Microeconomics Part-1

Question-1

There is a negative relationship between two variables if: 

they move in opposite directions.

they move in the same direction.

one variable changes and the other does not.

neither variable moves

Question-2

The study of the choices made by individual households, firms, and government is called:

A) macroeconomics.

B) microeconomics.

C) managerial economics.

D) market economics.

Question-3

According to the principle of diminishing returns, if the number of workers increased beyond the point of diminishing returns, then the additional worker

Increases total output by the same amount as previous workers

Increases total output by more than the amount of previous workers

Increases total output by less than the amount of previous workers

Decreases total output

Question-4

A firm produces its products using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50 percent. Which of the following is the most likely explanation of this finding?

a. The principle of opportunity cost

b. The principle of diminishing returns

c. The marginal principle

d. The spillover principle

Question-5

The marginal principle implies that an individual should produce or consume where

a. marginal benefit exceeds marginal cost

b. marginal benefit is less than marginal cost

c. marginal benefit equals marginal cost

d. total benefit equals total cost

Question-6

The price of iPhones has fallen dramatically. Which of the following is likely to happen?

A. The quantity of iPhones supplied will decrease.

B. The quantity of iPhones supplied will increase.

C. The supply of iPhones will Decrease.

D. The supply of iPhones will increase.

Question-7

If the equilibrium price of a good decreases and the equilibrium quantity of the good decreases, we can conclude that

Demand increased

Demand decreased

Supply increased

Supply decreased

Question-8

When the price of apples goes up

The demand for apples will decrease,  ceteris paribus

B) The demand for apples will decrease,  ceteris paribus

C) The quantity of apples demanded will decreases,  ceteris paribus

D) The quantity of apples demanded will decreases, ceteris paribus

Question-9

If the demand for school ball caps is inelastic, an increase in price will result in: 

a decrease in profits

an increase in total revenue

 a decrease in total revenue

an increase in the quantity demanded.

Question-10

The quantity supplied of hot dogs is 200 at the unit price of $3.50. Suppose the price elasticity of supply by the initial value method is 2, and you would like to induce seller to increase the quantity of hot dogs supplied to 220. The new price must be: 

a. $1.50 

b. $2.00 

c. $2.50 

d. $3.00

All options are wrong. To increase the quantity supplied, price should increase. So, new price should be greater than $3.50

Question-11

A ban on imports will ____ domestic producer surplus and ____ domestic consumer surplus

Increase; increase

Increase; decrease

Decrease; increase

Decrease; decrease 

Question-12

A n electrician licensing program in the state of North Carolina requires each electrician to obtain a license and renew it each year. Which of the following is a result of having the licensing program in North Carolina?;

a. a decrease in total surplus;

b. excess demand for electrical service;

c. an increase in the quality of electricians;

d. all of the above;

Question-13

Suppose at the start of an election season two candidates with extreme positions are running against each other. The median voter model predicts that each candidate will become more moderate because

Voters with extreme views will not switch loyalties, but voters in the middle will vote for the candidate whose views are closest to his or her own views

Median voters will refuse to vote for a candidate who holds extreme views

The debate convinced each candidate that the other position has some good points

Voters with extreme views are less likely to vote than are voters with moderate views

Question-14

The self-interest model of government

Suggests that government officials are selfish

Explains why there are limits on government taxation and spending

Shows why some government projects take place even if the costs exceed the benefits

All of the above are correct

Question-15

The self-interest theory of government was suggested by:

a. James Buchanan

b. Charles M. Tiebout

c. bureacrats

d. the European Union

Question-16

Suppose Smith's oil refinery and Jones's paper mill both pollute a river, and both firms operate under a system of marketable pollution permits. If it costs Smith $45 to reduce pollution by 500 gallons per day, and Jones can reduce costs by $65 by increasing pollution by 500 units per day ____.

A) The firms cannot gain by trading the right to pollute

B) Both firms can benefit if Smith trades the right to increase pollution by 500 gallons to Jones for 30.00

C) Both firms can benefit if Smith trades the right to increase pollution by 500 gallons to Jones for $50.

D) Both firms can benefit if Jones trades the right to increase pollution by 500 gallons to Smith for $30.

Question-17

The economic approach to air pollution is to: 

a. use command and control

b. internalize the external cost with a pollution tax

c. use marketable pollution permits

d. create a subsidy for cars

Question-18

When the EPA requires that specific abatement equipment be installed in cars.

A) Total vehicle emissions might increase.

B) Total vehicle emissions must decrease, and the most efficient technology used.

C) Total emissions will remain the same, but the most efficient technology must be used

D) Total emissions must decrease, but the technology may not be the most efficient.

Question-19

When a person's expressed valuation of a product is affected by the numbers in her head, this is an important implication of ___.

A) Mental accounting

B) The decoy effect

C) Bundling

D) The anchoring effect

Question-20

Over decades of choices, the dopamine system is used to learn the benefits for a wide variety of products, with benefit valuations that can be used ___ for new purchases and ____ for repeat purchases.

A) Directly; directly

B) Directly; indirectly

C) Indirectly; directly

D) Indirectly; indirectly

Question-21

When a firm increases output and the costs rise disproportionately slower, then the long-run average cost curve is ____ and the firm experiencing.

A) Horizontal; constant returns to scale.

B) Downward sloping; constant returns to scale

C) Upward sloping; diseconomies of scale

D) Downward sloping; economies of scale

Question-22 

suppose that the only input used in the generation of solar energy is sunlight, which has a zero cost. The average total cost of producing electricity is:

a. zero

b. equal to the marginal cost

c. equal to the average fixed cost

d. immeasurably high

Question-23

What is the most likely reason that milk sold in convenience stores is more expensive than milk sold in grocery stores?

A) Convenience stores sell milk in smaller packages, so the per-gallon packaging costs are higher.

B) Grocery stores buy in bulk, while convenience stores buy milk in smaller quantities.

C) People who buy milk at convenience stores tend to have less elastic demand for milk.

D) Convenience store owners are greedier than grocery store owners.

Question-24

In a constant cost industry, an increase in price causes ___.

A) Some firms to exit the industry

B) Quantity supplied to remain constant

C) Some firms to enter the industry

D) Price controls

Question-25

If a firm that makes $100 profit per pair of shoes pays Lebron James $2,000,000 to endorse their basketball shoes, then to make the endorsement pay off they must sell at least

A) $2,000,000 more in shoes. 

B) $20,000 more in shoes. 

C) 20,000 more pairs of shoes. 

D) 200,000 more pairs of shoes