000.
B) $1,000.
C) $4,000.
D) $5,000.
E) $20,000.
Q4) Give one argument for and one argument against the Troubled Asset Relief Program (TARP).
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Economic Growth and the Wealth of Nations
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/38939
Sample Questions
Q1) Which of the following factors is positively correlated with economic growth?
A) collectively owned resources
B) high barriers to international trade
C) restrictions on immigration
D) political stability and the rule of law
E) high rates of inflation
Q2) In 2011,per capita real gross domestic product (GDP) in Mexico was roughly $10,100.If Mexico experienced economic growth of 4.8% in 2012,per capita real GDP would increase to:
A) $10,585.
B) $10,148.
C) $21,042.
D) $485.
E) $15,353.
Q3) Resources are:
A) the output that firms produce.
B) inputs used to produce goods and services.
C) the technology that firms use to make things.
D) the institutions that encourage efficiency.
E) the cost of producing goods and services.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Growth Theory
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/38940
Sample Questions
Q1) A type of policy that would be advocated by modern growth theory would be to:
A) build new power plants.
B) offer financial aid.
C) make available short-term loans to small businesses.
D) reduce trade restrictions.
E) increase tax rates to raise revenue.
Q2) Suppose a major hurricane hits the eastern coast of Florida and only destroys significant amounts of physical capital.All else the same,in the short run,real gross domestic product (GDP) will _________,and in the long run,real GDP will _________.
A) decline; be permanently lower
B) decline; return to the steady state level
C) be unchanged; decline
D) increase; decrease
E) decline; end up higher than the original level
Q3) What policy prescriptions follow from the Solow growth model?
Q4) Why does the Solow growth model predict that per capita gross domestic product (GDP) levels across nations will equalize as nations approach the steady state?
Q5) Explain the difference between investment and net investment.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: The Aggregate Demandaggregate Supply
Model
Available Study Resources on Quizplus for this Chatper
149 Verified Questions
149 Flashcards
Source URL: https://quizplus.com/quiz/38941
Sample Questions
Q1) A rise in the price level that leads to a change in the interest rate,and therefore to a change in the quantity of aggregate demand,will cause:
A) an upward movement along the aggregate demand curve.
B) a downward movement along the aggregate demand curve.
C) a rightward shift of the aggregate demand curve.
D) a leftward shift of the aggregate demand curve.
E) no change in the quantity of aggregate demand.
Q2) Based on the figure,if the economy starts at point A and ends up at point E,then in the short run,there was:
A) a decrease in aggregate demand.
B) an increase in aggregate demand.
C) a decrease in short-run aggregate supply.
D) an increase in short-run aggregate supply.
E) an increase in long-run aggregate supply.
Q3) Starting from long-run equilibrium,draw an aggregate demand-aggregate supply graph to illustrate the difference between a long-run and a short-run equilibrium due to an increase in aggregate demand.Once the economy is in the short-run equilibrium,explain-but it's not necessary to illustrate-how long-run equilibrium will be restored.
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: The Great Recession, the Great Depression, and Great Macroeconomic Debates
Available Study Resources on Quizplus for this Chatper
142 Verified Questions
142 Flashcards
Source URL: https://quizplus.com/quiz/38942
Sample Questions
Q1) During the Great Depression,the U.S.aggregate demand curve shifted to the left,in part,because:
A) a large number of U.S.banks failed.
B) there was an increase in the U.S.population.
C) the U.S.government decreased taxes.
D) there were advances in technology in manufacturing.
E) there was an increase in stock prices.
Q2) During the Great Depression,a major financial crisis followed the collapse of the stock market,which led to:
A) a decrease in tax rates and increase in the money supply.
B) an increase in oil and gas prices.
C) the failure of many banks.
D) an increase in consumer sentiment and spending.
E) a decrease in barriers to international trade.
Q3) Keynesian economists believe that government intervention in the economy is sometimes necessary to reach full employment.Explain why this is so.
Q4) Assume that you are a classical economist.Someone asks you what the government should do when the economy falls into a recession.What is your response?
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Federal Budgets: the Tools of Fiscal Policy
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/38943
Sample Questions
Q1) Excise taxes are levied on:
A) property that is gifted to others.
B) imports.
C) individual income.
D) corporate income.
E) specific goods or commodities.
Q2) Using the table,what is the total payroll tax bill (assume zero state and local income taxes) for someone who makes $67,000 per year?
A) $17,905.25
B) $23,030.75
C) $13,751.25
D) $16,933.75
E) $5,125.50
Q3) _____________ would be considered a mandatory outlay in your monthly budget.
A) A student loan payment
B) A donation to your alma mater
C) A grocery bill
D) Your electric bill
E) Gasoline money (for travel to and from work)
Q4) Why may a budget deficit be considered undesirable?
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Fiscal Policy
Available Study Resources on Quizplus for this Chatper
148 Verified Questions
148 Flashcards
Source URL: https://quizplus.com/quiz/38944
Sample Questions
Q1) A government might want to reduce aggregate demand if it believes that:
A) the economy is in long-run equilibrium.
B) the economy is above the natural rate of unemployment.
C) the economy is producing below full-employment output.
D) the economy is expanding past its long-run capabilities.
E) the economy is in a recession.
Q2) If the marginal propensity to consume (MPC) equals 0.75 and the government increases spending by $200 billion,what is the total impact on spending?
Q3) Fiscal policy includes:
A) only increases and decreases to taxes.
B) only increases and decreases to government spending.
C) increases and decreases to both taxes and government spending.
D) only decreases in taxes and increases in government spending.
E) only increases in taxes and decreases in government spending.
Q4) List and summarize the three shortcomings of fiscal policy.
Q5) What are the two ways to conduct typical fiscal policy,and how do these affect the components of aggregate demand?
Q6) Give two examples of automatic stabilizers,and explain why they are an important component of fiscal policy.
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Money and the Federal Reserve
Available Study Resources on Quizplus for this Chatper
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/38945
Sample Questions
Q1) Using the table,what is the value of M2 that is not part of M1?
A) $13,500,000
B) $17,500,000
C) $47,500,000
D) $57,500,000
E) $64,500,000
Q2) In a fiat money economy,M1 includes currency as well as:
A) certificates of deposit.
B) money market mutual funds.
C) checkable deposits.
D) savings deposits.
E) gold holdings.
Q3) Which of the following is not a component of M1?
A) coins
B) traveler's checks
C) checking accounts
D) savings accounts
E) paper currency
Q4) Why are credit cards excluded from the equation for money supply?
Q5) Why do banks hold some deposits,but not 100% of deposits,in reserve?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Monetary Policy
Available Study Resources on Quizplus for this Chatper
150 Verified Questions
150 Flashcards
Source URL: https://quizplus.com/quiz/38946
Sample Questions
Q1) Injecting new money into the economy eventually causes:
A) a recession.
B) deflation.
C) stagflation.
D) unemployment.
E) inflation.
Q2) By shifting aggregate demand,monetary policy can affect __________ and
A) real gross domestic product (GDP); unemployment
B) real GDP; interest rates
C) interest rates; unemployment
D) money supply; real GDP
E) money supply; unemployment
Q3) Printing more paper money doesn't affect the economy's long-run productivity or its ability to produce; these outcomes are determined by:
A) resources only.
B) technology only.
C) institutions only.
D) resources, technology, and institutions.
E) resources and technology only.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: International Trade
Available Study Resources on Quizplus for this Chatper
142 Verified Questions
142 Flashcards
Source URL: https://quizplus.com/quiz/38947
Sample
Questions
Q1) Spencer and Trevor produce cars and trucks.Spencer can produce 10 cars per hour and 5 trucks per hour.Trevor can produce 12 cars per hour and 4 trucks per hour.Who has the absolute advantage and comparative advantage in the production of cars and trucks?
Q2) Jim's opportunity cost of producing one pound of cheese is ____________ house(s).
A) 1/500
B) 1/250
C) 1/10
D) 250
E) 500
Q3) One argument for trade restriction focuses on new industries.It can be summarized in the following manner:
A) trade barriers must be used to protect all domestic workers.
B) tariffs imposed to aid new industries should never be removed.
C) new industries are usually capable of competing with established rivals.
D) new industries need to be shielded in their early stages.
E) trade barriers can be used to enhance national security.
Q4) List three trade-restrictive policies.
Q5) Would consumers benefit more from a tariff or a quota on imports?
Page 21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: International Finance
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/38948
Sample
Questions
Q1) In the short run,____________ would increase domestic aggregate demand in the context of the aggregate supply-aggregate demand model.
A) an increase in the value of the domestic currency against all foreign currencies
B) a depreciation of the domestic currency against all foreign currencies
C) an appreciation of the domestic currency against all foreign currencies
D) a depreciation of all foreign currencies against the domestic currency
E) either an increase or decrease in domestic government spending
Q2) Does the theory of purchasing power parity hold true in the real world? Why or why not?
Q3) If the U.S.dollar ____________,it becomes _____________ valuable in world markets.
A) appreciates; less
B) depreciates; less
C) depreciates; more
D) is indexed; less
E) is indexed; more
Q4) Why might a large capital account surplus be considered bad for an economy?
Q5) Why should a large trade deficit not necessarily be a cause for concern for an economy?
To view all questions and flashcards with answers, click on the resource link above. Page 22