Introductory Microeconomics Practice Final Exam PDF

Introductory Microeconomics Practice Final Exam Professor Stephanie Thomas 1. Comparative Advantage and Production Assume that Brazil and Argentina can switch between producing coffee and producing soybeans at a constant rate. Brazil can pr...

Introductory Microeconomics Practice Final Exam Professor Stephanie Thomas 1. Comparative Advantage and Production Assume that Brazil and Argentina can switch between producing coffee and producing soybeans at a constant rate. Brazil can produce 15 tons of coffee or 10 tons of soybeans in one day, while Argentina can produce 10 tons of coffee or 20 tons of soybeans in one day. Assume that Brazil and Argentina each has 5 days available for production. Originally, each country divided its time equally between the production of coffee and soybeans. Now, each country spends all of its time producing the good in which it has a comparative advantage. As a result, the total output of soybeans increases by: a. 10 tons b. 20 tons c. 25 tons d. 30 tons 2. Supply and Demand What will happen to the equilibrium price and quantity of electric scooters if the price of gasoline increases, the cost of lithium batteries (used in electric scooters) decreases, and more firms enter the electric scooter market? a. Price will rise, and quantity will rise. b. Price will fall, and quantity will fall. c. Price will rise, and the effect on quantity is ambiguous. d. Quantity will rise, and the effect on price is ambiguous. 3. Elasticity If the price elasticity of demand for milk is -0.3, and the price of milk increases by 15%, the quantity demanded will: a. Increase by 4.5% b. Decrease by 4.5% c. Increase by 15% d. Decrease by 15% 4. Consumer Choice A consumer spends all of his income on two goods, X and Y. If the price of X decreases, the substitution effect will cause him to: a. Buy more of X and less of Y. b. Buy less of X and more of Y. c. Buy more of both X and Y. d. Buy less of both X and Y. 5. Market Structures In an oligopolistic market, firms: a. Are price takers. b. Sell identical products. c. Have significant control over price. d. Earn long-run economic profits. 6. Production Possibilities Frontier If a country's production possibilities frontier shifts outward, this could be due to: a. A decrease in the labor force. b. Technological advancement. c. A decrease in capital stock. d. An increase in unemployment. 7. Public Goods A public good is characterized by: a. Rivalry and excludability. b. Non-rivalry and non-excludability. c. Rivalry and non-excludability. d. Non-rivalry and excludability. 8. Externalities If a factory emits pollution into the air, this is an example of: a. A positive externality. b. A negative externality. c. A public good. d. A private cost. 9. Taxes If a tax is levied on buyers of a good, the: a. Supply curve will shift up. b. Supply curve will shift down. c. Demand curve will shift left. d. Demand curve will shift right. 10. Price Ceilings A binding price ceiling on a good: a. Is set above the equilibrium price. b. Is set below the equilibrium price. c. Creates a surplus of the good. d. Has no effect on the market. 11. Opportunity Cost The opportunity cost of an item is: a. The number of dollars needed to buy it. b. What you give up to get that item. c. Usually less than the dollar value of the item. d. The value of all the alternatives forgone. 12. Marginal Cost Marginal cost is the: a. Change in total cost divided by the change in quantity produced. b. Total cost divided by the number of units produced. c. Change in total cost divided by the change in labor used. d. Total cost minus fixed cost. 13. Perfect Competition In a perfectly competitive market: a. Firms have significant control over price. b. There are a small number of firms. c. Firms produce differentiated products. d. Firms are price takers. 14. Price Floors A binding price floor on a good: a. Is set above the equilibrium price. b. Is set below the equilibrium price. c. Creates a shortage of the good. d. Has no effect on the market. 15. Income Elasticity of Demand If the income elasticity of demand for a good is positive and greater than one, the good is: a. A necessity. b. An inferior good. c. A luxury. d. A substitute. 16. Substitution Effect When the price of a good decreases, the substitution effect causes the quantity demanded to: a. Increase for inferior goods only. b. Decrease for normal goods only. c. Increase for both normal and inferior goods. d. Decrease for both normal and inferior goods. 17. Law of Demand According to the law of demand, other things being equal, when the price of a good rises, the quantity demanded of the good: a. Increases. b. Decreases. c. Remains unchanged. d. Can increase or decrease. 18. Marginal Utility Marginal utility is: a. The total satisfaction received from consuming a good or service. b. The satisfaction received from consuming one additional unit of a good or service. c. The cost of producing one more unit of a good or service. d. The difference between total utility and total cost. 19. Price Elasticity of Supply If the price elasticity of supply is greater than one, supply is: a. Perfectly elastic. b. Elastic. c. Unit elastic. d. Inelastic. 20. Government Intervention A subsidy granted to producers of a good: a. Increases the supply of the good. b. Decreases the supply of the good. c. Leaves the supply of the good unchanged. d. Leaves the demand for the good unchanged.