Econ 110 Microeconomics Exam Questions With
Correct Answers
Producers ||will ||bear ||a ||larger ||burden ||if____ ||- ||CORRECT ||ANSWER✔✔-Demand ||is ||relatively ||
elastic ||and ||supply ||is ||inelastic ||(demand ||is ||more ||flat ||negative ||slope ||and ||supply ||has ||steep
||positive ||slope)
The ||two ||characteristic ||problems ||for ||cartels ||are: ||- ||CORRECT ||ANSWER✔✔-Policing ||
members' ||output ||restrictions ||and ||preventing ||new ||entrants ||(this ||is ||why ||there ||are ||thing's ||
like ||medical ||licenses).
Suppose ||Harrison ||Ford ||Makes ||2 ||movies ||per ||year ||and ||earns ||$10M/movie. ||The ||next ||best ||
alternative ||is ||commercials ||earning ||$0.5M/year. ||What ||is ||his ||economic ||rent ||if ||he ||makes ||
movies? ||- ||CORRECT ||ANSWER✔✔-He ||is ||earning ||economic ||rent ||of ||$19,500,000/year
If ||the ||world ||price ||is ||set ||at ||$t, ||higher ||than ||the ||equilibrium ||for ||a ||certain ||country's ||good.
||Would ||it ||import ||or ||export? ||- ||CORRECT ||ANSWER✔✔-The ||country ||would ||export ||because ||
the ||suppliers ||now ||want ||to ||produce ||at ||the ||point ||that ||matches ||the ||world ||price, ||so ||there
||would ||be ||an ||excess ||supply ||equal ||to ||the ||triangle ||formed ||between ||the ||equilibrium, ||and ||
the ||points ||on ||the ||demand ||curve ||and ||supply ||curve ||at ||$t.
At ||a ||garage ||sale, ||Ken ||purchases ||a ||bicycle ||for ||$8, ||he ||was ||willing ||to ||pay ||$25 ||and ||it ||
costs ||$75 ||new. ||What ||is ||Ken's ||consumer ||surplus? ||- ||CORRECT ||ANSWER✔✔-$17. ||Consumer
||surplus ||is ||the ||difference ||between ||what ||the ||consumer ||values ||the ||product ||or ||service ||at ||
and ||what ||they ||actually ||paid. ||($25-$8)
What ||are ||explicit ||costs? ||- ||CORRECT ||ANSWER✔✔-These ||are ||actual ||purchases ||of ||goods ||
and ||services ||by ||the ||firm.
, What ||are ||implicit ||costs? ||- ||CORRECT ||ANSWER✔✔-Are ||costs ||that ||accountants ||ignore ||
because ||there ||is ||no ||actual ||market ||transaction ||for ||them ||but ||there ||is ||an ||opportunity ||
cost. ||For ||example ||use ||of ||company ||assets, ||time ||spent ||on ||something.
A ||downward ||sloping ||LRAC ||curve ||will ||shift ||downward ||because ||of ||_____ ||- ||CORRECT ||
ANSWER✔✔-a ||decrease ||in ||factor ||prices.
What ||are ||increasing ||returns ||to ||scale? ||- ||CORRECT ||ANSWER✔✔-A ||situation ||in ||which ||
output ||increases ||more ||than ||in ||proportion ||to ||inputs ||as ||the ||scale ||of ||a ||firm's ||production ||
increases. ||A ||firm ||in ||this ||situation ||is ||a ||decreasing ||cost ||firm.
What ||is ||the ||relationship ||between ||LRAC ||and ||SRATC? ||- ||CORRECT ||ANSWER✔✔-No ||short-
run ||cost ||curve ||can ||fall ||below ||the ||long-run ||cost ||curve ||because ||the ||LRAC ||curve ||is ||the ||
lowest ||attainable ||cost ||for ||each ||possible ||output. ||It ||is ||tangent ||to ||the ||minimum ||of ||every ||
possible ||SRATC
Any ||point ||below ||the ||LRAC ||represents____ ||- ||CORRECT ||ANSWER✔✔-unattainable ||cost ||
levels. ||You ||can ||have ||costs ||higher ||than ||the ||LRAC ||but ||that ||is ||when ||production ||is ||running
||inefficiently.
If ||money ||income ||is ||reduced ||by ||half, ||and ||the ||prices ||of ||all ||goods ||consumed ||by ||the ||
household ||are ||reduced ||by ||half, ||the ||household's ||budget ||line ||will____ ||- ||CORRECT ||
ANSWER✔✔-not ||change. ||They ||can ||still ||buy ||the ||exact ||same ||quantities ||as ||before ||because
||even ||though ||they ||only ||have ||half ||as ||much ||money, ||everything ||costs ||half ||as ||much
Suppose ||that ||many ||coal ||mines ||are ||shut ||down ||for ||environmental ||reasons. ||This ||will ||cause
||what ||kind ||of ||shift? ||- ||CORRECT ||ANSWER✔✔-A ||leftward ||shift ||of ||the ||supply ||curve ||
because ||there ||is ||a ||decrease ||in ||the ||quantities ||supplied. ||(This ||would ||lead ||to ||a ||price ||
increase ||for ||the ||coal ||that ||was ||still ||being ||mined).
If ||firms ||in ||a ||competitive ||industry ||are ||earning ||positive ||economic ||profits, ||in ||the ||long ||run ||
we'll ||expect? ||- ||CORRECT ||ANSWER✔✔-The ||supply ||curve ||to ||shift ||to ||the ||right ||as ||new ||
Correct Answers
Producers ||will ||bear ||a ||larger ||burden ||if____ ||- ||CORRECT ||ANSWER✔✔-Demand ||is ||relatively ||
elastic ||and ||supply ||is ||inelastic ||(demand ||is ||more ||flat ||negative ||slope ||and ||supply ||has ||steep
||positive ||slope)
The ||two ||characteristic ||problems ||for ||cartels ||are: ||- ||CORRECT ||ANSWER✔✔-Policing ||
members' ||output ||restrictions ||and ||preventing ||new ||entrants ||(this ||is ||why ||there ||are ||thing's ||
like ||medical ||licenses).
Suppose ||Harrison ||Ford ||Makes ||2 ||movies ||per ||year ||and ||earns ||$10M/movie. ||The ||next ||best ||
alternative ||is ||commercials ||earning ||$0.5M/year. ||What ||is ||his ||economic ||rent ||if ||he ||makes ||
movies? ||- ||CORRECT ||ANSWER✔✔-He ||is ||earning ||economic ||rent ||of ||$19,500,000/year
If ||the ||world ||price ||is ||set ||at ||$t, ||higher ||than ||the ||equilibrium ||for ||a ||certain ||country's ||good.
||Would ||it ||import ||or ||export? ||- ||CORRECT ||ANSWER✔✔-The ||country ||would ||export ||because ||
the ||suppliers ||now ||want ||to ||produce ||at ||the ||point ||that ||matches ||the ||world ||price, ||so ||there
||would ||be ||an ||excess ||supply ||equal ||to ||the ||triangle ||formed ||between ||the ||equilibrium, ||and ||
the ||points ||on ||the ||demand ||curve ||and ||supply ||curve ||at ||$t.
At ||a ||garage ||sale, ||Ken ||purchases ||a ||bicycle ||for ||$8, ||he ||was ||willing ||to ||pay ||$25 ||and ||it ||
costs ||$75 ||new. ||What ||is ||Ken's ||consumer ||surplus? ||- ||CORRECT ||ANSWER✔✔-$17. ||Consumer
||surplus ||is ||the ||difference ||between ||what ||the ||consumer ||values ||the ||product ||or ||service ||at ||
and ||what ||they ||actually ||paid. ||($25-$8)
What ||are ||explicit ||costs? ||- ||CORRECT ||ANSWER✔✔-These ||are ||actual ||purchases ||of ||goods ||
and ||services ||by ||the ||firm.
, What ||are ||implicit ||costs? ||- ||CORRECT ||ANSWER✔✔-Are ||costs ||that ||accountants ||ignore ||
because ||there ||is ||no ||actual ||market ||transaction ||for ||them ||but ||there ||is ||an ||opportunity ||
cost. ||For ||example ||use ||of ||company ||assets, ||time ||spent ||on ||something.
A ||downward ||sloping ||LRAC ||curve ||will ||shift ||downward ||because ||of ||_____ ||- ||CORRECT ||
ANSWER✔✔-a ||decrease ||in ||factor ||prices.
What ||are ||increasing ||returns ||to ||scale? ||- ||CORRECT ||ANSWER✔✔-A ||situation ||in ||which ||
output ||increases ||more ||than ||in ||proportion ||to ||inputs ||as ||the ||scale ||of ||a ||firm's ||production ||
increases. ||A ||firm ||in ||this ||situation ||is ||a ||decreasing ||cost ||firm.
What ||is ||the ||relationship ||between ||LRAC ||and ||SRATC? ||- ||CORRECT ||ANSWER✔✔-No ||short-
run ||cost ||curve ||can ||fall ||below ||the ||long-run ||cost ||curve ||because ||the ||LRAC ||curve ||is ||the ||
lowest ||attainable ||cost ||for ||each ||possible ||output. ||It ||is ||tangent ||to ||the ||minimum ||of ||every ||
possible ||SRATC
Any ||point ||below ||the ||LRAC ||represents____ ||- ||CORRECT ||ANSWER✔✔-unattainable ||cost ||
levels. ||You ||can ||have ||costs ||higher ||than ||the ||LRAC ||but ||that ||is ||when ||production ||is ||running
||inefficiently.
If ||money ||income ||is ||reduced ||by ||half, ||and ||the ||prices ||of ||all ||goods ||consumed ||by ||the ||
household ||are ||reduced ||by ||half, ||the ||household's ||budget ||line ||will____ ||- ||CORRECT ||
ANSWER✔✔-not ||change. ||They ||can ||still ||buy ||the ||exact ||same ||quantities ||as ||before ||because
||even ||though ||they ||only ||have ||half ||as ||much ||money, ||everything ||costs ||half ||as ||much
Suppose ||that ||many ||coal ||mines ||are ||shut ||down ||for ||environmental ||reasons. ||This ||will ||cause
||what ||kind ||of ||shift? ||- ||CORRECT ||ANSWER✔✔-A ||leftward ||shift ||of ||the ||supply ||curve ||
because ||there ||is ||a ||decrease ||in ||the ||quantities ||supplied. ||(This ||would ||lead ||to ||a ||price ||
increase ||for ||the ||coal ||that ||was ||still ||being ||mined).
If ||firms ||in ||a ||competitive ||industry ||are ||earning ||positive ||economic ||profits, ||in ||the ||long ||run ||
we'll ||expect? ||- ||CORRECT ||ANSWER✔✔-The ||supply ||curve ||to ||shift ||to ||the ||right ||as ||new ||
