Micro final- practice questions
Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. 9. Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is a. $80. b. $30. c. $20. d. $10.
D
Which of the following is not a result of rent control? a. Fewer new apartments offered for rent b. Less maintenance provided by landlords c. Bribery d. Higher quality housing
D
(SEE QUESTION 18) The slope of the curve between points A and B is a. -2. b. 2 c. -1/2 d. 1/2
A
(SEE QUESTION 19 ON EXAM 2) The price ceiling shown in graph (a) a. is not binding. b. creates a surplus. c. creates a shortage. d. is binding.
A
(SEE QUESTION 22) If these are the only two consumers in the market, then the market quantity demanded at a price of $6 is a. 19 units. b. 4 units. c. 6 units. d. 13 units.
A
(SEE QUESTION 27 ON EXAM 2) If the price were P3, consumer surplus would be represented by the area a. A. b. A+B+C. c. D+H+F. d. A+B+C+D+H+F.
A
(SEE QUESTION 28 ON CH. 8-13 EXAM) What is the average fixed cost of producing 5 units of output? a. $4 b. $5 c. $40 d. $44
A
A key determinant of the price elasticity of supply is the a. time horizon. b. income of consumers. c. price elasticity of demand. d. importance of the good in a consumer's budget.
A
A key determinant of the price elasticity of supply is the a.time horizon. b.income of consumers. c.price elasticity of demand. d.importance of the good in a consumer's budget.
A
As a result of a decrease in price, a. new buyers enter the market, increasing consumer surplus. b. new buyers enter the market, decreasing consumer surplus. c. existing buyers exit the market, increasing consumer surplus. d. existing buyers exit the market, decreasing consumer surplus.
A
Ashlyn installed a wooden sculpture in her front yard. A positive externality arises if the sculpture a. increases the value of other properties in the neighborhood. b. increases the value of Ashlyn's home. c. is visually unappealing to Ashlyn's neighbors. d. creates a safety hazard for neighborhood children.
A
Cost-benefit analysts often encounter the problem that those who would benefit from government provision of a public good tend to a. overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good. b. overstate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good. c. understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to overstate the costs they would incur from the public good. d. understate the benefit they would receive from the public good and those who would be harmed by government provision of a public good tend to understate the costs they would incur from the public good.
A
If a tax shifts the demand curve upward, a. we cannot infer anything because the shift described is not consistent with a tax. b. we can infer that the tax was levied on buyers of the good. c. we can infer that the tax was levied on both buyers and sellers of the good. d. we can infer that the tax was levied on sellers of the good.
A
If long-run average total cost decreases as the quantity of output increases, the firm is experiencing a. economies of scale. b. diseconomies of scale. c. coordination problems arising from the large size of the firm. d. fixed costs greatly exceeding variable costs.
A
If the demand for a good falls when income falls, then the good is called a. a normal good. b. a regular good. c. an ordinary good. d. an inferior good.
A
If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is a. zero. b. negative, and the consumer would not purchase the product. c. positive, and the consumer would purchase the product. d. There is not enough information given to answer this question.
A
If the price of walnuts rises, many people would switch from consuming walnuts to consuming cashews. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of a. the availability of close substitutes in determining the price elasticity of demand. b. a necessity versus a luxury in determining the price elasticity of demand. c. the definition of a market in determining the price elasticity of demand. d. the time horizon in determining the price elasticity of demand.
A
If the production of computer chips yields greater technology spillovers than the production of potato chips, the government should a. encourage the production of computer chips with subsidies. b. discourage the production of potato chips with taxes. c. encourage the production of potato chips with subsidies. d. discourage the production of computer chips with taxes.
A
Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is a. 8 units of output. b. 10 units of output. c. 122 units of output. d. 132 units of output.
A
State and local governments a. use a mix of taxes and fees to generate revenue. b. are required by federal mandate to levy income taxes. c. are required to tax property at a standard rate set by the federal government. d. must tax wages more heavily than interest and dividend income.
A
The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case? a. Private good b. Club good c. Common resource d. Public good
A
Under rent control, bribery is a potential mechanism to a. bring the total price of an apartment (including the bribe) closer to the equilibrium price. b. allocate housing to the poorest individuals in the market. c. force the total price of an apartment (including the bribe) to be less than the market price. d. allocate housing to the most deserving tenants.
A
When the price of candy bars is $1.20, the quantity demanded is 490 per day. When the price falls to $1.00, the quantity demanded increases to 500. Given this information and using the midpoint method, we know that the demand for candy bars is a. inelastic. b. elastic. c. unit elastic. d. perfectly inelastic.
A
market power refers to the a. power of a single person or small group to influence market prices. b. ability of a person or small group to successfully market new products. c. power of the government to regulate a market. d. importance of a certain market in relation to the overall economy.
A
the overriding reason why households and societies face many decisions is that a. resources are scarce. b. goods and services are not scarce. c. incomes fluctuate with business cycles. d. people, by nature, tend to disagree.
A
(SEE QUESTION 1 ON EXAM CH.8-13) In the absence of trade, the equilibrium price of coffee in Uganda is a. $15. b. $45. c. $50. d. $70.
B
(SEE QUESTION 12 ON MICRO EXAM 2) At a price of $70 per unit, sellers' total revenue equals a. $900. b. $1,050. c. $1,200. d. $1,020.
B
(SEE QUESTION 29 IN CH. 8-13 EXAM) In the absence of trade, total surplus in Uganda is represented by the area a. C + B + A. b. C + B + A + F + D. c. C + B + A + F + D + H. d. C + B + A + F + D + H + G.
B
(SEE QUESTION 30 ON CH. 8-13 EXAM) What is the equilibrium quantity of output in this market? a. 5 units b. 4 units c. 3 units d. 6 units
B
(SEE QUESTION 31 ON CH. 8-13 EXAM) Assume that the price of a weekend skiing trip pass is $45 and that the price reflects the actual unit cost of the trip. How much consumer surplus accrues to Max and Daniel individually? a. $55 and $80 respectively b. $80 and $55 respectively c. $80 and $30 respectively d. $55 and $30 respectively
B
(SEE QUESTION 6 ON EXAM CH. 8-13) The graph represents a market in which a. there is no externality. b. there is a positive externality. c. there is a negative externality. d. The answer cannot be determined from inspection of the graph.
B
. Why do some policymakers support a consumption tax rather than an income tax? a. The average tax rate would be lower under a consumption tax. b. A consumption tax would encourage people to save earned income. c. A consumption tax would raise more revenues than an income tax. d. The marginal tax rate would be higher under an income tax.
B
An increase in the overall level of prices in an economy is referred to as a. the income effect. b. inflation. c. deflation. d. the substitution effect.
B
As the economy's income has grown, the government has a. grown at about the same pace. b. grown at a faster pace. c. grown at a slower pace. d. shrunk.
B
At the equilibrium price, the quantity of the good that buyers are willing and able to buy a. is greater than the quantity that sellers are willing and able to sell. b. exactly equals the quantity that sellers are willing and able to sell. c. is less than the quantity that sellers are willing and able to sell. d. could be greater or less than the quantity that sellers are willing and able to sell.
B
If the number of sellers in a market increases, then the a. demand in that market will increase. b. supply in that market will increase. c. supply in that market will decrease. d. demand in that market will decrease.
B
In addition to tax payments, the two other primary costs that a tax system inevitably imposes on taxpayers are: a. deadweight losses and frustration with the political system. b. deadweight losses and administrative burdens. c. administrative burdens and tax-preparation costs. d. administrative burdens and the risk of punishment for failure to comply with tax laws.
B
In the simple circular-flow diagram, the participants in the economy are a. firms and government. b. households and firms. c. households and government. d. households, firms, and government.
B
Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works.
B
Microeconomics is the study of a. how money affects the economy. b. how individual households and firms make decisions. c. how government affects the economy. d. how the economy as a whole works.
B
Refer to Table 1. (SEE QUESTION #9) What is the opportunity cost of increasing the production of rye from 700 bushels to 1200 bushels? a.250 bushels of corn b.500 bushels of corn c.750 bushels of corn d.1000 bushels of corn
B
Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see a. no change in the demand for energy drinks. b. a decrease in the demand for energy drinks. c. an increase in the demand for energy drinks. d. a decrease in the supply of energy drinks.
B
Suppose that for a particular business there are no implicit costs. Then a. accounting profit will be greater than economic profit. b. accounting profit will be the same as economic profit. c. accounting profit will be less than economic profit. d. the relationship between accounting profit and economic profit cannot be determined without more information.
B
The business cycle is the a. relationship between unemployment and inflation. b. irregular fluctuations in economic activity. c. positive relationship between the quantity of money in an economy and inflation. d. predictable changes in economic activity due to changes in government spending and taxes.
B
The concept that people should pay taxes based on the benefits they receive from government services is called a. the ability-to-pay principle. b. the benefits principle. c. horizontal equity. d. vertical equity.
B
The most likely explanation for economies of scale is a. coordination problems. b. specialization of labor. c. increasing marginal cost. d. decreasing marginal cost.
B
The opportunity cost of an item is a. the number of hours needed to earn money to buy the item. b. what you give up to get that item. c. usually less than the dollar value of the item. d. the dollar value of the item.
B
The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began a. exporting almonds and the price per pound in Uruguay remained at $3.00. b. exporting almonds and the price per pound in Uruguay increased to $4.50. c. importing almonds and the price per pound in Uruguay remained at $3.00. d. importing almonds and the price per pound in Uruguay increased to $4.50.
B
To improve living standards, policymakers should a. impose restrictions on foreign competition. b. formulate policies designed to increase productivity. c. impose tougher immigration policies. d. provide tax breaks for the middle class.
B
When positive externalities are present in a market a. private benefits will be greater than social benefits. b. social benefits will be greater than private benefits. c. only government regulation will solve the problem. d. the market will not be able to generate an equilibrium.
B
When the government prevents prices from adjusting naturally to supply and demand, it a. equates the amount buyers want to buy with the amount sellers want to sell. b. adversely affects the allocation of resources. c. improves equality and efficiency. d. improves efficiency but reduces equality.
B
Which of the following statements about models is correct? a. Economic models are built to mirror reality exactly. b. A model can be accurately described as a simplification of reality. c. Models cannot be used to explain how the economy functions. d. Economic models are usually plastic representations of the economy.
B
Which of the following statements about trade is false? a. Trade increases competition. b. With trade, one country must win and one country must lose. c. Bulgaria can benefit, potentially, from trade with any other country. d. Trade allows people to buy a greater variety of goods and services at lower cost.
B
Which of the following statements is correct? a. A tax levied on buyers will never be partially paid by sellers. b. Who bears the burden of a tax depends on the price elasticities of supply and demand. c. Government can decide who ultimately pays a tax. d. A tax levied on sellers always will be passed on completely to buyers.
B
Which tax system requires all taxpayers to pay the same percentage of their income in taxes? a. A regressive tax b. A proportional tax c. A progressive tax d. A horizontal equity tax
B
Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? a. Profits and costs to firms b. Consumer and producer surplus c. The equilibrium price and quantity d. Incomes of and prices paid by buyers
B
trade a. allows specialization, which increases costs. b. allows specialization, which reduces costs. c. reduces specialization, which increases costs. d. reduces specialization, which reduces costs.
B
when two variables have a positive correlation, a. if the x-variable increases, the y-variable decreases. b. if the x-variable decreases, the y-variable decreases. c. one variable will move while the other remains constant. d. the variables' values are never positive.
B
(SEE QUESTION 27 ON CH. 8-13 EXAM) From the figure it is apparent that a. Uganda will experience a shortage of coffee if trade is not allowed. b. Uganda will experience a surplus of coffee if trade is not allowed. c. Uganda has a comparative advantage in producing coffee, relative to the rest of the world. d. foreign countries have a comparative advantage in producing coffee, relative to Uganda.
C
20. Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is a. $150. b. $425. c. $500. d. $850.
C
A group of buyers and sellers of a particular good or service is called a. a coalition. b. an economy. c. a market. d. a competition.
C
An example of positive analysis is studying a. whether equilibrium outcomes are fair. b. whether equilibrium outcomes are socially desirable. c. how market forces produce equilibrium. d. if income distributions are fair.
C
An example of positive analysis is studying a.whether equilibrium outcomes are fair. b.whether equilibrium outcomes are socially desirable. c.how market forces produce equilibrium. d.if income distributions are fair.
C
An externality is the uncompensated impact of a. society's decisions on the well-being of society. b. a person's actions on that person's well-being. c. one person's actions on the well-being of a bystander. d. society's decisions on the poorest person in the society.
C
Central planning refers to a. markets guiding economic activity. Today many countries that had this system have abandoned it. b. markets guiding economic activity. Today many countries that did not have this system have implemented it. c. government guiding economic activity. Today many countries that had this system have abandoned it. d. government guiding economic activity. Today many countries that did not have this system have implemented it.
C
Consider the market for gasoline. Buyers a. and sellers would lobby for a price ceiling. b. and sellers would lobby for a price floor. c. would lobby for a price ceiling, whereas sellers would lobby for a price floor. d. would lobby for a price floor, whereas sellers would lobby for a price ceiling.
C
Economists at the Department of Justice a. track the behavior of the nation's money supply. b. advise Congress on economic matters. c. help enforce the nation's antitrust laws. d. prepare the federal budget.
C
If marginal cost is rising, a. average variable cost must be falling. b. average fixed cost must be rising. c. marginal product must be falling. d. marginal product must be rising.
C
Laws that enforce chemical hazard control are examples of government intervention that is intended to reduce a. efficiency. b. equality. c. externalities. d. productivity.
C
Making rational decisions at the margin means that people a. make those decisions that do not impose a marginal cost. b. evaluate how easily a decision can be reversed if problems arise. c. compare the marginal costs and marginal benefits of each decision. d. always calculate the dollar costs for each decision.
C
Minimum-wage laws dictate a. the exact wage that firms must pay workers. b. only a maximum wage that firms may pay workers. c. only a minimum wage that firms may pay workers. d. both a minimum wage and a maximum wage that firms may pay workers.
C
Producer surplus directly measures a. the well-being of society as a whole. b. the well-being of buyers and sellers. c. the well-being of sellers. d. sellers' willingness to sell.
C
SEE QUESTION 25 The equilibrium price and quantity are a. $0.00 and 350 cases. b. $4.00 and 250 cases. c. $2.00 and 300 cases. d. $6.00 and 200 cases.
C
SEE QUESTION 26 If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. $625 b. $1,250 c. $2,500 d. $5,000
C
The decrease in total surplus that results from a market distortion, such as a tax, is called a a. wedge loss. b. revenue loss. c. deadweight loss. d. consumer surplus loss.
C
The minimum wage was instituted to ensure workers a. a middle-class standard of living. b. employment. c. a minimally adequate standard of living. d. unemployment compensation.
C
The opportunity cost of an item is a. the number of hours that one must work in order to buy one unit of the item. b. always less than the dollar value of the item. c. what you give up to get that item. d. always greater than the cost of producing the item.
C
The parable called the Tragedy of the Commons applies to goods and services such as a. police protection and cable TV. b. tornado sirens and medical research. c. grazing land and fishing. d. antipoverty programs and national defense.
C
Which of the following is an example of a positive, as opposed to normative, statement? a. If welfare payments increase, the world will be a better place. b. The income tax rate should be increased to offset the budget deficit. c. Prices rise when the government prints too much money. d. Antitrust laws should be used to prevent further concentration in the wireless telephone service market.
C
Which of the following is likely to have the most price elastic demand? a. Ice cream b. Frozen yogurt c. Häagen-Dazs® vanilla bean ice cream d. Vanilla ice cream
C
Which of the following is not correct? a. The economy contains many labor markets for different types of workers. b. The impact of a minimum wage depends on the skill and experience of the worker. c. A minimum wage would be binding for workers with high skills and much experience. d. A minimum wage would not be binding if the equilibrium wage was above the minimum wage.
C
Which of the following statements exemplifies a principle of individual decision making? a. Trade can make everyone better off. b. Governments can sometimes improve market outcomes. c. The cost of something is what you give up to get it. d. Prices rise when the government prints too much money.
C
the minimum wage was instituted to ensure workers a. a middle-class standard of living. b. employment. c. a minimally adequate standard of living. d. unemployment compensation.
C
the y-coordinate of an ordered pair specifies the a. diagonal location of the point. b. horizontal location of the point. c. vertical location of the point. d. quadrant location in which the point is located.
C
(SEE QUESTION 10) The equilibrium price is a. $10.00. b. $8.00. c. $6.00. d. $4.00.
D
. Eldin is a house painter. He can paint three houses per week. He is considering hiring his friend Murphy. Murphy can paint five houses per week. What is the maximum total output possible if Eldin hires Murphy? a. 2 houses b. 3 houses c. 5 houses d. 8 houses
D
A tax affects a. buyers only. b. sellers only. c. buyers and sellers only. d. buyers, sellers, and the government.
D
Economics is the study of how society manages its a. limited wants and unlimited resources. b. unlimited wants and unlimited resources. c. limited wants and limited resources. d. unlimited wants and limited resources.
D
Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by a. a market economy. b. a strong reliance on prices and individuals' self-interests. c. a system of large privately owned firms. d. the actions of government central planners.
D
SEE QUESTION 29 If these are the only two sellers in the market, then the market quantity supplied at a price of $6 is a. 12 units. b. 9 units. c. 8 units. d. 21 units.
D
Soup is an inferior good if the demand a. for soup falls when the price of a substitute for soup rises. b. for soup rises when the price of soup falls. c. curve for soup slopes upward. d. for soup falls when income rises.
D
Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct? a. Marshall's marginal tax rate is higher than Lily's marginal tax rate. b. Marshall's average tax rate is higher than his marginal tax rate. c. Lily's average tax rate is higher than her marginal tax rate. d. Lily's average tax rate is higher than Marshall's average tax rate.
D
Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $50,000? a. 12 percent and 20 percent, respectively b. 12 percent and $50,000, respectively c. $6,000 and 12 percent, respectively d. $6,000 and 20 percent, respectively
D
Suppose the number of buyers in a market increases and a technological advancement occurs also. What would we expect to happen in the market? a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
D
The line that relates the price of a good and the quantity demanded of that good is called the demand a. schedule, and it usually slopes upward. b. schedule, and it usually slopes downward. c. curve, and it usually slopes upward. d. curve, and it usually slopes downward.
D
Which of the following is not a characteristic of a perfectly competitive market? a. Different sellers sell identical products. b. There are many buyers and sellers. c. Sellers must accept the price the market determines. d. There is no free entry or exit.
D
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? a. There is no such thing as a free lunch. b. People buy more when prices are high than when prices are low. c. No matter how much people earn, they tend to spend more than they earn. d. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
D
Which of the following statements does not apply to a market economy? a. Firms decide whom to hire and what to produce. b. The "invisible hand" usually maximizes the income of society as a whole. c. Households decide which firms to work for and what to buy with their incomes. d. Government policies are the primary forces that guide the decisions of firms and households.
D
By definition, exports are a. goods produced abroad and sold domestically. b. goods produced domestically and sold abroad. c. goods produced and consumed domestically. d. goods produced and consumed abroad.
b