ECONOMICS TODAY THE MICRO VIEW
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS FULL SOLUTION
STUDY GUIDE
●● The price of soft drinks increases. Which of the following is not part
of the likely chain of events that follows from this price change:
A) Producers of soft drinks increase their production of soft drinks
B) Some consumers of soft drinks reduce their consumption of soft
drinks
C) The demand for fruit juices increases
D) The manufacturers of soda−canning machines lay off some workers
Answer: D
●● Buyers and sellers receive information about what should be bought
and what should be produced:
A) By listening to TV news programs
B) From prices in a market system
C) From newspaper gossip columns
D) From friends and family
,Answer: B
●● Suppose that a rap group called RG2 has released its first CD with
Live Records at an intended list price of $14.99. Music stores have
discovered that they can markup the price to $17.99 with continued
strong sales. What information does this higher price convey to the
recording label:
A) The recording label should cut back on the production and
distribution of RG2's first CD
B) The price of the CD was too expensive to begin with
C) The markup by music stores indicates a surplus of RG2's CD on store
shelves.
D) The recording label should expand the production and distribution of
RG2's first CD
Answer: D
●● Voluntary exchange:
A) Makes both parties to a trade better off
B) Is not part of the market system
C) Makes one party better off while making the other party worse off
D) Relates to price ceilings and price floors
Answer: A
,●● In a market system, how are the terms of exchange established:
A) The forces underlying supply and demand interact to set a price
B) Consumer advocacy groups establish fair prices for items, and most
firms comply because they don't want to anger their customers
C) Federal and state legislation establish minimum and maximum prices
D) Industry associations set up acceptable price ranges for their goods,
and firms within each industry are required to set price within its
relevant range
Answer: A
●● The publication Car and Driver reduces transactions costs for high-
performance car buyers:
A) By providing reliable information so that car buyers do not have to
spend as much time doing their own research
B) By offering dollars-off coupons to subscribers
C) By lobbying car makers to hold the line on prices
D) By advertising sales at discount dealerships
Answer: A
●● Which of the following is not an example of a transaction cost:
, A) The opportunity cost of time spent looking for stores selling the
desired item
B) The cost of returning a defective product
C) The time and effort spent researching the product as well as its
various sellers
D) The enjoyment of using the good
Answer: D
●● Voluntary exchange refers to an act of trading between individuals
that makes both parties to the trade subjectively better off:
A) True
B) False
Answer: A
●● In general, the less organized the market, the lower the transaction
costs:
A) True
B) False
Answer: B
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS FULL SOLUTION
STUDY GUIDE
●● The price of soft drinks increases. Which of the following is not part
of the likely chain of events that follows from this price change:
A) Producers of soft drinks increase their production of soft drinks
B) Some consumers of soft drinks reduce their consumption of soft
drinks
C) The demand for fruit juices increases
D) The manufacturers of soda−canning machines lay off some workers
Answer: D
●● Buyers and sellers receive information about what should be bought
and what should be produced:
A) By listening to TV news programs
B) From prices in a market system
C) From newspaper gossip columns
D) From friends and family
,Answer: B
●● Suppose that a rap group called RG2 has released its first CD with
Live Records at an intended list price of $14.99. Music stores have
discovered that they can markup the price to $17.99 with continued
strong sales. What information does this higher price convey to the
recording label:
A) The recording label should cut back on the production and
distribution of RG2's first CD
B) The price of the CD was too expensive to begin with
C) The markup by music stores indicates a surplus of RG2's CD on store
shelves.
D) The recording label should expand the production and distribution of
RG2's first CD
Answer: D
●● Voluntary exchange:
A) Makes both parties to a trade better off
B) Is not part of the market system
C) Makes one party better off while making the other party worse off
D) Relates to price ceilings and price floors
Answer: A
,●● In a market system, how are the terms of exchange established:
A) The forces underlying supply and demand interact to set a price
B) Consumer advocacy groups establish fair prices for items, and most
firms comply because they don't want to anger their customers
C) Federal and state legislation establish minimum and maximum prices
D) Industry associations set up acceptable price ranges for their goods,
and firms within each industry are required to set price within its
relevant range
Answer: A
●● The publication Car and Driver reduces transactions costs for high-
performance car buyers:
A) By providing reliable information so that car buyers do not have to
spend as much time doing their own research
B) By offering dollars-off coupons to subscribers
C) By lobbying car makers to hold the line on prices
D) By advertising sales at discount dealerships
Answer: A
●● Which of the following is not an example of a transaction cost:
, A) The opportunity cost of time spent looking for stores selling the
desired item
B) The cost of returning a defective product
C) The time and effort spent researching the product as well as its
various sellers
D) The enjoyment of using the good
Answer: D
●● Voluntary exchange refers to an act of trading between individuals
that makes both parties to the trade subjectively better off:
A) True
B) False
Answer: A
●● In general, the less organized the market, the lower the transaction
costs:
A) True
B) False
Answer: B
