Principles of Microeconomics Review
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Course Introduction
Principles of Microeconomics introduces students to the fundamental concepts and analytical tools used to understand the behavior of individuals and firms in making decisions regarding the allocation of scarce resources. The course covers topics such as supply and demand, elasticity, utility, production and cost, market structures, and the impact of government interventions in markets. Students will learn how market outcomes are determined, explore the effects of market failures, and develop skills to analyze real-world economic issues using microeconomic frameworks.
Recommended Textbook
ECON MICRO 6th Edition by
William A. McEachern
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21 Chapters
4209 Verified Questions
4209 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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203 Flashcards
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Sample Questions
Q1) Refer to the circular-flow model in Exhibit 1.1. If D represents firms and B represents resource markets,then the flow from D to B is _____
A)revenue.
B)expenditures.
C)labor, capital, and natural resources.
D)income and expenditures.
E)wages, interest, rent, and profit.
Answer: E
Q2) Behavioral assumptions _____
A)make economic models more complex than if these assumptions were removed. B)pertain only to consumers.
C)hold all other things constant.
D)are ways to test a hypothesis.
E)describe what motivates decision makers.
Answer: E
Q3) Labor and capital are exchanged in the resource market.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economic Systems
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Sample Questions
Q1) Efficiency involves _____
A)producing output using a large amount of labor.
B)producing output using a large amount of capital.
C)producing at a point inside the production possibilities frontier.
D)producing only one out of many possible commodities.
E)getting the maximum possible output from available resources.
Answer: E
Q2) Barter is _____
A)illegal in the United States.
B)an efficient system of exchange.
C)most useful when there is much specialization and international trade.
D)only possible if money is used as a medium of exchange.
E)the direct exchange of goods without the use of money.
Answer: E
Q3) A production possibilities frontier will shift outward if there is an improvement in technology.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Economic Decision Makers
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Sample Questions
Q1) In recent years,redistribution has been the fastest growing category of federal government outlays.
A)True
B)False
Answer: True
Q2) The term fiscal policy refers to:
A)the amount of physical output produced by firms.
B)the means by which government policy makes firms more productive.
C)a tool by which the government influences credit markets.
D)spending and taxing by governments.
E)a tool of the government that works in the opposite direction of monetary policy.
Answer: D
Q3) A disadvantage of the corporate form of business organization is that corporate income is taxed twice.
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) A price ceiling set above the equilibrium price of a good will result in a shortage. A)True
B)False
Q2) The table given above shows the quantity supplied and the quantity demanded of a good at different prices.If the price of the good described in the table above is $1.60,then an economist would expect the _____
A)price to decrease to $1.40.
B)price to decrease to $1.50.
C)quantity supplied to decrease to 30 units.
D)quantity demanded to increase to 90 units.
E)quantity demanded to increase to 90 units .
Q3) Which of the following can account for a decrease in the demand for peanut butter,a normal good?
A)an increase in the supply of peanut butter
B)an increase in the price of peanut butter
C)a substantial increase in the price of bread
D)a drought in Georgia that destroyed 30 percent of the peanut crop
E)an increase in consumer income
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Chapter 5: Elasticity of Demand and Supply
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Sample Questions
Q1) Refer to Exhibit 5.3,which shows a linear demand curve.Between points B and C,the demand is _____
A)unit elastic.
B)elastic.
C)inelastic.
D)perfectly elastic.
E)perfectly inelastic.
Q2) Refer to Exhibit 5.7,which shows four demand curves.If D(2)is the demand curve after a price increase,which demand curve best illustrates how consumers will respond to the change in price over one year?
A)curve D(1)
B)curve D(2)
C)curve D(4)
D)curve D(3)
E)curve D(1) or curve D(4)
Q3) If demand is elastic,a decrease in price leads to a decrease in total revenue.
A)True
B)False
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Chapter 6: Consumer Choice and Demand
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199 Flashcards
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Sample Questions
Q1) If marginal utility is positive,then total utility is _____
A)constant.
B)negative.
C)increasing.
D)decreasing.
E)zero.
Q2) When would a consumer experience disutility?
A)if total utility is increasing and marginal utility is decreasing
B)if total utility is decreasing and marginal utility is increasing
C)if total utility is increasing and marginal utility is zero
D)if total utility is increasing and marginal utility is greater than zero
E)if marginal utility is negative
Q3) If Joel buys ten fidget spinners,which are worth a total of $30 to him,and he pays $1 per spinner,his consumer surplus is _____
A)$24.00.
B)$15.00.
C)$20.00.
D)$10.00.
E)$30.00.
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Page 8
Chapter 7: Production and Cost in the Firm
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Sample Questions
Q1) Increasing marginal returns are generally the result of _____
A)diseconomies of scale.
B)increasing costs.
C)the specialization and division of labor.
D)labor unions.
E)changes in technology.
Q2) If a firm has explicit costs of $100,000 and implicit costs of $30,000,and generates $150,000 in revenue,then its accounting profit is _____
A)$20,000.
B)$30,000.
C)$50,000.
D)$100,000.
E)$130,000.
Q3) Which of the following would be shown on a firm's accounting statement?
A)revenue, implicit costs, explicit costs, and economic profit
B)revenue, implicit costs, explicit costs, and accounting profit
C)revenue, explicit costs, and economic profit
D)revenue, explicit costs, and accounting profit
E)revenue, implicit costs, and accounting profit
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Page 9
Chapter 8: Perfect Competition
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Sample Questions
Q1) The short-run equilibrium in a perfectly competitive market is determined by the
A)intersection of the market demand and market supply curves.
B)intersection of the market demand and the largest firm's supply curve.
C)intersection of the market demand and the largest firm's marginal cost curve.
D)intersection of the market supply curve and the demand curve of the largest firm in a market.
E)intersection of the market supply curve and the most profitable firm's demand curve.
Q2) Suppose the market for hot pretzels in New York City is perfectly competitive.Which of the following is true of the demand in this market?
A)The demand curve facing each seller is perfectly elastic.
B)The demand curve facing each seller is perfectly inelastic.
C)The market demand curve is perfectly elastic.
D)The market demand curve is perfectly inelastic.
E)The market demand curve is positively sloped.
Q3) A perfectly competitive firm has a horizontal supply curve in the short run.
A)True
B)False
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Chapter 9: Monopoly
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Sample Questions
Q1) Refer to Exhibit 9.4,which shows the total cost and total revenue curves for a monopolist.The total profit earned by the monopolist at the profit-maximizing output is
A)$20.
B)$30.
C)$0.
D)$70.
E)$40.
Q2) A major fruit juice manufacturer fails in its attempt to engage in price discrimination between students and all other consumers of fruit juice.Which of the following explanations is most likely to account for this failure?
A)The students resold the juice to other consumers.
B)The market for fruit juice was monopolistically competitive.
C)The price elasticity of demand for fruit juice was different for each group.
D)The cost of producing the fruit juice was extremely high.
E)The students preferred to purchase juice from other small juice manufacturers.
Q3) A natural monopoly emerges from legal restrictions imposed by a government.
A)True
B)False
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Page 11
Chapter 10: Monopolistic Competition and Oligopoly
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200 Flashcards
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Sample Questions
Q1) Refer to Table 10.1,which shows the output,price,and total cost for a monopolistic competitor.At the profit-maximizing output,the firm _____
A)earns an economic profit of $31.
B)earns an economic profit, but the amount cannot be determined.
C)earns zero economic profit.
D)earns an economic profit of $32.
E)suffers an economic loss.
Q2) Colluding firms,compared with competing firms,usually _____
A)produce more.
B)charge less.
C)block new firms.
D)earn less economic profit.
E)means that consumers pay lower prices.
Q3) A monopolistically competitive firm produces where demand is inelastic.
A)True
B)False
Q4) Price wars occur more often in monopolistic competition than in other market structures.
A)True
B)False
Page 12
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Chapter 11: Resource Markets
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197 Flashcards
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Sample Questions
Q1) Refer to Exhibit 11.6,which shows the demand and supply curves of a resource.The economic rent in equilibrium equals _____
A)$0.
B)$10.
C)$100.
D)$1,000.
E)$1,100.
Q2) Refer to Table 11.10.The firm's demand curve for a resource is the _____
A)average total cost curve.
B)average variable cost curve.
C)marginal revenue product curve.
D)marginal resource cost curve.
E)average fixed cost curve.
Q3) A firm's demand for a resource is a(n)_____
A)final demand.
B)derived demand.
C)secondary demand.
D)induced demand.
E)marginal demand.
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Page 13
Chapter 12: Labor Markets and Labor Unions
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198 Flashcards
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Sample Questions
Q1) Craft unions typically attempt to increase wages by _____
A)setting a wage floor.
B)reducing labor supply.
C)increasing labor demand.
D)reducing initiation fees.
E)expanding new union memberships.
Q2) At a low wage rate,_____
A)there is usually no substitution effect.
B)there is usually no income effect.
C)the substitution effect usually outweighs the income effect.
D)the income effect usually outweighs the substitution effect.
E)the disutility of market work is usually high.
Q3) It is sometimes claimed that deckhands on crab boats in the icy waters off Alaska are paid more than elementary school teachers.If this is true,one reason might be
A)the difference in working conditions.
B)that school teachers are usually women.
C)that the supply of teachers is small.
D)that the demand for teachers is small.
E)that the market does not value teachers.
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Chapter 13: Capital, interest, entrepreneurship, and Corporate Finance
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) As defined by economists,interest is _____
A)only the amount earned by productive capital as a resource.
B)only the amount earned by land as a resource.
C)only the amount earned by lending money.
D)both the amount earned by productive capital and the amount earned by lending money.
E)both the amount earned by land as a resource and the amount earned by lending money.
Q2) The supply of loanable funds curve reflects _____
A)the inverse relationship between the market interest rate and investment, other things constant.
B)the inverse relationship between the market interest rate and the quantity of saving, other things constant.
C)the direct relationship between the market interest rate and the investment, other things constant.
D)the direct relationship between the market interest rate and the quantity of saving, other things constant.
E)the direct relationship between the market interest rate and the quantity of present consumption, other things constant.
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Chapter 14: Transaction Costs, asymmetric Information, and Behavioral Economics
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199 Verified Questions
199 Flashcards
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Sample Questions
Q1) 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.
Q2) Dating websites are popular because they _____
A)increase the marginal benefit of search.
B)reduce the marginal cost of search.
C)increase the marginal cost of search.
D)reduce the optimal amount of search.
E)increase quality dispersion.
Q3) If a firm that experiences economies of scope doubles its production of an item,its costs will less than double.
A)True
B)False
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Chapter 15: Economic Regulation and Antitrust Policy
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199 Flashcards
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Sample Questions
Q1) A camera manufacturer sells its cameras only to retailers who agree to buy the brand of film it sells.This is an example of _____
A)price discrimination.
B)exclusive dealing.
C)a tying contract.
D)an interlocking directorate.
E)a trust.
Q2) A natural monopoly,such as a local telephone company,is characterized by _____
A)a lack of natural competitors.
B)low fixed costs and diseconomies of scale.
C)economies of scale.
D)a lack of government regulation.
E)constant costs of production.
Q3) Price discrimination that substantially lessens competition is prohibited by the Clayton Act.
A)True
B)False
Q4) Antitrust policy has no relationship with socially desirable market performance.
A)True
B)False
Page 17
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Chapter 16: Public Goods and Public Choice
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Sample Questions
Q1) Special-interest groups,such as the pharmaceutical lobby,often get what they demand because _____
A)politicians are rationally ignorant.
B)voters are rationally ignorant.
C)the pharmaceutical lobbying group intends to increase the quality of the service for the public.
D)they are driven by incentives to produce output at the lowest cost per unit.
E)bureaus typically rely on special-interest groups for their revenue.
Q2) Refer to Exhibit 16.1.In Box A,a good that is rival and exclusive is _____
A)private.
B)a natural monopoly.
C)open-access.
D)public.
E)a free-rider.
Q3) Compared to private firms,we should expect public bureaus to _____
A)have smaller budgets.
B)be more cost efficient.
C)be less cost efficient.
D)be more concerned with adopting new technologies.
E)be more in tune with consumer preferences.
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Chapter 17: Externalities and the Environment
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Sample Questions
Q1) Government allocation of pollution rights cannot be efficient if polluters cannot be easily identified and monitored.
A)True
B)False
Q2) The Clean Air Act of 1970 _____
A)set up a depletion tax system.
B)reduced air pollution standards.
C)recognized air as an economic resource.
D)established a system of transferable pollution rights.
E)forbade producers to emit any pollutants into the air.
Q3) To enhance social welfare,the government should encourage the production of _____
A)private goods.
B)goods that produce moral hazard.
C)goods that produce positive externalities.
D)goods that have close substitutes.
E)goods that produce negative externalities.
Q4) The marginal social benefit curve is downward sloping under variable technology. A)True
B)False
Page 19
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Chapter 18: Poverty and Redistribution
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Sample Questions
Q1) Over the last forty years,poverty in the United States-as measured by the number of poor-has increased the most _____
A)among households headed by white males.
B)among women because of a high divorce rate.
C)among households headed by women.
D)among the elderly because of cutbacks in the Social Security program.
E)among men because of a lack of job opportunities for them.
Q2) The U.S.infant mortality rate _____
A)is lower than the mortality rates in other industrialized countries.
B)is higher than the mortality rates in other industrialized countries.
C)is the same as the mortality rates in other industrialized countries.
D)is not related to the poverty rate.
E)is inversely related to the poverty rate.
Q3) The official poverty level in the United States _____
A)remains constant every year.
B)decreases every year, based on the annual average income of households.
C)increases every year, based on the annual average income of households.
D)changes based on family size and inflation.
E)changes based on the unemployment rate and the total income of households.
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Page 20
Chapter 19: International Trade
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Sample Questions
Q1) Countries export products they can produce cheaply in return for products that are unavailable domestically or are cheaper elsewhere.
A)True
B)False
Q2) World trade totaled about ____ in 2016.
A)$21 trillion
B)$15 trillion
C)$10 trillion
D)$11 trillion
E)$2 trillion
Q3) International trade between countries typically produces a winner and a loser.Generally,it is the more economically advanced country that gains at the expense of the less developed nation.
A)True
B)False
Q4) Tariffs and quotas are the only two devices used to restrict foreign trade.
A)True
B)False
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Page 21
Chapter 20: International Finance
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Sample Questions
Q1) Suppose a basket of internationally traded goods that sells for $10,000 in the United States sells for 8,000 in the euro zone.According to the purchasing power parity theory,the equilibrium exchange rate should be equal to _____
A)$2.50 per euro.
B)$1.50 per euro.
C)$1.25 per euro.
D)$1.00 per euro.
E)$.80 per euro.
Q2) The merchandise trade balance measures _____
A)the value of goods exported by different states within the country.
B)the value of all services exported minus the value of all services imported.
C)the value of all services imported minus the value of all services exported.
D)the value of all tangible products exported minus the value of all tangible products imported.
E)the value of all tangible products imported minus the value of all tangible products exported.
Q3) The Bretton Woods agreement established the gold standard.
A)True
B)False
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Page 22
Chapter 21: Economic Development
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Sample Questions
Q1) Which of the following is true about the GNI of the United States?
A)It excludes profit earned by an American factory in Great Britain.
B)It includes profits earned by a Japanese factory in Kentucky.
C)It includes profit earned by an American factory in Great Britain.
D)It stands for General National Income.
E)It is the difference between the value of U.S. exports and imports.
Q2) Which of the following leads to an inefficient use of labor?
A)underemployment
B)a high rate of economic growth
C)overemployment
D)a high rate of growth of income
E)a high rate of inflation
Q3) An aging population poses fiscal problems for any country.
A)True
B)False
Q4) Throughout the world,poverty is found to be greater among men than women.
A)True
B)False
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