ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

Practice Questions for the Mid‐term Exam I (Ch1‐4)

Microeconomics, ECON 2113
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Assume perfect competitive markets unless otherwise specified in the question.

1) In broad terms the difference between microeconomics and macroeconomics is that

A) they use different sets of tools and ideas.
B) microeconomics studies decisions of individual people and firms and macroeconomics studies the
entire national economy.
C) macroeconomics studies the effects of government regulation and taxes on the price of individual
goods and services whereas microeconomics does not.
D) microeconomics studies the effects of government taxes on the national unemployment rate.

2) Scarcity is a situation in which ________.

A) some people are poor and others are rich
B) something is being wasted
C) we are unable to satisfy all our wants
D) long lines form at gas stations

3) Factors of production include

A) the economic system.
B) land, labor, capital and entrepreneurship.
C) labor and capital (not land, which is fixed).
D) only capital, land, and labor.

4) An outcome is considered efficient if

A) it is not possible to make someone better off without making anyone else worse off.
B) it is the best available choice for an individual.
C) it results in fair shares for everyone involved.
D) it is possible to make someone better off without making anyone else worse off.

5) The opportunity cost of any action is

A) all the possible alternatives given up.
B) the highest-valued alternative given up.
C) the benefit from the action minus the cost of the action.
D) the dollars the action cost.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

6) On Saturday morning, you rank your choices for activities in the following order: go to the library,
work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the
library. Your opportunity cost is
A) working out at the gym, having breakfast with friends, and sleeping late.
B) working out at the gym.
C) zero because you do not have to pay money to use the library.
D) not clear because not enough information is given.

7) Joe likes to sleep late in the mornings and play tennis in the afternoons. The opportunity cost of Joe
attending his morning class for one hour is
A) an hour of tennis given up.
B) an hour of sleep given up.
C) both the tennis given up and the sleep given up.
D) nothing because he is paying for his class.

8) Your employer has asked you to start working overtime and has offered to pay $18 per hour for
every hour you work beyond forty hours a week. The wage rate for each of the first forty hours will
continue to be the usual $15 per hour. In terms of dollars, what is the marginal benefit of working each
hour of overtime?
A) zero
B) $3.00
C) $15.00
D) $18.00

9) Laura is a manager for HP. When Laura must decide whether to produce a few additional printers,
she is choosing at the margin when she compares
A) the total revenue from sales of printers to the total cost of producing all the printers.
B) the extra revenue from selling a few additional printers to the extra costs of producing the printers.
C) the extra revenue from selling a few additional printers to the average cost of producing the
additional printers.
D) HP's printers to printers from competing companies, such as Lexmark.

10) A store remains open from 8 a.m. to 4 p.m. each weekday. The store owner is deciding whether to
stay open an extra hour each evening. The owner's marginal benefit
A) is the benefit the owner receives from staying open from 8 a.m. to 5 pm.
B) depends on the revenues the owner makes during the day.
C) must be greater than or equal to the owner's marginal cost if the owner decides to stay open.
D) is the benefit the owner receives from staying open from 8 a.m. to 6 pm.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

11) Which of the following are TRUE regarding "positive" statements?

I. They describe what "ought to be."
II. They describe what is believed about how the world appears.
III. They can be tested as to their accuracy.
A) I and II
B) II and III
C) I and III
D) I, II and III

12) Which of the following is a positive statement?

A) People buy more of a good or service when its price falls.
B) The distribution of income is fair.
C) The government ought to provide health care to everyone.
D) Corporations should be more socially responsible.

13) The production possibilities frontier itself shows

A) the maximum amount of resources available at any given time.
B) combinations of goods and services that do not fully use available resources.
C) the maximum rate of growth of output possible for an economy.
D) the maximum levels of production that can be attained.

14) A production possibilities frontier figure does NOT illustrate

A) the limits on production imposed by our limited resources and technology.
B) the exchange of one good or service for another.
C) opportunity cost.
D) attainable and unattainable points.

15) A reduction in the amount of unemployment

A) shifts the production possibilities frontier outward.
B) moves the economy's point of production closer to the production possibilities frontier.
C) moves the economy's point of production along the production possibilities frontier.
D) moves the economy's point of production further away from the production possibilities frontier.

16) While producing on the production possibilities frontier, if additional units of a good could be
produced at a constant opportunity cost, the production possibilities frontier would be
A) bowed outward.
B) bowed inward.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

C) positively sloped.
D) a straight line.

17) Refer to the production possibilities frontier in the figure above. Which production point indicates
that resources are NOT fully utilized or are misallocated?
A) point a
B) point b
C) point c
D) point e

18) Refer to the production possibilities frontier in the figure above. Which production point is
unattainable?
A) point a
B) point b
C) point c
D) point e

19) In the figure above, moving from production at point d to production at point a requires
A) technological change.
B) a decrease in unemployment.
C) decreasing the output of consumer goods in order to boost the output of capital goods.
D) both capital accumulation and a decrease in unemployment.

20) Refer to the production possibilities frontier in the figure above. If the country moves from point a

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

to point d, the opportunity cost of the move is

A) 30 million capital goods.
B) 20 million capital goods.
C) 10 million capital goods.
D) 10 million consumption goods.

21) At one point along a PPF 40 tons of wheat are produced while 80 tons of rice are produced. At
another point along the same PPF, 41 tons of wheat are produced while 70 tons of rice are produced.
The opportunity cost of producing a ton of wheat between these points is ________ per ton of wheat.
A) 1/2 ton of rice
B) 10 tons of rice
C) 1/10 ton of rice
D) 4/7 ton of rice

Point Production of X Production of Y

A 0 40
B 3 36
C 6 28
D 9 16
E 12 0

22) The above table shows production combinations on a country's production possibilities frontier.
Which of the following is an example of a point that is unattainable?
A) 0 units of good X and 40 units of good Y
B) 6 units of good X and 28 units of good Y
C) 10 units of good X and 16 units of good Y
D) 3 units of good X and 35 units of good Y

23) The above table shows production combinations on a country's production possibilities frontier.
Which of the following is an example of a production point that is inefficient?
A) 0 units of good X and 40 units of good Y
B) 6 units of good X and 28 units of good Y
C) 10 units of good X and 16 units of good Y
D) 3 units of good X and 35 units of good Y

24) The above table shows production combinations on a country's production possibilities frontier.
Which of the following points signifies efficient production?
A) 0 units of good X and 40 units of good Y
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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

B) 3 units of good X and 25 units of good Y

C) 10 units of good X and 16 units of good Y
D) 12 units of good X and 1 unit of good Y

25) The above table shows production combinations on a country's production possibilities frontier.
The opportunity cost of increasing the production of Y from 16 to 28 units is ________ units of good X
per unit of good Y.
A) 12
B) 6
C) 3
D) There is no opportunity cost when moving from one point to another along a production
possibilities frontier so none of the above answers is correct.

26) The above table shows production combinations on a country's production possibilities frontier.
What is the opportunity cost of one unit of Y when the production of good Y increases from 16 to 28
units?
A) 4 units of good X per unit of good Y
B) 3 units of good X per unit of good Y
C) 1/4 unit of good X per unit of good Y
D) There is no opportunity cost when moving from one point to another along a production
possibilities frontier.

27) The above table shows production combinations on a country's production possibilities frontier.
What is the opportunity cost of increasing the production of X from 0 to 3 units?
A) 40 units of good Y per unit of good X
B) 3 units of good Y per unit of good X
C) 4/3 units of good Y per unit of good X
D) 0 units of good Y per unit of good X

28) The above table shows production combinations on a country's production possibilities frontier. A
movement from ________ involves the greatest opportunity cost of increasing the production of good
Y.
A) point E to point D
B) point D to point C
C) point C to point B
D) point B to point A

29) Claire and Dag are farmers who produce beef and corn. In a year, Claire can produce 16 tons of

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

beef or 40 bushels of corn, while Dag can produce 5 tons of beef or 25 bushels of corn. The opportunity
cost of producing a ton of beef is
A) 10 bushels of corn for Dag and 8 bushels of corn for Claire.
B) 5 bushels of corn for Dag and 2.5 bushels of corn for Claire.
C) 20 bushels of corn for Dag and 50 bushels of corn for Claire.
D) 36.5 days for Dag and 45.6 days for Claire.

30) An opportunity cost of economic growth is

A) essentially zero because economic growth leads to such large gains in the long run.
B) the decrease in production of consumption goods in the present time period.
C) decreased by the creation of capital goods rather than consumption goods.
D) so high that places such as Hong Kong have had to do without it.

31) The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two
cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make
20 pizzas or 30 servings of pasta. Which of the following should be the manager's choice?
A) Fire David because he is not as productive as John. John will do both jobs.
B) John will make pizza because he has comparative advantage in making pizza.
C) David will make pizza because he has comparative advantage in making pizza.
D) John and David both will spend half their time making pizza and half their time making pasta
because each has a comparative advantage in making pizza.

32) One of the largest categories of exports from the United States is now pop culture: movies, music,
TV programming, and videos. A direct conclusion from this information is that, compared to other
countries, the United States has
A) lower wages for producers of pop culture.
B) higher wages for producers of pop culture.
C) an absolute advantage in producing pop culture.
D) a comparative advantage in producing pop culture.

33) Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that
a typical American factory can produce 10 cameras or one computer in an hour. Germany wishes to
purchase computers from the United States in exchange for cameras. What is the maximum number of
cameras per computer that Germany would be willing to pay the United States?
A) 10 cameras per computer
B) 20 cameras per computer
C) 1 camera per computer
D) 2 cameras per computer

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

34) The price of a DVD rental is $2.50 and the price of a downloaded movie is $1.00. If the price of a
DVD rental falls by $0.50, the relative price a downloaded movie
A) rises.
B) falls.
C) does not change.
D) might change but more information is needed.

35) A changes in which of the following shifts the demand curve for hamburgers?
A) an increase in the price of the meat used to produce hamburgers
B) an increase in the price of a hamburger
C) a fall in the price of french fries, a complement for hamburgers
D) an increase in the number of hamburger restaurants

36) The observation that the demand curve for grape jelly shifts rightward every time the price of
peanut butter falls means that grape jelly and peanut butter are
A) complements.
B) substitutes.
C) inferior goods.
D) normal goods.

37) Which of the following does NOT shift the demand curve for broccoli?
A) an increase in the cost of fertilizer used to grow broccoli
B) a warning by the U.S. Surgeon General that broccoli causes schizophrenia
C) an increase in the price of spinach, a substitute for broccoli, because rodents gobbled up much of
this year's spinach crop
D) a decrease in the price of spinach, a substitute for broccoli, because of a bumper crop of spinach this
year

38) Cable television companies must pay increased charges by the networks for the programs the cable
companies carry. As a result, the price of cable television rises. Thus
A) the demand curve for cable television service shifts rightward.
B) the demand curve for cable television service shifts leftward.
C) there is a movement down the demand curve for cable television to a higher quantity demanded.
D) there is a movement up the demand curve for cable television to a smaller quantity demanded.

39) Each point on a supply curve represents

A) the highest price buyers will pay for the good.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

B) the lowest price for which a supplier can profitably sell another unit.
C) the lowest price buyers will accept per unit of the good.
D) the highest price sellers can get for each unit over time.

40) A bakery can produce either cakes or cookies. If the price of cookies rises, then
A) the supply curve of cake shifts leftward.
B) the supply curve of cake shifts rightward.
C) there is a movement downward along the supply curve of cakes.
D) there is a movement upward along the supply curve of cakes.

41) Which of the following does NOT shift the supply curve?
A) a technological advance
B) a decrease in the wages of labor used in production of the good
C) a fall in the price of a substitute in production
D) an increase in the price of the good

42) In March, the quantity of orange juice sold in the town of Jackson was 3000 cartons and the price
$3. In May, the quantity of orange juice sold in the town of Jackson was 3500 cartons and the price was
$3.20. This change in the price and quantity sold could have been the result of
A) the release of a medical study suggesting that consuming orange juice helps prevent cancer.
B) a reduction in the number of orange juice coupons provided by local markets.
C) the after effects of a cold winter in Florida that killed half of the orange crop.
D) the after effects of a warm winter in Florida that increased the orange crop yield by 50 percent.

43) Leather belts and leather shoes are substitutes in production. If style changes increase the demand
for leather belts, the supply curve of leather shoes will shift
A) leftward and the equilibrium price of leather shoes will fall.
B) leftward and the equilibrium price of leather shoes will rise.
C) rightward and the equilibrium price of leather shoes will fall.
D) rightward and the equilibrium price of leather shoes will rise.

44) There is a technological advance in the production of a good and simultaneously also an increase in
the expected future price. Which of the following will happen?
A) The equilibrium price will rise because the supply curve shifts rightward.
B) The equilibrium price falls because the supply curve shifts leftward.
C) The technological improvement shifts the supply curve rightward while the increase in the expected
future price shifts the supply curve leftward. The net effect is not known.
D) The demand curve shifts rightward and the supply curve does not shift.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

45) Which of the following increases the equilibrium price of a used car and decreases the equilibrium
quantity?
A) an announcement by the U.S. Attorney General that the windows on older cars were made with
cheaper glass that can explode at high speeds
B) new federal legislation that raises the legal driving age to twenty-four in all states
C) a new fee that used car dealers must pay to the government on all sales of used cars
D) all of the above because each is consistent with the "law of demand"

46) The equilibrium quantity of a good will increase and its equilibrium price might rise, fall, or stay
the same when
A) its demand and supply both increase.
B) its demand increases and supply decreases.
C) its demand decreases and supply increases.
D) its demand and supply both decrease.

47) Between 2000 and 2015, advances in PC production technology increased the supply of PCs
sharply. The demand for PCs also increased, but not nearly as much as the supply did. As a result, the
price of a PC ________ and the quantity of PCs sold ________.
A) rose; decreased
B) rose; increased
C) fell; decreased
D) fell; increased

48) When the quantity of coal is measured in kilograms instead of pounds, the demand for coal
becomes
A) more elastic.
B) less elastic.
C) neither more nor less elastic.
D) undefined.

49) The price elasticity of demand for oil is estimated at 0.05. This value means a 10 percent increase
in the
A) quantity of oil demanded will result from a 0.5 percent increase in the price of oil.
B) quantity of oil demanded will result from a 0.5 percent decrease in the price of oil.
C) price of oil will increase the quantity of oil demanded by 0.5 percent.
D) price of oil will decrease the quantity of oil demanded by 0.5 percent.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

50) Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity
demanded from 12,500 to 11,500 bushels. The price elasticity of demand is
A) 0.5.
B) 1.0.
C) 2.0.
D) 1000.0.

51) The price elasticity of demand is 5.0 if a 10 percent increase in the price results in a ________
decrease in the quantity demanded.
A) 2 percent
B) 5 percent
C) 10 percent
D) 50 percent

52) If the demand for a good is perfectly elastic, the price elasticity of demand is ________ and the
demand curve is ________.
A) infinite; vertical
B) zero; vertical
C) zero; horizontal
D) infinite; horizontal

53) A straight-line demand curve with negative slope intersects the horizontal axis at 200 tons per
week. The point on the demand curve at which the price elasticity of demand is 1 corresponds to a
quantity demanded
A) of 0 tons.
B) of 100 tons.
C) of 200 tons.
D) that would be negative if a negative quantity demanded were possible.

54) To maximize its revenue

A) a firm facing inelastic demand should always raise its price.
B) a firm facing elastic demand should always raise its price.
C) a firm should always charge the highest price possible regardless of the elasticity of demand.
D) None of the above answers is correct.

55) If Sam wants to increase her total revenue from her sales of flowers and she knows that the demand
for flowers is price inelastic, she should
A) lower her price to increase the demand and shift the demand curve rightward.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

B) raise her price because she knows that the quantity demanded will also increase.
C) raise her price because she knows that the percentage decrease in the quantity demanded will be
smaller than the percentage increase in price.
D) lower her price because she knows that the percentage increase in the quantity demanded will be
greater than the percentage decrease in price.

56) Which of the following statements is FALSE?

A) Goods or services that have few close substitutes generally have a less elastic demand.
B) Goods or services for which a greater proportion of income is spent on the item generally have a
more elastic demand.
C) A narrowly defined good or service generally has a less elastic demand.
D) The longer the time that has elapsed since a price change, the more elastic the demand.

57) If a 5 percent increase in the price of good A leads to a 4 percent decrease in the demand for good
B, then ________.
A) the goods are substitutes
B) only one good is a normal good
C) the goods are complements
D) both goods are normal goods

58) The income elasticity of demand is largest for

A) food.
B) clothing.
C) shelter.
D) luxuries.

59) The demand for corn increases. As a result, the price of corn will ________, and the less elastic the
supply of corn, the ________ will be the effect on the price.
A) fall; smaller
B) fall; greater
C) rise; smaller
D) rise; greater

60) Apple, the consumer electronics giant, on Tuesday rolled out new versions of its popular iPhone.
The CEO decided to decrease the price of iPhones in an attempt to increase total revenue from iPhone
sales. One of his employees, Jess, disagrees and suggests that an iPhone price increase will increase
total revenue. Who is CORRECT?
A) The CEO is correct if demand is price elastic.

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ECON 2113: Microeconomics    Practice Questions  Instructor: Fei DING 

B) The CEO is correct if demand is price inelastic.

C) Jess is correct if demand is price elastic.
D) Jess is correct if demand is unit elastic.

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