Principles of Microeconomics Solved
Exam Questions
Course Introduction
Principles of Microeconomics introduces students to the fundamental concepts and analytical tools used to understand how individuals, firms, and governments make decisions regarding the allocation of limited resources. The course covers essential topics such as supply and demand, market equilibrium, elasticity, consumer behavior, production and costs, market structures (including perfect competition, monopoly, and oligopoly), and the role of government in addressing market failures. Through real-world examples and problem-solving exercises, students develop an understanding of how microeconomic principles shape economic outcomes and inform policy decisions.
Recommended Textbook Microeconomics 4th Edition by David Besanko
Available Study Resources on Quizplus
17 Chapters
1037 Verified Questions
1037 Flashcards
Source URL: https://quizplus.com/study-set/2902
Page 2
Chapter 1: Analyzing Economic Problems
Available Study Resources on Quizplus for this Chatper
48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/57803
Sample Questions
Q1) Which of the following represents an example of normative analysis?
A) How will the equilibrium price of coffee be affected by drought?
B) How will a government subsidy affect the quantity demanded of public housing?
C) What is the best method for allocating tax revenues?
D) How will a tax cut affect a typical consumer's disposable income?
Answer: C
Q2) The definition of an exogenous variable is
A) a variable whose value is determined within the model under study.
B) a variable whose value is determined outside the model under study.
C) a variable whose value is determined through constrained optimization.
D) a variable whose value is determined through comparative statics.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Demand and Supply Analysis
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/57804
Sample Questions
Q1) Factors that could cause a demand curve to shift to the left include all of the following except
A) a change in preferences away from the product in question.
B) an increase in the price of substitute products.
C) a growing awareness of a health risk associated with the product.
D) a decrease in the general level of income in the country.
Answer: B
Q2) Consider the demand curve Q<sup>d </sup>= 40 - 2P + 6i.If the value of i rises,the demand curve will
A) not shift at all
B) shift to the right
C) shift to the left
D) rotate so it becomes upward sloping
Answer: B
Q3) What is the elasticity of the following demand curve? QP<sup>2</sup> = 100
Answer: \(\varepsilon\)<sub>Q,P</sub> = -2.
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Consumer Preferences and the Concept of Utility
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/57805
Sample Questions
Q1) 38.Which of the following statements is true?
A) Because total utility is constant along an indifference curve,the marginal rate of substitution is also constant.
B) If an indifference curve is convex,the marginal rate of substitution varies along the curve.
C) The slope of an indifference curve measures the consumer's marginal rate of substitution.
D) Both b) and c) are true.
Answer: D
Q2) An illustration of an indifference curve has:
A) prices of the goods on the axes.
B) quantities of the goods on the axes.
C) price on the vertical axis, quantity on the horizontal axis.
D) Price on the horizontal axis, quantity on the vertical axis.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Consumer Choice
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/57806
Sample Questions
Q1) Evaluate the truthfulness of the following statements. I.All points to the interior of the budget constraint are affordable.
II.All points that lie on the budget constraint cost the same amount of money.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.
Q2) Evaluate the truthfulness of the following statements. I.The budget constraint is a function of consumer preferences.
II.The budget constraint defines the set of baskets that a consumer can purchase with a specific level of income.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: The Theory of Demand
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/57807
Sample Questions
Q1) Compensating variation is
A) the change in income necessary to hold the consumer at the final level of utility as price changes.
B) always the area under the demand curve and above the price paid.
C) the change in income necessary to restore the consumer to the initial level of utility.
D) the difference in the consumer's income between the purchase of the original basket and the new basket at the old prices.
Q2) The concept of compensating variation means
A) the change in income necessary to hold the consumer at the final level of utility as price changes.
B) the change in income necessary to restore the consumer to the initial level of utility as price changes.
C) the income effect.
D) the substitution effect.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Inputs and Production Functions
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/57808
Sample Questions
Q1) The production set represents
A) the set of all technically feasible combinations of inputs and outputs.
B) the technically efficient combinations of inputs and outputs.
C) the maximum output the firm can produce from a given level of inputs.
D) the minimum amounts of inputs necessary to produce a given level of output.
Q2) The slope of the isoquant can be expressed as
A) the ratio of the input prices.
B) the ratio of the inputs.
C) the ratio of the marginal productivities of the inputs.
D) the sum of the marginal productivities of the inputs.
Q3) If marginal product is greater than average product
A) total product must be increasing.
B) marginal product must be decreasing.
C) marginal product must be increasing.
D) average product may be increasing or decreasing.
Q4) The labor requirements function is derived from
A) the demand curve.
B) the supply curve.
C) the production function.
D) the capital requirement function.
Page 8
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Costs and Cost Minimization
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/57809
Sample Questions
Q1) A firm's production process uses labor,L,and capital,K,and materials,M,to produce an output,Q according to the function Q = KLM,where the marginal products of the three inputs are MP<sub>L</sub> = KM,MP<sub>K</sub> = LM,and MP<sub>M</sub> = KL.The wage rate for labor is w = 2,the rental rate of capital is r = 1,and the cost of materials is m = 4 per unit.Let materials input be fixed now at M = 2.What is the cost minimizing level of capital that the firm must use to produce a target level of output,Q = 1600?
A) K = 5
B) K = 10
C) K = 20
D) K = 40
Q2) The "equal bang per buck" condition refers to the firm equating A) marginal revenue with marginal cost.
B) the marginal productivity of the last dollar spent on labor with the marginal productivity of the last dollar spent on capital.
C) the marginal productivity of capital with the marginal productivity of labor. D) the cost of capital with the cost of labor.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Cost Curves
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/57810
Sample Questions
Q1) The cost of producing a good in a single-product firm is
A) additional cost
B) stand-alone cost
C) variable cost
D) average cost
Q2) When the prices of all inputs increase by a proportionate amount,
A) the firm's total cost curve will remain unchanged since the cost-minimizing combination of inputs is unchanged.
B) the firm's total cost curve may rotate upward or may leave the long-run total cost curve unchanged.
C) will always rotate the long-run total cost curve upward.
D) could actually rotate the long-run total cost downward if the firm chooses to produce a lower level of output.
Q3) Which of the following factors may explain diseconomies of scale?
A) Increasing returns to scale of inputs.
B) Specialization of labor.
C) Indivisible inputs.
D) Managerial diseconomies.
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/57811
Sample Questions
Q1) Identify the truthfulness of the following statements. I.Economic rent may equal economic profit.
II.Economic rent may exceed economic profit.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.
Q2) In an increasing cost industry,the long-run market supply curve is
A) downward sloping
B) horizontal
C) upward sloping
D) vertical
Q3) Economic rent can be defined as
A) always the same as economic profit.
B) the maximum amount that firms would be willing to pay for a fixed input.
C) the minimum amount that firms actually have to pay for a fixed input.
D) the difference between the maximum amount that firms would be willing to pay for a fixed input and the minimum amount that firms actually have to pay for that input.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Competitive Markets
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/57812
Sample Questions
Q1) The domestic market for calculators is perfectly competitive and is in equilibrium.Domestic demand is given by Q<sup>d</sup> = 100 - P and domestic supply is given by Q<sup>s</sup> = 4P.The world price for calculators is $10.How many units of calculators will be imported?
A) 0
B) 10
C) 30
D) 50
Q2) When a tax is imposed on the producers of a product,which of the following is incorrect?
A) The consumers and producers each bear some part of the burden.
B) If the demand curve is relatively inelastic, the burden borne by consumers increases.
C) If the supply curve is relatively elastic, the burden borne by consumers increases.
D) If the tax is levied on producers, the producers bear the burden of the tax; if the tax is levied on consumers, the consumers bear the burden of the tax.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Monopoly and Monopsony
Available Study Resources on Quizplus for this Chatper
66 Verified Questions
66 Flashcards
Source URL: https://quizplus.com/quiz/57813
Sample Questions
Q1) **The deadweight loss under monopoly would be
A) 75
B) 150
C) 225
D) 300
Q2) **The total economic benefit under monopoly would be
A) 300
B) 600
C) 900
D) 1,200
Q3) A measure of monopoly power,the percentage markup of price over marginal cost (P-MC)/P is called
A) The Inverse Elasticity Pricing Rule
B) Lerner Index of market power
C) Monopoly Midpoint Rule
D) Market Power Rule
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Capturing Surplus
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/57814
Sample Questions
Q1) Advertising is an example of a firm's
A) revenue-maximization strategy.
B) pricing strategy.
C) non-pricing strategy.
D) price-discrimination strategy.
Q2) Bundling is a form of
A) first-degree price discrimination.
B) second-degree price discrimination.
C) third-degree price discrimination.
D) tying.
Q3) An example of second-degree price discrimination is
A) when you get an "early bird" discount by eating at a restaurant before 6:00 pm.
B) when you sell something illegally to an individual through the mail.
C) when you segment the market and charge individuals of different ages different prices for the same product or service.
D) when you order 12 of something online and you pay less per unit than if you had bought only one.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Market Structure and Competition
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/57815
Sample Questions
Q1) Which of the following is not a characteristic of monopolistic competition?
A) The market is fragmented.
B) There is free entry and exit.
C) In the long-run equilibrium, firms earn positive profits.
D) Firms produce horizontally differentiated products.
Q2) In the Cournot model,the curve that traces out the relationship between the market price and a firm's quantity when rival firms hold their outputs fixed is called
A) Reaction function
B) Best response
C) Residual demand curve
D) Cournot equilibrium
Q3) Which of the following is a real-world example of a monopolistically competitive industry?
A) The soft-drink industry.
B) The breakfast cereal industry.
C) The semiconductor industry.
D) The Chicago restaurant industry.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Game Theory and Strategic Behavior
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/57816
Sample Questions
Q1) The prisoners' dilemma shows that in a Nash equilibrium
A) neither player can have a better result than the other.
B) sometimes players do not reach the optimal outcome.
C) only an irrational strategy will lead to an outcome worse than the optimal outcome.
D) each player acting independently will lead to the optimal outcome.
Q2) *In Game 1 above,
A) Player A choosing A1 and Player B choosing B1 is a Nash equilibrium.
B) Player A choosing A2 and Player B choosing B2 is a Nash equilibrium.
C) there is no Nash equilibrium.
D) there are multiple Nash equilibria in pure strategies.
Q3) *In Game 6 above,
A) Player A has a dominant strategy.
B) Player B has a dominant strategy.
C) both players have dominant strategies.
D) neither player has a dominant strategy.
To view all questions and flashcards with answers, click on the resource link above.
16
Chapter 15: Risk and Information
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/57817
Sample Questions
Q1) With common values in an auction
A) each bidder has his own personalized valuation of an object.
B) no bidder knows how much the object is worth to the other bidders.
C) the object has the same value to all bidders.
D) individuals are likely to have idiosyncratic assessments of the value of the object.
Q2) Asymmetric information refers to
A) bad information.
B) incomplete information.
C) misleading information.
D) differences in the amount of information the parties have.
Q3) What would be the expected value,variance and standard deviation of an event that always took the value one as its outcome?
A) 1, 1, 1
B) 1, 0, 1
C) 1, 0, 0
D) 1, 1, 0
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: General Equilibrium Theory
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/57818
Sample Questions
Q1) An allocation of goods and inputs in an economy is economically efficient if A) that allocation minimizes costs.
B) that allocation maximizes profits.
C) there exists an alternative, feasible allocation of goods and inputs that would make all consumers better off as compared with the initial allocation.
D) there does not exist an alternative, feasible allocation of goods and inputs that would make all consumers better off as compared with the initial allocation.
Q2) The significance of the Second Fundamental Theorem of Welfare Economics is that:
A) even if the economy is in competitive general equilibrium, significant intervention will be required to bring about economic efficiency.
B) there is a possibility that an economy could simultaneously attain an efficient allocation and one in which the resulting distribution of utility is in some sense equitable.
C) Even though households and firms behave independently and each pursues its own self-interest, the resulting equilibrium is efficient in the sense that it exploits all possible mutually beneficial gains from trade or from reallocation of inputs.
D) resources are scarce in the economy and so must be managed for the long term.
To view all questions and flashcards with answers, click on the resource link above.
18
Chapter 17: Externalities and Public Goods
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/57819
Sample Questions
Q1) Suppose a particular national park imposes a voluntary contribution system for entrants of the park.It is suggested that all entrants pay something and there is an estimate given that $5 per user on average will be sufficient to pay for the expenses of maintaining the park.It is most likely that
A) everybody that enters the park will pay a sufficient amount to make sure that expenses are covered.
B) nobody who uses the park will contribute anything and the expenses will not be covered.
C) some users of the park will not pay anything and will act as trespassers.
D) some users of the park will not pay anything and will act as free riders.
Q2) A commonality between externalities and public goods is that
A) in each case, markets are not likely to allocate resources efficiently, even though they might otherwise be competitive.
B) in each case, government agency intervention would create inefficiency compared to the market solution.
C) competitive markets are likely to be efficient in each case.
D) the invisible hand (as discussed by Adam Smith) is likely to lead to efficiency in each case.
To view all questions and flashcards with answers, click on the resource link above.
Page 19