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Microeconomics Practice MCQ

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Do you use facebook?

Photo of a smartphone with the Facebook application open
Economics is greatly impacted by how well information travels through society. Today, social media giants Twitter, Facebook, and Instagram are major forces on the information super highway. (Credit: Johan Larsson/Flickr)

Decisions ... decisions in the social media age

To post or not to post? Every day we are faced with a myriad of decisions, from what to have for breakfast, to which route to take to class, to the more complex—“Should I double major and add possibly another semester of study to my education?” Our response to these choices depends on the information we have available at any given moment; information economists call “imperfect” because we rarely have all the data we need to make perfect decisions. Despite the lack of perfect information, we still make hundreds of decisions a day.

And now, we have another avenue in which to gather information—social media. Outlets like Facebook and Twitter are altering the process by which we make choices, how we spend our time, which movies we see, which products we buy, and more. How many of you chose a university without checking out its Facebook page or Twitter stream first for information and feedback?

As you will see in this course, what happens in economics is affected by how well and how fast information is disseminated through a society, such as how quickly information travels through Facebook. “Economists love nothing better than when deep and liquid markets operate under conditions of perfect information,” says Jessica Irvine, National Economics Editor for News Corp Australia.

This leads us to the topic of this chapter, an introduction to the world of making decisions, processing information, and understanding behavior in markets —the world of economics. Each chapter in this book will start with a discussion about current (or sometimes past) events and revisit it at chapter’s end—to “bring home” the concepts in play.

Introduction

In this chapter, you will learn about:

  • What Is Economics, and Why Is It Important?
  • Microeconomics and Macroeconomics
  • How Economists Use Theories and Models to Understand Economic Issues
  • How Economies Can Be Organized: An Overview of Economic Systems

What is economics and why should you spend your time learning it? After all, there are other disciplines you could be studying, and other ways you could be spending your time. As the Bring it Home feature just mentioned, making choices is at the heart of what economists study, and your decision to take this course is as much as economic decision as anything else.

Economics is probably not what you think. It is not primarily about money or finance. It is not primarily about business. It is not mathematics. What is it then? It is both a subject area and a way of viewing the world.

Microeconomics will ground you in - surprise - basic microeconomics-how markets function, how to think about allocating scarce resources among competing uses, what profit maximizing behavior means in industries with different numbers of competitors, how technology and trade reshapes the opportunities people face, and so on. We will apply economic ideas to understand current economic problems, including the housing bubble, the current unemployment situation (particularly for high school gradutes), how Google makes its money and why healthcare costs are rising so fast.
Test PDF eBook: 
Microeconomics Practice MCQ
Download Microeconomics MCQ Test PDF eBook
43 Pages
2014
English US
Educational Materials



Sample Questions from the Microeconomics Practice MCQ Test

Question: Demand is said to be inelastic when:

Choices:

the percentage change in quantity demanded is greater than the percentage change in price of a good

in a linear demand curve, quantity demanded is close to zero (given the price) so that the percentage change in quantity demanded will be very high

the percentage change in price exceeds the percentage change in quantity demanded of a good

a relatively small change in price results in a relatively big change in quantity demanded

Question: The quantity demanded will equal the quantity supplied at a free market equilibrium and also when:

Choices:

a price floor is established above the equilibrium price.

a shortage of a commodity persists.

a price ceiling is established below the equilibrium price.

an effective price ceiling exists and the government is able to prevent the development of a black market.

none of the above cause quantity demanded to equal quantity supplied.

Question: If it is observed that, in a particular market, price has risen and quantity exchanged has increased, it is likely that:

Choices:

supply has increased.

supply has decreased.

demand has increased.

demand has decreased.

Question: All of the following statements about price floors are true except:

Choices:

There will be a surplus of a commodity when a price floor is set above the equilibrium price.

The government may have to set up a system of storage to handle the excess supply when a price floor is set above the equilibrium price.

If the price floor is set below the equilibrium price, the intervention will have no effect on the market.

If the price floor is set below the equilibrium price, the price must be reduced.

Question: If the elasticity of demand for a commodity is estimated to be 1.5, then a decrease in price from $2.10 to $1.90 would be expected to increase daily sales by:

Choices:

50%

1.5%

5%

15%

Question: Consumers will bear more of the burden of a tax the:

Choices:

more elastic supply is.

more elastic demand is.

the more inelastic supply is.

consumers always bear the burden of the tax since they pay the final price.

none of the above.

Question: From which of the following data might you estimate a price elasticity of supply?

Choices:

a price hike from $7 to $13 causes sales to fall from 16,000 shirts to 8,000 shirts monthly.

farmers increase soybean plantings 15 percent when the price increases 5 percent.

Ford's production increases when Chevy sales fall because GM raises prices.

the output of tennis balls slumps 8 percent when the prices of racquets go up 12 percent.

steel production and sales rise 18 percent when national income grows 13 percent.

Question: An income elasticity of demand equal to 2 for a particular product means that:

Choices:

demand curves for the product slope upward.

the product is an inferior good.

a 10 percent increase in income will yield a 20 percent increase in the quantity sold.

a 20 percent increase in income will result in a 10 percent increase in the quantity sold.

(% change in Q) / (% change in P) = 2.

Question: The quantity of a good demanded rises from 1000 to 1500 units when the price falls from $1.50 to $1.00 per unit. The price elasticity of demand for this product is approximately:

Choices:

1.0

.16

2.5

4.0

Question: You know the following facts: a) the Boston Celtics have just won the 1989 NBA championships with the LA Lakers. Both Larry Bird and Magic Johnson, wearing Converse basketball shoes, have played magnificently. As a result, millions of young boys and girls wish to emulate them in every particular. b) Converse announces major labor strikes by 50% of their employees. What is the effect on Price and Quantity exchanged in the market for Converse basketball shoes?

Choices:

price would increase and quantity exchanged would decrease.

price and quantity exchanged would both decrease.

price would increase and quantity exchanged would be indeterminate.

price would be indeterminate and quantity exchanged would not change.

there is not enough information to determine either price or quantity.

Question: A long-run demand curve, as compared to a short-run demand curve for the same commodity, is generally:

Choices:

more elastic

less elastic

of the same elasticity

steeper if the curves are plotted against the same horizontal scale.

none of the above.

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Source:  Levy, Frank. 11.203 Microeconomics, Fall 2010. (MIT OpenCourseWare: Massachusetts Institute of Technology), http://ocw.mit.edu/courses/urban-studies-and-planning/11-203-microeconomics-fall-2010 (Accessed 13 Mar, 2014). License: Creative Commons BY-NC-SA
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