Microeconomics
Exam Answer Key
Course Introduction
Microeconomics explores the behavior of individual consumers, firms, and markets, analyzing how decisions are made regarding the allocation of limited resources. The course covers fundamental concepts such as supply and demand, elasticity, utility maximization, production and costs, market structures, and the role of government in correcting market failures. Through theoretical models and real-world applications, students gain an understanding of how prices are determined, how resources are distributed, and how economic agents respond to incentives in various market environments.
Recommended Textbook
Microeconomics 3rd Australian Edition by Glenn Hubbard
Available Study Resources on Quizplus
16 Chapters
3350 Verified Questions
3350 Flashcards
Source URL: https://quizplus.com/study-set/3651
Page 2
Chapter 1: Economics: Foundations and Models
Available Study Resources on Quizplus for this Chatper
160 Verified Questions
160 Flashcards
Source URL: https://quizplus.com/quiz/72634
Sample Questions
Q1) The additional cost to a producer of hiring an additional unit of labour is called the marginal cost.
A)True
B)False
Answer: True
Q2) The three fundamental questions that any economy must address are
A)What will be the prices of goods and services;how will these goods and services be produced;and who will receive them?
B)What goods and services will be produced;how will these goods and services be produced;and who receives them?
C)Who gets jobs;what wages do workers earn;and who owns what property?
D)How much will be saved;what will be produced;and how can these goods and services be fairly distributed?
Answer: B
Q3) Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Choices and Trade-Offs in the Market
Available Study Resources on Quizplus for this Chatper
192 Verified Questions
192 Flashcards
Source URL: https://quizplus.com/quiz/72635
Sample Questions
Q1) Refer to Figure 2-4.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
Q2) Refer to Table 2-5.Which of the following statements is true?
A)Fred has an absolute advantage in making both products.
B)Barney has an absolute advantage in making both products.
C)Barney has an absolute advantage in making pogo sticks and Fred in making unicycles.
D)Barney has an absolute advantage in making unicycles and Fred in making pogo sticks.
Answer: B
Q3) The payment received by suppliers of entrepreneurial skills is called interest. A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Where Prices Come From: the Interaction of
Demand and Supply
Available Study Resources on Quizplus for this Chatper
202 Verified Questions
202 Flashcards
Source URL: https://quizplus.com/quiz/72636
Sample Questions
Q1) If,in response to an increase in the price of chocolate,the quantity of chocolate demanded decreases,economists would describe this as
A)a decrease in demand.
B)a decrease in quantity demanded.
C)a change in consumer income.
D)a decrease in consumers' taste for chocolate.
Answer: B
Q2) Vineyards can grow either red wine grapes or white wine grapes on their land.Which of the following would cause the supply of red wine grapes to decrease?
A)an increase in the price of white wine grapes
B)a decrease in the price of white wine grapes
C)an increase in the demand for red wine grapes
D)an increase in the price of red wine
Answer: A
Q3) An increase in the quantity of a product supplied is caused by an increase in the price of the product.
A)True
B)False
Answer: True
5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Elasticity: the Responsiveness of Demand and Supply
Available Study Resources on Quizplus for this Chatper
226 Verified Questions
226 Flashcards
Source URL: https://quizplus.com/quiz/72637
Sample Questions
Q1) Since 1950 there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?
A)The absolute value of the price elasticity of demand for wheat is less than 1,and the income elasticity of demand for wheat is greater than 1.
B)The absolute value of the price elasticity of demand for wheat is greater than 1,and wheat is a close substitute for other food products.
C)The absolute value of the price elasticity of demand for wheat is less than 1,and the income elasticity of demand for wheat is low.
D)The income elasticity of demand for wheat is high,and wheat is an inferior good.
Q2) Refer to Figure 4-3.Using the midpoint formula,calculate the absolute value of the price elasticity of demand between e and f.
A)0.32
B)0.4
C)2.5
D)3.125
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Economic Efficiency, Government Price Setting and Taxes
Available Study Resources on Quizplus for this Chatper
187 Verified Questions
187 Flashcards
Source URL: https://quizplus.com/quiz/72638
Sample Questions
Q1) Refer to Figure 5-3.What is the value of the deadweight loss at the equilibrium price of $15?
A)$0
B)$40
C)$60
D)$100
Q2) The following equations represent the demand and supply for bottles of nail polish.
Q<sub>D</sub> = 25 - P
Q<sub>S</sub> = -15 + 3P
What is the equilibrium price (P)and quantity (Q - in thousands)of bottles of nail polish?
A)P = $5;Q = 20 thousand
B)P = $15;Q = 30 thousand
C)P = $20;Q = 5 thousand
D)P = $10;Q = 15 thousand
Q3) The minimum wage is an example of a price ceiling.
A)True
B)False
Q4) What area on a supply and demand graph represents consumer surplus?
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Consumer Choice and Behavioural Economics
Available Study Resources on Quizplus for this Chatper
254 Verified Questions
254 Flashcards
Source URL: https://quizplus.com/quiz/72639
Sample Questions
Q1) After getting an A on your economics exam,you decide to go to your favourite Mexican restaurant to celebrate.You are having trouble deciding whether to order the chipotle chicken chimichanga or the cilantro seafood enchiladas.Use the rule of equal marginal utility per dollar to determine which one to purchase: (a)the chimichanga for $8 which gives you 120 units of utility,or (b)the enchiladas for $15 which gives you 195 units of utility?
Q2) Which of the following correctly describes the result of a price increase for an inferior good?
A)Both the substitution effect and the income effect cause the consumer to buy less of the good.
B)The substitution effect causes the consumer to buy less of the good and the income effect causes the consumer to buy more of the good.
C)The substitution effect causes the demand for the good to decrease;the income effect causes the demand for the good to increase.
D)The substitution effect causes the demand for the good to increase;the income effect causes the demand for the good to decrease.
Q3) Explain the endowment effect.
Q4) What is an indifference curve? Why can indifference curves never cross?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Technology, Production and Costs
Available Study Resources on Quizplus for this Chatper
300 Verified Questions
300 Flashcards
Source URL: https://quizplus.com/quiz/72640
Sample Questions
Q1) Refer to Table 7-8.Elegant Settings experiences
A)economies of scale up to an output level of 400.
B)diminishing returns up to an output level of 400.
C)increasing returns beyond an output level of 400.
D)economies of scale at an output of 300 or less and diseconomies of scale at an output level above 400.
Q2) If four workers can produce 18 chairs a day and five can produce 20 chairs a day,the marginal product of the fifth worker is
A)2 chairs.
B)3 chairs.
C)4 chairs.
D)38 chairs.
Q3) The shape of the average total cost curve is determined by the shape of A)the marginal cost curve.
B)the average fixed cost curve.
C)the average product curve.
D)the firm's production function.
Q4) As output increases,average fixed cost gets smaller and smaller.
A)True B)False
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Firms in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
270 Verified Questions
270 Flashcards
Source URL: https://quizplus.com/quiz/72641
Sample Questions
Q1) The demand curve for an individual seller's product in perfect competition is
A)the same as market demand.
B)downward sloping.
C)vertical.
D)horizontal.
Q2) For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.
A)True
B)False
Q3) Marginal revenue is
A)total revenue divided by the total quantity of output.
B)the change in profit divided by the change in the quantity of output.
C)the change in total revenue divided by the change in total cost.
D)the change in total revenue divided by the change in the quantity of output.
Q4) In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?
Q5) Under what conditions should a competitive firm shut down in the short run?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Monopoly Markets
Available Study Resources on Quizplus for this Chatper
281 Verified Questions
281 Flashcards
Source URL: https://quizplus.com/quiz/72642
Sample Questions
Q1) Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1200.Assume that Iris and Daphne do not know each other.If the price is $500 per copy,
A)only Iris will purchase Joss's services,and Joss will undertake the job for her.
B)only Daphne will purchase Joss's services,and Joss will undertake the job for her.
C)both Iris and Daphne will purchase Joss's services,and Joss will undertake the job. D)both Iris and Daphne will want to purchase Joss's services,but Joss will not be willing to undertake the job.
Q2) Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?
Q3) What is perfect price discrimination and why do economists believe that no firm is able to practice perfect price discrimination?
Q4) Identify four reasons for high entry barriers.Briefly explain each reason.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Monopolistic Competition
Available Study Resources on Quizplus for this Chatper
253 Verified Questions
253 Flashcards
Source URL: https://quizplus.com/quiz/72643
Sample Questions
Q1) A monopolistically competitive firm chooses
A)both the quantity of output to produce and the price at which it will sell its output.
B)the price of the product it sells,but market forces determine the quantity it will be able to sell.
C)the quantity of output to produce,but the price of the product it sells is determined collectively by all firms in the industry.
D)the price of the product it sells,but the quantity of output to produce is agreed upon by all firms in the industry.
Q2) Refer to Figure 10-8.What is the firm's profit-maximising price?
A)$12
B)$13
C)$14
D)$16
Q3) Refer to Table 10-2.What is Eco Energy's profit?
A)$125
B)$140
C)$145
D)$150
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Oligopoly: Firms in Less Competitive Markets
Available Study Resources on Quizplus for this Chatper
186 Verified Questions
186 Flashcards
Source URL: https://quizplus.com/quiz/72644
Sample Questions
Q1) A patent is a government-imposed entry barrier because
A)it allows a firm to achieve economies of scale.
B)it is a key input owned by the firm that is granted the patent.
C)it limits the quantity of a good that can be imported into a country.
D)it gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented.
Q2) Which of the following is not a reason why government officials are willing to impose entry barriers?
A)to raise revenue
B)to encourage innovation which may improve the standard of living in the long run
C)to increase economic efficiency
D)to promote an equitable distribution of income
Q3) Marginal revenue for an oligopolist is
A)identical to the demand for the firm's product.
B)difficult to determine because the firm's demand curve is typically unknown.
C)downward sloping beneath the firm's demand curve.
D)horizontal on a price-quantity diagram.
Q4) Most economists are concerned about entry barriers.Why is this so important to them?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Markets for Labour and Other Factors of Production
Available Study Resources on Quizplus for this Chatper
253 Verified Questions
253 Flashcards
Source URL: https://quizplus.com/quiz/72645
Sample Questions
Q1) If the demand for labour is unchanged,population growth will increase the supply of labour and increase the equilibrium wage.
A)True
B)False
Q2) Refer to Table 12-2.The firm represented in the table
A)has market power in the factor market.
B)has market power in the output market.
C)has market power in both the factor and product market.
D)has no market power in the factor or product market.
Q3) What is the difference between 'straight-time pay,' 'commission pay,' and 'piece-rate pay'?
Q4) Some superstar athletes in the sports industry earn very high levels of income relative to other occupations,and over time the wage differential has been increasing.What could have caused this?
A)The supply of star athletes has decreased.
B)The supply of star athletes has increased due to university athletic programs.
C)Technological advances such as cable television has increased the demand for sports entertainment.
D)The market power of athletes' unions has increased.
Page 14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: International Trade
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/72646
Sample Questions
Q1) Refer to Table 13-6.Prior to trade,what was the opportunity cost to produce 1 hat in Belize?
A)1/6 of a clock
B)2/3 of a clock
C)1.5 clocks
D)6 clocks
Q2) Once a country has lost its comparative advantage in producing a good,its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.
A)higher;less efficient
B)higher;more efficient
C)lower;less efficient
D)lower;more efficient
Q3) Which of the following is not an example of a trade restriction?
A)tariffs
B)quotas and voluntary export restraints
C)legislation requiring that cars sold in a country have a 50 per cent domestic content
D)consumer preferences for goods produced domestically
Q4) Why do domestic firms offshore production processes?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Government Intervention in the Market
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/72647
Sample Questions
Q1) Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?
A)Access to the commons can be restricted through community norms and laws.
B)Offer subsidies to consumers.
C)Force people to move away from the commons.
D)Persuade people to use less of the scarce resource through an advertising campaign.
Q2) Why might a young,healthy person choose not to buy health insurance?
Q3) The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information.
A)True
B)False
Q4) Moral hazard refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.
A)True
B)False
Q5) Why are many companies concerned about brand management?
Q6) What is the principle-agent problem?
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Externalities, Environmental Policy and Public Goods
Available Study Resources on Quizplus for this Chatper
212 Verified Questions
212 Flashcards
Source URL: https://quizplus.com/quiz/72648
Sample Questions
Q1) A public good that is a good that is both rival and excludable.
A)True
B)False
Q2) The Coase theorem states that
A)government intervention is always needed if externalities are present.
B)assigning property rights is the only thing the government should do in a market economy.
C)if transactions costs are low,private bargaining will result in an efficient solution to the problem of externalities.
D)a free market equilibrium is the best solution to address externalities.
Q3) The cost borne by a producer in the production of a good or service is called A)private cost.
B)public cost.
C)social cost.
D)internal cost.
Q4) When a tax on output is imposed to internalise the external costs of pollution,the supply curve shifts down by the amount of the tax.
A)True
B)False
17
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: The Distribution of Income and Social Policy
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/72649
Sample Questions
Q1) The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called
A)the ability-to-pay principle.
B)the horizontal-equity principle.
C)the vertical-equity principle.
D)the benefits-received principle.
Q2) Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,the government's revenue from the tax
A)is larger if the supply curve is S<sub>0</sub>.
B)is larger if the supply curve is S<sub>1</sub>.
C)is identical under either supply curve.
D)is not maximised.
Q3) For a given supply curve,the deadweight loss from the imposition of a tax is smaller if demand is more elastic.
A)True
B)False
Q4) Income inequality increases as the Gini coefficient approaches 1.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18