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Concepts in Microeconomics

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1.Each of the following is an example of an economic resource except
A)land.
B)money.
C)capital.
D)labor.

2.Human wants are
A)relatively limited.
B)relatively unlimited.
C)easily satisfied.
D)about equal to our productive capacity.

3.Which one of these people is not underemployed?
A)A woman working as a secretary but doing all her boss's work.
B)A part-time worker who wants to work full time.
C)A star baseball player in the Negro League (before Jackie Robinson broke the color barrier in major league baseball).
D)A factory worker who has been laid off and is collecting unemployment insurance benefits.

4.Scarcity exists because
A)of unlimited resources.
B)human wants are enormous relative to the means available to satisfy them.
C)production is limited only by technology and human energy.
D)advertising creates unnatural desires for surplus goods.

5.Which of the following demonstrates opportunity cost?
A)With a new strain of wheat, the wheat crop of Canada grows by 20% with no change in the productive resources devoted to wheat farming.
B)A tax cut increases people's purchases of consumer goods and decreases state expenditures on education.
C)The ravages of World War II reduced Japan's ability to produce goods.
D)Flora gets a 10% raise and increases her expenditures on movies.

6.An outward shift in the entire production possibilities frontier
A) represents economic decline.
B) means that previous levels of production are now unobtainable.
C) means that the only way the economy can increase the production of one good is by producing less of an alternative good.
D) represents economic growth.

7.Which of the following will shift an economy's production possibilities curve inward?
A) an improvement in technology
B) an increase in the unemployment rate
C) a decrease in land, labor, or capital
D) a decrease in the unemployment rate

8.If supply increases and demand remains unchanged, equilibrium quantity will _______ and equilibrium price will ______________.
A)rise, rise
B)fall, fall
C)fall, rise
D)rise, fall

9.A decrease in demand means that quantity demanded falls
A)at least one price.
B)at a few prices.
C)at most prices.
D)at all prices.

10.At equilibrium price,
A)quantity demanded is always equal to quantity supplied.
B)quantity demanded may be equal to quantity supplied.
C)quantity demanded is usually equal to quantity supplied.
D)quantity demanded is never equal to quantity supplied.

11.The forces of demand and supply ensure that at equilibrium
A)there are no shortages or surpluses.
B)there are no shortages, but there may be surpluses.
C)there are no surpluses, but there may be shortages.
D)there may be shortages or surpluses.

12.As price rises, quantity demanded
A)rises.
B)falls.
C)remains the same.

13.As price declines, quantity supplied
A)rises.
B)falls.
C)remains the same.

14.At equilibrium, quantity demanded __________________ quantity supplied.
A)always equals
B)usually equals
C)sometimes equals
D)never equals

15.If quantity demanded is greater than quantity supplied
A)the price will fall.
B)the price will rise.
C)the market is cleared.
D)the price is at equilibrium.

16.Rent controls tend to __________ the supply of housing and the ________ the level of rents paid.
A)raise, raise
B)lower, lower
C)raise, lower
D)lower, raise

17.When there is a price floor there will be
A)a shortage.
B)a surplus.
C)either a shortage or a surplus.
D)neither a shortage nor a surplus.

18.When there is a shortage
A)quantity demanded is greater than quantity supplied.
B)quantity supplied is greater than quantity demanded.
C)quantity demanded is equal to quantity supplied.

19.Capitalism is an economic system in which the ownership of resources is mostly
A)private.
B)collective.
C)by government.
D)all of the above.
E)none of the above.

20.The law of demand holds
A)for individuals, but not for markets.
B)for markets, but not for individuals.
C)for both individuals and for markets.
D)for neither individuals nor for markets.

21.Changes in demand are caused by each of the following except
A)changes in income.
B)changes in the prices of related goods and services.
C)changes in tastes and preferences.
D)changes in supply.

22.Chicken and pork are substitutes. Other things being equal, an increase in the price of chicken will
A)put downward pressure on the price of pork.
B)have no effect on the demand or pork,
C)increase the demand for pork.
D)decrease the demand for pork.

23.Computers and computer software are complements. A decrease in the price of computers is likely to
A)decrease the demand for computers.
B)decrease the demand for computer software.
C)increase the demand for computers.
D)increase the demand for computer software.

24.If demand is inelastic and price is lowered, total revenue will
A)rise.
B)fall.
C)stay the same.
D)possibly rise or possibly fall.

25.A demand curve that is perfectly horizontal is
A)perfectly elastic.
B)perfectly inelastic.
C)relatively elastic.
D)relatively inelastic.

26.Demand is elastic when
A)percentage change in price is greater than percentage change in quantity.
B)percentage change in quantity is greater than percentage change in price.
C)the demand curve is vertical.
D)total revenue rises when price is raised.

27.In general, the fewer the substitutes available for a good
A)the more inelastic the demand for the good.
B)the more elastic the demand for the good.
C)the greater the demand for the good.
D)the less the demand for the good.

28.The law of diminishing returns states that as output rises, eventually _____ output will decline.
A)total
B)average
C)fixed
D)marginal

29.As output rises, average fixed cost
A)rises.
B)falls.
C)remains the same.

30.Which is most clearly a variable cost?
A)rent
B)insurance premiums
C)salaries of employees under long-term contract
D)interest payments
E)wages of production workers

31.Which is most clearly a fixed cost?
A)insurance premiums
B)wages of production workers
C)advertising
D)shipping costs
E)cost of raw materials

32.A firm produces at that output at which marginal cost = marginal revenue
A)all of the time.
B)most of the time.
C)some of the time.
D)on rare occasions.
E)none of the time.

33.When MC > MR, the firm should
A)keep production unchanged.
B)increase production.
C)decrease production.
D)shut down.
E)go out of business.

34.The perfect competitor will produce at that output at which
A)marginal cost equals marginal revenue.
B)total revenue is maximized.
C)average total profit is maximized.

35.Under perfect competition there are
A)many firms producing an identical product.
B)a few firms producing an identical product.
C)many firms producing a differentiated product.
D)a few firms producing a differentiated product.

36.A return above implicit and explicit costs is called
A)accounting profit.
B)economic profit.
C)opportunity cost.
D)total revenue.
E)total physical product.

37.Which of the following is an example of an identical product?
A)wheat
B)cars
C)apartment buildings
D)accounting services
E)jeans

38.The price faced by a perfectly competitive firm is
A)determined by market demand and supply.
B)the same as the market demand curve.
C)the same as the market supply curve.
D)the same as the firm's marginal cost curve.

39.A natural monopoly
A)has an average cost curve that reaches minimum possible average cost at a low level of output.
B)has a marginal cost curve that is steeply upward sloping.
C)is usually subject to antitrust suits.
D)is usually allowed to choose its price so as to maximize profits in the United States.
E)occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if two or more firms supplied the market.

40.Monopolies are usually viewed with concern from an economic standpoint since
A)size is inherently dangerous; the larger the firm, the more likely it is to squeeze out the "little producer."
B)resources may be allocated in an inefficient manner.
C)the government may be put at the mercy of several large producers.
D)the variety of goods available on the market will be limited.

41.Each of the following is a legal barrier to entry into an industry EXCEPT
A)licensing.
B)patents.
C)government franchises.
D)brand names.

42.A monopolistically competitive industry has
A)many firms producing a differentiated product.
B)many firms producing an identical product.
C)a few firms producing a differentiated product.
D)a few firms producing an identical product.

43.Price discrimination
A)occurs whenever a good or service is resold.
B)is prohibited by law.
C)occurs when a seller charges two or more prices for the same good or service.
D)occurs when the seller charges different prices for different quality products.

44.The definition of monopolistic competition includes
A)few firms and ease of entry and exit.
B)few firms and barriers to entry and exit.
C)many firms and barriers to entry and exit.
D)many firms and ease of entry and exit.

45.A cartel is
A)generally legal in the United States.
B)a group of firms acting under collusion to control output and maximize group profits.
C)similar to a monopolistically competitive industry.
D)a group of firms acting like a perfectly competitive industry.

46.An oligopolist must be very sensitive to its rivals because
A)there are so many that their actions are unpredictable.
B)the government doesn't regulate oligopolists when it comes to colluding on prices and quantities.
C)there are so few that their behavior may well have consequences for the firm.
D)oligopolists try not to use non-price competition since it seems to be unfair to the consumer.
E)they have little else to do.

47.Oligopolistic firms
A)pay close attention to the actions of their rival firms.
B)are so few in number that at least one firm has some control over price.
C)charge a price that is higher than its ATC.
D)all of the above

48.The Clayton Act prohibited
A)interlocking directorates.
B)all forms of monopoly.
C)foreign control of U.S. corporations.
D)false and deceptive advertising.

49.A merger between Hertz Rent-a-Car and Budget Rent-a Car would be a ______ merger.
A)horizontal
B)vertical
C)conglomerate
D)diversifying

50.A vertical merger takes place when
A)a firm acquires a conglomerate.
B)a firm acquires a competitor.
C)a firm integrates its production backward toward its source of supply or .forward in its marketing chain.
D)firms merge in order to diversify.

51.A conglomerate merger takes place when
A)a firm acquires a competitor.
B)similar firms agree to compete.
C)a firm integrates its production backward toward its source of supply or forward in its marketing chain.
D)a firm buys another firm unrelated to the original firm's business.

52.The demand for goods and services is called ______ demand, while the demand for resources is called ____ demand.
A)derived, derived
B)final, final
C)final, derived
D)derive, final

53.The demand for resources is based on
A)just the demand for the final product.
B)just the productivity of that resource.
C)both the demand for the final product and the productivity of the resource.
D)neither the demand for the final product nor the productivity of the resource.

54.The firm's demand schedule for a resource is its _____ schedule.
A)MPP
B)MRP
C)total revenue
D)output

55.A decline in the wage rate would
A)raise the quantity of labor demanded.
B)lower the quantity of labor demanded.
C)increase the demand for labor.
D)decrease the demand for labor.

56.A minimum wage increase _________ the number of unemployed people.
A)may decrease
B)will decrease
C)may increase
D)will increase

57.The federal minimum hourly wage rate was established in
A)1920.
B)1938.
C)1950.
D)1973.
E)1990.

58.A tariff can best be described as
A)an excise tax on an imported good.
B)a government payment to domestic producers to enable them to sell competitively in world markets.
C)an excise tax on an exported good.
D)a law which sets a limit upon the amount of a good which can be imported.

59.An import quota is
A)a tax on imported goods.
B)revenue producing for state governments but not the federal government.
C)always tied to a foreign nation's trade policies toward American goods sold in that country.
D)deflationary.
E)a limit on the quantity of foreign goods that can be sold in a nation's domestic market.

60.If nations trade on the basis of comparative advantage
A)a nation can gain only at the expense of trading partners.
B)exporting nations gain and importing nations lose.
C)importing nations gain and exporting nations lose.
D)all trading partners mutually gain.

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1.Each of the following is an example of an economic resource except
A)land.
B)money.
C)capital.
D)labor.

Answer B. money.

2.Human wants are
A)relatively limited.
B)relatively unlimited.
C)easily satisfied.
D)about equal to our productive capacity.
Answer B. relatively unlimited.

3.Which one of these people is not underemployed?
A)A woman working as a secretary but doing all her boss's work.
B)A part-time worker who wants to work full time.
C)A star baseball player in the Negro League (before Jackie Robinson broke the color barrier in major league baseball).
D)A factory worker who has been laid off and is collecting unemployment insurance benefits.

Answer D. A factory worker who has been laid off and is collecting unemployment insurance benefits.

4.Scarcity exists because
A)of unlimited resources.
B)human wants are enormous relative to the means available to satisfy them.
C)production is limited only by technology and human energy.
D)advertising creates unnatural desires for surplus goods.
Answer B. human wants are enormous relative to the means available to satisfy them.

5.Which of the following demonstrates opportunity cost?
A)With a new strain of wheat, the wheat crop of Canada grows by 20% with no change in the productive resources devoted to wheat farming.
B)A tax cut increases people's purchases of consumer goods and decreases state expenditures on education.
C)The ravages of World War II reduced Japan's ability to produce goods.
D)Flora gets a 10% raise and increases her expenditures on movies.
Answer B. A tax cut increases people's purchases of consumer goods and decreases state expenditures on education.

6.An outward shift in the entire production possibilities frontier
A) represents economic decline.
B) means that previous levels of production are now unobtainable.
C) means that the only way the economy can increase the production of one good is by producing less of an alternative good.
D) represents economic growth.
Answer D. represents economic growth.

7.Which of the following will shift an economy's production possibilities curve inward?
A) an improvement in technology
B) an increase in the unemployment rate
C) a decrease in land, labor, or capital
D) a decrease in the unemployment rate
Answer C. a decrease in land, labor, or capital

8.If supply increases and demand remains unchanged, equilibrium quantity will _______ and equilibrium price will _____________.
A)rise, rise
B)fall, fall
C)fall, rise
D)rise, fall
Answer D. rise, fall

9.A decrease in demand means that quantity demanded falls
A)at least one price.
B)at a few prices.
C)at most prices.
D)at all prices.
Answer D. at all prices.

10.At equilibrium price,
A)quantity demanded is always equal to quantity supplied.
B)quantity demanded may be equal to quantity supplied.
C)quantity demanded is usually equal to quantity supplied.
D)quantity demanded is never equal to quantity supplied.
Answer A.quantity demanded is always equal to quantity supplied.

11.The forces of demand and supply ensure that at equilibrium
A)there are no shortages or surpluses.
B)there are no shortages, but there may be surpluses.
C)there are no surpluses, but there may be shortages.
D)there may be shortages or surpluses.
Answer A.there are no shortages or surpluses.

12.As price rises, quantity demanded
A)rises.
B)falls.
C)remains the same.
Answer B)falls.

13.As price declines, quantity supplied
A)rises.
B)falls.
C)remains the same.
Answer B) falls.

14.At equilibrium, quantity demanded __________________ quantity supplied.
A)always equals
B)usually equals
C)sometimes equals
Answer D)never equals

15.If quantity demanded is greater than quantity supplied
A)the price will fall.
B)the price will rise.
C)the market is cleared.
D)the price is at equilibrium.
Answer B)the price will rise.

16.Rent controls tend to __________ the supply of ...

Solution Summary

Its a quiz containing 60 MCQ's based upon principles in microeconomics.

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