Quiz Yourself On Microeconomics

24 Questions

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Quiz Yourself On Microeconomics

You can be a complete novice or the most experience person in a particular field of work or study, and a helpful quiz on that topic will still benefit you, whether it’s to add to your knowledge or simply to reinforce it. Today, we’ll be taking a look at the subject of microeconomics and seeing just how much you can tell us about how it all works. Think you can achieve full marks? Let’s find out!


Questions and Answers
  • 1. 
    • A. 

      Businesses would lose money if they offered free lunches

    • B. 

      The thought of a free lunch is often better than the reality of consuming it

    • C. 

      There are always opportunity costs when scarce resources are used to prepare lunches

    • D. 

      Businesses use free lunches to attract customers but this advertising practice is costly

  • 2. 
    As a result of a decrease in the price of hamburger, producers reduce the supply of hamburger. This is an illustration of:
    • A. 

      A shift in the supply curve due to the price effect

    • B. 

      Changing production in response to resource cost changes

    • C. 

      The desire of producers to restrict supply to maximize their profits

    • D. 

      A movement along the supply curve

  • 3. 
    Which of the following is most likely to cause an increase (shift) in the supply curve for cell phones?
    • A. 

      A decrease in the rates charged by cell phone companies for using cell phones

    • B. 

      An elimination of tariffs on imported cell phones

    • C. 

      Manufacturers of cell phones decide to raise the price of cell phones

    • D. 

      A decrease in the rates charged by companies that provide “land line” services

  • 4. 
    In which range of the demand schedule below is demand price elastic?
    • Price   Quantity Demanded
    • $7                   200
    • 5                     300
    • 3                     400
    • 1                     500
    • 0                     600
    • A. 

      $0-$1

    • B. 

      $1-$3

    • C. 

      $3-$5

    • D. 

      $5-$7

  • 5. 
    A remote island nation is discovered, and on this island the cross elasticity of demand for coconut milk and fruit punch is 1.0. This indicates that these two goods are:
    • A. 

      Normal

    • B. 

      Inferior

    • C. 

      Complements

    • D. 

      Substitutes

  • 6. 
    The main determinant of elasticity of supply is the:
    • A. 

      Number of close substitutes for the product available to consumers.

    • B. 

      Amount of time the producer has to adjust inputs in response to a change in product price.

    • C. 

      Extent to which the product is a necessity.

    • D. 

      Number of uses for the product.

  • 7. 
    The supply of product X is elastic if the price of X rises by:
    • A. 

      5 percent and quantity supplied rises by 7 percent

    • B. 

      8 percent and quantity supplied rises by 8 percent

    • C. 

      10 percent and quantity supplied remains the same

    • D. 

      7 percent and quantity supplied rises by 5 percent

  • 8. 
    A necessary and sufficient condition for a rational consumer to be in equilibrium is that the marginal utility:
    • A. 

      Of all products he or she consumes is zero

    • B. 

      Of all products he or she consumes is positive

    • C. 

      Is the same for all products bought

    • D. 

      Per dollar last spent is the same for all products consumed

  • 9. 
    The long-run supply curve would be upsloping in:
    • A. 

      An increasing-cost industry

    • B. 

      A decreasing-cost industry

    • C. 

      A constant-cost industry

    • D. 

      A variable-cost industry

  • 10. 
    A natural monopoly occurs when:
    • A. 

      Long-run average total costs decline continuously through the full range of market demand

    • B. 

      A firm owns or controls all the resources essential to production

    • C. 

      Long-run average costs rise continuously as output is increased

    • D. 

      Maximum economies of scale are obtained at relatively low levels of output

  • 11. 
    Which of the following actions would definitely be in violation of anti-trust laws?
    • A. 

      If there are 5 firms in an industry characterized as an Oligopoly, and the leaders of the firms meet and agree to take turns as the low bidder on government contract opportunities

    • B. 

      All the firms in an industry are found to be charging the same price for their products

    • C. 

      In an industry the Herfindahl index score is 1500, and one of the firms has a 50% market share, each of the firm decides to pursue a strategy that is lower price based on their expectation that the other firms will not change their prices

    • D. 

      Mergers in an industry result in a decline in the number of competitive firms and a 4 firm concentration ratio of 80%

  • 12. 
    Prices are likely to be more rigid (less likely to fluctuate):
    • A. 

      In oligopoly

    • B. 

      In monopolistic competition

    • C. 

      Where product demand is inelastic

    • D. 

      None of the above

  • 13. 
    Refer to the above game theory matrix where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax’s profits are shown in the upper right part of each cell; Acme’s profits are shown in the lower left. If the two firm engage in collusion, the most likely outcome of the game is cell: Ajax's Advertising Stragy                Large Budget             Small Budget Large            A.                               B. Budget      $800/800                   $1200/600 Small            C.                               D. Budget      $600/1200                 $1000/1000
    • A. 

      A.

    • B. 

      B.

    • C. 

      C.

    • D. 

      D.

  • 14. 
    Monopolistic competition resembles pure competition because:
    • A. 

      Both market structures emphasize non-price competition

    • B. 

      In both instances firms will operate at the minimum point on their long-run average total cost curves

    • C. 

      Both entail the production of differentiated products

    • D. 

      In both instances barriers to entry are either weak or nonexistent

  • 15. 
    Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a:
    • A. 

      Lower price and lower output

    • B. 

      Higher price and lower output

    • C. 

      Higher price and higher output

    • D. 

      Price and output that may be higher or lower

  • 16. 
    Under the kinked demand curve model of oligopoly, which of the following is true:
    • A. 

      The firms are in violation of the Sherman Antitrust Act

    • B. 

      If the marginal cost of one of the firms rises sufficiently, it may raise its price

    • C. 

      All of the firms agree to keep prices rigid to avoid competition

    • D. 

      All of the above

  • 17. 
    Assume that a restaurant is hiring labor in an amount such that the marginal resource cost of the last worker is $10 and the marginal revenue product for the last worker hired is $12. On the basis of this information we can say that:
    • A. 

      Profits will be increased by hiring fewer workers

    • B. 

      Profits will be increased by hiring more workers

    • C. 

      Marginal revenue product must exceed average revenue product

    • D. 

      The restaurant is maximizing profits

  • 18. 
    • A. 

      Use more labor and less fertilizer

    • B. 

      Use more fertilizer and less labor

    • C. 

      Use more labor and more fertilizer

    • D. 

      Continue using the same amounts of each input

  • 19. 
    In pure competition, a profit-maximizing firm will equate the marginal revenue product of labor with the:
    • A. 

      Marginal resource cost of labor

    • B. 

      Profits produced by the employment of an extra worker

    • C. 

      Cost of producing one extra unit of output

    • D. 

      Price received from selling one extra unit of output

  • 20. 
    Other things equal, the monopsonistic employer will pay a:
    • A. 

      Lower wage rate and hire fewer workers than will a purely competitive employer

    • B. 

      Higher wage rate but hire fewer workers than will a purely competitive employer

    • C. 

      Lower wage rate but hire a larger number of workers than will a purely competitive employer

    • D. 

      Higher wage rate and hire a larger number of workers than will a purely competitive employer

  • 21. 
    Which of the following is most associated with the demand-enhancement union model?
    • A. 

      Reducing the price of inputs that are substitutes for union workers

    • B. 

      Lobbying for increases in public expenditures on the product it is producing

    • C. 

      Restricting the number of workers allowed to work in the industry

    • D. 

      Increasing the price of products that are complements for the one it is producing

  • 22. 
    Refer to the above diagram. If this labor market is monopsonistic, the wage rate and level of employment respectively will be:
    • A. 

      D and E

    • B. 

      C and F

    • C. 

      B and F

    • D. 

      A and F

  • 23. 
    The Gini ratio:
    • A. 

      Measures the relative extent of poverty in a nation

    • B. 

      Compares the income of persons, households, or households at the 90th percentile of the income distribution to the income at the 10th percentile

    • C. 

      Is a numerical measure of the extent of income inequality in a nation

    • D. 

      None of the above

  • 24. 
    The crowding model of discrimination suggests that:
    • A. 

      Women and selected minorities are systematically excluded from high-paying occupations and crowded into low-paying occupations, decreasing their wages and reducing domestic output

    • B. 

      Employers having high discrimination coefficients will be crowded out of the market by nondiscriminating employers in the long run

    • C. 

      Firms will base hiring decisions on group averages, rather than on individual characteristics and productivity

    • D. 

      Occupational segregation is largely the result of the “taste for discrimination” among employers