Microeconomics Prep Questions Midterm Chapters 1-5
When a market is in equilibrium,
a) total surplus is maximized
b) consumer surplus is minimized
c) producer surplus is minimized
d) all of these are true
After getting a raise at work, Jennie now regularly buys steak instead of hamburger. Bas...
1). When a market is in equilibrium,
a) total surplus is maximized
b) consumer surplus is minimized
c) producer surplus is minimized
d) all of these are true
Ans: total surplus is maximized
2). After getting a raise at work, jennie now regularly buys steak instead of hamburger. based
on this behavior we can assume:
a) steak is a normal good, and hamburger is an inferior good for jennie
b) steak and hamburger are complementary goods to jennie
c) steak is an inferior good, and hamburger is normal good for jennie
d) we cannot make any of these assumptions about jennie
Ans: steak is a normal good, and hamburger is an inferior good for Jennie
3). The slopes of the production possibilities curves for two nations reflect the:
a) relative prices of the resources in the two nations
b) opportunity costs of production in the two nations
c) average income levels in the two nations
d) amounts of imports and exports of the two nations
Ans: opportunity costs of production in the two nations
4). If the price of a domino's pizza decreases, while the price of a pizza hut pizza doesn't, we
expect the quantity of pizza hut pizza demanded to:
a) decrease as some people switch from pizza hut to the relatively cheaper domino's
b) increase as some people switch from pizza hut to the relatively cheaper domino's
c) decrease as some people switch from pizza hut to the relatively more expensive
domino's
d) increase as some people switch from pizza hut to the relatively more expensive domino's
Ans: decrease as some people switch from Pizza Hut to the relatively cheaper
Domino's
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, 5). Deadweight loss:
a) creates efficiency in markets
b) is the loss of total surplus that results when the quantity of a good that is bought and
sold is equal the market equilibrium quantity
c) is the loss of total surplus that results when the quantity of a good that is bought and
sold is below the market equilibrium quantity
d) always occurs in markets
Ans: is the loss of total surplus that results when the quantity of a good that is bought
and sold is below the market equilibrium quantity
6). Suppose an american worker can make 50 pairs of gloves or grow 300 radishes per day. a
bangladeshi worker, on the other hand, can produce 100 pairs of gloves or grow 200
radishes per day. using the concepts of absolute and comparative advantage, we can say
that:
a) the united states has the comparative advantage in neither the production of gloves nor
radishes
b) the united states has the comparative advantage in the the production of gloves only
c) the united state has the comparative advantage in the production of both gloves and
radishes
d) the united states has the comparative advantage in the production of radishes only
Ans: the United States has the comparative advantage in the production of radishes
only
7). Suppose when the price of calculators in $10, the quantity demanded is 100, and when the
price is $12, the quantity demanded drops to 80. using the midpoint method, the price
elasticity of demand is:
a) -.81
b) -1.22
c) -81 percent
d) -122 percent
Ans: -1.22
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, 8). Which of the following prices could represent sally's willingness to pay for a pair of shoes if
she bought them for $45?
a) $55
b) $15
c) $25
d) $49.99
Ans: $55
9). An unintended consequence of price floors is:
a) the loss of total surplus always outweighs the benefits of the policy
b) the non-price rationing must occur, and can lead to bribes
c) the transfer of surplus from consumer to producer is rarely recognized
d) the cost to taxpayers if the government buys all surplus
Ans: the cost to taxpayers if the government buys all surplus
10). An effective price floor:
a) will set a legal maximum price in a market
b) will increase total well being
c) will cause quantity demanded to exceed quantity supplied
d) will cause quantity supplied to exceed quantity demanded
Ans: will cause quantity supplied to exceed quantity demanded
11). A seller's willingness to sell:
a) is the maximum price that a seller is willing to accept in exchange for a good or service
b) is their maximum reservation price
c) is the minimum price that a seller is willing to accept in exchange for a good or service
d) must always equal the buyer's willingness to buy
Ans: is the minimum price that a seller is willing to accept in exchange for a good or
service
12). After you purchased a coffee cup from your local gas station for $5.00, you can always refill
your cup for $0.50. the sunk cost of the coffee purchased at the gas station is:
a) $5.00
b) $0.50
c) $5.50
d) $10.00
Ans: $5.00
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