Microeconomics Test

For each of the following questions, select the choice that BEST corresponds with the answer. You will receive 10 points for each correct answer; 5 points will be deducted for each incorrect answer. Points will be neither awarded or taken away if you do not attempt to answer a question.
1. Which of the following would most likely result in the market price of a good falling?

Rising demand with falling supply
Rising demand with rising supply
Rising demand with unchanging supply
Falling demand with falling supply
Falling demand with rising supply
 

2. Which of the following are capital as defined by economists?

Stocks and bonds
Water and air
Gold and silver
Computers and wrenches
Cabins and boats
 

3. Which type of merger creates the greatest threat of increased monopoly power?

Conglomerate
Horizontal
Vertical
Diagonal
Multinational
 

4. If the production of a good creates negative externalities, the private market will produce

too much of the good at too low a price
too much of the good at too high a price
too little of the good at too high a price
too little of the good at too low a price
the right amount of the good at the correct price
 

5. Which of the following statements is/are true?

I. A price ceiling causes a shortage if the price ceiling is below the equilibrium price.
II. A price floor causes a surplus if the price floor is above the equilibrium price.
III. A price ceiling causes a shortage if the price ceiling is above the equilibrium price.
IV. A price floor causes a surplus if the price floor is below the equilibrium price.

I only
II only
III only
I and II only
III and IV only
 

6. If one of a firm's fixed costs rises,

its profit-maximizing output level will increase
its profit-maximizing output level will decrease
its profit-maximizing output level will not change
its profits will remain the same after it adjusts its output level (either up or down)
it would likely increase its price
 

7. All of the following are characteristics of oligopolies EXCEPT

large expenditures on advertising and product development
the existence of significant barriers to entry
"price-setting" through informal price leadership arrangements
considerable concentration of the means of production
extensive price competition to gain market share
 

8. The Toscano Pizza Company faces a demand for its pizzas which obeys the law of demand. Thus, if the owner lowers the price she charges per pizza, the number of pizzas sold would

rise as would her total revenues
rise, but her total revenues would fall
rise, while her total revenues could rise, fall, or even stay the same
fall as would her total revenues
fall, while her total revenues could rise, fall, or even stay the same
 

9. A public good is characterized by which of the following?

I. People who do not pay for the good can be excluded from using it.
II. If one person uses the good, it does not reduce its usefulness to others.
III. It is easy to determine who must pay the costs of the good.

I only
II only
III only
II and III only
I, II, and III
 

10. A newspaper reports, Coffee growers in Brazil and Colombia organized to consider world coffee supply levels. If this group should decide to act in a concerted effort for the benefit of the group as a whole, the likely result is

increased coffee production and prices
decreased coffee production and increased prices
increased prices with no change in coffee production
increased coffee production and decreased prices
coffee production and prices at competitive levels
 

11. Which of the following is necessary for perfectly competitive markets to exist?

Economies of scale in production
Advertising
Barriers to entry for new entrepreneurs
Firms with products which are perfect (identical) substitutes for each other
A few firms each with a large market share
 

12. What is the opportunity cost of buying a new car?

The value of other goods and services you could have purchased with the money you spent on the car
The price you paid for the car
The cost of operating and maintaining the car
The difference between the price of the car and the price of a used car
The difference between what the car costs now and what a similar car like it will cost a year from now
 

13. Stephanie's Waterbeds faces the demand shown below for its beds. Each bed costs $300 to produce (no matter how many are made). What price should Stephanie charge to maximize her profits?
Price (per bed)Quantity Demanded (per day)
$1,0001
$9002
$8003
$7004
$6005

$1,000
$900
$800
$700
$600
 

14. Property (or unearned) income (that is, profits, interest, and rents) accounts for approximately what percentage of total national income?

90 percent
70 percent
50 percent
20 percent
10 percent
 

15. Which of the following could cause supply to decrease in the short run?

A labor union representing the workers who produce this good is able to negotiate higher wages for its members.
More producers enter this industry.
The price of a close substitute for this good falls.
A large group of consumers decide to boycott this good due to the political beliefs of some of the producers.
A technological breakthrough in the production of this good lowers the cost of producing it.
 

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