BMAL-590 MICROECONOMICS ULTIMATE EXAM PREP: COMPLETE QUESTION BANK COVERING MICROECONOMIC PRINCIPLES, AUSTRIAN SCHOOL CRITIQUE OF EQUILIBRIUM, SCARCITY AND TRADE-OFFS, POSITIVE VS. NORMATIVE ECONOMICS, AND EMPIRICAL HYPOTHESIS TESTING - 200 QUESTIONS WITH

BMAL-590 MICROECONOMICS ULTIMATE EXAM PREP: COMPLETE QUESTION BANK COVERING MICROECONOMIC PRINCIPLES, AUSTRIAN SCHOOL CRITIQUE OF EQUILIBRIUM, SCARCITY AND TRADE-OFFS, POSITIVE VS. NORMATIVE ECONOMICS, AND EMPIRICAL HYPOTHESIS TESTING - 200 QUESTIONS WITH DETAILED EXPLANATIONS 1. When we refer to "individual" action in microeconomics, we are referring to: A) Only consumers making purchasing decisions B) Only producers making supply decisions C) A variety of actors including sellers (producers) and buyers (consumers) D) Only government regulators Answer: C Rationale: Individual action in microeconomics refers to a variety of actors that can be referred to as sellers (producers) and buyers (consumers). These actors influence the supply of and demand for goods and services. ________________________________________ 2. The means for achieving coordination in microeconomic individual action are generally: A) Government regulations and policies B) Money and interest rates C) Social norms and traditions D) Barter systems and trade agreements Answer: B Rationale: The means for achieving coordination in microeconomic individual action are generally money and interest rates. ________________________________________ 3. Microeconomics can be considered a: A) Positive science that prescribes courses of action B) Normative science that prescribes courses of action C) Normative science that does not prescribe a course of action D) Descriptive science that only describes historical events Answer: C Rationale: Microeconomics can be considered a normative science. It does not prescribe a course of action. Rather, it tries to explain what might happen as a result of certain changes. ________________________________________ 4. If the supply of crude oil decreases, microeconomics suggests that: A) The price of gasoline may decrease B) The price of gasoline may increase C) The demand for gasoline will increase D) There will be no change in gasoline prices Answer: B Rationale: Microeconomics suggests that if the supply of crude oil decreases, the price of gasoline may increase. ________________________________________ 5. The general equilibrium theory was introduced by: A) Alfred Marshall in 1890 B) Adam Smith in 1776 C) Leon Walras in 1874 D) John Maynard Keynes in 1936 Answer: C Rationale: The general equilibrium theory was introduced by Leon Walras in 1874. ________________________________________ 6. The partial equilibrium theory was introduced by: A) Leon Walras in 1874 B) Alfred Marshall in 1890 C) Karl Marx in 1867 D) Milton Friedman in 1950 Answer: B Rationale: The partial equilibrium theory was introduced by Alfred Marshall in 1890. ________________________________________ 7. The partial equilibrium theory believes in: A) Developing measurable hypotheses related to economic events and subjecting them to empirical testing B) Relying solely on theoretical assumptions without testing C) Only using historical data without hypothesis development D) Ignoring empirical evidence in economic analysis Answer: A Rationale: The partial equilibrium theory believes in developing measurable hypotheses related to economic events, and subjecting the hypotheses to empirical testing to determine which of the hypotheses work best. ________________________________________ 8. Economists make several assumptions to arrive at solutions because: A) It is easy to replicate tests in economics B) It is difficult to replicate tests in economics C) Economic data is always readily available D) Economic experiments are always controlled Answer: B Rationale: Since it is difficult to replicate tests, economists make several assumptions such as infinite sellers and buyers, perfect knowledge, homogeneous goods and services, and static relationships to arrive at solutions. ________________________________________ 9. Which of the following is NOT an assumption economists make to arrive at solutions? A) Infinite sellers and buyers B) Perfect knowledge C) Heterogeneous goods and services D) Static relationships Answer: C Rationale: Economists make assumptions such as infinite sellers and buyers, perfect knowledge, homogeneous goods and services (not heterogeneous), and static relationships to arrive at solutions. ________________________________________ 10. The Austrian school argues that equilibrium theories are: A) Flawless and perfectly realistic B) Flawed and unrealistic C) The only valid approach to economics D) Too complex to understand Answer: B Rationale: The Austrian school argues that the equilibrium theories are flawed and unrealistic. ________________________________________ 11. The Austrian school acknowledges: A) Perfect knowledge and homogeneous goods B) Imperfections and heterogeneity C) Only static relationships D) Infinite sellers and buyers Answer: B Rationale: The Austrian school acknowledges imperfections and heterogeneity and tries to explain how economic incentives might facilitate individuals overcoming the problems posed by uncertainty and ignorance. ________________________________________ 12. According to the Austrian school, markets exist precisely because: A) People have complete knowledge and identical preferences B) People have incomplete knowledge, differing preferences, and other imperfections C) Government mandates their existence D) All economic conditions are perfectly predictable