Microeconomic Theory Review Questions
Course Introduction
Microeconomic Theory explores the foundational principles of economic behavior at the individual and firm level. The course examines how consumers make choices under conditions of scarcity, the decision-making processes of firms regarding production and pricing, and the interplay of supply and demand in various market structures. Key topics include utility maximization, cost minimization, competitive and non-competitive markets, and the welfare implications of market outcomes. Through the rigorous application of mathematical and graphical models, students gain a deeper understanding of how microeconomic concepts inform policy and real-world economic phenomena.
Recommended Textbook Principles of Microeconomics 6th Edition by
Robert H. Frank
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14 Chapters
1931 Verified Questions
1931 Flashcards
Source URL: https://quizplus.com/study-set/2934
Page 2
Chapter 1: Thinking Like an Economist
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) The marginal benefit of an activity is the:
A)same as the total benefit of an activity.
B)total benefit of an activity divided by the level of the activity.
C)extra benefit associated with an extra unit of the activity.
D)total benefit associated with an extra unit of the activity.
Answer: C
Q2) Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decides to stay home and work on the paper. According to the Scarcity Principle, the reason Josh doesn't go to the game is that:
A)Josh prefers schoolwork to football games.
B)writing the paper is easier than going to the game.
C)Josh can't go the game and finish the paper.
D)going to the game won't be fun.
Answer: C
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3
Chapter 2: Comparative Advantage
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157 Verified Questions
157 Flashcards
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Sample Questions
Q1) The United States was unable to maintain its dominance in the production of televisions because:
A)the highly technical skills necessary to produce televisions are greater in other countries.
B)the raw materials necessary to build televisions became scarce in the United States.
C)the product designs evolved too rapidly for engineers in the United States to keep up.
D)automated techniques allowed production to be outsourced to countries with less-skilled workers.
Answer: D
Q2) In general, individuals and nations should specialize in producing those goods for which they have a(n):
A)absolute advantage.
B)comparative advantage.
C)absolutely comparative advantage.
D)absolute advantage and a comparative advantage.
Answer: B
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Chapter 3: Supply and Demand
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Almost every holiday season at least one gift idea achieves fad status. When that happens, prices tend to increase dramatically. Why?
A)Sellers want to take advantage of people who received a year-end bonus.
B)Quantity demanded exceeds quantity supplied.
C)Too much government regulation in the market.
D)The demand curve for fad items is upward-sloping.
Answer: B
Q2) Suppose that the price of doughnuts decreases and that doughnut-holes are a by-product of producing doughnuts. One would expect:
A)the supply of doughnut holes to decrease.
B)the supply of doughnuts to decrease.
C)the supply of doughnut holes to increase.
D)the supply of doughnuts to increase.
Answer: A
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Chapter 4: Elasticity
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Which of the following determines whether a firm will earn higher revenues when it raises its price?
A)The cost of the firm's inputs.
B)Government regulation of the industry.
C)The price elasticity of demand.
D)None of the above, because companies always earn higher revenues when they increase price.
Q2) All else equal, compared to small-budget items such as paper towels, the price elasticity of demand for big-ticket items such as refrigerators is ______.
A)higher
B)lower
C)very low
D)equal
Q3) If the income elasticity for a particular good is negative, then:
A)the good is a normal good.
B)as income increases, consumers will tend to purchase more of the good.
C)as income increases, consumers will tend to purchase less of the good.
D)the good is a luxury good.
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6
Chapter 5: Demand
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's marginal utility from his first hour of skiing was ______ his marginal utility from his tenth hour of skiing.
A)less than B)greater than C)the same as D)more negative
Q2) When the price of a good rises, marginal utility per dollar spent on that good ______, leading consumers to purchase ______ of that good. A)rises; more B)falls; more C)rises; less D)falls; less
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Page 7
Chapter 6: Perfectly Competitive Supply
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152 Verified Questions
152 Flashcards
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Sample Questions
Q1) Which of the following would be considered a factor of production in the provision of bus service?
A)The revenue from the sale of bus tickets.
B)The amount it costs to provide bus service between two locations.
C)Bus drivers.
D)The hourly wage paid to bus drivers.
Q2) Jenny sells lemonade in front of her house in the summer. Several other kids in Jenny's neighborhood also run lemonade stands in the summer. The lemonade market in Jenny's neighborhood is more likely to be perfectly competitive if:
A)all of the kids advertise heavily.
B)each stand tries to get more customers by offering different varieties of lemonade and snacks.
C)each lemonade stand sells the same kind of lemonade.
D)some of the neighborhood parents build elaborate booths for their kids' stands while some kids sell from makeshift tables.
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8
Chapter 7: Efficiency, Exchange, and the Invisible Hand in Action
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) If you were to start your own business, your implicit costs would include the:
A)rent that you have paid in advance for the use of a building.
B)opportunity cost of the time you spend working at the business.
C)profit you earn over and above your normal profit.
D)interest that you pay on your business loans.
Q2) If resources are misallocated in a perfectly competitive market, then in the long run profit opportunities will:
A)bring about a more efficient allocation of resources.
B)bring about a less efficient allocation of resources.
C)not bring about a reallocation of resources unless there is government regulation.
D)not bring about a reallocation of resources unless firms are subsidized.
Q3) Adam Smiths theory of the invisible hand posits the actions of independent, self-interested buyers and sellers will ______ lead to the most efficient allocation of resources.
A)always
B)often
C)rarely
D)never
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Chapter 8: Monopoly, Oligopoly, and Monopolistic Competition
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) Once a firm has determined the quantity of output it wishes to sell, the maximum price it can charge for each unit is determined by:
A)the average cost of making the product.
B)the demand curve facing the firm.
C)the marginal cost of making the product.
D)the firm's marginal revenue curve.
Q2) Economies of scale exist when:
A)firms become larger.
B)input prices are falling.
C)the average cost of production falls as output rises.
D)doubling all the inputs leads to less than double the output.
Q3) Which of the following is NOT an example of a good with network economies?
A)A cell phone
B)Internet service
C)A computer printer
D)Facebook
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Chapter 9: Games and Strategic Behavior
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) Game theory is not useful in understanding perfect competition because in a perfectly competitive market:
A)no single firm can influence the market price, so firms' decisions are not interdependent.
B)each firm only cares about its own profit, so there is no interdependence.
C)there are too many firms to be able to model their behavior accurately using game theory.
D)the payoffs to firms' choices are unknown.
Q2) In the Nash equilibrium of a prisoner's dilemma:
A)there is no cash left on the table.
B)there is unrealized opportunity for both to gain.
C)total economic surplus is maximized.
D)both players have equal payoffs.
Q3) A credible threat is:
A)possible to carry out.
B)legally enforceable.
C)in the threatener's interest to carry out.
D)not in the threatener's interest to carry out.
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11
Chapter 10: Externalities and Property Rights
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) A cost of an activity that falls on people not engaged in the activity is called a(n):
A)external benefit.
B)prisoner's dilemma.
C)negative externality.
D)positive externality.
Q2) Lunch in Jamie's dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. If the cafeteria changed its policy so that students had to pay for each item chosen, students would:
A)make the same selections as before, but eat more of what they select.
B)select only the most expensive items in the buffet.
C)encounter shortages earlier in the day.
D)only select an item if its marginal benefit is greater than or equal to its price.
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Chapter 11: The Economics of Information
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123 Verified Questions
123 Flashcards
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Sample Questions
Q1) Gasoline prices tend to be higher at stations that are just off the freeway than they are at stations in the middle of town. The most likely reason for this is that:
A)freeway exit stations sell a higher quality product.
B)people who buy gas at freeway exit stations tend to have higher search costs.
C)freeway exit stations are more likely to have an attached convenience store.
D)demand for gas at freeway exits is lower than it is in the middle of town.
Q2) Insurance companies practice statistical discrimination because:
A)young males are willing to pay more for insurance than other groups.
B)the demand for insurance is very inelastic.
C)young males are more likely than other groups to generate insurance claims.
D)insurance markets aren't perfectly competitive.
Q3) When buyers and sellers are not equally informed about the characteristics of the goods and services offered for sale, information is said to be:
A)costly-to-fake.
B)asymmetric.
C)credible.
D)symmetric.
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Page 13
Chapter 12: Labor Markets, Poverty, and Income Distribution
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) The marginal product of the 14<sup>th</sup> worker is 8 and the firm sells its output for $4 per unit. If labor is the only variable cost, then the value of the 14<sup>th</sup> worker's marginal product is
A)$2.
B)$4.
C)$12.
D)$32.
Q2) A decrease in demand for a firm's output results in a(n):
A)increase in labor supply.
B)decrease in labor demand.
C)decrease in labor supply.
D)increase in labor demand.
Q3) Those whofavor programs aimed at reducing inequality argue that these programs:
A)provide a financial incentive to work harder.
B)provide a financial incentive to invest in human capital.
C)help reduce poverty.
D)discourage firms from discriminating in their hiring.
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Chapter 13: The Environment, Health, and Safety
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125 Verified Questions
125 Flashcards
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Sample Questions
Q1) Profit-maximizing firms should:
A)only improve workplace safety if the marginal cost of doing so is zero.
B)improve workplace safety if the marginal cost of improved safety is less than the value workers place on improved safety.
C)only improve workplace safety if they are ordered to do so by a regulatory agency.
D)only improve workplace safety if the labor market is perfectly competitive.
Q2) If the marginal cost of pollution abatement differs across firms, then regulations that require all polluters to reduce pollution by a fixed proportion will be:
A)efficient.
B)inefficient
C)ineffective.
D)fair to all polluters.
Q3) According to the text, the allocation of scarce health care resources should be:
A)determined by length of time on a waiting list.
B)based on the willingness to pay of the recipient of the care.
C)based on the degree of suffering of the recipient of the care.
D)determined by weighing marginal costs and marginal benefits.
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Page 15
Chapter 14: Public Goods and Tax Policy
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136 Verified Questions
136 Flashcards
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Sample Questions
Q1) Kris, Taylor and Max are the only three residents in a neighborhood. A public good that would benefit all of them has a one-time installation cost of $900. The value of the public good to each resident is shown in the table below. Any tax plan must be approved by simple majority. \[\begin{array} { | c | c | c | }
\hline \text { Resident } & \text { Reservation Price } & \text { Income } \\
\hline \text { Kris } & \$ 100 & \$ 1,000 \\
\hline \text { Taylor } & \$ 200 & \$ 5,000 \\
\hline \text { Max } & \$ 700 & \$ 6,000 \\
\hline
\end{array}\] Suppose that the government knows each resident's reservation price. To collect no more than $900 in tax revenue, each resident should be charged ______ percent of their ______.
A)100; reservation price
B)70; reservation price
C)20; income
D)90; reservation price
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Page 16