Exam
1: Microeconomics
Answers
1.
The best measure of the
economic cost of doing your homework is the
a.
best opportunity you give
up when you do your homework.
b.
amount you would have to
pay to get someone else to do it.
c.
accounting cost plus the
explicit cost of doing the homework.
d.
tuition paid for your
schooling.
e.
time it takes to do your
homework.
2.
Which of the following best
describes the way resources are allocated in the U.S. economy?
a.
by markets
b.
by command
c.
by tradition
d.
by government
e.
by command and government
3.
The fundamental problem of
economics is
a.
for whom to produce.
b.
the scarcity of resources
relative to human wants.
c.
how to get government to
operate efficiently.
d.
how to create employment
for everyone.
e.
how to create wants and
needs.
4.
Which of the following can
change without shifting demand?
a.
consumer income
b.
consumer taste
c.
the price of the good
itself.
d.
the prices of other goods.
e.
buyer’s expectations.
5.
In a competitive market,
the price of a good is determined by
a.
only the market power of
buyers.
b.
only the market power of
sellers.
c.
the market power of the
government.
d.
the interaction of buyers
and sellers.
e.
what sellers wish to sell.
6.
The essential signal of
the market mechanism is
a.
income.
b.
price.
c.
property.
d.
government directive.
e.
money.
7.
If the price of tea
increases, the probable result would be
a.
a decrease in the demand
for tea.
b.
decreases in the prices of
substitutes for tea.
c.
increases in demand for
products that are substitutes for tea.
d.
a decrease in the supply
of tea.
e.
an increase in the demand
for products that are complements for tea.
8.
A rise in the price of
corn gives farmers a greater incentive to
a.
decrease the costs of
producing corn.
b.
decrease the price of
corn.
c.
devote more acreage to
corn production.
d.
devote more acreage to
wheat production.
e.
seek government
protection.
9.
If, at the present output
level, price exceeds marginal cost, the purely competitive firm
a.
is maximizing its profit
or minimizing its loss.
b.
should increase output to
maximize its profit or minimize its loss.
c.
should reduce output to
maximize its profit or minimize its loss.
d.
should increase its price
to maximize its profit or minimize its loss.
e.
should shut down.
10.
Which of the following is not
an element of industry structure?
a.
the number of sellers in
the industry
b.
the extent of barriers to
entry
c.
the existence of economic
profits
d.
the nature of the product;
the degree of product differentiation
e.
the size distribution of
the firms in the industry
11.
The purpose of a pollution
tax is to
a.
force firms to internalize
their external costs.
b.
force firms to cease
production.
c.
make a product’s price
more accurately reflect the true private cost of its production.
d.
encourage polluting firms
to expand output to the socially optimal level.
e.
encourage firms to
pollute.
12.
A tax is _____ if it takes
a constant fraction of income as income rises.
a.
regressive
b.
proportional
c.
progressive
d.
ability-to-pay
e.
benefits-received
13.
When there is a surplus of
output in a market
a.
buyers desire to purchase
more than is produced.
b.
there is downward pressure
on price.
c.
the market could still be
in equilibrium.
d.
there are too many buyers
chasing too few goods.
e.
price is lower than the
equilibrium price.
14.
Which of the following is least
likely to be a variable cost?
a.
the cost of raw materials
b.
the wages of production
workers
c.
insurance premiums
d.
shipping expenses
e.
energy costs
15.
Which of the following
would most
likely result in the market price of a good falling?
a.
rising demand with falling
supply
b.
rising demand with rising
supply
c.
rising demand with
unchanging supply
d.
falling demand with
falling supply
e.
falling demand with rising
supply
A
A
B
C
D
B
C
C
B
C
A
B
B
C
E