Final Micro Econ Practice Questions Correctly Solved
Answers
1.Using the graph and beginning on D1, a shift to D0 would indicate a(n):
a) decrease in demand
b) increase in demand
c) decrease in quantity demanded
d) increase in quantity demanded: a) decrease in demand
2.When the marginal cost of a price-taking firm is less than the market
price of its product, the firm should:
a) reduce output (provided that price is not less than average variable cost)
b) expand output (provided that price is not less than average variable cost)
c) maintain output (provided that price is not less than average variable cost
d) charge more than the market price: b) expand output (provided that
price is not less than average variable cost)
3.Which of the following most closely determines the demand for labor?
a) the marginal physical product of labor
b) the marginal physical product of capital
c) the income effect and substitution effect on labor
d) the marginal revenue product of labor: d) the marginal revenue product o
labor
4.When an employee receives benefits such as paid vacation, which of
the following occurs?
a) wages> price of labor
b) wages = price of labor
c) wages < price of labor
d) more information is needed: c) wages < price of labor
5.In the long run, if as output expands average total cost increases, the
firm is experiencing;
a) economies of scale
b) constant returns to scale
c) diseconomies of scale
d) economies of scope: c) diseconomies of scale
6.Which of the following will cause an increase in quantity supplied?
a) a decrease in price
b) an increase in the number of sellers
c) an increase in price
d) a decrease in demand due to a decline in incomes: c) an increase in price
7.In monopoly and there are high barriers to entry, thus potential
for long run economic profits
,a) monopolistic competition; little
b) oligopoly; some
c) monopolistic competition; some
d) oligopoly; little: b) oligopoly; some
8.If, due to diminishing returns, the marginal physical product of labor
de- creases, we can expect the marginal cost of output to:
a) increase
b) not change
c) decrease: a) increase
9.If an increase in the price of Product X causes an increase in he demand
for Product Y, we can conclude that:
a) product X and Y are complements
b) product X and Y are normal goods
c) products X and Y are substitutes
d) the price of product Y will decrease: c) products X and Y are substitutes
10.Fred has a strong preference for Coke. Jason likes Coke and Pepsi
equally. Since Fred has a strong preference, he is less price sensitive and
his price elasticity demand for Coke will be , while Jason price elasticity of
demand for Coke will be .
a) more elastic; more inelastic
b) more inelastic; more elastic
c) more elastic; more inelastic
d) less inelastic; less elastic: b) more inelastic; more elastic
11.Buyers of a product are expecting prices to fall next year. Sellers have
no such expectation. What do you expect to happen to demand and rice?
a) demand and price will both decrease
b) demand will increase but price will decrease
c) demand will decrease but price will increase: a) demand and price will
both decrease
12.Del Taco estimates the price elasticity of demand for Tacos in the
entire market to be unit elastic. As a result Del Taco believes that the
demand for their brand is:
a) income elastic
b) unit elastic
c) elastic
d) inelastic: c) elastic
13.Using the data, the marginal cost of producing a third watch equals:
a) $5
b) $4
c) $50
, d) $69: b) $4
Answers
1.Using the graph and beginning on D1, a shift to D0 would indicate a(n):
a) decrease in demand
b) increase in demand
c) decrease in quantity demanded
d) increase in quantity demanded: a) decrease in demand
2.When the marginal cost of a price-taking firm is less than the market
price of its product, the firm should:
a) reduce output (provided that price is not less than average variable cost)
b) expand output (provided that price is not less than average variable cost)
c) maintain output (provided that price is not less than average variable cost
d) charge more than the market price: b) expand output (provided that
price is not less than average variable cost)
3.Which of the following most closely determines the demand for labor?
a) the marginal physical product of labor
b) the marginal physical product of capital
c) the income effect and substitution effect on labor
d) the marginal revenue product of labor: d) the marginal revenue product o
labor
4.When an employee receives benefits such as paid vacation, which of
the following occurs?
a) wages> price of labor
b) wages = price of labor
c) wages < price of labor
d) more information is needed: c) wages < price of labor
5.In the long run, if as output expands average total cost increases, the
firm is experiencing;
a) economies of scale
b) constant returns to scale
c) diseconomies of scale
d) economies of scope: c) diseconomies of scale
6.Which of the following will cause an increase in quantity supplied?
a) a decrease in price
b) an increase in the number of sellers
c) an increase in price
d) a decrease in demand due to a decline in incomes: c) an increase in price
7.In monopoly and there are high barriers to entry, thus potential
for long run economic profits
,a) monopolistic competition; little
b) oligopoly; some
c) monopolistic competition; some
d) oligopoly; little: b) oligopoly; some
8.If, due to diminishing returns, the marginal physical product of labor
de- creases, we can expect the marginal cost of output to:
a) increase
b) not change
c) decrease: a) increase
9.If an increase in the price of Product X causes an increase in he demand
for Product Y, we can conclude that:
a) product X and Y are complements
b) product X and Y are normal goods
c) products X and Y are substitutes
d) the price of product Y will decrease: c) products X and Y are substitutes
10.Fred has a strong preference for Coke. Jason likes Coke and Pepsi
equally. Since Fred has a strong preference, he is less price sensitive and
his price elasticity demand for Coke will be , while Jason price elasticity of
demand for Coke will be .
a) more elastic; more inelastic
b) more inelastic; more elastic
c) more elastic; more inelastic
d) less inelastic; less elastic: b) more inelastic; more elastic
11.Buyers of a product are expecting prices to fall next year. Sellers have
no such expectation. What do you expect to happen to demand and rice?
a) demand and price will both decrease
b) demand will increase but price will decrease
c) demand will decrease but price will increase: a) demand and price will
both decrease
12.Del Taco estimates the price elasticity of demand for Tacos in the
entire market to be unit elastic. As a result Del Taco believes that the
demand for their brand is:
a) income elastic
b) unit elastic
c) elastic
d) inelastic: c) elastic
13.Using the data, the marginal cost of producing a third watch equals:
a) $5
b) $4
c) $50
, d) $69: b) $4
