Intriguing Quiz On Microeconomics

72 Questions

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Microeconomics Quizzes & Trivia

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Questions and Answers
  • 1. 
    Which of the following causes a shift in quantity demand?
    • A. 

      Change in population

    • B. 

      Change in number of sellers

    • C. 

      Change in price

    • D. 

      Change in technology

  • 2. 
    A shift in demand
    • A. 

      Occurs because of a change in price

    • B. 

      Causes a shift along the curve

    • C. 

      Is a shift of the whole line either left or right

    • D. 

      Always causes higher prices

  • 3. 
    When a given percent change in price generates a LARGER percent change in the quantity demanded:
    • A. 

      Demand is inelastic

    • B. 

      Demand is elastic

    • C. 

      The consumer is NOT being very responsive to the change in price

    • D. 

      Both A and C

  • 4. 
    If Spain can produce wine with fewer resources than cloth, and China can produce cloth with fewer resources than wine, then, according to the principles of free trade:
    • A. 

      Spain has a comparative advantage in the production of wine

    • B. 

      China has a comparative in the production of wine

    • C. 

      Both countries should produce a surplus of both of these products

    • D. 

      Both countries should put a tariff on one of these products to promote free trade between them

    • E. 

      Both A & D

  • 5. 
    An inelastic demand curve
    • A. 

      Is not as steep as an elastic demand curve

    • B. 

      Can result from an overabundance of substitutes

    • C. 

      Is when a large charge in price is accompanied by a comparatively smaller change in quantity demanded

    • D. 

      Both B and C

  • 6. 
    A price floor creates
    • A. 

      A shortage

    • B. 

      A surplus

    • C. 

      Nothing

    • D. 

      Cannot tell from the information given

  • 7. 
    The point where marginal revenue is most equal to marginal cost in a firm is important because it is also where:
    • A. 

      Prices are the highest

    • B. 

      Total costs are the highest

    • C. 

      Profits are the highest

    • D. 

      Output is the lowest

  • 8. 
    From what was covered in class, when the government intervenes and a shortage is created, the government has most likely instituted a
    • A. 

      Price floor

    • B. 

      Price ceiling

    • C. 

      Monopoly

    • D. 

      Tax

  • 9. 
    Among high income occupations, those with the LOWEST correlation (connection) between high pay and job performance are:
    • A. 

      Movie stars like Tom Hanks

    • B. 

      "superstar" professional atheletes

    • C. 

      Entertainers like Garth Brooks

    • D. 

      Corporate CEO's of Fortune 100 companies

  • 10. 
    Economies of scale is defined as
    • A. 

      The period in which costs increase and output increases

    • B. 

      The period in which costs decrease and output decreases

    • C. 

      The period in which costs decrease and output increases

    • D. 

      None of the above

  • 11. 
    • A. 

      The degree of concentration of any industry, using only the largest four firms

    • B. 

      The degree of concentration of any industry, using all of the firms in the industry

    • C. 

      The potency of a drink consumed by people in the lowest household income group

    • D. 

      The value of Italy's imports plus its exports as a percent of GDP

  • 12. 
    At what point are profits maximized?
    • A. 

      ATC < ATR

    • B. 

      MR=MC

    • C. 

      P > min. ATC

    • D. 

      D=S

  • 13. 
    Which of the following is NOT an "other factor" determining the price elasticity of DEMAND for a product? 
    • A. 

      The number of substitutes available for the product

    • B. 

      The percent of income required to purchase the product

    • C. 

      The amount of technology required to produce the product

    • D. 

      Whether the product is perceived as a luxury or a necessity by the consumer

  • 14. 
    Which of the following firms engages in the least amount of advertising?
    • A. 

      PC

    • B. 

      MC

    • C. 

      O

    • D. 

      PM

  • 15. 
    Which of the following statements is correct about the five household income groups (from the lowest to highest in the bar chart presented in class) -- used to plot the Lorenz curve for the U.S.?
    • A. 

      The lowest income group is actually receiving a larger share of total national income than considered equitable

    • B. 

      The highest income group is actually receiving a smaller share of total national income than considered equitable

    • C. 

      Both the lowest and highest income groups each contain 20% of the total population

    • D. 

      All of the income groups together do not show a "reverse L" distribution of income that exists in most "Third-World" countries

    • E. 

      All of the above

  • 16. 
    Which of the following is the best example of a PC firm?
    • A. 

      Southwest Airlines

    • B. 

      San Antonio Express News

    • C. 

      Dairy Queen

    • D. 

      Drummond Ranch

  • 17. 
    The official poverty definition used by the U.S. government is a threshold of income inadequate to provide:
    • A. 

      Three times the cost of a minimum food budget

    • B. 

      Minimum biological needs

    • C. 

      The average income of the poorest twenty percent of the families in the population

    • D. 

      The average U.S. welfare allowance

  • 18. 
    The last wave of merger activity involved which kind of mergers?
    • A. 

      Horizontal

    • B. 

      Vertical

    • C. 

      Conglomerate

    • D. 

      All of the above

  • 19. 
    Which of the following firms has the greatest amount of profit to put into research and development?
    • A. 

      PC

    • B. 

      PM

    • C. 

      O

    • D. 

      MC

  • 20. 
    Which of the following choices best arranges the four industry models from least concentrated to most concentrated?
    • A. 

      PC,MC,PM,O

    • B. 

      PM,O,MC,PC

    • C. 

      PC,MC,O,PM

    • D. 

      O,PC,PM,MC

  • 21. 
    A backward bending S curve demonstrates
    • A. 

      Elasticity of supply

    • B. 

      How much labor you are willing to supply based on the wage you receive

    • C. 

      How much labor you are willing to supply based on the opportunity cost of working somewhere else

    • D. 

      None of the above

  • 22. 
    Which of the following measures our distribution of income?
    • A. 

      Gini Coefficient

    • B. 

      Herfindahl Index

    • C. 

      Concentration Ratio

    • D. 

      HH Y Groups

  • 23. 
    Which of the following is true about comparative advantage?
    • A. 

      It is an outdated system of trade that resulted in the United States obtaining 95% of the world's gold supply and was therefore abandoned

    • B. 

      It is a result of tariffs and quotas being placed on imports, thereby giving domestic industries an advantage over foreign industries

    • C. 

      It occurs when two countries compare their economies and determine who is better

    • D. 

      It occurs when one country devotes resources to the production of a good they are efficient at making and trade the surplus to another country in return for goods they are inefficient at making

  • 24. 
    We say the U.S. dollar has appreciated in value when
    • A. 

      It takes more dollars to buy another currency

    • B. 

      It takes less dollars to buy another country

    • C. 

      Everyone accepts the dollar regardless of what country they are in

    • D. 

      None of the above

  • 25. 
    Which of the following can affect the balance of trade?
    • A. 

      Currency appreciation

    • B. 

      Currency depreciation

    • C. 

      Imports and exports

    • D. 

      All of the above

  • 26. 
    Protectionism results in 
    • A. 

      The benefit of one sector of the economy at the expense of the economy as a whole

    • B. 

      The benefit of the whole economy at the expense of a few sectors

    • C. 

      Free trade between countries

    • D. 

      A decrease in tariffs and quotas

  • 27. 
    The balance of payments is determined by adding
    • A. 

      The net revenue from imports and exports

    • B. 

      The net revenue from the flow of investments

    • C. 

      Money left over in SDR accounts at the IMF

    • D. 

      All of the above

  • 28. 
    Free trade
    • A. 

      Places tariffs and quotas on imports to help our domestic industries

    • B. 

      Hurts our national economy

    • C. 

      Benefits of the whole economy at the expense of a few sectors

    • D. 

      Benefits one sector of the economy at the expense of the economy as a whole

  • 29. 
    An increase in price will lead to a decrease in demand for the same product.
    • A. 

      True

    • B. 

      False

  • 30. 
    A change in the number of sellers can result in a change in supply.
    • A. 

      True

    • B. 

      False

  • 31. 
    When a change in price is accompanied by a larger change in quantity, demand and supply are considered inelastic
    • A. 

      True

    • B. 

      False

  • 32. 
    Supply tends to become more inelastic over time.
    • A. 

      True

    • B. 

      False

  • 33. 
    Poverty spending as a percentage of GDP has increased dramatically.
    • A. 

      True

    • B. 

      False

  • 34. 
    Foreign aid has shown to have a great effect on poverty overseas.
    • A. 

      True

    • B. 

      False

  • 35. 
    Last month, 1.40 USD was equivalent to 1 Euro. This month, 1.50 USD is equivalent to 1 Euro. It can be said that our currency has appreciated in value.
    • A. 

      True

    • B. 

      False

  • 36. 
    The balance of trade is determined by adding together the balance of payments, balance of investment flows, and our SDR account at the IMF.
    • A. 

      True

    • B. 

      False

  • 37. 
    A deficit int he balance of trade is carried over into the next fiscal year and added into our total national debt.
    • A. 

      True

    • B. 

      False

  • 38. 
    Which of the following statements about poverty in the U.S. is correct?
    • A. 

      Spending more on poverty aid always just increases the rate of poverty

    • B. 

      As a percent of Federal budget expenditures, we are spending more on poverty today than in 1960

    • C. 

      The "War on Poverty" in the 1960s was a complete failure

    • D. 

      In the U.S., people in poverty tend to remain in poverty their entire lives

  • 39. 
    A tariff:
    • A. 

      Legally specifies the maximum amount of import ceilings

    • B. 

      Increases the supply of imported goods into the country that has established the tariff

    • C. 

      Is a special tax applied only to internationally traded goods, and is paid by the exporter of the goods

    • D. 

      Helps increase incomes in foreign countries

    • E. 

      Both C and D

  • 40. 
    A fundamental reason that countries engage in trade is that:
    • A. 

      It is more expensive to buy some goods from other countries than to produce them at home

    • B. 

      It improves the standard of living in the country

    • C. 

      Domestic markets are continually shrinking

    • D. 

      Importing more goods than exporting goods reduces a country's balance of trade deficit

  • 41. 
    The more UNequal the distribution of income in an economy:
    • A. 

      The more social and political stability

    • B. 

      The more developed the economy

    • C. 

      The disparity between a Lorenz curve and its 45-degree line is greater

    • D. 

      The disparity between a Lorenz curve and its 45-dgree line is less

  • 42. 
    The distribution of income in the United States:
    • A. 

      Has improved since 1935, but worsened since 1972

    • B. 

      Has worsened since 1935, but improved since 1972

    • C. 

      Is about the same as the distribution of income in most of the less developed countries

    • D. 

      Is better than the distribution of income in the countries of Western Europe and Japan

  • 43. 
    Monopolistically Competitive (MC) industries are made up primarily of:
    • A. 

      A few big businesses, most of which control a large share of their total industry market

    • B. 

      Farmers who have no control over market price

    • C. 

      Only the big businesses that are regulated public utility firms

    • D. 

      Small businesses that we deal with on a daily basis

  • 44. 
    A major reason why the firms in the "competitive" industries (PC and MC) are efficient is that:
    • A. 

      They can produce at low output levels and make high profits

    • B. 

      They can earn consistently high profits over the long run

    • C. 

      They must watch their costs carefully

    • D. 

      They can charge high prices to consumers

  • 45. 
    A price that is maintained ABOVE market equilibrium will generate:
    • A. 

      A surplus

    • B. 

      A shortage

    • C. 

      A condition where the quantity demanded is equal to the quantity supplied

    • D. 

      Both A and C

  • 46. 
    Which of the following statements about U.S foreign trade is correct?
    • A. 

      Our exports have exceeded our imports since 1981

    • B. 

      Our foreign trade is only about 1% of total world trade

    • C. 

      Our imports have exceeded our exports since 1981

    • D. 

      Our imports and exports together are smaller than for most countries

  • 47. 
    PROTECTIONISTS argue that tariffs and quotas:
    • A. 

      Improve our protected industries and therefore the entire economy

    • B. 

      Reduce incomes in countries overseas and therefore the demand for our exports

    • C. 

      Protect a few of our inefficient industries at the expense of several other healthy ones

    • D. 

      Increase GDP in countries worldwide

  • 48. 
    Which of the following statements about U.S. expenditures on foreign aid is correct?
    • A. 

      They have been increasing since 1960

    • B. 

      They have been decreasing since 1960

    • C. 

      They have remained the same since 1960

    • D. 

      They have reduced the rate of poverty overseas by one half

  • 49. 
    If firms in an industry are experiencing a HIGHER concentration ratio over time, this indicate that:
    • A. 

      Less competition is taking place among the firms in the industry

    • B. 

      Mergers by firms in the industry are now less likely to be allowed by the Justice Department

    • C. 

      The firms in the industry have experienced lots of merger activity

    • D. 

      All of the above

  • 50. 
    Oligopolistic (O) industries are made up primarily of:
    • A. 

      Big businesses

    • B. 

      Public utility firms

    • C. 

      Agricultural firms

    • D. 

      Small firms

  • 51. 
    A difference between the perfectly competitive type of firm (PC) and the monopolistically competitive type of firm (MC) is that:
    • A. 

      PC earns norm profits in the LR, and MC earns above norm or econ profits in the LR

    • B. 

      PC faces a semi-elastic demand for its output; MC faces a perfectly elastic demand for its goods

    • C. 

      PC must onside the reactions of its competitors when considering a price change; MC does not need to worry about its competitors' reactions to its price changes

    • D. 

      PC accepts the market price determined by the supply and demand conditions of its industry, MC does not have to accept the exact price set by its industry

  • 52. 
    The types of industries that tend to earn ECONOMIC profits in the long run include:
    • A. 

      PC and PM (unregulated) firms

    • B. 

      O and PM (unregulated) firms

    • C. 

      MC and O firms

    • D. 

      PC and MC firms

  • 53. 
    The kinked demand curve of an oliogopolist is based on the assumption that:
    • A. 

      The firm has no control over market price

    • B. 

      The firm will always suffer a loss in the long run

    • C. 

      Competitors will match a price cut, but ignore a price increase

    • D. 

      Competitors will ignore a price cut, but match a price increase

  • 54. 
    Which of the following is a characteristic of pure competition (PC)?
    • A. 

      Entry into the industry is difficult for new firms

    • B. 

      A small number of firms make up the industry

    • C. 

      There is absence of non-price competition (advertising) among firms in the industry

    • D. 

      The products are all different among firms in the industry

  • 55. 
    An example of a firm that is both unregulated and a monopoly is:
    • A. 

      Ford Motor Company

    • B. 

      USX Steel Corporation

    • C. 

      DeBeers Diamond Company

    • D. 

      McDonalds

    • E. 

      City Public Service (CPS) in San Antonio

  • 56. 
    In the SHORT RUN, an Oligopolistic firm (O) will earn:
    • A. 

      Economic or above norm profits

    • B. 

      Norm profits

    • C. 

      Negative profits (losses)

    • D. 

      Any of the above are possible

  • 57. 
    Which of the following is NOT a necessary condition for a firm to carry out price discrimination over a sustained period of time?
    • A. 

      The seller must possess some degree of monopoly power

    • B. 

      The seller must be part of a PC industry

    • C. 

      The seller must be able to segment the market, that is, to identify buyers who will pay differing prices and keep them apart

    • D. 

      The seller must be able to prevent the buyer who is paying a low price from reselling the good at a higher price (scalping)

  • 58. 
    In chapter 8 of the text, the presentation of long run costs indicates that if a firm can expand its size by adding more plants over several years, and also bring its per unit costs down, it is experiencing:
    • A. 

      The law of diminishing returns

    • B. 

      Decreasing profits

    • C. 

      Diseconomies of scale

    • D. 

      Economies of scale

  • 59. 
    In the model of pure competition (PC), the firm's marginal revenue curve is:
    • A. 

      Perfectly elastic

    • B. 

      Perfectly inelastic

    • C. 

      The same as the firm's demand curve

    • D. 

      Both A and C

  • 60. 
    Which of the following type of businesses is LEAST likely to be involved in price discrimination?
    • A. 

      A wheat farmer in Kansas

    • B. 

      A dry cleaner

    • C. 

      A movie theater in San Antonio

    • D. 

      An auto dealer

  • 61. 
    We as consumers usually accept price discrimination if:
    • A. 

      The custom of the society is to bargain for the price of the good

    • B. 

      The price discrimination invokes a small amount of money

    • C. 

      There is knowledge of alternatives to paying the higher price

    • D. 

      All of the above

  • 62. 
    The best short description of the control over price in a purely competitive firm (PC) IS:
    • A. 

      Some within limits

    • B. 

      Absolute if unregulated

    • C. 

      Considerable with collusion

    • D. 

      Little to none

  • 63. 
    The main reason why the firms in the competitive industries (PC and MC) are considered among the most efficient:
    • A. 

      They are both made up of large firms in the U.S. economy

    • B. 

      They earn consistently high profits over the LR

    • C. 

      They must watch their costs carefully

    • D. 

      They can charge high prices to the consumer

  • 64. 
    A few years ago, Southwestern Bell Corporation now (SBC) of San Antonio merged with Pacific Bell Corporation. This was a:
    • A. 

      Leveraged buy out

    • B. 

      Vertical merger

    • C. 

      Horizontal merger

    • D. 

      Conglomerate merger

  • 65. 
    The type of firm in which government regulation of price and output is most justified is:
    • A. 

      A "natural" monopoly

    • B. 

      A "progressive" oligopoly

    • C. 

      A perfectly competitive firm

  • 66. 
    Among the industries in which of the firms have some control over their prices, a "stickiness" or "rigidity" of prices occurs most often in the OLIGOPOLISTIC type of industry.
    • A. 

      True

    • B. 

      False

  • 67. 
    The Herfindahl Index measures the degree of concentration among ALL the firms in an industry
    • A. 

      True

    • B. 

      False

  • 68. 
    The ability to finance research and development from LR profits is a strong point for firms in the PC type of industry
    • A. 

      True

    • B. 

      False

  • 69. 
    A "conglomerate" type of merger occurs when one firm merge with another firm in the SAME industry.
    • A. 

      True

    • B. 

      False

  • 70. 
    The balance of trade for the U.S. is the same as the:
    • A. 

      Current account of our balance of payments

    • B. 

      Capital account of our balance of payments

    • C. 

      Reserve account of our balance of payments

    • D. 

      Account of our SDR in the IMF

  • 71. 
    The long-run effect of tariffs on goods imported into the U.S. leads to:
    • A. 

      Lower foreign sales by U.S. exporters

    • B. 

      Higher employment in the whole U.S.

    • C. 

      Higher incomes in foreign countries

    • D. 

      A stronger national defense in the U.S.

  • 72. 
    If the quantity supplied is completely unresponsive to changes in price, it is:
    • A. 

      Somewhat elastic

    • B. 

      Somewhat inelastic

    • C. 

      Unitary elastic

    • D. 

      Perfectly elastic

    • E. 

      Perfectly inelastic