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Microeconomics Multiple Choice Questions

1) Suppose that recycling rubber for sneakers create an external benefits of $2.0 per ton of rubber . There are no external costs. The efficient amount of rubber will be recycled when the government create a :
A) subsidy of more than $2.00 per ton of rubber(B) subsidy of $2.00 per ton of rubber(C) Tax of more than $2.00 per ton of rubber.(D) tax of $2.00 per ton of rubber.
2) Of those listed below , the best example of a pure public good is
A) State lottery(B)A book (C)A rock concert held in a small auditorium (D) A radio broadcast

3) A free rider problem with a public goods leads to:
A) Inefficiency if good is provided by only private markets with no government action(B)Overproduction if the good is provided private market(C) Underproduction if the good is provided by the government(D) None of the above answer is corrected

4) The problem of the commons arises because _____ exceeds _____ when the resource is used
A)Marginal social benefit; marginal private benefit(B) Marginal private benefit; marginal social benefit

5) A decrease in the supply of a factor normally
A) Decrease both its equilibrium price and its equilibrium quaintly (B) ) Increase both its equilibrium price and its equilibrium quaintly(C) Lower its equilibrium price and Increase its equilibrium quantity (D) Raise its equilibrium price and decrease its equilibrium quantity.

6) If the marginal revenue product of a factor of production exceeds the price of the factor the
A)Firm should hire more then that factor(B) Firm should hire less of that factor(C) Firms is maximizing profit (D) Firm should shut down

7)If the elasticity of demand for labor is 1.5, a10% increase in wage rate will result in
A) 15% decrease in the quantity of labor demanded(B) ) 15% increase in the quantity of labor demanded(C) 6.7% increase in the quantity of labor demanded(D) 6.7% decrease in the quantity of labor demanded

7) Lifetime income is distributed
A) Less equally than annual income and less equally than the measure wealth (B) Less equally than annual income and more equally than the measure wealth(C) More equally than annual income and less equally than measure weight(D) More equally than annual income and more equally than measure weight

8) High skilled worker earn more than low skill worker in part because
A) High skilled worker have higher marginal revenue product(B) of government legislation (C) the supply of a high skilled worker is more elastic (D) the demand for high skilled worker is more elastic

9)The poor receive:
A) Less in benefits than they pay in taxes and so do the rich (B)More in benefits than they pay in taxes and so do the rich (C) Less in benefits than they pay in taxes, the rich receive more in benefits than they pay in taxes . (D) More in benefits than they pay in taxes and the rich receive less in benefits than they pay in taxes

10)Jessica must chose option A or option B. Option A gives her $10,000 for sure Option B gives her $5,000 if a fair coin toss shows heads and $15,000 IF ITS SHOW TAILS. If Jessica is a risk averse her utility of wealth curves becomes
A) Flatter as her wealth increase and she will choose Option A (B) Flatter as her wealth increase and she will choose Option B (C) Steeper as her wealth increase and she will chose option A (D) Steeper as her wealth increase and she will chose option B

11) Once Akira has found a VCR priced at his reservation price, marginal benefit of further search.
A) Is Zero(B) Equal his reservation price (C) Equal his marginal cost of further search (D) equal his elasticity of demand

12) You have invested $100,000 in each of two independent project. Your total investment is $200,000. Eavh project has a 50% change of losing $25,000 and a 50% change of making $50,000 .You chance of having a negative return on $200,000 you have invested is
A)1/8 (B) ¼ (C) ½ (D) 1

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