CMI 3358 MIDTERM EKO EXAM – FULL STUDY GUIDE & DETAILED REVIEW (2025 EDITION)

CMI 3358 MIDTERM EKO EXAM – FULL
STUDY GUIDE & DETAILED REVIEW (2025
EDITION)
CMI 3358 Midterm Exam: Principles of Economics

Section 1: Fundamental Concepts (Questions 1-20)

1. The fundamental economic problem is:
a) Unemployment
b) Inflation
c) Scarcity
d) Poverty
Answer: c) Scarcity (✓)

2. The term "opportunity cost" refers to the:
a) Financial cost of a good or service.
b) Cost of producing a good or service.
c) Value of the next best alternative forgone when a choice is made.
d) Cost of finding a business opportunity.
Answer: c) Value of the next best alternative forgone when a choice is made. (✓)

3. A point inside a production possibilities curve (PPC) indicates:
a) Economic growth
b) Efficiency
c) Inefficiency or unemployed resources
d) An unattainable combination of goods
Answer: c) Inefficiency or unemployed resources (✓)

4. An economy that relies on both markets and government intervention to allocate
resources is called a:
a) Traditional economy
b) Command economy
c) Market economy
d) Mixed economy
Answer: d) Mixed economy (✓)

,5. The law of demand states that, all else equal:
a) As price increases, quantity demanded increases.
b) As price increases, quantity demanded decreases.
c) As income increases, demand decreases.
d) As price decreases, supply increases.
Answer: b) As price increases, quantity demanded decreases. (✓)

6. A shift of the entire demand curve to the right is caused by:
a) A decrease in the price of the good itself.
b) An increase in the price of the good itself.
c) An increase in consumer income (for a normal good).
d) A decrease in consumer tastes for the good.
Answer: c) An increase in consumer income (for a normal good). (✓)

7. If two goods are complements, an increase in the price of one will lead to:
a) An increase in demand for the other.
b) A decrease in demand for the other.
c) An increase in the quantity demanded of the other.
d) No change in demand for the other.
Answer: b) A decrease in demand for the other. (✓)

8. The law of supply states that, all else equal:
a) As price increases, quantity supplied increases.
b) As price increases, quantity supplied decreases.
c) As technology improves, supply decreases.
d) As input prices rise, supply increases.
Answer: a) As price increases, quantity supplied increases. (✓)

9. A government-imposed maximum price that can be charged for a good is a:
a) Price floor
b) Price ceiling
c) Equilibrium price
d) Tariff
Answer: b) Price ceiling (✓)

10. At a price above the equilibrium price, a:
a) Shortage exists, and price will tend to fall.
b) Shortage exists, and price will tend to rise.
c) Surplus exists, and price will tend to fall.

, d) Surplus exists, and price will tend to rise.
Answer: c) Surplus exists, and price will tend to fall. (✓)

11. If the demand for a good is perfectly inelastic, an increase in its price will lead to:
a) A large decrease in quantity demanded.
b) A small decrease in quantity demanded.
c) No change in quantity demanded.
d) A proportional increase in quantity demanded.
Answer: c) No change in quantity demanded. (✓)

12. The price elasticity of demand is calculated as:
a) The percentage change in price divided by the percentage change in quantity
demanded.
b) The change in quantity demanded divided by the change in price.
c) The percentage change in quantity demanded divided by the percentage change in
price.
d) The slope of the demand curve.
Answer: c) The percentage change in quantity demanded divided by the percentage
change in price. (✓)

13. Goods with an income elasticity greater than 1 are known as:
a) Inferior goods
b) Normal goods
c) Luxury goods
d) Complementary goods
Answer: c) Luxury goods (✓)

14. The cross-price elasticity of demand for substitutes is:
a) Negative
b) Positive
c) Zero
d) Infinite
Answer: b) Positive (✓)

15. Consumer surplus is defined as the:
a) Difference between the price paid and the cost of production.
b) Total revenue received by sellers.
c) Difference between the maximum price a consumer is willing to pay and the market
price.
d) Cost to the government of subsidizing a good.

, Answer: c) Difference between the maximum price a consumer is willing to pay and
the market price. (✓)

16. A production function shows the relationship between:
a) Inputs and costs.
b) Inputs and outputs.
c) Costs and revenues.
d) Price and quantity supplied.
Answer: b) Inputs and outputs. (✓)

17. The short run is a period in which:
a) All inputs are variable.
b) All inputs are fixed.
c) At least one input is fixed.
d) Technology is constant.
Answer: c) At least one input is fixed. (✓)

18. The additional cost of producing one more unit of output is the:
a) Average total cost.
b) Average variable cost.
c) Marginal cost.
d) Fixed cost.
Answer: c) Marginal cost. (✓)

19. Economies of scale occur when:
a) Marginal cost is falling.
b) Average total cost falls as output increases.
c) Average variable cost is constant.
d) The firm is too small.
Answer: b) Average total cost falls as output increases. (✓)

20. Implicit costs are:
a) Costs that involve direct monetary expenditure.
b) The same as variable costs.
c) The opportunity costs of using resources owned by the firm.
d) Costs that are always fixed.
Answer: c) The opportunity costs of using resources owned by the firm. (✓)

Section 2: Market Structures & Firm Behavior (Questions 21-40)