Microeconomics

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Answer ALL questions
1. In economics the central problem is:
A. Money
B. Allocation
C. Scarcity
D. Production

2. Indicate below what is NOT a factor of production.
A. Bank loan
B. Capital
C. Labour
D. Land

3. Macroeconomics deals with:
A. Aggregate demand
B. Firms
C. Consumers
D. Industry

4. The total demand for goods and services in an economy is known as
A. Aggregate demand
B. Gross national product
C. National demand
D. Economy-wide demand

5. The concept of opportunity cost:
A. suggests a major increase in public health-care spending means an expansion in other
areas will be harder to achieve.
B. is relevant only for a capitalist economy like the United States
C. would be irrelevant if we eliminated poverty.
D. suggests all our wants can be achieved.

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6. Opportunity cost is
A. a cost that cannot be avoided, regardless of what is done in the future
B. that which we forgo, or give up, when we make a choice or a decision.
C. the additional benefit of buying an additional unit of a product.
D. the cost incurred in the past before we make a decision about what to do in the future.

7. The study of inflation is part of :
A. Microeconomics
B. Descriptive economics
C. Macroeconomics
D. Normative economics

8. Aggregate supply is the total amount:
A. of labour supplied by all households.
B. of goods and services produced in an economy
C. produced by the government.
D. of products produced by a given industry.

9. The 'law of demand' implies that:
A. as prices rise, demand decreases.
B. as prices fall, demand increases.
C. as prices fall, quantity demanded increases.
D. as prices rise, quantity demanded increases.

10. The Majujaya Corporation produces chairs. An economist working for the firm predicts that
'if people's incomes rise next year, then the demand for our chairs will increase, ceteris
paribus.' The accuracy of the economist's prediction depends on whether the chairs
Majujaya produce:
A. have many complementary goods.
B. have few substitutes.
C. have few complementary goods.
D. are normal goods.

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11. What effect is working when the price of a good falls and consumers tend to buy it instead of
other goods?
A. The diminishing marginal utility effect.
B. The income effect
C. The ceteris paribus effect.
D. The substitution effect

12. The quantity demanded of Pepsi has decreased. The best explanation for this is that:
A. Pepsi's advertising is not as effective as in the past
B. Pepsi consumers had an increase in income.
C. the price of Pepsi increased.
D. the price of Coca Cola has increased.

13. Demand curves are derived while holding constant:
A. income, tastes, and the price of the good.
B. income, tastes, and the price of other goods.
C. income and tastes.
D. tastes and the price of other goods.

14. When the decrease in the price of one good causes the demand for another good to
decrease, the goods are:
A. Normal
B. Inferior
C. Substitutes
D. Complement

15. Suppose the demand for good Z goes up when the price of good Y goes down. We can say
that goods Z and Y are:
A. Perfect substitutes
B. Substitutes
C. Complement
D. Unrelated goods


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16. If the demand for coffee decreases as income decreases, coffee is:
A. A normal good
B. A substitute good
C. A complement good
D. An inferior good

17. Which of the following will NOT cause a shift in the demand curve for compact discs?
A. A change in wealth.
B. A change in the price of pre-recorded cassette tapes.
C. A change in income
D. A change in the price of compact discs.

18. Which of the following is consistent with the law of supply?
A. As the price of calculators rise, the quantity supplied of calculators decreases, ceteris
paribus.
B. As the price of calculators rise, the quantity supplied of calculators increases, ceteris
paribus.
C. As the price of calculators falls, the supply of calculators increases, ceteris paribus.
D. As the price of calculators rise, the supply of calculators increases, ceteris paribus.

19. The price of computer chips used in the manufacture of personal computers has fallen. This
will lead to __________ personal computers.
A. a decrease in the quantity supplied of
B. an increase in the quantity supplied of
C. an increase in the supply of
D. a decrease in the supply of

20. When excess demand occurs in an unregulated market, there is a tendency for:
A. Price to fall
B. Price to rise
C. quantity supplied to decrease.
D. quantity demanded to increase.


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21. Market equilibrium exists when _____________ at the prevailing price.
A. quantity demanded is greater than quantity supplied
B. quantity demanded equals quantity supplied
C. quantity supplied is greater than quantity demanded
D. quantity demanded is less than quantity supplied

22. A movement along the demand curve to the left may be caused by:
A. a decrease in supply.
B. a rise in income.
C. a rise in the price of inputs.
D. a fall in the number of substitute goods.

23. If marginal benefit is greater than marginal cost, a rational choice involves:
A. more or less, depending on the benefits of other activities.
B. less of the activity.
C. no more of the activity.
D. more of the activity

24. Unemployment means that:
A. at the going wage rate, there are people who want to work but cannot find work
B. people are not willing to work at the going wage rate.
C. there is excess demand in the labour market.
D. there are some people who will not work at the going wage rate.

25. A recession is:
A. a period of declining unemployment.
B. a period during which aggregate output declines.
C. a period of very rapidly declining prices.
D. a period of declining prices.

END OF QUESTIONS