ECS2601 MICROECONOMICS EXAM –
INTERMEDIATE TO ADVANCED LEVEL
COMPREHENSIVE PRACTICE TEST & STUDY
GUIDE
Prescribed Textbook: Pindyck, R.S. & Rubinfeld, D.L. Microeconomics for UNISA, 7th
Edition. Pearson Education International.
SECTION A: MULTIPLE CHOICE QUESTIONS
(Questions 1-80)
Answer all questions. Choose the most correct option.
1. Which of the following best defines the economic concept of scarcity?
A. The situation where wants exceed the available resources
B. The situation where resources are unlimited but wants are limited
C. The condition where all goods are freely available
D. The state of having insufficient money to purchase goods
Answer: A
2. Microeconomics is primarily concerned with:
A. The aggregate performance of the entire economy
, B. The study of individual economic units such as households and firms
C. The determination of national income and employment
D. The analysis of inflation and unemployment rates
Answer: B
3. The opportunity cost of a decision is defined as:
A. The monetary cost incurred in making the decision
B. The total cost of all alternatives foregone
C. The value of the best alternative foregone
D. The sum of all explicit costs involved
Answer: C
4. A rational consumer will continue to consume a good until:
A. Total utility is maximised
B. Marginal utility equals zero
C. Marginal utility equals price
D. Average utility equals price
Answer: C
5. The law of diminishing marginal utility states that:
A. Total utility increases at an increasing rate as consumption increases
B. Marginal utility decreases as consumption of a good increases, ceteris paribus
C. Marginal utility increases as consumption of a good increases
D. Total utility eventually becomes negative
Answer: B
6. Which of the following is NOT an assumption of perfect competition?
A. Many buyers and sellers
B. Homogeneous products
C. Perfect information
D. Significant barriers to entry
Answer: D
,7. The demand curve for a normal good will shift to the right when:
A. Consumer income decreases
B. The price of a substitute good increases
C. The price of a complementary good increases
D. Consumer preferences shift away from the good
Answer: B
8. Price elasticity of demand measures:
A. The responsiveness of quantity supplied to a change in price
B. The responsiveness of quantity demanded to a change in price
C. The responsiveness of demand to a change in income
D. The responsiveness of demand to a change in the price of another good
Answer: B
9. If the price elasticity of demand for a product is -2.5, a 10% increase in price will
result in:
A. A 25% increase in quantity demanded
B. A 25% decrease in quantity demanded
C. A 4% decrease in quantity demanded
D. A 2.5% decrease in quantity demanded
Answer: B
10. A Giffen good is characterised by:
A. A positive income effect that outweighs the substitution effect
B. A negative income effect that outweighs the substitution effect
C. A positive substitution effect that outweighs the income effect
D. An upward-sloping supply curve
Answer: B
11. The marginal rate of substitution (MRS) is defined as:
A. The rate at which a consumer is willing to trade one good for another while
maintaining the same level of utility
B. The rate at which a firm can substitute one input for another
C. The slope of the budget constraint
, D. The ratio of prices of two goods
Answer: A
12. At the consumer's optimal consumption bundle:
A. The MRS equals the ratio of the prices of the two goods
B. The MRS is greater than the price ratio
C. The MRS is less than the price ratio
D. Total utility is maximised regardless of the MRS
Answer: A
13. The substitution effect of a price change:
A. Always leads to an increase in the consumption of the good whose price has
fallen
B. Always leads to a decrease in the consumption of the good whose price has
fallen
C. May lead to either an increase or decrease depending on whether the good is
normal or inferior
D. Is always zero for Giffen goods
Answer: A
14. An inferior good is one for which:
A. Demand increases as consumer income increases
B. Demand decreases as consumer income increases
C. Demand is unaffected by changes in income
D. The demand curve is upward sloping
Answer: B
15. The Engel curve for a normal good:
A. Slopes downward
B. Slopes upward
C. Is horizontal
D. Is vertical
Answer: B
INTERMEDIATE TO ADVANCED LEVEL
COMPREHENSIVE PRACTICE TEST & STUDY
GUIDE
Prescribed Textbook: Pindyck, R.S. & Rubinfeld, D.L. Microeconomics for UNISA, 7th
Edition. Pearson Education International.
SECTION A: MULTIPLE CHOICE QUESTIONS
(Questions 1-80)
Answer all questions. Choose the most correct option.
1. Which of the following best defines the economic concept of scarcity?
A. The situation where wants exceed the available resources
B. The situation where resources are unlimited but wants are limited
C. The condition where all goods are freely available
D. The state of having insufficient money to purchase goods
Answer: A
2. Microeconomics is primarily concerned with:
A. The aggregate performance of the entire economy
, B. The study of individual economic units such as households and firms
C. The determination of national income and employment
D. The analysis of inflation and unemployment rates
Answer: B
3. The opportunity cost of a decision is defined as:
A. The monetary cost incurred in making the decision
B. The total cost of all alternatives foregone
C. The value of the best alternative foregone
D. The sum of all explicit costs involved
Answer: C
4. A rational consumer will continue to consume a good until:
A. Total utility is maximised
B. Marginal utility equals zero
C. Marginal utility equals price
D. Average utility equals price
Answer: C
5. The law of diminishing marginal utility states that:
A. Total utility increases at an increasing rate as consumption increases
B. Marginal utility decreases as consumption of a good increases, ceteris paribus
C. Marginal utility increases as consumption of a good increases
D. Total utility eventually becomes negative
Answer: B
6. Which of the following is NOT an assumption of perfect competition?
A. Many buyers and sellers
B. Homogeneous products
C. Perfect information
D. Significant barriers to entry
Answer: D
,7. The demand curve for a normal good will shift to the right when:
A. Consumer income decreases
B. The price of a substitute good increases
C. The price of a complementary good increases
D. Consumer preferences shift away from the good
Answer: B
8. Price elasticity of demand measures:
A. The responsiveness of quantity supplied to a change in price
B. The responsiveness of quantity demanded to a change in price
C. The responsiveness of demand to a change in income
D. The responsiveness of demand to a change in the price of another good
Answer: B
9. If the price elasticity of demand for a product is -2.5, a 10% increase in price will
result in:
A. A 25% increase in quantity demanded
B. A 25% decrease in quantity demanded
C. A 4% decrease in quantity demanded
D. A 2.5% decrease in quantity demanded
Answer: B
10. A Giffen good is characterised by:
A. A positive income effect that outweighs the substitution effect
B. A negative income effect that outweighs the substitution effect
C. A positive substitution effect that outweighs the income effect
D. An upward-sloping supply curve
Answer: B
11. The marginal rate of substitution (MRS) is defined as:
A. The rate at which a consumer is willing to trade one good for another while
maintaining the same level of utility
B. The rate at which a firm can substitute one input for another
C. The slope of the budget constraint
, D. The ratio of prices of two goods
Answer: A
12. At the consumer's optimal consumption bundle:
A. The MRS equals the ratio of the prices of the two goods
B. The MRS is greater than the price ratio
C. The MRS is less than the price ratio
D. Total utility is maximised regardless of the MRS
Answer: A
13. The substitution effect of a price change:
A. Always leads to an increase in the consumption of the good whose price has
fallen
B. Always leads to a decrease in the consumption of the good whose price has
fallen
C. May lead to either an increase or decrease depending on whether the good is
normal or inferior
D. Is always zero for Giffen goods
Answer: A
14. An inferior good is one for which:
A. Demand increases as consumer income increases
B. Demand decreases as consumer income increases
C. Demand is unaffected by changes in income
D. The demand curve is upward sloping
Answer: B
15. The Engel curve for a normal good:
A. Slopes downward
B. Slopes upward
C. Is horizontal
D. Is vertical
Answer: B
