PRINCIPLES OF MICROECONOMICS – Final Exam

If there are many available substitutes for a good, the demand is typically more:
a elastic
b inelastic
c unit elastic
d there is no connection

T or F? Inflation is a good example of a microeconomic topic.

What is the opportunity cost of living in a house you already own?
a. zero, because you already own it
b that mostly depends on current mortgage rates.
c the rent you receive if you rented the house out to someone.

Economics is best defined as the study of _____.

Suppose that you read in the newspaper that the price of motorcycles has decreased while the quantity has increased. What is the most likely explanation?
a demand has increased
b demand has decreased
c supply has increased
d supply has decreased

Suppose that the price of tea ^ from $0.50/cup to $0.60/cup, and consumption of tea drops 10%. Is there evidence of a shift in the demand curve?

which of these is a good reason for studying microeconomics?
a making more informed business decisions
b making better decisions w your own choices
c being more informed about policy issues
d all of the above

Which of the following is an economic explanation for trade?
a exporting helps the economy
b The World Trade Organization requires it
c specializing according to comparative advantage and trading
d trade helps eliminate jobs

Venezuela adopts the view that some goods are a necessity, so that price should not be allowed to rise. If they adopt policies that keep prices below equilibrium, what is the likely result?
a frustrated sellers
b frustrated buyers
c market clearing
d prosperity

Suppose that the demand for milk is very inelastic, and that environmental conditions destroy a significant portion of the milk supply. Which is the most likely result?
a no significant change in price or quantity
b large change in prices and small change in quantity
c small change in prices and a large change in quantity
d price and quantity change in similar proportions

Megan has $2. She wants Funions or Necco Wafers. She decides to buy Necco Wafers. What is her opportunity cost?

Over time, incomes are rising while computers are getting cheaper to produce. Given that computers are a normal good, which of the following is the most certain prediction?
a prices will fall
b prices will rise
c quantity traded will fall
d quantity traded will rise

Suppose that Donald decides that he is going to stop trading with anyone. What is the most likely outcome?

Having a comparative advantage in a particular task means that:
a you are better at it than other people
b you give up more to accomplish the task than others do
c you give up less to accomplish the task than others do
d you have specialized in that task, while others have not.

Suppose that you observe that eBooks are becoming more and more popular and less expensive. Which one of these explanations could lead to both of these happening?
a consumers are earning more, and eBooks are a normal good.
b fewer companies are producing eBooks
c the costs of producing eBooks has fallen
d the price of paperbacks-a substitute for eBooks-has fallen

What is the law of supply?

What is the standard rule for finding the profit maximizing level of output?

Which of these is the term for an industry in which there are many firms, selling identical goods?

Suppose that the market for novels has low barriers to entry. If producers are earning high profits, which will happen?

Suppose that you observe that smartphones are simultaneously becoming more popular and also less expensive. Which one of these explanations could explain both of these happening?

Venezuela enacts policies that prevent the prices of certain necessities - like food - from rising. Which of these is the most likely consequence of this policy?

Suppose that at a price of $3 per cup, Americans buy 150 million cups of coffee per day. If the price increases to $4.00 per cup, other things equal, what will coffee consumption be? (Assume that demand is NOT perfectly inelastic.)

Which of these best describes the behavior of a monopoly compared to a perfectly competitive market?

Which of these is the term for when small scale production is more cost efficient than large scale production?

Which of these is the equilibrium condition for a market?

When demand decreases, what happens to the equilibrium price and quantity?

Suppose that people develop a belief that eating eggs creates serious health problems. At the same time, Western states impose regulations that make the production of eggs more expensive. Which is the most certain prediction about equilibrium?

Economics is best defined as the study of

Which is the best example of a headline about microeconomics?

Which of the following is an economic explanation for trade?

Having a comparative advantage in a particular task means that

Suppose that we discover a new milking technique, allowing us to produce more milk. Which best describes what happens to the production possibilities frontier for dairy products?

Suppose that the demand for marijuana is very inelastic. Suppose then that a state decides to completely legalize marijuana for all uses, allowing free entry into the market. What probably happens to the total amount that marijuana users spend on marijuana?

If there are many available substitutes for a good, the demand is typically more

Suppose that the (straight line) demand curve for Netflix subscriptions includes a point where 90 million subscriptions are sold for $9 each, and a point where 100 million gallons are sold for $6 each. What is the elasticity of demand at a price of $6?

Which of these is a weakness of average cost pricing regulation?

Which of the following is a characteristic of a monopoly?

Suppose that shampoo is a monopolistically competitive industry. Suppose that most producers of shampoo are taking losses. What will happen to the price of shampoo in the long run?

Which market structure offers consumers the greatest variety of goods?

Suppose that Colgate undertakes a marketing campaign that turns out to be a great success, and increases the demand for Colgate. Which of the following would be the result?

Suppose that Feng produces computers and Margaret produces soybeans, and the two have agreed to trade with each other. Donald decides that the two should not be allowed to trade, and so stands between the two demanding that they pay him if they want to trade with each other. As a result of Donald's behavior, the two do not trade. What was the likely effect of Donald's behavior?