Principles of Microeconomics Test
Bank
Course Introduction
Principles of Microeconomics introduces the foundational concepts and analytical tools used to understand the behavior of individuals, households, and firms in making decisions about the allocation of scarce resources. The course covers topics such as supply and demand, market equilibrium, elasticity, consumer and producer surplus, the role of government in markets, market structures (perfect competition, monopoly, monopolistic competition, and oligopoly), and the analysis of externalities and public goods. By exploring how prices are determined and how markets function, students develop a framework for evaluating economic policies and real-world events from a microeconomic perspective.
Recommended Textbook
Microeconomics Theory and Applications 12th Edition by Edgar K. Browning
Available Study Resources on Quizplus
20 Chapters
1871 Verified Questions
1871 Flashcards
Source URL: https://quizplus.com/study-set/3553 Page 2
Chapter 1: An Introduction to Microeconomics
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/70552
Sample Questions
Q1) Which of the following is true of sunk costs?
A)It is a type of opportunity cost.
B)It is a type of implicit cost.
C)It should be ignored when making decisions.
D)It includes annual costs like payroll,insurance expenses,etc.
Answer: C
Q2) The relative price of a good:
A)is always measured in current dollars.
B)is a measure of the relative share of the consumer's income devoted to its purchase.
C)reflects its price compared to prices of other goods.
D)is equal to the average price of the good over the last five years.
Answer: C
Q3) The implicit cost of time spent on shopping:
A)has decreased because of the growth of single-wage-earner families.
B)has increased because of the decline in average income levels.
C)has increased,contributing to the growth of fast-food restaurants.
D)has decreased,contributing to the growth of convenience stores at gas stations.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Supply and Demand
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/70553
Sample Questions
Q1) When the per-unit cost of producing a commodity is constant,the price elasticity of supply is:
A)zero.
B)infinite.
C)one.
D)negative.
Answer: B
Q2) All of the following are common responses to a price ceiling,except:
A)an excess supply.
B)nonprice rationing.
C)quality deterioration.
D)black markets.
Answer: A
Q3) The income elasticity of demand for an inferior good:
A)is negative.
B)is positive.
C)is zero.
D)depends on the price elasticity of demand for that food.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: The Theory of Consumer Choice
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/70554
Sample Questions
Q1) Marginal utility is _____.
A)the amount that total utility changes when consumption increases by one unit
B)the level of utility after all units have been consumed
C)the level of total utility divided by the number of units consumed.
D)the amount that total utility changes when consumption is at its maximum
Answer: A
Q2) Consider a graph with Yvonne's income on the Y-axis and Xavier's income on the X-axis.Yvonne has twice as much income as Xavier.If Yvonne cares about the material well-being of Oscar,and considers the latter's income as an economic good,the slope of the indifference curves representing Yvonne's preferences:
A)will be steeper,the more willing she is to transfer some of her income to Xavier.
B)will be flatter,the more willing she is to transfer some of her income to Xavier.
C)cannot be determined from the information given.
D)will not change as Yvonne's willingness to donate to Xavier changes.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Individual and Market Demand
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/70555
Sample Questions
Q1) When the substitution effect of a price change that is positive is greater than the income effect that is negative:
A)the good is an inferior good.
B)the good is a Giffen good.
C)the good is a normal good.
D)the good has no substitute.
Q2) Which of the following is true of an excise tax?
A)It has an income and a substitution effect.
B)It only has an income effect.
C)It only has a substitution effect.
D)The income and substitution effects work in opposite directions in case of an excise tax.
Q3) The substitution effect of a price decrease:
A)allows the consumer to obtain a higher level of well-being.
B)reflects an increase in real income.
C)is a movement along the indifference curve to consume more of the lower priced good and less of the higher priced good.
D)is a shift of the indifference curve indicating higher consumption of both the goods.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Using Consumer Choice Theory
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/70556
Sample Questions
Q1) Refer to Figure 5-2.The deadweight loss of an excise subsidy that lowers the price from P<sub>1</sub> to P<sub>2</sub> is area _____.
A)P<sub>1</sub>ACP<sub>2</sub>
B)P<sub>1</sub>BCP<sub>2</sub>
C)ADC
D)ABC
Q2) Answer the following:
a)Sarah drives 6 miles to work every day.Liam takes the same route but has to drive for a total of 11 miles.With the objective of reducing traffic jams,the government decides to impose a tax on drivers.How would an annual fixed payment of $500 as congestion charges affect Sarah and Liam? Explain your answer using indifference curves and a common budget line for Liam and Sarah.
b)What if the government decided to impose a fee of $1 per mile driven?
Q3) Which of the following leads to the diversification of risk?
A)Investing in assets that give the highest possible returns
B)Investing in safe assets that may give low returns
C)Investing in multiple assets rather than a single asset
D)Investing in assets that are highly risky but give high returns
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Exchange, Efficiency, and Prices
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/70557
Sample Questions
Q1) Suppose Jen and Mike have initial distributions of movie theater passes and gallons of gas such that Jen's marginal utility of movie passes and gasoline are both 5,while Mike's marginal utility of movie passes and gasoline are 8 and 1 respectively.If movie theater passes are $9 each and gasoline is $3 per gallon,which of the following should occur?
A)Jen should trade gasoline for movie passes until her marginal utilities for both are 3 and 1 respectively.
B)Mike should trade movie passes for gallons of gasoline until his marginal utilities for each is 2 and 3 respectively.
C)Mike should trade gasoline to Jen for movie passes until the marginal utilities of both goods are the same between the two of them,and their marginal rates of substitution of movie passes for gasoline are both equal to 3.
D)Mike should trade gasoline to Jen for movie passes until the marginal utility of gasoline for each is three times the marginal utility of movie passes for each.
Q2) Are non-price allocation mechanisms efficient? Explain.
Q3) What would you expect to see in the market for healthcare if the government decided that healthcare allocation would be done on the basis of altruism? Why?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Production
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/70558
Sample Questions
Q1) A farmer is growing corn on an acre of land.Output will be 200 bushels if one worker is hired,500 if two,700 if three,850 if four,and 900 if five.The marginal product of the fourth worker is _____ bushels of corn.
A)850
B)150
C)212.5
D)50
Q2) The ratio of the change in total product to the change in total quantity of the input being used is _____.
A)equal to marginal product
B)constant as employment levels of the input vary
C)equal to average product
D)equal to the marginal rate of technical substitution
Q3) The short-run refers to:
A)a time period of two years or less.
B)the time period in which the usage of all inputs are held constant.
C)the time period in which it is too costly to change the usage of at least one input.
D)the time period in which the usage of all inputs can be changed.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: The Cost of Production
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/70559
Sample Questions
Q1) Consider two firms A and B.Firm A notices that its total costs have declined by 10 percent each time its cumulative output has doubled.Firm B notices that its average cost of production declined by 10 percent after it increased production by 5 percent and hired 50 more workers to work with its existing unused equipments.Explain graphically whether the experiences of these two firms will have similar implications on the long run average cost of production.
Q2) A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets.Labor costs $10 per unit and capital $5 per unit.For the quantities of inputs employed,MP<sub>L</sub> = 2 and MP<sub>K</sub> = 5.In this situation,the firm:
A)is producing the maximum output possible given the prices and relative productivities of the inputs.
B)could lower its production costs by using more labor and less capital.
C)could increase its output at no extra cost by using more capital and less labor. D)should use more of both inputs in equal proportions.
Q3) Consider the cost function C<sub>0</sub> = 20L + 30K and production function Q = L<sup>0.3</sup>K<sup>0.7</sup> of a firm.Derive the first order conditions if the firm is maximizing its output subject to the given cost constraint.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Profit Maximization in Perfectly Competitive Markets
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/70560
Sample Questions
Q1) The short-run supply curve for a competitive industry is upward-sloping because:
A)firms must pay more for inputs as more are hired./firms must incur higher costs the more inputs they hire.
B)the efficiency of the variable inputs decreases as more such inputs are employed in production.
C)new firms enter the industry as product prices increase.
D)of the law of diminishing marginal utility.
Q2) Firms in an industry are unlikely to have pricing power if:
A)elasticity of demand for the product is high.
B)the product is not homogeneous.
C)the firms' elasticity of supply is high.
D)there are barriers to entry in the market.
Q3) Refer to Figure 9-2.At which of the following output levels is the firm incurring its highest loss?
A)1 unit
B)2 units
C)3 units
D)4 units
Q4) Derive the first-order and second-order conditions for perfect competition.
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Using the Competitive Model
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/70561
Sample Questions
Q1) When a price ceiling is imposed in a competitive market at a level below the equilibrium price:
A)the gain to producers outweighs the loss to consumers.
B)the output level becomes inefficient.
C)the total surplus in the market is not affected.
D)the producer surplus is increased.
Q2) A rent control has been imposed on the market for rental housing in a country.If the long run supply curve in this competitive market is more price elastic than the short run supply curve,it implies that:
A)the deadweight loss of the rent control is higher in the long run compared to the short run.
B)the deadweight loss of the rent control is higher in the short run compared to the long run.
C)the deadweight loss of the rent control is zero in the long run.
D)the deadweight loss of the rent control is zero in the short run.
Q3) Is the outcome of a competitive market efficient? Explain with the help of a graph.
Q4) Explain how entry restrictions imposed on taxis by a city affects fares and profits of licensed taxi owners as demand increases over time.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Monopoly
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/70562
Sample Questions
Q1) The shape of the monopolist's demand curve indicates that:
A)profit per unit increases as more units are sold.
B)demand for the good produced by a monopoly firm is elastic.
C)the firm practices price discrimination.
D)price and output are inversely related for the firm.
Q2) Which of the following is true of the demand curve that a monopolist faces?
A)It is perfectly elastic at the equilibrium price level.
B)It is perfectly inelastic at the equilibrium output level.
C)It shows how much the monopolist can sell given the output of the other firms.
D)It is the same as the market demand curve.
Q3) A price ceiling imposed by the government in a monopoly market can:
A)lead to a decrease in output.
B)increase the deadweight loss from a monopoly.
C)raise prices and lower output.
D)lead to a decline in product quality.
Q4) Refer to Figure 11-5.A fall in price will keep total revenue unchanged _____.
A)between the points E and F
B)between the points E and A
C)between the points A and F
D)at point A
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Product Pricing With Monopoly Power
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/70563
Sample Questions
Q1) Which of the following is true of the comparison between a non-price discriminating monopoly and a perfectly price discriminating monopoly?
A)The non-price discriminating monopolist will produce a higher amount of output.
B)The non-price discriminating monopolist will have more producer surplus.
C)The non-price discriminating monopolist will impose a greater efficiency loss.
D)The non-price discriminating monopolist will capture more consumer surplus.
Q2) Refer to Figure 12-2.Compared to the situation when there is no price discrimination,first-degree price discrimination causes the consumer surplus to decline by the area:
A)ZVN.
B)CVF.
C)VWE.
D)EIF.
Q3) Which of the following consumer segments are benefited by price discrimination?
A)Consumers with high income
B)Consumers with perfectly inelastic demand
C)Consumers with highly elastic demand
D)Consumers with more than one source of income
Q4) Why is it difficult to implement first-degree price discrimination?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Monopolistic Competition and Oligopoly
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/70564
Sample Questions
Q1) Which of the following is not true of a monopolistically competitive firm in long run equilibrium?
A)Price exceeds marginal cost
B)The average total cost curve lies above the demand curve
C)Marginal revenue equals marginal cost
D)The price elasticity of demand is zero
Q2) Suppose a cartel is formed by the tomato farmers.Which of the following would increase the ability of this cartel to set output and prices in the domestic market?
A)Acreage restrictions by the government
B)Highly inelastic demand for tomatoes
C)A high supply elasticity for other tomato farmers
D)A high import tariff on tomatoes
Q3) From the shape of the monopolistically competitive firm's demand curve,you can imply that:
A)the firm has some degree of market power.
B)the firm sells a homogeneous good.
C)the firm's product has no substitutes.
D)the firm's level of output is efficient.
Q4) What is a cartel and why are cartels considered to be inherently unstable?
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Game Theory and the Economics of Information
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/70565
Sample Questions
Q1) A representation of how each combination of choices affects the profits of each player is known as a:
A)strategic interaction matrix.
B)Nash equilibrium.
C)payoff matrix.
D)dominant strategy equilibrium.
Q2) A repeated game is a game:
A)that is played simultaneously by different sets of players.
B)that is played more than once,but under different rules each time.
C)that is played more than once,by the same set of players.
D)that is played by a different set of players each time.
Q3) _____ is the term used to describe the total amount of the hospital cost that is borne by a patient before insurance coverage becomes effective.
A)Copayment
B)Premium
C)Deductible
D)Coinsurance
Q4) What is a prisoner's dilemma? Draw a payoff matrix which illustrates this game.
Q5) Define adverse selection and moral hazard and give examples of each.
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Using Noncompetitive Market Models
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/70566
Sample Questions
Q1) Refer to Table 15-2.Which of the following is true?
A)Company B's dominant strategy is to set a high price.
B)Company B's dominant strategy is to set a medium price.
C)Company B's dominant strategy is to set a low price.
D)Company B does not have a dominant strategy.
Q2) Which of the following,if true,would be considered a natural monopoly?
A)The pharmaceuticals industry where patents form a barrier to entry
B)The airlines industry that has high fixed costs and high operating costs
C)The software industry that has very low marginal costs
D)The utilities industry that has falling average costs over the entire range of output
Q3) In Figure 15-3,if the maximum price allowed in the market is P<sub>1</sub>,output levels below Q<sub>1</sub> will:
A)yield more economic profit than at Q<sub>1</sub>.
B)yield positive but lesser economic profit than at Q<sub>1</sub>.
C)yield negative economic profit.
D)yield zero economic profit.
Q4) What is a natural monopoly? Draw a diagram to illustrate the profit-maximizing output of a natural monopoly.
Q5) Define and illustrate iterated dominance and commitment strategy.
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Employment and Pricing of Inputs
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/70567
Sample Questions
Q1) The marginal product of labor shows:
A)the total productivity of all the labor employed.
B)the average output produced by the labor employed.
C)the extra revenue from the output produced by the last worker.
D)the extra output produced by the last worker hired.
Q2) Suppose that a firm that produces widgets employs welders as the labor input for production.The demand for welders is:
A)derived from the total industry output of widgets.
B)represented by the marginal value product curve if the firm is monopolist in the output market.
C)derived from the demand curve for widgets faced by the firm.
D)represented by the marginal revenue product curve if the firm is competitive.
Q3) Consider a firm's isocost line where labor is measured on the horizontal axis and capital on the vertical axis.If everything else is unchanged,an increase in the price of capital would:
A)decrease the horizontal intercept of the isocost line.
B)shift the isocost line outward away from the origin.
C)shift the isocost line inward toward the origin.
D)decrease the vertical intercept of the isocost line.
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Wages, Rent, Interest, and Profit
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/70568
Sample Questions
Q1) Which of the following is the best example of economic rent?
A)Bob leases a two-bedroom apartment in town for $1,000 that he could have got for $700.
B)Ann was paid a $20,000 bonus this year for selling $500,000 more than her required sales quota.
C)Diane received a $20,000 raise to counter a job offer she received from a competing firm.
D)Carl,a union member,earns $20,000 more than a worker who is not a member of the union.
Q2) Which of the following is true of wage differentials between different occupations in equilibrium?
A)Wages cannot differ across occupations if there is free mobility of labor.
B)Wages can differ across occupations due to differences in training,abilities,and preferences.
C)Wages can differ across occupations depending on the size of the labor force in the economy.
D)Wages cannot differ across occupations if there are equal opportunity employment laws.
Q3) How can the presence of a union in a labor market be beneficial?
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: Using Input Market Analysis
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/70569
Sample Questions
Q1) The aggregate supply curve of hours of work used to analyze a payroll tax is generally:
A)elastic.
B)perfectly elastic.
C)inelastic.
D)unit elastic.
Q2) Refer to Figure 18-3.The total income of the residents of the country increases by the area _____ post immigration.
A)ABC.
B)wACw'.
C)ABCE.
D)wABw'.
Q3) According to the U.S.Congressional Budget Office,immigrants in the United States:
A)are wealthier on average than current residents.
B)are more productive on average than current residents.
C)are less educated on average than current residents.
D)are more skilled and experienced on average than current residents.
Q4) Explain how you would investigate whether wage differences are due to discrimination.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: General Equilibrium Analysis and Economic Efficiency
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/70570
Sample Questions
Q1) In Figure 19-1,point F represents a resource allocation that is:
A)is feasible but undesirable from the society's point of view.
B)inefficient.
C)desirable but not attainable.
D)both undesirable and unattainable.
Q2) Which of the following statements about the welfare frontier is incorrect?
A)Some of the points on the welfare frontier are efficient.
B)The welfare frontier is downward sloping.
C)Any point on the welfare frontier is preferred to any point inside it.
D)the marginal rate of substitution [MRS] is equal to the marginal rate of transformation [MRT] at all points on the welfare frontier.
Q3) A perfectly competitive economy generally results in an efficient distribution of products among consumers.This because competitive markets:
A)produce homogenous products.
B)establish a single price for all goods.
C)allow free entry and exit of firms.
D)are controlled by the government.
Q4) Why is efficiency considered to be a reasonable goal for economic performance?
Q5) What is the difference between partial and general equilibrium analysis?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Public Goods and Externalities
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/70571
Sample Questions
Q1) Perfect competition ensures efficiency in industry output if:
A)the demand and supply curves are perfectly inelastic.
B)the marginal cost of producing the good is zero.
C)the demand and supply curves properly reflect the marginal benefits and costs.
D)the market price of the commodity truly reflects the private costs of production.
Q2) The free-rider problem occurs because:
a.it is easy to exclude others from consuming the good.
b.consumption is rival in nature,and the consumption of a product by one individual diminishes that available for others.
c.exclusion is costly or impossible,so that a consumer or producer can use the good without having to pay for it.
d.the consumption of a good imposes costs on others who not directly involved in the transaction.
Q3) Mention some of the situations in which the Coase Theorem will not ensure an efficient outcome?
Q4) Explain with the help of a suitable figure,why the government needs to subsidize inoculation against a viral infection.
To view all questions and flashcards with answers, click on the resource link above. Page 22