Micro Practice test questions

Higher prices, and higher quantity supplied

Holding supply constant, an increase in demand leads to...

It will shift the market supply curve

How will an increase in population affect the labor market

Negative

If one's demand for peanut butter decreases as income rises, the income elasticity of demand for the product is...

Demand increased

If price increases and the quantity purchased increases, we know that...

Increase the equilibrium wage and increase the number of workers employed

If the labor supply is unchanged, an increase in the demand for labor will...

An increase in the quantity of labor demanded

A decrease in the wage rate

An increase in the quantity of labor demanded

A decrease in the wage rate causes

Marginal revenue equals marginal cost

A firm seeking to maximize economic profits should produce at the output at which...

Decreases

As a firm increases the level of output that it produces, SHORT-RUN average fixed cost...

Labor theory of value, water diamonds paradox

Beliefs of classical economists

Zero-sum game, money constitutes real wealth of a nation, central planning needed

Beliefs of mercantilists

The marginal cost from pollution reductions in air would exceed the marginal benefit

Congressman Murphy made the following proposal "we should establish policies that completely eliminate air pollution. This is the only way to ensure none of our citizens suffers the negative effects of air pollution." If congressman Murphy's proposal was adopted and all forms of air pollution were eliminated, which of the following would be true?

Country A uses fewer resources to produce corn than Country B does

Country A would have an absolute advantage compared to country B in the production of corn if...

Marginal cost curve

Curve 1 is... (second half U)

Average total cost curve

Curve 2 is... (smaller U)

Average variable cost curve

Curve 3 is... (bigger U)

Average fixed cost curve

Curve 4 is... (first half U)

LAC curve

Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the...

is downward sloping

In a perfectly competitive industry, the industry demand curve...

Horizontal shift in a demand curve

Income elasticity relates to...

Self-interest

Is consistent with many goals that people pursue, including betterment of others

Variable cost/ marginal product (^C/^Q)

Marginal cost

A statement of "what should be"

Normative economics involves...

The marginal revenue product of labor curve

The demand curve for labor is also...

An example of normative analysis

The just price theory holds that there is a single price at which each good should be sold, this is...

Methodological Individualism

The mercantilists promoted the idea that a "public interest" existed separately from individual people. What idea does this contradict?

Consumer tastes, substitute/complement, inferior/normal, # of buyers, income

Things that cause a shift in the demand curve

# of sellers, technology, tax/subsidy, input prices

Things that cause a shift in the supply curve

Set the membership price below the market clearing price

To enhance their prestige, some country clubs like to point to the fact that they have a waiting list for new members. Even at clubs with high initiation fees it is common that prospective members have to wait three or more years before there is room for them on the membership rolls. How do these country clubs set the price of membership to ensure that thy have a waiting list?

Abstract theory

Used to analyze and explain the real world; real world observations lead to the development of new abstract theories

Reduce its level of output

When MR<MC for a firm, the firm should...

Consumer surplus

When consumers would have been willing to pay higher prices at various quantities consumed than the market clearing price, the differences are called...

Quantity demanded exceeds quantity supplied

When rent controls establish a legal max rental rate below the equilibrium rental rate...

If the percentage of the population from age 16 to 65 decreases

When would the labor supply for an industry decrease

Engaging in aggressive advertising that slams a competitor's product

Which of the following is NOT an example of rent seeking behavior

Opportunity cost is always a forgone opportunity

Which of the following is a true statement (opportunity cost)

The price of apples

Which of the following would likely be considered as falling into the domain of microeconomics

Voting paradox

the observation that majority voting may not always result in consistent (transitive) choices